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| Breaking Headlines |  |
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| Profitability Fell At Retail In '04: NSGA
MARCH 18, 2004 -- The report, published every two years by the National Sporting Goods Association, indicated that Net Operating Profit and Return on Net Worth fell for full-line retailers; Return on Total Assets rose. Specialty sports shops slipped on all three key measurements. "In spite of productivity gains in many key metrics, the NSGA Cost of Doing Business Survey shows full-line retailers were hurt by a sharp drop in Gross Margin on Merchandise Sales; specialty sport shops suffered from a rise in Total Operating Costs," NSGA CEO Jim Faltinek said. For full-line sporting goods stores, Net Operating Profit fell to 1.2% versus 2.4% compared to the 2001 survey; Return on Net Worth, 6.2% versus 7.3%. Return on Total Assets rose to 3.4% versus 1.4% in the 2001 survey. For specialty sports shops, Net Operating Profit fell to 2.8% versus 4.1% compared to the 2001 survey; Return on Net Worth, 11.9% versus 19.9%; Return on Total Assets, 4.4% versus 9.5%. In spite of the drop in gross margins, full-line retailers improved four other measures of productivity (sales per selling square foot, sales per employee, total operating expenses and inventory turnover), while specialty sports shops improved only gross margins from levels in the previous study. Sales per selling square foot edged up slightly for full-line sporting good stores ($260 in 2003 vs. $254 in 2001), but fell sharply in specialty sport shops ($215 in 2003 vs. $278 in 2001). "Specialty sport shops did a better job of improving gross margins on merchandise sales," Faltinek said. Specialty shops improved their margin from 40.9% in 2001 to 43.7% in to 34.7% from 38.0% two years earlier. Full-line store inventory turnover rate rose to 2.6 times versus 2.0 times in 2001 and on a level with the 1999 and 1997 surveys. Specialty sport shops, with an inventory turn of 2.5 times, was on a par with the three previous surveys. According to Faltinek, "This research effort provides sporting good stores with the most up-to-date comparative financial performance information available anywhere. A record number of 314 companies participated in the 2003 study versus 295 in 2001. This has allowed us to segment a new specialty area (backpacking/camping) in addition to the three specialty areas (specialty fitness, ski and team dealers) already in the survey." In addition to the segmentation of sporting good stores and specialty shops by sales volume, comparison categories include single versus multi-store operations, size of store and marketing mix. The study also provides comparisons to high-profit performing retailers. Besides Balance Sheet and Income Data, the NSGA Cost of Doing Business Survey includes five measures of profitability, three measures of financial management and 14 measures of productivity. The study is provided at no cost to NSGA retailer members. Non-members can obtain the study for $250. For more information, contact NSGA VP/CFO William Webb, Jr., who supervised the research program. Phone: 847/296-6742, ext. 104; e-mail: [email protected]. The study is prepared for the Association by Industry Insights, Inc., a research firm based in Columbus, OH, that specializes in these types of studies. |
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