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Financial Management: Economic and Financial Performance of Australian Retail Industry

Conduct a Top Down analysis of the overall economic environment and a Bottom Up analysis of companies' current financial situation in a chosen industry.

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Added on  2023-06-04

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This study analyzes the economic and financial performance of the Australian retail industry, with a focus on two companies: JB Hi-Fi and Myer Corporations. The study is divided into two parts, addressing economic factors and comparing financial performance using 2017 financial statements.

Financial Management: Economic and Financial Performance of Australian Retail Industry

Conduct a Top Down analysis of the overall economic environment and a Bottom Up analysis of companies' current financial situation in a chosen industry.

   Added on 2023-06-04

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Financial Management 1
Principles of Financial Management
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Financial Management: Economic and Financial Performance of Australian Retail Industry_1
Financial Management 2
Executive Summary
The study seeks to address the economic and financial performance aspects facing the
Australian retail industry. The focus is on the performance of two Australian retail
companies: JB Hi-Fi and Myer Corporations. JB Hi-Fi is an ASX listed Company operating
in the Australian retail industry. The Company was established by John Barbuto (JB) in 1974.
Likewise, Myer is also an ASX listed company that operates in the Australian retail industry.
The Company was established in 1899 in Melbourne by a Russian Sidney Myer. The two
companies sell grocery and non-grocery retail products. The study is divided into two parts.
The first addresses the economic factors that affect the operation of the two companies.
While the second parts compare the financial performance of the two companies using their
2017 financial statements.
Financial Management: Economic and Financial Performance of Australian Retail Industry_2
Financial Management 3
Brief introduction
An overview of the Australian Retail industry
Over the past two decades, the Australian retail industry has posted positive performance.
The growth in household income and low-interest rate in the market have encouraged
consumers to spend more on grocery and non-grocery products. The industry has over 250
stores with both local and international origin. Wesfarmers is considered the most extensive
retail shop in Australia based on firm performance and market share. The emergence of
online retailing has increased the growth of the industry as many consumers prefer price
competitiveness and convenience offered via internet shopping (Schulz, 2008, p. 34).
Amid the success of the industry, it faces competition from other global players. The three
critical rivals of the Australian retail industry are Amazon, Lidl, and the Chinese retailers.
The growing. Australian tourism sector, the spending habit by the Australian population, and
growing population are key factors that encourage entrant of international competitors into
the local industry.
History mission statement of the JB Hi-Fi and Myer Companies
a) JB Hi-Fi Company
JB Hi-Fi is an ASX listed Company operating in the Australian retail industry. The Company
was established by John Barbuto (JB) in 1974 as a single store known as East Keilor in
Victoria. From a single store, JB Hi-Fi has grown to become a significant competitor in the
Australian retail industry. The Company sells a variety of products such as electronic
products, kitchen equipment, car sound systems, games, and movies. JB Hi-Fi has several
subsidiaries both in Australia and New Zealand with at least 250 stores across the two
countries. The Company recorded an impressive financial performance in 2017. Its
Financial Management: Economic and Financial Performance of Australian Retail Industry_3
Financial Management 4
Australian sales rose by 11% to $4.2 billion in 2017 contributing to an increase in its
operating cost by 19% to $262 million (Plunkett, 2005, p. 171).
b) Myer Company
Myer is an ASX listed company that operates in the Australian retail industry. The Company
was established in 1899 in Melbourne by a Russian Sidney Myer. Myer grew into a
significant competitor in the retail store through the development of new stores and the
acquisition of the existing ones. For instance, Myer acquired Western Store, Gosford, Grace
Brothers, and Boans in 1961, 1968, 1983 and 1984 respectively.
Myer sells a variety of products such as women's and men's clothing, children's and babies'
clothing, accessories and footwear, computers, electrical, furniture, homeware, bedding,
video games, toys, and foodstuff among others. In 2017, the company registered a
disappointing financial performance. Myer recorded a profit of $11.9 million profit which
was an 80% reduction compared to the profit posted in 2016. Likewise, sales dropped by
1.4% to $3.2 billion in 2017. The decreased in profit was attributed to increased operating
cost and expenses like impairment charges (Productivity Commission, 2011, p. 213).
Top-down analysis
The top-down analysis focuses on the bigger picture before narrowing down to smaller
details. This section addresses the global economic performance before narrowing down to
the Australian and industrial economic performance respectively and how they impact the
economic position of JB Hi-Fi and Myer Companies.
a) Industry Analysis
According to the World Bank Group is expected to grow at a slow rate before slowing in the
next three years. The slow growth will be caused by decelerating growth of developed
Financial Management: Economic and Financial Performance of Australian Retail Industry_4

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