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 pattern broad based among major European grocery chains, a sign of structural cost inflation rather than company specific 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 for the fifth straight year cost and margin pressure topped the list of concerns.

The pressure points CEOs named were labor cost inflation, operational expenses, investments in store expansion and refurbishments, and rising outlays for 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 bigger slice of revenue for most 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 has dropped over the years, going 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, since rising energy and logistics costs typically add to spending pressure.

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.

Rising SG&A expenses weighed on operating income, adjusted EBITDA, and adjusted net income, all down from a year before. CFO Linda Drysdale attributed the rate change to higher technology SaaS fees and the cost of operating more corporate stores, several of which are still ramping up sales.

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

Central Garden & Pet reported SG&A expenses of $186 million, up 3% year over year. The outlay also shrank as a share of revenue in the period, going from 21.6% in 2025 to 20.5% in 2026.

Tractor Supply had bigger expenses, up 6.1% year over year to $1.07 billion, and here the higher spending also took a bigger bite of net sales, rising from 29% to 29.7% in one year.

Part of the increase paid for the company's plan to speed up store openings (40 new units during the quarter) but revenue came in below expectations. CFO Kurt Barton said the company put money into strategic initiatives across the business, which left Q1 carrying a heavier SG&A load.

For the second half of 2026, Tractor Supply expects roughly $10 million of added expense to cover the launch of its 11th distribution center and related shipments.

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The logistics and fuel angle

Freshpet's adjusted SG&A expenses climbed as a share of net sales in the quarter, going from 32.2% in 2025 to 34.2% in 2026. The company pointed to higher variable compensation, a bigger proportional outlay on media, and rising logistics costs.

Media spending rose 0.7 percentage points to 15.8% of net sales in the quarter, while logistics costs hit 6.3% of revenue compared with 5.8% a year ago. The company cited storm damage, driver shortages, and fuel cost increases that started in March after conflicts in the Middle East.

For the full 2026, Freshpet expects media expenses to stay roughly flat with last year, but the company anticipates higher logistics costs because of fuel prices.

Colgate-Palmolive faces similar pressure. After raising spending by 2% last year, the producer started 2026 with a 9.4% jump in SG&A expenses to $2.07 billion.

The company expects an extra $300 million in raw material and logistics costs, driven mainly by higher oil prices and their effect on oil byproducts, resins, fats and other oils, plus a 10% increase in ocean and land freight costs. CFO Stan Sutula said logistics flow into SG&A, so the impact will compound.

In 2025, the company's costs hit $7.9 billion because of one time items like litigation and a growth program, plus higher employee costs. At the same time, it cut advertising.

At Hill's Pet Nutrition, advertising investments rose by 50 basis points last year, pushing total general and administrative expenses for the pet segment up by 60 basis points.

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 grows sales faster than expenses is in a different position than one that doesn't.

It also doesn't separate discretionary spending from structural cost inflation. A company opening new stores is making a choice, a company paying 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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