The 1997 NRHA/HCI Cost of Doing Business Study provides detailed inancial
results of hardware stores, home centers and lumber/building materials
outlets. Results profiled in this report are based on income statement,
balance sheet, and operating data provided by 811 participating firms.
The tables contained in this report are designed to provide comprehensive,
yet straight forward guidelines for analyzing profitability among hardware
stores, home centers and lumber/building materials outlets.
Report Format
The report is organized into a number of sections, each designed to
ssist management in a specific area of inquiry:
- Executive Summary - The summary provides an overview of the
study results, with emphasis on the differences between types of hardlines
retailers.
- Management Discussion - This section is a discussion of a topic
that is particularly important based upon the results of the survey. The
topic for this year is Cash Flow Management-Planning for Profitable Growth.
Detailed Results-In-depth reporting of return on investment, income statement,
balance sheet, financial ratios and productivity ratios is provided in
this section of the report. Management commentary is provided to focus
on the importance of these operating statistics.
- Analysis by Industry Segments - Detailed results are presented
separately covering the performance of each of the industry's segments:
hardware stores, home centers and lumber/building materials outlets.
- Appendix - Finally, the appendix provides an overview of the
survey methodology and detailed information on the calculation of the financial
ratios used in the report.
Explanation of Statistics
Almost all of the figures provided in this report are medians. The median
for a particular variable or calculation is the middle number of all values
reported from lowest to highest. The median is also referred to as the
50th percentile, whereas the highest value is the 100th percentile. The
median represents the typical company's results. The median is not influenced
by any extremely high or low values reported. An average or mean value,
on the other hand, may be influenced by extreme values. Thus, the median
is the preferred statistic for this analysis.
To determine each group of high profit firms, all participating firms
are ranked on the basis of pre-tax return on assets (ROA). The high profit
firms are those which fall into the top twenty-five percent of the firms
based on ROA. The figures reported for each of the high profit categories
represent a median for that group. Participant Support Every retail company
that participated in the study received an individual company Profit Improvement
Profile and a Profit Toolkit computer software package. The Profit Improvement
Profile compares each firm's financial performance to the industry. Areas
where financial improvements are needed were indicated. Specific suggestions
to help achieve higher profitability were also given.
The Profit Toolkit is a very simple, but powerful software package to
help plan for profit. The program enables the retailer to easily set their
own targets for improvement and immediately view the financial results
based on a series of "what-if" scenarios.