Gains by Safeway, Kroger hold retail index in check
February 20, 2004 11:03:02 (ET)
CHICAGO (CBS.MW) -- Shares of the nation's largest grocery stores forged ahead Thursday, offsetting weakness by other stocks in the retail sector after an analyst declared that the big supermarket chains are able to hold their own despite the growth of Wal-Mart.
The S&P Retail Index ($RLX) was fractionally lower at 390.37. Shares of Safeway (SWY, Trade) tacked on 26 cents, or 1.1 percent, to .47 while Kroger (KR, Trade) was higher by 17 cents to .42.
In a new report for its clients, Merrill Lynch urged clients to buy shares of Kroger and Safeway, saying an upturn in the economy bodes well for food retailers.
Additionally, the report asserted that Wal-Mart doesn't deserve being branded as the bane of big-city grocery stores, which have cited the effects of competing against the retail behemoth.
"Wal-Mart is hammering away at the whole industry, but its growth is focused on smaller-town America and its impact is greatly overestimated in big cities," analyst Mark Husson wrote in the Merrill Lynch report.
Husson said that neither Kroger nor Safeway has lost share. "In some markets," he said, "Wal-Mart is more important than the cycle, but the large big-city retailers, these can be counted on the fingers of one hand and are often in Texas," which has seen an explosion of oversized supermarkets in the last 18 months.
Elsewhere, Albertson's (ABS, Trade) added 31 cents, or 1.3 percent, to .77. Great Atlantic & Pacific Tea Co. (GAP, Trade) bagged 20 cents, or 2.6 percent, to .92. Supervalu (SVU, Trade) was up 18 cents to .55.
Winn-Dixie (WIN, Trade), which has been hardest hit by the influx of new competitors to its Texas hold, declined 7 cents, or 1.1 percent, to .12.
Wal-Mart (WMT, Trade) shares climbed 46 cents to .84.