Negative Operational Gearing, Compounded By Vertical Integration

[Gromit]

Surely seemingly educated people should be able to communicate better than this example I saw today...

// "If we take inflation into account then the volume position is truly disastrous, with negative operational gearing, compounded by vertical integration, eating into margin." //

What does it mean?

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10560351/Fears-for-recovery-as-Britains-biggest-retailers-suffer-disastrous-Christmas.html

And why do newpapers aimed at the general public, print such gibberish?

[jno]

wrong link? I don't see that quote

[ludwig]

I didn't see that quote either, but this one caught my eye..

// “I am a naturally optimistic guy and sometimes that is my undoing,” he said. //

That's bullsh1t talk for 'I lied'.

[wolf63]

I thought that your headline had something to do with the crashed helicopter - it nearly made sense in that context.

I will toddle back to the animals and nature section

[jno]

I tried to click on the Comments on that link but it won't do anything - is that just me? Do I have to register to see them?

[Gromit]

Jno,

I think someone at the Telegraph must have realised it was meaningless gibberish and cut it from the article.

It was there earlier when I copied the quote and link.
http://www.google.co.uk/search?q=%22If+we+take+inflation+into+account+then+the+volume+position+is+truly+disastrous,+with+negative+operational+gearing,+compounded+by+vertical+integration,+eating+into+margin.%22&ie=UTF-8&oe=UTF-8&hl=en&client=safari

[jno]

true, wolf, negative operational gearing does sound like a helicopter trying to fly backwards, and its vertical integration would be poor.

[jno]

ah yes, it's in this report, not aimed at the general reader (but not aimed at analystspeakers either)

http://www.foodmanufacture.co.uk/Business-News/Tesco-Morrisons-and-M-S-results-reveal-unhappy-Christmas

The Telegraph probably just cut and pasted it, then thought better of it (or were warned about plagiarism).

[Gromit]

The same quote is here

http://www.foodmanufacture.co.uk/Business-News/Tesco-Morrisons-and-M-S-results-reveal-unhappy-Christmas

[Gromit]

Jno

Try copying the quote (or anything) in that link.

I get a warning about it being copyrighted. Never seen that before.

[LazyGun]

Its just management speak to attempt to explain poor performance and lack of profit.

Operational gearing is the relationship between a companies fixed costs, and sales growth. No operational gearing should mean that operating profit rises in direct proportion with sales growth.High, or positive operational gearing offers a greater operating profit from sales growth; low or negative operational gearing means no profits or even an operating loss from sales growth.
Vertical integration is the acquisition of companies at different points in the supply chain.
Inflation always tends to eat into profits, and volume selling is usually the sales of high volume low margin products, so any small change can have a big impact on sales/profits.

[jno]

it strikes me that "If we take inflation into account then the volume position is truly disastrous" is meaningless.

Surely sales volume (the number of products sold) is different from sales revenue (the money you got from selling them)? Inflation would affect the latter, when you compare them with revenues from an earlier period, but shouldn't have anything to do with sales volumes; so you've no need to take it into account at all.

Maybe I'm missing something.

[browntrout]

I once attended a course, you know the sort of thing, a few seminars and presentations over a couple of days. the organisers described the course as - a series of sub-blocks, placed end to end, except for those separated in time.
naturally, it was complete b*ll*cks.

[AB Editor]

Browntrout, surely you mean it provided you with absolute testicular solutions?

[Bazile]

Economics is so boring

[sandyRoe]

Does it mean they didn't do as well as they would have liked? I can't see it winning a plain English award.