Financial Analysis on Retail Industry

Executive Summary This analysis studied financial information of three multinational corporations in the retail industry, Ralph Lauren, American Eagle, and Gap. This examination is predominantly and analysis of Ralph Lauren and American Eagle, and it compares its financials and performance to that of Gap. In order to reach a decision on which firm my company should invest in; we recreated and cleaned both company’s financial statements followed by an analysis using key financial ratios and metrics. My company is searching for the firm that would be more profitable in the following fiscal years. After completing an in-depth analysis of these companies, we concluded that Gap would be the best investment for future growth in the industry of retail. Gaps sales growth may not be relatively high compared to other industry leaders but it is on the rise. Also the sales decrease can be related to the closing of stores and restructuring of international operations. This also relates to net income growth showing signs of regression in the past fiscal years. Gap’s EBIT Margin and EBITDA Margin suggest that the company is healthy and also properly managed. These ratios show us that the sales growth and net income growth decreases are due to other factors in the business. Gap will show to be the right choice for our company to invest in as well as other industry research that we have done to help make this investment persuasive.

Gap Inc. 2009 2010 2011
Sales Growth -7.8% -2.3% 3.3%
Net Income Growth 16.1% 14.0% 9.3%
EBIT Margin 10.7% 12.8% 13.4%
EBITDA Margin 15.1% 17.5% 17.9% Case Write Up and Analysis All three of these multinational corporations generate their revenues in the apparel: retail brand industry. Gap is headquartered in San Francisco, California and the year-end date is January 30. American Eagle is headquartered in Pittsburgh, Pennsylvania and their year-end date is January 30. Ralph Lauren is headquartered in New York, New York