Walmart's Midlife Crisis

Being an upscale industry, Abercrombie and Fitch would appear to be a successful corporation. Although the company was once successful for a number of years, it’s apparent that there has been a significant decline in its overall appeal and how much revenue the company acquires each year. With just over 1,000 retail stores in the U.S., Canada, and Europe, Abercrombie and Fitch has thrived to be one of the most avid corporate extensions. While the company may be seeing the start to its decline, past years are proof that Abercrombie and Fitch have made a good name for themselves. How does the industry operate one might ask?

The weak headline data captured an inventory correction, but, even so, real final sales grew a paltry +0.7%. The desire to cut inventory in Q1 is understandable, given the recent uptick in the inventory-to-sales ratio to its highest level since 2009. Headline GDP data in Q2 is expected to be more robust, but it is unlikely to be a game changer for the Fed. The FOMC is no longer attempting to achieve faster growth, as testified by its decision to pursue tapering. Has the Fed lowered long-term US growth expectations?

Mulligan, Casey B. "Who Lost Work During the Great Recession?" Economix Who Lost Work During the Great Recession Comments. New York Times, 07 Sept. 2011. Web.

Financial Ratio Analysis - Harry 's Hamster Limited Financial statements are useful as they can be used to predict future indicators for a firm using the financial ratio analysis. From an investor 's perspective financial statement analysis aims at predicting the future profitability and viability of a company, while from the management 's point of view the ratio analysis is important as it helps anticipate the future conditions in which the firm should expect to operate and facilitates strategic decision making (Brigham and Houston 2007, p. 77). Profitability analysis Harry 's Hamsters Limited (HHL) experienced growth in its profitability from 2007 to 2008; however, the net income reduced significantly during 2009. The return on equity (ROE)

These facts indicate that Amazon’s cost of goods sold grew faster than its revenue. The income statement in figuer 1 shows that the net income shrank a lot during this four years, it even hit negative 39 million in 2012. The decline value of net income states that Amazon suffered from low or even negative profit. It’s easy to understand Amazon’s profitability by using return on asset ratio and return on equity ratio. Return on asset gives an idea as to how efficiently company is to generate revenue by using assets.

Unfilled orders fell .8%, marking a third-consecutive month of decline. Industries are softening up as durable goods orders fall below expectations, and it may continue to struggle if companies are reluctant to increase capital spending. There is growth nonetheless, but the rest of the year may yield below expected levels if the factory sector cannot recover. The US economic growth may be slowing as consumer spending slowed to a more moderate pace. According to the Commerce Department, the total value of goods and services slowed to 2.3% with a previous rate of 1.8% last year.

The most important of which is consumption. Consumption in the United States has been less than expected mainly due to low consumer confidence. Consumer confidence has hit a 10 year low with an index of 106.8 as reported by Alan Greenspan. In the past 2 months the index number has plummeted nearly 22 points, the biggest decrease since the 1990-1991 recession. The reason for this recent drop in consumer confidence is due to several key factors.

Retrieved May 16, 2008, from Walmart.com: http://walmartstores.com Murphy, S. (2007, July). The Walmart.com Way. Chain Store Age , p. 80. Shinkle, K. (2008). Wal-Mart Surges as Economy Sinks; Earnings and sales are up as consumers look for lower prices.

Their former competitive advantage in low cost operations—sustained for decades—is no longer as difficult to imitate as it once was. Although Walmart’s financial reports still show fairly admirable ratios, their customer traffic in U.S. stores declined during the five consecutive quarters ending in February 2011 (Denning, 2011). Their five-year stock performance (WMT in blue) vis-à-vis Amazon (AMZN in red) also paints a bleak picture, as seen in the chart below. Another growing cause for concern over Walmart’s battle for cost leadership is its impact on their negative public image as an employee-abusing, union-busting bully. Proposed Solution: Interactive In-Store Shopping Experience Although their cost leadership has been conquered by focused e-tailers, Walmart possesses a resource that is at once valuable, rare, not easily imitable and supported by an organizational structure that is prepared to leverage it.

With these two large competitors out of the way, Best Buy had a strong advantage in the consumer electronics industry. Even with such an advantage, the company’s past stock returns have been below those of the S&P retailing group. Revenue growth has slowed down. The slowing down of the revenue growth can be blamed on the recession and the increase on new competitors such as Walmart and Costco. The company’s strategic issues include slow sales growth, net income loss and too much debt.