Kohl 's Inventory Turnover Is Better Than The Industry Average

Target Corporation (NYSE:TGT) is the leading large-format general merchandise and discount retailer in the U.S., challenging Wal-Mart in electronics, toys and apparel while also seeking to differentiate with higher-end fashions and products for an upscale audience. As of the close of their latest fiscal year (FY2011), Target operated approximately 1,760 stores encompassing 233,000 square feet in 49 states and the District of Columbia. The company is divided into the retail and credit card divisions and moves the majority of its products through a highly integrated network of 37 different distribution centers, which include four food distribution centers. Target is one of the most well-entrenched large format retailers in the U.S., has the ability to manage their pricing strategies at a level of accuracy and precision that is comparable to Wal-Mart (Henderson, 2001). Unlike Wal-Mart, Target concentrates on a value-based message that concentrates on quality and price differentiation to sustain their gross margins while Wal-Mart concentrates on supply chain efficiency and a continual reduction of supplier and transaction costs (Krishnamurthi, 2001).

Competition is a constant challenge for Kohl’s especially when it comes to retaining customers and the market share. Kohl’s also has a weak global presence and the profitability was declined in

After the recession, Target’s value proposition shifted to simply offer affordable options in a wide array of product areas. However, now with better economic conditions and without the ability to offer lower prices than its affordable retail competitors, such as Walmart, and in order to stay relevant and refresh the company, Target needs to reposition itself as the high-quality concept and style-oriented retail store it was once known for.

In 2011, Walmart's inventory turnover was 11.62 and the industry average was 10.4(stock-analysis). It's fixed asset turnover was 3.88 and the industry average was 3.56, and it's total asset turnover was 2.34 and the industry average was 1.56(Stock-analysis). The values calculated for all three ratios mentioned all resulted in substantially different values in a positive way (Appendix B). Historically the values of each ratio have maintained relatively constant, which in this case is not a weakness. Asset management is a strength for Walmart, which ultimately means that they are maintaining their assets in the correct manner in order to have an efficient way of business.

Accounts Receivable Turnover: This ratio decreased, but had a substantial jump to be at 6.35 in 2013.

Target achieved its differentiation in the marketplace by positioning its products and store experience as higher quality than its main discount competitors Wal-Mart, with lower prices than department stores. Target’s main focus is QUALITY product and at a LOW PRICE. It all began with the idea of, “fashionable, smart design…delivered at a competitive discount prices.” Target strives to deliver to customers a unique shopping experience. Target grabs customer’s attention by their big red bulls eye and customers keep going to target. But at the same time Target need to make sure that their shelves are stocked, they gave good customer service,

Costco turns over its entire inventory 12 times per year9, (the industry average being 9.7º). As the largest of its kind in the United states, and the second largest retailer in the world, the scale and pace of its inventory turnover enable is to operate profitably at significantly lower gross margins than other retailers.

Asset turnover depicts investment efficiency, because it shows how many sales dollars are generated for every dollar invested in the company’s assets. Lowe’s had relatively lower asset turnover ratios than Home Depot because their recent investment in PP&E.

All evidence below can be found in the 2005, 2012, and 2014 Annual reports. In 2005 Dollar Generals inventory turnover ratio was at 3.92 days however, it rose

Kohl’s current stock price is 51.13 as of February 3, 2016. It’s 52 week high is 79.59 and its 52 week low is 41.86. (Reuters)

In March of 2011, Kohl’s also announced its plans to remodel 100 stores, an 18 percent increase from 2010 (18) leading to speculation that Kohl’s may be trying

Asset Management  Parts Inventory Turnover in Days is higher than the industry average as a large proportion of parts must still be sourced from Asia due to lack of North American suppliers. Transportation raises the cost, and additional stock must be carried to guard against interruptions in the longer supply chain. This should improve in the future as the more local suppliers are developed and JIT principles are applied. WP Inventory Turnover in days is lower than industry average due to the modern, highly automated assembly line. FG Inventory Turnover in days is much lower than industry average due to the flexible nature of the assembly lines that allows it to quickly switch between the products. Also inventory can be delivered quickly

To calculate the current ratio, which is one of the most popular liquidity ratios you divide all of firms current assets by all of its current liabilities. McDonalds has $1,819.3 (*everything is in millions for McDonalds) of current assets and $2,248.3 in current liabilities making the firms current ratio .81. In 2005 Wendys has current assets of $266,353 and current liabilities of $296,687 making their current ratio .90. Current ratios are used to represent good liquidity and financial health. Since current ratios vary from industry to industry, the industry average determines if a firms current ratio is up to par, strength or a weakness. In any event if the current ratio is less than the industry average than an analyst or individual interested in investing might wonder why the firm isn't

Over the last five years, American Eagle has had a stable inventory turnover, presented either in 6 or 7. For the period 2013, the firm presented a low inventory turnover may because of the weak store traffic in North American coming from the 2012. However, a continued competitive pressure and a challenging macroeconomic environment led to increase in the firm’s markdown rates to so had a high performance in its sales during the fiscal 2013 (Annual Report 2014, p.24). For the period 2014-2016, there is seen that the company presented an average of 7. Showed so as the highest inventory turnover during these periods. The reason behind this slight increase in the ratio may be because of using the retail method where the company reviewed its inventory

The one thing that Kmart did do was invest in redundancy. Unfortunately, their supply chain has always been behind the times, as its regular out-of-stock notices on hot items indicate, while causing an overflow of less popular products. The lack of real-time data access resulted in higher inventory carrying costs, poor buying decisions, and increased markdowns when products did not sell as anticipated. Financially, it has resulted in lower sales and lower profit margins per square foot. Kmart earns $245 whereas Target earns $275 and Wal-Mart $440. Kmart’s gross margins are 2.0 to 3.0 percent whereas Target’s are 5.5 to 7.0 percent and Wal-Mart’s are 5.5 to 6.5 percent (Atlas Partners & Watertown Capital, 2002).