BBE604 Report: In-depth Financial Analysis of Watch Shop UK

This report provides a financial analysis of Watch Shop, a UK-based online watch retailer acquired by Aurum Holdings. It examines the company's background, products, and financial performance, including revenue, gross profit, and net profit from 2019 to 2022. The report also discusses the types of funding obtained by Watch Shop, such as merchant cash advances and e-commerce finance, and compares its financial metrics to competitor Beaverbrooks. The analysis concludes that Watch Shop needs to focus on managing operating expenses to maintain profitability and competitiveness. Desklib provides a platform to access this and many other solved assignments.

BBE604 Assessment
Two Report

Contents
INTRODUCTION...........................................................................................................................3
QUESTION A..................................................................................................................................3
QUESTION B..................................................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
International Finance is also known as the international macroeconomics. It is the process of
transactions b/w two or more countries in monetary terms (Azizi and Mahmoudi 2019). It mainly
focuses on FDI and exchange rates. Watch shop is a UK based company which deals in online
mode with the watches, jewellery and sunglasses. It's market trend is good according to today's
scenario.
QUESTION A
It is an online retailing watch company in UK. It was founded in 25 July, 2007. Arum
holdings is the biggest UK expensive jeweller which acquired the watch shop in 2014. It has
many subsidiaries and branch company all over the world. It is a devoted retailer who designs
luxury watches and have 125 years of experience in ornaments and watch sector. Its
headquartered in Reading, Berkshire in United Kingdom. Arun holdings is the parent company
and it has self-retailers like goldsmith, and Switzerland watches. The main purpose of
establishing this company was to provide unique design in watches, sunglasses, jewellery and
different type of ornaments. The organisation was listed in the authority of SDK jewellery which
was owned by Sham Naib in 1991. After that his son Kishore Naib linked the company in 2007
and launched its website and renamed the company name as Watch Shop. This company has
biggest showroom of 1200 square feet retail branch in the area of Reading, Berkshire in UK.
It was funded by Kishore Naib with $ 100 in 2007. These company deals in several
products. Company set up its first advertisement across all over the UK includes sky news, bbc
news channel, and magazines. In further it was purchased by arum holdings largest UK watch
shop which has already good position in the market. On april, 2017 this organisation has started
selling its designer sun glasses from brand designer such as Ray-Ban, Persol, Oakley and Nike.
The company was started by small jewellers and it is an advanced street and online designer
watch wholesaler (Crammond, 2020). Now this company is selling thousands of hundreds of
watches and ornaments per year. It was the advanced watch self-reliant retailer for publicity of
watch on national tv and they are actively participating in promotion activities. This business
was freshly registered in the Fast track company which is one of the biggest thriving company in
the UK and has accepted several awards for better customer service. This organisation has

received has multiple awards from 2010 to 2018. It has received appreciation from e transaction
watch retail merchant of the year,
ranked in pureplay highest 50 e-commerce merchant’s retailer, ranked 53 in sales in Sunday
times magazine and in 2010 and excellent awards in Shopzilla circle. These organizations also
deal in gifts shops, fashion watches, online retailing (El Kharouf and et.al., 2021).
It was further funded by arum holdings with huge investments because it is one of the
largest jewellery designer in the world from many brands includes Raymond well, coach. Arum
holdings has a major role in expanding its company for diversification. This funding helps the
company to flourish the company in new heights. After acquisition it provides employment to
thousands of people. This company has major contribution in charitable tasks. On march, 2011
organisation has partnership with Casio to donate funds for the crises in the Tohoku earthquake
and calamity. In 2016 the entity has business with Guess to raise funds for the breast awareness
cancer.
This organization deals in all kind of watches, western jewellery and sunglasses. It is the
best online watch company which provides for all the age group people or all the gender. It has
various categories of sunglasses, jewellery and so on. It is fast growing company in retail
industry. They provide a lot of offers to the consumer so that Upper and medium class people
can easily purchase the products and they can take advantages of their services. The company
give guarantee of their goods and services. They assure the consumer to provide best quality in
this industry for attract the customer more (Lee, 2021).
Once a client has been purchased anything from this store, after that it has been updating
them on regularly basis so that consumer will do repurchasing from this organization. It also
takes feedback from the user at continue basis so that they can connect with the customers and
satisfy their needs and wants. As they trade with sunglasses so they ensure that the product is
best quality and consumer don't get any health issues regarding eyes and all. The company said
that the jewellery which is offered by them it is best in the industry. It is not gold and silver
platinum but it is not less them. They launch new design timely under the consumer preferences
i.e. their needs and wants for the purpose of more selling of the products and services.
Profit data of past three year (2019, 2020, 2021) according to market trend:
Year 2019-20 2020-21 2021-22
Revenue 404.3M 560.9M 591.5M

gross profit 25.1M 54.2M 60.8M
Net profit 2.6M 15.7M 14.5M
As per the above data, this has been shown that the market trend of this company is
increasing peer year but the net margin of 2021-22 financial year is fall down due to expenses.
Revenue is rising per year that means customer is admiring their products and like to purchase
from them. In other words, in this year company has done a lot other expenses like
advertisement, discounting, selling and administration and etc. so company needs to focus on
their expenses to maximize the profitability. If the organization would less their expenditures so
they can reach the profit whatever they have estimated or expected. If the net earnings of the
business are higher it means company's position is good in market. The organization is able to
cover their operating expenses. The enterprise has more sustainability. It's market share price
would enhance in future (Legrand and et.al., 2020).
QUESTION B
The implications of the companies’ products on the type and amount of funding obtained,
compared to other companies in similar markets:
Watch Shop is a UK online watch retailer which was established in 2007 and it was acquired
by the UK's largest luxury jeweller, Aurum Holdings Ltd., in the year 2014. The products here
consist of high-street and designer watches and jewellery from brands considering Raymond
Weil, Coach and Frédérique Constant. The funding acquired by watch shop essentially depends
upon its products and the kind of response that each of the product has in the market. Watchshop
uses 25 different technologies products and services that includes HTML5, google analytics and
jQuery according to the reports given by G2 stack. It utilises around 34 technologies for its
websites for taking orders (Majhi, 2019). The company is ranked 102,033 among websites
globally based on its 892,684 monthly web visitors. Its monthly visits have almost 11.2% growth
as compared to previously collected data. The reason behind its excessively and effectively
funding operations. The company gets funded through two most used funds, such as:1. Merchant cash advance: A merchant cash advance is the most used type of cash
advance and is a smart secondary financing option for businesses. Merchant Cash
Advances supplies businesses with a loan that is then repaid with the help of a percentage
of customers’ card payment, not like the conventional loan which has a fixed repayment

every month. The best thing about this option is that it does not have any rigid options
and is very flexible to the revenue intake of the business which means that the business
can decide upon the amount to be repaid every month which means the business has
flexibility to pay lesser amount when the revenue earned that month is less and pay more
when the revenue earned is high.
2. E-commerce Finance: For a retail business like Watchshop especially on an online
platform, the business can be benefited to very high extent with finance from an e-
commerce platform. Whether there is a demand for more staff, more stock or there is a
requirement to invest in your online presence, e-commerce finance may be a good option
for the businesss (Meyer, 2020). If there occurs an online platform to run the business
such as ebay, magento or amazon, the lenders easily incorporate with the company
systems to examine the online accounts for evaluating the current trends and
affordability. This is an easy option to secure funding to keep the business running.
3. Unsecured loans: For businesses who don’t want to, or can’t, provide any security for the
purpose of acquiring a loan or just don’t have any assets which can be used in the form of
a collateral for a loan, then in such a situation business can opt for an unsecured loan.
Unsecured loans work as an extremely fast lending alternative for companies that require
to purchase more stock, that brands them as the best option for retail businesses.
Net profit of company
Revenue of Watch shop for Financial Year 2017 is 404.3M and its production cost for the
same financial year is 379.2M which results in Gross Profit of 54.2M. Gross Profit margin for
the fiscal year 2017 is 9.7%. The company incurred operating expenses of 34.1M in year 2017
and its earning before the payment of interest, tax, depreciation and amortisation expense is
41.3M which leads to earnings before interest, tax, depreciation and amortisation expense margin
of 7.4%. Its earning before occurrence of interest and tax expense is 20.1M and margin of
earnings before interest and tax is 3.6%. Pre-tax profits or earning before tax of Watch Shop is
15.0M for the financial year 2017. The income tax expenses paid by the company during the year
2017 is 610.0K which ultimately results in the net income of Watch shop for the accounting year
2017 of 14.5M.
Total assets for the year 2017 comprises of cash, accounts receivables, inventories, current assets
and PP&E amounts to 354.4M. On the other hand, total liabilities constituting of accounts

payable, current liabilities, non-current liabilities amount to 180.8M. Retained earnings for the
year 2017 is 88.6M and common stock for the same year 4.9M. Financial leverage for the fiscal
year 2017 is 2. Total equity of watch shop for year 2017 is 173.5M (Piñeiro-Chousa and et.al.,
2020).
Beaverbrooks, a competitor of Watch Shop, has a net income of 43,605 for the accounting year
2017 which less as compared to Watch Shop. It means the profits of Watch Shop are more than
its competitor. Expenditure incurred by Beaverbrooks of 1,175,932 in the year 2017 which is less
than Watch Shop whose expenditure in the year 2017 amounts to 34.1M. The balance sheet of
Beaverbrooks represents currents assets of 7,922 in year 2017 and its creditors amounts to
25,000. On the contrary, Watch Shop has current assets of 214.9M and current liabilities of
162.6M which is more than its competitor. Beaverbrooks has a net asset of 8,290,922 and watch
shop has a net asset 354.4M which is again more than Beaverbrooks.
CONCLUSION
As per the above discussion it has been concluded that the company needs to focus on their
operating expenses then it will able to survive in today's scenario otherwise it's net margin is
falling down in future. The business will unable to survive in the market. The company will not
beat the competitors and the investors will not take more interest in watch shop business.

REFERENCES
Books and Journals
Azizi, M. and Mahmoudi, R., 2019. Learning outcomes of entrepreneurship education:
Entrepreneurship education for knowing, doing, being, and living together. Journal of
Education for Business, 94(3). pp.148-156.
Crammond, R.J., 2020. Entrepreneurship: origins and nature. In Advancing Entrepreneurship
Education in Universities (pp. 23-55). Palgrave Macmillan, Cham.
El Kharouf, A. and et.al., 2021. The Entrepreneurship Ecosystem for Enhancing Women's
Entrepreneurship in Jordan. In Women, Entrepreneurship, and Development in the
Middle East (pp. 133-151). Routledge.
Lee, J., 2021. Entrepreneurship in Singapore. In The Singapore Economy (pp. 5-25). Routledge.
Legrand, W. and et.al., 2020. Social Entrepreneurship in Hospitality: Principles and Strategies
for Change. Routledge.
Majhi, S., 2019. Social Entrepreneurship in Agriculture Sector: Challenges and
Opportunities. Productivity, 60(1).
Meyer, C., 2020. The commons: A model for understanding collective action and
entrepreneurship in communities. Journal of Business Venturing, 35(5), p.106034.
Piñeiro-Chousa, J., and et.al., 2020. Innovation, entrepreneurship and knowledge in the business
scientific field: Mapping the research front. Journal of Business Research, 115. pp.475-
485.
Ranjan, R.K. and Gautam, A., 2019. Entrepreneurship education in India: A critical
assessment. Asian Journal of Management, 10(4). pp.400-404.
Taneja, N. and Bhatia, H., 2022. A Study on the Influence of Entrepreneurship Education on
Entrepreneurial Self-efficacy. Vision, p.09722629221110130.