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Tickers in this Article: COST, BJ, WMT, SWY, XLP, KR
A new wave of frugality has hit the country, as more and more Americans have tightened their purse strings during this prolonged recession. Dubbed the "New Normal," this movement towards increasing personal saving and decreasing frivolous spending is having far-reaching effects on our consumer driven economy. As Americans are rediscovering Jenga and pizza instead of going out, analysts predict that this trend could last quite a while, upwards of seven years. This period could be highlighted by higher unemployment, more deleveraging, more regulation, and overall a weaker U.S. dollar.

The obvious investment for the new normal is in consumer staples, and the Consumer Staples SPDR (NYSE:XLP) has performed accordingly. The ETF has beaten the broad stock market index by nearly 15% during the recession. But what is surprising isn't that consumers are focusing on the downturn resistant world of razor blades, cereal and toilet paper, but where they are shopping for these items.

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Grocery Stores Take a Back Seat
Cash-starved consumers are now prioritizing their purchases, and there has been a shift away from traditional grocery stores. Wholesale and warehouse clubs have been one of the stronger performers throughout the past year as they have used their low-cost bulk size advantage to woo cost concerned consumers, much to the chagrin of traditional grocery chains. Shoppers have been greeted with new fresh food offerings as well as the "surprise" low cost discretionary finds that these clubs are known for. The grocery business is a game of inches, as profit margins are razor thin. Recent price wars between major operators to gain market share have begun to take their toll on cash flow. More recently, supermarket chain Safeway (NYSE:SWY) announced that 2010 results could miss expectations, based on a tough year. While same-store sales showed a slight 1% gain. Last year, they fell 2.5%.

Insulated from the resulting price wars, wholesale clubs have flourished during the recession. Both Costco (Nasdaq:COST) and BJ's Wholesale Club (NYSE:BJ) saw an increase in foot traffic, and grew their membership figures for the quarter. Costco reported an increase of 9% in sales at established stores. The company was able to capitalize on its international efforts with a significant gain from the weaker dollar and locally with higher gasoline prices. Smaller operator, BJ's grew 4.6% with a 2.3% bump from gasoline. (To analyze retail stocks, investors need to be aware of the most common metrics used, as well as the company-specific and macroeconomic factors that affect operations. To learn more, check out Analyzing Retail Stocks.)

The Potential Real Winner
Showing a 3.8% same store sales for its Sam's Club operations, Wal-Mart (NYSE:WMT) stores may be the biggest winner in the grocery store/warehouse battle. Wal-Mart has quickly become the country's largest grocery chain, and felt the effects of the price war. Comparable store sales were down all of 2% from the year earlier quarter. Wal-Mart could continue to show price aggression on its regular staple items, while moving more goods through its higher margined warehouse clubs. Something that analyst believe haven't be taken into account for Safeway's, Kroger (NYSE:KR) and these rest of the industries estimates for the year. In addition international sales, a much higher margin business soared 19.5% with comparable store sales growing by 5.6% in Brazil and 4.8% in China. With the market focusing on the 2% drop here in the U.S., as occurrence that has never happened before, smart investors could snap up shares at less than 13.4 projected 2010 earnings.

Bottom Line
The recession has caused a shift in the way we shop. Grocery stores are seeing the effects of lowering prices on their balance sheets and cash flow, while warehouse clubs have seen their market share grow over the past year. Both Costco and BJ's can be seen as direct plays on this new growing trend with Wal-Mart being the ultimate global consumer play in the months ahead. (We look at a retailer's inventory turnaround times, its receivables as well as its collection period. To learn more about investmenting in retail stores, read Measuring Company Efficiency.)

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