Foot Locker, Inc., the New York-based specialty athletic retailer, recently reported first quarter financial results. Some of the Key Performance Indicators (KPIs) used within the report are:
Condensed Consolidated Statements of Operations (Foot Locker, Inc. 2010)
Ken C. Hicks, Chairman of the Board and Chief Executive Officer of Foot Locker, Inc. stated in the news release that “these strong results reflect the hard work of our associates worldwide who drove sales gains by providing diligent customer service at the store level, while managing our inventories and operating expenses effectively. ” (Foot Locker, Inc. 2010)
Foot Locker, Inc. operates 3,500 stores in 21 countries in North America, Europe and Australia.
For further examples of performance reports in the retail industry, explore the Retail KPIs in practice section of smartkpis.com (smartKPIs.com 2010), which include links to the Foot Locker, Inc. performance reports.
Camelot is the operator of The UK National Lottery. It operates solely in the UK and Isle of Man and its head office is situated in Watford. The primary purpose of the Camelot Group is to drive sales in order to maximize returns, having as principal activity the operation and promotion of The UK National Lottery in a socially-responsible manner. Its strategy is centered on four key elements:
Strengthening the National Lottery brand and giving it universal appeal.
Growing the core product range and diversifying into new products to better satisfy consumer needs.
Giving consumers easy access to the brand.
Building direct dialog with consumers alongside traditional mass communications, wherever possible.
The Camelot Group monitors and uses a set of Performance Standards (Key Performance Indicators) in order to achieve its purpose, follow the strategy and also remaining compliant with regulations so it will maintain its Operating License.
The financial KPIs cover sales levels, prizes and returns, as well as net profit levels. The performance standards cover areas like the availability of the computer systems, player service, prize payment, complaints investigation and resolution, and customer contact.
The table below presents some of the KPIs used by the Camelot Group, together with the targets set and achieved at the end of 2008.
The table clearly depicts how performance indicators (both financial and non-financial) are aligned to the strategy the Camelot Group follows.
For example, to maximize the returns the Camelot Group monitors indicators such as:
$ Profit before taxation
$ Gross ticket sales
$ Prizes
To give consumers easy access to the brand the Group monitors indicators such as:
% Terminal sales availability
% Access to NLL Voice Response System (VRS)
% Complaint resolution (all channels)
The Camelot Group managed to achieve its targets for 2008 and even surpass some of them, safeguarding its position as one of the most cost-efficient lottery operators in the world.
Companies use profitability ratios in order to measures their ability to generate returns through effective allocation and use of available resources. KPIs in this area have often as main component profit or return. One of the most popular profitability ratios is the Berry ratio.
It was developed by Dr. Charles Berry (1930-2007), a specialist in industrial organization and applied microeconomics and professor at the Princeton University, in conjunction with a tax court case involving transfer pricing between a U.S. parent company and a foreign subsidiary. He consulted with dozens of government agencies, corporations and law firms on antitrust and regulatory matters, transfer pricing and corporate taxation before launching the ratio that carries his name.
The Berry ratio measures the ratio of a company’s gross profits to operating expenses and is used mostly by tax and transfer pricing analysts.
It is calculated by dividing $ Gross margin (which is basically the difference between $ Sales and $ Cost of goods sold) to the $ Operating expenses.
A ratio coefficient of 1 or more indicates that the company is earning a profit over and above its variable expenses; a coefficient below 1 indicates that the firm is losing money.
Although the Berry ratio is a simple profitability measure, it is probably one of the most misused ratios in analysis of transfer pricing. Due to failure in understanding its limitations, errors in interpreting it may appear. The Berry ratio cannot be applied to distributors that also perform manufacturing functions as it cannot capture the additional return earned by the manufacturing function.
Empirical studies have shown that distributors with low operating expense intensity (less than 10%-15% relative to sales ratios) show very high values of the Berry ratio when compared with distributors with higher operating expenses. Thus, an extra caution should be taken when comparing two distributors with a large gap between their operating expense intensities.
Using the Berry ratio together with other profit level indicators will provide a higher level of validity of the information.
Stevens, R. (2007), “Charles Berry, economist and ‘dedicated University citizen,’ dies”, Princeton Weekly Bulletin September 16, 2007, Vol. 97, No. 1, available at: http://www.princeton.edu/pr/pwb/07/0916/berry/ (accessed 24 February 2010)
Over the past few weeks the majority of media outlets in the world have been writing about how Avatar surpassed the world’s highest grossing film of all time – Titanic. Cinema and motion pictures are acknowledge today as a major art form, also called the seventh art. At the same time they constitute a major business. Blockbusters can generate millions and more recently billions of dollars. One important source of revenue represents the money collected as admission to film, also called the Box Office.
Besides the critical reviews and awards a movie receives, the pragmatic element (but not the least as importance) of the movie’s triad of success is its financial performance. Rankings and Top ten lists are developed in order to compare the sales performance of movies and related products.
This is how the All Time Box Office (without adjustment for ticket price inflation) looks like at the end of January 2010:
As you can see, different indicators display information that can be confusing for someone who is searching for the most successful movie ever. It is interesting to observe how people are influenced by the Movie box office, which indicates the amount a producer received as admission to the film, and not how many people went to see it, nor how many enjoyed it. The most popular indicator may not always provide the most relevant information in terms of overall success. From this point of view one might say the most successful movie of all times is still Gone With the Wind as it was both a financial success and a masterpiece as an art form.
Sometimes indicators are chosen to provide the desired result for a certain party. In this case, the Box office is used to attract more people to watch a movie: the higher the income, the more positive promotion the movie will receive and the more people will go to attend it. It is important not to rely only on one indicator, but to find the right combination that will provide the best information, and will lead to the best decisions.
One of the important events of 2009 for the Retail industry and Sustainability community was the launch of the Sustainable Product Index initiative by Walmart and the establishment of the Sustainability Consortium.
The Sustainable Product Index is intended to be an open source worldwide standard of measuring the sustainability of a product.
The Sustainability Consortium is an independent group of scientists and engineers from leading academic research institutions around the world who engage with other leading researchers from the NGO, Governmental and Industrial sectors. The primary function is to develop the science to support the indexing of consumer products throughout all phases of the products life.
The initiative was announced by Mike Duke, president and CEO, Walmart at the July 2009 Milestone Meeting. The 20 minutes video of the address is available below:
Key discussion points:
On measurement
Retailer at hart, with engineering training (Alumni of Georgia Tech)
I like metrics, I like measurements, I like to set goals and measure results. I guess it comes with that qualitative measurement approach.
If you can’t measure it, you can manage it.
In some ways we have got measurements already, we think there is a need of much more in this area of measurement.
On customer expectations
Consumers have much higher expectations from retailer and suppliers:
Savings. The Global Financial Crises brought on new expectations from consumers. Customers want to save money even more and they are smart about what and how they are spending.
Transparency. The speed of information is higher. Greated transparency in the future is expected and will accellerate. If businesses are not transparent, they will not have the trust of consumers.
Sustainability. World population is currently 6.7 billion, growing to over 9 billion by 2050 . We are depleating the natural resources of the world if consumer patters will be mantained or accelerate.
On the Product Sustainability Index
A global standard to be used across the world with all retailers, in all countries. Will help raise quality and lower cost, while enabling innovation across the supply chain.
1. Supplier Assessment
A 15 questions questionnaire will be provided to suppliers to evaluate therir approach to sustainability. The questions are dedived into four areas:
Energy and Climate
Natural resources
Material efficiency
People and Community
Piloted with the top 50 suppliers from the USA and gradually rolled-out globally to over 100,000 suppliers.
2. Lifecycle Analysis Database
Consortium of universities that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the lifecycle of products – from raw materials to disposal.
Arizona State University and the University of Arkansas will jointly administer the consortium.
The company will also partner with one or more leading technology companies to create an open platform that will power the index.\
3. A Simple Tool for Consumers
Standard database available to tell customers about the sustainability index of they product they are purchasing.
The sustainability consortium will help determine the scoring process in the coming months and years.
Quotes
“The index will bring about a more transparent supply chain, drive product innovation and, ultimately, provide consumers the information they need to assess the sustainability of products. If we work together, we can create a new retail standard for the 21st century.”
Mike Duke, President and Chief Executive Officer, Wal-Mart Stores, Inc.
Walmart Sustainability Milestone Meeting, July 16, 2009
“I think from a business perspective there is another opportunity that Since the beginning of modern retailing in the US, there has never been a retail brand that’s transitioned from one generation to the next. This is our opportunity to connect with the next generation. By leading in sustainability and being able to deliver quality products at low prices, to be able to deliver our value proposition, we will connect with these consumers. We may never be cool, but we care and we can make a difference.”
John Fleming, EVP and Chief Merchandising Officer, Wal-Mart Stores, Inc.
Walmart Sustainability Milestone Meeting, July 16, 2009
Videos from the Walmart Sustainability Milestone Meetings, July and November, 2009
Retailer at hart, with engineering training (Alumni of Georgia Tech)
I like metrics, I like measurements, I like to set goals and measure results. I guess it comes
with that qualitateive measurement approach.
If you can’t measure it, you can manage it.
In some ways we have got measurements already, we think there is a need of much more in this
area, of measurement.
Consumers have much higher expectations from retailer and suppliers.
1. Savings. The Global Financial Crises brought on new expectations from consumers. Customers
want to save money even more and they are smart about what and how they are spending.
2. Transparency. The speed of information is higher. Greated transparency in the future is
expected and will accellerate. If businesses are not transparent, they will not have the trust
of consumers.
3. Sustainability. World population is currently 6.7 billion, growing to over 9 billion by
2050 . We are depleating the natural resources of the world if consumer patters will me
mantained or accelerate.
Walmart Sustainability Index
A global standard to be used across the world with all retailers, in all countries.
Help raise quality and lower cost.
Create innovation across the supply chain.
1. Supplier Addessment
A 15 questions questionnaire will be provided to suppliers to evaluate therir approach to
sustainability. The questions are dedived into four areas:
Energy and Climate
Natural resources
Material efficiency
People and Community
Piloted with the top 50 suppliers from the USA and gradually rolled-out globally to over
100,000 suppliers.
2. Lifecycle Analysis Database
Consortium of universities that will collaborate with suppliers, retailers, NGOs and
government to develop a global database of information on the lifecycle of products – from raw
materials to disposal.
Arizona State University and the University of Arkansas will jointly administer the
consortium.
The company will also partner with one or more leading technology companies to create an open
platform that will power the index.
3. A Simple Tool for Consumers
Standard database available to tell customers about the sustainability index of they product
they are purchasing.
The sustainability consortium will help determine the scoring process in the coming months and
years.
“I think from a busines sperspective there is another opportunity that Since the beginning of modern retailing in the US, there has never been a retail brand that’s transitioned from one generation to the next. This is our opportunity to connect with the next generation. By leading in sustainability and being able to deliver quality products at low prices, to be able to deliver our value proposition, we will connect with these consumers. We may never be cool, but we care and we can make a difference.”
John Fleming, EVP and Chief Merchandising Officer, July 2009 Milestone Meeting – Sustainability Index
www.smartKPIs.com registered users can now select their Key Performance Indicators (KPIs) from over 900 Performance Measures documented and published in the online database. The team focused in the last few days on the Information Technology and Corporate Social Responsibility.
The functional areas with the highest number of documented measures are:
smartKPIs.com registered users can now select their Key Performance Indicators (KPIs) from over 800 Performance Measures documented and published in the online database. The team focused in the last few days on the Information Technology and Corporate Social Responsibility.
The functional areas with the highest number of documented measures are:
Condensed Consolidated Statements of Operations (Foot Locker, Inc. 2010)
