Ratio Analysis of Macy's and Nordstroms Essay Example | Topics and Well Written Essays - 1500 words

Ratio Analysis of Macy's and Nordstroms - Essay Example The company has entered into credit card and debit card business as well which is operated by one of its subsidiaries. Nordstrom sells both branded and private labeled cloths which make it a favorite for not only elite class of the society but it is equally popular amongst middle class or aspiring middle class citizens. Nordstrom generates sales from following segments. Firstly, retail full line stores generate substantial earnings which are evident from its financial ratios. Secondly, a direct segment is another organ of Nordstrom Inc. This segment primarily focuses on internet based selling. Nordstrom’s website reports high traffic on it, which is a sign of high customer satisfaction. Company has always delivered its promise of quality, fashion and customer service. Thirdly, credit segment earns revenue through charges levied on their company’s own or co-branded credit cards. Macy’s Inc. is another giant of the retail industry. It is based in Cincinnati, Ohio s ince 1820 and has been crowned as one top retail stores in the United States. Company operates through its two organs namely retail stores and its website. Macy has a huge portfolio for its customers, ranging from apparels, shoes and other accessories for men, women and children. They have also entered into home furnishings and various other consumer goods. In short, Macy’s Inc. has everything which one could dream for his/her living. Macy has been focusing on forward integration lately so that it can offer premium service to its customers and consequently, increase its saving by inventory management and price optimization. Keeping a holistic view of the retail industry, it is evident by the reports published by National Retail Federation(NRF) that the retail industry will grow by 4% in the current year due to better-than expected holiday season. However, commodity prices will increase due to augmenting levels of inflation which can create setbacks for the retail industry. Re tail industry survives on volume of sales. Whoever, can provide high quality with low price wins the bid therefore, Nordstrom and Macy have been working to reduce cost through better inventory management controls and reduces their cost of goods sold to sales ratio. Nordstrom Inc. has performed well in the last couple of years. It has continued to grow and prosper which can be seen by its improving profitability ratios. The return on Equity has improved to 34.12% in 2010 as compared to 31% in 2009. Nordstrom has established a strong line up of globally recognized brands which have added substantially to its earnings. The company’s earning has made a heap of 39% in 2010 from $441M in 2009 to $613M in 2010. Analyzing its Gross profit margin notifies an increment of $587M which is about 19.9%. Gross profit margins have grown to 36.39% in 2010 from 34.1% in 2009 as the company has been able to reduce the percentage of sales devoted to cost of goods sold from 68.83% to 66.27%. whic h is a reason of reducing its cost of goods sold to sales ratio. Company has integrated better mechanisms of inventory management to increase their year-end earnings. Moreover, sales have climbed up by 16.68% from $4560M in 2009 to $5321M in 2010 which is a reason for higher profitability ratios. Subsequently, net profit margins have increased from 9.67% to 11.52% in 2010. Nordstrom has performed well in terms of liquidity. This is evident from its current ratio as it has increased to 2.56 in 2010 from 2 in 2009. Looking closely at it, these figures are better than the industry averages hence the company is in a relatively safe position to pay off its current obligations. Nordstrom has performed really well in terms of managing their assets. Inventory turnover period has