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Financial Statement Analysis

Essay by   •  April 21, 2011  •  Case Study  •  360 Words (2 Pages)  •  1,271 Views

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Threats

* The economic recession- With the downturn in the economy, consumers are trying to cut back on spending. The first area consumers look to cut back is on luxury spending. Abercrombie is considered a luxury item which causes problem for their brand.

* Growing competition in the industry- The retail industry seems to get more competitive every day. Other stores are taking price cuts in response to the recession while Abercrombie continues to have high prices.

* Overexpansion- A&F has been rapidly expanding over the past few years and plan to continue to expand into next year. The store may be getting close to meeting its maximum capacity meaning there are too many stores to keep profits high. If this were to happen sales will steadily begin to decrease.

Financial Statement Analysis:

Balance Sheet:

Abercrombie and Fitch had total current assets of $1,092.08 in 2007 and increased to $1,140.26 in 2008. In 2009 these current assets decreased to $1,072.01 then increased to $1,225.68 in 2010 and continued to increase to $1,433.27 in 2011. Regarding total assets, the values increase from 2007 to 2008 from $2,248.07 to $2,567.60; and again in 2009 to $2,848.18. In 2010 the total assets slightly decreased to $2,821.87, but increased again in 2011 to $2,947.90. Total current liabilities also increased from 2007 to 2008 from $510.63 to $543.11. Unfortunately, these values decreased to $449.80 in 2009 and $449.37 in 2010. In 2011 the total current liabilities rose again to $558.85. The total liabilities rose in 2007-2009 from $842.77 to $1,002.60. The company's liabilities decreased in 2010 to $993.95, but rose again to 1,057.12 in 2011. Concerning total equity the same pattern can be seen with an increase from 2007 to 2009 from $1,405.30 to $1,845.58. Another decrease was seen in 2010, but only to $1,827.92, but total equity increased to $1,890.78 in 2011. The same trend can also be seen in total liabilities and stockholder's equity. From 2007 to 2009 there was an increase from $2,248.07 to $2,848.18. A decrease was seen from $2,821.87 in 2010 with a rise to $2,947.90 to 2011. (All values in millions of dollars)

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