Inflation cools, but “funflation” persists

You’ve likely heard the good news. Inflation is coming down. In June, the Consumer Price Index rose by three percent over the last 12 months. While that’s still above the Fed’s target of two percent, it’s getting close. When you strip out food and energy, you get at what is called “core” inflation. This number shows growth of 4.8 percent over last year.  While higher than overall inflation, this is still a good number.  Many economy watchers see this as a positive trend.

But some categories are growing more, like services and eating out.

• In June 2023, the Consumer Price Index grew by only 3% year-over year. 
  • But food away from home grew by 7.7%... 
  • …and services grew by 6.2%.

Since the pandemic ended, we’ve traded in some spending on goods for experiences. That demand for the fun activities we once longed for has helped to keep prices growing. How long will this “funflation” persist? That’s an open question.

Entertainment concepts expand to meet demand

That demand for experiences could be a benefit for some commercial property owners. That’s because it has fueled a growing list of expanding entertainment concepts.

• Download the JLL Entertainment report here.

In a recent report, we counted over 9.1 million square feet of entertainment concepts planned to open in the U.S. and Canada in the next two years.

Dollar Tree rises above the dollar to expand its offerings

Value retailers that sell consumables have been pinched by rising costs and have had to pass those costs along to consumers. This can be especially tricky for a store with “dollar” in its name. When Dollar Tree experimented with pushing its lowest price point up to $1.25 at select locations in 2019, many shoppers initially pushed back.  But today, that move has helped the chain improve sales and paved the way for a move into higher price points and more expensive categories like frozen foods. 

• Dollar Tree has historically sold fewer grocery items than rival Dollar General. 
• Dollar General stores earn $45 more per square foot than Dollar Tree. 

(Source: Creditntell estimates for Dollar General for 2/3/2023 and Dollar Tree for 1/8/2023.)

Dollar Tree plans to roll out these new higher price points across all stores by the end of this year. 

Walgreens to close 150 stores… and acquire 120 pharmacies

Drug store chains were economic beneficiaries of the pandemic. But now, they have seen declines in traffic and spending as COVID fades into the past. At Walgreens, this decline has led to cost cutting measures, including a 10% cut in workforce and an announced 150 U.S. store closures. This may sound like a large number of stores, but for a chain like Walgreens with over 8,700 locations, it’s only 1.7% of the store fleet. And Walgreens recently announced the purchase of 120 pharmacies from Brookshire Grocery Co. in Texas, Louisiana, and Arkansas. Most of which will now operate inside the Brookshire supermarkets under the Walgreens brand.