Retail Store Industry StudyRetail Store Industry Study

Part OnePart One

Assignment:Assignment:

Perform online research into the retail Perform online research into the retail industry;industry;

Bring pertinent information to share;Bring pertinent information to share;

Review the Value Lines and Data Files on Review the Value Lines and Data Files on the Retail Store stocks and bring an SSG the Retail Store stocks and bring an SSG on the 1 or 2 you think we should study.on the 1 or 2 you think we should study.

First, what did everybody First, what did everybody learn?learn?

Industry Specific Industry Specific CharacteristicsCharacteristics

In the Retail Store IndustryIn the Retail Store Industry

1. Comps1. Comps

Comps are Comparative Same Store Comps are Comparative Same Store SalesSales– Stores open more than a yearStores open more than a year– A standard measure of revenue growthA standard measure of revenue growth– A first sign of problems with merchandise mix, good A first sign of problems with merchandise mix, good

or bad location, changing trends of buyers, new or bad location, changing trends of buyers, new competition, good or bad weather, etc.competition, good or bad weather, etc.

Where do we find them?Where do we find them?– Company press releasesCompany press releases– Association websites like www.retailforward.comAssociation websites like www.retailforward.com

Finding Comps – press releasesFinding Comps – press releases

Finding Comps – Association websitesFinding Comps – Association websites

2. New Store Openings2. New Store Openings

A standard measure of A standard measure of futurefuture growth growth – Important to know what they “consider” is the Important to know what they “consider” is the

saturation point for their venue, so we know how to saturation point for their venue, so we know how to estimate growth going forward.estimate growth going forward.

Where do we find store openings?Where do we find store openings?– Value Line (10-year statistical array)Value Line (10-year statistical array)– Company press releasesCompany press releases

Finding New Store OpeningsFinding New Store OpeningsValue Line

Company Press Release

3. Inventory3. Inventory

Is Inventory OK? Is Inventory OK? – 22ndnd sign of trouble in retail sign of trouble in retail– Right behind reduction in same store salesRight behind reduction in same store sales– Should be growing at same rate as salesShould be growing at same rate as sales

Where and how do we calculate Inventory?Where and how do we calculate Inventory?– It’s on the balance sheetIt’s on the balance sheet– We should calculate last 5 quarters, and year over year We should calculate last 5 quarters, and year over year

for 5 years when doing initial studyfor 5 years when doing initial study– Multex Investor is the easy way to get the numbersMultex Investor is the easy way to get the numbers

Finding InventoryFinding Inventory

How to Calculate a % IncreaseHow to Calculate a % Increase

Here’s the calculation! “This year minus last year, divided by last year”

183.0 – 169.7 div. By 169.7 = 8% 169.7 – 163.6 div. By 163.6 = 4%163.6 – 185.4 div. By 185.4 = (12%)185.4 – 160.4 div. By 160.4 = 16%

Was the substantial increase, then decrease, in inventory due to the holidays??

Compare Inventory to SalesCompare Inventory to SalesHere are the calculations for sales:

256.5 – 258.4 div. By 258.4 = (1%)258.4 – 274.0 div. By 274.0 = (5%)274.0 – 219.2 div. By 219.2 = 25%219.2 – 210.3 div. By 210.3 = 4%

Now, let’s compare percentages only!

Qu. End 8/02 5/02 2/02 11/01

Sales (1%) (5%) 25% 4%Inventory 8% 4% (12%) 16%

What else should we Compare?What else should we Compare?

Historical Sales Historical Sales Historical Pre-tax Profit Historical Pre-tax Profit Historical EPS Historical EPS Current Debt/Capital Current Debt/Capital Signature P/Es & Relative ValueSignature P/Es & Relative ValueUpside Potential, andUpside Potential, and11stst three items on a quarterly basis? three items on a quarterly basis?

All found on the SSG & PERT!All found on the SSG & PERT!

What else should we Compare?What else should we Compare?

Long-term projected growth rates? Long-term projected growth rates? Gross Margin? (Multex)Gross Margin? (Multex)Net Margin? (Multex)Net Margin? (Multex)Return on Assets? (Multex)Return on Assets? (Multex)Financial Strength? (Value LIne)Financial Strength? (Value LIne)Earnings Predictability? (Value Line)Earnings Predictability? (Value Line)Buying back Shares? (Value Line)Buying back Shares? (Value Line)

Important! – But OptionalImportant! – But Optional

The Value Line Companies The Value Line Companies in our Studyin our Study

Quality at a Glance…Quality at a Glance…

……Take your Pick!Take your Pick!

BJ’s Wholesale Big Lots, Inc. Costco Wholesale

Dillard’s Dept. Store Dollar General Federated Dept. Store

Family Dollar Stores Fred’s, Inc. J. C. Penney

Nordstrom’s Kmart Kohl’s

May Dept. Stores Neiman-Marcus Sears Roebuck

Shopko, Inc. Saks 5th Ave. Target

Wal-Mart

Stocks that meet our Quality:Stocks that meet our Quality:

BJ’s Wholesale Costco Wholesale

Stocks that Meet our Quality: Stocks that Meet our Quality:

Dollar General Family Dollar Stores

Stocks that Meet our Quality:Stocks that Meet our Quality:

Fred’s, Inc.Kohl’s

Stocks that Meet our Quality:Stocks that Meet our Quality:

Target Wal-Mart

Time to Choose!Time to Choose!

Here are our options:Here are our options:

1.1. Each person pick a stockEach person pick a stock (Draw them out of a hat?!)(Draw them out of a hat?!)

2.2. Pick teams of two – 4 stocks to studyPick teams of two – 4 stocks to study

(Pair up and pick your choice!)(Pair up and pick your choice!)

November AssignmentNovember Assignment

Prepare a report and SSG on your companyPrepare a report and SSG on your company– Follow format on handout so everyone is bringing Follow format on handout so everyone is bringing

the same informationthe same information– Keep it short and simple!Keep it short and simple!– Teams can split up the work and one person can Teams can split up the work and one person can

format the reportformat the report

Post it on our website by November 5Post it on our website by November 5 thth

– We need to wrap this up before year’s end!We need to wrap this up before year’s end!– This gives everyone 1 week to review all reportsThis gives everyone 1 week to review all reports– Post to Files|Retail Store Industry Study|NovemberPost to Files|Retail Store Industry Study|November

Assignment folderAssignment folder

• Click on the Retail Store Industry Study

• Follow the November Assignment folder line all the way to the right

• Click on the “Upload” link

• Click on Browse

• Find the report on your computer

• After you double-click on your report, it will automatically appear in the “File” box.

• After you click OK, it will use your original file name, so make sure you name your file “XYZ Company Report.”

• Now do the same with the SSG file. Leave the file name XYZ.itk.

And here they are…And here they are…

Questions?!Questions?!

Be prepared next month!Be prepared next month!