The research, which has been carried out, aims to create a profile of such a company as 99 Cents Only Stores, in particular, we are going to discuss its development within the context of S&P. We should determine, how exactly the stock assets of this retailer should be treated: whether they should be purchased, sold, or retained. In order to cope with this task, we may employ the method of SWOT (strengths, weaknesses, opportunities and threats) analysis, this technique seems to be the most effective in this case. It can be presented in the following way :
99 Cents Only Stores
Strengths:
- high inventory turnover: the company can be labeled as a price-point retailer, which means that the goods can be purchased at a very low price, namely $1. Consequently, over the last two years, 99 Cents Only Stores has significantly increased its Net Sales. Yet, such approach may also have rather negative impact on the company, for instance, its dependence on the leading manufactures.
- Dales Sales Outstanding: it takes a relatively short amount of time for the company to collect the revenue, approximately 0.549 days. It seems that these are probably the most significant advantages or strengths of the company (Plunkett, p. 99). Nonetheless, one has to admit that in the long run high inventory turnover may have rather detrimental effects. We will speak about them in the next section.
Weaknesses:
- arguably, the major weakness of 99 Cents Only Stores is the inflexible pricing policy, which the management pursues. As it has been noted before, the products are sold at the price of 1$, certainly, it enables them to maintain high sales level, but according to the information, published recently, 99 Cents Only Stores has sustained substantial losses in 2008. At this moment this company manages to hold its position in the market mostly due to the high inventory turnover and the increase in sales.
- Low Turnover of Fixed Assets, which means that the expenses company goes to, generate less and less profit. Partly, it can be ascribed to the recent economic crisis that compelled manufactures to advance the prices on their products (Plunkett, p. 100).
Opportunities: the willingness of the US government to assist the companies that suffered a severe blow after the 2008 recession. Nonetheless, even if we take into consideration this possibility, we should point out that 99 Cents Only Stores should develop new strategies that might help to decrease costs of the operation, otherwise, the future scenario is rather unfavorable.
Threats: unstable economic situation in the market, certainly, any considerable rise in prices will easily imperil the company’s profitability. Probably, in the near future, 99 Cents Only Stores will be forced to change its pricing policy or it will no longer be cost-effective. The major problem is that in the next two or three years, the company may cease to be a price-point retailer.
As regards S&P or Standard and Poor, as it is also known, we should say that this index includes stocks with various levels liquidity, it means that sometimes they are not easily convertible into money (Chian, p. 77). The price of the stocks is determined in accordance with the weighted mean of all share stocks. At this moment, it is more prudent to sell the shares of 99 Cents Only Stores because there is a high risk that they will devalue. But if the management will develop more flexible pricing policy, there is a great likelihood that 99 Cents Only Stores will strengthen its positions, in this case, a person should retain the shares of this company.
Bibliography
- Abraham C.-L. Chian. “Complex Systems Approach to Economic Dynamics” Springer, 2007.
- Jack W. Plunkett. “Plunkett’s Retail Industry Almanac 2006: The Only Complete Reference To The Retail Industry” Plunkett Research, Ltd., 2005.