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Why is that important exactly? I would think that the gross margins don't matter much at all. If your net margin is -1%, who cares if your gross is 22%?
by 0xffff2 7y ago
Why is that important exactly? I would think that the gross margins don't matter much at all. If your net margin is -1%, who cares if your gross is 22%?
- sokoloff 7y agoBecause if your gross margin is high enough, it's possible to invest to scale such that with greater fixed cost absorption that your net margins can improve from -1% to +2%. Many companies go through a phase of initial losses (negative net margins) when they first start up until they reach scale where the gross margins pull the net margins positive. A competitor to Walmart would be in grave trouble (and shouldn't even try) if their gross margin was 1-3%.