Publix Succeeds the Old Fashioned Way
In many ways, Publix is a quiet company, although it is by no means a tiny, obscure operation. At over 1,100 stores and more than $30 billion a year in volume, it’s up there with the likes of Kroger, Safeway and Delhaize/Ahold and larger than HEB and Whole Foods. It may seem quiet because it pretty much sticks to its headquarters state, Florida, with nearly three-quarters of its stores; it keeps a low profile in the national financial and trade media; and, as an employee owned company, its stock is not publicly traded but is only sold to employees.
Quiet Publix may be, nonetheless its performance is definitely high decibel. For example, sales gained over 6% in the first half, and that was mainly due to solid increments in store productivity since there were only 26 more stores open this year compared to last – a little more than a 2% increase. On the other hand, comp stores sales rose a robust 4.7%. While price inflation played a role here, increased customer counts were integral with the increases.
Profits, too, were on the rise in the first half, by 15% to be precise. In addition to the strong sales gains, a reduction in the expense ratio plus a four tenths of a point year over year increment in gross margins to 28.1% decisively expanded profitability. Although the numbers are not necessarily comparable, many conventional operations function with gross margins in the 22-26% range.
Perhaps the most telling statistic is the chain’s net-to-sales ratio: It was 6.3% in the first half. Kroger, a really well run conventional chain, for example, does 1.9%. Even high powered Whole Foods does only 3.9% in comparison. And the first half is no flash in the pan. In last fiscal year, for example, the chain earned 5.7% net on sales, following annual improvements in this ratio since at least 2010.
Publix has several powerful competitive advantages. Its name and its stores are very, very popular with Floridians, as well as residents of the five other Southern states in which Publix also operates. A recent study by Market Force Information showed that, among supermarkets, Publix rates number one in fast checkout, cleanliness, availability of items, ease of finding items, and specialty department service and number two in good sales and promotions and in cashier courtesy. The study concluded that Publix, along with Trader Joe’s and Aldi, are America’s top three grocers by consumer preference.
The chain’s slogan is “where shopping is a pleasure,” and it has seven different footprints to make this happen. They range from 28,000 to 61,000 sq. ft., and interestingly, recent openings have favored the middle and lower end of the range at 45,000 and 29,000 sq. ft.
There’s also its powerful store brands program, Publix Premium. On the chain’s website, for example, a shopper can click on “Publix Brands” and find 50 store brand deals each week. According to company officials, private label brands play an important role in its merchandising strategies.
Publix epitomizes what can be done with conventional supermarkets by bringing into play excellent merchandising, development of strong consumer franchise, sharp operations, and a major store brands program.