Smaller Food Retailers’ Profits Higher Than Those of Larger Chains in 2003-04

Washington, D.C., Small food retailers reported a six-year high in net profits and return on equity in fiscal 2003-2004, according to the 2004 Annual Financial Review released today by the Food Marketing Institute (FMI). These retailers, with sales of less than $100 million, posted net profits of 1.45% and 20.38% return on equity. The net profit for the whole industry declined to 0.88%, from 0.95% a year earlier, the report revealed. This decline was mostly due to figures posted by larger food retailers that still are feeling the impact of the Southern California labor strike. Additionally, the 19% increase in health-insurance costs in 2003-2004 was another factor in the industry profit decline.

“Without a doubt, this is a tough, competitive market,” FMI president and CEO Tim Hammonds said in a statement. “Companies are squeezed by fierce price competition and continued double-digit increases in the cost of heath benefits—a major expense for an industry as labor intensive as ours.” However, Hammonds said that retailers are generally optimistic about the future, and are finding ways to operate more efficiently and are investing in technology, customer service and new products.