Management did note first quarter earnings will fall 15% to 20% on margin pressures and increased marketing costs.
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Net earnings from operations are expected to decline approximately 15 percent- 20 percent in the first quarter due to gross margin pressure and higher marketing-related costs, to be followed by earnings growth in all subsequent quarters.
With the company committed to cutting down on its Average Unit Cost and marketing, general and administrative expenses, we expect that the EBITDA margin for this division will gradually increase to around 25% by the end of our forecast period.
If the retailer's overall costs--such as labor, shipping, marketing and other products--remain static, that extra penny of margin can flow to the bottom line.
However, first-half gross and operating profit margins fell from 53.2% and 33.9%, respectively, to 50.2% and 31.1% due to increased advertising and marketing expenses, more aggressive pricing and a greater proportion of sales from lower-margin products.
People familiar with the investigation said that the team found that for at least two years, Autonomy booked sales of low-margin hardware products as software and would label the cost of that hardware as marketing or other expenses, which made products appear faster growing and more profitable than they really were.
The challenges that e-commerce companies face in India mean that they are more likely to be successful if operating in small, high-margin niches, and rely on word of mouth for new customers instead of overblown marketing campaigns.
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For instance, Renault had done a good job on cutting vehicle development costs, but its operating margin was still subpar because it was uncompetitive in other areas, including logistics, distribution and marketing costs, Pelata said.
Nike should see margin compression begin to ease as price hikes, coupled with continuing strength, take effect, though marketing efforts in the coming Olympics and Euro Cup could pressure margins in the short term.
Dealers typically realize a normal profit margin, with slightly reduced prices offset by low costs brought on by the lack of need for a marketing plan.
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