Thursday, December 19, 2019
DuPont Analysis Paper Footlocker vs. Champ Example
Essays on DuPont Analysis Paper: Footlocker vs. Champ Essay DuPont Analysis Paper CompanyÃ¢â¬â¢s Founded in 1879 and headquartered in New York, Footlocker Inc. retails athletic apparel and footwear. The company compensated officers include Mr. Kenneth Hicks as the chairman, Lauren Peters as Financial Officer, Richard Johnson as the Operating Officer, Robert McHugh as the Vice president, and Gary Bahler as the Senior Vice President. The company has two sections; Direct to Customers and Athletic Stores. The segment dealing with athletic stores retails athletic accessories, athletic footwear, athletic apparel and equipment such as Foot Locker, Champs Sports, CCS, and Lady Foot Locker. The company had 3335 stores in New Zealand, Europe, United States, and even Australia as of February 2013. The segment dealing with Direct to Customers includes the Footlocker and CCS which sell team licensed products, internet websites, athletic footwear, and mobile devices. Additionally, the company offers franchise licenses to operate in Korea and Middle East. Conversely, Finish Line Inc. Operates in United States. It operated stores offering athletic and performance casual shoes, apparel, mens accessories, womens accessories, and kidÃ¢â¬â¢s accessories (Bull, 34). The company also has operating specialty stores that offer performance running shoes, and an assortment of women and men accessories, additionally it has line branded shops. The company operated 660 stores as of December 2013. The company reaches its clients through finishline.com,, m.finishline.com, and run.com websites. The company was started in 1976 and has its headquarter in Indiana. Some of its compensated officers include Glenn Lyon as the chairman, Edward Wilhelm as the Finance officer, Samuel Sato as the president, Steven Schneider as the executive president, and Mark Landau as the Chief Business Development Officer. 2. As of February 18th, 2014, the company announced a cash dividend of 0.22 dollars per share as a common stock. The dividend represented a 10% increase over the last quarter amount. This has demonstrated an increase in financial strength for the company. Additionally, its diversity in products has placed the company higher in the industry. In addition, the company has global upfront compared to its competitor (Fridson, 67). This is attributed to the number of branches distributed in Europe, thereby widening its market. Some of the weaknesses that the company is experiencing a falling demand in the market place, a fragmented industry with higher number of competitors, and low cost to switch purchase from one outlet to the other. In summary Profitability 2011-01 2012-01 2013-01 TTM Tax Rate % 34.24 36.09 34.60 35.63 Net Margin % 3.35 4.94 6.42 6.41 Asset Turnover (Average) 1.77 1.89 1.93 1.90 Return on Assets % 5.92 9.35 12.37 12.16 Financial Leverage (Average) 1.43 1.45 1.42 1.41 Return on Equity % 8.51 13.45 17.70 17.33 Return on Invested Capital % 7.80 12.41 16.40 16.11 Interest Coverage 52.40 63.14 56.18 59.18 ROA was calculated as. ROE was calculates as ROC was calculated as. Finish Line Inc. has increased its shares by 1.61% close to 25.21 dollars per share. The stocks that were traded between 24.94 dollars and 25.34 dollars equivalent to 571,152 shares that were traded upgraded the company rating to purchase from the hold shares of the company, thereby gaining 33%. Other than the financial strength the company is skilled with personnel and experience (Lafuente, 75). The company experiences a setback in marketing, since it has a low market compared to footlocker Inc. Additionally, the company has no interest coverage for the last 3 years. In summary Profitability 2011-02 2012-02 2013-02 TTM Tax Rate % 37.48 37.08 38.50 39.02 Net Margin % 5.60 6.19 4.95 4.28 Asset Turnover (Average) 1.93 1.99 2.04 2.15 Return on Assets % 10.80 12.32 10.08 9.20 Financial Leverage (Average) 1.36 1.34 1.35 1.42 Return on Equity % 14.77 16.63 13.56 12.90 Return on Invested Capital % 14.77 16.63 13.56 12.90 Interest Coverage Ã¢â¬â Ã¢â¬â Ã¢â¬â Ã¢â¬â 3. Footlocker Inc. Efficiency 2011-01 2012-01 2013-01 TTM Days Sales Outstanding Ã¢â¬â 3.18 3.45 3.32 Days Inventory 108.27 101.48 98.38 108.18 Payables Period 22.63 22.08 23.67 26.96 Cash Conversion Cycle Ã¢â¬â 82.58 78.16 Ã¢â¬â Receivables Turnover Ã¢â¬â 114.76 105.68 Ã¢â¬â Inventory Turnover 3.37 3.60 3.71 3.37 Fixed Assets Turnover 13.06 13.83 13.48 12.23 Asset Turnover 1.77 1.89 1.93 1.90 Finish Line Efficiency 2011-02 2012-02 2013-02 TTM Days Sales Outstanding 2.13 2.61 3.01 2.79 Days Inventory 86.07 84.96 88.34 112.14 Payables Period 29.80 28.74 27.19 36.42 Cash Conversion Cycle 58.40 58.83 64.16 78.51 Receivables Turnover 171.66 139.77 121.25 130.86 Inventory Turnover 4.24 4.30 4.13 3.26 Fixed Assets Turnover 9.37 10.80 9.38 8.37 Asset Turnover 1.93 1.99 2.04 2.15 Asset Use Efficiency: From the above data the asset turnover for Footlocker Inc. is 1.90, while that of its competitor; Finish Line Inc. is 2.15. Footlocker is more sluggish in terms of their sales. This indicates there are problems in asset categories that comprises of fixed assets, receivables, and inventory. Therefore, Footlocker needs to analyze its assets to find out which of the assets has a problem. This problem may arise in a single fixed or current asset. Sales Efficiency From the data below, the gross profit margin for Footlocker Inc. is 27% while its competitor is 32%. Meaning, the more its competitor retains every dollar from its sales, thereby leaving a lot of money for other net profit and expenses. Therefore, Footlocker generates lower revenues to cater for the operating expenses; the company is unable to control inventory costs and control production. Leverage: From the data below the total liability to total asset for Footlocker Inc. is 0.29, while Finish Line has a leverage of 0.25. This implies that the total assets financed by liabilities, debt, and creditors are higher for Footlocker than the Finish line. Meaning that Footlocker is more risky than its competitor Finish Line Inc. Liquidity ratio: From the data below, Footlocker has a current ratio of 409% while its competitor has current ratio of 386%. Therefore, Footlocker has enough cash to cater for its debts Footlocker Period Ending: Trend 2/2/2013 1/28/2012 1/29/2011 1/30/2010 Liquidity Ratios Current Ratio 372% 379% 396% 409% Quick Ratio 188% 184% 179% 170% Cash Ratio 146% 155% 142% 136% Profitability Ratios Gross Margin 33% 32% 30% 27% Operating Margin 10% 8% 5% 2% Pre-Tax Margin 10% 8% 5% 2% Profit Margin 6% 5% 3% 1% Pre-Tax ROE 26% 21% 13% 4% After Tax ROE 17% 13% 8% 2% Leverage 2013 Total Liab/Total Assets 0.29 Total Liab/Inv Cap 0.36 Total Liab/Comm Equity 0.42 Interest Coverage Ratio 122.40 Curr Debt/Equity NA LTD/Equity 0.06 Total Debt/Equity 0.06 Finish Line Period Ending: Trend 3/2/2013 3/3/2012 2/26/2011 2/27/2010 Liquidity Ratios Current Ratio 367% 399% 403% 386% Quick Ratio 185% 240% 250% 220% Cash Ratio 169% 222% 237% 204% Profitability Ratios Gross Margin 34% 35% 34% 32% Operating Margin 8% 10% 9% 6% Pre-Tax Margin 8% 10% 9% 6% Profit Margin 5% 6% 6% 3% Pre-Tax ROE 21% 25% 22% 16% After Tax ROE 14% 16% 14% 8% Leverage 2013 Total Liab/Total Assets 0.25 Total Liab/Inv Cap 0.31 Total Liab/Comm Equity 8.90 Interest Coverage Ratio NA Curr Debt/Equity NA LTD/Equity NA Total Debt/Equity NA 4. The measures of Footlocker Inc. efficiency of human resource I would consider HR FTE to the total ratio of FTE, calculated as measured in unit ratios. Additionally I would measure the Human Resource departmental cost per PTE calculated as in money units and within duration of one year. Consequently, the average response time for the normal Human resource inquiries. Here, the unit will be time in hours and under a minimized direction. Human Resource function FTE ratio No. of Co. replying min median mean max Footlocker data %tile rank 40 10 54 70 316 12 5 Payroll as percentage for personal costs (%) 36 57.34 79.85 80.01 97.53 60.01 4 Turnover rate 37 0.09 5.14 6.62 33.25 30.02 98% 5. Generally, Footlocker strength is based on its management, experienced asset, well-seasoned, and strategically crucial in meeting its future vision. Additionally, the company has well established infrastructure in terms of its catalog distribution, distributing centers and internet capabilities. The company also can limit number of entries in the industry thereby competing against Finish Line. Consequently, the company has a strong brand name this will help it in expanding both locally and internationally. Conversely, Footlocker relies on mall traffic which places it at risk in future in terms of its profitability (Miskelly, 33). Additionally, the company has lower inventory compared to its competitor, this shows weakness in the company. The inventory turnover means that efficiency in managing its inventory is lowered. Since its turnover is low, the company will not employ its invested capital efficiently. This indicates there are problems in asset categories that comprises of fixed assets, receivables, and inventory. Therefore, Footlocker needs to analyze its assets to find out which of the assets has a problem. This problem may arise in a single fixed or current asset. 6. The price to Earnings ratio for Footlocker is 15.40, while that of Finish Line is 19.39. Therefore, it is better to buy stocks for Finish Line Inc. now. This is because the investor will expect higher earnings rise in the future with Finish Line Inc. When compared to Footlocker. Technical analysis Foot Locker, Inc. (NYSE) Range: 1d 5d 1m 3m 6m 1y 2y 5y max Type: Bar | Line | Candle Scale: Linear | Log Size: M | L Moving Avg: 5 | 10 | 20 | 50 | 100 | 200 EMA: 5 | 10 | 20 | 50 | 100 | 200 Indicators: MACD | MFI | ROC | RSI | Slow Stoch | Fast Stoch | Vol | Vol+MA | W%R Overlays: Bollinger Bands | Parabolic SAR | Splits | Volume The investment advice for anyone willing to buy Footlocker stock is to hold until the company comes back to its profitability trends. This is because, over the last financial year, the company has recorded decline in revenue at a rate of -3, 6%. Additionally, the company has closed some of its stores internationally, meaning the company has fewer funds to finance all of its operations. The company needs to improve profitability and efficiency through changing its store base. The strategy involves opening new branches, relocating the present stores to strategic locations, and shutting down stores that are unproductive. Reference Bull, Richard. Financial ratios: how to use financial ratios to maximize value and success for your business. Oxford: CIMA, 2008. Print. Fridson, Martin S., and Fernando Alvarez. Financial statement analysis: a practitioners guide. 4th ed. Hoboken, N.J.: Wiley, 2011. Print. Lafuente, Ana MariÃ a. Fuzzy logic in financial analysis. Berlin: Springer, 2005. Print. Miskelly, Matthew. Encyclopedia of major marketing strategies. Detroit: Gale/Cengage Learning, 2013. Print.