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Bon-Ton Stores Inc Gross Margin: 37.4 ( as of Jan13)

* All numbers are in millions except for per share data BONT 10-Y Financials »

Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue. It is calculated as

Gross margin
= Gross Profit / Revenue
= (Revenue - Cost of Goods Sold) / Revenue


A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Formula

Gross margin = (Revenue - Cost of Goods Sold) / Revenue

Bon-Ton Stores Inc grossmargin Calculation

* All numbers are in millions except for per share data

Bon-Ton Stores Inc Annual Data

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Bon-Ton Stores Inc Quarterly Data

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Explanation

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key.

Beaware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching gross margin and Operating Margin closely helps avoid value trap situations.

Related Terms

Operating Margin, Revenue, Cost of Goods Sold, Gross Profit
* All numbers are in millions except for per share data

Bon-Ton Stores Inc Annual Data

This information is for Premium Members Only.


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Bon-Ton Stores Inc Quarterly Data

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