Closing non-performing stores is a positive. For example:
Scenario 1 (non-performing store)
1
Store 1
Store 2
Store 1 + 2
2
Revenue
$500m
$500m
$1,000m
3
Profit
$25m
-$10m
$15m
4
Scenario 2 (close non-performing store)
1
Store 1
2
Revenue
$500m
3
Profit
$25m
As shown above, sales has dropped off since closure of Store 2 but the company is now more profitable as the loss making store is closed. Hence, profit margin has increased which would suggest a market re-pricing due to improved cash flow.
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