Financial Statement Analysis: Dsw Shoes & Payless Shoes

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FINANCIAL STATEMENT ANALYSIS
DSW SHOES INC. & PAYLESS SHOESOURCE
BY: EULALIA RAMIREZ
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TABLE OF CONTENTS
SECTION PAGE
Executive Summary………………………………………………………. ……… 3 Firm Background and Competitive Environment………………………. 4 Significant Risks…………………………………………………………………… 5 Financial Statements…………………………………………………………….. 6 Profitability………………………………………………………………………….. 19 Liquidity……………………………………………………………………………… 22 Asset Management……………………………………………………………… 26 References…………………………………………………………………………. 28 Page 3 of 28

I. EXECUTIVE SUMMARY
The shoe retail business is a competitive field. According to the Annual Retail Trade Survey conducted by the Bureau of Census, shoe retail trade registered sales of 21,627 billion in 2003 in the United States from about 28,457 shoe stores across the country.

The shoe retail industry is segmented across the product lines of children’s shoes, men’s shoes, women’s shoes and athletic shoes. Both the men and women s market segments are growing. Price-wise, however, men’s shoes are more expensive than women s shoes. On the other hand, the demand for shoes is driven by price, demographics, income, weather, fashion trends, target markets, and economic factors. Competition in the industry is strong. There are a number of established players in the shoe industry with established market positions, brands and reputations. A mall often houses several shoe stores, mostly the major players. Major players in this industry have numerous retail outlets throughout the US, while smaller players are generally independently owned and operated in one or two locations. Competition also comes from department store with well-appointed shoe departments. The Internet is also emerging as a source of competition as a growing number of users are becoming more comfortable shopping shoes online.

The focus of this project is to examine two of the largest footwear specialty retailer stores in the United States. An introduction of the subject company’s market and product lines will be briefly analyzed. Afterwards, a section focusing on risks will be also taken into account as well as comparison between the two firms’ financial statements. The companies are DSW Incorporated and Payless Shoesource Incorporated. Page 4 of 28

II. FIRM BACKGROUND AND COMPETITIVE ENVIRONMENT
DSW stands for Designer Shoes Warehouse. The retail chain, DSW Inc. headquartered in Columbus, Ohio and owned by Retail Ventures, offers a selection of brand name and designer dress, casual and athletic footwear for women and men. The company operates in two segments: DSW stores and leased departments. As of February 3, 2007, DSW operated a total of 223 stores located throughout the United States. During the fiscal year ended February 3, 2007, DWS opened 29, DSW stores. Leading competitor, Payless Shoesource Incorporated as of February 3, 2007, has 4,572 retail stores in 15 countries and territories. The company Payless Shoesource retail stores in the United States, Canada, the Caribbean, Central America and South America and sold over 177 million pairs of footwear during the fiscal year ended February 3, 2007. Besides shoes, it sells accessories such as handbags and hosiery. Unlike DSW, Payless Shoesource offers footwear and accessories for women, men and children.

Although there is not any dominant company in the shoe business, DSW is more than fashionable. The Discount Shoe Warehouse (DSW) reported year-end results in March 29, 2007, and the numbers are enough to make the most skeptical person stand up and notice. Although the two companies are doing very well among the industry, DSW is doing a better job in comparison to its competitor Payless Shoesource. DSW has a Return on Assets of 11.8%, Return on Equity of 19.27%, and Revenues Per Employee of $220,528. In particular the company is average at managing their resources, and is above average at managing their owner's equity and at generating revenues from employees compared to other...
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