Published on: November 26, 2003
During one of the most challenging periods in the recent recession, food retailers turned in a resilient economic performance, according to the Annual Financial Review, 2002-2003 released by the Food Marketing Institute (FMI).
Operating income increased to a five-year high of 3.34 percent in the fiscal year from April 1, 2002, to March 31, 2003. "This figure reflects disciplined and efficient management at the store level," said Tim Hammonds, FMI president and CEO. "Supermarkets are spending their dollars on technology to improve productivity and on the products and services that customers value."
The industry also posted a five-year high in another key indicator, gross margin return on inventory (GMROI), at 409 percent. "This result shows smart inventory management," Hammonds said. "For over a decade, the industry has focused intensely on reducing inventory costs. We're now seeing progress, especially among the smaller companies."
For retailers with sales below $100 million, the GMROI increased to 530 percent, up from 470 percent the previous year.
Astute inventory management was also evident in the 3.33 percent asset turnover rate, another five-year high, along with inventory as a percentage of assets ó 22.03, down from 26.64 a decade ago.
In earnings before interest, taxes, depreciation and amortization (EBITDA), the industry scored 5.08 percent - the second straight year in the past five that this figure surpassed the 5 percent mark.
While industry net profits dropped below the one percent mark for the first time in a decade. Hammonds said, "The predominant reason had nothing to do with industry operations. Large companies changed accounting practices and wrote off significant extraordinary expenses. If these costs are discounted, industry profits were well within the recent range of 1.3 percent."
"Despite the industry's resilience, competition continues to constrain both top and bottom line growth. Price-driven competition remains relentlessly intense, and today just about every retailer - from big box stores to gas stations - is selling food."
Hammonds aid that the report provides cause for optimism in the performance of the top 25 percent profit leaders. "These companies are investing profits in their stores with capital expenditures nearly twice that of industry norms (4.71 percent vs. 2.67 percent). They're outpacing other companies by even greater margins in return on assets (7.64 percent vs. 3.04 percent)and return on equity (24.48 percent vs. 10.60 percent)."
The FMI Annual Financial Review, 2002-2003
is available to FMI members at the FMI website: http:// www.fmi.org/pub/