It’s time for retailers to trim payroll, turn the lights down and eliminate supply-chain inefficiencies.
Retailers are getting pummeled by higher selling, general and administrative costs, according to an analysis by WWD of publicly traded mass, off-price and specialty apparel companies. Of the 33 retailers analyzed, 18 posted higher SG&A-to-sales ratios in the most recent quarter over the prior year. By channel, 10 of those companies were specialty retailers such as Abercrombie & Fitch, New York & Company Inc., Urban Outfitters and Pacific Sunwear of California Inc.
Within the 18 retailers that showed higher SG&A to sales costs, nine posted changes of more than 100 basis points, which is a red flag to investors who prefer not to see triple-digit changes. More tolerable increases would be between 10 and 50 basis points.
SG&A line items include things such as employee payroll and pensions as well as commissions. Other items include utilities, rent and insurance as well as general maintenance costs. Marketing costs are also included in SG&A line items. All of these items differ from “cost of goods sold,” which are the direct, attributable costs related to selling (or making) a product.
From an investor’s perspective, SG&A-to-sales ratios reveal how effectively a retailer uses
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