FMS Financial Management Systems LTD and Canadian Federation of Independent Grocers release 2018 Canadian Independent Financial Survey.
Profits held steady at 1.5% of sales and EBITDA increased to 1.8%. Labor expense increased by .7%. This cost increase was anticipated given legislated wage hikes in some areas in late 2017 and early 2018. However gross margin performance was strong as respondents realized 1.9% year over year growth. Depreciation was up .4% the prior year which factors into the EBITDA growth.
Food inflation for the survey period was +1.6%. The survey results, however, yielded a .3% decrease meaning sales decreased in real dollars by 1.9% year over year. Notably, Quebec and Ontario posted positive gains of 1.1% and 0.6% respectively before adjustments for food inflation.
The battle for top-line sales continues to escalate and we were surprised to note 70% of respondents do not have an online ordering offering. “Click and pick” is the most popular form of online shopping amongst the balance of respondents. As retailers try to grow sales and retain parity with competitors. The ‘click and pick’ online solution offers a quicker rollout and is a much lower cost alternative compared to online shopping coupled with delivery.
Overall survey results were positive. Independents are faring well in an increasingly competitive landscape. Additionally, retailers have had to absorb the cost of legislated wage hikes. Stable profit, improved EBITDA, and margin growth reflect the resilience of the independent retailer segment. Growing top line and managing labour will be the key to success as we move forward. Understanding labour metrics and continued increases in labour efficiency coupled with adopting a viable online shopping platform will be crucial. Robert Graybill of FMS stated, “It will be critical that retailers develop good labour management solutions and begin to research the feasibility and payback of investing in online ordering as this is the next real threat to top line sales.”
—CNW
