How to Know Which Firms are Leading and The Pros and Cons of JC Penney's Choices

Case Study 2: Jc Penney
Your Name
Subject and Section
Date
1. Explain which firms in the industry and performing better than the other firms, and most importantly, explain why you feel they are performing better.
By looking at the financial information provided in part 1, one can distinguish the leading firms in each of the industries presented. In Department Stores, Kohl’s Corporation (KSS) is outperforming every other firm in the market. Its net income and Total Assets have consistently increased for five years from 1995 to 2000. Its net income by the end of year 2000 is $372 million, which is higher, especially when considering that $73 million during 1995. Additionally, the company has also the least amount of equity relative to its net income, which means that it also has a high Earnings-per-Share ratio.
In Drugstores, it is Walgreen’s Boots Alliance (WBA) that showed a similar trend and thus leading the industry. It could be seen that its net income has consistently increased in the span of five years, starting from $372 million from 1995 up to $886 million in year 2000. It’s shareholder equity (2000 Equity = 5,207) has also not ballooned to the point where its earnings could become diluted. Lastly, its Total Assets could also be seen as increasing together with its Assets turn. This means that while the company is being able to turn assets into cash and cash equivalents, it is also purchasing the necessary equipment to meet with the demand.
Aside from a good EPS, Net income growth, and equity share, both of the companies have good profit margins when compared to their competitors (KSS = 4.9%; WBA = 3.4%), with the exception of May Department Stores Co (6.4%). This is an important indicator that their costs on production or acquisition of goods are much better as compared to others. Since high EPS is one of the things that investors are looking for a firm, then the scores of the both KSS and WBA should attract more capital into the company. They could then use it to purchase more assets, invest in other segments, or even market their own companies, which could give them a significant advantage as compared to ...