Retail Metrics

Measuring Retail performance- An overview

Taking Stock : what the Analysts want to see

1.Change in Total Sales %

2.Comps : Change in Comparable Store Sales %

3.Earns – Gross Margin %

4.Turns – Inventory Turnover

5.GMROI – Gross Margin Return on Investment

6.RONW – return on Net Worth

7.Sales Per Square Feet

Change in Total Sales %

• Reported Monthly Quarterly and Annually• A retailer with strong sales growth is presumed to have

a strong retailing concept at least one that matches with the current mood of the customer and economy

Issues • Inflation in economy can have an effect on overall sales

number

• New Store openings- Share in the total sales

Comparable Store Sales (Comps)

• Sales Growth % for only the stores open Throughout the reporting period – eliminating new stores

• Compare to direct competition

• Compare to Sector

• Reflects consumer preference over cart competitors

• Reflects increase Share of the Wallet

Gross Margin %Gross Margin % = { 1-(COGS/Net Sales)}COGS – cost of goods sold

Gross Margin Must Cover :

• Cost Of Capital• Cost of Storage• Cost of Obsolescence

• Ranges from 15 % to 100 % depending on category

• A one point increase in SG& A(Selling,General and Administrative Expenses) as a percentage of sale is associated with a one point increase in Gross Margin.

•It enables retailers with different gross Margins to achieve similar return on sales average.

Inventory TurnsInventory turns = {Net Sales/Inventory at Retail}

Or

Inventory Turns = {COGS/Inventory at cost}

Both Measures are equivalent

Net Sales/Inventory at cost

GMROI• Gross Margin return On investment• Measured as

• = Earns X Turns• For a retailer or a format to be successful

the GMROI should be equal to or greater than 100

• However this number could change with the context of lower operating costs

Return on Net Worth (RONW)

• Net profit/net sales X Net Sales/Total Assets X Total Assets/Net worth

• Profit Margin X Assets turnover X Leverage

• Margin x Assets x Finance = High Yield

Return On Space

• = rupee margin/number of racks units

• Should be measured per month basis Quarterly, Half Yearly and Annually

• 1 wall Rack Unit = 1.5 X 1 Floor Rack unit