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Blue Nile vs. Tiffany's
Transcript of Blue Nile vs. Tiffany's
Financial Statements and
Key Ratios? Blue Nile
Strategic Profit Model
Analysis Case Study 13:
Tiffany's and Blue Nile:
Comparing Financial Performance Using the financial information provided: Construct a strategic profit model for Tiffany's and Blue Nile. 1. NPM: 3.26%
ROA: 34.75% December 2006 December 2005 NPM: 4.87%
ROA: 13.43% December 2004 NPM: 5.85%
ROA: 36.8% Tiffany’s
Strategic Profit Model
Analysis January 2005 NPM: 2.59%
ROA: 1.76% NPM: 16.43%
ROA: 11.99% January 2006 NPM: 14.87%
ROA: 14.84% January 2006 1. NPM: Net Profit Margins
AT: Asset Turnover
ROA: Return On Assets Definitions 2. Tiffany's Blue Nile Manufactures its own merchandise Outsources Manufacturing Jan. 2007 Tiffany's Number of Employees 8,900 8,120 7,341 161 146 120 Square Ft. in Stores 792,000 745,000 729,000 N/A N/A N/A Square Ft. in offices ,
Wharehouses 601,000 601,000 601,000 37,000 37,000 37,000 Jan. 2006 Jan. 2005 Blue Nile Dec. 2006 Dec. 2005 Dec. 2004 3. From a retail strategy perspective,
Why do we expect differences? Operating Expenses to
Sales Ratio Blue Nile/ Online Retailing.
Less Overhead!! Net Profit Margin Tiffany's is higher.
In- House Manufacturing.
Brick/Mortar Iventory Turnover Blue Nile has higher ratio.
Effective: Selling Merch. quickly.
With less remaining.
Asset Turnover Tiffany's has higher AT ratio.
Efficiency: Using assets t0 generate revenue.
Brick/Mortar = Touch/ Feel.
Over 150 years of service.
Which retailer has better overall financial performance now? 4.1 Tiffany's Higher Profit per Dollar Ratio.
Consistent A. T.
Recession...??? Currently: Tiffany's Which retailer will have better overall financial performance in the future? 4.2 Why? Continue Growth 12-16%.
Recent increase in global sales.
Strong brand name.
Broaden assortment. (Pearl collection). Future: Why? Summary of
Key Ratios A Brief History of
Tiffany & Co. 1837: Charles Lewis Tiffany and John F. Young open Tiffany & Young. 1841: Tiffany and Young take on another partner, J. L. Ellis, and the store becomes Tiffany, Young & Ellis. 1853: Tiffany buys out his partners and the firm becomes Tiffany & Co. 1878: The Tiffany Diamond. Charles Lewis Tiffany purchased a 287 carat yellow diamond, cut into 128.54 carats. 1910-1940s- Tiffany open a store at the corner of 57th Street and fifth avenue. 1960s- Audrey Hepburn creates the New York Tiffany’s style in “Breakfast at Tiffany’s." 1987- Tiffany celebrates their 150th anniversary. 2007- Tiffany opens at 37 Wall Street in a restored building. 2004- NASCAR asks Tiffany’s for a handcrafted trophy by Tiffany artisans. 1967- The National Football League asks Tiffany’s to design their trophy. MGMT EFFECTIVENESS Tiffany's Blue Nile Return on Equity 16.4% 36.6% Return on Assets 9.3% 15.8% Return on Investment 12.6% 35.9% Dividend Information Blue Nile Yield 1.5% 0% Tiffany's Annual Dividend 1% 0% Payout Ratio 34% 0% Blue Nile Diamond Retailer Largest online Diamond retailer.
Founded in 1999.
Highest Quality diamonds.
Ranked #42 on Forbes top 200.
Good customer service/ Guarantee Policy. Blue Nile:
Less Inventory = Cheaper Diamond Sustainable Competitve Advantage Tiffany's: Higher Ticket Price = Prefferred Purchase in Store. Price Increase = Increase Profit Margin. References:
Levy, Michael, Barton A. Weitz, Retail Management McGraw-Hill Irwin, New York, 2009.
Mercer, Jason. "Tiffany & Co." Wikinvest.com. Mediawiki. Web. Feb. 2011.