Noni B and OrotonGroup: A comparison of Profit Margin
Looking through Sue’s ratios, something that stood out for me was a dip in our PM during 2014. I wanted to see if there was perhaps any correlation between overall retail industry performance trends and our company performance during this period.
First I mapped graphed our restated PM ratios. Please note the graph data is representative of end of financial year reports.
As you can see, 2014 was not fantastic for our companies. To find an indicator of overall retail industry performance during this time, I went to the Australian Bureau of Statistics (ABS) website. The graph below was from the 8501.0 data set (ABS, 2015) and shows the trend in sales volumes for the clothing, footwear and personal accessory retailing sector, which I thought was most relevant to our companies.
Interestingly, there was a dip in sales volumes in 2014 after slightly picking up towards the end of 2013/beginning of 2014. This would make sense seeing the Christmas and New Year period could have contributed possibly to sales volume.
To see the ABS (2015) data trend line against the average line of Noni B and OrotonGroup’s PM, I decided to use Illustrator to merge the graphs together. Visually, it looks like a bit of a mish-mash monster graph, but this is not a graphic design class and I think it gets the point across. It’s good to see the trends juxtaposed against each other: Follow the green and black lines.
Obviously our companies were in really different positions in 2012 and 2013, and vastly different to the ABS (2015) data average. However things start to follow the overall industry trend in early 2014 through to the end of the 2015 financial year.
As discussed in my previous analysis of the 2013 ratios, for OrotonGroup I know that there was a key driver, the “Ralph Lauren Effect” which explains why there was such a huge drop in PM for my company between 2013 and 2014.
Reading Sue’s assignment, she has noted:
“In 2013 and 2014 large write-offs were made for impairment of brand names and goodwill, in the region of $5M in both years. The impairment of goodwill in 2013 was described as the write off of “the remaining goodwill that was created when the company was listed on the ASX in 2000”. (Noni B Annual Report, 2013) No explanation could be found for the impairment of brand names of $5.4M recorded in 2014.” (Sue Brock, 2016)
The impairment of good will could be a clue to why Sue’s overall company performance went into decline around 2013. It will be interesting to talk Sue to see what other drivers contributed to the decreasing PM.
I’ll continue to update the blog with discussion as it progresses, and please jump in via the comments if you have any insights!