Trade-Off 3:
Direct versus Fulfillment Partner
0%
5%
10%
15%
20%
25%
30%
35%
0 1 2 3 4 5 6 7 8 9 10 11
Turnover
Profit Margin
ROE=20%
Direct
Fulfillment Partner
(Gross-Basis: they take returns)
Fulfillment Partner
(Commission-Basis)
Fulfillment Partner
Trade-Off 4:
Discount Retailer versus Department Store
0%
5%
10%
15%
20%
25%
30%
35%
0 1 2 3 4 5 6 7 8 9 10 11
Turnover
Profit Margin
ROE=10%
ROE=20%
Department Store
Overall Evaluation of Trade-Off
0%
5%
10%
15%
20%
25%
30%
35%
0 1 2 3 4 5 6 7 8 9 10 11
Turnover
Profit Margin
ROE=10%
ROE=20%
May Department Stores
Overstock.com
Ross Stores
Amazon.com
Dupont Analysis:
Overstock versus Amazon
Overstock.com
= Return on Net Operating Assets
(0.163)
(0.250)
Net Borrowing Cost (NBC)
3.078
1.971
Spread (RNOA – NBC)
(3.241)
(2.221)
Financial Leverage (LEV)
0.107
0.004
ROE = RNOA + LEV*Spread
(0.512)
(0.258)
Amazon.com
= Return on Net Operating Assets
(0.876)
(0.007)
0.179
Net Borrowing Cost (NBC)
0.072
0.064
0.061
Spread (RNOA – NBC)
(0.948)
(0.072)
0.117
Financial Leverage (LEV)
(5.171)
(1.598)
(1.775)
ROE = RNOA + LEV*Spread
4.027
0.107
(0.030)
x Net Operating Asset Turnover
7.507
3.663
5.056
= Return on Net Operating Assets
(2.454)
(0.163)
(0.250)
Net Borrowing Cost (NBC)
0.312
3.078
1.971
Spread (RNOA – NBC)
(2.766)
(3.241)
(2.221)
Financial Leverage (LEV)
0.782
0.107
0.004
Net Operating Margin
0.061
0.057
0.053
0.057
0.058
x Net Operating Asset Turnover
5.391
5.551
5.824
5.321
= Return on Net Operating
Assets
0.306
0.292
0.332
0.310
Net Borrowing Cost (NBC)
0.066
0.060
0.014
0.000
Overstock.com
Advanced Dupont Model
2001
2002
2003
Net Operating Margin
(0.327)
(0.045)
(0.049)
x Net Operating Asset Turnover
7.507
3.663
5.056
= Return on Net Operating Assets
(2.454)
(0.163)
(0.250)
Advanced Dupont Model
1999
2000
2001
2002
2003
Net Operating Margin
0.080
0.074
0.065
0.058
0.049
x Net Operating Asset Turnover
1.764
1.650
1.585
1.609
ROE = RNOA + LEV*Spread
0.212
0.178
0.133
0.101
Margins and Turnover:
Overstock.com
Overstock.com
Margin Analysis
Gross Margin
#DIV/0!
#DIV/0!
0.187
0.227
0.117
EBITDA Margin
#DIV/0!
#DIV/0!
(0.194)
0.015
(0.039)
EBIT Margin
#DIV/0!
#DIV/0!
(0.339)
(0.044)
(0.052)
Net Working Capital Turnover
#DIV/0!
10.551
4.231
5.888
Avge Days to Collect Receivables
#DIV/0!
7.140
17.018
13.119
Avge Inventory Holding Period
#DIV/0!
42.551
55.404
37.939
Avge Days to Pay Payables
#DIV/0!
26.918
49.199
41.245
PP&E Turnover
#DIV/0!
15.944
18.425
33.122
Amazon.com
Margin Analysis
Gross Margin
0.218
0.238
0.239
0.273
0.253
EBITDA Margin
(0.192)
(0.123)
(0.032)
0.049
0.066
EBIT Margin
(0.364)
(0.240)
(0.074)
0.027
0.051
Net Operating Margin (b4 non-rec.)
(0.364)
(0.240)
(0.074)
0.027
0.051
Net Operating Margin
(0.387)
(0.464)
(0.137)
(0.002)
0.031
Avge Days to Pay Payables
80.458
70.558
69.293
68.349
PP&E Turnover
8.076
9.786
15.389
22.704
Net Operating Margin (b4 non-rec.)
0.063
0.057
0.053
0.057
0.058
Net Operating Margin
0.061
0.057
0.053
0.057
0.058
Turnover Analysis
Net Operating Asset Turnover
5.391
5.551
5.824
5.321
Net Working Capital Turnover
12.847
13.087
13.552
11.131
Avge Days to Collect Receivables
2.028
2.136
2.010
2.031
Margins and Turnover:
May Department Stores
May Department Stores
Margin Analysis
Gross Margin
0.358
0.351
0.350
0.340
0.339
EBITDA Margin
0.164
0.156
0.145
0.134
0.138
EBIT Margin
0.131
0.120
0.105
0.093
0.096
Net Operating Asset Turnover
1.764
1.650
1.585
1.609
Net Working Capital Turnover
4.758
4.837
5.327
5.293
Avge Days to Collect Receivables
53.501
51.744
49.768
47.817
Avge Inventory Holding Period
111.519
115.175
117.459
115.828
Avge Days to Pay Payables
39.162
39.121
43.396
46.779
PP&E Turnover
3.002
2.790
2.515
2.514