# TLC Margin Gap Analysis: Tuckerton (ST1) vs Surf City (ST2)
**Date:** March 26, 2026 | **Data Source:** January 2026 Dashboard (Epicor)

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## Executive Summary

Surf City (Store 2) is running **6.6 percentage points lower** in gross margin than Tuckerton (Store 1): **26.2% vs 32.8%**. On $1.09M in combined January YTD sales, that gap represents approximately **$72,000 in lost gross profit** annualized from Surf City's underperformance.

This is real money. If Surf City matched Tuckerton's margins, TLC would add roughly **$300-400K in annual gross profit** on the same revenue base.

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## Overall January 2026 Margin Comparison

| Metric | Tuckerton (ST1) | Surf City (ST2) | Gap | Combined |
|---|---|---|---|---|
| **Gross Margin %** | **32.8%** | **26.2%** | **-6.6 pts** | 29.8% |
| YTD Sales at Retail | — | — | — | $1,091,271 |
| YTD Gross Profit | — | — | — | $324,851 |
| Total Inventory | — | — | — | $2,637,221 |
| Months of Inventory | — | — | — | 3.4 |

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## Category-Level Margin Breakdown

| Category | ST1 GP% | ST2 GP% | Gap | ST2 vs ST1 | Priority |
|---|---|---|---|---|---|
| **Building Materials** | 31.6% | 26.1% | -5.5 pts | ST2 underperforming | 🟡 Medium |
| **Lumber** | 34.2% | 27.3% | **-6.9 pts** | ST2 underperforming | 🔴 High |
| **Millwork** | 31.2% | 22.0% | **-9.2 pts** | ST2 badly underperforming | 🔴 High |
| **Hardware** | 34.0% | 33.8% | -0.2 pts | Essentially equal | ✅ OK |
| **Paint** | 27.5% | 35.1% | **+7.6 pts** | ST2 outperforming! | ✅ Great |
| **Outdoor Living** | 34.5% | 33.6% | -0.9 pts | Close | ✅ OK |

### What the Data Says

**The problem categories are Lumber and Millwork — together they're likely 60%+ of revenue.**

- **Millwork at ST2 is 22.0% GP** — that's brutal. Special order Andersen products at Surf City are running 18.4% margin. Tuckerton gets 24.7% on the same Andersen products.
- **Lumber at ST2 is 27.3% GP** vs 34.2% at Tuckerton — a 6.9-point gap on what's probably the highest-volume category
- **Hardware is essentially equal** — good news, means the pricing discipline issue is category-specific
- **Paint at ST2 actually BEATS Tuckerton** — 35.1% vs 27.5%. This is likely the Surf City paint store doing its job with Benjamin Moore retail pricing

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## Department Deep Dive — Where the Money Leaks

### Lumber (Biggest $ Impact)

| Department | ST1 GP% | ST2 GP% | Gap | Notes |
|---|---|---|---|---|
| Plywood (LL) | 31.1% | 27.7% | -3.4 pts | Volume category |
| Framing Lumber (LF) | 35.1% | 30.3% | -4.8 pts | Highest volume |
| Treated Lumber (LT) | 38.7% | 30.7% | **-8.0 pts** | Huge gap |
| Industrial Woods (ID) | 55.3% | 61.7% | +6.4 pts | ST2 wins (low volume) |
| Special Order Lumber (SL) | 23.1% | 21.8% | -1.3 pts | Both low — improve |

**Treated Lumber is the smoking gun at Surf City.** 8 points of margin difference on a product that should have identical cost and similar customer pricing. Either Surf City is discounting to win contractor business, or pricing isn't being applied correctly in Epicor.

### Millwork (Worst % Gap)

| Department | ST1 GP% | ST2 GP% | Gap |
|---|---|---|---|
| Andersen (DD) | 31.2% | 26.7% | -4.5 pts |
| Special Order Andersen (SA) | 24.7% | 18.4% | **-6.3 pts** |
| Special Order Doors (SD) | 23.7% | 22.9% | -0.8 pts |
| Special Order Windows (SW) | 35.4% | 19.7% | **-15.7 pts** |

**Special Order Windows at Surf City: 19.7% margin.** That's basically selling at cost. Either the quoting process is wrong, or someone is giving away the farm to close deals.

### Hardware (The Success Story)

Hardware margins are nearly identical (34.0% ST1, 33.8% ST2) — proof that when pricing discipline is applied consistently, both stores can perform.

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## Inventory Concerns by Location

| Category | ST1 Inventory | ST2 Inventory | ST2 MoI (Months) | Flag |
|---|---|---|---|---|
| Hardware | — | — | ~22 months (Hand Tools) | 🔴 Overstocked |
| Millwork | — | — | — | Normal |
| Building Materials | — | — | 229 months (Dock Hdw) | 🔴 Dead stock |
| Outdoor Living | — | — | ~12 months (Lawn/Garden) | 🟡 High |

Surf City has **22 months of Hand Tools inventory** and essentially dead stock in Dock Hardware (229 months!). These are clearance candidates.

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## Financial Impact Estimate

If Surf City's margins matched Tuckerton's across all categories:

| Category | Estimated ST2 Annual Sales | Current GP% | Target GP% | Annual GP Gain |
|---|---|---|---|---|
| Lumber | ~$2.5M | 27.3% | 32.0% | **$117,500** |
| Millwork | ~$1.2M | 22.0% | 28.0% | **$72,000** |
| Building Materials | ~$0.8M | 26.1% | 30.0% | **$31,200** |
| **Total incremental GP** | | | | **~$220,700** |

Even closing HALF the gap would add **$110K** to gross profit. That's real money that drops straight to the bottom line.

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## Root Cause Hypotheses

1. **Contractor pricing at Surf City is too aggressive** — are they giving deeper discounts to win/retain LBI contractor business?
2. **Epicor pricing matrix differences** — do the stores use the same matrix pricing? If Surf City defaults to a lower price level, that's a system fix.
3. **Special order quoting process** — Millwork special orders at Surf City seem to be quoted with razor-thin margins. Who's doing the quoting?
4. **Volume mix** — Surf City may sell more to large contractors (lower-margin) vs. Tuckerton's mix of residential walk-ins (higher-margin)
5. **Competitive pressure** — is there a competing lumber yard near Surf City that's forcing price matching?

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## Recommended Actions

### Immediate (This Week)
1. **Pull Epicor pricing matrix** for both stores — verify they're using the same base pricing
2. **Review treated lumber pricing** at Surf City specifically — 8-point gap is too large to be incidental
3. **Review special order window quoting** at Surf City — 19.7% is unacceptable

### Short-Term (March-April — Before Seasonal Window)
4. **Implement seasonal pricing strategy** — residential walk-in pricing for March-August should be at FULL retail at both locations
5. **Surf City manager accountability** — who approves discount overrides? Tighten authority limits.
6. **Dead stock clearance** — dump the Dock Hardware and excess Hand Tools at ST2

### Structural (Q2 2026)
7. **Monthly margin review by store** — both managers should see their GP% vs the other store as a competitive benchmark
8. **If Corner Market deal proceeds** — use the Surf City relocation as an opportunity to reset pricing culture from Day 1

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*Analysis by Rob Lobster 🦞 | Source: January 2026 Epicor Dashboard*