by Paige Wickline, Finance Director
Fiscal Year 2019 runs from July 2, 2018 through June 30, 2019. The Fiscal Year 2019 budget was prepared by management, reviewed by our Board’s Finance Committee, and approved by our Board at their June 2018 meeting. This budget includes the $2.271 million expansion project at our Middleton store (Willy West) that was completed in October 2018. The project budget included $2 million in capital expenditures, $146k in additional operating expense and $125k of additional inventory.
Long Term Financial Sustainability and Investment in Your Co-op’s Future
When Willy East moved to 1221 Williamson Street in 1999, and when we opened Willy West in 2010, we budgeted to operate at a loss for multiple years due to the expense of moving into a brand new store. We anticipated we would have operating losses the first few years after we opened Willy North, and our current budget for FY19 is the third and final year we anticipate budgeting for net losses because of opening Willy North. The budgeted net loss also includes one-time operating expenses from our West Expansion Project that was originally planned to be completed in FY18. Once all project plans were complete the project start date was pushed back to the 4th quarter of Fiscal Year 2018 and was completed on time in October 2018.
Our financial results from the first two years after opening Willy North were much better than expected with actual losses almost $1.5 million less than budgeted. In FY17 our sales exceeded our budget and we were able to manage our expenses to come in lower than expected. This is great news! In FY18 we didn’t have the West Expansion one-time costs that had been budgeted due to the project start date being moved out, we exceeded our sales budget, and had a reduction in our tax liability because of the change in the tax law.
Total Sales: The Fiscal Year 2019 sales projections for our three retail sites and catering program are based on our current sales trends, changes in the Madison-area grocery market, and upgrades in our product offerings to allow for similar products and services at all our retail sites. The budget shows a sales increase of 4.73% year-over-year, with most of the growth continuing to come from Willy North and some from our increased retail space at Willy West.
Gross Margin: 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 36.0% is a slight increase from the previous fiscal year. We do not anticipate any significant changes to our pricing.
Personnel: Personnel expenses include labor hours and benefits and are budgeted to be 25.93% of sales, which is slightly lower than the previous year. This includes pay range adjustments for retail staff that were made late in the previous fiscal year and pay range increases for office staff at the beginning of the current fiscal year. We have also included funds for pay-for-performance pay increases of up to 3% to go into effect later in the year, and a 3% 401(k) match. We plan to continue to focus on labor efficiencies this year to help fund raising our starting wage again in FY20.
Capital Budget: The Fiscal Year 2019 approved capital budget is $411,040 excluding the completed $2,271,000 Willy West Expansion Project. The Willy West Expansion Project was approved by our Owners in July 2017, started in April 2018 and completed in October of 2018. Items included in the capital budget typically involve significant investments to support strategic initiatives such as customer service, sales growth and/or operational efficiency, equipment replacement, or facility improvement.
Our focus continues to be long-term financial sustainability which is achieved by investing in staff and our retail outlets, continuing to provide high-quality and fairly priced products and meeting and exceeding our Owners’ expectations. This year we expanded the retail space at Willy West to be able to expand the products we sell and improve your shopping experience at West.