ARLINGTON, Va. — Food retailers suffered a decline in profitability and same-store sales in 2009, although they were more optimistic about 2010 results, according to the annual Speaks industry survey research released last week by Food Marketing Institute here.
Median net income for food retailers in the survey totaled just 1.22% of sales in 2009, vs. 1.43% in 2008, FMI said in the report, as same-store sales were down 0.82%. Total sales were up only 0.12%.
Weekly sales were $310,945 per store in 2009, the survey found (the median of the reported average), with large chains posting significantly higher average weekly sales than small independents. Median weekly sales per square foot of selling area was $11.77, measured across all supermarket formats.
More than half, 56.9% of retailers, reported negative identical-store sales, up from 16.9% who reported negative same-store sales in 2008. Even more retailers — 61.1% — reported growth numbers below the rate of food-at-home inflation, which was calculated at 0.5% for 2009.
“Shoppers' overwhelming focus on price and value has led to fierce price competition among food retailers,” said Leslie G. Sarasin, FMI president and chief executive officer, in a prepared statement accompanying the report. “As a result, supermarkets are focused on trying to distinguish themselves from the competition by fine-tuning their private-label strategies, SKU reduction and price differentiation in order to retain their current customers and attract new ones.”
Projecting trends for 2010, about 55% of retailers in the survey said they expected gains in the average basket size this year, vs. 30.3% who had that expectation a year ago. Similarly, 44.1% of retailers said they expected gains in trip frequency in 2010, vs. 26% who said that last year.
The economy, competition — primarily from supercenters and other full-service supermarkets — and rising health care costs were the top three concerns for food retailers.
Only 26.7% of retailers believed the marketplace had a positive impact on identical-store sales in 2009.
Food retailer health care costs increased an average of 8.1% between 2008 and 2009, and more than one-third of retailers reported a double-digit increase in cost.
To share cost increases with their workers, 70.2% of retailers said they increased plan premiums, and 53.2% said they increased copays. Fourteen percent of retailers reduced plan benefits, and 2.3% increased eligibility requirements.
Retailers reported the lowest level of net income before taxes and extraordinary items of the last decade in 2009. The median came in at 1.62% of total sales, down from 1.8% in 2008 and 2.11% in 2007.
Retailers continued to promote private label and store brands as part of their value proposition, according to the report, with 98.5% of retailers reporting that they offer such products in the most recent survey, up from 94.4% in 2007. More retailers are also offering multiple tiers of private-label items, with 71.4% of retailers reporting that they do so, vs. 47.1% in 2007.
The survey found a sharp increase in the number of retailers saying they offer fresh, prepared foods to consume in the store, with 84.5% saying they offer such products and facilities, up from 73.8% last year and 64.4% in 2007. Accordingly, wireless Internet access is also on the rise, with 39.7% offering the service in the most recent survey, vs. 20.7% in 2007.
More retailers also report that they are paring back on SKUs, the survey found, with 24.1% saying they plan to do so over the next two years. That compares with 16.9% who said they planned to cut SKUs last year and 10.3% who said they planned to so in the 2008 survey.
Similarly, in the most recent survey, only 8.6% of retailers said they were adding SKUs, compared with 15.4% who said that a year ago and 33.8% who said they were adding SKUs in the 2008 survey.
“The Food Retailing Industry Speaks: The Annual State of the Industry Review 2010,” funded in part by PepsiCo, is available for sale at www.fmi.org/store/.
Supermarket median net income in 2009
Source: FMI Speaks