SURVEY REVEALS SHARP DROP IN ANNUAL SALES

Results of the twelfth annual survey of the nation's department stores and specialty shops conducted by the Graduate School of Business Administration's Bureau of Business Research reveal that the last year has been featured by a sharp decline in the total sales and in the size of the average sale of 675 stores doing a business of $1,300,000,000. More than half, the stores reporting lost money, but well-managed stores of all sizes showed sizeable earnings.

"Last year was an extremely difficult one for department and specialty stores, owing chiefly to the falling off in total sales and in the size of the average sale brought about largely by the decline in prices. Stores were able to make small reductions in the cost of handling the average transaction, but the smaller sales volume resulted in percentages of operating expenses to sales which were considerably higher than those for any other year covered by the Harvard studies. These higher rates of expense were accompanied by rates of gross margin slightly smaller than those achieved in 1930; so that earnings were substantially reduced.

"Department stores with sales of $2,000,000 or more on the average last year incurred expenses including interest on capital owned amounting to 36 per cent of sales. Gross margin, on the other hand, was only 33.2 per cent of sales, so that these department stores last year commonly earned 2 per cent on net worth. Specialty stores with sales. of $2,000,000 or more reported a smaller net loss on their merchandising operations, 1.7 per cent of sales, but a smaller final net gain on net worth, 1.6 per cent. The smaller department stores and specialty stores in 1931 had average results distinctly less favorable.

"This survey, made by the Bureau in cooperation with the National Retail Dry Goods Association, covered reports from 521 firms which operated 675 stores and had total sales last year of more than $1,300,000,000, which is estimated to be approximately 25 per cent of the total sales of department and specialty stores in the United States in 1931.

Sales Statistics Show Slump

"In the 1931 report, the Harvard Bureau gives for the first time typical figures for margin, expenses, and profit per average gross sales transaction. These figures show clearly that stores last year reduced the cost of handling the average transaction. This resulted in part from an increase in the average number of transactions handled per employee. The slightly lower percentages of gross margin on the smaller average sale, however, did not yield sufficient margin to cover even the reduced expenses.

"For department stores with sales of $2,000,000 or more the average gross sale last year was $2.30. For department stores with sales of from $500,000 to $2,000,000 the corresponding figure was $1.90, and for department stores with sales less than $500,000, $1.95. In large specialty stores the average gross sale was $6.10.

"Figures indicate that although the more profitable firms in some cases achieved higher than average rates of gross margin, their larger profits of smaller losses resulted chiefly from lower expenses."

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