Independent Grocers Improve Net Profits in 2011

The National Grocers Association (NGA) and FMS today released the results of their joint 2012 Independent Grocers Financial Survey. Despite the challenging economic environment, the independent sector held their own, posting an average net profit before taxes of 1.12 percent in fiscal year 2011. Independent grocers also grew same-store sales by 2.6 percent and improved gross margins across key store categories.

“Economic, market and shopper challenges are demanding that grocery retailers seek new ways to grow sales and profits and find further efficiencies in their businesses,” says Peter J. Larkin, NGA President and CEO.  ”It is extremely encouraging to see independents have done just that. They have pushed through one of the worst economic downturns in our nation’s history and continue to do so with much success.”

With continued economic woes and their far-reaching impact on the shopper, independents were faced with difficult decisions relative to pricing and margins in an inflationary environment. Same-store sales among independents increased over 2011 by 2.6 percent, but once adjusted for food-at-home inflation, the independent sector lost ground at a rate of -2.2 percent. However, the total store gross margin increased to 26.33 percent, with important gains in key departments. This ultimately translated in increased net profits before taxes of 1.12 percent of sales in 2011 from 1.08 percent in 2010 among independents.

The report’s review of the top 25 percentile in terms of net profits revealed a group of independents that managed to outperform the rest by a wide margin. These profit leaders more than quadrupled the national average at 4.67 percent – an increase of 60 points from 2010. “The profit leaders have developed a formula for success by gaining a close understanding of their local market, controlling expenses and growing margins,” says Robert Graybill, President and CEO of FMS. “By solid management decisions in good economic years, they managed to grow profits even further despite the difficult business environment.”

In addition to sales distribution and gross margin data by department, the report also provides detailed financial information by region, store sales volume and profit leaders. The general section of the report includes a thorough review of the nation’s economic and political landscapes and how they impact independent food retailers.

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