Case study 2: JC Penney Using the Return on Equity

Case Study 2: JC PENNEY
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1. Using roughly half of a page of 8.5” x 11” paper, single spaced, with 12 point font, using the information calculated in part 1, explain which firms in each industry are performing better than the other firms, and most importantly, explain why you feel they are performing better.
Using the Return on Equity (ROE) criteria, the best performing department store was the May Department Stores at 20.60% which is the average ROE for the years 1995 to 2000. This was followed by Kohl’s Corporation (NYSE:KSS) at 16.80% and Sears, Roebuck and Co at 15.80%. , and the May Department Stores performed the best as the profit margin was highest at 6% to 7% from 1995 to 2000. The worst performing department store was the Elder-Beerman Stores Corp at -91.60%. Among the thirteen department stores J. C. Penney Company, Inc. is at the 9th position based on the returns on equity with an average ROE of 5.50%. In the DuPont identity the product of the profit margin, asset turnover and the equity multiplier is the return on equity. The best performing department stores focused on attracting more customers including stocking the brand that had high demand and improving on customer services. Even though, J. C. Penney Company, stocked private brands there was a need to further differentiate the store’s products and determine whether to focus on price and quality alone or together and the influence of exclusivity on customer’s shopping behavior.
When looking at the average ROE for the four drug stores were; Rite Aid Corporation at 33.90%, Walgreens Boots Alliance, Inc. at 18.00%, CVS Health Corporation at 11.50% and Eckerd Drugs (subsidiary of J.C. Penney) at 8.90%. However a closer look at the net income and equity performance of the Rite Aid Corporation drug store reveals that in the year 2000 there was both a loss and negative equity that resulted in the ROE being 474.4%. Both Walgreens Boots Alliance and CVS Health Corporation had positive profit margin, asset turnover and the equity multiplier in the five years. The differences in the performance of the retail pharmacy section of the drug stores p...