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Financial Trends Paper: Dillards

1231 words - 5 pages

Dillard's is one of the largest fashion apparel and home furnishings retailer in the United States. The company offers a broad selection of merchandise including apparel, footwear, cosmetics, and home products. Dillard's stores are primarily located in the Southwest, Southeast, and Midwest region of the US. Dillard's wide range of private and designer brands provides customers with an expansive range of apparel, thereby strengthening its position in the upscale retail market. However, rising consolidation in the retail discounters and departmental stores market may affect the company's market share. In this paper I will outline the financial trends identified in the past 2-3 years for ...view middle of the document...

The current ratio is calculated by taking the current assets and dividing it by the current liabilities.Current ratio = Current Assets/Current LiabilitiesDillard's:2005 - 2,561,689.00 / 1,608,387 = 1.562004 - 3, 309,357 / 2,116,073 = 1.59The debt ratio is the ratio of total liabilities to the total of liabilities and owners' equity.Debt ratio = Total liabilities/Total liabilities and Owners' EquityDillard's:2005 - 3,366,800.00 / 3,366,800.00 + 2,242,060.00 = 60%2004 - 4,174,000.00 / 4,174,000.00 + 2,207,459.00 = 65%The debt/equity ratio is the ratio of total liabilities to total owners' equity. Thus, a debt ratio of 50% would be the same as a debt/equity ratio of 1 (or 1:1).Debt/equity ratio = Total liabilities / Total owners' equityDillard's:2005 - 3,366,800.00 / 2,242,060.00 = 1.5%2004 - 4,174,000.00 / 2,207,459.00 = 1.9%One of Dillard's weaknesses is that is has a weak investment strategy. During fiscal 2004, Dillard's reported a return on assets of 1.87 (against industry average of 8.65), return on investments of 2.41 (against industry average of 13.18) and return on equity of 5.20 (against industry average of 20.89). In comparison, its competitors reported significantly higher returns. For example, Neiman Marcus reported return of assets of 8.89, return on investments of 12.26 and return on equity of 16.22, during 2004. In order for Dillard's to increase these numbers, I would recommend that this company develop a better investment management strategy. A fortune 500 company like Dillard's has to successfully manage its funds so it can positively impact the company's ability to profitably operate and finance its growth plans.Another weakness is that Dillard's has one of the lowest operating margins in the retail industry. During fiscal 2004, the company reported an operating margin of 2.36, verses the industry average of 6.55. For example, Kohl's, one of Dillard's competitors, reported a higher operating margin of 10.57. Dillard's has to incur lower operating expenses and this in turn will reflect upon the company's inefficient cost management strategy.One article I located was titled "Dillard's, Inc. Reports September Sales Results; Reports Hurricane Impact." This article discusses how the 2005 hurricane season affected the company's sales record in the month of September. Dillard's Inc. reported that sales for the five weeks ending October...

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