Independent Grocers Navigated Inflationary Pressures and Rising Costs in FY 2023

October 16, 2024

Washington, D.C. - The 2024 Independent Grocers Financial Study, a collaborative effort between the National Grocers Association (NGA) and FMS Solutions, reveals the resilience of independent grocers during a turbulent fiscal year 2023. The study highlights grocers' strategic responses to moderating inflation, shifting consumer behavior, and rising operational costs.

Despite inflation easing, independent grocers continued to face the cumulative effects of elevated prices, leading to more cautious spending from shoppers. A large majority of consumers, responding to price pressures, shopped across multiple stores and ultimately reduced their overall purchases. These dynamics led to a slowdown in inventory turns, which dropped from 18.4 in 2022 to 17.2, and the industry-wide store shrinkage rate remained steady at 3.0%. While same-store sales edged up by 1.8%, this growth was largely driven by a 1.2% annual inflation rate rather than an increase in unit sales.

To remain competitive in this challenging environment, independent grocers continued to reinvest in their operations, allocating an average of 1.8% of sales to capital improvements. Investments focused primarily on store remodels rather than new store openings. With 70% of consumers comparing sales and promotions across stores and 86% checking in-store sales, independent grocers also invested in expanding loyalty programs and pivoting to digital marketing. However, staffing challenges persisted, with associate turnover reaching 39.4%, pushing more than half (56%) of independent grocers to adopt self-checkout technology to enhance operational efficiency.

While transactions per store averaged 7,647 per week, spending per trip remained flat. Gross margins were compressed to 27.7%, as operational expenses, particularly labor and benefits, surged to 15.6% of sales-the highest on record. As a result, net profit dropped to 1.4%, a return to pre-pandemic levels, and EBITDA decreased to 2.77%.

The 2024 Independent Grocers Financial Study drew on responses from 127 survey participants, representing 654 store locations, alongside financial benchmarks derived from FMS Solutions' database of 434 independent grocers with 1,531 store locations. This comprehensive study offers a critical look into the financial and operational performance of independent grocers and provides insights into how the sector is adapting to an evolving retail landscape.

NGA will present an in-depth analysis of the study findings during a session at its upcoming Executive Conference and Public Policy Summit, taking place from October 28-30, 2024, in Washington, D.C. This premier event for C-suite executives and leadership teams will explore strategies for navigating ongoing industry challenges.

More information can be found at https://www.nationalgrocers.org/executive-conference