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Youngor Group is a domestic enterprise designing and selling men's clothes

Finance Dec 27, 2020

Youngor Group is a domestic enterprise designing and selling men's clothes. An analyst identified the following revenue-related information from the company's 2016 annual report: Table 1: Revenue Composition by Business Segments In million RMB Sales % Brand Fashion 4,274.4 28.70% Real Estate 9,882.0 66.34% Development Other 738.6 4.96% Total 14,895.0 Gross profit margin 63.94% 33.39% N/A 41.73% Table 2: Revenue Composition for Business Segment “Brand Fashion” In million RMB Sales % Gross profit margin Online sales 128.7 3.01% 55.76% Store sales 4,145.7 96.99% 64.19% Total 4,274.4 100% 63.94% Table 3: Production, Sales Volume and Inventory for Business Segment "Brand Fashion" In thousand pieces Shirts Suits Trousers Jacket/T-Shirt/Coat Other Total Production 4,862.5 703 1,861.2 2,195.3 734.5 10,356.5 Sales Volume 5,785.6 772.8 2,174.8 2,511.5 1,040.8 12,285.5 Ending Inventory 5,044.6 1,219.4 2,117.3 2,526.2 1,270.6 12,178.1 Additional information: Youngor has about 2,554 retail stores, with a total area of 382 thousand square meters. In 2016 Youngor's reported profit for the brand fashion segment is 550 million RMB. Required: a) Calculate the average size per store, average sales revenue per store per day (assuming 7 business days), and average profit per store per day (assuming 7 business days) b) What comments do you have for Table 3? c) Evaluate the quality of revenue for Youngor 2016.

Expert Solution

Answer:

A)

1. Calculation of average size per store-

Total area of all stores = 3,82,000 square meters

Total number of stores=2,554 stores

avergae size per stores= 3,82,000/2554 = 149.56 which is approx 150 square meters

2. Calculation of average sales revenue per store per day-

Total sales revenue from store=4145.7 million RMB

Total number of stores= 2554 stores

each stores sales revenue= 4145.7/2554= 1.839 million RMB

per day revenue per store= 1.839/364= 0.0050 million RMB (Assume 7 business days)

3. Calculation of average profit per store per day-

Profit margin from brand fashion segment = 550 million RMB

so from brand fashion stores it would be = 550* 96.99% = 533.445 million RMB

each stores profit= 533.445/2554 = 0.20886 million RMB

per day proft per store= 0.20886/364= 0.00057 million RMB (Assume 7 business days)

B) Comments for Table 3

if we analyse the given table we can find out the opening inventory in the following way

In thousand pieces Production Sales Volume Ending Inventory Opening Inventory
Shirts 4862.5 5785.6 5044.6 5967.7
Suits 703 772.8 1219.4 1289.2
Trousers 1861.2 2174.8 2117.3 2430.9
Jacket/T-Shirt/Coat 2195.3 2511.5 2526.2 2842.4
Other 734.5 1040.8 1270.6 1576.9
Total 10356.5 12285.5 12178.1 14107.1

Formula adopted to get opening inventory is Sales - Production+ Ending inventory

Assuming the prodcution level at its optimum capacity , all the categories of inventories has moved in right direction resulting to more sales and less ending inventory. This can be find out by differentiating between the ending and opening inventory

In thousand pieces Movement
Shirts 923.1
Suits 69.8
Trousers 313.6
Jacket/T-Shirt/Coat 316.2
Other 306.3

Also we can infer here that since the gross margin % substantial high in brand fashion business segment of Youngor group, it would be suggestable to concentrate more on this business segment inorder to be more profitable.

C) Quality of revenue for Youngor 2016

if you can see the revenue composition table by business segments (refer Table 1) you can find out that "Brand fashion" is the most of the profitable business segment and has contibuted more revenue compared to the other business segment.

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