David Jones was founded in 1838 by David Jones, a Welsh immigrant, and is claimed to be the oldest continuously operating department store in the world still trading under its original name. David Jones Limited is an ASX 100 Australian retailer with FY10 earnings of AUD 204.8 million from its core department store business and a further AUD 44.4 million from its complementary financial services business. The Company employs between 8,500-10,500 people and operates 36 department stores in key metropolitan and suburban centres in and around Sydney, Melbourne, Brisbane, Adelaide, Perth and Canberra. David Jones is uniquely positioned in Australia’s retail sector, with a loyal ...view middle of the document...
The company operates in two segments department stores and financial services. The department store segment includes David Jones department stores, rack stores and corporate head office. The financial service segment includes the alliance between the company and the American Express LTD.
As the Financial analysts appointed by the DAVID JONE LTD; our duty is to do the ratio analysis for the fiscal year 2010 with compared to the year 2009. This ratio analysis includes profitability analysis, efficiency analysis, liquidity analysis, capital structure ratio analysis and the market performance analysis.
RATIO ANALYSIS FOR THE FISCAL 2010- 2009
The profitability ratios for DAVID JONES LTD are generally favorable and reflect positively on company. In 2010 relative to 2009, the company has been able to improve its ROE (Return on Equity), ROA (Return on Assets), and profit margin. ROE shows the performance of the company for that fiscal year.ROA shows the entity’s ability to convert sales revenue into profit, and its ability to generate income from its asset investments. Return on Equity (ROE) for DAVID JONES LTD increased from 2010 to 2009- an investment of one dollar of shareholders equity in 2010 returned 23.90 cents of earnings available for distribution to shareholders. In 2009, an equivalent investment generated 23.20 cents of earning available for distribution to shareholders. So it shows an increment of 0.7 cents ROE from the previous year. David Jones LTD generated 16.99 cents of EBIT per dollar of investment in assets in 2009, its profit generating ability improved in 2010, with one dollar of investments in assets generating 21.48 cents of EBIT. So the ROE’s contribution towards the ROA is higher. So the improvement of the ROA must be investigated.
In the fiscal year 2010 Gross profit margin increased 10 basis points on fiscal year 2009, delivered a full year result of 39.7%. This was 39.59% for the fiscal year 2009. This shows David Jones ability to deliver the improvement in Gross Profit margins during the difficult retail environment experienced in fiscal year 2009 and shows the leverage that exists to improve margins when strong retail conditions prevail. The sales revenue of David Jones for the year 2010 was $2, 053, 1 million which is increased 3.4% on fiscal year 2009 which was $1, 985, 5 million. The cost of sale for the fiscal year 2010 is $1,237,358 million; so it must therefore account for 60.30 cents of each dollar in 2010 (60.41 cents in 2009). So this shows that the David Jones selling price in fiscal year 2010 was comparatively higher than the last year. So it shows the David Jones Ltd follows a higher pricing strategy and their targeted customers are upper middle class to higher levels.
DAVID JONES LTD converted one dollar of sales revenue into 11.37 cents of EBIT in 2009, and increased to 12.14 cents in the fiscal year 2010. It is always good if the profit margin is declined. But...