Profitability Falls for Specialty Fitness Dealers

Profitability and productivity for specialty fitness dealers fell in 2003 according to data reported in the just-published National Sporting Goods Association (NSGA) Cost of Doing Business Survey.

Net operating profit among specialty fitness retailers fell to 2.0% in 2003 from 4.2% in 2001. Return on total assets dropped to 4.4%, versus 15.8% in 2001.

Specialty fitness retailers showed mixed results in key productivity categories. Gross Margin on Merchandise Sales was 38.2%, the same as in 2001, and Sales Per Employee rose to $343,375 from $248,681 in 2001. Inventory Turnover improved slightly, 4.4x versus 4.1x in 2001. However, Sales per square foot ($300 versus $333 in 2001), Total Operating Expenses (36.2% versus 33.9% in 2001), and Shrinkage (0.6% versus 0.4% in 2001) did not meet 2001 levels.

“Although surveyed in 2003, the balance sheets provided reflected the difficult recessionary environment of 2002,” said NSGA Vice President of Information & Research Thomas B. Doyle. According to Doyle, “Even so, this research effort provides industry retailers with the most up-to-date comparative financial performance information available anywhere. A total of 314 companies participated in the 2003 study.”

In addition to the segmentation of sporting good stores and specialty shops by sales volume, comparison categories include single versus multi-store operations, size of store and marketing mix. The study also provides comparisons to high-profit performing retailers and segments fitness, ski, backpacking/camping, bicycle and team businesses. Besides Balance Sheet and Income Data, the NSGA Cost of Doing Business Survey includes five measures of profitability, three measures of financial management and 14 measures of productivity. The study is provided at no cost to NSGA retailer/dealer members. Non-member retailers/dealers can obtain the study for $250.

Performance Measures for Specialty Fitness Dealers

	Profitability	         2003	  2001	   1999    	1997	
	Return on Total Assets	 4.4%    15.8%	  13.4%   	14.3%
	Return on Net Worth	18.0%	  n/a	  37.4%   	50.1%
	Net Operating Profit     2.0%	  4.2%	   3.7%   	6.1%

	Productivity
	Sales per Square Foot	 $300	  $333	   $465   	$380	
	Sales per Employee     $343,375 $248,681 $234,813     $199,837	
	Gross Margin on 
        Merchandise Sales	38.2%	  38.2%	   32.1%   	36.4%
	Total Operating 
        Expenses	        36.2%	  33.9%	   29.0%   	30.6%	
	Inventory Turnover	4.4x	  4.1x	   9.1x  	4.7x
	Shrinkage 
        (% of net sales)	0.6%      0.4%	   0.1%   	0.2%
	
	Source: National Sporting Goods Association, Mount Prospect, Illinois.