Hardware Retailing

DEC 2017

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

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HARDWARE RETAILING | December 2017 30 F or nearly 100 years, the North American Retail Hardware Association (NRHA) has collected financial and operational data from the independent home improvement industry's hardware stores, home centers and lumberyards. The result of that research is the annual Cost of Doing Business Study, which assesses the performance of retailers who submit their confidential financial reports to NRHA. The study provides composite income statements, balance sheets and averages for key performance ratios. Highlights from the 2017 study are presented in the following three pages, revealing healthy growth for the sector. This year's study uses data from the 2016 fiscal year to offer information about the performance of the industry's retail operators, as well as tools they can use to improve their businesses. Retailers throughout the industry use the study for benchmarking, goal setting and planning. The real-world numbers that study participants contribute give an accurate picture of how home improvement retailers of all sizes and store types are performing. Retailers representing 989 independent home improvement stores participated in the 2017 study. The information is segmented by store type, as well as by typical and high-profit store performance. Methodology NRHA gathers the study's data by mailing paper questionnaires to a sampling of hardware stores, home centers and lumberyards in the U.S. Retailers can mail their information to NRHA or upload it online. NRHA provides the analysis in the final report after extensively reviewing the data. Most of the figures in this report are medians, which are the middle numbers in the data when arranged from highest to lowest. The median represents the typical company's results, without extremely high or low outliers skewing the data. To determine high-profit stores, NRHA ranked all participating companies based on net profit before taxes. The high-profit companies in each segment are in the top 25 percent. Another Strong Year for Independents Cost of Doing Business Study Here are some pointers for using the 2017 Cost of Doing Business Study effectively. • Determine your expenses as a percentage of sales and calculate your balance sheet as a percentage of total assets. Compare your numbers to the study results for both typical and high-profit stores. • Don't look at percentages alone. Compare your real-dollar expenditures, as well. • Compare your numbers to stores of similar size. Don't limit your comparison to one type of store. Defining hardware stores, home centers and lumber outlets is practical for statistical purposes, but your store may have attributes of more than one type. • When your business's performance differs significantly from the study data, determine the cause and develop a plan to bring your numbers in line with high-profit stores. • Although high profits have little to do with size, sales growth is one of the keys to profitability. • When reviewing the numbers on the following pages, note that this report contains figures from a different sample group of stores each year. Overall figures can vary widely from year to year based on the group of stores participating. Year-to-year comparisons are helpful for illustrating general trends over time. How to Use This Study

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