1. Pet Retail Performance Report: Identify Profit Opportunities
Michael Becher, CPA Vice President Industry Insights, Inc.

2. The Importance of Information
“Information is the oil of the 21st century, and analytics is the combustion engine.”
- Peter Sondergaard, Senior Vice President at Gartner
“(This) is surely the century of data.”
- David Donoho, Professor of statistics as Stanford University
“It’s amazing how much data is out there. The question is how do we put it in a form that’s usable?”
- Bill Ford Jr., Ford

3. Objectives
About the Study
How Benchmarks Work and Why They’re Important for Your Business
Most Relevant Measures for Your Store
Highlights of Survey Results
Analysis of a Hypothetical Company
Discussion/Q&A

4. Survey Sent to Pet Retailers in the U.S. and Canada 4-Page Survey Form
About
Survey Sent to Pet Retailers in the U.S. and Canada
4-Page Survey Form
118 Participating Companies Representing 257 Locations
Easy-to-Understand, Actionable Tool for Companies to:
Evaluate their own company’s operating results
Pinpoint strengths and weaknesses, and improvement opportunities
Provide information that will enable retailers to better manage their businesses

5. WPA Retail Operating Performance Reports
Overall Industry Report

6. WPA Retail Operating Performance Reports
Confidential, Company Performance Report

7. WPA Retail Operating Performance Reports
Online Reporting Tools

8. Ratios must be compared against some standard
How Benchmarks Work
Financial information is more useful as a ratio than as an absolute figure
Ratios create a common platform for reviewing information and basing decisions
Ratios must be compared against some standard
Industry Peers
Historical Performance
Budgets

9. Why Benchmarks are Important
Measure Performance & Productivity
Profit Margins
Return on Investments
Employee Productivity
Can be Dangerous to Only Look at Profits
Gauge Health
Balance Sheet Ratios (Liquidity, Leverage, Cash Cycle)
Hybrid Ratios (ROA, RONW, Inventory Turnover)

10. Keep in Mind…
Industry statistics should be regarded as “guidelines” rather than absolute standards
Major deviations between your own firm’s performance and industry norms are not necessarily good or bad, but signals areas of further analysis
EVEN A RELATIVELY SIMPLE ANALYSIS CAN RESULT IN SIGNIFICANT INSIGHTS ABOUT YOUR BUSINESS

11. Most Relevant Measures for Your Store
What is your goal and what is your strategy?
Improving lives
Pets
Customers
Employees
Maximizing financial success

12. Most Relevant Measures for Your Store
Overall Key Performance Measures
Net Profit Margin
Operating Margin
Asset Turnover
Return on Assets
Return on Net Worth
Management Ratios
Inventory Turnover
Turn & Earn Profitability Index
Financial Leverage
Debt to Equity
Days in Inventory
Cash Cycle
Current Ratio
Quick Ratio
Employee Productivity Ratios
Revenue per Employee
Operating Margin per Employee
Payroll as a % of Total Revenue
Payroll per Employee
Value Add per Employee
Employee Turnover
Sales Measures
Sales Growth
Forecasted Sales Growth
Revenue per Square Foot
Revenue per Selling Square Foot
Operating Margin per Square Foot
Operating Margin per Selling Square Foot
Sale Price per Transaction

13. Real GDP Growth

14. Retail Sales Growth Excluding motor vehicle and parts dealers

15. Retail Sales Growth Other Miscellaneous Store Retailers

16. Unemployment and Disposable Income

17. Respondent Demographics All Respondents
40.2% Pet Store with Animals
35.9% Pet Store – Dry Goods Only
18.8% Grooming Store with Retail Sales
5.1% Other

18. Respondent Demographics
Pet Stores with Animals
Pet Stores Dry Goods Only
Grooming Stores w/ Retail
All
High Profit
Sales Volume
$2.2MM
$1.4MM
$3.4MM
$4.7MM
$644K
$583K
Total Employees
15.7
16.3
22.9
34.9
8.6
9.4
Years in Operation
29 years
35 years
17 years
15 years
10 years
Total Square Feet
4,800
6,600
3,000
2,760
2,000
Number of Register Transactions
48,225
37,769
98,483
127,359
27,817
24,320

19. Revenue Growth 2016 vs. 2015 All High Profit Pet Stores with Animals
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

20. Revenue per Selling Square Foot
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

21. Sales Price per Transaction
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

22. Operating Margin All High Profit Pet Stores with Animals
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

23. Total Operating Expenses
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

24. Net Operating Profit Before Taxes
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

25. Summary Income Statement
Pet Stores with Animals
Pet Stores Dry Goods Only
Grooming Stores w/ Retail
All
High Profit
Total Revenues
100.0%
Total Cost of Goods Sold
58.0%
57.1%
59.8%
53.3%
17.8%
22.4%
Operating Margin
42.0%
42.9%
40.2%
46.7%
82.3%
77.6%
Total Payroll Expenses
17.0%
12.9%
16.8%
15.1%
41.9%
35.5%
Total Occupancy Expenses
12.5%
10.9%
8.9%
10.3%
17.2%
Total G & A Expenses
6.5%
4.6%
7.9%
8.6%
13.9%
13.8%
Total Operating Expenses
35.9%
28.4%
33.6%
34.1%
73.0%
61.8%
Net Operating Profit
6.1%
14.6%
6.6%
12.7%
9.3%
15.8%

26. Summary Income Statement
Pet Stores with Animals
Pet Stores Dry Goods Only
Grooming Stores w/ Retail
All
High Profit
Total Revenues
100.0%
Total Cost of Goods Sold
58.0%
57.1%
59.8%
53.3%
17.8%
22.4%
Operating Margin
42.0%
42.9%
40.2%
46.7%
82.3%
77.6%
Total Payroll Expenses
17.0%
12.9%
16.8%
15.1%
41.9%
35.5%
Total Occupancy Expenses
12.5%
10.9%
8.9%
10.3%
17.2%
Total G & A Expenses
6.5%
4.6%
7.9%
8.6%
13.9%
13.8%
Total Operating Expenses
35.9%
28.4%
33.6%
34.1%
73.0%
61.8%
Net Operating Profit
6.1%
14.6%
6.6%
12.7%
9.3%
15.8%

27. Inventory Turnover Cost of Goods Sold / Inventory
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

28. Days in Inventory 365 days / (COGS / Average Inventory)
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

29. Asset Turnover Sales / Total Assets
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

30. Return on Assets Net Operating Profit Before Taxes / Total Assets
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

31. Financial Leverage Total Assets / Net Worth
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

32. Return on Net Worth Net Operating Profit Before Taxes / Net Worth
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

33. Pathway to Profitability DuPont Profit Model
Profit before Tax
Asset Turnover
Return on Assets
Profit Before Taxes
Total Revenue
Profit Before Taxes
Total Revenue
Total Revenue
Total Assets
Total Revenue
Total Assets
Profit Before Taxes
Total Assets = X

34. Pathway to Profitability DuPont Profit Model
Profit before Tax
Asset Turnover
Return on Assets
Financial Leverage
Return on Net Worth
Profit Before Taxes
Total Revenue
Total Revenue
Total Assets
Profit Before Taxes
Total Assets
Profit Before Taxes
Total Assets
Total Assets
Total Net Worth
Total Assets
Total Net Worth
Profit Before Taxes
Total Net Worth = = X X

35. Pathway to Profitability DuPont Profit Model
Profit before Tax
Asset Turnover
Return on Assets
Financial Leverage
Return on Net Worth
Profit Before Taxes
Total Revenue
Total Revenue
Total Assets
Profit Before Taxes
Total Assets
Profit Before Taxes
Total Assets
Total Assets
Total Net Worth
Total Assets
Total Net Worth
Profit Before Taxes
Total Net Worth = = X X

36. Current Ratio Current Assets / Current Liabilities
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

37. Quick Ratio (Current Assets – Inventory) / Current Liabilities
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

38. Revenue per Employee All High Profit Pet Stores with Animals
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

39. Operating Margin per Employee
All High Profit
Pet Stores with Animals
All High Profit
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

40. Payroll per Employee All High Profit Pet Stores with Animals
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

41. Employee Turnover All High Profit Pet Stores with Animals
Pet Stores Dry Goods Only
All High Profit
Grooming Stores w/ Retail

42. Profit Leader Overview
High Profit Company’s Generally Reported:
Above Average Revenue Growth
Better Expense Control
Higher Revenue per Selling Square Foot
Higher Sales per Transaction
More Productive Asset Usage
Better Inventory Control
More Leveraged
Higher Operating Margin per Employee
Lower Payroll Expenses as % of Sales
Lower Employee Turnover

43. Which Metrics Should You Track?
By Tracking These Inputs
Revenue
Cost of Goods Sold
Profit Before Taxes
Current Assets
Inventory
Total Assets
Current Liabilities
Total Liabilities
Total Equity
You Can Calculate These Ratios
Sales Growth
Net Profit Margin
Operating Margin
Asset Turnover
Inventory Turnover
Return on Assets
Return on Net Worth
Turn & Earn Profitability Index
Financial Leverage
Debt to Equity
Days in Inventory
Current Ratio
Quick Ratio

44. Hypothetical Company Case Example
Your
Company
Pet Stores
with Animals
OVERALL KEY PERFORMANCE MEASURES
Net Profit Margin
6.0%
6.1%
Operating Margin
48.8%
42.0%
Asset Turnover
5.0
5.3
Return on Assets
20.9%
13.1%
MANAGEMENT RATIOS
Inventory Turnover
6.2
6.6
Financial Leverage
2.0
1.4
Debt to Equity
1.0
0.5

45. Hypothetical Company Case Example
Your
Company
Pet Stores
with Animals
LIQUIDITY RATIOS
Current Ratio
2.3
1.9
Quick Ratio
0.8
0.6
EMPLOYEE PRODUCTIVITY RATIOS
Total Revenues Per Employee
$161,646
$150,000
Total Payroll as a % of Total Revenues
23.1%
24.0%
SPACE PRODUCTIVITY RATIOS
Total Revenues Per Selling Square Foot
$257
$310
Operating Margin Per Selling Square Foot
$105
$131

46. Sample Report Card

47. EVEN A RELATIVELY SIMPLE ANALYSIS CAN RESULT IN SIGNIFICANT INSIGHTS
Closing Thoughts
Make a plan of the metrics to monitor
Compare these to your historical performance and industry norms
Major deviations between your own firm’s performance and industry norms are not necessarily good or bad, but are signals of areas for further analysis
EVEN A RELATIVELY SIMPLE ANALYSIS
CAN RESULT IN SIGNIFICANT INSIGHTS
ABOUT YOUR BUSINESS

48. Questions and Comments
Michael Becher, CPA
Vice President x 114
Industry Insights, Inc Emerald Parkway
Dublin, OH