The table below is calculated from the Exhibit 6 of Zara case. What is the worst interpretation regarding the competitive advantage of Zara (i.e., Inditex) based on the table below? Calculated from Exhibit 6 Inditex H&M Gap Benetton operating profit/revenue 21.7% 13.8% 2.4% 13.6% net income/revenue 10.5% 9.6% -0.1% 7.1% working capital (current asset-current liability) 20 1036 1116 602 working capital ratio (current asset/current liability) 1.0 3.4 1.5 1.6 working capital / Sales 0.6% 24.3% 9.7% 28.7% PPE ratio 37.8% 15.5% 30.2% 34.3% (PPE/revenue) Total asset/sales 80.2% 51.1% 55.1% 134.5% ROA 13.1% 18.8% -0.1% 5.2% ROE 22.9% 24.8% -0.3% 11.9% (a) To interpret Zara's competitive advantage, it is better to compare Zara with H&M, rather than GAP or Benetton because Zara and H&M is in the same strategic group. (b) Zara has competitive advantages in terms of operating efficiency compared to H&M. (c) Zara has competitive advantages in terms of working capital compared to H&M. (d) Zara has competitive advantages in terms of fixed-asset capital compared to H&M.
The table below is calculated from the Exhibit 6 of Zara case. What is the worst interpretation regarding the competitive advantage of Zara (i.e., Inditex) based on the table below? Calculated from Exhibit 6 Inditex H&M Gap Benetton operating profit/revenue 21.7% 13.8% 2.4% 13.6% net income/revenue 10.5% 9.6% -0.1% 7.1% working capital (current asset-current liability) 20 1036 1116 602 working capital ratio (current asset/current liability) 1.0 3.4 1.5 1.6 working capital / Sales 0.6% 24.3% 9.7% 28.7% PPE ratio 37.8% 15.5% 30.2% 34.3% (PPE/revenue) Total asset/sales 80.2% 51.1% 55.1% 134.5% ROA 13.1% 18.8% -0.1% 5.2% ROE 22.9% 24.8% -0.3% 11.9% (a) To interpret Zara's competitive advantage, it is better to compare Zara with H&M, rather than GAP or Benetton because Zara and H&M is in the same strategic group. (b) Zara has competitive advantages in terms of operating efficiency compared to H&M. (c) Zara has competitive advantages in terms of working capital compared to H&M. (d) Zara has competitive advantages in terms of fixed-asset capital compared to H&M.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Exhibit 6 Key Competitors and Inditex, 2001
Gap
H&M
Benetton
Inditex
Operating Results (€ Millions)
Net Operating Revenues
15,559
10,904
2,098
1,189
909
4,269
3,250
Cost of Goods Sold
2,064
2,204
1,615
1,563
1,687
982
Gross Margin
Operating Expenses
Operating Profits
Non-operating Expenses
Pre-tax Income
4,656
4,276
379
624
589
286
704
108
-28
43
209
272
617
243
495
Income Tax
280
206
92
150
Minority Interests
Net Income
-9
410
148
340
Financial Position (€ Millions,
except where noted otherwise)
Current Assets
3,436
4,695
1,468
1,558
854
Property, Plant, and Equipment
Other Noncurrent Assets
661
720
1,228
523
435
54
543
Total Assets
8,566
2,320
2,850
5,170
2,183
2,821
956
2,605
834
285
1,119
Current Liabilities
432
Noncurrent Liabilities
101
625
Total Liabilities
532*
1,580
Equity--Book Value
Equity--Market Value"
One Year Change in Market Value (%)
3,396
12,687
-60%
1,650
15,564
1,241
2,605
1,486
13,433
47%
8%
-20%
Other Statistics
Employees
Number of Countries of Operation
Sales in Home Country (%)
Sales in Home Continent (%)
Number of Store Locations
Stores in Home country (%)
Stores in Home Continent (%)
Average Store Size (sq. meter)
26,724
166,000
6.
22,944
6,672
14
120
39
87%
12%
44%
46%
NA
96%
78%
77%
3,097
771
5,456
1,284
87%
15%
40%
60%
92%
96%
80%
86%
632
1,201
279
514
Sources: Compiled from annual reports; analyst reports; Bloomberg; Standard & Poor's Compustato data via Research
Insight"; J. P. Morgan, "Hennes & Mauritz," company report, February 10, 1999, p. 89, Compustat.
* Totals off due to rounding.
*On May 22, 2002.
bin-home currency-
"Includes franchised stores.
24
Transcribed Image Text:The table below is calculated from the Exhibit 6 of Zara case. What is the worst interpretation regarding the competitive advantage of Zara (i.e.,
Inditex) based on the table below?
Calculated from Exhibit 6
Inditex
H&M
Gap
Benetton
operating profit/revenue
21.7%
13.8%
2.4%
13.6%
net income/revenue
10.5%
9.6%
-0.1%
7.1%
working capital
(current asset-current liability)
20
1036
1116
602
working capital ratio
(current asset/current liability)
1.0
3.4
1.5
1.6
working capital / Sales
0.6%
24.3%
9.7%
28.7%
PPE ratio
37.8%
15.5%
30.2%
34.3%
(PPE/revenue)
Total asset/sales
80.2%
51.1%
55.1%
134.5%
ROA
13.1%
18.8%
-0.1%
5.2%
ROE
22.9%
24.8%
-0.3%
11.9%
(a) To interpret Zara's competitive advantage, it is better to compare Zara with H&M, rather than GAP or Benetton because Zara and H&M is in the
same strategic group.
(b) Zara has competitive advantages in terms of operating efficiency compared to H&M.
(c) Zara has competitive advantages in terms of working capital compared to H&M.
(d) Zara has competitive advantages in terms of fixed-asset capital compared to H&M.
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