Financial Analysis Of Matalan And House Of Fraser

2501 words - 10 pages

Investment Analysis



House of Fraser


In this essay I would like to elaborate on the investment analysis of two companies, open a space of possibilities in discourse and practices in order to determine which of the two companies to invest in. The essay will commence with a brief overview of the two companies that are being considered. The latter part of the essay will explain and critique the financial position of the two companies and also the strategy and structure of the organization. For this purpose different financial tools will be used. The conclusion will be description and reasons for the company chosen to invest.

Company overview

Matalan Plc is quoted to the FTSE 250 with a current market capitalization of £695.83M.

The Group is an out of town retailer, which it distributes its products straight from the manufacturer. The company operates a chain of 143 retail stores, covering the United Kingdom and its main product range consists of clothing and footwear for ladies, men and children, as well as furnishings for home. Some famous brands that the Group is trading include Wrangler, Wonderbra, Falmer, Wolsey. In 2003 the Group's UK clothing market share was 3.1% increased by 0.3% compared to 2002 and Matalan is now the UK'S fifth largest clothing retailer by value and third largest by volume.

Matalan plc now has over 9.1 million active members (an increase of 11%), while its store estate in 2003 has increased from 143 to 163. Its total trading space is up 22% to 4.5 million sq ft, while its average store size is up 8% from 25,578sq ft to 27,695 sq ft.

The Group's strategy focuses on six key areas, in order to improve the operational effectiveness of its business. By already having the advantage of prices up to 50% below the equivalent high street prices due to products directly brought by the manufacturer and low overhead costs, as a result of its out of town location, the Group targets to a sustainable profit growth in the future by investing on: a) People development, b) systems capability, c) supply chain, d) retail execution e) brand development and f) buying and sourcing system.

The second company to be considered today is House of Fraser. House of Fraser is Britain's leading retailer of designer brands. It operates a chain of 50 stores in the United Kingdom. Its product range consists of clothing, footwear, furnishing and food. Some famous brands that the Group is trading include Gucci, Dolce & Gabbana, Armani. House of Fraser is quoted to the FTSE with a current market capitalization of 234.80 million. The groups strategy focuses on a) people development b) new store opening program c) develop brand d) reposition the home office e) information technology development f) supply chain g) cost saving.

Financial overview

To ascertain which of the two companies to invest in it is very important to know the present financial position of the two companies. In this part of the...

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