Specialty sporting goods retailers improved their profitability over the past two years, prior to the economic crisis that unfolded this fall. The latest NSGA Cost of Doing Business Survey showed that 150 small and large specialty dealers, including some fitness and outdoor shops, improved in key areas, such as the ratio of net profit before taxes to total revenue.
"Specialty shops versus two years ago have been functioning well," Thomas Doyle, vice president of information and research for NSGA (www.nsga.org), told SNEWS®.
Capturing information from the beginning of 2007 to the summer of 2008, the survey primarily included bike shops and ski shops, but also included a smattering of fitness dealers and outdoor stores. It showed that stores with sales less than $500,000 improved net profit before taxes to total revenue to 4.9 percent versus 0.5 percent two years ago. For shops with sales of $500,000 to $1 million, net profit before taxes to total revenue rose to 4.9 percent from 2.3 percent two years ago.
Stores with sales between $1 million and $2 million didn't fare as well, with the same statistic dropping from 5.5 percent to 5.1 percent. But the largest dealers did well, as net profit before taxes to total revenue was 4.2 percent versus 3.6 percent two years ago.
Almost all specialty retailers improved in several other measures of profitability, including ratios of net profit before taxes to total assets, net profit before taxes to net worth, and EBIT to revenue.
The most dramatic statistic came from shops earning less than $500,000. Their net profit before taxes to net worth skyrocketed from a negative 0.1 percent two years ago to positive 14.5 percent in the recent study.
While most retailers posted good numbers in the study, the largest dealers -- those earning $3.5 million or more -- turned in the strongest results in all measures of profitability. For example, their net profit before taxes to net worth was 18.2 percent versus 14.2 percent in the past survey.
Doyle said larger retailers benefited from their sheer size. "For example, they can use more part-time employees, which saves money. Plus, they have more sophisticated accounting methods, and their size gives them an advantage in buying," said Doyle. But he and other representatives from NSGA noted that small shops, like their bigger brethren, benefited from making good business decisions.
"Full-line sporting goods retailers of all sizes have been making sound business decisions, and their profitability and productivity results are evidence of that," said William H. Webb Jr., NSGA's vice president and CFO, in a statement. "This year's survey shows that retailers are more productive and more profitable, which can only be achieved through sound business practices."
Of course, the survey does not reflect the economic flop of the past few months, so the next survey, which will be released in two years, could look dramatically different.
The NSGA Cost of Doing Business Survey not only includes balance sheet and income data, but it also has five measures of profitability, three measures of financial management and 14 measures of productivity. The study is provided at no cost to NSGA retailer members. Non-members can obtain the study for $250.