CFIG WEST SHOW 2015 A LOOK AT THE TOP PERFORMERS. Presented by: Robert Graybill April 2015

Transcription

1 CFIG WEST SHOW 2015 A LOOK AT THE TOP PERFORMERS Presented by: Robert Graybill April 2015

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3 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?

4 Fiscal year 2014: the competition backdrop

5 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?

6 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.

7 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.

8 Competition: supercenters have greatest impact, but new formats rising 1. Avg. score Supercenters 2. Conventional supermarkets 3. Limited assortment stores 4. Other formats 5. Gourmet/specialty stores 78.8% of stores in the survey have a Walmart supercenter in their direct market areas Bodegas Cash plus formats Warehouse club stores Convenience stores Drug stores Commissaries Farmer s markets Same day online delivery Butcher stores

9 Competitive strategies: driving sales through advertising and service Marketing/advertising Customer service Capital investments, including remodels and Focus on perishables Aggressive prices/edlp Assortment/merchandising Loyalty program/rewards Social media/online engagement Finding further efficiencies Community involvement Private label 8.1% 6.8% 6.8% 5.4% 4.1% 20.3% 17.6% 14.9% 14.9% 12.2% 29.7%

10 Fiscal year 2014: the economy

11 Canada GDP Growth Annualized

12 8.5% Annualized Unemployment 8.3% 8.1% 8.0% 7.5% 7.2% 7.5% 7.3% 7.1% 7.0% 6.8% 6.9% 6.8% 6.5% 6.3% 6.0% 6.0% 6.1% 5.5% 5.0% Feb-15

13 Unemployment by Province Canada AB BC MB NB NL NS ON PE QC SK % 4.7% 7.2% 5.3% 9.8% 15.6% 8.8% 6.8% 11.2% 8.5% 5.3% % 4.0% 5.9% 4.7% 9.7% 15.2% 8.4% 6.6% 10.9% 8.2% 5.1% % 3.5% 4.8% 4.3% 8.7% 14.8% 7.9% 6.3% 11.1% 8.1% 4.7% % 3.5% 4.3% 4.4% 7.5% 13.5% 8.0% 6.4% 10.2% 7.3% 4.2% % 3.6% 4.6% 4.2% 8.5% 13.3% 7.6% 6.6% 10.9% 7.2% 4.0% % 6.5% 7.7% 5.2% 8.7% 15.5% 9.2% 9.1% 11.9% 8.6% 4.9% % 6.6% 7.6% 5.4% 9.2% 14.7% 9.6% 8.7% 11.4% 8.0% 5.2% % 5.4% 7.5% 5.5% 9.5% 12.6% 9.0% 7.9% 11.0% 7.9% 4.9% % 4.6% 6.8% 5.3% 10.2% 12.3% 9.1% 7.9% 11.2% 7.7% 4.7% % 4.6% 6.6% 5.4% 10.3% 11.6% 9.1% 7.6% 11.6% 7.6% 4.1% % 4.7% 6.1% 5.4% 9.9% 11.9% 9.0% 7.3% 10.6% 7.7% 3.8% Feb % 5.3% 6.0% 5.6% 10.4% 12.6% 9.1% 6.9% 10.1% 7.4% 5.0%

14 Unemployment by Province TAMSIN MCMAHON The Globe and Mail Published Monday, Mar , 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 Overall, Canada shed 1,000 jobs versus an estimated 5,000 loss in February.

15 $ Crude Oil Price per Barrel (USD) $ $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

16 Food Inflation by Category 10.00% 8.00% 8.01% 7.96% 6.00% 4.00% 2.00% 2.86% 4.34% % -0.22% 0.00% Meat Fish Dairy Bakery Fruits Vegetables Other -0.53% -2.00% -4.00%

17 150 Average National Gas Prices Cents per Litre

18 4.0% Canada CPI All Items 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 1.0% 0.5% 0.0%

19 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!

20 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

21 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

22 Equipment 1.Pumping good money after bad? 2.Store Image 3.Shrink with Cooling Levels 4.Any Tax Advantages for Investments?

23 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!

24 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

25 Generate Sales and Reduce Shrink Shrink is a big distinguisher of a successful bottom line

26 Competitive strategies 30% Marketing/advertising 20% Customer service 18% Capital investments 15% Focus on perishables 15% Aggressive pricing Other: - Assortment - Merchandising - Loyalty programs - Social media - Finding efficiencies - Community involvement - Private label

27 Another option changing formats 61% Stay with conventional 11% Already implemented alternative format 17% Healthy market 9% Cost plus 3% Lim. assortment

28 Billions Is flat the new growth? All Departments Dollar Sales Unit Volume $719 $748 $771 $784 $ 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

29 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

30 What are we looking at? DELI 8.3% DRY GROCERY 1.3% MEAT 4.1% DAIRY 2.2% PRODUCE 5.3% TOTAL STORE SHRINK 3. 2 %

31 What are achievable improvements? All Top performers Total store 3.2% 1.8% Dry grocery 1.3% 0.8% Dairy 2.2% 1.5% Produce 5.3% 4.0% Meat 4.1% 2.8% Deli/Prepared foods 8.3% 5.1% What are the top performers doing differently?

32 Financial performance Sales, profits and the profit leaders

33 2014 Are we returning to normal? Average net profits before taxes % 1.88% 2014 Preliminary: Single: 1.94% Multi: 1.91% 1.52% 1.68% 1.65% 1.50% 1.08% 1.12%

34 Profit leaders increase results vs. YAGO 25 th percentile 0.17% 0.44% The pack 0.66% 1.08% 2013 fiscal year 75 th percentile 2.64% 2.72% 2012 fiscal year Highest profit reported 8.00% 8.41% Lowest profit reported -3.62% -6.06% Median or 50 th percentile 1.27% 1.51% 1.92% 2014 Profit leaders (Top 25%) 4.10% 3.44%

35 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

36 Total store gross margin virtually flat at percent Total store gross margin Preliminary: - Single: Multi: % 26.48% 26.33% -Meat: down - Produce: up 25.68%

37 Profit leaders widen gap Net profit all respondents and profit leaders All respondents Profit leaders 4.10% 4.07% 4.67% 4.01% 4.31% 1.68% 1.08% 1.12% 1.65% 1.50%

38 The profit leaders Keep debts low and leverage assets The Pack Top performers Debt to asset ratio Long-term debt* 30.4% 22.6% Short-term debt* 31.2% 28.2% * % of total liabilities and equity

39 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 Emphasize fresh Produce, meat & deli Higher sales allocation and higher-thanaverage gross margins Produce turns 48.9x 49.3x

40 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

41 The profit leaders Focus on cost control The pack Profit leaders Salaries and benefits 13.68% 13.07% Rent/CAM 1.87% 1.70% Utilities 1.68% 1.60% Supplies 1.25% 1.17% All expenses 23.29% 19.29% 4.00 difference in key controllable expenses

42 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

43 The profit leaders Keep debts low and leverage assets The Pack Top performers Debt to asset ratio Long-term debt* 30.4% 22.6% Short-term debt* 31.2% 28.2% * % of total liabilities and equity

44 Conclusion 2014 unemployment drops overall Inflation Flat 2014 Profits show savvy of the independent operator 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

45 Thank you! Check for the presentation Go to news section For questions and Survey Copies Salary/Financial: Bob: