Every year we see different results for individual companies when comparing this year’s numbers to last and 2018 was certainly no different. I can’t even say that the wide swings were terribly unusual (from up nearly 100% to down 45%). But when looking for patterns, regional, business type, branded vs. non-branded, watches vs. bridal, high-end vs. modest priced, etc., I could find none. When I can’t see a pattern of any kind, it bothers me. And so, I am left somewhat bothered.
The drilling (into numbers) started in earnest around December 14th when a client called to ask how the season was going so far. While I check into 5 or 6 companies each day, I was just highlighting, not concentrating in a specific part of the country but mostly thinking about those who have been having a rough year for various reasons. I like to keep my eye on them.
So, this client calls and says that their sales are off 45% for the first 2 weeks of the month. That’s not possible, I said, mostly since I hadn’t heard a single complaint about sales being down this much. While we were on the phone, I brought up their company and sure enough, sales were off by 45%. I spent the next few hours slicing and dicing their data, as well as all of the other companies within 100 miles of their store. There was only one other similar company (lots of brands) that was off a bunch, but every other company was either flat or was up (at that point in the month). I didn’t get it. I checked their data every day, expecting that the marketplace will even out over the remaining 10 days of the season and they would catch up. They didn’t. So, I started running reports for our Plexus groups and other groups whom we aggregate data for and combined them into one big spreadsheet, representing 80 companies (I didn’t add up the doors, but a bunch). We’ll get back to the store that was down a little later.
The interesting part of the season was that the total sales from these 80 companies were almost even, down, overall by 2%. When we hear about total retail sales reported, we’ll hear that sales were up or down by whatever percent, but that doesn’t really tell the entire story. The wide range of results tells the story. More importantly, what are the numbers behind these numbers? And here’s where it gets concerning: traffic.
Sales, as I’ve said was down, overall, by 2%, but number of items sold was down 15%! For those of you who don’t know how we track sales, for these purposes we exclude bulk items, such as beads, repairs, batteries, etc. This is just jewelry sales. Fifteen percent fewer items sold in 2018 vs. 2017. But then, how were sales nearly flat? Of course, the answer lies in the average ticket price, which was up, coincidentally, by 15%. When items sold drops by 15% but average ticket is up by 15%, sales are nearly even. The average sale was $889 compared with $774 from a year ago. I’m happy that average tickets were up by 15% but not at all happy to see this drop in unit sales.
Because we’re working with an aggregation of 80 companies for this sample, I wanted to point out that the results were all over the board regarding number of items sold by individual stores. More than a few actually saw increases in the number of transactions, but we’re looking at overall results here.
So, back to the jeweler who was down 45%…
I waited until the entire month was in and ran 5-year reports for this retailer to see what the longer trends looked like. There was a lurching up and down year over year (one up, one down) that showed a far more volatile result than we are used to. Typically we see steady increases over time, but when we come to expect that this year is going to be better than last year, and it doesn’t turn out that way, depression sets in. This is in many ways, similar to what we are seeing in the stock market – after a decade of growth, we expect this year to be better than last – and are surprised (or just disappointed) when it isn’t. Trending multiple years usually establishes a pattern, but that doesn’t mean this trend will continue – the marketplace has its own ideas and it can turn due to circumstances beyond your control. A large local employer closes, a trade-war heats up, interest rates rise, markets react, customers buy online, or they don’t buy at all.
Developing budgets around the expectation that this year will be better than last can cause pain when the numbers don’t meet expectations. Inventory levels are another one of those numbers I watch (we spend a lot of time at our Plexus group meetings talking about inventory levels and debt), and when there is expectation that this year will be better than last, we buy into that expectation. But when we don’t hit our numbers, we wind up staring at huge payables in January, and no one wants that. Look at your Asset inventory over the past 4 or 5 years. Has it grown? If so, why? Also look at your aged inventory, not as a % of total inventory but in dollars. Do you have more non-performing inventory today than you did 4 or 5 years ago? If so, how are you dealing with it?
We also look at price point reports to see consumer behavior. One thing I did hear from the jewelers who called or wrote in December was that their bigger ticket sales didn’t happen this year for many retailers. (Stock market jitters?) Ironically, other retailers had no problem with their higher-ticket sales. There was, as I mentioned, no discernible pattern.
We can’t know how 2019 is going to turn out. There are headwinds with trade, the short-term business cycle, jittery financial markets, divisive politics and rising interest rates that effects everyone who buys or sells anything. However, as more retailers close, your share of the pie will increase – those customers coming in for repairs or batteries (often the first time they visit you) are your future – don’t let them leave without showing them something fun or at least interesting.
With fewer people shopping in stores, every customer is your new best customer. Every sale becomes important. As does sales management, inventory management, event planning, social media…. Need I go on?
To sum up, this is a great time to be running multi-year analysis for your stores so you can get familiar with what’s happening. Three to five year trends looking at Sales, Units Sold, Average Ticket, GP%, Inventory Levels, Aged Inventory Levels – doing this over time shows, not only how your customers are behaving, but should let you know how you have been responding to them. Price points, categories and vendor reports explain how each element of your business is behaving and should allow you to make adjustments going forward. This is a good time to balance your portfolio.
The Balance to Buy Team is looking forward to working through your numbers with you. Of course, should you have any questions in the meantime, don’t hesitate to reach out to one of us.
Best wishes for a Happy, Healthy and Successful 2019!