Question

Crocs and Deckers Outdoor: Comparing footwear manufacturers (LO 5-1)

Crocs designs, develops, and manufactures consumer products from specialty resins. The company’s primary product line is Crocs-branded footwear for men, women, and children. It sells its products through traditional retail channels, including specialty footwear stores. Deckers Outdoor designs and produces sport sandals as well as sheepskin and sustainable footwear. The company’s products are marketed under three proprietary brands: Teva, Simple, and UGG. It sells its products through domestic retailers and global distributors and directly to consumers via the Internet.

Financial ratios for each company follow. EBI denotes after-tax earnings before interest expense and excluding nonoperating gains or losses.

Selected Financial Ratios

Note that Deckers Outdoor changed its fiscal year. The data reported for 2012 and 2013 are for the years ended December 31. There was a 3-month transition period for which Deckers reported financial information not shown in the data above. The data marked 2014 is for the year ended March 31, 2015. So, all of the periods shown are 12-month periods.

Required:

1. Which company was the more profitable in 2014?

2. What was the likely source of that company’s superior profit performance in 2014?

3. Which company was the more profitable in 2012?

4. Which company better manages its receivables and inventories?

5. How might the statistics provided for Deckers have been affected by the change in the fiscal year-end from December 31 to March 31?

Answer 1

Crocs and Deckers Outdoor: Comparing Footwear Manufactures ( LO 5-1)

Crocs designs, develops, and manufactures consumer products from specialty resins.

Ansi- Deckers Ootdoor was more profitable EB1/ sales margin is higher. in 2014. Its a) Its higher Asset turnover and ROA Crocs was more profitable in 2012 Receivables Management. Deckers Outdoor has managed its receivables better as it has been able to reduce the DRo appreciably from 49.6 days to 250 days in two years. In contrast, Crocs has its DRO increasing. Inventory management: Deckers Outdoor has managed its inventory better as it has been able to reduce the Din appreciably from 129.1 chys to 8 in two years ... In contrast, Crocs improvement in DRI is marginal. Ang lower Performance during the 3 month period, Jan-man of 2014, coint not be reflected in the third 12 month period. However, as this information is not available, the exact impact cannot be assessed.