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Nordstrom Financial Analysis

1033 Words5 Pages

My love for clothes and shoes always leads me to DSW (NYSE:DSW) , Nordstrom (NYSE:JWN) , and Bebe (NASDAQ:BEBE). All three companies are leading apparel stores, taking in millions of dollars a day. In order to perform my financial analysis, I will use several ratios. In order to evaluate the company’s ability to pay current liabilities, I will calculate the current ratio. Additionally, I will calculate the gross profit percentage in order to measure the profitability of each sales dollar above the costs of goods sold. To measure the proportion of assets financed with debt, I will calculate the debt ratio. In order to determine how efficiently each business uses its average total assets to generate sales, I will calculate the asset turnover …show more content…

Ideal asset turnover ratios are typically high 1.5+. Based on the industry average, 1.7 is ideal. All three companies fall within a reasonable range, 1.99 being the highest, and 1.55 being the lowest. Nordstrom’s asset turnover ratio was 1.55, meaning they produce $1.55 of sales revenue for each dollar. DSW’s asset turnover ratio is 1.87, a satisfactory rate by industry standards. Bebe’s turnover ratio is exceptionally high at 1.99, meaning they produce $1.99 of sales revenue for each dollar. All companies are within range, however if they weren't, they could increase the ratio by increasing net sales. Alternatively, they could decrease average total …show more content…

In some aspects, the companies are right on target, but in other aspects, they fall below the mark. The industry current ratio is 1.66, compared to the industry average, the companies’ ratios were too high. Bebe’s was the highest at 3.15. DSW was 2.46, also high for the industry. Nordstrom’s ratio was low compared to industry averages, 1.04. Industry gross profit averages at 46.92%, all companies fall below the benchmark. Nordstrom’s gross profit is 34.96%, DSW 29.32%, and Bebe 30.96%. In order to improve gross profit, the companies can work to increase the amount of profit earned on merchandise inventory. Average industry debt ratio is 90.14%, Nordstrom comes the closest to the industry average at 88.69%. Bebe and DSW fall below the debt ratio at 30.96% and 29.32%. The asset turnover ratio is typically 1.7. All companies were on target, staying within range. Nordstrom’s ratio is 1.55, DSW, 1.87, and Bebe

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