True Region Jeans: Financial Ratio Analysis and SWOT

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Table of Contents

Financial ratios
Internal company analysis
External company analysis
References

True Region’s financial analysis and swot analysis is presented in this case study as a way to identify how the company can strengthen its position in the industry and to continue enjoying the largest share in the market. This paper starts with the financial ratio analysis followed by the SWOT analysis.

Financial ratios

The financial ratios of True Region compared to other premium jeans companies in 2009 are presented in exhibit 1. True Region posted the highest gross margin among the companies analyzed. The company does not finance operations from the interest gained from trading.

The company utilizes internal sources of financing fro majority of its operations. All operations done by the company appear financed from equity capital. The financial analysis indicates the company does not have any debt. This fundamentally indicates the company minimally utilizes debt financing as an option for funding company operations ². The operating margin for True Region remains higher than that of the other companies.

The company, however, does not post high gross profits. While the gross profit remains low, the profit margin for the company indicates the highest figures among all companies.

True Region, therefore, seems to be operating under impressive financial status. The total percentage of denim sales posted by True Region remains the lowest. This could be an indication of the company’s successful shift form overreliance on denim sales ². With the competition continuing to rise, this shift could immensely improve the financial status of the company.

Internal company analysis

Strengths

The most notable strength for the company lies in the company being ranked as the second largest manufacturer of denim. Within, the United States, this position leaves the company among the market leaders within the denim manufacturing industry. The company continues to strengthen this position through expansion.

The company has continually increased the number of company owned retail stores. This move forms another strong point for the company ¹. The company can immensely increase sale of its products through company owned stores.

The company possesses total control over the products sold within company’s retail stores. Limits could be imposed on the availability of products from other companies within these stores.

The company also diversified into other kinds of products. This provided an increased range of market. The company could supply clothing manufactured from other material than denim. As indicated by the financial analysis for 2009, denim only comprised 13% of company sales.

This means other products provided a larger percentage than denim ³. Competitiveness of the company becomes overly increased through diversification of products. Hiring of Mike Egeck to the company management immensely increased the quality of the management team.

The experience possessed by this gentleman could become essential in managing competition for the company. As the company moves towards diversification, the leadership provided by Egeck becomes essential in managing competition within the industry.

Weaknesses

The imminent weakness in the company structure remains manufacturing denim products targeting young women. As opposed to other companies, with products for old women, True Region manufactures denim targeting young women. The old generation of women has higher purchasing power than the young ones.

This means that the highly-priced denims produced by True Region could find difficulties entering the market ³. This target market might significantly affect the sales achieved by the company.

External company analysis

Opportunities

The company operations present numerous opportunities towards the future growth of the company. The company already utilizes trendy boutiques as their selling agents. These establishments continue to be market leaders in selling highly-priced products. The contacts established with these boutiques provide the company with a marketing opportunity for the new products ³.

The diversified products the company moved into manufacturing could receive a marketing edge selling through trend outlets. Availability of middle-class individuals with luxurious taste provides another opportunity for the company. These individuals could become the target market for the highly-priced products of True Region.

The bankruptcy of Rock and Republic presented new opportunities for True Region. Going down of competitors leaves a supply shortage for products. The company could utilize this opportunity to capture the market gap left by the company.

Following the economic rebound, citizens now have increased purchasing power. This means that the company now has a wider range for selling than before. Speedy marketing could be utilized to capture the available market.

Threats

Numerous threats continue to be presented by the competing companies. Some companies have introduced price-bargained jeans. These products have significantly affected the sale of highly –priced jeans with fixed prices. Another threat occurred in 2007. A general slowdown in the premium denim industry was realized.

Coping with the challenges of the slowdown becomes a threat to the company sales. Following the slowdown, upscale stores and boutiques struggled to make impressive sales. These retail outlets remain adamant in stocking highly-priced, denim products. The company experiences immense threat from this occurrence as it utilizes these stores in making its sales ¹.

References

Hill, T., R. Westbrook. SWOT Analysis: It’s Time for a Product Recall. Long Range Planning (1997): 30 (1): 46–52.

Kieso, D. E., Weygandt, J. J., Warfield, T. D. Intermediate Accounting (12th ed.). Hoboken, NJ: John Wiley & Sons; 2007.

Lenskold, James D. The Path to Campaign, Customer, and Corporate Profitability. New York: McGraw-Hill; 2003.

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