This case guides candidates through a structured profitability analysis, starting with identifying profit margin decline (20% to 10%) and progressively drilling into cost drivers, specifically COGS. The case emphasizes the importance of quantitative rigor—calculating absolute and percentage changes, and working backwards from margin targets to determine feasible COGS levels. The interviewer guidance signals that strong candidates should notice both the absolute profit erosion and the margin compression, then propose supplier renegotiation as the key strategic lever.
Home Improvement Co. is a major home improvement retailer in the U.S. that sells tools, construction products, appliances, and services. Since 2020, the company has struggled to hit their profitability targets and are looking for possible solutions.
Our client, the CFO of the company, has hired us to come up with a plan reverse this trajectory and return the company to its profitability level from 3 years ago.