Jones Apparel Group Inc. is the latest big boy retailer to post gains in earnings and largely attribute it to decreases in expenses.
The company which owns and operates everything from Anne Klein, Jones New York and Evan Picone to Nine West and Easy Spirit stated that 2nd quarter earnings rose 24% versus a year ago.
At the risk of sounding like a broken record, which I’m going to do anyway, cutting costs is a major way to stay solvent at a time when store traffic and average transactions are down.
THE REAL WORLD RETAILING TAKEAWAY
Focusing on top four ways to save on expenses may help save your company.
Increase margins – negotiate with your vendors to give you a few more points of gross margin. If the line isn’t critical to your sales, negotiate harder, opting to even consider dropping the line if the margin isn’t increased. There are a million lines out there. You have to decide how important the line is to your business. If they don’t provide a better margin, move their product back and bring a line forward in your store that is giving you better margins and promote it.
Close stores – it’s of critical importance to consider closing locations (if you have more than one) if the stores aren’t profitable, or barely eeking out a profit. A store that’s only contributing 3% to your bottom line probably isn’t worth the effort – it’s only serving to distract you from making your more successful stores even more so.
Decreasing staff – are you maximizing your payroll. Remember, you should be shooting for your total payroll to be 15% max of sales. If you’re not hitting that number, then you need to reduce. Use more part-time employees, schedule for shorter shifts, and schedule only when the business is there to support more staff members.
Reduce inventory – merchandise that’s just sitting on shelves isn’t productive. So why are you allowing it to consumer your working capital? Check with vendors to see if they’ll take it back. If not, mark it down and move it out. Remember, 80% of sales come from 20% of skus. Make sure you’re maximizing the skus that are selling.
How are you reducing expenses and what impact is it having on your business?
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How are you decreasing expenses