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1、Page 3,Upside/,November 9,2012Americas:Retail:SupermarketsEquity ResearchInaugural Grocer Survey:The food fight continues its evolutionSurvey results show increasing fragmentation in food retail,We surveyed 2,000 US consumers for the past five quarters and asked each,TABLE OF CONTENTS,person to answ
2、er questions on grocery shopping.Our high level takeawaysinclude:(1)consumers are increasingly shifting grocery shopping behaviorto new channels,(2)price remains the key driver for consumers changingwhere they shop,and(3)improved perception of affordability suggestsinflation pressures are waning.Gro
3、cery not immune to the secular shift onlineAlthough groceries are thought of as defensible products for brick-and-mortar retail,the percentage of consumers indicating they shop for at leastsome groceries online has increased from 25%in 3Q10 to 42%in 3Q12.Theincreased adoption is occurring across all
4、 age groups and income levels.,PM SUMMARYMETHODOLGY&KEY FINDINGSDETAILED FINDINGSUPCOMING EVENTSDollar Tree(DLTR)3Q12 Earnings 11/15 BMOThe Fresh Market(TFM)3Q12 Earnings 11/28 BMOKroger(KR)3Q12 earnings 11/29 BMORELATED COVERAGE OVERVIEW,Page 2Page 5,Interestingly,the most recent percentage of cons
5、umers shopping online forgroceries is greater than that of video games just two years ago.In our,TickerDLTRFDO,Rating PriceTarget TimeBuy$48 12monthBuy$77 12month,Downside26%17%,Methodology15.5XF24monthEPS15.5XF24monthEPS,view,most food retailers are still slow to address online,and we believeincrea
6、sing price transparency could lead to longer-term margin pressure(“AMZN is to WMT what WMT was to the Grocers”-June 27,2012).,WFMTFMKRSWY,NeutralNeutralSellSell,$105$60$23$14,12month12month6month6month,16%0%6%15%,30XF24monthEPS30XF24monthEPS5XadjEV/EBITDA5XadjEV/EBITDA,Source:Goldman Sachs Research
7、estimatesDollar store grocery momentum building Buy FDO and DLTRDollar stores continue to see a greater percentage of consumers that planto increase grocery shopping in the channel.While dollar stores are heavilyskewed towards lower income consumers,the greatest momentum hasbeen with middle-income g
8、roups.Our surveys have also shown dollarstores are favored by older age groups,which should provide a longtailwind of growth as aging baby boomers are expected to drive 3%growthin the 65+demographic.As such,we reiterate our Buy ratings on FDO andDLTR and maintain our$77 and$48,12-month price targets
9、,respectively.Traditional still stuck in the middle Sell SWY and KRWhile local grocery stores saw an increasing percentage of consumersindicate they will shop the channel more over the upcoming year,they arealso seeing an increasing percentage indicate they plan to shop the channelless.We believe th
10、is is a reflection of encroaching competition from the lowend(dollar stores),middle(discounters),and to a lesser extent the high end(niche).As such,we reiterate our Sell ratings on SWY and KR and maintainour estimates and 6-month price targets of$14 and$23,respectively.,Stephen Grambling,CFA(212)902
11、-7832 Goldman,Sachs&Co.Christopher Prykull(212)934-4206 Goldman,Sachs&Co.The Goldman Sachs Group,Inc.,Goldman Sachs does and seeks to do business withcompanies covered in its research reports.As a result,investors should be aware that the firm may have a conflict ofinterest that could affect the obj
12、ectivity of this report.Investorsshould consider this report as only a single factor in makingtheir investment decision.For Reg AC certification and otherimportant disclosures,see the Disclosure Appendix,or go Analysts employed by non-US affiliates are not registered/qualified as research analystswi
13、th FINRA in the U.S.Global Investment Research,2,November 9,2012,Americas:Retail:Supermarkets,PM Summary:The food fight continues its evolution;Buy DollarStores and Sell Traditional GrocersWe surveyed 2,000 US consumers for the past five quarters and asked each person toanswer questions on grocery s
14、hopping.Our high level takeaways include:(1)Consumers are increasingly shifting shopping behavior to new formats andchannels:Dollar stores are gaining popularity with middle-income consumers,and remaina core destination for lower income and older aged demographics.Discounters are seeingthe strongest
15、 momentum across income levels,with a tilt toward young and middle-agedconsumers.Online is also becoming a force in grocery as consumers participating in thechannel have increased from 25%in 3Q10 to 42%in 3Q12,roughly the equivalent to videogames just two years ago.By contrast,trends for local groce
16、ry stores have been mixed asa greater percentage of consumers indicate they plan to shop the channel more and less.(2)Price is consistently the number one reason consumers switch where they shopfor groceries:Price has been consistently cited by consumers as the number one reasonfor shifting their sp
17、end,supporting momentum at dollar stores and discounters.However,quality has been gaining momentum as a driver among high income consumers,youngerage groups(Millenials),and older age groups(baby boomers).We believe this is a directreflection of these consumers focus on health,which could continue to
18、 grow and benefitspecialty grocers such as TFM and WFM who emphasize quality and wellness.(3)Consumers perceive grocery affordability is improving as inflation has waned:Webelieve this dynamic is driven by food retailers promoting away moderating input costs asthey seek to drive volume.With raw comm
19、odities still pointing to moderating inflation,wewould expect this trend to continue.Based on our findings,we are reiterating our favorable outlook for the dollar storesand cautious outlook for traditional grocers:DLTR(CL-Buy,$48)&FDO(Buy,$77)attractive industry positions with companyspecific cataly
20、sts:We expect both DLTR and FDO to see 15%+EPS growth fueled in partby industry and demographic shifts.For DLTR,we anticipate a re-rating will occur off of atrough 13.5X FY13 P/E once temporary sales disruptions subside.For FDO,we expectaccelerating fundamentals to drive upside now that its consumab
21、les rollout is complete.We maintain our$77 and$48,12-month price targets for FDO and DLTR,both of which arebased on 15.5X F24-month EPS,implying 17%and 26%upside,respectively.KR(Sell,$23)&SWY(Sell,$14)increasing competition to pressure sales andmargins:We continue to see a combination of secular and
22、 cyclical headwinds facingtraditional food retailers.While both stocks trade at trough multiples,we do not see acatalyst to re-rate the shares higher in the near-term and see relative downside to ourcoverage.Our estimates are unchanged and our six-month price targets for KR and SWYare unchanged at$2
23、3 and$14,respectively,equating to 6%and 15%downside.Exhibit 1:We reiterate our Buy ratings on DLTR and FDO and Sell ratings on KR and SWYFY13 Estimates,Ticker,Rating PriceTarget Time,Upside/Downside,Methodology,P/E,EV/EBITDA,EPSGrowth,CROCI,DLTRFDOWFMTFMKRSWY,BuyBuyNeutralNeutralSellSell,$48$77$105$
24、60$23$14,12month12month12month12month6month6month,26%17%16%0%6%15%,15.5XF24monthEPS15.5XF24monthEPS30XF24monthEPS30XF24monthEPS5XpensionadjustedEV/EBITDA5XpensionadjustedEV/EBITDA,13.6X14.0X30.4X31.8X9.8X7.7X,7.5X7.4X11.7X13.7X5.5X5.4X,16%17%17%27%5%6%,16%15%13%20%10%8%,Source:Factset,Goldman Sachs
25、Research estimates.Goldman Sachs Global Investment Research,3,November 9,2012,Americas:Retail:Supermarkets,MethodologyGoldman Sachs proprietary consumer survey-We surveyed 2,000 US consumers for thepast five quarters and asked each person to answer questions related to food retail.Respondents were 5
26、4%female/46%male and spread across all age groups,levels ofhousehold income and geographic regions.We asked consumers to answer a series ofquestions about the channels they visited to meet their grocery shopping needs in the last12 months.Key Findings:Momentum in online,dollar stores,and discounters
27、Online seeing rapid adoption in grocery;expect even greater pricetransparency to followGrocery is not immune to the secular shift towards online shopping.The percentage ofconsumers indicating they shop for at least some groceries online has increased from 25%in 3Q10 to 42%in 3Q12.The increased adopt
28、ion is occurring across all age groups andincome levels.Not surprisingly,younger age groups saw a higher penetration shopping forgroceries online.By contrast,the lowest income consumers have one of the highestpenetration shopping for groceries online,implying an opportunity or risk for all foodretai
29、lers.As Exhibit 3 illustrates below,the 42%of consumers shopping online for groceries in 3Q12is greater than that of video games just two years ago.We believe most food retailers arestill slow to address online and expect a combination of increasing price transparency andmargin pressure longer-term(
30、see“AMZN is to WMT what WMT was to the Grocers”-June 27,2012).In our view,food retailers who are able to truly differentiate their offeringthrough unique items,price points or experience are best positioned to offset theseheadwinds.In our view,these include DLTR(CL-Buy),WFM(Neutral),TFM(Neutral),and
31、UNFI(Neutral).However,we note e-commerce is a clear opportunity for those foodretailers able to leverage the channel as a tool to drive loyalty and sales.,Exhibit 2:Online grocery spending has seen some of thefastest adoption in the past two years%of consumers making any purchase of the category onl
32、ine,Exhibit 3:The percentage of people purchasing groceriesonline in 3Q12 mirrors video game statistics in 3Q10%of consumers making any purchase of the category online,3Q10,3Q12,Var,VideoGames,Grocery,Clothing,shoes&accessoriesConsumerElectronics(ex.videogames)BooksHomedecor&smallappliancesHealthand
33、wellnessVideogames(bothphysicalanddigital)JewelryGroceries/fooditems,60%52%58%39%43%36%27%25%,74%72%71%58%56%53%43%42%,14%20%13%19%13%16%16%17%,Alittle(025%)Some(25%50%)Agoodamount(50%75%)Alot(75%100%)Total,3Q1014%10%7%5%36%,3Q1217%12%10%4%42%,AutoPartsPetSuppliesFurnitureSource:GS Survey of 2,000 C
34、onsumers.,28%26%24%,42%41%35%,13%15%10%,Source:GS Survey of 2,000 Consumers.,Dollar store momentum sustained across income and age groupsAn increasing percentage of consumers are shopping dollar stores more for their groceryneeds.Specifically,the penetration has reached new peaks as it increased fro
35、m 20.1%in3Q11 to 27.6%in 3Q12.While dollar stores are heavily skewed towards lower incomeGoldman Sachs Global Investment Research,4,November 9,2012,Americas:Retail:Supermarketsconsumers,the greatest momentum has been in middle-income consumers as shown inExhibit 4 below.In fact the percentage of con
36、sumers indicating they will shop at dollarstores more is now higher in the$90k-$120k than all other income brackets other than$30k.Our survey has also shown dollar stores are favored by older age groups,whichshould provide a long tailwind of growth as aging baby boomers are expected to drive 3%popul
37、ation growth in the 65+demographic for the next 15-20 years.These factors give usconfidence that DLTR and FDO should generate low-to mid single-digit comp growthfor the foreseeable future.,Exhibit 4:Middle-to upper-income consumers areshowing the greatest momentum with Dollar Stores%of respondents w
38、ho plan to shop Dollar Stores more forgroceries over the coming year by Income40%35%30%25%20%15%10%5%,Exhibit 5:Dollar stores index most with older consumers,which should provide a tailwind as Baby Boomers age%of respondents who plan to shop Dollar Stores more forgroceries over the coming year40%35%
39、30%25%20%15%10%5%,0%,Under$30K,$30Kto$49,999,$50Kto$69,999,$70Kto$89,999,$90Kto$119,999,$120Korabove,0%,1824,2534,3544,4554,5564,65+,2Q11,3Q11,4Q11,1Q12,2Q12,3Q12,2Q11,3Q11,4Q11,1Q12,2Q12,3Q12,Source:GS Survey of 2,000 Consumers.,Source:GS Survey of 2,000 Consumers.,Traditional grocery still stuck i
40、n the middleWe see mixed relevancy of traditional grocery as an increasing percentage of consumersplan to shop the channel more and less over the next year.We believe these results reflectencroaching competition from online,discounters,dollar stores,and even specialty.Whilediscounters are often thou
41、ght to cater to a lower income demographic,our surveysuggests a much broader and growing penetration as shown in Exhibit 7.Given the lowercost structures of these competitors,we expect continued headwinds for traditional players.Goldman Sachs Global Investment Research,5,November 9,2012Exhibit 6:An
42、increasing%of consumers are indicatingthey plan to shop at local grocery stores more and less%of respondents who will shop local grocery stores forgroceries over the coming year(both more and less)30%25%20%15%10%5%,Americas:Retail:SupermarketsExhibit 7:Discounters are resonating across incomelevels,
43、with high and growing%shopping more%of respondents who will shop discount stores for groceriesmore over the coming year by income40%35%30%25%20%15%10%5%0%,0%,ShopMore,ShopLess,Under$30K,$30Kto$49,999,$50Kto$69,999,$70Kto$89,999,$90Kto$119,999,$120Korabove,2Q11,3Q11,4Q11,1Q12,2Q12,3Q12,Vs.3Q11:,120bp
44、,130bp,420bp,560bp,1260bp,380bp,Source:GS Survey of 2,000 Consumers.,Source:GS Survey of 2,000 Consumers.,Detailed findingsSince 2Q11 we have found on average the three most popular channels for groceryshopping are discounters,local grocery stores,and dollar stores as evidenced by thepercentage of r
45、espondents who said they will shop these channels the same or more overthe coming year(Exhibit 8).Exhibit 8:Discounters,local grocery,and dollar stores are the three most heavily shoppedchannels based on the%of respondents on average since 2Q11 who have said they willshop more or the same vs.a year
46、ago in these channelsAverage%of respondents who responded more or the same(2Q11-3Q12)100%,90%,86%,85%,81%,80%70%,75%,73%,73%,63%,60%50%40%30%20%10%0%,Discount store(i.e.Wal-Mart,Local GroceryStore,Dollar store,Drug Store,Natural/OrganicSpecialty(ie.,WarehouseClub(i.e.,Conveniencestore(i.e.7/11,Targe
47、t),Whole Foods,Sprouts,etc),Costco,BJs),or gas stationstore),Source:GS Survey of 2,000 Consumers.Goldman Sachs Global Investment Research,6,November 9,2012,Americas:Retail:SupermarketsThe two channels which seem to be gaining the most momentum are discounters anddollar stores.These channels saw the
48、greatest increase since 3Q11 among thoserespondents who said they plan to shop more or the same vs.a year ago as detailed inExhibit 9.The increasing popularity of these two channels can be confirmed by thedecrease in the number of respondents who said they plan to shop less across thesechannels vs.a
49、 year go as seen in Exhibit 10.,Exhibit 9:Since 3Q11,discounters and dollar stores sawthe greatest increase among those who said they plan toshop more or the same vs.a year ago%of respondents who responded more or the same,Exhibit 10:The increasing popularity of these channels isconfirmed by the sma
50、ller%that said they plan to shopless across discounters and dollar stores vs.a year ago%of respondents who responded less,3Q11,3Q12,Variance,3Q11,3Q12,Variance,Discountstore(i.e.WalMart,Target)DollarstoreLocalGroceryStoreDrugStoreConveniencestore(i.e.7/11orgasstationstore)WarehouseClub(i.e.Costco,BJ
