Dive Brief:

• Tops Markets saw its same store sales drop 3.4% during the first quarter of this year amid a slowdown in store traffic, according to Supermarket News. The 173-store retailer also attributed its declines to food deflation and reduced funding for the Supplemental Nutrition Assistance Program.
• To combat the slowdown, Tops CEO Frank Curci said in a company release that Tops gradually increased its promotions in recent months and was seeing improved results by the end of the quarter.
• As an example, Curci highlighted six Hannaford stores Tops acquired last August as part of the Ahold Delhaize divestitures. He noted that the stores' sales improved as promotions increased, and are now making money for the company.

Dive Insight:

CEO Frank Curci said Tops' losses reflect “industry-wide trends.” The company’s sales, he said, accelerated as promotions increased throughout the quarter, indicating the fiscal second quarter would likely be better than its first. These comments are encouraging, but they mask the larger struggles Tops faces as a conventional retailer.

New York state, where Tops operates its 173 stores, is home to a host of strong operators — including Wegmans, Walmart, Price Chopper and Stop & Shop. While promotions can certainly give Tops stores a lift, the company will struggle against its competition without some key differentiating strategies. Tops has increased its assortment of fresh items and prepared meals, and the company sports a solid private label selection, store app and loyalty program. But it is still very much a conventional retailer operating at a time when customers are increasingly turning to alternative formats, including online shopping.

That said, Tops does run some very effective promotions. Over the holidays, it offered gift card discounts to shoppers based on how much they spent, and extended a popular “Price Lock Guarantee” that helped boost sales during a busy time of the year. These promotions helped the retailer maintain its market share at a crucial time.

Easing deflation and increasing promotions should produce results for the retailer, but other factors may weigh it down. The reliance on SNAP funding is troubling, especially considering the increased cuts proposed by the Trump administration. Tops also doesn’t have an e-commerce platform, which might not hurt the company right now, but definitely could down the road as competitors like Walmart continue to expand theirs.