1. food and drink
2. food and grocery retailers
3. grocery stores

CFIG WEST SHOW 2015
A LOOK AT THE TOP PERFORMERS
Presented by:
Robert Graybill
April 2015
What’s in store?
•
•
•
•
Review of Economic Situation
What Does Todays Market Place Look Like
What Trends follow the top 25%
What are some of the best practices the top
performers use to maximize the bottom line?
Fiscal year 2014: the competition
backdrop
Look at Competition
• Target: What happened?
• Arrogance?
• Incompetence?
• Who really cares…the real question is who will take advantage of this?
• Other Big Box?....
• Independent?....
• Chains?....
• Safeway: Impact on wholesale/Competition
• Who supplies you?
• Do they compete with you?
Look at Competition
About Walmart Canada
Walmart Canada operates a growing chain of 389 stores nationwide, including 247
supercentres, serving more than 1.2 million customers each day. In addition,
Walmart Canada’s flagship online store, walmart.ca, is visited by 300,000
customers daily.
With more than 95,000 associates, Walmart Canada is one of Canada’s largest
employers and is ranked one of Canada’s top 10 most influential brands. Walmart
Canada’s extensive philanthropy program is focused on helping Canadian families
in need, and since 1994 Walmart has donated and raised more than $200 million
to Canadian charities. Additional company information can be found at
walmartcanada.ca, facebook.com/walmartcanada and at
twitter.com/@walmartcanada.
Look at Competition
The expansion plan announced Wednesday is expected to cost $340 million and create
3,700 construction jobs, 1,000 in-store jobs and 300 new positions at distribution
centres.
Target Canada's failure leaves store landlords scrambling for new tenants
The move comes after 11 new Walmart supercentres opened across Canada in
January, and on the heels of Walmart rival Target's ignominious retreat in the coming
weeks from the Canadian market, less than two years after opening to much fanfare.
Competition: supercenters have greatest
impact, but new formats rising
Avg. score
4.3
1. Supercenters
3.8
2. Conventional
supermarkets
78.8% of stores in the survey have a Walmart
supercenter in their direct market areas
Bodegas
Cash plus formats
Warehouse club stores
3.1
3. Limited assortment
stores
Convenience stores
Drug stores
Commissaries
2.5
4. Other formats
Farmer’s markets
Same day online delivery
2.0
5. Gourmet/specialty
stores
Butcher stores
1.
Competitive strategies: driving sales through
advertising and service
Marketing/advertising
29.7%
Customer service
20.3%
Capital investments, including remodels and…
17.6%
Focus on perishables
14.9%
Aggressive prices/EDLP
14.9%
Assortment/merchandising
12.2%
Loyalty program/rewards
8.1%
Social media/online engagement
6.8%
Finding further efficiencies
6.8%
Community involvement
Private label
5.4%
4.1%
Fiscal year 2014: the economy
Canada GDP Growth Annualized
8.0
6.1
6.0
5.1
5.4
4.3
4.0
3.8
3.4
2.2
2.0
3.2
2.7
2.5
2.6
2.1
2.0
1.9
2.2
1.9
1.2
2.4
2.0
1.7
0.9
3.2
2.7 2.9
1.0
0.7 0.7
0.0
0.0
2007
2008
2009
2010
-2.0
-4.0
-3.6
-4.4
-6.0
-8.0
-10.0
-9.0
2011
-0.6
2012
2013
2014
Annualized Unemployment
8.5%
8.3%
8.1%
8.0%
7.5%
7.5%
7.3%
7.2%
7.0%
7.1%
6.9%
6.8%
6.5%
6.8%
6.3%
6.0%
6.1%
6.0%
5.5%
5.0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Feb-15
Unemployment by Province
Canada
AB
BC
MB
NB
NL
NS
ON
PE
QC
SK
2004
7.2%
4.7%
7.2%
5.3%
9.8%
15.6%
8.8%
6.8%
11.2%
8.5%
5.3%
2005
6.8%
4.0%
5.9%
4.7%
9.7%
15.2%
8.4%
6.6%
10.9%
8.2%
5.1%
2006
6.3%
3.5%
4.8%
4.3%
8.7%
14.8%
7.9%
6.3%
11.1%
8.1%
4.7%
2007
6.0%
3.5%
4.3%
4.4%
7.5%
13.5%
8.0%
6.4%
10.2%
7.3%
4.2%
2008
6.1%
3.6%
4.6%
4.2%
8.5%
13.3%
7.6%
6.6%
10.9%
7.2%
4.0%
2009
8.3%
6.5%
7.7%
5.2%
8.7%
15.5%
9.2%
9.1%
11.9%
8.6%
4.9%
2010
8.1%
6.6%
7.6%
5.4%
9.2%
14.7%
9.6%
8.7%
11.4%
8.0%
5.2%
2011
7.5%
5.4%
7.5%
5.5%
9.5%
12.6%
9.0%
7.9%
11.0%
7.9%
4.9%
2012
7.3%
4.6%
6.8%
5.3%
10.2%
12.3%
9.1%
7.9%
11.2%
7.7%
4.7%
2013
7.1%
4.6%
6.6%
5.4%
10.3%
11.6%
9.1%
7.6%
11.6%
7.6%
4.1%
2014
6.9%
4.7%
6.1%
5.4%
9.9%
11.9%
9.0%
7.3%
10.6%
7.7%
3.8%
Feb-15
6.8%
5.3%
6.0%
5.6%
10.4%
12.6%
9.1%
6.9%
10.1%
7.4%
5.0%
Unemployment by Province
TAMSIN MCMAHON
The Globe and Mail Published Monday, Mar. 16 2015, 10:13 AM EDT
After a decade of explosive growth, Alberta’s construction industry is
poised for three years of job losses as plunging oil prices force energy
companies to cancel or delay new projects.
The number of construction jobs in the oil sands could fall by 15 per cent or
more, construction industry association Build Force said in a new forecast
Monday.
Employment in Alberta fell by 14,000 in February, pushing the
unemployment rate in the province up 0.8 percentage points to 5.3
percent, the highest since September 2011. Overall, Canada shed 1,000
jobs versus an estimated 5,000 loss in February.
Crude Oil Price per Barrel (USD)
$120.00
$100.00
$80.00
$60.00
$49.14
$40.00
$44.84
$20.00
$0.00
Apr-11 Jul-11
Oct-11 Jan-12 Apr-12 Jul-12
Oct-12 Jan-13 Apr-13 Jul-13
Oct-13 Jan-14 Apr-14 Jul-14
Oct-14 Jan-15 Apr-15
Food Inflation by Category
10.00%
8.01%
7.96%
8.00%
6.00%
4.34%
2011
4.00%
2012
2.86%
2013
2.00%
2014
-0.22%
0.00%
0.00%
Meat
Fish
Dairy
Bakery
-0.53%
-2.00%
-4.00%
Fruits
Vegetables
Other
Average National Gas Prices
Cents per Litre
150
140
130
120
110
109.3
100
90
80
92.9
Canada CPI All Items
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
1.0%
Operational benchmarks
Enough Doom and Gloom…on to success
The top 25% of retailers were performing and continue to do so at 4 to 5
times pre tax profits!
What distinguishes the top 25%?
• Knowing their business
–
–
–
–
–
–
–
Not only the P&L but the B/S and Cash Flow Statement
Paying attention to the B/S Accounts
Investing when available
Low Debt
Investing when it makes sense(Equipment)
Perishable Departments
Shrink
Balance Sheet vs. Income Statement
• Income Statement: How you feel today…How your
business is a t a point and time
• Balance Sheet: True Health…is your business terminal
or healthy no matter how it looks at the P&L point in
time.
• Ex. Back Room Inventory Levels
• Current and Quick Ratios
• Bad Checks
• Cash/Cash on Hand (Safe Audits)/ATMs
• Payables/Receivables: Vendor /Customer
Review
Equipment
1.Pumping good money after bad ?
2.Store Image
3.Shrink with Cooling Levels
4.Any Tax Advantages for
Investments?
Investing
1.Equipment(Previous Slide)
2.Good Years Invest(prior to
competition)
3.Don’t over commit distributions to
family
4.Keep debt low but available credit
high!
Technology: weighing investment vs. ROI
• Investments are considerable and ROI is hard to track
– Will it reduce costs?
• Harness the power of technology to remain competitive,
improve efficiency and connect with shoppers
–
–
–
–
–
–
–
–
Mobile payment
Apps
E-commerce
Social media
Loyalty programs
Big data
Data security and PCI compliance
Front-end and back-office automation
Generate Sales and Reduce Shrink
Shrink is a big distinguisher of a successful bottom line
Competitive strategies
30% Marketing/advertising
20% Customer service
18% Capital investments
Other:
- Assortment
- Merchandising
- Loyalty programs
- Social media
- Finding efficiencies
- Community involvement
- Private label
15% Focus on perishables
15% Aggressive pricing
Another option… changing formats
61%
Stay with
conventional
11%
Already
implemented
alternative
format
17%
Healthy market
9%
Cost plus
3%
Lim. assortment
Is flat the new growth?
All Departments
Billions
Dollar Sales
248
2010
•
$798
$784
$771
$748
$719
Unit Volume
251
251
252
252
2011
2012
2013
2014
Dollar Trend
+4%
+3%
+2%
+2%
Unit Trend
+1%
0%
0%
0%
Average
Price Trend
+3%
+3%
+1%
+2%
Source: Nielsen Answers, Total U.S. All Outlets Combined (plus Convenience), All Departments, All Brands (UPC), % Change, 52 week periods vs.
year ago
Operational shrink
• Some level of operational shrink natural in grocery
retailing, but…
Independents total store shrink 3.2%
Best-in-class total store shrink
1.5%
Understanding
how to close
the gap
Goal: avoid losses due to inefficient processes
What are we looking at?
MEAT
DELI
8.3%
DRY
GROCERY
4.1%
1.3%
DAIRY
2.2%
PRODUCE
5.3%
TOTAL
STORE
SHRINK
3.2%
What are achievable improvements?
Total store
Dry grocery
Dairy
Produce
Meat
Deli/Prepared foods
All
Top performers
3.2%
1.3%
2.2%
5.3%
4.1%
8.3%
1.8%
0.8%
1.5%
4.0%
2.8%
5.1%
What are the top performers doing differently?
Financial performance
Sales, profits and the profit leaders
2014 Are we returning to normal?
Average net profits before taxes 2006-2013
2014 Preliminary:
Single: 1.94%
Multi: 1.91%
1.94%
1.88%
1.68%
1.65%
1.52%
1.50%
1.08%
2006
2007
2008
2009
2010
1.12%
2011
2012
2013
Profit leaders increase results vs. YAGO
The pack
0.66% | 1.08%
2013 fiscal year
75th percentile
2.64% | 2.72%
25th percentile
0.17% | 0.44%
Lowest
profit
reported
-3.62% | -6.06%
Median or
50th percentile
1.27% | 1.51%
1.92%
2014
2012 fiscal year
Highest
profit
reported
8.00% | 8.41%
Profit leaders (Top 25%)
4.10% | 3.44%
Sales hold steady
• Same-store sales growth
– 2013: 1.1%
– 2012: 1.5%
– 2011: 2.6%
• However, food-at-home inflation is key
–
–
–
–
Annualized 2014: 2.4%
Annualized 2013: 0.9%
Annualized 2012: 1.7%
Annualized 2011: 4.8%
• Inflation-adjusted growth holds steady
Total store gross margin virtually flat at 26.12
percent
2014 Preliminary:
Total store gross margin 2010-2013
26.12%
26.48%
26.33%
- Single: 26.57
-Multi: 25.01
-Meat: down
- Produce: up
25.68%
2013
2012
2011
2010
Gross margins by department – single vs multi stores
Gross margin across
departments
All companies
Single store
Multiple stores
Grocery
Dairy
Frozen
HBC
GM
Beer/wine/liquor
Tobacco
24.46%
23.25%
26.56%
23.72%
24.69%
19.26%
13.65%
25.36%
22.00%
26.90%
22.58%
24.57%
19.35%
14.83%
23.98%
23.99%
26.34%
24.38%
24.76%
19.22%
13.12%
Produce
Floral
31.61%
30.38%
30.86%
26.87%
32.02%
31.85%
Meat
Deli
Bakery
Seafood
25.05%
39.38%
39.35%
25.21%
24.68%
41.24%
37.50%
24.36%
25.25%
38.37%
40.37%
25.66%
Pharmacy
Other
Total
23.69%
19.10%
26.12%
23.10%
16.11%
26.46%
23.72%
20.00%
25.45%
Gross margins by department – Profit Leaders
Gross margin across
departments
All respondents
The pack
Profit leaders
Difference
Grocery
Dairy
Frozen
HBC
GM
Beer/wine/liquor
Tobacco
24.46%
23.25%
26.56%
23.72%
24.69%
19.26%
13.65%
24.30%
23.53%
27.07%
22.95%
25.01%
18.21%
14.29%
25.85%
21.90%
23.71%
22.64%
21.07%
21.50%
13.35%
1.55
-1.63
-3.36
-0.31
-3.94
3.29
0.94
Produce
Floral
31.61%
30.38%
31.47%
31.41%
32.84%
28.99%
1.37
-2.42
Meat
Deli
Bakery
Seafood
25.05%
39.38%
39.35%
25.21%
24.64%
38.20%
41.22%
24.10%
27.23%
40.75%
35.41%
27.03%
2.59
2.55
-5.81
2.93
Pharmacy
Other
Total
23.69%
19.10%
26.12%
23.45%
19.11%
24.99%
25.26%
19.07%
26.41%
1.81
-0.04
1.42
Profit leaders widen gap
Net profit all respondents and profit leaders
All respondents
Profit leaders
4.67%
4.10%
4.07%
4.01%
4.31%
2.81
1.68%
1.65%
1.08%
2009
2010
1.12%
2011
2012
1.50%
2013
The profit leaders…
• Keep debts low and leverage assets
“The Pack”
Top performers
1.4
0.9
Long-term debt*
30.4%
22.6%
Short-term debt*
31.2%
28.2%
Debt to asset ratio
* % of total liabilities and equity
The profit leaders
• Better manage inventory
All
Profit leaders
Total store turns
17.2x
17.2x
Dry grocery
14.8x
13.8x
Dairy turns
33.0x
33.5x
Meat turns
35.1x
36.9x
Produce turns
48.9x
49.3x
Emphasize fresh
 Produce, meat & deli
 Higher sales allocation
and higher-thanaverage gross margins
The profit leaders…
• Invest and reinvest in the business
“The Pack”
Profit leaders
Capital expenditures
1.43%
2.02%*
Advertising
1.30%
1.43%
Share opening stores
15.1%
21.4%*
* Small sample
The profit leaders…
• Focus on cost control
The pack
Profit leaders
13.68%
13.07%
Rent/CAM
1.87%
1.70%
Utilities
1.68%
1.60%
Supplies
1.25%
1.17%
23.29%
19.29%
Salaries and benefits
All expenses
4.00 difference in key controllable expenses
The profit leaders…
• Focus on cost control
– Use technology for efficiency
– Know your numbers
– Spend Less in the back office and more on your customers
and your store
– Staffing…Happy & Trained Staff = Stellar service
The profit leaders…
• Keep debts low and leverage assets
“The Pack”
Top performers
1.4
0.9
Long-term debt*
30.4%
22.6%
Short-term debt*
31.2%
28.2%
Debt to asset ratio
* % of total liabilities and equity
Conclusion
• 2014…unemployment drops overall
• Inflation Flat
• 2014 Profits show savvy of the independent operator
• 2014-2015 increased competitive pressures
– Draw on lessons from profit and shrink leaders who
manage above-average sales, margin and profit growth
– Watch out Size influences Walmart/Target, Safeway Sale,
find your niche, stay fresh
Thank you!
• Check www.fmssolutions.ca for the presentation
– Go to news section
• For questions and Survey Copies Salary/Financial:
– Bob: bobg@fmssolutions.com