Low is up to 27
Base is 27-72
High is 72+
If we look at these new ranges we can determine that the threshold for a LV store is about $205.50/sq. ft based on the average size of a Target Store being about 131,400 sq. ft. This is important given the changes that are taking place.
I am speculating at this being the point at which Spot looks at the store as an ongoing operation or candidate for profitability review.
In my case, our store is approximately 124,800 sq. ft. I believe we did about $24 Million in sales last year. That puts us at about $192.30/sq. ft. in sales or less than the average by about $13.20/sq. ft.
A nearby store at approximately 120,170 sq. ft. did about $50+ Million in sales last year. This equates them at about $416.08/sq. ft.
We now have some reference points for a little analysis.
Given the additional payroll/cost required to go to E2E or Store Modernization, stores like mine will struggle or fail to maintain profitability.
Gross Sales - Cost of Goods Sold (approx 70% of Gross Sales - Annual Report) = Gross Profit
This is not our Net Profit, but our Gross Profit which does not include any expenses associated at the store level, nor any of the expenses allocated at the store level by corporate.
At my store we have:
$24 Million - 16.8 Million = 7.2 Million Gross Profit. This is roughly $600K/month. Not bad, but this is not reality. We most likely generate the majority of this in a 3-4 month period. This equates to about 67% of it over a 4 month time period (75% over 3 mos.).
So if we allocate accordingly, we look more like this using 4 mos. peak earning:
.67 X 7.2 Million = $4.824 Million or about $1.206 Million/month Gross Profit for 4 (four) peak months. This leaves us at non peak with about $297,000/Gross Profit/month ($2.376 Million/8 months). A negative impact of $303,000/month. Ouch!
This is why LV Stores have struggled with payroll with the limited E2E/Store Modernization implementations. It appears that Spot projects annually when it comes to program results. This would explain the drastic cut in hours given the operational requirements to operate Spot's current and new processes.
To put it simply, we are not profitable enough to sustain Spot's new initiative throughout the year. We drastically cut hours already to maintain profitability with the current process. The additional payroll will only make things more difficult going forward.
Once Spot's payroll support allocation goes away so does the payroll to support the new program as I have witnessed in my store. This new program requires a certain amount of "static hours" in order to function. You will no longer be able to get by with slashing hours to maintain profitability as it combines work centers' hours and task into a daily activity regardless of other factors.
Gone are the days of Flow Team going home early/hours reduced or leaving the Truck for day side to push. Can't cut Sales Floor, because they have sets, signs, pricing, and/or they have to be there to push truck. In other words, we are now one. This new program relinquishes a lot of measures taken in the past to maintain profitability.
This also would explain the big emphasis in Team Members being pushed towards the new approach to selling. If LV stores fail, it puts more pressure on Base and HV stores to pickup the lost sales to maintain volume. If the LV Stores fail because of the new program, it ripples throughout Target now
The store I mentioned earlier could just about support our peak payroll requirements since their Gross Profits at non peak months would be about $618K/month. $18K higher than our average for the year. This is why higher volume stores do not feel the impact like the lower volume stores.
Source:
As of year-end 2017, the company owned 1,526 stores, owned the building on leased land for 160 stores and leased 136 locations. The average store's size was approximately 131,400 square feet, and there were: 274 stores greater than 170,000 sq ft; 1,500 stores between 50,000 and 170,000 sq ft; and 48 stores less than 50,000 sq ft.
Target | Real Estate | eMarketer Retail - https://retail-index.emarketer.com/company/data/5374f24c4d4afd2bb44465dd/5374f29c4d4afd824cc15c72/lfy/false/target-real-estate