H&M Accounting Analysis Report

2940 WordsMar 7, 201412 Pages
Report by Analysts of Group 6. Investment Recommendation:HOLD (Current stock is fairly priced) Business Analysis Overview The Swedish company Hennes & Mauritz AB is the second largest clothing retailer in the world, just behind Spain-based Inditex (parent company of ZARA). The H&M Group’s business consists mainly of sales of clothing, accessories, footwear, cosmetics and home textiles to consumers. In addition to H&M Home, the group also owns several brands, as shown here, which make the company well-known for its fast-fashion clothing offerings for women, men, teenagers and children. H&M was established in Västerås, Sweden in 1947 by Erling…show more content…
In short, currently H&M has a continuous sales growth, even though its pace has been slowing down. The two main initiatives mentioned previously (internet store and new brand launch) are expected to accelerate the growth rate to the same level of the past years. Cash Flow Analysis H&M Cash Flow Analysis Major source: CFO, CFI: change in financial investments, 3-12 months Major use: CFI: investments in fixed assets CFF: dividend GAPCash Flow Analysis: Major source:CFO is declining in line with net income. Major use: CFF for Repurchases of common stock, which caused manipulation of EPS. The growth rate of net income is smaller than that of EPS. Earning Quality Analysis Revenue Management Detection Net Sales and Account Receivables for H&M and Gap ($ in million) 2006 2007 2008 2009 2010 2011 H&M Net Sales 9,876 11,312 12,783 14,639 15,663 15,882 % of growth (YOY) 14.54% 13.00% 14.53% 6.99% 1.40% Account receivables 125 162 287 287 326 337 % of growth (YOY) 29.71% 77.45% -0.05% 13.47% 3.50% AR Turnover 41 37 21 27 24 23 Days receivable turnover 9 10 17 14 15 16 GAP Net sales 15,923 15,763 14,526 14,197 14,664
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