FMI Review: Food Retailers Achieve Highest Net Profits in Nearly 30 Years
WASHINGTON, DC - The supermarket industry posted its highest net profits in nearly three decades at 1.25 percent of sales, according to the Food Marketing Institute's 2000-2001 Annual Financial Review. Operating income, at 3.03 percent, was near the 10-year high of 3.05 percent.
FMI President and CEO Tim Hammonds attributed the high profits in part to retailers' efficiency, rigorous cost controls and strategic use of technology, while noting that the percentage of disposable income spent for food-at-home continues to remain low (6.2 percent). In addition, food inflation in 2000 was only 2.3 percent, more than a full point below the consumer price index increase for all items (3.4 percent), according to the Bureau of Labor Statistics.
The gains in efficiency were most evident in reduced inventory costs, which continued a long-term decline - from 27.56 percent of assets a decade ago to 22.19 percent. At the same time, capital expenditures remained high, at 2.99 percent of sales - the second highest level in five years.
"These figures paint the picture of a resilient industry focused on efficiency and delivering the products and services that consumers demand," said Hammonds.
"Most importantly, they are putting the products on the shelf and delivering the services that consumers want and need. Food retailers are accomplishing this by analyzing scanning data and using category management to ensure that entire product groups mirror customer demand.
"They are providing one-stop convenience by adding gasoline pumps, full-line banking services, wellness centers, pharmacies, coffee bars, and prepared, ethnic and natural foods - all investments that will benefit the industry and our customers well into the future."
By virtually every measure, the industry's financial performance improved:
* Return on assets - 3.78 percent, up from 3.55 percent in 2000-2001.
* Return on equity - 13.42 percent, from 10.71 percent.
* Asset turnover - 3.21 percent, from 3.18 percent.
* Earnings before interest, taxes, depreciation and amortization (regarded by many analysts as the best measure of operating performance) - 4.92 percent, up from 4.78 percent and the second highest level in the past five years.
FMI President and CEO Tim Hammonds attributed the high profits in part to retailers' efficiency, rigorous cost controls and strategic use of technology, while noting that the percentage of disposable income spent for food-at-home continues to remain low (6.2 percent). In addition, food inflation in 2000 was only 2.3 percent, more than a full point below the consumer price index increase for all items (3.4 percent), according to the Bureau of Labor Statistics.
The gains in efficiency were most evident in reduced inventory costs, which continued a long-term decline - from 27.56 percent of assets a decade ago to 22.19 percent. At the same time, capital expenditures remained high, at 2.99 percent of sales - the second highest level in five years.
"These figures paint the picture of a resilient industry focused on efficiency and delivering the products and services that consumers demand," said Hammonds.
"Most importantly, they are putting the products on the shelf and delivering the services that consumers want and need. Food retailers are accomplishing this by analyzing scanning data and using category management to ensure that entire product groups mirror customer demand.
"They are providing one-stop convenience by adding gasoline pumps, full-line banking services, wellness centers, pharmacies, coffee bars, and prepared, ethnic and natural foods - all investments that will benefit the industry and our customers well into the future."
By virtually every measure, the industry's financial performance improved:
* Return on assets - 3.78 percent, up from 3.55 percent in 2000-2001.
* Return on equity - 13.42 percent, from 10.71 percent.
* Asset turnover - 3.21 percent, from 3.18 percent.
* Earnings before interest, taxes, depreciation and amortization (regarded by many analysts as the best measure of operating performance) - 4.92 percent, up from 4.78 percent and the second highest level in the past five years.