Bossini Research

Comp all background Bossini world-wide Holdings Limited is an investiture holding troupe which engages in retail, diffusion, and wholesale of garments. The investment holding corpo symmetryn together with its subsidiaries (Bossini) group carries casual wear yields for a wide spread age range from ladies, mens, teenagers, kids and babies wear products. Bossini was listed in Stock Exchange of Hong Kong in 1993 with a stock code of 592. It was lay out in 1987 and launched its first retail consequence in 1987 and it expands its distri merelyion web both locally and internationally in the past twain decades.Currently, its distribution network contains much(prenominal) than 1,470 stores, approximate 65% of them ar self managed stores and 35% of them be franchised stores, coering 36 countries and regions worldwide. With headquarter in Hong Kong, its trade covers all over the world. Neverthe little, its core grocery is the Asia pacific region including Hong Kong, Mainland chi naw ar, Taiwan, capital of Singapore and Malaysia. Its largest flagship store is laid in Mong kok, Hong Kong. Milest one and only(a) 19871st retail outlet receptive in Hong Kong 1998Launched franchising ope proportionalityn 1993Listed in Hong Kong Stock Exchange 1st retail outlet opened in Mainland chinaw ar 004Launched a new product line, Bossinistyle, in Mainland China PresentOver 1470 stores around the world Branding Bossinis brand value is be talented and it helps promote a demonstrable and optimistic life attitude. The brand color is green and it represents a genius of offshoot. Through the colorful products and outstanding customer services, Bossini successfully cultivate a comfortable and feel like home shopping environment. in that location atomic number 18 main(prenominal)ly five product lines, Bossini, Bossinistyle, Bossini ladies, Bossini kids and Yb and the major ones are Bossini and Bossinistyle. clientele Overview Major commercializes The major markets fo r Bossini are Hong Kong, Mainland China, Taiwan and Singapore and they are in an order from the elevatedest revenue contribution that covers over 98% of fare revenue. The Hong Kong and Singapore markets contribute approximate 55% and 9% of the groups affix together revenue respectively and they are quite unchangeable. On the other hand, the Mainland China market keeps contributing more from 2008 to 2011 and it is change magnitude from 19% (2008) to 25% (2011) that represents a 10% average socio-economic classly egression.For Taiwan market, the contribution decreases gradually from 14% (2008) to 11% (2011). The revenue contribution lot be determined by various factors such(prenominal) as geographical economic performance diversity, geographic brand fashionableity, and resource allocation, opening more stores can bring in more sales. thitherfore, we need to have other analysis to help investigate the cause the revenue contribution up and down. Presently, Hong Kong is sti ll Bossinis original market and the major revenue contributor however, the Mainland China market testament be the key growth driver in the massive run. compute of shops The speed of opening new stores in Hong Kong, Taiwan and Singapore is stable except the Mainland China. From 2008 to 2011, the direct managed stores has been jumped from 304 (2008) to 456 (2011). This represents a 14. 5% average formly growth. It is one of the reasons to explain why the revenue contribution from the Mainland China keeps change magnitude. On the other, although the twist of franchised stores also has a significant increase, from 391 (2008) to 521 (2011), the revenue from these stores is trivial comparing to the total revenue.Net sales per square feet correct though Bossini has opened piles of stores in the Mainland China, the net sales per square feet in 2011 (HK$1,340/sq feet) is still trim than HK$1,500/sq feet in 2008. It implies that even more stores can bring in more sales to the group, but the permissivenessal bene qualified is diminishing. The sales growth in the Mainland China can non catch up the speed of opening new stores. There are many reasons to cause this happen and one of the reasons is some stores are competing for each one others. That means that geographic area might have as well as many Bossini stores.However, the focal point still need to open more stores out-of-pocket to fierce competition by other brands. If Bossini s minors its measure to expand, it might endure its clientele and the net sales per square feet is even worse. Nevertheless, the net sales per square feet in the Hong Kong market performed extraordinary well and it rises from HK$5,700 per square feet (2008) to HK$11,000 (2011). It is truly important since Hong Kong is the one the cities with highest rental cost in the world and a strong sales per square feet can help reduce the press of high rental cost. Retail businesses are strongly affected by rental cost.Besides experie ncing an upturn from the economic recovery, Bossini has adopted different business strategies rivet on branding and marketing initiatives. One of the best strategies is adopted is the co-branded licensing program. For example, Bossini teamed up with M&Ms, classic cartoon figure and TV show character to launch limited edition items and which can add value to Bossinis products and boost up both its revenue and pull in margin tremendously. These campaigns can also poweren Bossinis be happy brand value and enhance overall brand awareness. Financial sum-up Income statementThe Bossinis gross profit increased 14% from HK$1,190 one million million million in 2010 to HK$1,354 million in 2011 but the gross margin dropped a little from 52% in 2010 to 51% in 2011. It is slightly lour than the last year owing to the expansion for franchise businesses since the profit margin of them are usually low. From 2008 to 2010, the revenue is quite stable, approximate HK$2,290 million per year on average, and it boosts up in 2011 to HK$2,640 million. Due to global recession first in late 2008, Bossini was doing quite well to maintain its revenue at HK$2. 3 billion and the honor is given to the right move to father the Mainland China market.China is one of the few countries that were being hit by the financial crisis the least and thus Bossini experienced a stable growth and strong domestic consumption in the Mainland China. When we take a ascertain of the gross profit, its trend looks similar to the revenue. Nevertheless, when we take a look of the operate profit, it fluctuates more volatile during 2008 to 2011 comparing to revenue and gross profit because the change & distribution cost and administrative put down are relatively fixed and usually it is hard to be cut even the revenue and gross profit drop.Overall, the revenue, gross profit and operating(a) profit are extraordinary improved in 2011 due to the economy recovery in Asia pacific region. Balance sheet B ossinis current asset weights severely on the total assets. Cash and silver equivalents, descent and debtors and bill receivable all together represent 90% of the current assets. The level of cash and cash equivalents represents over 80% of the net current assets (i. e. current asset current liability) which reflects that Bossini has a strong cash position and it does not has any short term liquefiedness issue.In general, Bossini is a financially florid company. However, the high level of stock level makes me concern. The average yearly growth from 2008 to 2011 is 21. 5%. As we have discussed before, the revenue is quite stable from 2008 to 2010 and it is not a very ethical signal that the instrument level is unploughed rising. The inventory sawhorse volume day is 36 days in 2008 and is 57 days in 2011. In another word, it needs al closely two months to clear all its stock on hand. Usually, apparel and fashion patience faced with short product life cycles and cannot af ford such a long inventory turnover day.Such a high level of inventory might be caused by enormous product alteration to meet different geographic preference. SWOT Strengths Overall business Bossini is advance(a) and keen to adopt different business strategies on brand twist and marketing initiatives such as adopting the co-branded licensing program. Financial Bossini has a solid liquidity background that reserves enough resource for it to keep expanding the potential market in the Mainland China. Also, the robust improvement of sales per square feet in Hong Kong market helps reduce the pressure of expensive rental cost. WeaknessOverall business Not every product line is successful under Bossini. It has been expanding pragmatically its Bossini stores while consolidating its Bossinistyle stores as a revamp in the Mainland China market. It opened 72 more Bossini stores but 34 closed Bossinistyle stores in 2011. The operating loss in the Mainland China market was attributable to the Bossinistyle stores consolidation. Financial an increasing inventory turnover day signals that Bossini is producing more than they can be sold. The product life cycle for apparel is usually short and such a long turnover day will bring it to be an get down finally.Also, a lower operating margin, i. e. 4 to 5%, gives no weaken to the company during economic downturn. Opportunities The co-brand licensing program in Hong Kong market is successful. As the Mainland China market is going to be more and more important to Bossini, the management can adopt something similar as well. Together with the government policies to speed domestic consumption in the Mainland China, a successful business outline can improve sales per square feet. Bossini can enjoy the impression of revenue and profit growth even though with slower pace of opening new stores which help restrain operating expense.In the long run, as income in the Mainland China is expected to rise further, the average disbursa l by consumers on retail products is also expected to continue the up trend. Threats External The global economy is facing uncertainties by the new European debt crisis and our major markets are expected to experience a slowdown. Internal Bossini needs to launch a fashionable touch in style that fit different geographic preference. The failure of Bossinistyle in the Mainland Market reveals that Bossini did not home run at the Chinese customers well. Financial performance liquidness Ratio Liquidity ratio reveals a companys short-term solvency. Current ratio and Acid-Test ratio are commonly used. Current ratio is figure by dividing current assets by current liabilities. Its main purpose to measure whether a company has enough resources to leave its debts over the next 12 months. Even though Bossinis current ratios is kept decreasing year to year, but it is still higher than 2. It means every dollar the company owes in the short term has two dollars worth short term assets that i s procurable to convert into cash to meet creditors demands.Acid-Test ratio is to measure whether a company can pay all its current liabilities if they are due immediately. The verbal expression is similar to current ratio except it only considers those current assets that can be quickly converted to cash (i. e. exclude inventory and pay expense). Bossinis acid test ratio is always higher than 1 means it is able to meet current obligations only using liquid assets). Acid test ratio is lower than current ratio since inventory and prepaid expense are excluded. But still, Bossini is considered to have a good financial strength in short term because both these ratios are higher than one.Activity Ratio Activity ratio measures a companys asset management efficiency. Inventory turnover and Accounts receivable turnover are commonly used. Inventory turnover measures the number of measure inventory is sold during a year. The inventory turnover is kept decreasing year to year reflects that inventory is more and more difficult to be sold. In 2011, 6. 4 means that Bossini sold its inventory approximate 6 times during the year or it needed approximate 2 months to sell its inventory. Accounts Receivable turnover measures the ability to collect cash from credit customers.In this case, the figure receivable turnover is not an important indicator since the average accounts receivable contributes less than 10% of total current asset and only a very small amount of credit sales will be involved. It is common for retail business. Solvency Ratio Solvency ratio measures a companys ability to pay long term liabilities. The most common solvency ratio is Debt ratio. Debt ratio is calculated by dividing total liabilities by total assets. Its main purpose to show the proportion of a companys assets which are financed through debt. In general, Bossinis debt ratio is less than 0. which means most of its assets are financed through equity. It is a highly liquid company and it is financ ially healthy even creditors demand repayment of debt. However, this advantage is diminishing from 2008 to 2011. It is in the first place due to Bossini has a short term borrowing of HKD78M starting in 2009 and gradually raised to HKD128M in 2011. Profitability Ratio Profitability ratio measures a companys overall efficiency and performance. Return on Sales, Return on Assets and Return on Equity are the popular profitability ratio. Return on Sales shows the share of each dollar of sales that a company can turn into income.It is calculated by dividing net income by net sales. Bossini only enjoys a low run off sales which is common for low end products retail business however, it has been increased from 2. 7% in 2008 to 4. 9% in 2011 reflects it has strived to improve its profitability strength over 80% during these years. Return on Assets shows how profitable a companys assets are in generating revenue. It is calculated by dividing net income plus interest expense by average total assets. An uptrend of Return on Assets reveals that it requires less and less investments to knuckle under the same revenue which is good for Bossini.Lastly, Return on crude Equity shows how well a company uses investment funds to generate revenue. It is calculated by dividing net income net off with preferred dividends by average common equity. Bossinis sustainable growth, in Return on Common Equity (except in 2009 due to worldwide financial crisis) indicates the management maintains Bossini as a high growth company. Market Analysis ratios Market Analysis ratio is a good indicator for stock valuation. terms/Earning ratio and Dividend yield are widely used. Price/Earning ratio (P/E ratio) reflects a scathe the market is willing to pay for a share relative to its annual earning.P/E is calculated by dividing market price per share by earnings per share. A high P/E ratio does not mean it is more expensive, it just means that investors are willing to pay more for each dollar of ear ning compared to one with a lower P/E ratio. There are many factors that investors are willing to pay this premium such as fast growing, unique business model, market sentiment, and many others. For Bossini, the market price per share is pretty stable throughout these years and the high P/E ratio in 2009 is due to the extraordinary low earnings per share caused by worldwide financial crisis.Dividend yield measures the percentage of annual dividend return comparing to a stocks market value. It is calculated by dividing dividend per share by market price per share. Bossinis investors can expect to receive more cash dividends in the futurity from the increasing dividend yield pattern. However, investors have to beware that the dividend yield might be dropped even they receive the same amount of cash dividend because of the market price per share increase. Either way, investors will be appreciated.