Equity Analysis of
A quantitative look through Trend Analysis,
Comparative Analysis, and Financial Ratio Data
Presented by: James, Susha Zhang, Renjun Ying

Company Background
• Founded as a single store in San Francisco in 1969,
and is currently one of the top American companies
within the family clothing store industry. SIC 5651
• Prides itself on quality and customer focus with
product offerings in apparel, accessories, and
personal care products for men, women, and
children
• Not unique. Many competitors. Barriers to entry
relatively low; competitive scope crowded.

Company Background (cont’d)
• Gap differentiates through offering many brands at
different price points and quality
• Also targets various demographics
• Various brand name subsidiaries also include:

A Trend Analysis view
2009 2010 2011 2012 2013
Operating Assets
Operating Cash 585.33 147.56 95 107.69 86
Net Receivables 0 0 205 297 331
Inventories 1506 98 107.57 107.24 116.73
Prepaid Expenses 356 73 40.7 41 42.4
Other Current Assets 387 86.8 74.4 93 98.7
Net Plant, Property & Equipment 2933 89.6 87.4 86 89.3
intangibles 197 94 89.3 89.3 160.4
deferred charges 0 0 0 0 0
Other Assets 429 118.1 93 96.5 94
Total Operating Assets 6393.33 98 93 96 101
Operating Liabilities
Accounts Payable 975 105.3 107.6 109.3 117.3
Taxes Payable 57 72 87.7 8.8 189
Accrued Expenses 548 106 71.9 73.4 75.4
Other Current Liabilities 528 91.3 114 112.9 128.6
Total Operating Liabilities 2108 101 99 98 111
Net Operating Assets (NOA) 4285.33 96 90 95 96
REFORMULATED BALANCE STATEMENT TREND ANALYSIS

A Trend Analysis view (cont’d):
Reformulated Income Statement TREND ANALYSIS
2009 2010 2011 2012 2013
Sales 14526 97.7 101 99.8 107.7
Cost of Goods sold 8426 92.7 96.4 97 105.9
Gross profit 6100 104.6 107.1 96.2 110.3
Operating expenses
Selling, General & Administrative expenses 3899 100.3 100.6 98.4 108.5
Depreciation, depletion&Amortization 653 100.3 99.2 90.7 85.6
Operating income from sales(before tax) 1548 117.2 127.1 92.9 125.5
Taxes
Taxes as reported 617 115.7 126.1 86.9 117.7
Tax on financial items and other operating income 3.15 66.7 77.8 866.7 1033.3
Operating income from sales(after tax) 927.85 118.4 128 94.2 125.5
Extraordinary Items 0 0 0 0 0
Discontinued operations 0 0 0 0 0
Income before extraordinary items & discontinued operations927.85 118.4 128 94.2 125.5
Financing income/expense
Interset expense 9 66.7 77.8 866.7 1033.3
Tax effect(35%) 3.15 66.7 77.8 866.7 1033.3
Net interest income/expense 5.85 66.7 77.8 866.7 1033.3
Noncontrolling interest-inc Acc 0 0 0 0 0
Preferred dividends 0 0 0 0 0
Savings due to common stock equivalents 0 0 0 0 0
Net financing income 5.85 66.7 77.8 866.7 1033.3
Non-operating income/expense 45 15.5 13.3 20 26.7
Special Items 0 0 15 0 0
Operating income(after tax) 967 114 123 86.1 117.4
Comprehensive income 967 114 123 86.1 117.4

Trend Analysis
0
200
400
600
800
1000
1200
1400
January, 2009 January, 2010 January, 2011 January, 2012 January, 2013
Comprehensive Income

Comparative Analysis
12 % 13 % 12 % 13 %
Operating Assets
Operating Cash 630.33 10 503.33 8 692.33 10 428.33 6
Accounts Recievables 297 5 331 5 2033 29 2129 29
Inventories 1615 26 1758 27 1148 16 1360 19
Prepaid Expenses 146 2 151 2 0 0
Other Current Assets 360 6 382 6 302 4 307 4
Property Plant and Equipment 2523 41 2619 41 2469 35 2579 36
Intangibles 176 3 316 5 175 2 175 2
Deferred Taxes 0 0
Other Assets 414 7 403 6 287 4 254 4
6161.33 100 6463.33 100 7106.33 100 7232.33 100
Operating Liabilities
Accounts Payable 1066 52 1144 49 917 44 1011 46
Accrued Expenses 402 19 413 18 388 19 404 18
Taxes Payabable 5 0 108 5 0 0 0 0
Other Current Liabilities 596 29 679 29 764 37 804 36
2069 100 2344 101 2069 100 2219 100
THE GAP NORDSTROM
OP CASH
A/R
INVENTO
RY
OTH
CURRENT
ASSETS
PPE
INTANG OTH ASST
OP CASH
A/R
INVENTO
RY
OTH
CURRENT
ASSETS
PPE

Comparative Analysis (cont’d)
12 13 12 13
Sales 10,877.00 111.7 14497 107.9
Cost of Goods sold 6,221.00 112.6 8173.2 109.2
Gross profit 4,656.00 110.5 6323.8 106.4
Operating expenses
Selling, General & Administrative expenses 3,023.00 111.5 3836.6 110.3
Depreciation, depletion&Amortization 371 115.6 592.3 94.4
Operating income from sales(before tax) 1,262.00 106.6 1438.1 135.1
Taxes
Taxes as reported 436.00 103.2 536.2 135.4
Tax on financial items and other operating income 48.65 120.14 2.73 119.2
Operating income from sales(after tax) 777.35 107.62 874 133.2
Extraordinary Items 0 0 0 0
Discontinued operations 0 0 0 0
Income before extraordinary items & discontinued operations 777.35 107.62 874 133.2
Financing income/expense
Interest expense 139 120 78 119.2
Tax effect(35%) 48.7 120 27.3 119.2
Net interest income/expense 90.3 120.3 50.7 119.2
Noncontrolling interest-inc Acc 0 0 0
Preferred dividends 0 0 0
Savings due to common stock equivalents 0 0 0
Net financing income 81.35 124.83 50.7 119.2
Non-operating income/expense 90.3 120.3 9 133.3
Special Items -13 0 0 0
Operating income(after tax) 773.3 103.09 833 136.3
Comprehensive income 773.3 103.09 833 136.3
NORDSTROM GAP

Financial Ratios

Financial Ratios
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
ROCE 0.22042398 0.225311797 0.291421569 0.302359347 0.392190739
RNOA 0.216517748 0.266292192 0.30781493 0.213741316 0.287291865
NBC -0.385069342 -0.00405584 -0.006531532 0.031181533 0.039540369
FLEV -0.023175291 -0.156272746 -0.054411765 0.485419238 0.423403594
Spread 0.168551594 0.262236352 0.301283398 0.182559783 0.247751497
ROCE (definition two) 0.22042398 0.225311797 0.291421569 0.302359347 0.392190739
Asset Turnover 3.389703943 3.440304168 3.800933126 3.555187387 3.799404272
RNOA 0.216517748 0.266292192 0.30781493 0.213741316 0.287291865
PM 0.06387512 0.077403677 0.080984043 0.060120971 0.075614977
Operating Liability Leverage 0.491910775 0.516396998 0.543027475 0.505579951 0.569024574
Return on Operating Assets 0.151722185 0.182419335 0.206526121 0.148682184 0.190355436
Implict Interest 42.16 42.62 41.9 41.38 46.88
RNOA(difinition two) 0.216517748 0.266292192 0.30781493 0.213741316 0.287291865
ROCE(definition three) 0.22042398 0.225311797 0.291421569 0.302359347 0.392190739

Graph for Ratios
0
0.1
0.2
0.3
0.4
0.5
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
ROCE
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
RNOA
0.44
0.46
0.48
0.5
0.52
0.54
0.56
0.58
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
OLLEV
-0.2
0
0.2
0.4
0.6
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
FLEV

Turnover Ratios
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Receivables Turnover - - 143.0634146 57.96414343 49.84394904
Inventory Turnover 5.46965271 5.241702984 5.248304811 5.368160742 5.289653128
Payables Turnover 8.50681474 7.81018981 7.829479769 8.210874704 8.073303167
Days Sales Outstanding - - 2.551316148 6.296996357 7.32285477
Days in Inventory 66.73184192 69.63385776 69.54626553 67.99349303 69.00263423
Days in Payables 42.90677664 46.73381939 46.61867848 44.45324197 45.21073871

Graph for Ratios
0
1
2
3
4
5
6
7
8
Jan-11 Jan-12 Jan-13
Days Sales Outstanding
55
60
65
70
75
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Days in Inventory
35
40
45
50
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Days in Payable

Graph for ATO

• With respect to 1/ATO, which can show the amount of
NOA used to generate dollars of sales. it can help us
understand the ability of the net operating assets(NOA)
to generate sales.
• The overall trend is falling down. Which means the firm is
adjusting its asset turnover .In general, the company’s
profit ability is increasing.
1/ATO ANALYSIS

Expense ratio

• Expense ratios calculate the percentage of
sales revenue that is absored by expense,it
shows the company’s revenues and expenses
structure.
• Gap used the expense very stable and
effictively
Expense ratios analysis

The End
Q&A