PCC says this year will be pivotal after an unprofitable 2023

Dive Brief:

This year will be “pivotal” for PCC Community Markets after the co-op’s sales growth fell short of expectations, unit sales declined and net sales were lower than expected in 2023, according to its recent update to members, which included a letter from CEO and President Krishnan Srinivasan along with financial results.
The decision to shutter its downtown Seattle location late last year significantly impacted PCC and ultimately made the year unprofitable for the grocer, Srinivasan said in his letter.
“2024 marks the beginning of a transformative, multi-year period for PCC,” Srinivasan said. “Knowing that sustained profitability is the only reliable way to deepen the impact of our mission in the community, we are now focused on returning the co-op to robust financial health.”

Dive Insight:

PCC’s underwhelming financial performance comes at a time when upscale and specialty grocers are facing stiffer competition from mass merchants and national grocers ramping up value messaging to appeal to grocery shoppers.

While PCC did not go into specifics about future changes, it emphasized its uniqueness as a food destination, indicating that the co-op is looking to double down on its efforts to stand out from other grocers as it looks to rebound from a tough year.

Despite net sales growing 3.5% year-over-year in 2023 to nearly $437 million, the metric came in below PCC’s expectations due to customers buying fewer items per shopping trip, according to the grocer’s latest report. Fewer purchases per trip did not counteract the uptick PCC saw in the overall number of shopping trips.

Nearly 64% of total sales last year stemmed from purchases by members, and PCC onboarded 9,800 new members last year. However, this growth did not drive purchases like the grocer had hoped, prompting Srinivasan to urge members to shop at PCC more often.

“[W]e ask you to consider strengthening your commitment to PCC; earmark the largest percentage of your grocery budget for the co-op. Make PCC the first stop on your grocery list,” Srinivasan said in a statement.

PCC reported an impairment charge and closing expense from its downtown Seattle store, which contributed to an overall operating loss of $12.5 million. Without the impairment charge, PCC said it would have achieved a “very small operating profit.”

The grocer added that locations that opened in recent years also impacted its overall profitability.

PCC has agreed to pay higher wages, which could make it more challenging for the company to turn a profit. The report outlined that 2024 contract gains for unionized workers include wage increases ranging from 4.1% to 16.5%; automatic pay increases in the event of future minimum wage rate increases; and increased night pay.

As of January, PCC had nearly 1,800 employees, and 85% of the total staff is unionized, the report said.

In February, PCC reached a tentative agreement on the terms of a new contract with the United Food and Commercial Workers Union Local 3000 after the union put pressure on the co-op to provide better pay.

“I want to emphasize how pivotal 2024 is for PCC,” Srinivasan said in a letter to the co-op’s members. “You, our member-owners, are the co-op’s most committed and loyal patrons, and we need your help.”