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1st and 2nd Quarter Financial NarrativeA
Report
from the Finance Department to the Membership
In an
effort to keep the membership informed of the status of the finances of
the
Coop, the Finance department is providing you with this narrative of
the first
half of fiscal year 2005. Sales The first
half of 2005 has been a stellar one in terms of record sales growth for
the
Coop. We wrote a conservative budget for 2005 by forecasting an 8%
increase in sales,
based on the limitations of our present location and the uncertainty of
the
economy. Our growth rate through June has in fact been 17% over last
year, a
full 9% above budget! Personnel
Expense These are
all the expenses associated with staff members and member workers at
the Coop.
At the close of the month of June, the Coop’s payroll was running 3.25%
below budget,
even after implementing a wage increase that brings us closer to a
living wage.
All new staff members now have a starting wage of $9.00 per hour and we
adjusted existing hourly staff members’ wages accordingly. Despite
adding only
a few new employees, our staff and member workers have managed the
tremendous
increase in sales well. Not enough can be said about how productive our
staff
and member workers have been. Our member
labor remains strong, with 34% of the Coop’s labor being provided by
members.
This is up from last year’s 30% for the same time frame. Our level of
staff discounts
is running 30% over budget, an encouraging sign that our staff is doing
more of
their shopping than ever here at the Coop. We have
remained claim free with respect to Workers Compensation, thus keeping
our
premiums very low. Our expenses for health and dental insurance were
well
within budget for the first half of the year. Occupancy
Expense These are
the expenses that are directly related to renting and maintaining the
store.
The areas where we exceeded our budget so far in 2005 are repairs and
maintenance of equipment and the store. We also put down a $2,000
deposit with
our landlord to hold the back area of our building in the event we
decide to
expand into it. On a positive note, even with the tremendous increase
in
utility costs, we were able to come in 10% under budget through the end
of
June. This has to do with a more efficient air conditioning system, in
conjunction with periodic maintenance of our heating and air
conditioning
systems. Our total occupancy expense was under budget for the first
half of the
year. Repairs
& Maintenance: Equipment. Some
unforeseen problems with deli equipment, as well as a lot of
maintenance to the
water machine, have contributed to our being slightly over budget. We
just
bought a new water machine that is much more efficient and our in-house
maintenance
person will be doing any needed fixes, which will help this budget area
in the
future. Repairs
& Maintenance: Store. Because
of construction of a new HaBA backstock room/office space, we are over
budget
here. Other areas that contributed to this overrun were repairs to the
front
door, plumbing, repairs to the coffee machine, new phone lines for the
Community Room, electrical work and refrigeration repair. Utilities:
Our
consumption
of electricity was running 14% below budget for January through June
2005.
Maintenance of the system has helped in this area, even with one of the
hottest
summers on record and increasing electrical costs. Natural gas
consumption is
6.5% less than budgeted, even with skyrocketing gas costs, again
proving that
maintenance is worthwhile. We had also taken into consideration the
extreme
increase in energy costs when writing the budget for 2005. Operating
Expense These are
the expenses related to operating the store on a day-to-day basis. We
are 6%
over budget for the first half of 2005 for a few reasons. Armored
Car Service: Our
armored car service raised their prices by adding a fuel surcharge to
each
delivery. This resulted in our being slightly over budget. Non-Capital
Equipment Purchases: This is an account we
created this year for purchases under $1,000 that
we do not capitalize. For the first time, we have budgeted these
expenses
separately from store supplies. Among the
items we have purchased are: new phones for the new HaBA backstock room
and
Community Room; a filing cabinet, office chairs and a small air
conditioning unit
for the new HaBA backstock room; self-closing trash cans as required by
Health
Department regulations; and an assortment of new scoops, spatulas and
containers for the Bulk department. Store
Supplies: This
is the first year that we are tracking the different store supplies by
department, a practice that will allow us to budget much more
efficiently for
the 2006 sales year. Increases in store supplies are a reflection of
sales. The
more people shop, the more people use plastic and paper bags supplied
by the
Coop. We do
recoup a portion of this money at the register by charging customers
for the
use of the new bags. Nevertheless, we had a very large plastic bag
order at the
end of June that made the account go over budget. This purchase of bags
will
last at least part of the second half of the year. We also purchased a
year’s
worth of golf pencils for customers to use when recording their PLU
numbers in Bulk,
Produce and HaBA, in order to make check-out easier. Bank
Service Fees: This
account is basically credit and debit card fees, which are over budget
by 5% —
which is really good, considering that our sales are 9% over budget. Administrative
Expense Administrative
expenses are related to the back office expenses needed to run the
Coop. At
this point in the year, we are running 32% under budget. Marketing
Expense These
are
our advertising, marketing, outreach and donation/ contribution
expenses. Also
included in this category are the various promotional discounts the
Coop provides
to senior citizens, vendors, visiting coop members, etc. Total
marketing
expenses were 25% below budget for the first half of 2005; the second
half of
the year will bring this closer to budget. Advertising:
At
the end of
June, advertising was 5.7% under budget for the first half of the year.
Our
primary advertising media are WAMC and WMHT, as well as Metroland and
many small local spots. Marketing
& Outreach: This
category was 26% below budget for the first two quarters. However, the
busy
summer and fall seasons will bring it closer to budget. Donations/Contributions:
We
have been
running over budget here due to the volume of requests. We are
committed to
donating 5% of our profits and we are having a record year. At present
our
donations/contributions are running 2.6% of profit, which gives us a
cushion to
make a large amount of donations at year’s end. Governance
Expense These
are
the expenses associated with the governance of the Coop and are
primarily Board
expenses. Total governance expenses were 25% under budget. One of the
large
expenses for the Board has been that we have finally, at the request of
the
membership, acquired insurance for Directors and Officers. Capital
Expenditures Hot
Food Case: We
have replaced the old hot food case with a new one, which has helped to
more
than double our sales of hot food this year. Produce
Case: We
replaced our old cold produce case with a new larger model, which has
certainly
brightened up the Produce department. Awning
and Plant Corral: We have extended the
awning out in front of the store and have
incorporated a large plant corral, in order to extend our plant season
and make
it less labor intensive for the Produce department to handle the
plants. The
new plant area has resulted in an increase in plant sales of 22.6% from
last
year. Water
Machine: As
noted above, we have replaced the water machine with a new unit, which
has
reduced the amount of “waste water” created by the filtration system
and will
greatly reduce the amount we have to spend on repairs and maintenance,
compared
to the old system. Community
Room: We
have
replaced the rug, purchased new tables and are in the process of
further
sprucing up the Community Room, while spending far less than the
$10,000
budgeted. |
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