Profit Margin:
Profitability should be analyzed by anyone considering investing into a company. This is
because high revenues alone do not automatically translate into dividends for investors
unless a company is clear of all its expenses and costs. According to Winmark’s balance
sheet (Exhibit 1), the company’s profit margin increased from 25% in 2012 to 33% in
2013. Business analyses determine that a profit margin of 20% is considered very healthy
(Yates, 2012). Winmark surpasses these expectations. Changes in economy could explain
the increase in profit margins.
Since the 2008 recession, the market for recycled goods weathered better than traditional
discounters such as Target or Wal-Mart. In fact, Winmark noted profit margins on used
clothing in the 60-percent range (Crosby, n.d.). Hard economic times tighten many family
budgets, however, kids continue to outgrow clothes, play new sports, and want to learn
new instruments, despite economic hardships. Resale has become a better and better
substitute to retail. This is exactly where Winmark’s brands twinkle in investors’ eyes.
Although the company has seen much of its success during the recession, profit margin
continues to trend upwards even as the economy rebounds. This is because customers
simply resonate more with the idea of buying a product for about 70% off for what they
can buy new. Winmark’s brands make a case for being able to stand again recession. For
example, Winmark’s brand Plato’s Closet. In 2012, Plato’s Closet generated 15.2 million in
franchise fees and royalties alone. Out of 30 new Plato’s Closet stores that were opened,
