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Module 1. Andrew DePalma. Why Valuation?. Driving force behind every business decision Goal to “ maximize shareholder value”. Valuation Steps. Knowledge of the company’s operating environment Identifying information about a company’s enterprise operating activities Analysis
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Module 1 Andrew DePalma
Why Valuation? • Driving force behind every business decision • Goal to “ maximize shareholder value”
Valuation Steps • Knowledge of the company’s operating environment • Identifying information about a company’s enterprise operating activities • Analysis • Estimate expected future payoffs
Porter’s Value-Chain Model • Primary activities: • Inbound logistics • Operations • Outbound logistics • Marketing and sales • Servicing
Porter’s Value-Chain Model • Support activities: • Company infrastructure • Human resource management • Technology/product development • Procurement
Porter’s 5 Forces Industry competition Bargaining power of buyers Bargaining power of suppliers Threat of substitution Threat of entry
Apparel Stores • Abercrombie (ANF) • American Eagle (AEO) • The Gap Inc. (GPX) • Aeropostle (ARO)
Industry Financials • Revenue: $97.8bn • Profit: $7.4bn
Key Drivers • Consumer Confidence Index • Cotton Prices • Per capita disposable income
Industy Trends • Purchases driven by price • Competition from department stores and specialty stores • Mature industry
A&F • Founded in 1892 under the name David T. Abercrombie Co in New York City • The name was changed after Ezra Fitch wanted to buy into the store
A&F SWOT Analysis • Strengths- diversification of the company and strong presence of e-commerce business • Weaknesses- overdependence on U.S. markets and 3rd party manufacturers • Opportunities- growth of online shopping, international sales, and growth of apparel industry • Threats- competitors, labor costs, and fluctuations of exchange rates
A&F Porter’s 5 Forces • Wal-Mart and Target can be potential competitors • Bargaining Power of the buyers is high because of consumer preference • Bargaining Power of the suppliers is low • The Gap Inc. is leading against A&F and American Eagle but are facing some of the same issues as A&F
Works Cited • IBISWorld – Family Clothing Stores in the US