The companies we selected are from the SEC Industry group 5651-Retail Clothing stores. This industry has a variety of stores ranging in age, distribution, and reputation. The companies we will financially analyze are Nordstrom, Gap Inc. and Abercrombie & Fitch. These three businesses represent the variety which the clothing industry contains. This report will consider and examine various financial aspects of our companies. By analyzing key figures from financial statements, we will be able to compare key issues between the companies. Such issues include liquidity, leverage, profitability, overall financial standing and accounting methods implemented. First we will begin with a brief description of each company.
Nordstrom was founded in 1901 by John W. Nordstrom. His philosophy was to offer customers the best possible service, selection, quality and value. The company is committed to the idea of which it began with, earning trust form customers one at a time. Nordstrom created its fashion departments to fit individual′s lifestyles. They currently have five channels of operation: full line stores, off/price stores, boutiques, catalog and the internet.
GAP was founded by Donald and Doris Fisher in 1969. Today it is one of the largest specialty retailers with three of the most recognized names: Gap, Banana Republic and Old Navy. The company employees over 165,000 people and has about 4,200 stores in the US, UK, Canada, France, Japan and Germany. The Gap is focusing on their international locations and continual expansion of company owned and operated stores. They are committed to monitor and improve the clothing production factories conditions overseas. The Gap continues to evolve and adopt good corporate governance revolving on conducting business in a responsible, honest and ethical matter (www.gap.com).
A & F was introduced in 1997 and spun off The Limited in 1998. It is a leading specialty retailer encompassing three concepts: Abercrombie & Fitch, Abercrombie and Hollister Co. The company focuses on high quality merchandise to compliment a casual American lifestyle, while targeting age′s 18-college. Abercrombie & Fitch claims their most important strategy: building their brands. Presently they are focusing on developing their women′s and girls departments. In 2002 they grew rapidly opening 112 new stores whereby at the end of the year the company had 597 locations nationwide (www.abercrombie.com).
Table of Contents
1. INDUSTRY ANALYSIS
2. COMPANY ANALYSIS
2.1 Nordstrom
2.2 Gap Inc.
2.3 Abercrombie & Fitch
3. ACCOUNTING POLICIES
3.1 Depreciation Method
3.2 Inventory Method
3.3 Allowances
3.4 Tax Accounting
3.5 Dividend policy
3.6 Revenue Recognition
3.7 Goodwill
3.8 Long term investments
3.9 Pensions
4. QUALITATIVE EVALUATION
4.1 Profitability
4.2 Assets Utilization/ Liquidity
4.3 Solvency
5. LIMITATIONS
6. RECOMMENDATIONS
Objectives & Key Themes
This report aims to conduct a comprehensive comparative financial analysis of three major retail clothing companies—Nordstrom, Gap Inc., and Abercrombie & Fitch—to evaluate their relative financial health and investment potential.
- Comparative analysis of financial ratios across profitability, liquidity, and solvency.
- Examination of corporate accounting policies and their influence on reported financial positions.
- Evaluation of operational efficiency and asset utilization within the retail sector.
- Assessment of growth strategies and dividend policies for potential investors.
- Identification of limitations inherent in quantitative comparative analysis.
Excerpt from the Book
Nordstrom
Nordstrom was founded in 1901 by John W. Nordstrom. His philosophy was to offer customers the best possible service, selection, quality and value. The company is committed to the idea of which it began with, earning trust form customers one at a time. Nordstrom created its fashion departments to fit individual’s lifestyles. They currently have five channels of operation: full line stores, off/price stores, boutiques, catalog and the internet. Nordstrom began as a shoe store. In the 1960s it was the largest shoe chain in the US. Toward the mid/1960s they added clothing to become the fashion retailer it is today. Recent goals of Nordstrom include driving top-line growth, implementing a new perpetual inventory system and to continue lowering expense levels as a percentage of sales.
Summary of Chapters
INDUSTRY ANALYSIS: Provides an overview of the retail clothing industry and introduces the three selected companies used for the financial comparison.
COMPANY ANALYSIS: Details the historical background, operational philosophy, and strategic growth goals for Nordstrom, Gap Inc., and Abercrombie & Fitch.
ACCOUNTING POLICIES: Explores the accounting methods employed by the firms, such as depreciation, inventory valuation (FIFO), and tax accounting, to determine their impact on financial reporting.
QUALITATIVE EVALUATION: Performs a rigorous quantitative assessment using financial ratios to determine which company exhibits the strongest profitability, efficiency, and solvency.
LIMITATIONS: Discusses the inherent constraints of the analysis, including differences in company age, market scope, and the impact of the 2002 economic climate.
RECOMMENDATIONS: Concludes with a specific investment recommendation based on the financial performance data presented in the report.
Keywords
Financial Statement Analysis, Nordstrom, Gap Inc., Abercrombie & Fitch, Retail Clothing Industry, Profitability, Liquidity, Solvency, Return on Assets, Dividend Policy, Asset Utilization, Investment Strategy, Accounting Methods, Financial Ratios, Equity.
Frequently Asked Questions
What is the primary purpose of this financial analysis?
The report provides a comparative study of the financial performance of three major clothing retailers—Nordstrom, Gap Inc., and Abercrombie & Fitch—to assist in investment decision-making.
Which companies are examined in this report?
The analysis focuses on Nordstrom, Gap Inc., and Abercrombie & Fitch, all belonging to the SEC Industry group 5651 (Retail Clothing stores).
What is the central research goal?
The goal is to determine which of the three companies offers the healthiest financial position and represents the best investment option based on 2002 financial data.
Which scientific method is applied?
The study utilizes quantitative ratio analysis, comparing profitability, liquidity, and solvency metrics across the companies' financial statements.
What topics are covered in the main body?
The body covers company histories, specific accounting policy variations (e.g., depreciation and inventory methods), and a detailed ratio-based evaluation of operational performance.
What are the primary keywords for this paper?
Key terms include Financial Statement Analysis, Profitability, Liquidity, Solvency, and specific retail industry performance metrics.
Why is Abercrombie & Fitch recommended over the other retailers?
Abercrombie & Fitch is recommended due to its superior overall financial performance, strong return on equity, and positive growth indicators as a younger company.
How did the 2002 economic climate affect the results?
The report acknowledges that unusual circumstances in the retail industry during 2002 serve as a limitation to the analysis, potentially skewing standard performance expectations.
- Quote paper
- Marion Maguire (Author), 2003, Financial statement analysis, Munich, GRIN Verlag, https://www.grin.com/document/20217
