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 32 Financial Performance, by Store Type Retail Store Performance T he following segmented data from the 2017 Cost of Doing Business Study allows retailers to compare their operations' performance against businesses similar to theirs. NRHA divides the analyses into three categories: hardware stores, home centers and lumberyards. The complete study, with an even more detailed breakdown of the data, is available for free to NRHA members or for purchase by nonmembers. Visit nrha.org to become a member or to purchase hard copies of the full 28-page report. Hardware Stores Hardware stores that participated in the 2017 study saw growing sales and profitability and record performance in areas such as sales per customer, gross margin after rebate and net profit per store. As an entire group, including high-profit, typical, multistore and single-store operations, hardware stores experienced same-store sales increases of 3.6 percent year over year. Respondents seemed to be driving sales growth by simply selling more to customers. Employee productivity looked particularly good, with average sales per employee of $176,657 and average transaction sizes of $22 per customer—record highs. Top-performing stores averaged $30 per transaction. Customer counts for the typical stores participating in the study were 86,162, the best that performance indicator has looked since 2007. High-profit stores' average customer counts were lower at 75,236, suggesting that those businesses are succeeding at selling more product to top-tier customers. High-profit operations saw average sales of $244 per square foot, compared to $188 per square foot for an average store. Home Centers Home centers generated their highest-ever sales per customer figures in this year's study. High-profit stores more than doubled the bottom-line performance of typical stores, churning out net profits of 5.9 percent of sales compared to the others' 2.7 percent. At the same time, the top-performing group had a cost of goods sold that was 1,000 basis points lower than that of the average sample stores. These metrics suggest that high-profit stores are more disciplined with cost management. A major difference between the typical stores and top performers was driven by the volume of customers at the high-profit operations, which experienced an average customer count of 82,958 compared to 57,942 at typical stores. Typical stores saw inventory turns hit 4.2 percent, which was nearly a 10-year high, while high-profit home centers registered average inventory turns of 2.1 percent. Typical stores also averaged $607 in sales per square foot versus $581 at high-profit stores. Lumberyards Lumberyards continued to drive profits as sales improved, according to the 2017 study. Same-store sales for lumberyards increased 3.8 percent, for an average of nearly $5.8 million in sales. Higher margins and careful expense management helped high-profit stores yield particularly strong results in this year's study. This group netted profits of 7 percent compared to a still healthy 4.2 percent at the typical lumberyard. High-profit respondents' sales of $4.8 million were slightly lower than the average stores. Top performing stores' higher net profits reflected more frugal management, shrewd buying and careful expense controls than at typical operations. Overall, lumberyards have driven labor costs down, resulting in the study's lowest-ever recorded payroll expense of 11.5 percent. Managing these numbers along with other expenses made an important difference for high performers versus average stores. Top performers also profited from margins that are a full 2.5 percent higher than their average counterparts.

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