Quantitative analysis
Objectives (established by the CEO for new product concepts):
1. Provide a significant revenue growth over next 5-7 years ($150-$200 million annually)
2. Create a strategy to access lucrative markets that were not likely able to support a full-line store
3. Develop a format to enhance the presence and awareness of the NM brand, both domestically and internationally
4. Expand and capitalize on the most attractive elements of the NM franchise, specifically unique top-quality merchandise, outstanding customer relationships and service
5. 15% return on invested capital
6. Contemporary style with a unique statement storefront to create a sense of destination for a smaller format
7. Retain NM signature
8. Ensure the scalability and sustainability of the concept
9. Enhance the strategy and meet the financial goals

Cost estimates
Capital expenditure: 3-3.5 million
Working capital: 2-3 million

Estimated annual sales and profit for a single Galleries store:
1. Revenue
a. According to Table B, jewelry has 10% of sales in an average store. In the year of 1998, total revenue is $2,373,347 in Exhibit 5. Thus:
The total revenue of jewelry would be = 10%*2,373,347=237,335 (K)

b. According to Table B, jewelry has 3.9% of overall Sq.Foot. In Exhibit 6, we found the overall Gross store Sq.Foot is 4417+316=4,733 (K) Thus:
The total Sq.Foot of jewelry would be =3.9%*4,733= 185 (K)

c. So for a typical 10 K Sq.Foot Galleries store, the revenue would be:
$237,335/185*10= $12,858 (K)

2. Gross margin
According to Table B,

Sales%
Gross Margin%
Precious
5.9
40.5
Fashion
4.1
48.9
We calculated the compounded gross margin as 43.9%

3. Operating expenses
Rent and property tax: average $60*10,000=$600,000
SG&A expenses mainly come from the HR cost.
Referring to the comparative size of typical full-line store alone with its HR configuration, averagely 14 times larger than a Galleries store, we assume the HR configuration in a typical Galleries store is: role quantity salary incentive% incentive sum up operating manager(general)
1
$70,000
40%
$28,000 $98,000 department manager
3
$47,500
7.50%
$3,563 $153,188
other