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In the United States, the food retail sector is vast and diverse. With varying standards of living, attitudes, and geographic factors influencing shopping habits, the landscape is dotted with numerous regional players. These include Ingles Markets, which operates around 200 supermarkets in the Appalachian region, Weis Markets and Village Super Markets in the Northeast, SpartanNash in the Midwest, H-E-B in Texas, and WinCo Foods in the West.
However, in a country known for its consumerism, these regional players are relatively small compared to the industry's giants. These major players can be grouped into four key categories: general retailers, warehouse clubs, low-price chains, and convenience and specialty retailers.
1/ General Retailers
Walmart is the world’s largest retailer and ranks among the top global companies by revenue across all sectors. The numbers are staggering: 10,500 stores, 2.1 million employees, and around 255 million customers served worldwide. Most of its sales (69%) are generated in the U.S., but Walmart also operates in 18 countries and through its subsidiary Sam’s Club, which we’ll discuss later.
Walmart is highly valued, with a price-to-earnings (P/E) ratio approaching or exceeding 30 times earnings. This high valuation is justified by Walmart’s dominant position, which brings with it significant advantages—strong negotiating power on prices, being a market benchmark, an excellent supply chain, and a well-established loyalty program. Its performance also supports this valuation, with slow but steady growth. Over the past decade since 2014, revenues have increased by 33%, and margins, though stable, remain above the industry average. In recent years, significant share buybacks have further bolstered Walmart’s stock performance.
Key figures for the past year:
- Sales: $642.6 billion
- 5-year sales CAGR: 4.7%
- Net margin: 2.4%
- Net debt: $37 billion
- ROE (Return on Equity): 18.4%
- Market capitalization: $633.5 billion
Walmart’s strong market position and consistent growth make it a formidable player in the retail space.
Kroger operates 2,722 supermarkets under various local banner names, serving approximately 62 million households annually across 35 U.S. states. The company specializes in "combo stores," which combine food and drugstore products, and also places a significant focus on fuel distribution, with gasoline stations contributing 11.1% of total sales.
Kroger's growth trajectory has been somewhat similar to Walmart's, with sales increasing by 38.3% since 2014, though its margins are slightly lower. However, the Cincinnati-based group is valued at about half of Walmart's market capitalization. Kroger lacks Walmart's scale, both in terms of size and brand influence. Its financial performance is also more volatile, particularly in terms of profitability—a key factor investors seek in low-margin businesses like this. Additionally, future growth expectations for Kroger appear muted, with analysts predicting a return to more normalized results.
Key figures for the past year:
- Sales: $150 billion
- 5-year sales CAGR: 4.2%
- Net margin: 1.4%
- Net debt: $12 billion
- ROE (Return on Equity): 20.1%
- Market capitalization: $37.2 billion
Present exclusively in the United States, Target employs 415,000 people and generates $107 billion in sales. With 1,956 stores, Target has a strong foothold in the digital space, where online sales accounted for 18.3% of total revenue last year, a key differentiator from its competitors.
Target aligns with other major retailers but has seen faster growth, with revenues increasing by 47.9% since 2014. Its margins are more stable than Kroger's, largely due to its focus on higher value-added segments like beauty and household essentials (30% of sales), furniture and home furnishings (17%), and appliances and accessories (15%).
Key figures for the past year:
- Sales: $107.4 billion
- 5-year sales CAGR: 7.3%
- Net margin: 3.8%
- Net debt: $12.2 billion
- ROE (Return on Equity): 33.5%
- Market capitalization: $67.2 billion
Albertsons operates 2,269 stores across 34 states, employing 285,000 people under more than 20 banners, including well-known names like Albertsons, Safeway, Vons, Pavilions, Randalls, and Jewel-Osco. The company also has a strong presence in the pharmacy segment, with 1,725 units in operation.
In terms of scale, Albertsons is nearly on par with Carrefour, generating close to $80 billion in revenue and holding a market capitalization of $10.5 billion. However, its margins are among the lowest in the sector, and recent results have fallen short of expectations. The company will need to improve performance to regain market share.
Key figures for the past year:
- Sales: $79.2 billion
- 5-year sales CAGR: 5.5%
- Net margin: 1.6%
- Net debt: $7.9 billion
- ROE: N/A
- Market capitalization: $10.7 billion
2/ Warehouse clubs
Costco holds the highest valuation among American mass retailers. Its unique business model grants store access exclusively to members, who pay an annual membership fee in exchange for unbeatable prices and a reward certificate worth up to 2% of their annual spending. Costco boasts 133.9 million members across its three loyalty programs (Executive, Gold Star, and Business), with a renewal rate exceeding 90%, highlighting the model’s popularity. The chain operates 890 stores.
Costco is a true growth company. Over the past decade, sales have more than doubled, reaching $242.3 billion last year—slightly more than Kroger and Albertsons Companies combined. Its margins are improving and are expected to continue on this trajectory. Costco has set a target to raise membership fees every 5 to 6 years, with these increases being well received by customers. The company maintains a strong cash surplus, with all financial metrics in excellent shape.
Key figures for the past year:
- Sales: $242.2 billion
- 5-year sales CAGR: 11.3%
- Net margin: 2.6%
- Net debt: -$7.2 billion (cash surplus)
- ROE (Return on Equity): 27.5%
- Market capitalization: $399.2 billion
Focused on the eastern half of the United States, BJ's Wholesale is a rising competitor in the warehouse club space. The company operates 264 warehouse clubs and 174 fuel stations across 21 states, with a particularly strong presence in New England, where it has three times as many stores as Costco. BJ's relies on two private labels, Wellsley Farms and Berkley Jensen, to broaden its product offering and serves around 7 million members.
Since its IPO in 2018, BJ's Wholesale has seen revenues grow 1.6 times. Margins have remained stable and are comparable to—if not exceeding—those of Costco. The company generates strong cash flow and, combined with a manageable level of debt, is able to fund both growth initiatives and shareholder returns through share buybacks. Despite the share price nearly quadrupling in the past four years, BJ's valuation remains well below that of Costco.
Key figures for the past year:
- Sales: $20 billion
- 5-year sales CAGR: 8.9%
- Net margin: 2.6%
- Net debt: $2.8 billion
- ROE (Return on Equity): 41.8%
- Market capitalization: $10.4 billion
- Sam's Club (Walmart)
Owned by Walmart, Sam's Club operates in 44 US states with nearly 850 stores. The company achieved sales of $86.2 billion last year, or 13% of Walmart's total sales. The group has two membership programs.
3/ Low-price chains
Dollar General, the largest discount retailer in the United States, operates 20,022 stores across 48 states. Its business model focuses on offering products at prices generally under $10. In 2023, the company began expanding into international markets, starting with Mexico.
However, Dollar General has recently lowered its annual forecasts, citing increased competition, especially from Walmart, a limited e-commerce presence, and financial pressure on low-income customers who are prioritizing essential purchases. As a result, 2024 has been labeled a "reset year" for the company.
Key figures:
- Sales: $38.7 billion
- 5-year CAGR: 8.6%
- Net margin: 4.3%
- Net debt: $6.5 billion
- ROE: 27%
- Market capitalization: $17.7 billion
Dollar Tree generates $30.7 billion in revenues and operates 16,774 retail stores under two main brands:
- Dollar Tree: 8,415 stores offering a variety of brands, most priced at $1.25.
- Family Dollar: 8,359 stores, focused on merchandise priced between $1 and $10. These stores tend to be smaller than Dollar Tree locations.
As a major competitor to Dollar General, Dollar Tree is facing similar challenges and has also revised its annual forecasts downwards.
A few quarters ago, both companies' shares were near record highs, and it seemed that inflation might benefit them. However, the prolonged inflationary period has led consumers to cut back on their purchases. As a result, the share prices of both Dollar Tree and Dollar General have fallen to pre-pandemic levels.
Key figures:
- Sales: $30.6 billion
- 5-year CAGR: 6%
- Net margin: N/A
- Net debt: $2.7 billion
- ROE: N/A
- Market capitalization: $14.3 billion
4/ Local and specialty retailers
This company operates 2,658 convenience stores across 17 U.S. states, with more than half located in Iowa, Missouri, and Illinois. Nearly 75% of these stores are in areas with fewer than 20,000 residents. In addition to its retail outlets, Casey's offers gasoline stations, with fuel accounting for 63.3% of revenues, while the rest primarily comes from food products. Notably, Casey's ranks as the fifth-largest pizza chain in the U.S. and employs 20,935 people.
Casey's stands out in a market often seen as challenging. Over the past decade, its stock price has surged tenfold, a performance comparable to some Silicon Valley tech firms.
For years, Casey's has maintained a growth pace perfectly suited to its resources—steady enough to avoid excessive debt, yet fast enough to ensure consistent expansion. As a result, the company has added stores at a proportional rate each year, and its financial performance remains strong. More importantly, Casey's is developing a competitive advantage, or MOAT, by building a robust network of convenience stores and gas stations in the heart of the U.S.
Key figures:
- Sales: $14.8 billion
- 5-year CAGR: 12.2%
- Net margin: 3.4%
- Net debt: $1.6 billion
- ROE: 17.7%
- Market capitalization: $13.8 billion
Based in Phoenix, this 407-store chain specializes in organic food and products tailored to various lifestyles, including gluten-free, vegan, non-GMO, and plant-based options. The company caters to a selective customer base that prioritizes food wellness. Sprouts Farmers Market places significant emphasis on marketing, as in this niche sector, the narrative surrounding the benefits of its products is crucial for attracting customers.
Growth has been impressive, with revenues growing 2.3 times over the past decade and net profitability stabilizing at just under 5%. The company's aggressive share buybacks have contributed directly to its earnings per share growth. However, the company is currently highly valued, and future growth will need to be sustained to justify such valuation multiples.
Key figures:
- Sales: $6.8 billion
- 5-year CAGR: 5.6%
- Net margin: 3.8%
- Net debt: -$67 million
- ROE: 23.6%
- Market capitalization: $10 billion
