Report Points to Supermarket Challenges

New York City, The U.S. supermarket industry continues to experience substantial challenges, for both structural and economic reasons. According to "Challenges Continue for U.S. Supermarket Sector," a report released today by Standard & Poor's Ratings Services, supermarkets historically have been viewed as one of the most stable sectors of retail because of relatively steady demand for their products throughout economic cycles and the favorable cash-flow characteristics of the business.

"Still, the sector has been less predictable than usual over the past two years, as a result of market share gains by nontraditional food retailers and soft consumer spending," said Standard & Poor's credit analyst Mary Lou Burde. These trends are expected to continue into the near future, with some resulting in a permanent change in the competitive landscape and others normalizing as the economy strengthens. Supermarkets are making progress in lessening the employee benefit burden through intense negotiations with unions, which are yielding contracts more favorable to the companies.