"…a retailer’s inventory position is the most important predictor of the impact of slower sales on gross profit margins."- More Shocks in Store for Retail Stocks, The Australian Financial Review, 7 May 2008
The Australian Bureau of Statistics reports that inventories are rising steadily. Given concerns about liquidity and consumer spending, this is a key risk and opportunity for retailers. The risks are quite clear, so where is the opportunity?
Carter McNabb’s presentation to Retail World 2008 discussed how leading retail forecasting and planning techniques can rapidly deliver windfall improvements in inventory and service performance. They represent a unique, proven opportunity to quickly create free cash flow whilst protecting profit margins from discounting and write-downs.
By way of evidence, Supercheap Auto reduced inventories and increased operating cash flow by $12 million whilst simultaneously improving stock availability. These results were achieved in a depressed retail sales environment and delivered within 12 months. As a result, they were able to fund growth from operating cash flow versus debt, and their share price went on to triple over the next 12 months. The leading retail planning techniques enabled Supercheap Auto to ‘buck the trend’ and turn tough times into a significant competitive advantage.
To download a copy of Carter McNabb’s presentation to Retail World 2008 please provide the following details.
You may also find the Retail Demand Planning series authored by GRA Partner Luke Tomkin and published in Logistics Magazine over 5 issues of interest.
Click 'Retail Demand Planning article series' to view on your browser or download the pdf below.
