Six KPIs for Financially Healthy Campus Stores

kpi.pngCertain key performance indicators (KPIs) can divulge at a glance whether the campus store is fiscally sound or needs a complete checkup. Track these numbers by month, academic term, and year to ascertain if your store is the picture of financial health:

   Gross Margin Return on Inventory (GMROI)
GMROI reveals how well the store’s revenues are doing in relation to the cost of the products on hand. Since inventory is the store’s largest expense, GMROI is a better indicator than topline sales. The ratio can red-flag numerous problems including excessive inventory and pricing that’s too low or too high.
How to calculate it:
Gross Margin ÷ Average Inventory at Cost
How to interpret your results:
GMROI of 1.0 is break-even, you are getting back the money that you invested but no increase.
GMROI below 1.0 means that you are losing money on your inventory investment.
GMROI above 1.0 indicates that you are generating profits on your inventory investment.
   Inventory Turnover
The number of times merchandise “turns over” characterizes the effectiveness of inventory management. Low turns could mean too much was ordered, which ties up inventory dollars, or that pricing isn’t attractive. Rapid turns may signal the store isn’t keeping up with demand and could be losing sales due to stock-outs.
How to calculate it:
Cost of Goods Sold ÷ Average Inventory at Cost
How to interpret your results:
Inventory Turn below 1.0 indicates that you have more than a year of inventory on hand.
Inventory Turn of 1.0 indicates that you have exactly one year of inventory on hand.
Inventory Turn of 2.0 indicates that you have six months of inventory on hand.
Inventory Turn of 3.0 indicates that you have four months of inventory on hand.
Inventory Turn of 4.0 indicates that you have three months of inventory on hand.
   Sales to Enrollment
This number is particularly useful for determining the store’s sales penetration in course materials for the institution it serves. Gauging both unit and dollar sales against the final enrollment of each class, as verified with the registrar, shows how many students have opted to purchase or rent materials from the store, as opposed to other sources or doing without.
For classes requiring more than one material, multiply enrollment by the number of materials. Use final enrollment figures, not the instructor’s projected enrollment or the enrollment prior to the drop/add date.
How to calculate it:
Sales ÷ Enrollment
   Operating Expense
Considering total expenses as a percentage of net sales will help determine whether operating costs are in line with revenues. A high percentage should prompt a review of cost centers to identify inefficiencies and possible savings. Be sure to include all operating costs—occupancy, personnel, utilities, taxes and insurance, supplies, repairs, marketing—but not the cost of  inventory.
Net sales is total revenue minus returns, allowances for damage, and discounts.
How to calculate it:
(Total Operating Expense ÷ Total Net Sales) x 100
Products can disappear due to shoplifting, internal and external fraud, errors in recording shipments, and mistakes at the checkout. If not watched, these losses can eat up the bottom line. Tracking shrinkage also allows the store to determine whether additional security measures or employee training are needed.
How to calculate it:
(Book Inventory – Physical Inventory) ÷ Net Sales x 100
   Sales Per Square Foot
How much revenue the store earns for each square foot of the sales floor (not offices, storage, or display windows) can provide insight into whether that space is being fully and efficiently utilized. Compare calculations for each merchandise section to help improve store layout and to right-size the product selections.
How to calculate it:
Net Sales ÷ Square Feet of Sales Space
Useful Tip:
For KPIs 3-6, participate in the indiCo financial survey and gain access to national averages for similar campus stores. Contact us  if you are interested.
Monitoring your KPIs regularly will alert you to possible concerns early.  Financial health is important to providing quality service to the students, faculty, and campus community.  If you need further assistance in improving your store’s financials, indiCo can provide store financial reviews, and recommend benchmarks and strategies.

Topics: Featured Resources