MAY DEPARTMENT STORES CO (THE): International Competitive Benchmarks and Financial

MAY DEPARTMENT STORES CO (THE): International Competitive Benchmarks and Financial Gap Analysis

Published Date: January 2003

Published By: Icon Group International, Inc.

Page Count: 80

Order Code: R307-20514

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MAY DEPARTMENT STORES CO (THE) is it financially competitive? There is no absolute answer to such a question. How does this firm's asset structure vary compared to global benchmarks? Does it hold more cash and other short term assets, or does it concentrate its assets in physical plant and equipment? On the liability side, does it have a higher percent of payables compared to the benchmarks, or does it hold a higher concentration of long term debt? The structure of the income statement is more telling. Does the firm have a relatively higher costs of goods sold, operating costs, or income taxes compared to its global benchmarks? Are their returns on equity higher? Are profit margins greater? Are inventories held longer? The report does so by going beyond traditional analyses by considering companies competing in the same or similar industrial classification at a global level. The goal of this report, therefore, is to assist consultants, financial managers, strategic planners, and corporate officers in gauging indicators of a company's financial structure compared to firms competing or participating in the same economic sector, at the global level. This report is not about whether a particular company or industry has performed well or poorly in the past or will do so in the future. With the globalization of markets, greater foreign competition, and the reduction of entry barriers, it becomes all the more important to benchmark a company's financial indicators against other firms on a worldwide basis. Doing so, however, is not an obvious task. First, one needs to find firms competing in the same sector, but not necessarily competing directly with the company in local markets. These firms should not be perceived, therefore, to be direct competitors to the company in question, but simply those that have been classified by various sources (e.g. EDGAR or similar foreign filings), as competing to serve customers in the same link of the value chain, or broad industrial classification, as identified by SIC, NAICS or similar codes. Second, given the international nature of the task, one needs to control for exchange rate volatility. Finally, one needs use comparable financial standards. This report overcomes these issues and gives full financial benchmarks vis-a-vis worldwide competitors who are present in the same narrow industrial classification. Benchmarks cover assets, liabilities, income and ratios. Since our reports are printed on demand, the statistics reported are for the latest quarter and are the most up to date available (4 reports are produced each year). Each report provides over 100 statistics and 40 graphs to the reader. This report is on MAY DEPARTMENT STORES CO (THE), USA.

Excerpt: Though we heavily rely on historical performance, the figures reported are not historical but are forecasts and projections for the coming fiscal year based on various data which may not reflect the current or future situation of the firm. The forecasts are updated quarterly. This particular report was updated in the last quarter. In order to maintain comparability over time and across companies and countries, we use a common currency (the US dollar). Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. The source(s) for the various raw statistics include public filings, corporate releases, and various other data sources (e.g. EDGAR, or similar filings). The calculation of the company's ratios is meant to yield roughly approximate forecasts, or "useful indicators". The forecasts are frequently based on the assumption of relative stability. These are derived from the last or previous fiscal year's full annual financial statements. These statements themselves may be only roughly accurate or indicative of current or future ratios, and subject to future change. While these figures can substantially change from one quarter or year to the next, we are interested in looking at the structural difference between these ratios and those of companies competing in the same or similar sector of the global economy; we call this difference, as is common in business school texts, a "gap". It is this forecasted structural difference that should be the focus, not any particular ratio or group of ratios estimated which are not claimed to be accurate. In fact, given the approximate nature of the exercise, one should consider the dynamics of the forecasted gaps, as opposed to those reported in a given quarter, or in this particular report. Although Icon Group often updates its forecasted benchmarks and gaps on a quarterly basis, the underlying ratios may not change for a particular company whose figures are updated on an annual basis. Rather, the companies used to calculate global benchmarks frequently change or the data from these are more volatile given that fiscal years are not aligned across countries. Again, a number of factors might make these forward-looking forecasts inaccurate (like all such forecasts). Given a company's foreseen financial structures and estimated ratios, the resulting figures are evaluated against "Global Benchmarks". In choosing the global benchmarks, Icon Group attempts to choose only those firms with sound financial situations or those not undergoing radical restructuring, or where random volatility, mergers, or bankruptcy affects labor performance. Often we consider, for benchmarks, only those firms over a given size (e.g. having more than 500 employees). In many countries, firms are organized into holding groups. These groups nominally have very few employees (e.g. 4 to 25 employees), but have extremely large assets, liabilities, or revenues. As such, the inclusion or exclusion of firms having this form of management can affect the ratios and benchmarks reported, so due caution is required. Since the calculation of benchmarks proceeds in a similar fashion to the company, and are averages across all selected companies, one can directly conduct a gap analysis. Here, Icon Group graphically reports, for each part of the financial statement, the larger structural gaps that the firm has compared to the global benchmarks. A gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or perhaps signal a firm's relative strength or weakness for the coming fiscal year.

Ticker: MAY

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