Case Study: Specialty Department Store Operations |
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Specialty department stores have been expanding rapidly. Here is a comparison of performance at two of the leading retailers – Pier 1 Imports and Cost Plus World Markets. Both have been adding stores over the last six years. Sales have grown accordingly. When adjusted for the number of stores, sales still show some growth. Cost Plus has had fairly consistent cost performance over this period. Likewise for Pier 1. Comparing performance on Cost of Sales and Occupancy, Pier 1 has better performance. For Other Expense, Cost Plus has the better performance. Cost Plus has a slightly lower marginal net income, but its fixed cost is significantly higher. This gives Cost Plus almost $10 million more income per quarter at lower sales levels. This advantage decreases as sales increase, with it turning negative around $2.5 billion in sales. |
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