Financial Analysis Assignment
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Financial Analysis Assignment
By: Rosani Varatharajan
Ms LangBAT 4U1Tuesday, January 19,2008
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Industry Description
Operates in Retail Industry Department Speciality
Ready made goods in stores for purchase
Success depends on strategy they use Compete on price and location
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Executive Summary
Le Chateau is a specialty retailer offering apparel, accessories and footwear for men and women. The company primarily operates in Canada and the US.
It is headquartered in Quebec, Canada and employs 3,000 employees.
The company recorded revenues of C$336.1 million during the fiscal year (FY) ended January 2008, an increase of 10.6% over 2007. The operating profit of the company was $51.4 million (approximately $48.7 million) during FY2008, an increase of 36.2% over 2007. The net profit was $33.6 million (approximately $31.8 million) in FY2008, an increase of 35.8% over 2007.
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SWOT ANALYSIS
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Strengths
Distinctive edge in fashion Innovative store design Merchandizing Financial position Team of employees
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Weaknesses
New coming competition Low business in USA
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Opportunities
Remain centered on improving all aspects of its business through: ongoing brand-building efforts, better inventory management, tighter cost controls, continued investments in research, design and development, renovations, and new technologies. The Company will also continue to study and draw
on opportunities for revenue generation through foreign licensing of its offering and brand.
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Threats
Competitive and Economic Environment
Changes in customer spending General economic conditions and
normal business uncertainty Leases Foreign Exchange
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Visual Analysis
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Sales
2008 2007 2006280000
300000
320000
340000
360000
Sales in '000
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Shareholders’ Equity
2008 2007 20060
20000
40000
60000
80000
100000
120000
140000
160000
Sharholders' Equity (in 000's)
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Net Earnings
2008 2007 20060
5000
10000
15000
20000
25000
30000
35000
40000
Net Earnings (in '000)
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Cash Flow From Operations
2008 2007 20060
5000
10000
15000
20000
25000
30000
35000
40000
Cash Flow From Operations (in '000)
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Ratio and Percentage Analysis for Le Chateau(in thousands of Canadian Dollars)
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Current Ratio Determines the liquidity to pay short
term debt. Total Current Assets/Total Current
Liabilities =127 789 /42 168 =3.030 =3.03 they are doing very well in terms of
being able to pay their short term liabilities
Le Chateau is higher then Industry avg. Of 1.2:1
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Quick Ratio
Shows if Company can pay off short term debt without selling inventory
Current Assets- (Inventory+ prepaid Expense)/ Current Liabilities
= 127 788 – (54 012+778)/ 42 168 =127 788- 54 790/42 168 =72 998/42 168 =1.75 Le Chateau has a very good Quick Ratio
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Working Capital
The ability to pay short term debts in a normal time
Total current assets- total current liabilities –(prepaid exp + inventory)
=127 788-42 168- (778+54 012) = 85 620-54 790 = 30 830 Le Chateau is in healthy financial position
where it can pay off short term debt easily.
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Debt Ratio
Percentage of assets that are paid for with borrowed money
Total liabilities/total assets =74 017/216 431 =0.34 =0.34:1 Le chateau is not much of a risk factor for
investors. A ratio under 1 indicates that the
company has more assets then debt
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Shareholder Equity Ratio
The percentage of assets are financed with shareholder money
Total equity/total assets = 142 414/216 431 =0.66:1 Shareholder’s will be pretty happy with
this ratio since they will receive 66cents for every dollar of assets in the case of liquidation.
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Gross Profit Margin
Percentage of each sales the company gets to keep as profit
(net income/net sales) x 100 = (38 621/345 614) x 100 = 0.11x 100 = 11% Le Chateau shows that they are
capable of having relatively well priced good and not high of costs.
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Return on Shareholders’ Equity
Income for every dollar invested by shareholders
(net income/owner’s average equity) x 100 = 38 621 / 142 414 = 0.27 =27% Le Chateau’s value of 27% is much higher
than the industry average of almost 13% They are making effective use of the trading
on the equity
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Collection Period
Ability to collect from credit customers Accounts receivable/ (sales/365) =4 791/ (345 614/365) =4 791/ 946.9 = 5.1 Le Chateau has a excellent collection
period .
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Earnings Per Share
Amount of net income per common share Net income/number of common shares
outstanding Basic
2008- 1.3 2009- 1.6
Diluted 2008- 1.3 2009- 1.6
In both cases the company’s EPS has increased at a good growth rate
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Price Earnings Ratio
Market price of a common share to the company’s earnings
Market price per share/earnings per share
= 9.45/1.56=6.05 Le Chateau is under a average P/E
Ratio but is definitely a good bargain.
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Le Chateau’s Future
Retail industry gaining profits Potential to even further success Unique path that no one can compete
with
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Le Chateau Conclusion
Well positioned in specialty retail Continues to expand costumer base Elevating service standards and product
innovation On going brand building, better inventory
management, cost controls, investments in research, design and development, renovations, and new technology
Also looking for opportunities for revenue generation through foreign licensing of brand.
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Thank You Le Chateau Inc