While
gross margin always goes down with the introduction of new product lines, the good news is that the only way is up:
In fact, in a business with narrow
gross margins, a 1% price decrease can cut operating return on assets in half.
Another major factor for the increased
gross margin of Hon Hai in the third quarter is increased shipment of high-priced products, such as servers and storage equipment.
Put briefly, the higher the
gross margin, the more profit you can make.
The half-year operating results reflect a 117-basis-point decrease in reported
gross margin to 22.53% that was partly offset by a 55-basis-point reduction in OG&A expense to 17% of sales.
HPT's solution builds on a platform of Carrier Invoice Management and Reconciliation,
Gross Margin Management, Contract and Tariff Management and Cost-Effective Infrastructures for Call Processing and Reporting.
Vineet Nayar, chief executive, HCL Tech, said, " We have decided to increase the wages of the employees effective from October 1, 2009 by 10 per cent and this will result in our
gross margin dropping by 130 basis points for the next two quarters." HCL's employee strength was 54,443 till September- end and the firm added 665 staff in the IT services segment in the period.
Hennes & Mauritz, the world's third-biggest clothing retailer by turnover, has reported a lower-than-expected pre-tax profit and
gross margin.
The adjusted quarterly operating profit of $15.8 million increased due in part to a 220 basis-point improvement in
gross margin to 56.6% of sales.
The only measure that showed a strong relationship was gross margin--a higher ratio of R & D-to-sales was associated with a higher
gross margin. This suggests that R & D succeeds in making products and services that incur lower costs, or with better features that can command a premium price, but that these advantages are obscured by the rest of the process, i.e., once selling, general and administrative (SG & A) expenses are added in, the performance improvement from R & D can no longer be observed.
Magazines are a vibrant and profitable supermarket product category with high
gross margin performance that exceeds that of the overall store, according to a Magazine Publishers of America-commissioned study on magazine benchmarks.
It said
gross margin would be 60% plus or minus a point, compared to its earlier forecast of 60% plus or minus a couple of points.
