November 4, 2013
Board of Directors, Ross Stores
Mary Z. Afuso
Dr. Scott Sherman, TAMUCC
Ross Stores Inc. (ROST) is the largest retailer in the specialty apparel market. The industry includes Abercrombie & Fitch (ANF), American Eagle Outfitters (AEO), Urban Outfitters (URBM) and Aeropostale (ARO). The comparative firm in the internal analysis is Abercrombie & Fitch. Value Chain Analysis
The elements that add value are Inbound Logistics, Marketing & Sales, Organizational Infrastructure, Human Resource Management and Procurement. The neutral elements are Outbound Logistics, Culture, and Technological Development. The elements that subtract value are Operations, Service, and Financial Management.
Added Value Elements
Inbound Logistics are strong because Ross Stores carries a large inventory that sells quickly. Ross’ inventory is 64.69% larger than Abercrombie & Fitch’s. (ROST,2013; ANF 2013). Ross keeps a large inventory on hand at their warehouses to take advantage of aggressive discounts offered by manufacturers. (ROST, 2013) Average daily sales are 53.6% higher than Abercrombie’s. (ROST,2013; ANF 2013) Ross Days Inventory Outstanding is 62.95 days compared to Abercrombie’s 91.99 days. (ROST,2013; ANF 2013) Abercrombie & Fitch has a better inventory turnover at 10.56 verses Ross’ 8.04. (ROST,2013; ANF 2013) In all other aspects, Ross is clearly the Inbound Logistics leader.
Ross takes the lead in Marketing & Sales. Ross creates a “treasure hunt” experience by offering brand name products at discount prices. (ROST, 2013). Marketing & Administration expenses are 14.79% of sales compared to Abercrombie’s 10.5% investment. (ROST, 2013; ANF, 2013). Abercrombie & Fitch use the in-stores experience as their primary advertising vehicle. (ANF 2013). Ross invested $67.7million in advertising on top of their Marketing & Administration expense. (ROST, 2013)
Organizational Infrastructure is strong due to the strong growth during the average tenure of Ross leadership. The average tenure of Ross executives is 5.14 years compared to Abercrombie’s 6.4 years (ROST, 2013; ANF, 2013). Sales growth for Ross was 8.43% CAGR over the past 5.14 years. (ROST, 2013). Sales growth for Abercrombie was 3% CAGR over the past 6.4 years. (ANF 2013, ANF 2007)
Human Resource Management is very strong for Ross. Ross has 66.6% fewer employees than Abercrombie, yet the employees are much more productive (ROST, 2013; ANF, 2013). Sales per employee are 72.15% higher at Ross than Abercrombie (ROST, 2013; ANF, 2013).
Procurement is the final added value element for Ross. Ross has a network of 7900 suppliers who work with Ross to provide inventory in the stores. Abercrombie & Fitch work with only 155 vendors. (ROST, 2013; ANF, 2013) Manufacturers and high end retailers work with Ross because Ross waives promotional and advertising allowances, return privileges, and other standard concessions required by high end retailers. (ROST, 2013). Neutral Elements
Outbound Logistics are not mentioned in the 10Ks of either Ross or Abercrombie & Fitch. There are no notes regarding firm culture. The lack of data suggests neutrality in these elements. Technological Development expenses are less than 1% of sales revenue for Ross Stores. Abercrombie & Fitch includes Information Technology expenses in the line items with home office and distribution centers. (ROST, 2013; ANF, 2013) The lack of data indicates neutrality in regards ot technological development. Subtracted Value Elements
Operations for Ross are negative compared to Abercrombie & Fitch. Ross has 148 more stores than Abercrombie. (ROST, 2013; ANF, 2013) The revenue per square foot for Ross is 36.6% lower than for Abercrombie (ROST, 2013; ANF, 2013). Ross’ operating margin is 27.87%, while Abercrombie & Fitch reported an operating margin of 62.44% (ROST, 2013; ANF, 2013). Service...
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