2013년 11월 26일 화요일

About 'how to calculate equity'|Customer equity to drive your marketing ROI







About 'how to calculate equity'|Customer equity to drive your marketing ROI








If               you               are               considering               investing               in               the               stock               of               a               retail               company,               here               are               8               steps               you               can               take               to               help               you               analyze               its               business.

1.

Visit               the               retailer's               stores.

Visit               at               least               one               of               the               company's               stores               and,               if               possible,               visit               several,               since               the               performance               of               a               single               store               will               reflect               not               just               the               policies               of               the               parent               company               but               also               the               performance               of               the               store               manager.

Even               a               great               retailer               may               have               some               poor               store               managers               and,               as               a               result,               evaluating               the               company               on               the               basis               on               one               store               can               be               misleading.

Also,               visit               stores               at               different               times               of               the               day               and               the               month.
               While               you               are               there               evaluate               the               look               of               the               store               and               whether               its               fixtures,               décor,               ambiance               and               overall               look               are               appropriate               for               its               retail               strategy.

Also               consider               the               store's               housekeeping               and               organization,               inventory               and               in-stock               levels,               pricing,               in-store               marketing               (including               signage               and               merchandise               display),               customer               service,               and               check-out               process,               among               other               things.
               Try               to               experience               the               store               as               a               customer               would               by               asking               store               employees               for               help               finding               an               item               or               for               information               about               a               product               and,               if               possible,               buy               something               for               real-life               experience               with               the               speed,               efficiency               and               friendliness               of               the               check-out               process.

Check               out               is               especially               important               since               it               creates               the               final               impression               with               which               a               customer               will               leave               the               store.
               2.

Compare               the               retailer               with               it               competition               by               visiting               and               evaluating               competing               stores.
               3.

Ask               friends               and               family               for               their               opinions               about               the               retailer               and               about               their               experiences,               both               good               and               bad,               in               its               stores.
               4.

Study               the               retailer's               sales               trends.

Among               other               things,               evaluate               its               year-over-year               changes               in               same-store               sales.

Rightly               or               wrongly,               the               year-over-year               change               in               same-store               sales               is               the               single               number               that               investors               most               often               focus               on               in               evaluating               retailers.

As               a               result,               a               better-than-expected               or               worse-than-expected               number               often               will               move               a               retail               company's               share               price               near               term.
               Same-store               sales               numbers               include               sales               for               stores               that               were               open               in               both               reporting               periods               being               compared.

As               a               result,               they               are               not               inflated               by               incremental               sales               from               new               stores               that               opened               in               the               interim               period.

Generally,               same-store               sales               are               not               reported               for               a               calendar               month               but               for               a               retail               month               consisting               of               either               four               or               five               weeks.

Many               retailers,               including               many               discounters,               apparel               retailers               and               department               stores,               report               same-store               sales               monthly,               while               some               only               report               them               quarterly.
               Even               if               the               retailer               you               are               evaluating               reports               same-store               sales               monthly,               using               a               figure               for               a               longer               period               such               as               a               quarter               can               be               more               indicative               of               sustainable               trends,               since               monthly               sales               may               be               affected               by               short-term               factors               such               as               weather               and               changes               in               holiday               schedules               (for               example,               Easter               is               in               March               some               years               and               April               others).

Another               useful               sales               figure               for               retailers               is               sales               per               square               foot,               which               should               be               evaluated               relative               to               the               retailer's               historical               levels               and               relative               to               sales               per               square               foot               for               competitive               retailers.
               5.

Don't               overlook               inventory.

Rising               inventory               levels               can               be               a               precursor               to               markdowns               and,               therefore,               to               margin               erosion,               so               keep               an               eye               on               this               number               quarterly               and               pay               attention               to               any               comments               that               management               makes               about               inventory               levels.
               Compare               current               inventory               per               square               foot               to               historical               figures               and               relative               to               competitors'               inventory               levels.

Also,               look               at               inventory               to               sales               relative               to               where               it               has               been               historically.

If               this               number               begins               to               rise,               it               could               signal               an               inventory               problem,               because               sales               are               deteriorating               relative               to               plan,               inventory               levels               are               climbing               or               both.
               A               quarterly               inventory               number               that               is               out               of               line               historically               is               worth               further               analysis.

It               could               reflect               a               temporary               blip.

For               example,               inventory               could               have               been               accumulated               for               new               stores               that               have               not               yet               opened               and,               therefore,               are               not               contributing               to               sales.

On               the               other               hand,               it               could               be               an               early               warning               signal               of               problems               ahead.
               6.

Analyze               the               retailer's               margins               relative               to               historical               levels,               including               its               gross               income,               operating               income               and               net               income               as               a               percent               of               sales.

Look               carefully               at               whether               margins               are               expanding               or               contracting,               which               can               provide               hints               about               price               trends,               product               sell-through               at               full               price               or               at               a               discount,               product               mix               and               sourcing.
               7.

Review               the               company's               financial               position,               including               cash               on               hand,               debt               levels               and               working               capital,               and               calculate               its               return               on               equity               (annual               net               income               divided               by               shareholders               equity).

Also,               take               into               account               the               retailer's               lease               commitments.
               Many               retailers               lease               their               stores               rather               than               owning               them,               which               means               that               they               avoid               taking               on               debt               or               using               cash               that               otherwise               would               be               needed               to               acquire               real               estate.

On               the               other               hand,               their               lease               agreements               may               commit               them               to               make               payments               for               many               years.

These               lease               payment               take               the               place               of               interest               that               would               be               booked               (or               interest               income               that               would               be               foregone)               if               the               store               was               purchased.

Information               on               leases               is               reported               in               the               retailer's               10-K               and               should               be               taken               into               account               when               considering               the               retailer's               financial               position.
               8.

Finally,               compare               the               retailer's               financials               to               those               of               other               companies               in               the               same               retail               sector,               because               many               of               the               relevant               figures               such               as               margins               and               sales               per               square               foot               will               vary               widely               from               one               sector               to               another.

For               example,               a               net               margin               that               is               adequate               in               the               supermarket               sector,               which               is               characterized               by               high               sales               volumes               and               low               margins               would               be               disappointing               for               a               specialty               apparel               retailer,               and               sales               per               square               foot               should               be               far               higher               at               a               jewelry               retailer               than               in               a               discount               store.
               These               steps               can               help               you               to               identify               retailers               that               you               may               want               to               evaluate               further               on               the               basis               of               your               preferred               valuation               measures               (such               as               price               to               earnings               per               share               (P/E),               market               capitalization               to               revenue,               price               to               book               value               per               share               and               so               on).






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