Originally Posted by
hamhead
Just as an added note, Wal-Mart's profit margins are 3.3% ttm, with much lower margins on groceries than on other products if you're shopping for those items. So even if you're dropping $100 in fresh food each trip you're only netting them a couple bucks profit.
You might already know that but I just wanted to clarify as sometimes the difference between revenue and profit, especially with low margin retailers, gets lost in discussions like these on the effect of (perhaps) loss leaders on foot traffic and profitability.
This is a very useful discussion. At least we start to having an understanding of why certain things happening in a logical and sensible way. However, I think for the sake of simplicity and ease of analysis, we should stick to gross margin discussion rather than consider all aspects of a store's profit margin by introducing space, wage, and opportunity cost. There are so many accounting tricks that can manipulate the formula to make it look one way or another. So I wouldn't count on the 3.3% is "accurate" based on set perceptions.
Gross margin is more concrete and easier to calculate. I think WM management will most likely look at the gross margin before making any decisions to kill or keep certain products.