Session 3 store profit and loss

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The slides talk about a typical profit and loss (PnL) statement for a retail store

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Session 3 store profit and loss

  1. 1. Arindam Palarindam.bit@gmail.com © Arindam Pal
  2. 2.  A retail store is the engine of Retail Profitability Retailers can have different stages of profitability As a retailer matures, they become more and more profitable ◦ Store  First level of profitability, when a store becomes operationally profitable ◦ Regional  When the accumulated profits from stores is able to pay for the cost of regional establishment (regional manpower, office etc), then the region is said to be profitable ◦ Zonal  When the accumulated profits from regions within the zone are able to cover the cost of zonal establishment, then the zone is said to be profitable ◦ National  Sum of zonal profits covers the cost of National Establishment ◦ Globally  Sum of National profits covers the cost of Global Establishment Most Food and Grocery retailers in India are still at the stage of Store / Regional Profitability. Some Apparel retailers are close to/have attained National Profitability Store – Profit & Loss Statement
  3. 3.  Sales Income  Product Margin  Other Income  Adjustments Expenditure  Staff Cost • This is how a typical  Expenses Incurred to Run Stores Store Profit and Loss  Repairs and Maintenance Costs Statement Looks Like  House Keeping Expenses  Telecommunication expenses  Travel Expenses • The major components  Security Expenses are  Stationary Expenses  Energy Expenses Income  Cost of Selling  Cost of Freight and  Cost of Packaging Expenditure  Shrinkage  Other Expenses  Rent Common Area Maintenance Bank Costs Insurance License expenses Store – Profit & Loss Statement
  4. 4.  Sales Income Sales  Product Margin  Other Income  Adjustments • Revenues accrued from sale of Expenditure merchandise at the store  Staff Cost  Expenses Incurred to Run Stores  Repairs and Maintenance Costs •  House Keeping Expenses  Telecommunication expenses  Travel Expenses  Security Expenses  Stationary Expenses  Energy Expenses  Cost of Selling  Cost of Freight  Cost of Packaging  Shrinkage  Other Expenses  Rent Common Area Maintenance Bank Costs Insurance License expenses Store – Profit & Loss Statement
  5. 5.  Sales Income Product Margin  Product Margin  Other Income  Adjustments • Margin as suggested by the system Expenditure which has been earned by sale of  Staff Cost  Expenses Incurred to Run Stores goods.  Repairs and Maintenance Costs House Keeping Expenses • Product Margin = Sales Revenue –   Telecommunication expenses   Travel Expenses Security Expenses Cost of Goods Sold  Stationary Expenses  Energy Expenses  Cost of Selling  Cost of Freight  Cost of Packaging  Shrinkage  Other Expenses  Rent Common Area Maintenance Bank Costs Insurance License expenses Store – Profit & Loss Statement
  6. 6.  Sales Income Other Income  Product Margin  Other Income  Adjustments • Additional investment from Expenditure Suppliers towards running  Staff Cost  Expenses Incurred to Run Stores promotions, liquidation of  Repairs and Maintenance Costs goods, hiring of assets in House Keeping Expenses stores, branding campaigns etc.   Telecommunication expenses  Travel Expenses  Security Expenses  Stationary Expenses • Additional Income from Marketing Energy Expenses tie-ups   Cost of Selling  Cost of Freight  Cost of Packaging  Shrinkage • Income from sale of scrap goods  Other Expenses from store  Rent Common Area Maintenance Bank Costs Insurance License expenses Store – Profit & Loss Statement
  7. 7.  Sales Income Adjustments  Product Margin  Other Income  Adjustments • Payment of Taxes (State Expenditure Development Tax, Mandi Tax)  Staff Cost  Expenses Incurred to Run Stores  Repairs and Maintenance Costs  House Keeping Expenses  Telecommunication expenses  Travel Expenses  Security Expenses  Stationary Expenses  Energy Expenses  Cost of Selling  Cost of Freight  Cost of Packaging  Shrinkage  Other Expenses  Rent Common Area Maintenance Bank Costs Insurance License expenses Store – Profit & Loss Statement
  8. 8.  Sales Income Staff Cost  Product Margin  Other Income  Adjustments • Cost of the salaries paid to all the Expenditure direct employees working at the  Staff Cost  Expenses Incurred to Run Stores store.  Repairs and Maintenance Costs House Keeping Expenses • Staff Cost also includes incentives   Telecommunication expenses   Travel Expenses Security Expenses paid to employees  Stationary Expenses Energy Expenses • Staff Welfare cost like cost of   Cost of Selling  Cost of Freight drinking water, refreshments like  Cost of Packaging  Shrinkage tea/coffee, snacks, celebrations and  Other Expenses awards are also part of Staff Cost  Rent Common Area Maintenance Bank Costs Insurance License expenses Store – Profit & Loss Statement
  9. 9.  Sales Income Repairs and Maintenance Cost  Product Margin  Other Income  Adjustments • Cost of repairs and maintenance Expenditure cost for plumbing, civil  Staff Cost  Expenses Incurred to Run Stores work, electrical fittings, AC, chillers  Repairs and Maintenance Costs and freezers, generators and pest House Keeping Expenses control equipments   Telecommunication expenses  Travel Expenses  Security Expenses  Stationary Expenses • Cost of Annual Maintenance Energy Expenses Contracts (AMC) for equipments are   Cost of Selling  Cost of Freight also apportioned to monthly cost  Cost of Packaging  Shrinkage  Other Expenses  Rent Common Area Maintenance Bank Costs Insurance License expenses Store – Profit & Loss Statement
  10. 10.  Sales Income House Keeping Expenses  Product Margin  Other Income  Adjustments • Cost of salary of House Keeping / Expenditure Loading / Packing staff  Staff Cost  Expenses Incurred to Run Stores  Repairs and Maintenance Costs • Cost of housekeeping paraphernalia House Keeping Expenses (sweeps, floor clearers, wipers etc.)   Telecommunication expenses  Travel Expenses  Security Expenses  Stationary Expenses Telecommunication Expenses  Energy Expenses  Cost of Selling  Cost of Freight • Cost of Telephone and Data  Cost of Packaging  Shrinkage connection bills  Other Expenses  Rent Common Area Maintenance • Card Swipe Machines (EDC machines) Bank Costs Insurance also require phone connection License expenses Store – Profit & Loss Statement
  11. 11.  Sales Income Travel Expenses  Product Margin  Other Income  Adjustments • Cost of travel of staff to other Expenditure stores/ Regional Office for training,  Staff Cost  Expenses Incurred to Run Stores settlement of vouchers, cycle count  Repairs and Maintenance Costs etc.  House Keeping Expenses  Telecommunication expenses   Travel Expenses Security Expenses Security Expenses  Stationary Expenses Energy Expenses • Cost of salary paid to security   Cost of Selling  Cost of Freight personnel  Cost of Packaging  Shrinkage  Other Expenses  Rent Common Area Maintenance Bank Costs Insurance License expenses Store – Profit & Loss Statement
  12. 12.  Sales Income Stationary Expenses  Product Margin  Other Income  Adjustments • Cost of stationary being used in Expenditure stores  Staff Cost  Expenses Incurred to Run Stores  Repairs and Maintenance Costs • Stationary tend to be misused or House Keeping Expenses stolen if not properly controlled   Telecommunication expenses   Travel Expenses Security Expenses leading to shooting up of cost  Stationary Expenses Energy Expenses Energy Expenses   Cost of Selling  Cost of Freight  Cost of Packaging  Shrinkage • Cost of electricity and fuel costs to  Other Expenses run backup generators  Rent Common Area Maintenance Bank Costs Insurance • One of the biggest elements of License expenses Operating Expenses for stores Store – Profit & Loss Statement
  13. 13.  Sales Cost of Freight Income  Product Margin  Other Income • Cost of doing home deliveries  Adjustments Expenditure  Staff Cost • Can be the cost of hiring a full time  Expenses Incurred to Run Stores vehicle or cost of hiring ad hoc  Repairs and Maintenance Costs  House Keeping Expenses vehicles  Telecommunication expenses  Travel Expenses  Security Expenses Cost of Packaging  Stationary Expenses  Energy Expenses  Cost of Selling • Cost of carry bags / wrappers  Cost of Freight  Cost of Packaging  Shrinkage • Usual source of misuse by store  Other Expenses  Rent staff. Important to provide the right Common Area Maintenance Bank Costs sized bag to customers Insurance License expenses • Retailers in India are now charging it back to customers Store – Profit & Loss Statement
  14. 14.  Sales Income Shrinkage  Product Margin  Other Income  Adjustments • Loss of Inventory between the point Expenditure of reception of goods from  Staff Cost  Expenses Incurred to Run Stores manufacturers and the point of sale  Repairs and Maintenance Costs   House Keeping Expenses Telecommunication expenses • Causes can be employee theft,  Travel Expenses shoplifting, admin losses, supply  Security Expenses  Stationary Expenses chain loss, margin leakage, damage  Energy Expenses  Cost of Selling and expiry etc.  Cost of Freight  Cost of Packaging  Shrinkage  Other Expenses  Rent Common Area Maintenance Bank Costs Insurance License expenses Store – Profit & Loss Statement
  15. 15.  Sales Income Rent  Product Margin  Other Income  Adjustments • Rental of the space occupied by the Expenditure store  Staff Cost  Expenses Incurred to Run Stores  Repairs and Maintenance Costs • Can be a fixed rent, or a profit   House Keeping Expenses Telecommunication expenses sharing basis  Travel Expenses  Security Expenses  Stationary Expenses • Some retailers operate by owning  Energy Expenses  Cost of Selling the property; hence no rental  Cost of Freight  Cost of Packaging  Shrinkage Common Area Maintenance  Other Expenses  Rent Common Area Maintenance • Maintenance fee for upkeep of Bank Costs Insurance common area of malls License expenses • Is usually charged on a per square feet basis Store – Profit & Loss Statement
  16. 16.  Sales Income Bank Cost  Product Margin  Other Income  Adjustments • Charges by Bank for cash collection Expenditure  Staff Cost  Expenses Incurred to Run Stores • Payment Gateway commission  Repairs and Maintenance Costs   House Keeping Expenses Telecommunication expenses • Sodexo / Meal Voucher charges  Travel Expenses  Security Expenses  Stationary Expenses Insurance  Energy Expenses  Cost of Selling  Cost of Freight • Insurance Premium Charges  Cost of Packaging  Shrinkage apportioned on a monthly basis  Other Expenses  Rent Common Area Maintenance License Expenses Bank Costs Insurance License expenses • Cost of renewing licenses required to operate the store Store – Profit & Loss Statement
  17. 17.  Total Income = Product Margin + Other Income - Adjustments Total Expenditure = Staff Cost + Cost of running store + Cost of Selling + Other Expenses EBITDA (Earnings before Interest, Tax, Depreciation and Amortization ) = Total Income – Total Expenditure EBITDA is a measure of Operating Profit Negetive EBITDA means the store is operating in losses Store – Profit & Loss Statement

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