Walmart Canada is expanding its grocery selection in an effort to take some market share from the likes of Loblaws and Sobeys.
But a retail analyst at Desjardins says Walmart could soon take the supermarket fight to the next level, and open an actual grocery store chain in Canada.
Keith Howlett says Canada is a likely place for Walmart to launch its Neighborhood Market chain.
A Walmart Neighborhood Market location is pictured in this photo from Walmart.com.
The discount grocery store chain is proving a success in the U.S., with sales growing for 20 straight quarters. The company has also seen a 7-per-cent increase in same-store sales in the most recent quarter.
“We speculate Walmart Canada may test this concept in Canada within the next three years,” Howlett wrote in a client note Thursday.
The Neighborhood Market is Walmart’s plan for competing with big-box U.S. grocery chains like Publix and Albertsons. The stores are about one-fifth the size of a Walmart Supercentre and offer discount pricing on a full selection of grocery and pharmacy items.
Walmart recently changed strategies, essentially giving up on its chain of small urban locations known as Walmart Express. Analysts say the company will focus instead on growing its Neighborhood Market chain and its supercentres.
In Canada, grocers “continue to grapple with the growth of Walmart Canada in discount groceries, and the increasing appeal of Costco Canada’s narrow selection of grocery product items to middle- and higher-income households,” Howlett wrote.
Howlett noted that Walmart has been increasing its market share in Canada. Same-store sales grew by 4.6 per cent in the most recent quarter, compared to 2.6 per cent at Loblaws grocery stores, 2.7 per cent at Sobeys and 5 per cent at Metro.
“Profitability of four out of the five major players in the market is increasing at this time,” Howlett noted.
He said growth in the number of stores has plateaued, and the competition is now focused on same-store sales growth. This often means retailers will be looking at new ways to entice shoppers into stores, such as price discounts and expanded product offerings.