The Fiscal Year 2018 (July 3rd, 2017-July 1st, 2018) budget was prepared by management, reviewed by our Finance Committee and approved by our Board at their June 2017 meeting. This budget reflects a full year with three retail stores and a co-op learning how to find ways to be more efficient and sustainable as we continue to grow.
We anticipated we would have operating losses the first few years after we opened Willy North and this is reflected in our current budget where we plan for a net loss of $-853,000. At the time we put the budget together, we were still reviewing how well we were managing our Fiscal Year 2017 expenses, where we budgeted for a loss of $-1.1 million. Our actual loss was much less at $-694,000, which is great news for a co-op with a new store. Given how well we did in Fiscal Year 2017 compared to our budget, we anticipate we will also do better than our budget in Fiscal Year 2018, meaning our loss may be slightly less this year than our loss in Fiscal Year 2017.
The Fiscal Year 2018 sales projections for our three retail sites and catering are based onour current sales trends, changes in the Madison grocery market and input from a 2017 market research report from Dakota Worldwide. The budget shows a sales increase of 3.2% year-over-year with most of the growth coming from Willy North.
Gross margin refers to the the percent of sales remaining after subtracting the cost of goods sold. Gross margin dollars are the funds used to pay for our operations. Our gross margin of 35.9% is the same as the previous fiscal year. We do not anticipate any significant changes to our product mix or our pricing.
Personnel expenses include labor hours and benefits and are budgeted to be 26.46% of sales, which is slightly lower than the previous year. This includes an increase in our starting wage to $12 per hour in September and pay increases for staff later this Fiscal Year. We continue to focus on ways to improve labor efficiencies to fund increases in our starting wage.
The Fiscal Year 2018 approved capital budget is $774,410 excluding the proposed $2,225,000 Willy West expansion project. The Willy West expansion project was approved by our Owners in July and can move forward once the financial projections and funding plan are approved by our Board. Items included in the capital budget typically involve significant investments to support strategic initiatives, such as sales growth and/or operational efficiency, equipment replacement or facility improvement.
Our focus for this year’s capital investments are on upgrades at Willy North along with purchases of equipment and software to improve labor efficiency. The upgrades for Willy North include the addition of a juice/coffee bar, a sandwich station in the deli along with replacing produce coolers and a new phone system. This will bring the product and service offerings at Willy North on par with our East and West stores.