A store P&L only needs about fifteen lines. The value is in getting the structure right so that two stores, two markets and two years are actually comparable, and so the break-even point is visible before the lease is signed.
The structure
| Line | Formula | Sanity check |
|---|---|---|
| Gross sales | Transactions x average basket | Traffic x conversion should reconcile |
| Returns and discounts | % of gross sales | Compare with category norm |
| Net sales | Gross less returns and discounts | This is the base for all ratios |
| Cost of goods | Net sales x (1 - gross margin) | Landed cost, not ex-works |
| Gross profit | Net sales less cost of goods | Before markdown, state clearly |
| Markdown | % of net sales | Rising markdown means a buying problem |
| Store payroll | Hours x loaded rate | Include statutory contributions |
| Rent | Base or turnover, whichever applies | Check the sales definition |
| Service charge and utilities | Fixed plus variable | Often 30-50% on top of rent |
| Other store costs | Consumables, cleaning, security | Small but consistently underestimated |
| Store contribution | Gross profit less all store costs | The number that decides the store |
| Central allocation | Share of head office | Keep visible but below contribution |
| Store profit | Contribution less allocation | Used for network comparison only |
Break-even
Break-even sales equals fixed store costs divided by the contribution margin percentage after variable costs. Fixed costs are rent, base payroll, service charge and other fixed store costs. Contribution margin is gross margin less markdown and less any variable payroll and transaction fees.
Run it in both directions: what sales are needed to break even, and what the store must sell per trading day and per square metre to reach that. The second version is what a store manager can act on.
- Cost of goods45% of net sales
- Markdown6% of net sales
- Payroll14% of net sales
- Occupancy18% of net sales
- Other store costs5% of net sales
- Contribution12% of net sales
Illustrative. Contribution is what is left before central allocation.
“Break-even sales equals fixed store costs divided by the contribution margin percentage after variable costs.”
Rules that keep it comparable
- Always report contribution before central allocation as the store's own number.
- Keep markdown as a separate line; folding it into cost of goods hides buying performance.
- Use landed cost of goods, including duty and inbound freight.
- State whether rent is pre- or post-lease-accounting treatment and stay consistent.
Using it before signing a lease
Build the model with three cases: a conservative case using the lowest comparable store in the network, a base case, and a landlord case using the footfall the landlord quotes. If the conservative case does not break even inside the payback horizon, the lease needs a break clause or a lower rent, not more optimism.
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