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No. of Recommendations: 11
Duxx -

Serious. I have 4 pages on revenue, 15 on key questions for various industries.

Here are my retailer questions, since I suspect a lot of TMF readers own at least one.


Hewitt

Stores:
How many stores are there?
In how many states?
Avg. square footage per store?
Does company own the stores? Lease? How much of each?
Are leases at below-market rates?
What is avg. sale to customer?
How much does it cost to build a store? How long does it take to recover outlay?
How many stores will company build a year for next 3 years? Same square footage?
% Metropolitan Statistical Areas (MSA) coverage?
Will new stores cannibalize existing store sales?
Revenue, earnings growth per existing store?
Are stores clean? (Or, do they need refreshening?)
Are there reserves for store closings or defaults?
Can company grow from local to regional to national? (Risk: No room for growth.)
How many stores has company opened/closed every year for last five years?
Aggressive use of part-timers?
How often does company remodel its stores to stave off brand fatigue.
(Ex: Growth due to a combination of new-store openings (avg 13. per year), consistent 6% or higher comparable-store
Sales growth (sales at stores open at least a year), and strong growth in the catalog and Internet retailing business.)
When stores last upgraded?
3-pronged attack: 1) same-store sales increase; 2) open new stores; 3) gross margin increase
Is same-store data unreliable due to promotions, markdowns, weather, store closures, relocations and refurbishes. Also, no standard way all retailers compile the data, end date, etc.
Comparable same store sales growth trend?
Square footage growth rate trend?
Average weekly sales per store trend?
Is management getting sloppy about siting new stores? (What is their method for siting new stores?)
How does management train new employees? How does management know if they are properly trained?
How much time does customer spend in store? (CostPlus it is 40 minutes -- a long time.)
How many times a year does average customer visit the store?
Average person who visits store returns ____ months later? (12/04: Apple store is 3 months, vs. 2 years for Best Buy)
% stores located in neighborhoods with household incomes below $20K a year; $40K a year
Stores in ___ account for 50% of revenue
How many states in company in?
How many states would company like to be in?
Average age of stores?
How will this company insulate its franchise from Wal-Mart?
Compare market value, revenue and profits of stores on per capital basis to competition
How many locations does company have? How many locations does it own?

Fashion risk, etc.:
What are the important brands? (ex: Sears important brands are Martha Stewart and Joe Boxer)
How are these brands doing?
Does company have one product that accounts for disproportionate % of sales?
How often does company offer fresh merchandise? (Coach every 4 weeks.)
Who makes the merchandise? Does company or is it private label?
What are initial markups? If 65%, company can take 5-30% of list and still make money.
What are gross margins? Very rarely do you see it above 40%. (Higher the better; a tonic for cash flow.)
How many SKU's does a store carry? Competition?
Employee productivity: sales per employee
Revenue per square foot
Loss allowance as % of receivables
Net charge-offs as % of receivables
Average gross margins are 33% in the specialty retail industry.
Is company investing in store modernization, merchandising technology?
What is trend in average ticket over last 3 years?
How much does company spend on information technology?

Sales-to-inventory ratio:
Who has best sales-to-inventory ratio in the industry?

At a minimum, you want sales growing faster than inventory, says David Berman of the Dee-Bee Index
Berman believes this bodes well for future profit growth; the bigger the spread, the better
American Eagle's sales grew 37% Q!05, inventories 5%. This 32% spread is a "mind-boggling accomplishment"

Credit card portfolio:
Are credit card losses rising faster than delinquencies? (Red flag.)
Are charge-offs rising faster than reserves for credit card losses?
What is ratio of reserves to annualized net chargeoffs (anything under 1 is trouble--means co is substantially underreserved)
Is the growth from new stores and credit cards?
What is the direction of inventory per square foot? Compare to prior quarter, prior year.
Number of stores remodeled last five years?
How many stores does a company have to build a year to maintain its revenue, earnings growth?
What is a new store's average sales, operating profit contribution?
(Dollar Tree contributes about $300,000 of operating profit on $450,000 investment, for an excellent 67% first-year return)
High first-year returns enable company to fund new store growth through internally generated funds, vs. stock sales or debt
For stores open more than a year, check comps.
How long does it take for a store to reach profitability? How many additional years before reaching maturity?
How many stores does company close a year? In its history?
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