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The Costco-effect: Local supermarkets see drastic drop in sales after Costco's arrival 6576

7. júl 2017 13:56

The largest Icelandic supermarket chains have experienced a significant drop in sales following the arrival of US warehouse retailer Costco. Hagar, which operates the Bónus and Hagkaup supermarkets, has announced that the drop in sales was larger than anticipated, causing its shares to take a dip in the Icelandic Stock Exchange.

A 8.5% drop in sales
The share price of Hagar has dropped 28% since the opening of Costco at the end of May. The share price of Hagar has not been lower since August 2014. The company recently announced a 8.5% drop in sales in June. The market saw a sell-off following the announcement.

Stock market analysts who spoke to the local news site Vísir said that the drop was larger than expected. However, investors and analysts do not expect a continuation of the Costco-effect. Their reasoning is that as the novelty of Costco wears off many consumers will slowly revert to previous shopping habits.

Long term impact still uncertain
One analyst with Landsbankinn bank told Vísir that it was still not clear what the long-term effect of Costco would be:

We believe the biggest blow came in June, and perhaps in this quarter, but that the effects will then ease out, so to speak. We have yet to see how Hagar will respond to this new competitive environment.

The largest Icelandic supermarket chains have experienced a significant drop in sales following the arrival of US warehouse retailer Costco. Hagar, which operates the Bónus and Hagkaup supermarkets, has announced that the drop in sales was larger than anticipated, causing its shares to take a dip in the Icelandic Stock Exchange.

A 8.5% drop in sales
The share price of Hagar has dropped 28% since the opening of Costco at the end of May. The share price of Hagar has not been lower since August 2014. The company recently announced a 8.5% drop in sales in June. The market saw a sell-off following the announcement.

Stock market analysts who spoke to the local news site Vísir said that the drop was larger than expected. However, investors and analysts do not expect a continuation of the Costco-effect. Their reasoning is that as the novelty of Costco wears off many consumers will slowly revert to previous shopping habits.

Long term impact still uncertain
One analyst with Landsbankinn bank told Vísir that it was still not clear what the long-term effect of Costco would be:

We believe the biggest blow came in June, and perhaps in this quarter, but that the effects will then ease out, so to speak. We have yet to see how Hagar will respond to this new competitive environment.