Cover Story: State of the Industry 2014
Stats show strides amid struggling customer base, big-box threat, ebbing foodservice momentum
Paging Rod Serling
Looking back at 2013, Plumby cautioned retailers not to take the SOI numbers at face value. Gasoline consumption was up slightly (0.6%), and fuel and sales margins were up, yet multiple factors cast shadows on these apparently solid statistics, creating an analytical “Twilight Zone” that required additional scrutiny, he said.
For instance, foodservice gross-profit dollars were up 2.5% for same firms in the NACS survey, but not as high as the previous year at 8.7%. Nor was the increase greater than the loss in cigarette gross-profit dollars, which according to the preliminary SOI numbers dropped 5.7%.
The good news/bad news scenarios went on. Credit-card fees were down slightly and overall relatively flat. But the bad news was that “the banks are still the most profitable firm in our [industry].” And with gas consumption, Plumby said yes, the number was up 0.6%, but it was a “slight blip” of a recovery, considering that in 2007, consumption fell 7.4%.
And one of the largest concerns was the comparison of gross profit dollars to operating expenses. While total gross profit dollars rose 4.4% from 2012 to 2013, direct-store operating expenses for the same time period rose 5.1%, he said.
Part of the issue is labor. The number of employees per store reported in the NACS data is up 19.5%. And from 2009 to 2013, the number of employees per store went from 11 to 15. Plumby attributes some of the activity to companies getting ready for the Affordable Care Act (ACA) or Obamacare.
“Our part-time workers are up 32.2%,” Plumby said. “In 2013, part time actually doubled what it was in 2010. We’re reacting to ACA [by adding] four more employees to the store. That costs money.”
Plumby also pointed to the pressure of an increasing minimum wage. He showed a map of the 20 states that have enacted minimum-wage increases and an additional 17 considering it.
“When minimum wage goes up, it’s not good for our industry,” Plumby said.
Revealing a new element of the SOI research, Plumby pointed out that recently developed regional charts can help retailers benchmark better by minimizing local differences in numbers. NACS defined the regions as the Northeast, Southeast, Midwest, South Central, Central and the West Coast.
Citing another “Twilight Zone” moment, he mentioned that many of the lower scores came from Texas. “Everything I’ve read about Texas is that it’s booming,” Plumby said. “A lot of our competitors down there are doing well, yet that’s not what the data shows.”
For instance, for in-store sales, the West was up 4.4%, while South Central (which includes Texas) was down 0.4%. The Northeast was up a meager 0.8%.
Fuel-gallon throughput was up 4.5% on the West Coast, while in the South Central it was down by 2%. Fuel margins showed a similar disparity, with margins at 20.6% on the West Coast and a negative 8.7% in the South Central region.
From a gross-profit standpoint, the West Coast was also a clear winner, up 11.1%, with South Central again down 8.4%.
Given that the NACS research committee tries to tie its data back to root causes, Plumby said the West has seen extensive growth in recent years, posting the strongest employment numbers of any region since 2011. South Central had the second slowest growth in employment since 2011.
“We’re successful when people are working, going to school,” Plumby said. “It could be a solid reason why we see these types of fuel changes. But note, too, how the Northeast had the least amount of growth, but it didn’t impact fuel much but did impact in-store sales.”