Photo: Wikipedia/Michael Rivera
Should one rough quarter have Publix’s management concerned?
Publix saw its same-store sales decline 0.4 percent in the first quarter of 2017. That was the first time the grocer has experienced a drop in that metric going back to 2009 when it was dealing with lingering effects of the Great Recession.
The chain attributed the small drop in its comp numbers to the Easter holiday falling in the second quarter this year and not the first quarter, as in 2016. Publix estimated its same-store number would have been up just under one percent if Easter remained in the first quarter.
While the Easter holiday provides an explanation for its un-Publix-like quarter, the chain has faced increased competition in its home market of Florida even as it expands up the East Coast into Virginia, with plans to perhaps extend further north. Well-regarded Wegmans is expanding from its New York state base southward down the East Coast at the same time.
The Orlando Sentinel reports Publix has lost share to Aldi and Walmart in the area between Orlando and Tampa. The chain is facing tough competition from not only those chains but also from Earth Fare, Lucky’s Market, Sprouts Farmers Market, The Fresh Market, Trader Joe’s, Whole Foods and others.
As a positive, The Charlotte Observer reports that Publix has gained market share since entering the local market in 2014. The chain is fourth behind Harris Teeter, Walmart and Food Lion in Charlotte.
Publix, which is known for great service, BOGO deals and delicious sub sandwiches made in its delis, has been taking steps to deepen its connections with customers, including partnering with Instacart in Miami and Tampa Bay to offer online shopping and home delivery.
The chain is also very active on Facebook, Instagram, Pinterest and Twitter as it seeks out customers on social media. Last summer, the grocer launched The Publix Checkout, a company blog written by employees about a wide range of topics, such as community initiatives, holiday entertaining, health and wellness and recipes. Publix is also running a pilot program to test opening Starbucks shops inside its stores.
Publix, currently operates 1,144 stores in Florida, Georgia, Alabama, Tennessee, South Carolina and North Carolina. The company generated $34 billion in sales in 2016.
- Publix Reports First Quarter 2017 Results and Stock Price – Publix/Business Wire
- Publix rings up rough first quarter – Orlando Sentinel
- Charlotte’s grocery wars: Who’s up, who’s down – The Charlotte Observer
- Will Wegmans take on Publix in Florida? – RetailWire
- Will growing competition in Florida slow Publix as it heads north? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you think the first decline in same-store sales since 2009 and increased competition in Florida has Publix management concerned? Has the chain’s expansion in recent years affected Publix’s ability to recreate its culture in stores far removed from its base in Florida?
Poll
BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Paula Rosenblum
Co-founder, RSR Research
Competition is good for the consumer and for the industry. That said, Publix has nothing to worry about. Its unique combination of copious SKUs with exceptionally friendly service places it squarely in the hearts of its customers. Its only credible competition is Wegmans, which doesn’t yet have the coverage to do Publix real damage.
A rough quarter at Publix would be the envy of any other grocer. Publix is setting themselves up for more greatness. Several Eastern seaboard chains are struggling and will most likely succumb under the expansion of Publix along with a little help from Wegmans and Lidl. I predict Food Lion, Bi-Lo, Lowes, Piggly Wiggly and The Fresh Market will be closing stores by the bushel. Publix will experience a huge surge in sales and market share. A handful of Wegmans and the unproven Lidl will only serve as muscle to wipe out the ineffectual grocers in the Carolinas and Virginia. Just the thought of Publix coming to the Carolinas brought Harris Teeter to it knees and forced them to sell out to Kroger. Publix could not care less about one quarter and is more concerned about the next quarter century.
The grocery business, always quite competitive, has gotten even tougher with increased competition, pricing pressure and rapidly-changing technologies. Publix has their challenges, but the good news is that Publix scores well on customer satisfaction and Net Promoter Score surveys. As one small proxy, my relatives in Florida rave about Publix. Having a loyal fan base is a great asset when facing business challenges. Now Publix needs to make smart strategic moves, manage their expansion responsibly and embrace technologies that their customers are likely to increasingly demand. I’m not a fan of them turning their brand over to third parties when it comes to e-commerce.
In such a competitive category as grocery, any anomaly should be reviewed and understood before dismissing it outright — where there’s smoke there may be fire! While Publix has a wonderful reputation for quality of both product and service, it is imperative that theydo not become complacent. Publix has a fantastic deli counter that has become a popular lunch destination. Given its popularity, I believe there is a fantastic opportunity for them to enhance the entire in-store shopping experience with a click-and-collect workflow without the use of a mobile app.
Publix (and any company) should always be concerned about competition. Yet is the word “concerned” the correct word? That conjures up an image of fear. Perhaps the word “aware” is better. A leader should be aware of what competitive forces could block their success, progress, etc. That can come from competition, the economy and other factors that impact revenue and the bottom line. Furthermore, does one negative quarter mean it’s a trend? I hardly think so. And Publix had a good explanation. I’d look at the next quarter or two before jumping to conclusions.
The second question is about leadership and culture. The distance a Publix store is from its Florida base shouldn’t impact the culture that has made them what/who they are. If there are problems I’d look at leadership and management of the store.
Concerned yes, panicked, no. Assuming the math is correct, Easter falling in a different quarter explains the decline.
Publix, like any retailer, is concerned as competition enters its market. Food may not be a true zero-sum game, but there only so much demand and with more competitors someone will lose volume. The trick is to make it be the other guy.
To-date Publix has done a good job of instilling its culture in its expanded territory. As many have learned, it takes a great deal of effort to do so as the number of units operated increases and the distance from the base grows. Can Publix instill its culture in new markets as it expands and/or keep it at the same level in its existing units going forward? Only time will tell.
All retailers are facing the most difficult and dynamic time in retail’s history — and that is especially true for grocery which has been relatively isolated from digital disruption for the last 20 years. In this environment, companies cannot test their courage cautiously or they will find themselves losing ground. That is true even for the best.
Grocery is truly a hot segment in 2017. We see strong new entrants in this space (e.g. Aldi, Lidl) and large/powerful existing brands not specialized in grocery wanting to take more market share (e.g. Walmart, Target). And then we have everyone’s favorite dark horse powerhouse, Amazon, experimenting with multiple approaches to the segment. Is a shakeout coming as certain brands falter (e.g. Whole Foods)? Most likely. Should Publix worry? While it’s always healthy for management to keep a close watch on competition and adapt accordingly, Publix has such a loyal customer base I wouldn’t shed a tear for them just yet. They have been performing well up until this quarter and clearly have found the right formula to deepen their relationship with customers.
As Publix heads north, they will likely run into stronger competition from Wegmans, Aldi, Walmart, Target and of course Amazon. I don’t see any risk in their expansion just yet as long as they continue to develop and expand their winning formula while keeping watch on the competition.
I’m going to say some radical things. I think Publix has lost more than a step over the past few years. Their out-of-stock situation is very challenging for a shopper and they’ve re-designed my local store three times in the past five years, with what I can only call inadequate signage. One of the redesigns seemed primarily intended to reduce inventory by about 15 percent (much wider aisles … means fewer aisles).
I think they have not been careful enough and it’s making them vulnerable. I still find it hard to believe that Aldi is taking their share, but I know a lot of people like that store. I don’t.
I think Publix has to get back to basics.
PS: I live in Miami, so this is not a “far-flung” issue. It’s a real problem.
I think Publix is already concerned and hopefully they’re thinking about solutions. However the concern isn’t a bad quarter — it’s the future. Growing up in New Jersey at one time there were a handful of supermarket chains with the leader being ShopRite. Then throughout the years ShopRite expanded beyond New Jersey and, shortly after they did, other supermarket chains opened stores in New Jersey. The population hasn’t increased, so all these supermarket chains are competing for smaller pieces of the pie. So what can Publix do? The same thing that all these competitors must do. And that is to give their customers a reason to shop at their stores and not the competition.
Quality, selection and inventory are imperative, as well as price matching. But what about service? How to do we make sure we don’t have long lines at the register? What about friendly and courteous associates in all the stores making the customer feel welcome and appreciated? Rewards programs, cooking classes, a large assortment of healthy products, shop-at-home conveniences, store pickup and home delivery are all excellent benefits. But the real answer is simple: if you want to increase your sales when you have huge competition, be different and offer your customers something your competitors do not.
A retailer (and any business) should always be concerned about where tomorrow’s business is coming from. But the focus should first be on the marketplace, not on the competitors.
What is the growth/decline in total grocery retail in the Publix geography? If average same-store-sales declined among all competitors, them the issue is not necessarily a competitive disadvantage for Publix. If their key competitors dropped 0.6 percent to Publix’s 0.4 percent then bravo for Publix.
Answer this question first, then Publix can start focusing on tomorrow’s strategy.
It’s interesting to see that the retailers that are slowly skimming off market share from Publix are new-generation grocers who have a niche value proposition. It tells me that shoppers are changing their patterns to shop for specific products, convenience or needs.
Neither a good month nor good quarter signifies a trend. Similarly, a less than stellar quarter should not be viewed with great alarm. Earnings per share were only down $.02. Yes, Publix has a competitive environment in Florida. However, to date, that hasn’t represented a real threat. Not convinced that the Aldi and Walmart shoppers represent Publix sweet spot. Conversely, the company’s performance relative to Harris Teeter is very positive, but not surprising.
I am a Publix loyalist who shops there during the winter in Florida. In my opinion the company does a terrific job on all of the aspects noted in the article. It’s Achilles Heal is the same as that of other traditional retailers, namely developing a viable omni-channel experience and dealing with a shrinking center of store.
Down .4% in an industry that just reported center store sales down around -2.5% in units for Q1 — I don’t think that’s a panic button moment, folks. Many/most of the retailers across the spectrum — ranging from O’Reilly’s to Starbucks — are reporting same store sales lower for Q1 of 2017. And GDP just came in at 0.7%. I’m not saying Publix management deserves a lollipop, primarily for reasons such as those Paula called out above — but this particular figure is no death knell in this environment.
Management already had an explanation prepared, so obviously they are following things. Are they “concerned”? Should they be? If by “concerned” one means panicking over a statistical artifice, then I don’t think they are … nor should they be. If by “concerned” one means “aware” of completion and of changes in the marketplace, then I think they are, which is why they have done well and are likely to continue to do.
Publix knows their business model probably better than most other grocery chains. They know they had a decline and probably already have steps in place to remedy it. I am not concerned about Publix. They know how to treat their customers which puts them steps ahead of the competition. I dare say you can walk in to a Walmart and immediately see the difference in customer service as well as employee interest. Possibly the expansion program is a little too aggressive and should be reduced. I do know Publix pricing is higher than the competition. That drives shoppers to other stores; but they always return.
As a resident in Publix’s home market, I see their fortunes through a unique lens. Anecdotal evidence suggests that while most customers consider Publix a “feel good” brand, an increasing percentage view Publix as having generally above-market prices. For price-sensitive shoppers, this is obviously a strong influencer of purchase.
While Publix does offer BOGO deals on a consistent basis, most people don’t know what product is available via BOGO until they enter the store for a shopping visit. For loyalists, this encourages basket splitting as some customers cherry-pick BOGO offers and visit a competitor to complete their shopping list. For the most price-sensitive shoppers, they may skip a visit altogether.
Despite cries that Publix is “expensive,” it continues to wear a shiny halo that identifies it as a nostalgic Florida brand. The recipe for future success may be for Publix to address competitive concerns now and make changes before the power of their brand halo weakens.
No surprise really, considering everyone who shops at Publix in FL considers them to be overpriced compared to others. Moreover, Publix has always put shareholders before its employees one would be hard pressed to find an employee that gets 40 hrs a week as most are cut short so the company can save on health care expenses which speaks volumes about who really comes first in management’s eyes. The best grocer in the U.S. right now is HEB hands down, a Texas based grocer.