Jcrew Group, Inc & Aeropostale Inc Financial Analysis

JCrew Group, Inc & Aeropostale Inc

Financial Analysis

JCrew is an American clothing and accessories retailer based in New York; founded in 1983 by Arthur Cinader and his daughter Emily Cinader Woods. JCrew Group, Inc. markets several lines of casual men's and women's clothing through distinctive catalogs, a chain of retail stores, and the company web site. Each year the company issues 20 editions of the J. Crew catalog, distributing more than 44 million copies.

Fact Sheet

NYSE: JCG

2009 Sales (mil.): $1,427.970

1-Year Sales Growth: 7.0%

2009 Net Income (mil.): $54.117

1-Year Net Income Growth: (44.3%)

2009 Employees: 10,900

1-Year Employee Growth: 25.3%

Headquarters location: New York

Stores: 300 (226 retail, 74 factory stores)

Aeropostale, Inc is an American clothing retailer that sells casual clothing with 903 stores in the United States, Canada, the Dominican Republic, Puerto Rico, Peru, and the United Arab Emirates. Their clothing is targeted at teenagers and young adults. Aeropostale was established by R.H. Macy and Co. Inc, in the early 1980 targeting men in their 20s. Macy's opened the first mall-based Aeropostale specialty store in 1987. In August 1998, Federated sold its specialty store division to Aeropostale's management team and Bear Stearns Merchant Banking for approximately $15 million. In May of 2002, the company went public

Fact Sheet

NYSE: ARO

2009 Sales (mil.): $1,885.531

1-Year Sales Growth: 18%

2009 Net Income (mil.): $149.422

1-Year Net Income Growth: 15.6%

2009 Employees: 14,689

1-Year Employee Growth: 31%

Headquarters location: New York

Stores: 903

1. Current Ratio: An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. Ideally the ratio should be greater than 2. It measures liquidity.

As seen in the Ratio for JCrew, the company improved its current ratio from 1.71 to 1.88 from the previous year, but still it is not as liquid as Aeropostale. Aeropostale has enough assets to cover its current liabilities. JCrew needs to pays some of its debt such as account payable $119,700 in order to be more liquid.

2. Quick Ratio: It measures stringent of liquidity, the higher the better. Ideally the ratio should be greater than 1.

Aeropostale has more liquidity, with a quick ratio of 1.30x compared to JCrew with a ratio of 0.8x. Some of the reason is that Aeropostale has more cash on hand and less current liabilities than JCrew. Also Aeropostale doesn't have account receivable which means that they are collecting right away their money for the goods sold.

3. Account receivable: This ratio measures efficiency on the number of times that accounts receivable amount is collected throughout the year.

A high accounts receivable turnover ratio indicates a tight credit policy.

A low or declining accounts receivable turnover ratio indicates a collection problem

Per our ratio, we can clearly see that JCrew instead of improving on collecting the accounts receivable it got worse from previous year, which it does impact the process of converting account receivable to cash and liquidity could be affected as seen in current ratio and Quick ratio. However, Aeropostale doesn't have account receivable; they are collecting for their goods sold right away.

A/R Days outstanding: How many days the company is taking to collect account receivable.

JCrew is taking 4 days to collect for account receivables, one day longer than previous year.

4. Inventory Turnover. The inventory turnover ratio measures the number of times a company sells its inventory during the year. A high inventory turnover ratio indicated that the product is selling well

JCrew with a turnover of 5.0x indicates how ineffective their inventory management is, also there is no improvement from last year. On the other hand Aeropostale has a significant improvement from last year of 0.7x. In addition Aeropostale products are selling faster with a inventory turnover of 9.4x than JCrew's making it more efficient.

Days Inventory outstanding: The ratio shows how quickly inventories are converted into Cash.

Aeropostale is only taking 39 days to convert