Thursday 5 May 2016

Morrisons second quarter of sales growth, a baseline for NAMs?

Today’s news of steady progression establishes a minimum standard for Morrisons’ NAMs in making their financial case for a fair share deal for both parties.

In other words, unless your brand has grown by at least 0.7%, you won’t justify an interview.

However, the more your growth exceeds Morrisons average, the greater your appeal…

The key build on this position is to measure and compare Morrisons main financial ratios with your conservative estimate of your brand’s performance to show point-for-point how you are adding to the retailer’s comeback performance…

In other words, until Morrisons reveal more detail, work with the latest annual report and calculate their Net Margin, rotation, credit period, sales/sq ft and rate of growth, and then compare with your best estimate of your brand’s performance within the retailer.

For instance, you are already growing faster, like-or-like, so you have the buyer’s attention...

Next assess bottom line impact, your real contributor...

Typically, most mults, operate on an average 25% gross margin, will receive up to 20% of purchases in Trade Investment, average 43 days credit, turn their stock 25.6 times/annum and sell approx £900/sq. ft./annum.

Net Margin
Say Morrisons Gross Margin on your brand is 30%, with typical shrinkage (2%) and Store costs & Handling (15%), Overheads of 5%, you are contributing 8% to their bottom line…minimum.

If their GM on your brand is less than 25%, tip in your trade investment…

Trade credit
If you are giving more than 43 days credit, you are adding the additional cost savings to their bottom line.

Stockturn
If you are delivering your main SKU on a weekly basis, this looks like a stockturn of 50 times a year.

Sales/sq. ft./annum
Calculate your brands foot-print performance in Morrisons (number of facings x back-of-facings stock x SKU footprint x number of stores stocked) to give your selling area, and divide it into your annual sales to Morrisons to provide your sales/sq. ft., vs Morrisons average…

The above calculations will give you a conservative estimate of your positive impact on Morrisons performance…and hopefully a basis for indepth discussion on leveraging your brand's performance and optimising your trade investment in the aisle...

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