How to Value a Women's Apparel Store
Posted on December 16, 2012
(SIC No. 5932)
(NAICS No. 45331, 522298)
A. Nature of the Business
An antique is defined as anything that is more than 100 years old, although this distinction is not always strictly followed. Antique stores are in the business of selling furniture, toys, clothing, and many other items. Store inventories will vary greatly depending on the owner of the shop, the location, and the type of store. Some stores sell only furniture or only items from a certain time period or era.
The typical antique store is overcrowded with antiques, and the owner and salespeople generally are extremely knowledgeable. Some antique dealers will search for an item for their customer. Other stores sell only what is in the shop, and many hold auctions.
The customer market for an antique store is the middle to upper classes. Well-preserved antiques tend to be expensive.
B. Industry Statistics
Dun & Bradstreet’s Industry Norms & Key Business Ratios (1992-1993) surveyed 484 antique stores and reported the average antique store in 1992 had net sales of $433,497, gross profit of $194,640, and net profit after tax of $29,911. Profitability figures show an average of 8.1% return on assets, 5.9% return on net sales, and 12.8% return on net worth.
In 1996, 448 stores were surveyed, and Dun & Bradstreet’s report showed the average store had $1,017,559 in net sales, gross profit of $462,989, and net profit after tax of $64,106. Profitability figures show an average of 4.3% return on sales, 8.8% return on assets, and 12.5% return on net worth.
NOTE: These figures are not specific to the Antique Store but apply to the larger category of Used Merchandise.
The size of antique shops will vary. Some operate in as little as 800 square feet, while larger stores may require more than 2,000 square feet. Store size will depend greatly on the investment in antique goods.
Regardless of the size of the shop, the largest area is generally allocated for display of antiques. In addition, an office, storage area, and a work area for refinishing antiques may be required.
A typical start-up lease for an antique shop is a short-term lease with an option to renew. The lease may be a flat rate or percentage lease. Assignment clauses are important for the transfer of a business.
Equipment for a new antique store generally ranges from $10,000 to $25,000. Typical equipment and fixtures for the shop include: shelves, cabinets, lighting, checkout counter, cash register, tables, stands, and showcases. Office equipment needed: desk, chair, filing cabinet, bookshelves, typewriter, and office supplies (stationery, sales slips, business cards, invoices, bags, boxes, mailing labels, etc.). Shop supplies include: cleaning products, waxes, polishes, light bulbs, and lamp shades. A security system usually is required, and this can range anywhere from $1,000 to $7,000.
Inventory will consist of the purchasing of antiques. This amount varies from store to store and depends greatly on what the owner is willing and able to invest.
Start-up expenses for a new antique store usually range from $50,000 to $100,000. Typical start-up expenses include: first and last months’ rent, security deposit, leasehold improvements, utility deposit, telephone deposit, payroll, inventory, supplies, equipment, licenses, taxes, advertising, accounting services, legal services, insurance, and any miscellaneous expenses.
F. Income and Expense Pro Forma - $500,000 to $2 million
1. Net Sales 100%
2. Gross Profit 49.5%
3. Operating Expenses 42.3%
4. Operating Profit 7.2%
5. All Other Expenses 1.5%
6. Profit Before Taxes 5.7%
- Rule of Thumb
Retail Stores in General
a. Approximately 25% to 50% of annual gross sales plus inventory.
b. Approximately 47% of annual gross sales.
Rules of Thumb may or may not be industry averages. They are usually applied to sales in some form. They result in an example of value for a business having that level of sales. Please see Section II, Chapter 5, for a discussion of Rules of Thumb and their limitations.
The values of fixed assets are generally included in Rules of Thumb; however, they are sometimes added in separately. Working Capital (e.g., cash, inventory, less payables), debt and real estate are many times not included. These three are generally valued separately and added to the formula value. Intangible Assets including goodwill and leasehold may be included, but normally only in Rules of Thumb based on earnings/cash flow.
2. General Valuation
The valuation of this entity as a going concern is usually accomplished through an Income Approach, most probably with a capitalization of earnings. Please refer to Section II, Chapter 3, of this book for a discussion of the Income Approach to Valuation of a Closely Held Business. See also Section I, Chapter 4, “How to Value a Retail Store.”
H. Sources for Further Statistical Information
(See also the bibliography at the end of this book, “Recommended for Reference.”)
Art and Antique Dealers League of America (AADLA)
1040 Madison Avenue
New York, NY 10021-0111 www.artantiquedealersleague.org
(212) 879-7558; Fax (212) 772-7197
National Antique and Art Dealers Association of America (NAADA)
220 East 57th Street
New York, NY 10022 www.naadaa.org
(212) 826-9707; Fax (212) 832-9493
Antiques an Collectibles Association (ACA)
P.O. Box 4389
Davidson, NC 28036 www.antiqueandcollectible.com
(704) 895-9088, (800) 287-7127; Fax (704) 895-0230
World Antique Dealers Association (WADA)
c/o Don McLaughlin
818 Marion Avenue
Mansfield, OH 44906
(419) 756-4374; Fax (419) 756-4979
2. Trade Publications
Antiques and the Arts Weekly
Bee Publishing Co.
P.O. Box 5503
Newtown, CT 06470 www.thebee.com
(203) 426-8036; Fax (203) 426-1394
P.O. Box 90
Knightstown, IN 46148-0900 www.antiqueweek.com
(765) 345-5133; Fax (800) 695-8153
P.O. Box 47
North Hollywood, CA 91603
(818) 763-7673; Fax (818) 753-9492
8 Medford Place
New Hartford, NY 13413 www.assoc-restorers.com
World of Antiques and Collectibles
Antique and Collectibles Association
c/o Jim Tucker
P.O. Box 4389
Davidson, NC 28036 www.antiqueandcollectible.com
(704) 895-9088, (800) 287-7127; (704) 895-0230
 RMA Annual Statement Studies 1996. (Philadelphia: RMA, 1996), p. 634.
 West, Thomas L., and Jeffrey D. Jones, eds. Handbook of Business Valuation. (New York: John Wiley & Sons, Inc., 1992), p. 126.