Hermes International: Financial Analysis Of Jimmy Choo

One of the biggest competitor of Jimmy Choo is Hermes International that is into designs, production, and distribution of personal luxury accessories and apparel. In terms of its profitability, Hermes International Gross Profit % as well as Return on Equity is comparatively higher than Jimmy Choo , due to major of the revenue generated from sales of Leather Goods. The Growth in Leather goods and Saddlery is (+14%) which is remarkable, due to which investments in Leather goods and Saddlery division might increase in the future by the investors as they will expect good returns on their investment.(MORNINGSTAR, 2017).Also, the return on equity of Hermes International is much more appreciating than that of Jimmy Choo’s which clearly indicates that
While the acid test ratio increased from 0.46 in the year 2014 to 0.49 in the year 2015, which remains constant in the year 2016.The current ratio indicates company’s capacity to survive or no in the market. Generally, investors expect ratio of 2:1, which means the assets are twice of the liabilities. However, the above table represents that the liabilities were more than the assets in the year 2014 and 2015, where in the year 2016, Jimmy Choo was in better position because of increased in the current assets compared to their current liabilities. Similarly, the acid test ratio is 0.46 in the year 2014, which indicates that company cannot completely pay back its obligation, to pay back the same it might have to use its inventory. The data from the table also demonstrates that Jimmy Choo is struggling to grow or maintain the the sales at same pace, as well as the information from the balance sheet of the company’s annual report indicates that the company is paying bills too rapidly and gathering receivables too
Generally, liquidity ratio that is more than 1 indicates that the organization is in good financial position and can pay back its obligation on time . However, if it is lesser than one it becomes difficult for the organization to meet the debt obligations on time (READYRATIOS, 2017).
From the below graphs, it is understood that Hermes international is performing better than Jimmy Choo. It also explains that liquidity ratio of Hermes International is performing much better than Jimmy Choo consecutively for 3 years because they have more of current assets in comparison to their current liabilities. However, in the year 2016, JimmyChoo’s current ratio is greater than 1 which explains that it is in position to meet the debt obligations.
Moreover, the recent analysis of the liquidity ratio of the firms from the below graph indicates that as per the industry average Hermes International is performing much better and way ahead of Industry average and Jimmy choo is struggling to be at par with the industry