Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-21
PROF|TLESSL|NES
ARE BEING STUDIED
Retail Store Executives Plan
Method of Reducing
Loss on Sales.
epeciaf Dispatch to The Star.

cpeClEl DlSpatC0 10 Inc 0lhT
NEW YORK, July 2l.-With the
necessity Of preserving net profit as the
driving force, steps to remedy the poor
showing of the increasing number of
on-proftable departments will inev-
itably figure prominently in retail plans
covering the near future, retail exec
utives hero agreed.
An acute stage of the problem. it was
felt has now been reached, with low
retail prices reducing the gross operat-
ing margins in profitable as we'll as
non-proftable departments. This is
further borne out by the fact that out
of 76 departments in so typical stores
doing $2,000,00 to S5,000,000 annually,
so were profitable, according to
1880 figures recently compiled by the
Controllers Congress of the National
Retail Dry Goods Association. These
so profitable divisions, moreover, it
was pointed out yesterday by H. I.
Kleinhaus, manager of the congress, ac-
counted for 54 per cent OF the total
dollar sales volume In other words,
more than half of the business of these
typical stores was done at loss.
Only % departments were profitable,
and they accounted for but Al per cent
of the dollar volume. The remaining
three departments broke even and &C
counted for per cent of the volume.
Drain on Store Profit.
How serious a drain the non-profita-
bic departments prove, from the stand
point of the store as whole, was shown
by Mr. Kleinhaus in the calculation
that the profit of 26 per cent on the
sales in the % profitable divisions,
equivalent to IL per cent on total dol
lar sales volume. was entirely wiped out
by the loss of per cent, also equiya-
lent to IL per cent on total dollar
volume, in the so non-profitable de-
partments, which had 81 per cent OF
the total sales.
In discussing one aspect OF the situa,
tiCn revealed by these figures, one well
known retail executive said he believed
that the device of having wholesalers
increase the cash discount, as recently
suggested by Oscar Weber, vice presi-
dent and general manager OF the j: l..
Hudson Co, would have the immediate
effect of swinging many present nom
profitable departments out OF the req
He said this would be particularly the
case in home furnishings, long non
profitable group of departments. He saw
this increased trade discount as likely
to materialize in a number OF lines In
the near future but did not see the
need for it in trades such as the ap-
parel industry in which discounts were
already high enough.
Other retail executives expressed
similar views. pointing out that dis
count of from to 8 per cent affords
a cushion that will make a material
difference in the combined discount
operations showing of many depart
mentS. discount increase OF say
or per cent will overcome losses OF l
or 2 per cent now experienced on sales,
it was asserted
Turning to other phases of the Ques-
ton of bringing departments out Of red
ink executives pointed out that only
a few of the so non-profitable divisions
are usually found on flrst-f1oor !oca-
tons. while a ma jority of the profit
able ones usually are found on the first
floor In other words, the trend in
recent years in department store mer-
chandising has been that the bulk of
the profits is obtained from the sale Of
impulse and convenience goods of the
quick turnover type. 1t is now the
need Of the stores to do as good mer-
chandising, promotion and manage
ment job in its upper-f1oor depart
ments, it was agreed.
Style Factors.
1t is also noteworthy, it was added,
that the non-profitable divisions are
beSet by larger variety of style factors,
which result in higher mark-downs,
most serious loss of profit. For exam
pie, despite the good rate of turnover
in apparel departments mark-downs in
ready-to-wear average more than 10
per cent against a total store average
of 76 per cent. Higher consumer re-
turns are also an important consid-
Grafton, running at about II per cent,
as against the store average Of 9.3 per
cent. Retail executives pointed out that
considerable Roadway is now being made
in lowering k-downs and in the re-
duction of consumer returns, the latter
through organized effort.
In one quarter the view was voiced
that a fundamental trouble with the
home furnishings sections, and possibly
others, is that items are pushed indis-
criminately, regardless of whether they
carry high expense charges or not. The
head of one large local store condemned
this method, stating that he had found
the solution of more profitable operation
to lie in the merchandising of miscel-
laneous items rather than the whole
range of home furnishings. This, he
said, achieves expense reduction through
the featuring and sale of goods carrying
the least expense to the department.