Financial Report for David Jones

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Financial Report Analysis for David Jones Ltd

Table of contents
0.0 Introduction ------------------------------------------------------- 1
1.0 Strategy Analysis ------------------------------------------------------ 1

2.0 Accounting Analysis --------------------------------------------------------- 4

3.0 Financial Analysis --------------------------------------------------------- 9

4.0 Prospective Analysis -------------------------------------------------------- 18

5.0 Conclusion and Recommendation --------------------------------------- 19
6.0 Reference ------------------------------------------------------- 20

7.0 Appendix --------------------------------------------------------- 20

Executive Summary
The purpose of the report is to valuate the performance of David Jones Ltd through a fundamental analysis. The report consists of strategy Analysis, accounting Analysis, financial Analysis and prospective Analysis. According to the analysis, a healthy and effective operation can be identified. The value of DJSs is calculated by three different methods using the result from the forecast. Finally a recommendation of buy for the stock of DJSs is made based on the analysis report.

0.0 Introduction
After the shock by financial crisis, the global economy is experiencing a relaxed period, consumer spending tends to increase over years and revive the retail industry. David Jones Ltd (DJs) as one of the top companies in the industry is performing well. This report will focus on the recent performance of David Jones Ltd and analyse the public information and numerical data that DJs Ltd provides. Besides the value of DJs will be calculated by three different methods. The report includes five main parts: Macroeconomic analysis, Accounting analysis, Financial analysis, Prospective analysis and finally with a recommendation that is helpful for investors to make decisions for investing in David Jones Ltd. 1.0 Macroeconomic Analysis

According to Australian Bureau of Statistics (ABS), through 2011 the GDP growth was 2.3 %(Australian Bureau of Statistics 2011). Due to the financial crisis in 2008, most countries around the world experienced economic downturn, the cash rate set by Reserve Bank of Australia (RBA) fell by 50 basis points during the whole year in 2011 (table1.1). On the other hand, the inflation rate is relative low as the RBA announced that it is 1.6% a bit lower than the target inflation rate of 2%-3% (table.1.2)(Reserve Bank of Australia 2012). The exchange rate does not have obvious change; in this case, the export goods and services during 2011 rose by 0.8% (Australian Bureau of Statistics 2011). 1.2 Industry Analysis

1.2.1 Rivalry among Existing Organisations
At first, according to ABS's households expenditure survey, the expenditure from June 2009 to June 2010 increased 38% compared to the last survey conducted in 2003-04(Australian Bureau of Statistics 2010). This is good news for department store industry: the increased spent from households would positive relate to the growth rate of the industry. In the next place, for department store industry in Australia, the main competitors for DJs is BigW, Kmart, Target and the most competitive company Myer. To consider the relative size of the organizations, DJS and Myer are two dominant companies in this industry. On the other hand, the concentration of brand retail stores, which sell the same products as department store, is relative high. Thirdly, although the range of products of departments stores is differentiated, considering the high concentration of other brand retail stores which are also included in department stores, the switching costs for consumers are relative low. Besides, online shopping is another reason of the low switching costs to consumers. The last aspect is that the most assets in the industry are their products,...
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