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Regional Retail Decline
Our client is a mid-sized regional apparel retailer with 120 stores across the Midwest. Over the past year, profits have declined by 25% despite stable revenues. How would you structure your approach to diagnose and address this issue?
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📋 Solution:
Regional Retail Decline
Clarifying Questions:
• Is the profit decline occurring across all stores or concentrated in certain regions?
• Has the company made any recent strategic changes, such as expansion or new product lines?
• Is management primarily focused on restoring short-term profitability or making structural improvements?
Solution:
I would structure this around three areas to isolate the driver of the profit decline and identify actionable levers.
- Revenue quality and mix
• Confirm whether total revenue is flat across stores or masking shifts in product or channel mix.
• Assess changes in pricing and promotional intensity that may be compressing margins.
• Evaluate store-level performance to identify structurally underperforming locations.
- Cost structure evolution
• Break down variable costs such as COGS to assess supplier pricing or input cost inflation.
• Analyze fixed costs including rent, labor, and overhead for structural increases.
• Examine logistics and inventory handling costs for inefficiencies.
- Structural or strategic factors
• Identify competitive dynamics such as new entrants or pricing pressure.
• Assess shifts in customer behavior, including migration to online channels.
• Evaluate internal decisions such as expansion timing or merchandising strategy.
