SG&A expenses climbed to 19.7% of revenue in 2025 for European grocery retailers

Selling, general and administrative expenses hit 19.7% of revenue for European grocery retailers in 2025, up from 19% in 2022, according to McKinsey's analysis in The State of Grocery Retail 2026.

The ratio and what drove it back up

The increase follows a dip to 19% in 2022. McKinsey called the increase widespread across major grocery retailers in European markets, indicating structural cost inflation rather than isolated inefficiencies.

SG&A covers the costs of running daily operations: marketing, advertising, rent, staff, and utilities. The firm interviewed 36 CEOs in the European grocery sector in the first quarter of 2026, and cost and margin pressure remained the number one concern for the fifth consecutive year.

The pressure points CEOs named were labor cost inflation, operational expenses, investments in store expansion and refurbishments, and increasing investments in IT, AI, and automation.

GlobalPETS ran the same calculation on eight pet companies (retailers and manufacturers) and found the average SG&A-to-net-sales ratio held steady at 24.3% in both 2022 and 2025, with a slight bump to 24.5% in 2024. The pet industry's percentages are significantly higher than grocery retail's.

Five of the eight companies GlobalPETS analyzed saw their ratio increase in 2025 compared to 2024: Colgate-Palmolive, Central Garden & Pet, Pet Valu, Tractor Supply, and General Mills. Expenses consumed a larger share of revenue for the majority of the sample.

When compared to 2022, the number is higher for six companies. Post Holdings and Chewy joined the group that saw the ratio climb over the three-year period, while Pet Valu is excluded from that count.

Freshpet is the only company in the sample for which the ratio declined over the years, falling from 40% in 2022 to 34% in 2025.

The 2026 numbers and where the pressure sits

GlobalPETS also analyzed companies that reported first-quarter 2026 results, given that higher energy and logistics costs tend to put further pressure on expenditure.

Pet Valu's SG&A expenses came to CA$55.5 million in the first quarter of 2026, up 1.5% year-over-year. The company spent more on technology related to cloud services, marketing and advertising, and store network growth. Lower expenses related to employee benefits helped offset the increase.

Higher SG&A expenses impacted operating income, adjusted EBITDA, and adjusted net income, all down from a year before. CFO Linda Drysdale said the rate was impacted by higher technology SaaS fees and costs associated with a higher corporate store count, a number of which are early in their sales maturation curve.

Despite the absolute increase, the spending represented a smaller portion of revenue for Pet Valu: 19.3% compared with 19.6% a year before.

Central Garden & Pet posted SG&A expenses of $186 million, up 3% year-over-year. The spending also represented a smaller portion of revenue in the period, dropping from 21.6% in 2025 to 20.5% in 2026.

Tractor Supply had larger expenses, up 6.1% year-over-year to $1.07 billion, and in this case greater spending accounted for a higher percentage of net sales, too, from 29% to 29.7% in one year.

Part of the increase financed the company's plan to accelerate store openings (40 new units during the quarter) but the larger share of revenue was due to sales being weaker than expected. CFO Kurt Barton said the company invested in strategic initiatives across the business, which helped Q1 to carry a heavier SG&A burden.

For the second half of 2026, Tractor Supply expects approximately $10 million of incremental expense to fund the launch of its 11th distribution center and associated shipments.

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The logistics and fuel angle

Freshpet's adjusted SG&A expenses increased proportionally to net sales in the quarter, from 32.2% in 2025 to 34.2% in 2026. The company attributed this to higher variable compensation, greater proportional spending on media, and increased logistics costs.

Media spending increased 0.7 percentage points to 15.8% of net sales in the quarter, while logistics costs were 6.3% of revenue compared with 5.8% a year ago. The company attributed this to storm-related costs, driver shortages, and recent fuel cost increases starting in March, following conflicts in the Middle East.

For the full 2026, Freshpet expects media expenses to remain in line with last year, but anticipates elevated logistics costs given increased fuel costs.

Colgate-Palmolive faces similar pressure. Having already increased spending by 2% last year, the producer began 2026 with a jump of 9.4% in SG&A expenses to $2.07 billion.

The company expects to rack up an additional $300 million in raw material and logistics costs, primarily due to rising oil prices and their impact on oil byproducts, resins, fats and other oils, along with a 10% increase in ocean and land freight costs. Logistics go into SG&A, so there will be an incremental impact from that, CFO Stan Sutula said.

In 2025, the company's costs totaled $7.9 billion due to both non-recurring expenses such as litigation and a growth program, and increased employee costs. On the other hand, it spent less on advertising.

At Hill's Pet Nutrition, advertising investments increased by 50 basis points last year, which led to a 60-basis-point rise in total general and administrative expenses for the pet segment.

Our read on the dual-pressure model

The pattern across both grocery and pet retail is the same: companies are dealing with cost pressure from two directions at once. One is external and largely unavoidable (logistics inflation driven by fuel costs, driver shortages, and freight rate increases). The other is discretionary but competitive (expansion, technology investment, and media spending).

The companies that managed to hold or reduce their SG&A ratio as a percentage of revenue did it by growing sales faster than expenses, not by cutting costs in absolute terms. Pet Valu and Central Garden & Pet both increased spending but saw the ratio drop because revenue grew faster.

Tractor Supply is the cautionary case: expenses rose and sales didn't keep pace, so the ratio climbed. The company is still opening stores and building distribution capacity, but weaker-than-expected sales mean those investments consume a larger share of revenue.

For independent retailers, the asymmetry is real. The chains have scale advantages on logistics that a single-location store doesn't, but the pressure to expand (or at least refresh and invest in technology) is the same. A percentage-point swing in SG&A ratio might sound small, but for a store running tight net margins, it's material erosion.

The other piece: brands pitching independents need to account for buyers with less margin room to experiment. Faster turns, better terms, or both. The retailer's budget cushion for inventory risk or promotional spend is tighter than it was two years ago.

What the ratio does not show

The SG&A ratio measures expenses as a share of revenue, but it doesn't tell you whether those expenses are productive. A store that spends 20% of revenue on SG&A and grows sales 8% is in a different position than one that spends 20% and grows sales 2%.

It also doesn't separate discretionary spending from structural cost inflation. A company opening 40 new stores in a quarter is making a choice, a company paying 10% more for ocean freight is not.

The other gap: the ratio doesn't capture what happens to gross margin. If a retailer's SG&A ratio holds steady but gross margin compresses because of promotional activity or mix shift, the operating margin still shrinks.

For a store owner, the number to watch is operating margin (gross margin minus SG&A). If that's tightening, the SG&A ratio is one input, but it's not the whole picture.

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