ARLINGTON, Va. — Given the tough economic outlook, independents need to keep their eyes peeled for potential acquisitions of competitors that could help them grow their businesses, according to David Schroeder, a principal in Food Partners, Washington.
His recommendation was included as part of the 2010 Independent Grocers Survey, a joint study by the National Grocers Association here and FMS Solutions, Baltimore.
“Looking forward, the economic downturn will likely accelerate a wave of divestitures of underperforming stores and potentially provide opportunities for a number of retailers to grow their businesses,” Schroeder said. “Our recommendation is that retailers prepare for such events … [that] will be driven by creditors and come to fruition on an extremely short timeline.”
The survey compared results among independents in 2009 with those of 2008. Among its findings:
Average net profits before taxes fell to 1.68% in 2009, compared with 1.88% among 2008 respondents — “a solid showing, considering the economic environment,” Robert Graybill, FMS president, pointed out. That compared with an average pre-tax profit of 1.31% for the top publicly traded chains, while the 25 independents with the highest volume saw net profits of 4.1%.
Top-line sales increased 3.94% among respondents, down from an increase of 4.31% a year ago. However, results in 2008 were heavily influenced by CPI Food at Home inflation, the study pointed out.
Gross margins fell 66 basis points to 26.94%, compared with 26.28% in 2008, “as consumers concerned about job security, loss of retirement fund value and equity in their homes began a search for value,” the survey noted.
Inventory turns remained relatively unchanged at 18.03 times a year, compared with 17.99 turns in 2008.
With capital difficult to obtain, 50% of respondents said they had already reduced capital spending from 2008 to 2009, while another 50% said new tax incentives would motivate them to increase capital spending.
The top political concern of respondents was health care reform, followed by energy costs.