Week 6 - Discussion Form

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KOHLSvsMACYS.pptx
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KOHL’S vs MACY’S FINANCIAL ANALYSIS

By Lorraine Geist

INTRODUCTION

Analyzation of 5 year period of Balance Sheet

Analyzation of 5 year period of Income Statement

Analyzation of past performance

Analyzation of present performance

Analyzation of future expectations

FIRM, INDUSTRY and ENVIRONMENT

Kohl’s is a retail corporation whose focus is based on strong values.

Macy’s is a premier retailer with focus on forecasting future opportunity.

Kohl’s Macy’s

Number of stores 1150 680

Number of Employees 138,600 138,000

Board of Directors 11 11

Highly competitive market between Kohl’s, Macy’s, J.C. Penney, TJX Companies, Target Corporation and Bon Ton Companies to provide quality merchandise at competitive prices.

Economic climate is not good for Kohl’s or Macy’s due to lower than expected earnings. Outlook is dismal due to e-commerce sales.

Kohl’s lawsuits

Misleading discounted prices.

Non payment of overtime for Assistant Managers

Kohl’s cash complicated

Macy’s lawsuits

Data breach

Employee discrimination

Overtime Pay

Sales Commission Deductions

Kohl's Financials
Income Statement
Year ended January 31, Year ended January 31,
(in millions) 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Sales Revenue 19.02B 19.2B 18.69B 20.08B 20.23B 100% 100% 100% 100% 100%
Cost of Goods Sold 12.98B 13.2B 12.88B 13.17B 13.16B 68.24% 68.75% 68.91% 65.58% 65.05%
Gross Profit 6.04B 6.01B 5.8B 6.92B 7.07B 31.76% 31.25% 31.09 34.42 34.95
SG&A Expense 4.35B 4.45B 4.44B 5.5B 5.6B 22.84% 24.00% 24.72% 27.35% 28.55%
Profit before interest and taxes 1.697B 1.392B 1.189B 1.419B 1.296B 8.92% 7.25% 6.36% 7.07% 6.40%
Interest Expense 347M 332M 314M 299M 256M 1.82% 1.73% 1.68% 1.47% 1.26%
Net Profit Before Tax 1.35B 1.06B 875M 1.12B 1.04B 7.10% 5.52% 4.68% 5.60% 5.14%
Income Taxes 46M (47) 22M (67) (31) 25.40% 20.20% 17.10% 13.20% 11.80%
Net Profit after taxes 867M 673M 556M 859M 801M 4.56% 3.50% 2.97% 4.28% 3.96%

Kohl's Financials
Balance Sheet
Year ended January 31,
(in millions) 2015 2016 2017 2018 2019
ASSETS
Cash 1.41B 707M 1.07B 1.31B 934M
Accounts Receivable 25M 26M 27M 62M 29M
Inventory 3.81B 4.04B 3.8B 3.54B 3.48B
Other Current Assets 334M 305M 351M 468M 397M
Total Current Assets   5.58B 5.08B 5.25B 5.38B 4.84B
Net Property, Plant & Equip 8.52B 8.31B 8.1B 7.77B 7.43B
Other Assets 238M 222M 224M 211M 182M
Total Assets   14.33B 13.61B 13.57B 13.39B 12.47B
LIABILITIES
Short Term Debt 125M 122M
Current Portion of Long Term Debt 110M 127M 131M 126M 115M
Accounts Payable 1.51B 1.25B 1.51B 1.27B 1.19B
Income Tax Payable 78M 130M 112M 99M 64M
Other Current Liabilities 1.16B 1.21B 1.22B 1.09B 1.24B
Accrued Payroll 1.35M 117M 147M 173M 154M
Miscellaneous Current Liabilities 1.03B 1.09B 1.08B 915M 1.09B
Total Current Liabilities 2.86B 2.71B 2.97B 2.71B 2.73B
Long Term Debt 4.64B 4.58B 4.48B 4.39B 3.38B
Deferred Taxes 298M 257M 272M 186M 160M
Other Liabilities 547M 563M 6.71M 662M 6.44M
Total Liabilities 8.34B 8.12B 8.4B 7.97B 6.94B
EQUITY
Common Equity 5.99B 5.49B 5.18B 5.42B 5.53B
Common Stock Par Value 4M 4M 4M 4M 4M
Retained Earnings 12.01B 12.33B 12.52B 13B 13.4B
Treasury Stock (8.74) (9.77) (10.34) (10.65) (11.08)
Total Shareholders Equity 5.99B 5.49B 5.18B 5.42B 5.53B
Total Liabilities & Shareholders Equity 14.33B 13.61B 13.57B 13.39B 12.47B

KOHL’S RATIOS

2015 2016 2017 2018 2019
Current Ratio 1.95% 1.87% 1.77% 1.98% 1.77%
Quick Ratio 6.19% 3.84% 4.88% 6.79% 4.98%
Inventory turnover 3.41 3.23 3.39 3.72 3.72
Average Collection Period 48 days 49.5 days 52.8 days 113 days 52.4 days
Total Asset Turnover 1.33 1.41 1.38 1.5 1.62
Debt ratio 58.20% 59.67% 61.90% 59.52% 55.65%
Debt to equity ratio 13.92% 14.79% 16.21% 14.70% 12.56%
Times Interest Earned 1.82% 1.73% 1.68% 1.47% 1.26%
Operating Profit Margin 22.84% 24.00% 24.72% 27.35% 28.55%
Net Profit Margin 4.56% 3.50% 2.97% 4.28% 3.96%
Earnings Per Share 2.94 2.81 2.89 3.23 3.63
Return on Total Assets 4.20% 4.03% 3.82% 4.05% 4.43%
Return on Equity 14% 12% 10% 15% 14.00%
Shares Outstanding 204B 195B 1.79B 1.68B 1.65B
2019 EPS 3.63 a 5.47% decline
Current Price $47.01

Macys Financials
Income Statement
Year ended January 31, Year ended January 31,
(in millions) 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Sales Revenue 28.1B 27.08B 25.78B 25.64B 25.74B 100% 100% 100% 100% 100%
Cost of Goods Sold 17.9B 17.56B 16.68B 16.17B 16.18B 63.70% 64.84% 64.70% 63.06% 62.85%
Gross Profit 10.21B 9.52B 9.1B 9.47B 9.56B 36.30% 35.16% 35.3 36.94 37.15
SG&A Expense 7.41B 7.2B 7.27B 7.82B 7.95B 26.29% 26.59% 28.20% 30.50% 30.89%
Profit before interest and taxes 2.69B 2.04B 1.18B (1.76)M 1.32B 9.57% 7.53% 4.58% -6.86% 5.13%
Interest Expense 395M 363M 367M 321M 261M 6.81% 5.62% 3.21% 5.48% 5.06%
Net Profit Before Tax 2.39B 1.68B 952m 1.52B 1.42B 8.48% 6.20% 3.69% 5.92% 5.52%
Income Taxes 864M 536M 470M 363M 209M 30.70% 19.80% 18.20% 14.20% 8.10%
Net Profit after taxes 1.53B 1.07B 619M 1.57B 1.11B 5.44% 3.95% 2.40% 6.12% 4.31%

Macy's Financials
Balance Sheet
Year ended January 31,
(in millions) 2015 2016 2017 2018 2019
ASSETS
Cash 2.28B 1.15B 1.33B 1.49B 1.2B
Accounts Receivable 424M 558M 522M 363M 400M
Inventory 5.52B 5.51B 5.4B 5.18B 5.26B
Other Current Assets 456M 442M 371M 613M 583M
Total Current Assets   8.68B 7.65B 7.63B 7.65B 7.45B
Net Property, Plant & Equip 7.88B 7.62B 7.02B 6.67B 6.64B
Intangible Assets 4.24B 4.41B 4.4B 4.39B 4.39B
Other Assets 743M 897M 813M 742M 719M
Total Assets   21.46B 21.87B 21.16B 20.25B 19.86B
LIABILITIES
Short Term Debt
Current Portion of Long Term Debt 76M 642M 309M 22M 43M
Accounts Payable 2.53B 2.34B 2.18B 2.33B 2.64B
Income Tax Payable 658M 227M 352M 296M 168M
Other Current Liabilities 2.28B 2.52B 2.81B 2.548B 2.38B
Accrued Payroll 511M 537M 542M 531M 574M
Miscellaneous Current Liabilities 1.778B 1.98B 2.27B 2.01B 1.81B
Total Current Liabilities 5.54B 5.738 5.65B 5.18B 5.23B
Long Term Debt 7.24B 6.97B 6.54B 5.84B 4.68B
Deferred Taxes 1.08B 1.48B 1.44B 1.15B 1.24B
Other Liabilities 380M 497M 532M 483M 492M
Total Liabilities 16.08B 17.61B 16.84B 14.51B 13.43B
EQUITY
Common Equity 5.38B 4.25B 4.32B 5.75B 6.44 B
Common Stock Par Value 4M 3M 3M 3M 3M
Retained Earnings 7.34B 6.33B 6.09B 7.25B 8.05B
Treasury Stock (1.94) (1.67) (1.49) (1.46) (1.32)
Total Shareholders Equity 5.38B 4.25B 4.32B 5.73B 6.44B
Total Liabilities & Shareholders Equity 21.46B 21.87B 21.16B 20.25B 19.86B

RATIO COMPARISON

KOHL’S

2019
Current Ratio 1.77%
Quick Ratio 4.98%
Inventory turnover 3.72
Average Collection Period 52.4 days
Total Asset Turnover 1.62
Debt ratio 55.65%
Debt to equity ratio 12.56%
Times Interest Earned 1.26%
Operating Profit Margin 28.55%
Net Profit Margin 3.96%
Earnings Per Share 3.63
Return on Total Assets 4.43%
Return on Equity 14.00%
Shares Outstanding 1.65B
Current Price $47.01

MACY’S

2019
Current Ratio 1.42%
Quick Ratio 4.19%
Inventory turnover 3.08%
Average Collection Period 42.5 days
Total Asset Turnover 1.30%
Debt ratio 67.60%
Debt to equity ratio 20.85%
Times Interest Earned 5.05%
Operating Profit Margin 30.89%
Net Profit Margin 4.31%
Earnings Per Share $3.60
Return on Total Assets 1.05%
Return on Equity 3.24%
Shares Outstanding 311M
Current Price $15.32

RATIO ANALYSIS

Current ratio: Kohl’s is showing they have a greater degree of liquidity.

1.77% vs 1.42%.

Inventory turnover: Kohl’s has a quicker turnaround time of 3.72 vs 3.08 which equates to 98 days vs 118 days of Macy’s.

Debt ratio: Macy’s is utilizing creditors to finance their assets. 67.6% vs 55.65%.

Debt to equity ratio: Macy’s is better utilizing its financial leverage.

20.85% vs 12.56%.

Times interest earned: Macy’s is on point at 5.05% vs 1.26%. 5.0 is optimal.

Net profit margin: Macy’s has a better net profit margin 4.96% vs 3.96%.

Return on total assets: Kohl’s has a better return at 4.43% vs 1.05%

Return on equity: Kohl’s has a better return at 14.00% vs 3.24%

KOHL’S COMMON SIZED INCOME STATEMENT

Year ended January 31, Evaluation
2015 2016 2017 2018 2019 5 year period
Sales Revenue 100% 100% 100% 100% 100% Same
Less Cost of Goods Sold 68.24% 68.75% 68.91% 65.58% 65.05% Better
Gross Profit Margin 31.76% 31.25% 31.09 34.42 34.95 Better
Less SG&A Expense 22.84% 24.00% 24.72% 27.35% 28.55% Worse
Operating Profit Margin 8.92% 7.25% 6.36% 7.07% 6.40% Worse
Less Interest Expense 1.82% 1.73% 1.68% 1.47% 1.26% Better
Net profits before taxes 7.10% 5.52% 4.68% 5.60% 5.14% Worse
Less Taxes 2.54% 2.02% 1.71% 1.32% 1.18% Better
Net profits after taxes 4.56% 3.50% 2.97% 4.28% 3.96% Worse
Although the cost of goods decreased, the SG&A increased due to technology investment
The increase in SG&A and the decrease in interest reduced the taxes,
The Net profit percentage after taxes decreased as well.

KOHL’S STOCK

Shares Outstanding Earnings per Share
2015 2.04B $2.94
2016 1.95B $2.81
2017 1.79B $2.89
2018 1.68B $3.23
2019 1.65B $3.63

SALES REVENUE

Sales Revenue

2015 2016 2017 2018 2019 19.02 19.2 18.690000000000001 20.079999999999998 20.23

Capital Structure

Kohl’s capital structure is meaningful

High liquidity

Acceptable debt ratio

Debt to equity is decreasing

Times interest earned needs to increase

OUTLOOK

The outlook of Kohl’s performance is good.

They are within proximity of the Optimal Capital Structure.

They are working on keeping debt low

They are motivated to increase the shareholders wealth

They are returning value to shareholders through share repurchases

Kohl’s Sales and Gross Profit are increasing

KOHL’S STRENGTHS AND WEAKNESSES

STRENGTHS

Capital Structure

Sales Increasing

Gross Profit Increasing

Over 1,000 stores

Over 138,000 employees

High Level of Customer Satisfaction

Strong Brand

WEAKNESSES

High attrition in work place

Refund Policy too lenient

Cash could be used more efficiently

Challenge in retaining customers

Challenge in maintaining market share

Limited Global Presence

OPPORTUNITIES & THREATS

OPPORTUNITIES

Increase in Consumer Spending

Online Sales – free pickup in store

Improved Technology

Kohl’s Brand Merchandise

Tapping the International Market

THREATS

Increasing Price of Material Goods

Competition of e-commerce

Lack of tracking Kohl’s cash

Abuse of Return Policy

SUMMARY

Kohl’s sales are steadily increasing

Kohl’s cost of goods are steadily decreasing

Debt ratio is at a good level

Kohl’s has a high liquidity

Kohl’s has many opportunities to gain a higher share of the market

CONCLUSION

Kohl’s has a potential for high rewards

Strong fiscal outlook

Sales growth higher than expectations

EPS exceeded expectations

Kohl’s is a good solid investment

REFERENCES

Corporate.Kohls.com/news 7-15-19

Mission-statement.com/Macys 8-4-19

Couponsinthenews.com 7-11-17

Classaction.org 10-16-18

Macrotrends.net/stocks/charts/Kohls

APPENDIX

Kohl’s 2015 2016 2017 2018 2019
Sales = Sales 100% 100% 100% 100% 100%
COGS = COGS/Sales 12.98/19.02*100 13.2/19.2*100 12.88/18.69*100 13.17/20.08*100 13.16/20.23*100
Gross Profit Margin=Sales-COGS/Sales 6.04/19.02*100 6.01/19.2*100 5.8/18.69*100 6.92/20.08*100 7.07/20.23*100
Operating Profit Margin=Oper Profits/Sales 4.35/19.02*100 4.45/19.2*100 4.44/18.69*100 5.5/20.08*100 5.6/20.23*100
Profit before taxes & interest/sales 1.697/19.02*100 1.392/19.2*100 1.189/18.69*100 1.419/20.08*100 1.296/20.23*100
Times interest earned=earnings before interest & taxes/interest 1.697/347 1.392/332 1.189/314 1.419/299 1.296/256
Net profit before taxes=net profit/sales 1.35/19.02*100 1.06/19.2*100 875/18.69*100 1.12/20.08*100 1.04/20.23*100
Net profit margin=earnings available for common shareholders/sales 867/19.02*100 673/19.2*100 556/18.69*100 859/20.08*100 801/20.23*100
Current Ratio=current assets/current liabilities 5.58/2.86*100 5.08/2.71*100 5.25/2.97*100 5.38/2.71*100 4.84/2.73*100
Quick Ratio=current assets-inventory/current liabilities 5.58-3.81/2.86*100 5.08-4.04/2.71*100 5.25-3.8/2.97*100 5.38-3.54/2.71*100 4.84-3.48/2.73*100
Inventory Turnover=COGS/inventory 12.98/3.81 13.2/4.04 12.88/3.8 13.17/3.54 13.16/3.54
Avg collection period=AR/annual sales/365 AR/avg sls per day 19.02b/365=52109589. 25m/52109589 19.2b/365=52602739. 26m/52602739 18.69b/365= 51205479. 27m/51205479 20.08b/365=5,501,369 62m/55013698 20.23B/365=55,424,657. 29m/55424657.
Total Asset Turnover 19.02/14.33 19.2/13.61 18.69/13.57 20.08/13.39 20.23/12.47
Debt Ratio=Total Liabilities/Total Assets 8.34/14.33*100 8.12/13.61*100 8.4/13.57*100 7.97/13.39*100 6.94/12.47*100
Debt to equity ratio=Total Liabilities/Common Stk Eq 8.34/5.99*100 8.12/5.49*100 8.4/5.18*100 7.97/5.42*100 6.94/5.53*100
Return on total assets=earnings available for common stockholders/total assets 5.99/14.33 5.49/13.61 5.18/13.57 5.42/13.39 5.53/12.47
Return on equity=earnings available for common stockholders/common stock equity 867m/5.99b 673m/5.49b 556m/5.18b 859m/5.42b 801m/5.53b
Earnings per Share=earnings available for common stockholders/number of common stock shares outstanding 867m/2.04 6.73m/1.95 5.56/1.79 859m/1.68 8.01m/1.65