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David Brown

By the Numbers: What We Have Here Is a Case of Pre-Election Jitters

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August shows fourth straight month of contraction.

August’s data showed a continuation of the sales slump that we have seen at the jewelry stores in our survey group since May, and it marks the first time we have had four successive months of decline since the end of 2013. Pre-election uncertainty is no doubt a factor contributing to nervousness among consumers and this will remain the case until that big November date.

August showed an average level of store sales of $119,481, down from $122,345 for the same month in 2015, representing a decline of 2.34 percent year-on-year. Rolling 12-month data shows annual sales of $1,602,895, down from July’s $1,605,759, a drop of 0.17 percent. This works out to be an annualized drop of 2.14 percent in sales should the trend continue.

 

MTD
COMPARISION
AUGUST
2015
AUGUST
2016
Gross Sales $ $122,345 $119,481
Total Sale # 348 286
Avg. Sale Value
(incl. repairs)
$317 $375
Margin 45% 45%
Overall Gross Profit $ $55,402 $53,864
Percentage of
Annual Sales
8% 7%

 

As the August data indicates, retail units sold declined from 348 to 286 units, a drop of 29 percent on last year, which was partially offset by the increase in average sale value, up by 18 percent from $317 to $375. Margins have been maintained resulting in a decrease in gross profit achieved. The ongoing and significant decline in items sold continues to be the key issue for many stores.

This month, our focus turns to silver — one of the traditionally high-volume areas for many stores. We have compared the performance of stores doing in excess of $1 million sales per annum against those doing less to see how they match up in this area of business.

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Silver Comparison
August 2016 YTD
Under
$1M
Over
$1M
Sales $ $99,271 $257,253
Sales # 1,553 3,299
Average Sale $64 $78
% total sales 14.6% 9.9%
Cost of Goods $44,296 $122,529
Gross Profit $ $54,975 $134,724
Gross Profit % 55.0% 52.0%
% of total GP 15.9% 11.7%
Mark Up % 124.0% 110.0%
Stockturn 0.83 0.77
Closing Stock $53,547 $158,576
PI 103 85

 

The above chart compares the performance for the last 12 months between stores doing in excess of $1 million in sales and those doing less.

It’s interesting to note that smaller stores generally achieve much better results than the larger stores when it comes to comparable data. Smaller stores achieve 14.6 percent of their sales from silver compared to 9.9 percent for larger stores (and in case you think the larger stores are selling a bigger percentage of diamonds, that’s not the case either). Also of interest is the profit being achieved by the smaller stores. They are achieving a margin of 55 percent compared to 52 percent for bigger stores, and this is helping to achieve a gross profit contribution of 15.9 percent of total gross profit compared with the larger stores’ 11.7 percent.

This better margin and a slightly healthier stockturn of 0.83 per annum are resulting in a return on investment of $1.03 for every $1 invested in silver. For larger stores the combination of a 0.77 stockturn and a markup of 110 percent results in a return of just $0.85 per every $1 of money invested in silver inventory.

How does your data compare? Are you achieving a return of more than $1 for every dollar invested in silver? Are your margins comparable to 55 percent? If not, why not? The great thing with comparative data is its ability to show best practices. If someone else is achieving better numbers then so can you.

This article originally appeared in the October 2016 edition of INSTORE.

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