The theories behind it are (a) higher turnover largely makes up for the lower margin, and (b) people who are there for consumables will frequently also buy something else with a higher margin. Like any business, there is no one metric (in this case gross margin) that tells the whole story, especially one that management has been (in effect, indirectly) *trying* to push down. It would be more informative to look at trends of gross margin in non-consumables, if it were reported separately.

...

Of course, over longer periods of time this strategy of having more food&bev has to demonstrate its veracity, say comparing two similar periods in the business cycle to see if the overall margin dollars per square foot have risen in real terms. If the sales are staying the same and the *only* change is falling margins (comparing similar periods in the cycle) then the strategy isn't working


Sales are up a bit, but it would be hard to say that the strategy is working - presumably, the consumables are low margin but not negative margin, so if income from operations is down steeply, as it is, from $3.6b in 2021 to $2.4b last year, or $2.1b TTM, if the strategy is working, it is just nullifying some other terrible phenomenon that is going the wrong way.

I guess the dilemma I have is, is this a good short term bet, and how short is short? I don't want to own them over the medium term, as I think everything is going against them - the shift to online retail, tariffs, the encroachment of other, cheaper discount retailers (particularly Walmart), and even, over the longer term, the gradual rise of prosperity, which means you are probably better to be at the aspirational end of the spectrum than at the bottom.

It is true that at 12 times earnings, if they can just recover a little bit, say getting margins halfway back to where they were a few years ago, then this could be good for a double in 12 months. I'm tempted, but haven't quite convinced myself.