Furniture retailers have seen a significant increase in average inventory days in recent years, according to the latest data from financial information firm Sageworks\'s private holding company.
According to preliminary estimates, inventory at private furniture stores averaged 142 days in 2013.
This is an increase of nearly a week over the furniture store\'s inventory in 2011, an increase of 18 days over the industry\'s average inventory in 2006.
Jenna Weaver, an analyst at Sageworks, said that while the correct inventory age may vary from company to industry, in general, it is better to have lower inventory days.
The inventory level should be sufficient to meet the customer\'s needs, but not too high, so that the retailer will bear the unnecessary cost of storing and maintaining the inventory, or risk the product being out of date.
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On April, before placing an order to buy a new inventory, it will undoubtedly review the inventory aging of its own stores.
When cash is tied to inventory, retailers lower the threshold for the amount of new inventory they will increase, or they may consider offering discounts to move the aging inventory.
\"Particularly in the furniture industry, sales are affected by tastes and trends, and even seasonal, so it is important to ensure that the existing inventory is in line with the current tastes and trends of the market, Weaver said.
The calculation of the number of days in stock is to divide the inventory by the cost of the goods sold, and then multiply the result by 365.
Weaver said that inventory days may increase when the cost of goods drops or the number of stocks increases.
Relative to sales, the cost of selling furniture retailers in the sageworks database has actually been quite low since 2006.
Companies can evaluate their inventory using different methods (
For example, last input, first output or first input, first output)
Therefore, it is difficult to determine whether the inventory unit has increased.
Sales of furniture retailers have improved since 2008, with sales falling by 2009.
But if shopkeepers expect a bigger rebound in the housing market, sales may not meet retailer expectations, Mr Weaver said.
\"We are not sure why;
What we can really be sure of is that the number of days in stock has increased, \"she said.
Because furniture retailers want to better manage their inventory, Weaver said, they can work with suppliers in order to deliver the goods in a timely manner to meet the needs of customers.
\"They can check their existing inventory to liquidate any remaining or out-of-date inventory and have some solutions, such as the inventory management system, to help retailers assess that the product line is useful and does not work for them.
\"Keeping a close eye on what they have, what is sales, and what is not sales is the key,\" she added . \".
A highlight of furniture retailers?
Mr Weaver noted that profitability had improved.
\"The profitability of the industry has increased significantly since 2008,\" she said . \".
\"Furniture retailers from 0.
07% net profit margin in 2008 was 4.
It was 3% in 2013, a major improvement.
Sales growth will help increase profitability, as will cost reduction.
Through its collaborative data model, Sageworks collects the financial statements of private companies from accounting firms, banks and credit cooperatives and aggregates the data at a rate of about 1,000 statements per day.
Adjusted net profit margin to exclude taxes and include owner compensation that exceeds the marketrate salaries.
These adjustments are usually made to the financial situation of private companies in order to have a more accurate understanding of the company\'s operational performance.
Sageworks, financial information company, collects and analyzes performance data from private holding companies and provides accounting and audit solutions.