The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods says its latest store converted to solar has slashed energy costs by up to 50 percent as it warned that continued cost pressures will challenge the food distribution sector’s “long-term viability”.

The BISX-listed food retail and franchise group, looking ahead to its current financial period and beyond in its just-released 2024 annual report, said exploiting technology and improving supply chain efficiency will be critical to containing costs and ensuring food security for Bahamians.

It expects there will be “significant pressures” on both employee wages and energy costs moving forward, hence its combined $2m investment installing solar energy via roof-top panels at four of its five New Providence grocery locations to-date.

“The economic conditions and challenges facing The Bahamas are multi-faceted and deeply rooted in its reliance on tourism, vulnerability to external shocks and exposure to climate change. While the nation has made strides in diversifying its economy through sectors like financial services, agriculture and technology, [COVID] and frequent natural disasters have underscored the need for greater economic resilience,” AML Foods told investors.

“Over the years, the grocery retail sector has been significantly impacted with rising costs, supply chain disruptions and inflation creating a difficult operating environment. Consumer spending remains constrained by factors such as high unemployment and inflation.

“The nation’s heavy reliance on imported goods has made grocery prices particularly sensitive to global market fluctuations and inflation, putting pressure on both retailers and consumers. To navigate these challenges, the sector will need to adapt by improving supply chain efficiency and leveraging technology to manage costs and meet consumer demand,” it added.

“Addressing these issues is critical for ensuring food security and maintaining the sector’s long-term viability in The Bahamas. Our industry is expected to continue facing challenges such as significant pressures on wages and increased energy costs.....

“To-date, four of our five grocery locations in New Providence are solarised with the remaining store set to be completed by the end of fiscal 2024-2025. In our most recent solar conversion, we have realised a reduction of nearly 50 percent in comparative energy billings. We hope to replicate this in as many of our current and future locations.”

Looking back at the 12 months to end-April 2024, AML Foods said had cut inventory shrink and losses with the cost of supplies falling by 9.6 percent. It added: “After several years of decreasing gross profit attributed to poor shrink performance and inflation pressures, overall gross profit for the 12 months ended April 30, 2024, increased by $5.6m and was 31.1 percent of sales compared to 29 percent in prior year.

“Through product mix offerings and the revamp of our deli programme, we have been able to improve gross profit margin in several locations and departments. Additionally, we continue to explore new vendor relationships and, during the year, we have been able to decrease the cost of supplies by 9.3 percent. We continue to look for ways to reduce inputs to cost of sales.

“Our efforts to improve shrink paid off for half of our stores that experienced year-over-year improvement in shrinkage. However, our Solomon’s Old Trail location, partly due to renovations, experienced a large increase in shrink during the year. Additionally, group-wide, our meat shrink performance declined compared to prior year,” AML Foods told shareholders.

“While overall shrink was less favourable than prior year, the majority of our excess shrink was experienced in the first three quarters of the year and trends show improvements in shrink as the year progressed. With this continued trend, we expect an improvement in shrink for the upcoming year.”

As for expenses, AML Foods said: “Total selling, general, and administrative expenses (SG&A) increased by $2.7m or 5.4 percent compared to prior year mostly from payroll and sales-related costs. During the year, we invested in our people and payroll dollars were up $1.5m or 7.2 percent over prior year. As a percentage of sales, payroll was 11.7 percent compared to 11.3 percent in prior year.

“Our corporate division payroll as a percentage of overall sales remained flat to prior year. However, both food and franchise divisions saw an increase in payroll as a percentage of sales. We anticipate future investments in payroll will be offset through driving greater sales volumes throughout our stores.”

Turning to the future, AML Foods added: “All of our Solomon’s and Fresh Market stores have been reset to our new planograms and we are able to run our stores more efficiently and maintain better in stock levels....

“We are beginning to install electronic shelf labels (ESLs) throughout our fleet of stores. This project is another investment in technology that will benefit both our associates and customers. ESLs are common place for grocery retailers globally and will improve the availability, accuracy and efficiency of pricing of inventory with less effort.

“Our e-commerce division was launched in the fourth quarter of this year in Exuma Markets and, subsequently, within our Fresh Market locations, providing customers with the ability to order our products online. In the near future, we intend to offer an e-commerce platform for all locations.”