Major department stores and retail giants like Wal-Mart Stores Inc. (NYSE:WMT) aren’t the only U.S. companies heavily discounting this holiday season, according to remarks at a Barclays PLC (LON:BARC) conference on Monday.
U.S. supermarkets, which traditionally start promotions the week before Thanksgiving, are also likely to be aggressive on promotions this year, said Barclays senior foods analyst Meredith Adler.
One key indicator of the depth of discount pricing are frozen turkey prices. The retail cost for a classic Thanksgiving dinner, according to American Farm Bureau Federation data, is down 1 percent this year, to the lowest price since 2010.
“Frozen turkey is kind of a leading indicator for how aggressive and promotional the environment will be,” Adler told reporters at a New York media event. “And it’s looking like it’s going to be very promotional.”
Remarkably, leading supermarkets are selling turkeys for $0.47 to $0.79 per pound, representing an average 35 percent markdown from the wholesale cost of about $1/lb for the year so far. In some cases, they sell turkeys at about half the wholesale price they buy it for, making a loss on the sale.
That makes turkey as a “loss leader,” or an enticing product which lures shoppers into the stores, where they're tempted to buy extra regularly priced items. In most cases, shoppers can only unlock that low turkey price by making other purchases totaling $35 or $50, according to Adler.
“They can’t come in and just get that price,” said Adler, of hopeful customers seeking cheap turkeys and cheap turkeys only.
Still, that’s the lowest frozen turkey prices that Adler can recall in recent memory.
But overall food prices rose slightly, according to the October Consumer Price Index released last week, meaning that turkeys and poultry outside of Thanksgiving cost 1.7 percent more than last year, according to IHS Global Insight.
Barclays expects holiday sales overall to rise 1.5 to 2 percent, relative to a 1.8 percent increase in holiday sales in 2012. That includes restaurant and retail, alongside supermarkets and drug stores. Food, drug and dollar stores will perform slightly better than clothes sellers and hard goods retailers, and on par with restaurant sales, on Barclays’ estimates.
Broader holiday sales forecasts show mixed expectations, with the benchmark National Retail Federation pegging holiday sales up 3.9 percent this year, above average in historical terms.
Private label turkey prices have been kept low by supermarkets, in a bid to compete with giants like Wal-Mart and Target Corporation (NYSE:TGT), according to a special survey on Monday by Supermarket News. At those giant retailers, the cheapest frozen turkeys could be found in Atlanta, Chicago and Los Angeles, where some 12-pound turkeys cost just under $9.50.
Nat Rudarakanchana covers commodities and companies for the International Business Times. He is especially interested in precious metals, the food and drink industry, and...