Evaluation Of Financial Condition Of Next Plc: A Comparative Study With Its Competitors

Discuss about the Evaluation of Financial Condition of Next Plc.

The Company Next Plc is retail marketing company in United Kingdom. The company deals with clothing, shoes and accessories of women, men and children. The company had opened its first store in the year 1982. The store contains an exclusive collection of clothing, accessories and other things for women. The Company Next now operates in almost 40 countries across the World. The clothes and accessories of the Company are designed by their in house team that has made a rapid success in their business (Pharoah and Walker 2015.).

The research work is to evaluate the performance of the Company over the last few years. The Company has introduced new features such as online marketing and internet Book for shopping in the year 1999. The Company has shown a rapid growth in sales and marketing since then (Dunis et al. 2017). The profit figures of the company have shown an upward trend over the years. The main competitors of the Company are Sainsbury, Tesco which also trades in retail marketing. The asset liabilities of these companies are to be checked in this research to identify the liquidity position of the business (Maynard 2013). A comparative study of the share prices of these companies, profit figures of these companies has been studied using ratio analysis.

The research has been conducted the study to know about the financial position of the company Next Plc from 2010 to 2015. The main aim of the research is to know about the financial stability of the Company Next Plc. The research also aims at depicting the significance and the financial techniques that can be used by the investors to get knowledge about the financial condition of the Company (Singh 2014). The research also compares the financial condition of the Company with other companies such as Sainsbury, Tesco Plc and others. This research will also help the share holders and investors of the Company to get an idea about the financial condition of the Company and to decide whether to invest in this Company.

The main objectives in this research work are:

To determine the financial position of the Company Next Plc.

To determine how relevant are the financial technique that are used to determine the financial position of the Company.

To give a clear idea about the financial position of the Company that will help the investors to understand the current situation of the Company.

To find out some recommended measures that will eradicate the financial problems in the Company.

The main research questions used for the research study are as follows:

What is the current financial position of the Company Next Plc.?

What are the changes in the financial condition of the Company Next Plc. Over the last few years?

How is the Company Next Plc. Performing over the years with regards to their financial position?

What can be said about the financial stability of the Company Next Plc.?

What is relative change in the ratio over the years?

The Company Next Plc. is an online retail Company that trades in clothing. The Company has started in the year 1982. The Company now has almost 500 stores in the country United Kingdom and 200 stores across 40 different countries over the globe. The company is one of the leading retail trading Company in United Kingdom. The Company is one of the chief competitors of the Company Sainsbury and Tesco. The company Sainsbury mainly trades in food and non food retail products. The Company Tesco is also a retail products Company that trades in variety of goods. Despite these two Companies, the Company Next Plc. Has established itself as one of the leading company in United Kingdom. The Financial position of the Company, the assets, liabilities of the Company and the share price of the Company needs to be studied based on the financial report of the Company. The various ratios like profit ratio, quick ratio and others has been calculated that will give a idea about the current financial position of the Company.

Research questions

The research work has been conducted to know about the current financial position of the Company Next Plc. The research will analyze the financial growth of the Company. The research will also compare the growth of the Company with its competitors. The research will help the investors of the company to take financial decision about investing in the Company.

The financial condition of the company is being used in this research area. The background study says that the company Next Plc. has captured the retail market within a short span of time. The profit figures of the Company have shown an increasing trend. The financial condition of the country is being analyzed in this report. The reasons for the success of the company have also been discussed in this research work.

The Company Next is a listed Company in the London Stock Exchange. The company is actually a British multinational clothing Company that trades in Foot3wares, accessories, clothing and other commodities. Te Company has its headquarters in Enderby, Leicestershire. The Company is mostly based in United Kingdom. More than 500 stores of the Company are located in United Kingdom and Ireland. There are almost 200 stores located all over Europe as well as in Asia, Europe and Middle East (Sethi, Martell and Demir 2015). The Company Next Plc has over taken the Company Marks & Spencers. The early history of the Company dates back to 1864 which was founded by Joseph Hepworth as a tailor. The Company has flourished its business over the years and employs almost 50000 employees. The profit of the Company has been estimated to be £634.9 million (Munteanu 2015).

The Company Next Plc has shown a rapid increase in the sales over the years. The financial report of the company states that the operating profit of retail has increased by 4.8% from the year 2015. The sales of the Company have increased by 1.1%. The net trading space that is the area of the stores has not increased as such. The new states have opened at many places while there is a closure of the old stores. The net trading area for retail stores is 275000 square feet in the year 2016. The Company has a goal to increase this space to 35000 square feet in the year 201. The overseas sales of the Company have also increased by 6.5%. The Company has also launched a mobile phone app and an iPad app for its customer. The iPad app gives a better view of the product of the customers. With the help of the mobile phone app the customer can get a better view of the product. The pages of the app site are like the pages of the catalogue. The Company however has kept its catalogue as most of the customers of the company are used to shop with the help of the catalogue (Datta, Gopalakrishna-Remani and Bozan 2015).

The Company operates its sales activities through three different platforms. The first is through the retail stores. There are almost 500 retail stores located in United Kingdom and other European countries. There is also another method of home shopping. The Company publishes a home shopping catalogue through which the customers can do home shopping. The company gets almost 3 million customers through this home shopping catalogue (Maynard 2013). There also International stores through which the Company gets International customers. The revenue growth of the Company has increased from 2013 to the year 2014. The growth rate of the Company Tesco has shown a negative growth. The Next Plc. on the other hand has shown a rapid growth in the sales figures and in the profit as well (Teodor, Maria and Bogdan 2015).

Background issues related to the research

The Company Sainsbury is also a retail trading company. This company is also a major competitor of Next Plc. According to some recent study, the profits of the grocery giant Company Siansbury has declined. The sales of the Company have been decreased by 1.1% in the year 2016. The share price of the company has also decreased by 4% in the current year. All these has contributed to the growth of the Company Next Plc. The sales of Next have also decreased from February to April in the year 2016. The sales of the Company have decreased by 0.9%. The Company however has expected that the sales of the Company will remain in between a fall of 3.5% and a rise of 3.5%. The retail sector is a place of great up down in market trends. The share price of the Company grows or falls to great extent. This creates great problems to the investors of the business. For example, the share price of the company Tesco has declined by 49% while for Sainsbury; there is a decrease of 27% in the share price. This financial report also aims to give an idea about the future sales of the Company Next Plc. from the previous year’s sales figures (Schmidlin 2014).

The financial performance of the company refers to the use of assets to generate the revenue of the Company. In order to make decisions about the financial condition of the company, the ratio analysis of the company needs to be done (Sethi, Martell and Demir 2015). The income statement o the Company needs to be studied in this respect. The return on equity, net profit margin of the companies also needs to be studied. The shareholders equity of the Company gives an idea about the financial condition of the Company (Coulson and O’Sullivan 2014). The competitor company’s financial condition also needs to be studied to get a clear idea about the current financial position of the Company. The Company Tesco is a chief competitor of the Company Next Plc. The analysis of the financial statement of the two company’s states that both the companies are top listed in the London Stock Exchange. The company Tesco has declined in the market in the past few years. The company revenue growth of the company Tesco has decreased over the last four years (Schürmann 2016).

The Company Next however has given a high performance in the market. The profit figures were high for a considerable period of time. There a lot of factors that has contributed to the growth of the Company (Schmidlin 2014). One of them is the changing consumer behavior in the retail market. The popularity of online shopping has made the customers to shift from ordinary method of shopping to the use of internets for shopping. The profit of the company has risen by 10.9%. The online shopping has been introduced by the Company in the year 1999. This has led to the span of their business across 70 countries outside United Kingdom (Johal, Vickerstaff and McAuliffe 2014). The Company has also adopted many new methods of business such as home delivery, next day delivery and others. The retailer allows the customers to collect and return clothes at any of the stores located across the country. The Company has focused more on their customer services to give a better quality of service (Evans 2013). There is an “in-house delivery service provided by the company to deliver the large items directly to the customers’ home in the weekends. The customers can also order at any time and check the payments in their accounts. This gives a clear idea about the transactions (Tsegba and Upaa 2015).

Justification for the research

The Company has also taken care of its corporate social responsibilities. The corporate social responsibility in this firm is mainly concerned with the ethical and environmental issues related to the business. The Company uses the policy of Corporate social responsibilities. However, the corporate social responsibilities are not visible as such.

According to Haddock and Rigby (2015), the financial performance of the company Tesco has been declined over the few years. The report analyses the four years financial data from the year 2011 to 2015. The report also tries to find out the main cause of the decline in trade of the company. The lower performance has been mainly due to the competition from other retail companies. The report also states that the change of the directors of the company and lack of proper leader has led to the decline of the company. The research also gives an idea about the possible measures for the recovery of the current situation of the company. The company has recovered a great deal by adopting several measures after the financial crisis.

According to Nalwaya and Vyas, the merger and acquisitions on the financial performance of a company has to be studied to get an idea about the financial performance of the business of a company. The two companies Hutch and Vodafone are chosen for the purpose of the study. The data collected for the study is secondary data. The data are collected from the financial report of the companies. The quick ratio, gross profit ratio, net profit ratio, return on investment, earnings per share, debt equity ratio has been calculated for the study. The comparison of these ratios has been done with the help of paired sample t-tests. The  95% confidence interval has also been calculated for the research work. The study reveals that the earnings growth has increased after the merging of the two companies.

According to Haddock and Rigby (2015), the performance of any company is greatly affected by the financial condition of the company. The report aims to analyze the financial performance of the life insurance companies of India. The financial ratios have been calculated for this study. The financial performance depends on various parameters. The liquidity ratio, solvency ratio, profitability of the firms is being calculated for this purpose. 18 Indian life Insurance companies have been chosen for this purpose. A linear regression model has also been fitted for this study. The regression has been conducted to see if the factors have any influence on the profitability of the life insurance companies. The results of the study reveal that the liquidity and size has a positive influence on the life insurance company while the capital has a negative impact on the life insurance companies.

Business Discipline and academic area that relate to the research

The previous literatures give an idea about how the research can be carried out. The research question in this research work is to determine the financial condition of the company Next Plc. The literatures are mainly theoretical research. This research study is based on the financial performance of the company. The first research is not so helpful for the study. The second research gives a lot of idea for performing the research work. The third research wok also gives the proper ideas about how to conduct the research work. The research question can be answered with the help of the various ratios like quick ratio, liquidity ratio, solvency ratio, profitability of the firms and others that has been conducted for the study.

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