Annual P&L Study 2021 - Part 4

Annual P&L Study 2021 - Part 4

by Tim Quebedeaux

To unlock the door to profitability, two Key Performance Indicators are needed to hit their goals, Inventory Turns and GMROII.  The largest Best Practices group in the P&L Study history (with 44 Garden Centers in 2020) was surpassed in 2021 with 47! Below is a list of 37 of these Centers with the remaining 10 (Best of the Best) to follow.

2021 P&L Study Best Practices Group

American Tree
B.B. Barns
Bedner's Farm & Greenhouse
Berns Garden Center Beavercreek
Berns Garden Center Middletown
Bloom Greenhouse & Garden Centre
Bountiful Acres
Buchanan's Native Plants
Burnett's Country Gardens
Corso's Flower & Garden Center
Dickman Farms Greenhouse & Garden Center
Durham Garden Center
Ellis Home & Garden Bossier
Ellis Home & Garden Longview
Faddegons Nursery
FarWest Landscape & Garden Center
Fernwood Garden Center
Fiddleheads Garden Center
Gardens of Babylon
Gateway Garden Center
Hunters Garden Centre - Vancouver
Hunters Garden Centre - Surrey
Kerby's Nursery & Landscaping
Mostardi Nursery
My Secret Garden
New Garden Landscaping & Nursery
Reems Creek Nursery
Rhoads Garden Center
Rockledge Gardens
Sandy's Back Porch Garden Center
South Pleasantburg Nursery,
Sunny Meadows Garden Center
Waldoch Farm
Wells Medina Nursery
White Oak Gardens
Wilson's Garden Center

The next part of the P&L Study covers Inventory Turns and GMROII, the ultimate report cards for your inventory management.  Inventory Turns are calculated by taking COGS and dividing it by Average Inventory.  This measurement speaks directly to how fresh your inventory is, which in turn will increase/decrease your margin and your customers' repeated visits.  Higher Inventory Turns will benefit your cash flow situation as there will be more cash in the bank and less tied up in older inventory on the sales floor.  Your Goal for Inventory Turns will vary widely by category due to the perishability of your product.  Inventory Turn expectations are lower for non-perishable products, because of the perception that they can sit for longer periods of time without losing value.  This is not true, the older and greater the amount you have not turning, the more you end up paying the carrying cost.

Gross Margin Return on Inventory Investment - GMROII, puts Inventory Turns and Margin Dollars together for one of the most essential measurements.  This is calculated by taking Margin dollars divided by average inventory (the Inventory Turns part of the equation).  Essentially saying, how many margin dollars do I get for every dollar invested in average inventory.  As we always say, Margin Dollars are important, as they pay the bills, but for GMROII Inventory Turns are more important, as they account for 2/3rds of the equation.  As you increase your Turns, you will increase your Margin Dollars, a profitable snowball effect!

What we saw in 2021, was decreasing GMROII and leveling Inventory Turns.  This can be seen obviously in the amount of ending Inventory, an increase of 33% from the beginning of the year to the end.  Despite the increased revenues and thus increased Margin Dollars, they were not able to overcome the amount of effect the ending inventory on average inventory, thus lower GMROII and level Turns.  With this rising amount of average inventory, alarm bells are going off in my head.  A lot was caused by Just in Case inventory buying, instead of Just in Time buying.  Where do you stand? How are you going to react as 2022 comes to bear upon us?

Next week we will reveal the Best of the Best Group, as well as the end of the line with the P&L Study – the balance sheet!  Your business’s ultimate report card.

Even more story to follow...

Got questions or need more information about The Group's the Annual P&L Study or the Weekly Department Review (WDR)? Give Tim a call or email.

Tim Quebedeaux
Cell: 770.355.6249

Group Client Reminder: You can watch the March 10th GROUPtalk LIVE presentation when Tim and Steve presented 2021 P&L Study Reveal. Log into the WebSystem and go to the Clients-Only menu and down to Training - 2021 P&L Study Reveal.

Tim Quebedeaux, RetailKPI Consulting, is a service provider for The Garden Center Group and manages all Group financial sharing programs. The Weekly Department Review (WDR) and The Annual P&L Study are industry exclusives developed by The Garden Center Group and are included in your retainer!

REMEMBER: Your interaction (by phone and email) with Group Service Providers such as Tim Quebedeaux, Sid Raisch, Jean Seawright, John Kennedy, and of course Danny Summers are included in your retainer! So what are you waiting for? Take advantage of all that The Group has to offer and give them a call or send an email now!

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