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Financial Statement Analysis Project -- A Comparative Analysis of Kohls Corporation and J.C. Penney Corporation
Tationa Elliott Financial Use & Analysis August 24th 2012
Scott St. Pierre Keller Graduate School of Managment
Financial Statement Analysis Project -- A Comparative Analysis of Kohls Corporation and J.C. Penney Corporation
J.C. Penney was founded by James Cash Penney in 1902. This Plano, Texas
based company currently provides clothing, home goods, appliances, shoes,
and some of them even have beauty shops located inside of them. J.C Penny
has 1,100 department stores as of December 7, 2011 in the United States and
Puerto Rico. They currently provide sales through the store, online and
catalogs. This more than a century old company also provides styling salon,
optical, portrait photography and custom decorating services. They also
employs 159,000 employees.
Kohl's Corporation currently handles 1,127 department stores in 49 states.
Kohl's headquarters is located in Wisconsin and does its business online and
store front base. Kohl's sells name brand clothing, jewelry, home goods and
other essentials. The company was founded by Max Kohl in 1962 in
Brookfield, WI. Today, They employ more then 30,000 employees.
Earnings per share As given in the income statement $3.67
Current ratio Current assets $5,645,000,000 = 2.08 $6,370,000,000 =
Current liabilities $2,710,000,000 $2,647,000,000
Gross Profit Ratio Gross profit $7,032,000,000 = 38.24% $6,960,000,000 =
Net Sales $18,391,000,000 $17,759,000,000
Kohl's Corporation J.C. Penney Corporation
Profit margin ratio Net Income $1,114,000,000 = 6.06% $389,000,000 =
Net Sales $18,391,000,000 $17,759,000,000
Inventory Turnover Cost of Goods Sold $11,359,000,000 3.8 $10,799,000,000
Average Inventory $2,979,500,000 times $3,118,500,000
Days in Inventory 365 days 365 = 96 365 =
Inventory turnover 3.8 days 3.5
Receivable Turnover Ratio Net credit sales = Not Applicable =
Average Net Receivables
Average Collection Period 365 = Not Applicable =
Receivable Turnover Ratio
Assets Turnover Ratio Net Sales $18,391,000,000 = 1.38 $17,759,000,000 =
Average Total Assets $13,362,000,000 $12,811,500,000
Return on Assets Ratio Net Income $1,114,000,000 = 8% $389,000,000 =
Average Total Assets $13,362,000,000 $12,811,500,000
Debt to Total Assets Ratio Total Liabilities $5,462,000,000 = 40.27% $7,582,000,000 =
Total Assets $13,564,000,000 $13,042,000,000
Times Interest Earned Ratio Net Income + Int Expense + Tax Expense $1,914,000,000 = 13.6 832,000,000 =
Interest Expense $141,000,000 231,000,000
Payout ratio Cash dividend declared on common stock = Not Applicable $189,000,000 =
Net income $389,000,000
Return on Common Stockholders' Equity Net income - Preferred stock dividend 1,114,000,000 = 14% $389,000,000 =
Average common stockholders' equity 7,977,500,000.00 $5,119,000,000
Free cash flow = ($96,000,000) =
Free cash flow
Free cash flow per kohl's includes tax benefit
from pension contribution, discretionaty cash
pension contribution and proceeds from sale
of assets on page 15 of the 10K report $915,000,000 = $915,000,000 $158,000,000 =
Current cash debt coverage ratio Cash provided by operations $1,676,000,000 = 0.66 $592,000,000 =
Average current liabilities $2,550,000,000 $2,948,000,000
Cash debt coverage ratio Cash provided by operations $1,676,000,000 = 0.31 $592,000,000 =
Average total liabilities $5,384,500,000 $7,692,500,000
Price/Earnings ratio Market price as of 1/31/2011 $50.78 = 13.84 $32.07 =
EPS $3.67 $1.44
Cash provided by operations minus capital
expenditures minus cash dividends paid
$915,000,000 $915,000,000
Interpretation and Comparison between the two
companies' ratios (Reading the Appendix of
Chapter 13 will help you)
$1.64
Comparing these numbers is not meaningful since
the number of shares outstanding differs.
2.41
JC Penney has $2.41 in current assets for every $1
dollar in current liabilities while Kohl's has only $2.08.
JC Penney is more liquid based on the current ratio.
39.19%
JC Penney's gross profit ratio is better than Kohl's
gross profit ratio by almost 1% (39.19% - 38.24%)
0.95
J.C. Penney Corporation
2.19%
Kohl's is more profitable based on the profit margin
ratio because it earns 6 cents for every $1.00 in
sales as compared to 2 cents earning per $1.00 of
JC Penney.
3.5
Kohl's inventory turnover is slightly better by .3 than
JC Penney. This might indicate that Kohl's volume of
sales in terms of inventory is better than JC Penney.
times
105
The result of the days' in inventory is consistent with
the inventory turnover. The result is in favor of
Kohl's. Kohl's has the ability to sell its inventory 9
days (105-96) ahead compared to JC Penney.
days
Not Applicable
Not applicable - there is no accounts receivable on
the annual report of both companies.
Not Applicable
Not applicable - there is no accounts receivable on
the annual report of both companies.
1.39
The result of this particular ratio is almost identical;
JC Penney is irrelevantly better than Kohl's.
3%
Kohl's efficiency in the usage of its resources is
reflected on the return on assets ratio as it earns 8
cents for every dollar of assets as compared to JC
Penney's 3 cents earning for every dollar of assets.
Therefore, Kohl's is more profitable based on this
ratio.
58.14%
Kohl's require to liquidate 40.27% of its assets at
their book value to satisfy their obligations while JC
Penney must liquidate 58.14% of its assets at their
book value to satisfy their obligations. This ratio tells
us that the stockholder's interest is larger at Kohl's
compared to JC Penney.
3.6
Kohl's ability to pay its obligation is in a better
position compared to JC Penney based on this ratio.
Kohl's times-interest earned ratio is significantly
higher than JC Penney.
48.59%
Not Applicable - Kohl's did not declare and pay
dividend on 2010.
8%
Kolh's earning for every dollar invested by common
stockholders is better by 6 cents as compared to JC
Penney so Kohl's is more profitable based on this
ratio.
($96,000,000)
Kohl's has $915M in free cash flow while JC Penney
has -$96M based on the provided solution but $158M
if based on the computation provided by the annual
report. Regardless, Kohl's has the advantage on this
particular ratio.
$158,000,000
0.20
Kohl's 66 cents in cash provided by operation in
relation to average current liabilities is better than JC
Penney's 20 cents so Kohl's is more liquid based on
this liquidity ratio.
0.08
Kolh's 31 cents in cash provided by operating
activities for every dollar in average total liabilities is
stronger that JC Penney's 8 cents for every dollar of
average total liabilities. Therefore, Kohl's is more
solvent as compared to JC Penney based on this
ratio.
22.27
JC Penney is more marketable and the public is
more optimistic based on the price earnings ratio.
Liquidity: Kohl's state of liquidity is better than JC Penney based on the results of the liquidity ratios like
current cash debt coverage ratio and free cash flow. Kohl's $915M free cash flow is significantly more
than JC Penney's $158M free cash flow so this a solid basis of Kohl's advantage in liquidity as compared
to JC Penney. The result of current cash debt coverage ratio is also significantly in favor of Kohl's
compared to JC Penney. However, JC Penney's current assets in relation to current liabilities is more by
33 cents as compared to Kohl's.
Solvency: The results of the debt to the total assets ratio and the times interest earned ratio are both in
favor of Kohl's. These two ratios project a significant margin in favor of Kohl's; 40.27% vs 58.14% 13.6 vs
3.6 for debt to the total assets ratio and the times interest earned ratio respectively. The free cash flow and
the cash debt coverage ratio are both good measurements as well because both results significantly favor
Kohl's with $915M free cash flow as compared to JC Penney's $158M and 23 cents advantage in cash
provided by operating activities for every dollar in average total liabilities. Therefore, Kohl's state of
solvency is better than JC Penney.
Profitability: The profit margin ratio, return on assets and return on common stockholder's equity are all in
favor of Kohl's. Kohl's profit margin ratio of 6.06% is significantly higher than JC Penney's 2.19% and the
difference of 5 cents in the return on assets ratio by Kohl's over JC Penney is also significant. Kohl's
earnings for every dollar invested by common stockholders is better by 6 cents as compared to JC
Penney. Overall, Kohl's is more profitable than JC Penney. JC Penney's gross profit ratio is slightly
higher than Kohl but this is not sufficient measurement compared to various ratios that are in favor of
Kohl's.
Conclusion: Kohl's is more liquid and solvent compared to JC Penney based on the analysis and I can also
safely say that Kohl's profitability is stronger than JC Penney because majority of the profitability ratios
are in favor of Kohl's. The price earnings ratio might say that JC Penney is more marketable and that the
public is more optimistic about the future of JC Penney but this ratio is lacking in many elements
compared to the ratios that are in favor of Kohl's. Overall, the financial standing of Kohl's is better than JC
Penney based on my evaluation of these two companies.
The Appendixes of your textbook and any information you use to profile the companies should be cited as a reference below.
http://finance.yahoo.com/q/pr?s=JCP+Profile
http://www.jcpenney.com
http://finance.yahoo.com/q/pr?s=KSS+Profile
http://www.kohlscorporation.com/PressRoom/PressRoom02C.htm
http://bigcharts.marketwatch.com/historical/default.asp?symb=kss&closeDate=01%2F31%2F2011&x=27&y=18
http://bigcharts.marketwatch.com/historical/default.asp?symb=jcp&closeDate=1%2F31%2F11&x=37&y=19
The Appendixes of your textbook and any information you use to profile the companies should be cited as a reference below.