The Pulse of the Garden Center Industry – Part 2

The Pulse of the Garden Center Industry – Part 2

by Steve Bailey

Besides Revenues, what’s the most important ratio for a business selling a product? I’ll answer that one for you; it’s the COST of the product being sold.

Better known as Cost of Goods Sold, this value is actually a calculated one based on how much you started with, what you purchased, and how much you had left over at the end of the period. All of these values are at Cost, which includes Freight. This is also called Landed Cost. The calculation looks like this–

Beginning Inventory + Purchases – Ending Inventory

If you have good accountability in your POS or accounting software, these values are pretty easy to attain. So enough of the basics, what were the results?

This is where interesting trends emerge. For example, Retail Garden Centers COGS decreases as Revenues increase. A decreasing Cost of Goods Sold is a good thing, of course. And is fairly common with Expenses. This trend is usually explained as an economy of scale issue in that the smaller the business, the harder it is to buy in the quantities actually needed. Not always, but sometimes! In some cases, it’s just a lack of buying control called a Budget!

But take an about-face and move over to the Retailer/Growers. For some reason, as Revenues increased so did Cost of Goods Sold! This is difficult to explain as economy of scale usually kicks in on larger growing operations. The fact it did not in the P&L Study is an indication that a more detailed analysis is required if your Center is in that Group.

Normally we look to the Best Practices/High Achiever Group for a goal percentage to attain. Unfortunately, that group has not been the one to emulate in Cost of Goods Sold as Revenues have increased. Their percentage of Revenues have increased in less Profitable categories, resulting in an increase of 1% in COGS and the resultant decrease in Margin % by the same amount.

Will an increase in Revenues offset the Best Practices/High Achiever increase in the cost of the product they sold? We’ll see when we cover Operating Expenses and Wage & Wage Benefits in the next article.

Better yet, join us in Nashville for The Fall Event 2019, and we’ll get into more exact numbers for you to ponder. The P&L Study Session will be on the first day, Monday afternoon, and will provide all of us with even more items to discuss during the remainder of our meeting.

Be there!



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

Steve Bailey
Tel: 618.319.9205
Cell: 618.521.5225

Steve Bailey 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 Steve Bailey, Robert Hendrickson, Sid Raisch, Jean Seawright, and John Kennedy 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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