LIZ CLAIRBORNE INC AND JONES APPAREL GROUP
TABLE OF CONTENTS
I. INTRODUCTION- 1 -
II. HORIZONTAL ANALYSIS OF JONES APPAREL GROUP- 2 -
III. SIGNIFICANT PERCENTAGE INCREASES- 3 -
IV. FINANCIAL RATIO ANALYSIS- 5 -
1. Current Ratio- 5 -
2. Gross Margin Percentage- 6 -
3. Profit Margin Percentage- 6 -
4. Accounts Receivable Turnover and Days to Collect- 7 -
5. Allowance for Doubtful Accounts to Accounts Receivable- 8 - 6. Inventory Turnover & Days to Sell- 8 -
7. Return on Equity- 9 -
8. Return on Assets- 10 -
9. Debt to Equity- 10 -
10. Times Interest Earned- 11 -
V. INVENTORY COST FLOW - 12 -
VI. DEPRECIATION METHODS- 12 -
VII. LIABILITIES- 12 -
VIII. CASH FLOWS: MAJOR SOURCES AND USES OF CASH.- 17 -
IX. REPORTS OF THE INDEPENDENT AUDITOR-- INTERPRETATIONS.- 17 - X. CHOICE OF INVESTMENT AND CONCLUSION- 18 -
This paper will give a financial analysis of the Jones Apparel Group and Liz Claiborne Inc. Both of these companies are involved in the production and selling of apparel and accessories. These two companies operate in an environment of intense competition; they are not only competitors themselves, but face national, regional and international competition in regard to customer base and market share.
Both companies had about $ 4 billion in sales last year (2008), although, they have different growth strategies: Jones buys huge companies, Liz Claiborne buys smaller ones. In addition, each apparel maker owns or licenses dozens of well-known competing brand names. Jones has Jones-New York, Polo Jeans, Nine West and Anne Klein. Liz Claiborne has Claiborne, Dana Buchman, Ellen Tracy and its recently acquired young urban brand, Enyce.
In general, this is an industry that has historically been subject to cyclical variations and depends on, though not limited to, general economic and business conditions, tastes and discretionary spending habits. The apparel sector market today has been significantly adversely affected by the current economic downturn affecting overall expenditure. Consumer confidence has declined, leading to decreases in consumer spending and significantly reduced retail sales-a trend which is likely to continue and will have further adverse effects in both companies for 2009 operations. Therefore, to address the uncertainty posed by the current economic conditions and protect their respective, credibility and future profitability, both companies are taking actions to this effect which also helps explain some of the results attained from this analysis.
II. HORIZONTAL ANALYSIS OF JONES APPAREL GROUP
|THE JONES APPAREL GROUP, INC. | |CONSOLIDATED STATEMENTS OF INCOME | |(All in millions except per share data) | |Year Ended December 31 |2008 |2007 |Change |% change | |Net sales |$3,562.60 |$3,793.30 |($230.70) |-6.08% | |Licensing income |52.1 |52 |0.1 |0.19% | |Service and other revenue |1.7 |3.2 |-1.5 |-46.88% | |Total revenues |3616.4 |3848.5 |-232.1 |-6.03% | |Cost of goods sold |2440.2...