RIVER ISLAND CLOTHING

River Island Clothing



River Island Clothing

Introduction

River Island Clothing has designs on more than just the UK. Designing most of the clothing and accessories it sells, the youth-oriented firm operates more than 250 clothing, accessory, jewelry, and footwear shops (including about two dozen superstores) and is among the best known UK brands. The company makes and markets such products as shirts, tops, knitwear, jeans, trousers, jackets, footwear, and other related accessories for both men and women. Skirts, dresses, and jewelry also are available for women. Customers can also shop online at the company's Web site. The company is owned by investment firm Lewis Trust and sells its products mainly in the UK, Ireland, Turkey, Poland, Singapore, and the Middle East.

River Island designs and retails men's and women's clothing, footwear, accessories and cosmetics. The majority of products are designed in-house and sold principally under the River Island brand, although other River Island owned brands are used. A small proportion of sales are attributable to third-party brands. River Island has shops in over 180 locations Great Britain and Northern Ireland, 9 shops in the Republic of Ireland and elsewhere in the world retails through franchise partners in Kuwait, Saudi Arabia, United Arab Emirates, Bahrain, Malta, Cyprus and Poland. In all territories the target market is the fashion aware 18-35 year old sector. In addition to its shops, River Island retails through mail order catalogue and website.

Within the geographic markets mentioned above, the River Island store card is available only in Great Britain and Northern Ireland. In addition to its store card, River Island accepts a full range of payment methods from customers, including cash, cheque, credit and debit cards.

Financial Highlights (2009)

Total Revenue

37,843,000,000

EBITDA

8,872,000,000

Operating Income

7,404,000,000

Net Income

4,427,000,000

Total Assets

62,497,000,000

Current Assets

11,666,000,000

Total Liabilities

30,174,000,000

Current Liabilities

11,591,000,000

Long Term Debt

11,351,000,000

Stockholders' Equity

32,323,000,000

Financial Performance

In the current situation of River Island Clothing, ratio analysis possess a very important role in determining the past, present and future outlook of the company. Ratio analysis is the most extensively used form of financial analysis. In this section, ratio analysis is aimed at characterizing the firm in a few basic dimensions considered fundamental to assess the financial health of River Island Clothing. We will compare the ratios of 2008 and 2009 in order to determine the financial health of River Island Clothing

Only one or two retailers operate their store cards in-house. River Island uses the services of GE Capital Bank Ltd. In the context of River Island considering bringing its store card operation in- house (which could potentially improve competition in the third party provider market) there are significant barriers to entry, including.

(a) Set up costs for:

Call centre operation

Compliance Department

Computer systems to manage card accounts

Development of credit scoring system

Hardware costs for the above

Human resources recruitment

Training Department

(b) Ongoing costs:

Bad debts

Card manufacturing costs

Credit scoring

Fraudulent card applications and usage

Higher marketing costs covering design/print issue of store card documentation

Human resources

Occupancy costs for call centre

Against these barriers the only significant advantage would be financial if River Island Clothing ...