Company Analysis - Ralph Lauren Corporation - Essay Example

Introduction Ralph Lauren Corporation has its headquarters situated in New York in U.S.A. With golden mallet brands like Polo by Ralph Lauren, RRL, Chaps, Club Monaco, as well as RLX Ralph Lauren, the company designs as well as markets accessories, apparel, home furnishings along with fragrances. Its collections are accessible at almost 11,500 locations globally, including several upscale and mid-tier sector stores. The company functions in approximately 435 Ralph Lauren in addition to Club Monaco retail stores globally and eight e-commerce sites. American style icon together with CEO Lauren operates the company. It is acknowledged for its wide range of goods that range from clothing to home decoration. It targets women as well as men from the urban premium category. Financial analysis in comparison with the industry (Dickie 2006) Return on equity measures the rate of return on the invested money by ordinary stock owners and reserved by the business due to preceding profitable years. It shows the companys capability to make profits from stockholders equity. Ralph Lauren Corps return on equity for the quarter that completed in Jun. 2014 stood at 19.58%.Return on Assets demonstrates the rate of return (subsequent to tax) being made on all of the businesss assets irrespective of funding arrangement (debt vs. equity). It measures how competently the business is using all investors assets to get returns. Ralph Lauren Corps return on capital for the quarter that finished in Jun. 2014 stood at 11.98%. Return on capital is a measure of how well a business makes cash flow in comparison to the invested capital in its commerce. Ralph Lauren Corps return on capital for the quarter that finished in Jun. 2014 stood at 12.72%. Current ratio stands at 3.1x while the quick ratio is 1.7x. The Total Debt/Equity compared to the industry is 14.45% while Total Liabilities/Total Assets is 35.20%. The other ratios are summarized in the table below. Total Revenue Industry Comparison 7.14% Tangible Book Value Industry Comparison 9.83% EBITDA Industry Comparison 0.88% Gross Profit Industry Comparison 4.34% Receivables Industry Comparison 2.29% Inventory Industry Comparison 12.06% Diluted EPS Before Extra Industry Comparison 4.90% Capital Expenditures Industry Comparison 46.07% Cash From Ops. Industry Comparison -1.72% Levered Free Cash Flow Industry Comparison -17.43% The Main issue facing Ralph Lauren Company is competition. The company faces a variety of extreme competitive challenges from other foreign as well as domestic fashion-oriented apparel and casual apparel producers (Kapferer 2008). Some of these producers may be notably larger, and extra diversified and have larger financial as well as marketing resources than the company has. The company as well faces growing competition from companies selling home products and apparel through the Internet. Although Ralph Lauren Media sells the company products domestically through the Internet, heightened competition globally accessories, apparel and home product industries from Internet-based entrants could reduce the company’s sales, margins and prices thus adversely affect the company’s outcomes of operations (Kapferer 2012). Competition is awfully strong in the section of the fashion as well as consumer product industries in which the company operates. Some of the company’s competitors may be extensively larger and have significantly greater resources than Ralph Lauren. It competes mainly on the basis of fashion, value, quality and service. Recommendations Competition is healthy, making a more colorful market, which is vital for the perceiving consumer in a globalised world. The company should complete mainly on the basis of: Predicting and responding to varying consumer demands in a timely way Obtain extra points of distribution as well as sufficient retail floor space, and efficiently present the products at retail Sustaining favorable brand recognition, reputation for quality and loyalty Developing inventive, high-quality products in colors, sizes and styles that appeal to customers Properly pricing products Providing strong as well as effective marketing support Creating a suitable value scheme for retail customers Ensuring product accessibility as well as optimizing supply chain efficiencies with retailers and manufacturers Obtaining adequate retail floor space as well as effective presentation of company’s products at retail stores Appropriate source raw materials at lucrative prices Offer effective and strong marketing support The recommendations should be implemented by entire human resources in the company. The executive committee of the company should sit down and plan the strategies on how to ensure their company is competitive. Representatives from various departments should be part of the committee. These departments include; production, marketing and human resources. Both managerial levels i.e. top, middle, first-line and non-managerial; are necessary to implement the strategies. Works cited Dickie, Robert B. Financial Statement Analysis and Business Valuation for the Practical Lawyer. Chicago, IL: ABA Section of Business Law, American Bar Association, 2006. Print. Kapferer, Jean-Noël. The New Strategic Brand Management: Advanced Insights and Strategic Thinking. London: Kogan Page, 2012. Internet resource. Kapferer. The new strategic brand management creating and sustaining brand equity long term. London Philadelphia: Kogan Page, 2008. Print. Kim, Eundeok, Ann M. Fiore, and Hyejeong Kim. Fashion Trends: Analysis and Forecasting. Oxford: Berg, 2011. Print. Lauren, Ralph. Ralph Lauren. New York: Rizzoli, 2007. Print Pride, William M, Robert J. Hughes, and Jack R. Kapoor. Business. Boston: Houghton Mifflin Company, 2008. Print. Reilly, Frank K, and Keith C. Brown. Investment Analysis & Portfolio Management. Mason, OH: South-Western Cengage Learning, 2012. Print. Wahlen, James M, Jefferson P. Jones, and Donald P. Pagach. Intermediate Accounting: Reporting and Analysis. Mason, OH: South-Western Cengage Learning, 2013. Print. Appendix Existing SWOT analysis Strengths The product has a variety of sub brands like Ralph Lauren Purple Label, Polo by Ralph Lauren, Ralph Lauren, Blue Label, Black Label and Lauren by Ralph Lauren. Each of these specialize into a brand. Another strength is that the corporation has a great brand acknowledgment and consumer loyalty. Polo Ralph Lauren is endowed with a low debt to capital percentage that allows financial strength. The financial strength allows for growth in the future (Reilly and Keith 2012) An additional point of company reaches extensive consumer base via its affiliation with large department stores in Asia to Europe and America. Ralph Laurens trade sector has approximately 330 retail besides factory opening stores global, apart from the businesss online store. It promotes Wimbledon and clothes the whole line as well as ball boys and girls in their product clothing, plainly displaying the iconic and unforgettable horse design. Outstanding promotion and labelling makes it an extraordinary brand memory brand (Reilly and Keith 2012). Weakness Being a global brand, unstable rates of exchange have a considerable influence on sales and similarly fake imitations and piracy are a concern. Another weakness is that the company at times has problems concerning functioning control on its merchants. Opportunities The company can venture in internet sales as a prime source of future growth. It can also focus on development of reserved markers with department stores to curb piracy. Threats There are comparable products existing in other brands, hence the cost of switching is less. The company is greatly threatened by global currency fluctuations which affect its performance. Lastly, common brands encounter an issue of counterfeit mock-ups. Updated SWOT analysis Strengths The company provides products through a wide range of price points. These products range from discount to luxury, enabling it to appeal to a broad target demographically. It has the capability of maintaining the strength of its brand for the many years. While other fashion companies have strived to retain customers with altering fashion trends, Ralph Laurens brand has remained strong and expanded its trademark to other products a well as geographies. This has made it to have a wide consumer appeal. Another strength is that it has a good relationship with other continents hence accesses many customers (Kapferer 2008). This is achieved through brilliant advertising and branding. Lastly, it provides quality products because it has various sub-brands that specialize in each product Weaknesses Being a worldwide brand, changing exchange rates have a considerable impact on its sales as well as piracy Opportunities The company is able to implement internet sales. In order to counter piracy, the company can contemplate on developing private labels to avoid piracy. It has a market that is yet to be exhausted, hence it can expand retail operations in upcoming markets, especially in Asia. This is possible because it has a license to conduct business in Southeast Asia area as well as China. It can open new stores in these regions. Lastly, the Ralph Lauren company recently incorporated its previously licensed Chaps mens sportswear trade into a directly operated wholesale business. This can thus contribute to higher revenue growth in wholesale conduit in the future (Kapferer 2008). Threats There are several threats that face the company. First of all, the present devaluation of Yen will have a negative result on RLs financials as Japan plays an imperative proportion of RLs revenues. Another threat is that at the moment, there is a weak macroeconomic circumstances in Spain, Italy and Greece. It is a major a threat to Ralph Laurens revenues as Europe contributes an important percentage of the companys whole wholesale revenues.Competition from other companies like Tommy Hilfiger Corporation, Liz Claiborne Inc along with GAP proving similar products. Lastly, the common brands offered by the company can be faked (Lauren 2007). Read More