Disinflation Nation: Perimeter Price Declines, Softening Transactions & Price Investments Suggest a Tough 2026 Outlook for Food Retailers

By Jonathan Feeney and David Schick and David Katzman and Jack Hermann Published on January 9, 2026 PDF

TLDR: We think Wednesday’s Albertson’s Q3 print (ACI -3.7% for the week) is a harbinger of tougher headlines and shakier outlooks for all food retailers, even vendors. Input costs are down, most sharply in pass through perishables, hurting the ID sales outlook. It now seems food retailers are using any benefits from same as fuel for price investments to gain traffic share in early 2026, while already navigating unit declines and major digital transformations.

Costs Are Down, Most Heavily At the Perimeter. Weighted average food industry costs are down -9.0% y/y, with some of the heaviest declines in pass through categories like meats (-33%y/y) & dairy (-24% y/y) that comprise a substantial (~20%) component of sales in a typical grocery store (See Fig. 1 & 2). Those more mechanical price decreases will likely affect headline comp negatively.

Food Retailers Are Investing Tailwinds in Price to Protect Traffic, Even Using AI To Help. From recent trends & commentary, its clear food retailers intend to invest cost tailwinds in price. Furthermore, they are doing so in the context of declining industrywide units, alongside softening spending & transaction count (See Fig. 3 & 4) in both mainstream and premium grocery. Until fall, premium grocery had been outperforming considerably — its now also decelerating.

Last Wednesday, while suggesting a lower near-term ID sales outlook, Albertson’s noted :“trends improved sequentially .. reflecting the impact of our surgical price investments. and to expect “selective price investments in key categories.” They added “we’ll be equipping our merchants with AI-driven insights and automated execution to optimize pricing.“

These echo sentiments shared by Kroger on 12/5/25: “We also increased our price investments this quarter.…these trends reinforce the importance of delivering value through lower prices, affordable quality in Our Brands products and more promotions for customers to save” They added “If you look at actually the breakdown of gross margin, selling grocery itself actually declined as we invested in pricing.“

Digital Success Remains a Key Bright Spot…. ACI just reported 21% growth in digital sales (9.5% of sales overall) for its 3^rd quarter (November). Kroger’s e-commerce is now at $14 billion annual business (~10% of total) having grown double-digit for 6 straight quarters (October). Kroger is presently introducing in-house agentic, starting with Instacart’s AI-powered Cart Assistant on its desktop site & mobile app.

…And Increasingly the Key Battleground. ACI told us this week that digitally engaged consumers spend 2x-3xthe average customer, with a much higher lifetime customer value. Kroger’s recent pivot (November) to expand its Instacart partnership, close its own automated fulfillment centers, and expand other delivery partnerships was a clear nod to the urgency of improving delivery speeds and overall execution. We think the consumer will likely win with a better experience, but with uncertainty for retailers’ cash flow and profits.

Figure 1: Weekly Input Commodity Performance by Group

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 2: Biggest Input Cost Movers y/y

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 3: Grocery Spending Summary

Figure 4: Grocery & Meal Delivery Spending Summary

DISCLOSURES AND DISCLAIMERS

Analyst Certification

The analyst primarily responsible for the preparation of this report attests to the following: (1) that the views and opinions rendered in this report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the analyst’s compensation was, is, or will be directly related to the specific recommendations or views in this report.

Analyst Certifications And Independence

Each of the Optimal Advisory analysts whose names appear on the front page of this report hereby certify that all the views expressed in this Report accurately reflect our personal views about any and all of the subject securities or issuers and that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views of in this Report.

Optimal Advisory (the “Company”) is an independent equity advisory provider. The Company is not a member of the FINRA or the SIPC and is not a registered broker dealer or investment adviser. Optimal Advisory has no other regulated or unregulated business activities which conflict with its provision of independent advisory work.

Limitations Of Research And Information

This Report has been prepared for distribution to only qualified institutional or professional clients of Optimal Advisory. The contents of this Report represent the views, opinions, and analyses of its authors. The information contained herein does not constitute financial, legal, tax or any other advice. All third-party data presented herein were obtained from publicly available sources which are believed to be reliable; however, the Company makes no warranty, express or implied, concerning the accuracy or completeness of such information. In no event shall the Company be responsible or liable for the correctness of, or update to, any such material or for any damage or lost opportunities resulting from use of this data.

Nothing contained in this Report or any distribution by the Company should be construed as any offer to sell, or any solicitation of an offer to buy, any security or investment. Any research or other material received should not be construed as individualized investment advice. Investment decisions should be made as part of an overall portfolio strategy and you should consult with a professional financial advisor, legal and tax advisor prior to making any investment decision. Optimal Advisory shall not be liable for any direct or indirect, incidental or consequential loss or damage (including loss of profits, revenue or goodwill) arising from any investment decisions based on information or research obtained from Optimal Advisory.

Optimal Advisory may receive consulting or other compensation from securities mentioned but is not related to any recommendation in this report.

Reproduction And Distribution Strictly Prohibited

No user of this Report may reproduce, modify, copy, distribute, sell, resell, transmit, transfer, license, assign or publish the Report itself or any information contained therein. Notwithstanding the foregoing, clients with access to working models are permitted to alter or modify the information contained therein, provided that it is solely for such client’s own use. This Report is not intended to be available or distributed for any purpose that would be deemed unlawful or otherwise prohibited by any local, state, national or international laws or regulations or would otherwise subject the Company to registration or regulation of any kind within such jurisdiction.

Copyrights, Trademarks, Intellectual Property

Optimal Advisory, and any logos or marks included in this Report are proprietary materials. The use of such terms and logos and marks without the express written consent of Optimal Advisory is strictly prohibited. The copyright in the pages or in the screens of the Report, and in the information and material therein, is proprietary material owned by Optimal Advisory unless otherwise indicated. The unauthorized use of any material on this Report may violate numerous statutes, regulations and laws, including, but not limited to, copyright, trademark, trade secret or patent laws.

Additional Information is available upon request.

For more information on receiving Optimal Advisory, email: [email protected]