Fiscal 2013 Proves Challenging for Independent Grocery Retailers
Independent grocers’ financial performance mirrored the overall economy in 2013, showing modest growth for some and others experiencing a loss of the gains they achieved in 2012, according to the 2014 Independent Grocers Financial Survey, a joint study conducted by the National Grocers Association (NGA) and FMS.
Competitive pressures proved especially fierce. "Competition in our industry will always be fierce," said Peter J. Larkin, president and CEO, NGA. "In addition to supercenters and conventional supermarkets, we've seen a variety of other formats, like dollar stores and drug stores, and price impact stores that are all competing for the food dollar. But, as always, entrepreneurial independent grocers continue to adapt and rebound in what remains to be a tough recovery for our economy."
Independent grocers maintained same-store sales growth, with a modest increase of 0.2 percent after adjusting for inflation. However, only multi-store formats saw an increase; single stores lost ground. Consumers took fewer trips to the store (10,704 transactions per store per week) as the second half of 2013 saw an increase in gas prices, but when they went to the store, the ring was slightly higher at an average of $24.38.
Single stores also held their own on margins while multi-stores dropped back to 2010 levels, which dropped the total-store margin to 26.12 percent of sales on average.
Expenses also rose for the third straight year, with many independents concerned about the rising costs of healthcare, which rose 10.1 percent. More than 80 percent of independent grocers reported that healthcare costs had gone up. Labor, benefits and utilities also increased.
All these factors combined for a 1.51 percent drop in net profits. The top 25 percent of retailers outperformed the rest of the group with an average net profit increase of 4.1 percent. "The profit leaders outperformed the rest in nearly every benchmark, including sales, margins, asset performance, and expenses control," says Robert Graybill, president and CEO of FMS. "By investing back into their companies in good and bad economic times, yet keeping long- term liabilities and expenses in check, they extended their lead compared with prior years and far outperformed the publicly-traded grocers."
Visit NGA for more information or to purchase a copy of the survey results.