Executive Summary of Oxford Industries, Inc. (OXM)
| Jeff Nelson |
| MBA 625
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Executive Summary of Oxford Industries, Inc. (OXM)
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| Section 1 |
| FALL |
| 2009 |
| Oxford Industries, Inc. |
| 1/31/2009 |
Company background and information
Oxford Industries Inc., which trades at the NYSE bourse under the symbol OXM, is one of the major apparel manufacturers in America. It traces its history to 1942 when it was founded by three Nashville-bred brothers. However, the brothers had started a venture eight years earlier, which involved production and selling of business forms and Dictaphones (OXM Website).
The business exhibited steady growth over the years and in 1943, it purchased a manufacturing facility, at which time it was now based in Oxford, Atlanta. The demand for the company’s products grew as World War II ended. With the post-war recession biting on every sector of the economy, businesses had to device methods of survival and growth. The company formed a growth strategy that saw it grow steadily through the post-war recession expanding steadily in the market. It was on three stock exchanges in 1960 when it went public with a public offering of 240, 000 shares. By this period, the company was making annual sales of 31 million dollars with a workforce of over 3,000 employees. The number of preferred stocks for the company currently stands at 30 million shares of $1.00 par value.
The company’s sales continued to grow rapidly as it bought other companies and manufacturing plants. The sales, however, dropped considerably in mid 70s when as one of its affiliate’s publicly- held company went public on the NYSE. In early 80s, the company saw an upward growth though this growth hit a slump in the mid of the decade because of various reasons originating from management issues. Due to extensive inventories and ineffective financial controls intermarried with the peak in popularity of the company’s fastest-growing labels, the company saw three years of reduced sales. Because of these problems, plants operated below capacity while the inventory sell-offs ate into profits.
The company has its headquarters at 222 Piedmont Avenue Atlanta, GA 30308 in the United States. Presently, the company has an employee force of about 4,000 workers and produces apparel products for the US and the UK markets. It has extensively diversified its product lines through maintaining the clothing industry.
Current Market Performance
As of 21st of October 2009, the stock performance for OXM on the stocks market witnessed a high of $23.50 for a share and a low of $ 22.94. The average closing share price for the company was $22.94 as of the 21st of December. With an average share volume of 164, 000 being traded, the company had a market capitalization of $378.95 million. The company does not sell its shares directly to the buyers but those wishing to buy the shares do so through a stockbroker.
Operational Performance and Financial Analysis
With respect to the company’s quarterly total revenue, the revenues have been declining steadily over the last four quarters. The quarter that ended November 1, 2008, the company registered total revenues of 244.186 million dollars with a cost of revenue of 150.557 million dollars (Wood and Sangster 2005). Total revenues declined to 199.868 million dollars in the next quarter with a cost of revenue of 110.006 million dollars. In the quarter that ended August 1, 2009, the company registered total revenues amounting to 192.887 million dollars while the previous quarter was 216.731 million and cost of revenue of $114.344M and $126.960M respectively.
The gross profits also declined steadily over the four quarters. However, the gross profits were more than the operating expenses registered leading to operating income except for the quarter extending 2-Nov-08 to 31-Jan-09, which recorded a heavy operating loss amounting to losses for all the $302.973M. On an annual basis, the trend has almost been the same over the last three years. The company registered $433.109M drop in total annual revenues over the revenue the previous year.
Profitability Trends
Profit margin (Net Income/Revenues)*100
In 2007, profit margin (1-Jun-07)
(52,137/1,128,907)*100
= 4.6184%
In 2008, profit margin (2-Feb-08)
(19,215 /695,798)*100
= 2.7616%
For 2009, profit margin (1-Jan-09)
(265,812)/947,516*100
-28.0536%
In 2007, with a profit margin of 4.618% this implies that for every dollar of sales made by the company, $0.0462 was a net income. For the company’s 2008 financial year, every dollar of sales contributed a net income of $0.0276. This was a drop in the profitability of the company as compared to its previous financial year. The same year saw the company experience several financial difficulties, which made its operations less profitable. Thus for the financial year ended 1-Jan-2009, the company’s sales resulted to a net loss of $.2805 for dollar of sales made.
With respect to the company’s liquidity, the company’s liquidity ratios over a three-year period are as follows:
- Current Ratio
Current ratio = (current assets/ current liabilities)
1-Jan-09
228,289/106, 8333
= 0.21368711815510706867615247305849
= 0.214
2-Feb-08
298,099 /156,417
= 1.9057966845036025495949928716188
= 1.906
1-Jun-07
334,241 / 142,444
= 2.3464729999157563674145629159529
= 2.345
From the above results, it is evident that the company’s present standing poses a great danger since the current ratio falls below one. This could mean that in case its short-term obligations come due in a short period, the company may not be able to cover them and therefore it is likely to face more financial difficulties (Wood and Sangster 2005). The trend further indicates a persistent fall in the current ratio value. A further look at the acid-test ratio may give a better understanding of the company’s position in relation to its ability and capacity to handle its short-term obligations.
Acid-test ratio = (Current Assets less inventories)/Current Liabilities)
31-Jan-09
(228,289 – 129,159)/106,833
= 0.92789681091048646017616279613977
= 0.93:1
2-Feb-08
(298,099 -158,925)/156,417
= 0.88976262170991644130753051138943
= 0.89:1
1-Jun-07
(334,241 -137,333)/ 142,444
= 1.3823537670944371121282749712168
= 1.38:1
From these figures, it is evident that Oxford Industries Inc. has not been able to cover its short-term obligations (the current liabilities) fully as they fall due. Even the figure for the year ended 1-Jun-2007 does indicate that the company was at great risk of any slight change in its current assets or any slight increase in current liabilities.
In order to examine the company’s activity, the asset turnover ratio is defining to help in understanding how far the company’s management utilizes the invested assets.
The asset turnover ratio = Revenue/Assets
31-Jan-09
947,516 /473,494
= 2.0011151144470679670703324646141
= 2.001
2-Feb-08
695,798/910,272
= 0.76438471138297124376010686915559
= 0.764
1-Jun-07
1,128,907/908,738
= 1.2422799530777847960578296494699
= 1.242
There seems to be no consistency in the decision of converting invested assets into revenue. The company has an investment grade of BB- as rated by Standard and Poors, which means that it most likely faces major uncertainties that might expose it to further adverse conditions; economically, financially and business-wise. This also implies that the business may not have adequate capacity to meet its financial commitment (Robertson 2007). Based on the analysis carried out and the information available from various sources, the company needs to adopt a more stringent credit management strategy.
Works Cited:
Wood F., and Sangster, A., (2005) BUSINESS ACCOUNTING 10th Edition Financial Times/ Prentice Hall.
Robertson, V. (2007) Focus on Finance http://www.yovich.co.nz/finplan/20070918.php
Oxford Industries Company Website Accessed on Thursday, October 22, 2009, from URL: http://www.oxfordinc.com/CG_ECP.asp
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