Nordstrom's Inventory Turnover Ratio

Nordstrom was established in 1901 and was a retail store for shoes. Among the stores many goals was to offer a wide selection of merchandise with outstanding quality and service. It was twenty two years before they added a second store, and eventually became one of the largest shoe store chains in the United States. They began offering clothing and accessories for the entire family. Right now, they are one of the top luxury retailers with over 320 stores in 29 states in have expanded into Canada. This paper will explore the financial health of Nordstrom for 2014, as compared to the previous year of 2013, and also compared to one of its top competitors; Macy’s. Its other competitors in the market are Dillards, and Neiman Marcus.
Macy’s
A high inventory turnover ratio is sometimes not a good thing for it reveals that the company may not have enough inventories to sell. People can analyze inventory turnover ratio with days in the inventory ratio. Nordstrom’s inventory turnover ratio in 2014 is 5.15 times which means the company turns over its inventory into sales 5 times a year, and the ratio in 2013 is 5.35 times. By comparing the inventory turnover ratio from 2013 with the ratio form 2014, we can conclude that Nordstrom’s inventory turnover ratio decreased. Nordstrom’s days in inventory are depicted as 70.87 days which means that Nordstrom takes approximately 70 days to sell its entire inventory in a year. Macy’s inventory turnover ratio is 2014 is 3.04 times, and its days in inventory ratio is approximately 120 days which means that Macy’s takes 120 days to complete turnover. Therefore, this difference shows that Nordstrom has enough inventories to sell and it demonstrates a better inventory control than
Debt to Total Assets Ratio
Nordstrom
2014 = 6805/9245 = 73.6%
2013 = 6494/8574 = 75.7%
Macy’s
2014 = 16083/21461 = 74.94%
2013 = 15371/21260 = 72.3%
In debt to total assets ratio, Nordstrom finances every dollar it has in assets with 74 cents in liability while its competitor, Macy’s, finances its assets with 75 cents in liabilities. This ratio shows that Nordstrom is heavily reliant on debt and is only .01 cents better than its competitor. However, Nordstrom is improving because the percentage decreased from 75.7 in 2013 to 73.6 in 2014.
Time Interest Ratio
Nordstrom
2014 = 695 + 138 + 465 / 138 = 9.41
2013 = 742 + 161 + 455 / 161 = 8.43
Macy’s
2014 = 1119+395+864/395 = 6.02
2013 = 1752+390+804/390 = 7.55
Nordstrom also shows greater ability in meeting its interest payable than Macy’s. According to the time interest earned ratio which measures the company’s ability to pay its obligation as they come due, Nordstrom’s ratio is recorded as 9.41 while Macy’s ratio is only recorded at 6.02. Furthermore, Nordstrom’s time interest earned ratio is increasing which shows that the company is more able to pay off its debt than Macy’s, whose ratio is decreasing. Nordstrom therefore exhibits an improving time interest earned ratio which shows its stability to creditors from a credit