INAUGURAL_GROCER_SURVEY:THE_FOOD_FIGHT_CONTINUES_ITS_EVOLUTION-2012-11-30.ppt
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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
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