Bossini Research

Comp each background Bossini International Holdings Limited is an investwork forcet holding political party which engages in retail, distribution, and wholesale of garments. The enthronement holding company together with its subsidiaries (Bossini) group carries casual wear products 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 contrast code of 592. It was found in 1987 and launched its first retail outlet in 1987 and it expands its distribution network both locally and internationally in the past two decades.Currently, its distribution network contains much than 1,470 stores, scratchy 65% of them be self managed stores and 35% of them ar franchised stores, covering 36 countries and regions worldwide. With headquarter in Hong Kong, its foodstuff covers all over the world. Nevertheless, its core market place is the Asia pacific region including Hong Kong, Mainland chin a, Taiwan, Singapore and Malaysia. Its largest flagship store is situated in Mong kok, Hong Kong. Milestone 19871st retail outlet opened in Hong Kong 1998Launched franchising ope dimensionn 1993Listed in Hong Kong Stock Exchange 1st retail outlet opened in Mainland chinaware 004Launched a new product line, Bossinistyle, in Mainland China PresentOver 1470 stores around the world Branding Bossinis brand value is be happy and it friends promote a positive and optimistic life attitude. The brand color is green and it represents a spirit of growth. Through the colorful products and outstanding customer services, Bossini successfully cultivate a comfortable and feel like home shopping environment. There are mainly five product lines, Bossini, Bossinistyle, Bossini ladies, Bossini kids and Yb and the major ones are Bossini and Bossinistyle.Business Overview Major markets The major markets for Bossini are Hong Kong, Mainland China, Taiwan and Singapore and they are in an order from the highest receipts parcel that covers over 98% of positive r pull downue. The Hong Kong and Singapore markets contribute approximate 55% and 9% of the groups total revenue respectively and they are quite stable. On the other hand, the Mainland China market keeps contributing more from 2008 to 2011 and it is increased from 19% (2008) to 25% (2011) that represents a 10% median(a) stratumly growth.For Taiwan market, the contribution decreases gradually from 14% (2008) to 11% (2011). The revenue contribution backside be determined by various factors such as geographic economic performance diversity, geographic brand popularity, and mental imagery allocation, opening more stores can bring in more gross revenue. Therefore, we need to have other analysis to help investigate the cause the revenue contribution up and down. Presently, Hong Kong is still Bossinis primary market and the major revenue contributor however, the Mainland China market will be the key growth device driver in the longsighted run.Number 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 yearly growth. It is one of the reasons to explain why the revenue contribution from the Mainland China keeps increasing. On the other, although the number of franchised stores also has a significant increase, from 391 (2008) to 521 (2011), the revenue from these stores is trivial canvass to the total revenue.Net sales per square feet Even though Bossini has opened lots of stores in the Mainland China, the net sales per square feet in 2011 (HK$1,340/sq feet) is still rase than HK$1,500/sq feet in 2008. It implies that even more stores can bring in more sales to the group, but the marginal benefit is diminishing. The sales growth in the Mainland China cannot catch up the speed of opening new stores. There are many reasons t o cause this happen and one of the reasons is some stores are competing each others. That fashion that geographic area might have too many Bossini stores.However, the management still needs to open more stores due to fierce competition by other brands. If Bossini slows its curtilage to expand, it might lose its line of business concern and the net sales per square feet is even worse. Nevertheless, the net sales per square feet in the Hong Kong market performed marvelous well and it rises from HK$5,700 per square feet (2008) to HK$11,000 (2011). It is very important since Hong Kong is the one the cities with highest rental toll in the world and a strong sales per square feet can help reduce the pressure of high rental cost. Retail businesses are strongly affected by rental cost.Besides experiencing an upturn from the economic recovery, Bossini has adopted different business strategies focusing on branding and marketing initiatives. One of the best strategies is adopted is the c o-branded licensing program. For example, Bossini teamed up with M&Ms, classic cartoon figure and TV direct character to launch limited edition items and which can add value to Bossinis products and boost up both its revenue and net income margin tremendously. These campaigns can also strengthen Bossinis be happy brand value and enhance overall brand awareness. Financial summary Income statementThe Bossinis perfect(a) profit increased 14% from HK$1,190 million in 2010 to HK$1,354 million in 2011 but the pure(a) margin dropped a little from 52% in 2010 to 51% in 2011. It is slightly lower 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 starting time 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 develop 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 look of the gross profit, its trend looks mistakable to the revenue. Nevertheless, when we take a look of the operating profit, it fluctuates more volatile during 2008 to 2011 comparing to revenue and gross profit because the selling & distribution cost and administrative expense 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 profit are extraordinary improved in 2011 due to the economy recovery in Asia pacific region. Balance sheet Bossinis flow rate asset weights heavily on the total assets. Cash and cash equivalents, inventory and debtors and bill due all together represent 90% of the current assets. The take aim of ca sh 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 concisely term limpidity issue.In general, Bossini is a financially healthy 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 good signal that the inventory level is kept rising. The inventory swage day is 36 days in 2008 and is 57 days in 2011. In another word, it needs almost two months to clear all its stock on hand. Usually, arrange and fashion industry faced with short product life cycles and cannot afford such a long inventory dollar volume day. such a high level of inventory might be caused by enormous product variety to meet different geographic preference. SWOT Strengths Overall business Bossini is innovative and keen to adopt different business strategies on brand building and marketing initiatives such as adopting the co-branded licensing program. Financial Bossini has a warm 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 period 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 tur nover day will bring it to be an expense finally.Also, a lower operating margin, i. e. 4 to 5%, gives no buffer 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 stimulate domestic consumption in the Mainland China, a successful business strategy can improve sales per square feet. Bossini can enjoy the result 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 spending by consumers on retail products is also expected to continue the upward trend. Threats External The global economy is facing uncertainties by the new European debt crisis and our major markets are expected to experience a sl owdown. Internal Bossini needs to launch a fashionable touch in style that fit different geographic preference. The trouble of Bossinistyle in the Mainland Market reveals that Bossini did not target at the Chinese customers well. Financial performanceLiquidity Ratio Liquidity ratio reveals a companys short-term solvency. Current ratio and Acid-Test ratio are generally used. Current ratio is calculated by dividing current assets by current liabilities. Its main mathematical function to measure whether a company has enough resources to pay its debts over the next 12 months. Even though Bossinis current ratios is kept fall 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 is useable 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 formula is similar to current ratio except it only considers those current assets that can be quickly converted to cash (i. e. exclude inventory and prepaid expense). Bossinis venomous 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 propagation 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 turn over measures the ability to collect cash from credit customers.In this case, the account receivable turnover is not an important indicator since the average accounts receivable contributes less than 10% of total current asset and only a very downcast 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 financially healthy even creditors demand repayment of debt. However, this advantage is diminishing from 2008 to 2011. It is mainly 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. fall out on Sales, regaining on Assets and get on Equity are the popular profitability ratio. Return on Sales shows the percentage 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 return 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 generate the same revenue which is good for Bossini.Lastly, Return on Common Equity shows how well a company uses investment fu nds 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. Price/Earning ratio and Dividend defer are widely used. Price/Earning ratio (P/E ratio) reflects a price the market is ordain 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 earning 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 passim 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 future 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.