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Furniture Stores: Key operating numbers

By Furniture Today Staff -- Furniture Today, December 25, 2005

All Stores
Sourcing

All Stores

Profitability measures
medians
2%	Net return on sales, Net income divided by net sales
4%	Net return on assets, Net income divided by total assets
8%	Return on net worth
43%	Gross margin percentage, Net sales minus cost of goods sold divided by net sales

Revenue sources
Merchandise sales	98%
Other income	&1%
Income from services	&1%
Finance/credit income	1%

Expense allocation
Merchandise costs	62%
Payroll	17%
Occupancy costs	6%
Advertising	5%
Other	10%

Efficiency measures
medians
Hours open a week	54
Close ratio, Percentage of customer visits that result in a sale	35
Sales per sales employee	$524,087
Sales per square feet of selling space	$156
Stock turns	3.2

Non-store activities
% of stores ...
Offering in-home design consultations, for a median of 10% of sales	54%
With a Web site, Of those with a Web site, 18% accept online orders, for a median of 2% of sales	58%
Also selling through a catalog, for a median of 20% of sales	12%

The sales floor

71% of gross space is allocated to selling

Fabric vs. leather
	Fabric	Leather
Stationary upholstery	77%	23%
Motion upholstery	72%	28%
Recliners	66%	34%

Best-selling price points
medians
Fabric covered sofa	$799
Leather covered sofa	$1,099
Recliner	$449
Casual dining	$699
Formal dining	$1,500
Master bedroom	$1,499
Youth bedroom	$499
Cocktail table	$269
Lamp	$99

Merchandise display mix for stores carrying the product
medians
	Percentage of...		Number of ...
	Sales	Selling space	Lines carried	SKUs on sales floor	% special order
BEDDING
Bedding	10%	8%	2	14	10%
CASE GOODS
Master bedroom	13	15	6	15	25
Youth bedroom	1	5	3	5	20
Cribs and other infant furniture	&1	1	1	2	20
Dining room	6	9	5	10	25
Dinette/casual dining	5	6	4	15	10
RTA	&1	4	3	18	15
Entertainment centers	3	5	4	15	15
Desks	1	3	3	8	10
Other home office	&1	2	3	5	32
Occasional tables	5	5	6	40	15
UPHOLSTERY
Stationary upholstery	20	25	6	40	40
Motion upholstery	3	5	2	10	29
Motion chairs	5	5	3	40	20
OTHER
Lamps	1	2	5	51	10
Area rugs	&1	2	2	40	15
Wall decor	&1	2	5	56	10
Other accessories	&1	2	10	175	10
Outdoor furniture	&1	4	2	11	20

% of stores carrying private label

% of stores carrying private label 18%

accounting for a median of 15% of their sales

Private-label products offered by retailers carrying private label
Bedding	60%
Bedroom	29%
Dining	19%
Leather upholstery	29%
Fabric upholstery	36%
Accessories	12%
Other	5%

Sales staff

Paying the sales staff takes of payroll allocation 43%

Pay methods for sales staff
	Full-time sales managers	Full-time sales associates	Part-time sales associates
Hourly	14%	21%	40%
Salary only	47%	16%	7%
Salary plus commission	37%	38%	32%
Commission only	2%	30%	24%
Bonus for performance	29%	20%	21%

Pay rates for sales staff
	Lowest	Highest
Buyers	$42,000	$50,000
Store managers	$45,000	$60,000
Sales managers	$40,000	$51,000
Sales staff	$25,000	$50,000

Measuring your store's performance
	Large stores >$20	Medium stores $5–$20 M	Small stores $2–$5 M	Smallest stores &$2 M	Your stores 2005	Your stores goal 2006
Source: Furniture/Today market research and Karen Haver, CPA
Revenue sources
Merchandise sales	98%	96%	99%	96%
Finance/credit income	1%	3%	&1	3%
Income from services	&1	1%	1%	1%
Other income	&1	&1	&1	&1
Expense allocation
Merchandise costs	63%	56%	58%	58%
Payroll	17%	20%	20%	20%
Occupancy costs	6%	9%	9%	11%
Advertising	5%	7%	6%	5%
Other	&1	8%	8%	6%
Efficiency measures
medians
Hours open a week	70	59	56	51
Sales per salesperson	$569,168	$508,905	$543,511	$400,000
Sales per square foot of selling space	$276	$165	$139	$101
Gross margin percentage	43%	45%	42%	43%
Return on sales	3%	2%	2%	4%
Return on assets	6%	1%	5%	6%
Return on net worth	12%	3%	9%	17%
Stock turns	3.7	3.1	2.9	3.2
Close ratio	40%	33%	30%	39%
Percentage of customer visits that result in a sale
Space allocation
Percentage of gross space
Selling	64%	62%	73%	74%
Administrative	4%	6%	5%	5%
Warehouse	32%	30%	20%	20%
Other	&1	2%	1%	&1
Non-store activities
Percentage of stores ...
Offering in-home design consultations	46%	63%	63%	47%
With a Web site	93%	78%	70%	37%
Also selling through a catalog	11%	5%	13%	15%
Payroll costs by funtion
Percentage of payroll dollars spent on ...
Administrative, office	26%	31%	32%	27%
Sales	41%	40%	44%	45%
Warehouse, delivery	26%	22%	21%	25%
Repair/deluxing	3%	3%	2%	1%
Janitorial/maintenance	1%	2%	1%	1%
Other	2%	3%	&1	2%
Advertising costs by media
Percentage of ad dollars spent on ...
TV	35%	37%	25%	16%
Newspaper	27%	26%	35%	42%
Radio	14%	5%	12%	13%
Direct mail	13%	19%	14%	9%
Other	11%	13%	14%	20%
Other includes local, state, national and regional magazines, Yellow Pages, sponsorships, in-store events and billboards
Frequency of marked-down sales
Percentage of stores taking mark-downs
Never	11%	5%	4%	10%
Annuallly	4%	3%	6%	7%
Twice a year	4%	15%	28%	32%
3–6 times a year	7%	18%	28%	25%
More than 6 times a year	14%	10%	10%	9%
Maintain a clearance area all year	61%	49%	24%	17%
Average mark-down median	20%	25%	23%	20%

Sourcing

Direct imports

34% of retailers imported directly in 2004

20% of their sales are accounted for by direct imports

% of direct importers importing each product ...
Master bedroom	76%
Dining room/casual dining	71%
Occasional tables	41%
Entertainment centers	39%
Desks/home office	27%
Youth bedroom	22%
Leather upholstery	54%
Fabric-covered upholstery	40%
Recliners	17%
Lamps	12%
Area rugs	9%
Other decorative accessories	18%
Outdoor furniture	6%
Other	5%

Importing form ...
China	73%
Canada	31%
Mexico	28%
Italy	28%
Vietnam	21%
Other Asian country	21%
Brazil	14%
Other Western European country	6%
India/Pakistan	4%
Middle East	4%
Other Latin American country	4%
Eastern European country	4%

Direct importers find sources by ...
Other includes trade advertising, buying group, travel to factories
Attending U.S. shows where sources exhibit	64%
Using a sourcing agent	22%
Referral by other retailer(s)	17%
Attending international shows where sources exhibit	14%
Other	14%

11% of retailers who did not import directly in 2004 will in 2005, while 4% who imported in 2004 will not in 2005

Behind the numbers

More detailed numbers on store performance are available in Furniture/Today's Furniture Store Performance Report, published in the Sept. 12, 2005, issue, and available online at www.furnituretoday.com.

Figures in the Furniture Store Performance Report are for fiscal years ending between Dec. 31, 2004, and May 31, 2005.

The Furniture Store Performance report gives retailers benchmarks to measure profitability, employment practices, merchandise performance and sourcing, buying and advertising. This year's full report shows both revenues and expense allocations for stores at various sales volume levels and by region.

Useful definitions

Return on assets = net profit (after tax) divided by total assets.
Return on net worth = net profit (after tax) divided by net worth (total assets minus total liabilities).
Gross margin = net sales minus cost of goods sold (including freight and shrinkage, excluding handling).
Gross margin percentage = gross margin divided by net sales.
Stock turns = cost of goods sold divided by annual average inventory (derived by adding the inventory at the beginning of the year to the inventory at the end of the year and dividing by 2).
Medians are the middle point for any range of figures. When medians are given, it means that one-half of the furniture stores reported figures above the median and one-half reported figures below the median. Unlike averages (means), the median is not distorted by unusually high or low figures that may be reported.
Sales per salesperson is calculated by dividing merchandise sales by the number of sales employees.
Sales per square foot is calculated by dividing merchandise sales by total square feet of selling space.
Close ratio is calculated by dividing the average number of customer visits per week that result in a purchase by the average number of customer visits per week.
Payroll expenses include commissions and fringe benefits.
Fringe benefits include all payroll taxes, workers' compensation, retirement plans, group health insurance, disability insurance, etc.
Occupancy costs include real estate taxes, utilities (heat, lights, water, sewer, power), building rent and depreciation, interest on mortgage indebtedness, personal property taxes, depreciation on furniture, fixtures and equipment, amortization of leasehold improvements, property and casualty insurance, building repairs, cleaning and maintenance supplies. Delivery vehicle costs are excluded.
Part-time employees are defined as those working less than 30 hours per week.

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Sep 25, 2005

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