Summary:
In this article The North West Company Inc, a grocery and merchandise company announces their fourth quarter earnings and a quarterly dividend ended January 31, 2011. Their net earnings were 17.3 million, a decrease of 14.6% from last year. Their sales increase 1.1% to 374.5 million more than last year fourth quarter. Strong food sales growth in Northern Canada and Alaska banners contribute to the increase in sales but their continued sales weakness in their International Operations wholesale business and soft general merchandise sales performance in their Cost-U-Less stores were the main reason of their decrease in net earnings. North West Company’s trading profit or earnings before interest, income taxes, depreciation, and amortization decrease 4.6% to 30.9 million compare to last year fourth quarter. The lower gross profit rates and higher expenses in Canadian Operations were the leading factors contributing to this decrease. Also the trading profit decreased 3.9% and was 8.3% as a percentage to sales compared to 8.8% last year. The President & CEO Edward Kennedy said that the short-term cost pressure continued in the fourth quarter causing underperformance from their discount banners and more than the strong sales gains in Alaska and Northern Canada stores.
Connections:
This article shows examples of dividends declared and cash flows in the cash flow statement. The first example is dividends declared it is located in the financing section. Dividends Declared is shown in the article above but we do not know if the dividend declared is paid or not, also it can affect the cash flow statement if it’s paid or not. If the dividend declared is paid this will affect the cash flow statement and potentially the cash flow will go down but if it’s not paid it will not include in the cash flow statement which will not affect anything in the cash flow statement. My second example is cash flow because in the article there are a bunch of cash inflow and outflow and also this can affect the cash flow statement. An example of a cash inflow in the article is when North West Company Inc sales increase to 374.5 million which result in an increase and an example of a cash outflow is when they bought inventories for their International Operations wholesale business and soft general merchandise sales performance because the sales for these aren’t profitability which result in a decrease. In a cash flow statement it will summarizes all the cash flows which will give the company’s cash position during the year and in the article the company’s cash position resulted in a decrease.
Reflection:
In my opinion I think the North West Company Inc is a successful grocery and merchandise company but they will need to act quickly to gain some profits in their International Operations wholesale business and soft general merchandise sales because if they don’t their net earnings will keep on decreasing even though they have strong food sales growth in northern Canada and Alaska. Also when shareholders see this they will stay away investing in this company because they’re not making any profits. One solution is they should lower their prices in their soft general merchandise sales hopefully the sales will increase and even out or counter their strong food sales. The other solution is they somehow need to get a strong cash flow because this will attract potential investors to invest in their company and more cash for the company. Therefore the profits they earned can cover their weakness in their International Operations wholesale business and soft general merchandise sales.
I agree with you that the North West Company Inc. needs to act quickly to make their profit increase. There is one thing I want to add on to your sentence in the connection section, "An example of a cash inflow in the article is when North West Company Inc sales increase to 374.5 million which result in an increase..." An increase in sales would cause the net income to increase in the cash flow, in the operating section. Also purchasing inventory would go into the financing section causing the cash flow to decrease. One of the points I disagree with you in the reflection section is where you said that they should lower prices. As you have stated in the summary, their sales increased but their profit was lower compared to last year. Instead of lowering the price, they need to find a way for Cost-U-Less and International Operations to make more money because they're the main reason for their decrease in net income. The North West Company also needs to find a way to lower their expenses or find a way to get cheaper inventory, perhaps saving a bit of electricity from every store everyday would help a little depending on their expenses. This is only one suggestion.
ReplyDelete