Saks Fifth Avenue vs. Neiman Marcus - A Detailed Company Analysis Using Balance Sheets and Income Statements

1205 Words May 19th, 2005 5 Pages
I am writing to analyse the company's current balance sheet and income statement. Particularly, I will critique on the company's results, compare it to past years, compare it to competitors, and make recommendations on how to improve its financial position.

Neiman Marcus department stores offer luxurious and high-quality men's and women's apparel and accessories. The Neiman Marcus Group operates 35 stores in nearly 20 states. The 2004 net income was an impressive $204 million and revenue was $3.5 billion. More importantly, their gross profit was $1.2 billion. Their net income is approximately 5.8% (compared to total revenue) and 1.7% (compared to their gross profit). This may seem little, but when a company revenues such a large amount, a
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Unfortunately, the accounts payable outweighs the cash account, but nevertheless, the "net receivables" account is at $560 million. After receiving that amount and including the cash, they will be able to pay off their entire accounts payable, as well as short term and long term debt. Lastly, the long term debt is at a mere $324 million. This is only 13% of their total assets, meaning that the company owns most of their assets.

Again, in comparison to Saks, Neiman Marcus is far better managed. Saks's total assets are an impressive $4.7 billion, but current assets make up only 44% of it. Most of their money is valued in "power plant and equipment" - $2 billion. Also, Saks has high current liabilities of $966 million and an even higher $1.1 billion in long term debt. They are not able to pay off these liabilities with their cash.

Recommendations based on the balance sheet are little, since the company is performing so well. Firstly, we can increase cash - meaning, make more sales and have more discounts to attract buyers. Furthermore, increase "service" sales. Introduce a dry-cleaning line or a tailor service. Secondly, increase property - more stores. We see that we are performing well and with more stores, we will increase assets. By doing so, we increase our collateral and gain more financial status. Overall, the company is performing very well

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