A memo on closing two shops that lose money
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The prompt
A European fashion retailer has 12 shops, and two lose money. Write the executive summary of a memo on whether to close them.
The two shops lose EUR 0.4 million and EUR 0.2 million a year. Closing them costs EUR 0.9 million once (ending the leases). Together they sell EUR 5 million a year. About 30 percent of those sales are expected to move to nearby shops. Those shops earn a contribution margin of 40 percent on them (the share of each sale left after its own variable costs). All figures are illustrative.
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