INDUSTRY ANALYSIS
Kohl’s Corporation and Dillard’s Inc operates in an industry of family oriented commodities such as apparel, cosmetics, foot wear, and other accessories of men and women. The industry is highly competitive because there are many sellers in the industry as well as the industry is such that the products in this industry are similar to some extent as well as the products in this industry requires frequent innovations in order to attract customers, which further increases the competition in the industry.
There are many economic factors which affect the company’s operations. The main economic factors that could affect the company’s operations are recession in the economy, inflation, substitutes as well as the weather and fashion in the economy. The above mentioned factors affect the demand of the products in the industry directly or indirectly. Recession in economy and increase in inflation would decrease the demand of the products of the company as well as increase in the number of substitutes would also affect decrease the demand of the goods offered by the company.
On the other hand, the products offered by the company are such that demand of which are highly influenced by the change in fashion or weather in the economy, such as, footwear or cosmetics which are in fashion would be sold more than others.
The main competitors of both companies in the industry are Target Corporation, J.C Penny Corporation. Inc., the TJX Companies Inc, Macy Inc. These competitors are well established and are performing well with respect to financial aspect which gives a threat to the companies that they might lose their customers as well as potential investors if both the companies did not improve their performance or the company lack in making appropriate strategies in order to enhance the overall effectiveness and efficiency in their operations.
The industry is expanding as well as the growth rate in the industry is increasing which provides opportunity to the companies to enhance their customer base as well as could capitalize in the entire market by attracting customers through excellent quality products and exceptional customer care services.
Both companies are similar in the sense that the products sold by both companies are nearly similar as well as both companies operate in the same industry and compete with almost same competitors. However, they differentiate with each other with respect to the size of business. Dillard is comparatively small in size and expansion as compared Kohl. Kohl is operating in 929 stores over 47 states. On the other hand, Dillard operates in 326 stores over 29 states. Moreover, Dillard also sells its products through online, which also differentiates its business from Kohl, to some extent.
INCOME STATEMENT ANALYSIS
The income statement has been prepared for both the companies in the appendices. The income statement analysis of Kohl shows that the company has maintained its gross profit ratio in comparison with the previous years. However, due to increase in admin and selling expenses in the current year the net profit margin of the company has been decreased slightly.
Upon analyzing the income statement of Dillard, the company has almost maintained its gross profit ratio very well. However, there is a huge decrease in the net income ratio of the company as compared to previous year. The net income ratio has been decreased by almost 2.25%. This decrease is due to increase in the operational costs of the company. Upon comparing the income statement of both the companies the net profit margin of Kohl and Dillard are 6.58% and 0.73% respectively. This shows that the Kohl is performing efficiently and effectively as compared to Dillard.
Kohl’s Corporation And Dillard’s Inc. Case Solution
Moreover, the quality of earnings of both the companies is good, but the earnings of Kohl’s is more persistent than the earnings of Dillard’s. Kohl’s has maintained its earning over the time period more efficiently than Dillard.
INVESTOR’S ANALYSIS
The return on equity ratios have been calculated for both the companies in the appendices. The return on equity ratio of both the companies has been decreased as compared to previous year. However, the ROE ratio of Dillard has been declined drastically as compared to that of Kohl’s. This depicts the inefficiency of Dillard in maintaining its earning over the time period. Moreover, it also effects negatively on the shareholders’ interest as the shareholders will resist while investing in Dillard because of such drastic decline in the Return on equity ratio of the company. On the other hand, the investors will be attracted toward the Kohl because of its high ROE ratio........
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