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David Brown

By The Numbers: Give Your Store a BMI Test

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TODAY WE’RE GOING to give the average jeweler a quick BMI test. Yes, we’re checking for obesity by looking at the store’s height (inventory) versus its weight (sales excluding repair and custom work). In retail, this is known as the stock-to-sales ratio, and it’s that easy to work out: Just divide sales by inventory.

In August, the average store in our survey had a stock-to-sales ratio of 1.2. That means $1 of inventory is producing only $1.24 in retail sales on an annual basis. This is not good. A ratio of less than 2 (each $1 of inventory is producing less than $2 of retail sales) means the store is in an at-risk health situation. Aged inventory is like blocked arteries — and could well be causing cash-flow and performance problems.

By The Numbers: Give Your Store a BMI Test

This story is from the November 2008 edition of INSTORE.

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