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RETAIL - CLOTHING INDUSTRY
Group 2Stefanie MoegleDovile NarutaviciuteBasak CopurogluIngah KutesaCarolina Martin-Leyes
AGENDA
Presentation of the Retail - Clothing Industry Evaluated Companies Retail - Clothing Industry Matrix Chosen Companies A deeper look at the Companies chosen. Comparison of the Ratios Conclusion Questions
World Clothing Retail Industry
World Clothing Retail Industry
Clothing sales reached US$850 billion in 2006. Growth of 3% over 2005. Volume sales growth by 8%. no. of working women - key factor driving sales in
2006. Women’s outerwear - 60% of overall 2006 value sales. Gap Inc - leadership position in the clothing market. The single largest brand in the sector was H&M. $ sales expected by 2011 - US$ 968 billion. # sales will grow indicating vibrant midrange market.
WE LOOKED AT THE FOLLOWING…
SMILEY CHART
CorporationCorporate
Governance CSRRisk
Management
Up to date
timing
Shareholder Friendly Info + Key Ratio Analysis Clarity Transparency
Effectiveness of
Managment Auditor
Transparency
Calarity of Bussines Strategy
Inditex
Primark
GapHelly
Hansen
Hugo Boss
Apranga
H&M /Benetton
A&F
Oilily
Very good
Could be better
Not good or not all info is available
ELIMINATION OF COMPANIES…
Corporate governance
Code benefit of employees,shareholders,customers sustainably increasing enterprise value
CSR
ecological, socialy sustainable concepts Work-Life-Balance
Risk management
Risk Report Identify risks at an early stage and to respond quickly Audited at regular intervals
Timing
Without delay Managing Board reports regularly, promptly
Shareholder friendliness & key ratio analysis
Benefit of employees, shareholders, customers Sustainably increasing enterprise value
Clarity of business strategy
Strategic focus on growth opportunities
Audit transparency Strategic focus on growth opportunities Standards for the audit Plan and perform the audit
Clarity & Transparency
Same information Reports regularly, promptly, and comprehensively on All topics of relevance
Corporate governance
Corporate governance guidelineCode of ethics
• Election• Independence
Transparency
Its own website Yahoofinance
Income statementBalance sheetCahs flow10 year annual report5 years summary10 years summary
Up to date timing
Informs all capital market at the same time by the same information.
Updates its website information every week.
Adds financial reports every quarter.
CSR
Boycott australian wool Donating $10 million to the construction of
a trauma center at Nationwide Children’s Hospital in Columbus, Ohio
Adds
THE GAP INC.
Sells casual apparel, accessories, and personal care products for men, women and children under the Gap, Old Navy, Banana Republic, and Piperlime brands.
The Gap
History
Founder
Brands
Don Fisher, Gap Inc. Founder and Chairman Emeritus
LOCATIONS
United States Canada The United Kingdom France Ireland Japan
LOOKING AT THE COMPANY..
Listed on NYSE. ( GPS)
Clarity and Auditing
Social cooperate responsibility.The gap reportCode red.
Recognition..
100 Companies with Conscience Audit Integrity Top 100 Business Ethics Awards: Social Reporting
Award Ceres-ACCA Commendation for Social
Reporting Ethisphere Magazine’s 2007 World’s Most
Ethical Companies2008
Revenue division..
As per 2007 revenue : 15 billon dollars.Old navy- 6.2 billion Gap direct – 903 million Banana republic- 2.5 billion International – 1.6 billion.
INDITEX
FY 2007 4,258 stores in 72
countries Sales 9.4 Bn, 63% Int’l Cash flow 1.8 Bn Net Income 1.3 Bn
Inditex is one of the worlds largest fashion distributors, with eight independent sales formats:
Pull and Bear
Strategic Direction
Inditex has it’s unique management model based on:- innovation - flexibility- integrated business model
Fashion philosophy: - creativity - quality design
Rapid response to market demand
Strategic growth : Fast international expansion
Excellent response to sales concepts
Customer driven
Compelling mix of latest fashions and quality at affordable prices
• Unique product strategy
• Customer interaction
• Attractive stores in prime locations
Distribution and Logistics
•Central distribution
•Shipment to all stores twice a week
•Orders to stores in 24-48 hours
Economic Indicators - Ratios
Inditex financial years is from 1st February to 31st january of the following year (1) in millions of euros.
Economic indicators FY2007 FY2006 % 07/06
Net Sales 9,435 8,196 15%
International sales 62.5% 60.4%
Gross Profit 5,349 4,607 16%
Gross margin 56.7% 56.2%
EBIT 1,652 1,356 22%
EBIT margin 17.5% 16.5%
Net Income 1,250 1,002 25%
margin 13.3% 12.2%
Key Ratios 2007 2006 31 Jan 08 31 Jan 07
Operating Margin 17.51 % 16.51 % Return on Equity 32.72 % 31.55 % Pretax Income to Sales 17.44 % 16.34 % Current Ratio 121.29 % 113.98 %
Corporate Governance
Is part of three international stock exchange indexes that recognize Good Governance:
- Dow Jones - Sustainability FTSE4 Good and - FTSE ISS Corporate Governance
Save the same voting and financial rights
No legal restrictions on the acquisition or transfer of shares.
The majority of the Board Members are External
The Audit and Control Committee presents its report independently
Delegation and autonomy of the executive committee
Corporate Social Responsibility - CSR
Inclusion of the guidelines into the internal corporate regulations, comprised by: - laws- rules and regulations- codes of conduct- other international initiatives & agreements
CSR• Global environmental system:
- Solid- Efficient- Adaptability- Control processes
• The general objectives of Strategic Environmental Plan 2007-2010 :
- reduce the emission of greenhouse gases
- increase the implantation of renewable energy sources
- maximize the efficient use of energy in manufacturing areas
- train the staff and raise their awareness
Risk Management
Shareholder Friendliness
Good faith in relations with stakeholders & with society as a whole
Continuous dialogue with stakeholders & social organizations
Ethical commitment & responsible perspective
Fair & honorable treatment
All the activities of the Inditex Group shall be carried out in manner that most respects the environment
“Fashion & Quality at the Best Price”
H&M - established in Västerås, Sweden in 1947 by Erling Persson
H&M: 33 countries, 1700 stores, 68,000 employees. Turnover in 2007 - SEK 92,123 million H&M’s growth target - increase no.of stores by 10–15 %/year
& increase sales at existing stores
Strategic Direction
H&M succeeded in strengthening its position in the market through: constant innovation renovation
Inviting top designers to create a product line for H&M, e.g. Karl Lagerfeld, Viktor and Rolf, Madonna.
Strategic growth – to international countries. H&M: Operational Indicators:
Corporate Governance (CG)
H&M applies with the Swedish Code of Corporate Governance which is described in the CG Report in the annual report.
CG is basically about how the company is to be run in order to safeguard the shareholders’ interests.
• The share is traded on the OMX Nordic Exchange Stockholm, Sweden. The symbol is H&M B
Corporate Social Responsibility
Code of Conduct & Sustainability Policy –the backbone of H&M’s work
It includes the following requirements:
compliance with local labor law statutory pay and working hours ban on child labor ban on discrimination ban on forced labor health & safety in the workplace right to organize & bargain collectively compliance with local environmental legislation.
Corporate Social Responsibility
Water samples from factories with water treatment Cooperating tightly with UNICEF Increased use of organic cotton Climate-smart transport solutions
Since 2005 H&M has been licensed to use the European Union’s official eco-label The Flower
Risk and Uncertainties
Most dealt with through internal routines Financial risks
Interest risk associated with liquid funds and short-term investments Currency risk associated with foreign currency flows Credit risk associated with financial assets and derivative positions
Others are affected more by external influences: fashions weather textile quotas exchange rates expansion into new markets launch of new concepts changes in consumer behaviour handling of the brand
Transparency in H&M
Auditing committee H&M’s Auditing Committee - appointed annually by the Board of
Directors. Auditors - elected at the Annual General Meeting every 4 years From 2005 - Ernst & Young AB H&M publishes interim reports & annual reports in Swedish and
English www.hm.com - a wealth of other information on H&M Investor Relations department H&M - participating company in the Fair Labor Association (FLA):
demonstrates stakeholders good work follow-up in factories; ensures quality of internal monitoring programme.
Ratio Comparison
HUGO BOSS A&F GAP IDITEX H&M
2006 2007 2008 2006 2007 2007 2008 2006 2007 2006 2007
PROFITABILITY RATIOS:
Gross Profit Margin 57.10% 57.90% 66.48 66.57 35.53 36.11 4607 5349 58.51 60.64
Net working Capital: Current Assets- Current liabilities
299 397 2272 1653 263.6 523.5 SEK M 17504
SEK M 19359
INDEBTEDNESS RATIOS:
Interest Cover N/A 31,000 6,285 N/A N/A N/A N/A 28.79 22
Earnings per share 1.84 2.22 161.3 201.4 13.05 16.42
455.53 581.45
81.37 47.34
3.8 4.78
Conclusions from ratios
It is difficult to compare companies between each other, as the measures are different, so as the sizes of the companies are not the same.
The Gross Profit Margins are changing through out the year, as it is very common for clothing companies, whose pricing policy and discounting changes very often.
Key trends in during the recession
Pessimism inhibits shopping habits
Consumers fearful of the future seek budget over brand
Window shopping
Research before purchasing
The new natural look
Commercial opportunities during recession
Advertise value for money and opportunities for bargain-hunters
Create a feeling of togetherness in the downturn
Advertise products through indicating that there are certain things that everyone needs
Offer consumers: 'treating yourself' because 'you're worth it'
Create an imaginary better world through your products – a way to escape from everyday hardships
Show price comparisons of your products
Conclusions
Presentation of the Retail - Clothing Industry Evaluated Companies Retail - Clothing Industry Matrix Chosen Companies A deeper look at the Companies chosen Comparison of the Ratios
Questions
Thanks for your attention.
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