financial analysis for A&F

Topics: Generally Accepted Accounting Principles, Balance sheet, Financial ratios Pages: 5 (1686 words) Published: November 2, 2014

FIRM ANALYSIS
Profile
Abercrombie and Fitch is an international fashion retailer selling apparel, fragrance and luxury products at consumers aged 7 to 25. The brand describes its retailing niche as “casual luxury”. The company has a strong brand image based on a provocative communication and a specific in-store experience well suited to the cool lifestyle it advocates. The company operates under four different brands and via U.S. based stores, international stores (in Canada, Europe and Asia) and online activities (Direct-to-Consumer). The original Abercrombie and Fitch was established in 1892 in downtown Manhattan, NYC, as a sporting and outdoor goods retailer. After filing for Chapter 11 bankruptcy in 1976, the company was bought back by Oshman’s Sporting Goods and later acquired by The Limited in 1988, which took A&F public on the NYSE in 1996. The nomination of Michael S Jeffries as president in 1992 marked a radical turn towards what the company and the A&F brand are today. Whether it is via physical stores or Direct-to-Consumer, domestically or internationally, the apparel industry is highly competitive. With a considerably large offer and low switching costs, consumers have a real power over apparel retailers and are consistently looking for the best quality for the cheapest price, unless they consider a certain loyalty to a particular brand. Therefore, differentiation is usually sought after in brand recognition (see below for A&F), price, store location and quality of the products. A&F’s main competitors are American Eagle Out-fitters , Aeropostale or The Gap , which are all somewhat cheaper alternatives with a less aggressive branding policy (more detailed analysis of A&F’s competitors in the Peer Comparison section). To differentiate from its competitors and obtain a sustainable advantage, A&F relies on two key drivers: its brand image and a specifically related in-store experience. The young all-American cool, classic and sexy lifestyle is the core of all the company’s products. Because of the company’s exclusionary customer policy (assumed or not, see insert Controversy), A&F customers really identify with the brand and feel like members of an exclusive group: cool people. Common size analysis.

INCOME STATEMENT
Period Ending: 2/1/2014 2/2/2013
Total Revenue $4,116,897 $4,510,805
Cost of Revenue $1,541,462 $1,694,096
Gross Profit $2,575,435 $2,816,709
Research and Development $0 $0
Sales, General and Admin. $2,366,397 $2,435,069
Non-Recurring Items $128,215 $7,407
Other Operating Items $0 $0
Operating Income $80,823 $374,233
Add'l income/expense items $0 $0
Earnings Before Interest and Tax $80,823 $374,233
Interest Expense $7,546 $7,288
Earnings Before Tax $73,277 $366,945
Income Tax $18,649 $129,934
Minority Interest $0 $0
Equity Earnings/Loss Unconsolidated Subsidiary $0 $0
Net Income-Cont. Operations $54,628 $237,011
Net Income $54,628 $237,011
Net Income Applicable to Common Shareholders $54,628 $237,011 a) 2012,the growth rate of sales is 8.48%
2013,the growth rate of sales is -0.873%
The growth rate for the next year is likely to be lower, because the growth rate of sales of 2012 is higher than that of 2013, and the growth rate of 2013 is negative. b)2012, the growth rate of net income is 64.66%

2013,the growth rate of net income is -76.95%
c) The gross margin rate is 63%
d) The operating margin is 2%
e) The pre-tax profit margin is 2%
f) The net profit margin is 1%
g) In 2013, the growth rate of net income is lower than the 2012's, so during 2014, the growth rate of net income likely to be lower than the 2013's. 3. Cash flow analysis
CASH FLOW
Period Ending: 2/1/2014 2/2/2013
Net Income $54,628 $237,011
Depreciation $189,345 $178,303
Net Income Adjustments $134,340 $70,720
Accounts Receivable $0 $0
Changes in Inventories ($103,304) $253,650
Other Operating Activities $44,138 ($34,318)
Liabilities ($143,654) ($21,195)
Net Cash...
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