Retail Company Financial Analysis
Added on 2020-05-11
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Financial Analysis and Management 1
Financial Analysis and Management
Financial Analysis and Management
Financial Analysis and Management 2
Table of Contents
Introduction......................................................................................................................................3
A) Back ground of the company and its position in front of its rivals............................................3
B) Ratio Analysis of Five years.......................................................................................................5
C) Strategic and Operational issues...............................................................................................15
Conclusion.....................................................................................................................................17
References......................................................................................................................................18
Appendices....................................................................................................................................22
Table of Contents
Introduction......................................................................................................................................3
A) Back ground of the company and its position in front of its rivals............................................3
B) Ratio Analysis of Five years.......................................................................................................5
C) Strategic and Operational issues...............................................................................................15
Conclusion.....................................................................................................................................17
References......................................................................................................................................18
Appendices....................................................................................................................................22
Financial Analysis and Management 3
Introduction
The objective of the report is to analyses the financial performance of the company namely
Debenhams Plc and its competitor. This report is divided into three tasks i.e. background of the
company, five year financial performance of the companies through ratio analysis and strategic
and operational issues of the company that influences the operations of the business. Ratio
analyses of the company analyze the performance of the company and its position in front of its
rivals.
A) Back ground of the company and its position in front of its rivals.
Debenhams plc is a leading British Multinational retail company started under the format of
departmental store in UK and Ireland. It has also different stores in different countries The first
store of the company is in London which has founded in 18th century and now the company ahs
the 178 locations across the UK, Denmark and Ireland. It is the public company listed in London
Stock Exchange (LSE).the current employees are 27,187.The company appointed the new
Director namely Mr David Adams in October 2017.Debenhams has the unique position in the
fashion accessories of all the ages and genders from more than two centuries (Debenhams,
2017). The company runs its 160 mid size departmental stores in the UK and deals in women,
kids and men’s apparel, cosmetics, electrical, house ware and toys. The leading brands of the
company are Debut, Red Herring and New England about 70% of its total sales. The company
also offers a weeding registry and inbuilt stores and restaurants. Apart from UK the company
opened its 7-0 stores at global level which includes the countries like Bahrain, Turkey and
Indonesia and company also has 15 stores which is owned and located in Ireland and Denmark.
Introduction
The objective of the report is to analyses the financial performance of the company namely
Debenhams Plc and its competitor. This report is divided into three tasks i.e. background of the
company, five year financial performance of the companies through ratio analysis and strategic
and operational issues of the company that influences the operations of the business. Ratio
analyses of the company analyze the performance of the company and its position in front of its
rivals.
A) Back ground of the company and its position in front of its rivals.
Debenhams plc is a leading British Multinational retail company started under the format of
departmental store in UK and Ireland. It has also different stores in different countries The first
store of the company is in London which has founded in 18th century and now the company ahs
the 178 locations across the UK, Denmark and Ireland. It is the public company listed in London
Stock Exchange (LSE).the current employees are 27,187.The company appointed the new
Director namely Mr David Adams in October 2017.Debenhams has the unique position in the
fashion accessories of all the ages and genders from more than two centuries (Debenhams,
2017). The company runs its 160 mid size departmental stores in the UK and deals in women,
kids and men’s apparel, cosmetics, electrical, house ware and toys. The leading brands of the
company are Debut, Red Herring and New England about 70% of its total sales. The company
also offers a weeding registry and inbuilt stores and restaurants. Apart from UK the company
opened its 7-0 stores at global level which includes the countries like Bahrain, Turkey and
Indonesia and company also has 15 stores which is owned and located in Ireland and Denmark.
Financial Analysis and Management 4
The company also runs its online business in the name of Debenhams Direct (Morning star,
2017).
The Debenhams Plc rivals are John Lewis Partnership Plc, Marks and Spencer Group Plc and
House of Fraser Limited.The3 position of the company against these competitors are lag behind
in some of its areas. In the below given figure it is identified that company lags behind in some
of the areas. In the below given table the position of the competitors are listed according to the
financial performance of the business. It can be identified that net income and market
capitalization is low as compared to its key competitors like Mark and Spencer and other groups.
Similarly, the interest coverage rate is high as compared to its competitors.
(Source: Morningstar, 2017)
The company also runs its online business in the name of Debenhams Direct (Morning star,
2017).
The Debenhams Plc rivals are John Lewis Partnership Plc, Marks and Spencer Group Plc and
House of Fraser Limited.The3 position of the company against these competitors are lag behind
in some of its areas. In the below given figure it is identified that company lags behind in some
of the areas. In the below given table the position of the competitors are listed according to the
financial performance of the business. It can be identified that net income and market
capitalization is low as compared to its key competitors like Mark and Spencer and other groups.
Similarly, the interest coverage rate is high as compared to its competitors.
(Source: Morningstar, 2017)
Financial Analysis and Management 5
The position of the company is behind as compared to its strong competitors in the market. The
presence of many retail stores makes the market share is low. The company’s brand is not into all
types of customer segments and limited global geographic presence (Financial Times, 2017). As
compared to industry average the position of the company is not good which is clearly indicated
in the above given figure.
B) Ratio Analysis of Five years
Ratio Analysis is an important part to analyse the company’s financial performance. Accounting
ratios are important to analyses the financial position of the company. It gives important
information to its users like investors, bankers and creditors. It analyses the profitability,
efficiency and comparing performance of the company with its historical trends to identify the
loopholes in the business. Below given ratios calculates the performance of the company and
compare with its competitor namely Marks and Spencer Plc.
Profitability ratios
Profitability ratio assesses the profits of the company and it evaluates the capacity of the
company to earn profits. The Profit refers that the amount which is left after excluding of all
costs and overheads from the income. There are different kinds of ratios which assess the
profitability position of the both the companies that includes return on assets ratio, gross profit
margin ratio, return on assets, operating margin, return on sales and return on equity. Gross
margin is helpful for the company to identify the profitability of the company’s goods and
services. Three key ratios can be taken to evaluate the performance of the business i.e. Gross
Profit margin, Return on Assets and Return on Equity. Return on assets is a financial ratio that
indicates the portion of profit in the form of percentage of the company generates on its assets
The position of the company is behind as compared to its strong competitors in the market. The
presence of many retail stores makes the market share is low. The company’s brand is not into all
types of customer segments and limited global geographic presence (Financial Times, 2017). As
compared to industry average the position of the company is not good which is clearly indicated
in the above given figure.
B) Ratio Analysis of Five years
Ratio Analysis is an important part to analyse the company’s financial performance. Accounting
ratios are important to analyses the financial position of the company. It gives important
information to its users like investors, bankers and creditors. It analyses the profitability,
efficiency and comparing performance of the company with its historical trends to identify the
loopholes in the business. Below given ratios calculates the performance of the company and
compare with its competitor namely Marks and Spencer Plc.
Profitability ratios
Profitability ratio assesses the profits of the company and it evaluates the capacity of the
company to earn profits. The Profit refers that the amount which is left after excluding of all
costs and overheads from the income. There are different kinds of ratios which assess the
profitability position of the both the companies that includes return on assets ratio, gross profit
margin ratio, return on assets, operating margin, return on sales and return on equity. Gross
margin is helpful for the company to identify the profitability of the company’s goods and
services. Three key ratios can be taken to evaluate the performance of the business i.e. Gross
Profit margin, Return on Assets and Return on Equity. Return on assets is a financial ratio that
indicates the portion of profit in the form of percentage of the company generates on its assets
Financial Analysis and Management 6
(Higgins, 2012). It is an important ratio that evaluates the company’s earnings on it’s per dollar
of its assets. Lastly, the return on equity is also the best indicator of the company to assess the
profits. It is an important ratio for the equity holders as they get the returns in a variable manner.
For this reason this ratio is important for the investors to know their returns in a long run. Below
given table indicated the profitability ratio of 5 years of both the companies.
Profitability Ratio of Debenhams Plc
Profitabilit
y Ratio
2016 2015 2014 2013 2012
Gross profit
ratio
12.51 12.8 12.06 13.5 13.5
Return on
Assets
3.9 4.3 4.05 6.0 5.9
Return on
equity
0.09 0.11 0.11 0.17 0.18
(Source: Yahoo Finance, 2017)
Profitability Ratio of Mark and Spencer Group Plc
Profitabilit
y Ratio
2016 2015 2014 2013 2012
Gross profit
ratio
39.11 38.65 37.5 37.8 6.62
Return on
Assets
4.9 5.7 6.4 5.9 6.1
(Higgins, 2012). It is an important ratio that evaluates the company’s earnings on it’s per dollar
of its assets. Lastly, the return on equity is also the best indicator of the company to assess the
profits. It is an important ratio for the equity holders as they get the returns in a variable manner.
For this reason this ratio is important for the investors to know their returns in a long run. Below
given table indicated the profitability ratio of 5 years of both the companies.
Profitability Ratio of Debenhams Plc
Profitabilit
y Ratio
2016 2015 2014 2013 2012
Gross profit
ratio
12.51 12.8 12.06 13.5 13.5
Return on
Assets
3.9 4.3 4.05 6.0 5.9
Return on
equity
0.09 0.11 0.11 0.17 0.18
(Source: Yahoo Finance, 2017)
Profitability Ratio of Mark and Spencer Group Plc
Profitabilit
y Ratio
2016 2015 2014 2013 2012
Gross profit
ratio
39.11 38.65 37.5 37.8 6.62
Return on
Assets
4.9 5.7 6.4 5.9 6.1
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