Showing posts with label space productivity. Show all posts
Showing posts with label space productivity. Show all posts

Wednesday 6 May 2015

Sainsbury's space productivity, getting into the space behind the headlines

Whilst the headline numbers provide some indication of the unprecedented pressures on Sainsbury’s and the other mults, in “...a marketplace changing faster than at any time in the past 30 years…”, working NAMs can derive usable insight by digging deeper into the detailed results issued this morning. (Sainsbury’s Results: 52 wks end March 2015)

Having written its space down by £900m i.e. 7.5% of a £12bn portfolio, Sainsbury’s have focused City attention on sales productivity i.e. Sales and Profit per sq. ft. per annum

See page 15, JS Results:
2015 Sales/sq. ft./annum       = £1,027
Op Profit/sq. ft./per annum   = £32.6

In other words, for the coming year Sainsbury’s have to be very receptive to supplier initiatives that drive Sales and Profit productivity.

For NAMs, this means calculating the ex VAT consumer sales generated in Sainsbury's by your brand footprint per annum – think number of facings x on-shelf backup stock x number of stores x SKU footprint - will give you a figure at least twice Sainsbury’s £1k/pa.

OK, they still have to carry all of the in-store waste area – non sales space like aisles etc.) - but it will still be possible to demonstrate that your brand is a high net contributor to Sainsbury’s major KPI for 2015/16…

However, your real contribution is via your brand's ability to improve on Sainsbury’s operating profit/sq. ft./annum.
(Sales per sq. ft. will keep you listed, Profit per sq. ft. will keep you in the inner circle…)

As you can calculate from their latest figures (page 15), Sainsbury’s are currently generating operating profits of £32.6/sq. ft./annum, i.e. 9p/day!

Your brand’s footprint, with its retail margin of 25%, trade investment of 20%, and 30 days credit has to be generating a lot more than 9p/sq. ft./day for Sainsbury’s…
(Why not grab an envelope and try it out, using your figures? – for precision, take off 15% to cover handling and shrink)

Space productivity is one of the biggest issues for the mults this year, your brand can help…  

Application to Tesco?
Incidentally, applying the above to another mult that occasionally makes the headlines, why not dig a bit deeper into Tesco’s recent results?

Page 3 & page 40 Results:
2015 UK Sales/sq. ft./annum               = £1,030
UK Trading Profit/sq. ft./per annum   = £11.04  i.e. 3p/sq. ft./day!

BTW, given that you are on the Tesco page, why not find some gems for your overseas colleagues in Asia and EU markets?

2015 EU Sales/sq. ft./annum               = £254
EU Trading Profit/sq. ft./per annum   = £5  

2015 Asia Sales/sq. ft./annum             = £298
Asia Trading Profit/sq. ft./per annum  = £17  

Tuesday 21 April 2015

Tesco property write-down - ‘official’ acknowledgement of the structural changes in UK retail

We all await - with bated breath - the extent of Tesco’s property write-down at Dave Lewis presentation of the annual results tomorrow. This will be the first official acknowledgement of the structural changes that have taken place in UK retailing, and at City estimates of £3bn+ the impact on Tesco’s Balance Sheet and the market will be fundamental.

...with other mults needing increasingly persuasive arguments for not following suit…

In round numbers, think 20% reduction in large space retail

Why the write-down?
As you know, large space UK retail works on the premise that sales per sq ft of £1,000 per annum are sustainable

Undershooting presents three alternatives:
  • Sell ‘em, Close ‘em or Convert ‘em…
  • Selling = ‘sell-off’ in an over-spaced market, Closing = write-off dilution of the bottom line, leaving fundamental Conversion as the only option…
  • Action: Amazon permitting, the way forward for the mults has to be via conversion of large outlets to collaborative ‘shopping centres’ based on partnerships with specialist retailers in non-food categories, leaving grocers to sell groceries…
In practice, this will mean retail partnerships based on a rental – % of sales combination, with  both measures focused on space productivity

What can suppliers do about it?
  • Short-term: Scope for any instore theatre at big venues, and best bit-parts locally
  • Medium-term: Scope for demonstrably productive instore theatre, all venues, based on a sales/sq. ft. KPI
  • Long-term: Think 1:1 consumer entertainment…
And by the way, back to the NAM-salesforce drawing board…