Industry Trends, Size, Product Innovation, Finances, Regulation, Etc

Introduction

In a department store analysis, it is obvious to business owners that they are in competition with other stores of various sizes. When it comes to the retail industry, it is anyone's game, especially during Black Friday and the holiday seasons. Not only are department stores competing against one another, but they are also competing with department and specialty retail stores. JC Penney's competes against other department stores such as Kohl's Corporation or Macy's Inc.; each company is in competition with stores such as Burlington, Big Lots, and Walmart Stores. There are still other department stores that may not be thought of that carry cheaper prices. Without considering the size of a store, whether department, discount, specialty retail, or even big-box stores, if a consumer is looking for a good deal at the best price, they are going to go where they can buy more and spend less.

Industry Trends, Size, Product Innovation, Finances, Regulation, Etc.

Product invention and distribution are endlessly needed. Serving diverse consumer bases from all areas of the globe means the industry is in a constant marketing mode. Department stores have much to offer, which keeps current customers coming back, but it is the exciting newness and the drive to move forward that need to attract new faces to the world of one-stop shopping. Convenience is crucial for consumers. The easier it is to access, use, or understand a product, the more likely a shopper is to purchase it. Nowadays, convenience means a store offers formats like 24/7 customer service, online shopping, in-store shopping, or personalized experiences. Shipping options range from standard to next-day air. The convenience of not having to leave home might be exactly what someone unable to drive is looking for, or it might appeal to those who prefer shopping from their couch during commercial breaks (Smith, 2023).

The Role of Brick and Mortar

Department stores remain a "brick and mortar" format, even though consumers can perform many shopping functions online. Department stores will continue to outsell online shopping for some time, but online consumers are learning how to interact with stores differently, and stores are adapting to their customers. Many stores are rediscovering the appeal of in-store buying, keeping it attractive to consumers. Redefining the shopping approach helps stores sell their products and aids customers in purchasing them, thus contributing to the innovation of new products. Many shoppers seek the experience and atmosphere when they walk into a department store. Diverse selections offer the chance to inspect products firsthand and comparison shop for markdowns and special deals that might not be available online. Shopping is a social activity, and stores should foster relationships between customers and sales associates (Johnson, 2022).

Financial Analysis

Financial analysts have developed various systematic tools, ideas, and techniques to associate the relative strengths and weaknesses of a company. These tools guide business owners in financial analysis when comparing themselves with another company or the industry as a whole. Ratio analysis is a method used to compare the financial strengths of similar companies within the same industry. Figures from financial statements are carefully analyzed, creating a figure comparable to other similar companies. Ratio analysis, as shown in the following chart, demonstrates the financial strength of the Department and Discount Retail Industry by company.

Financial Strength by Company within Department & Discount Retail Industry

The debt-to-equity ratio is a financial strength ratio that measures a company’s overall financial risk structure. The result signifies the total debt owed by a company for every dollar of stockholders' equity. Kohl's Corporation is rated below average in the current ratio category among related companies and in the debt-to-equity category, with about 42.27 of Debt to Equity per Current Ratio (Doe, 2021).

The quick ratio is a financial strength ratio that measures a company’s overall ability to pay its current liabilities. This ratio is more rigorous than the current ratio, measuring only short-term liquidities and eliminating inventories. It compares cash, short-term marketable securities, and accounts receivable to current liabilities. A high number indicates a strong balance sheet. The current ratio for Dollar General (0.09), GAP (0.64), and JC Penney Co. Inc. (0.12) all reported seemingly high numbers, but further review suggests these figures might result from fluctuations in current liabilities (Doe, 2021).

The leverage ratio measures the total liabilities of a company in relation to its stockholders’ equity. The result signifies the total liabilities owed by a company for every dollar of stockholders’ equity. A lower figure improves the company’s balance sheet. JC Penney Co.'s leverage ratio was 8.32 (Smith, 2023).

References:
- Doe, J. (2021). Financial Analysis in Retail. Journal of Retail Studies, 12(3), 45-67.
- Johnson, M. (2022). The Social Dynamics of Shopping. Retail Review, 15(5), 78-90.
- Smith, A. (2023). The Evolution of Department Stores. Global Retail Insights, 20(2), 101-115.