Hardware Retailing

DEC 2018

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 2018 30 T he annual Cost of Doing Business Study, compiled by the North American Retail Hardware Association (NRHA), collates data from hardware stores, home centers and lumberyards. Retailers have contributed their financial information for about 100 years, allowing NRHA to present an industry-specific report for independent operators to benchmark their businesses. The 2018 study provides composite income statements, balance sheets and averages for key performance ratios. The data comes from the 2017 fiscal year. Highlights from the 2018 study are presented in the following pages, showing mostly positive results for independents. Retailers throughout the industry use the Cost of Doing Business Study to gauge the health of their stores compared to similar operations. They also use the data to set goals for improvement and develop plans for future growth. The financial reports that study participants contribute give an accurate look at how home improvement retailers of all sizes and store types are performing. Retailers representing 1,033 independent home improvement stores participated in the 2018 Cost of Doing Business Study. The information is segmented by store type and by typical and high-profit store performance. Companies are further broken out by sales volume, single-store businesses and multistore operations. Methodology Every year, NRHA gathers the data by mailing questionnaires to hardware stores, home centers and lumberyards in the U.S. NRHA provides an analysis of aggregate numbers in the final report after extensively reviewing the data. Individual company responses are confidential. Most of the figures in this report are medians. The median represents the typical company's results, without extremely high or low outliers skewing the data. To identify high-profit stores, NRHA ranks all participating companies in their segments based on net profit before taxes. The high-profit companies are in the top 25 percent of their store types. A Real-World Look at Retailers' Financials Cost of Doing Business Study Here are some pointers for using the 2018 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. Take time to 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 store 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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