Independent Grocers See Sales Decline
Independent supermarkets posted a gain of 1.5 percent in same-store sales for 2014, according to the 2015 Independent Grocers Financial Survey conducted by NGA and FMS Solutions. However, much of that gain can be attributed to food-at-home inflation (2.4 percent), rather than true sales gains. When adjusted for inflation, industry sales were down nearly 1 percent.
“While overall results were down over the prior year,” said Robert Graybill, president and CEO, FMS Solutions, “much of this decrease was fueled by the Northeastern part of the country facing non-recurring business challenges on the wholesale side along with a harsh winter. Despite these challenges, the top 25 percent managed an impressive return, as always.”
Total store margins were down nearly 26 percent, especially in the meat department, which had above average inflation. While margins were down, expenses were up for the fourth consecutive year. Independents saw total expenses for 2014 increase to 23 percent as labor costs and utilities rose.
The result is a significant drop in net profit before taxes, from 1.5 percent in 2013 to 0.9 percent in 2014. Single-store operators fared better than their multi-store counterparts with an increase of 1.5 percent in sales gains, and 27 percent total store gross margin as well as net profits rising 1.2 percent.
Those operators who exceeded 2.4 percent in net profits before taxes also outperformed the rest of the category in sales, margins, asset performance and expenses.
Independents cited competition as having the greatest impact on business, with supercenters cited as the greatest competition. Nearly 81 percent of those surveyed have a Walmart supercenter operating in their market. Other impacts on business included the overall economy and the rising costs of hiring/retaining employees.
One of the biggest concerns for the independent operator is healthcare, as costs increased 4.4 percent on average in 2014 with nearly 70 percent of operators reporting their healthcare costs increased.
“Despite a challenging and competitive environment, independent supermarket operators, nimble in their nature, continue to find innovative ways to differentiate themselves in the marketplace,” said Peter J. Larkin, president and CEO, National Grocers Association. “Whether it's a change in store format, more engagement on social media, investment in their workforce, or a focus on the fresh/perishable department, independents are employing tactics to not only meet consumer demand, but become the store of choice.”