Publix Company’s Financial Ratio Analysis

Cite this

There are a few issues the management of Publix has to address that were revealed based on the complex analysis of the company’s performance. The list of issues is accompanied by various actions the management may undertake to start making changes to the company. All of the mentioned pieces of advice are aimed at providing Publix an opportunity to attain future growth and profitability.

The analysis of Publix’s financial ratios revealed some issues that have to be addressed. The Debt to Equity ratio is far from its excellent value – while it should generally be 100-150%, it is only 55,91%, meaning the assets of Publix are more funded by equity than by debt. At the same time, the Debt to Asset ratio that indicates what part of assets is financed by borrowing is average – it is lower than 40%, which is generally considered suitable. These ratios increased in 2019 in comparison to 2018, showing a negative tendency for the company.

Publix’s Liquidity ratios are considerably lower than the recommended values. The Current ratio equals 1,06, revealing that the company’s capital is only enough to meet the current debts. Thus, either the short-term obligations should be reduced, or the capital should be increased. Quick ratio equals 0,54 while it should be more than one or more, emphasizing that the company may have difficulties paying off its current liabilities because there are not enough assets converted to cash (Thompson, 2016).

Additionally, Publix shows only 7,88% of Net Profit Margin, meaning that only 7,88% of its income is profit (Publix Super Markets, n. d.). ROI is relatively low, showing that the probability of getting a return from an investment is only 12,26%. The management needs to implement measures to increase the profit, for example, starting a new marketing campaign that would increase sales. The ratios can be found in Table’ Financial Ratios of Publix’ in Appendix A.

Five Forces analysis has also revealed a few problems of the company, which are presented in Figure’ Five Forces Analysis of Publix Super Markets’ in Appendix C. Firstly, out of 4, only one threat has a minor influence on Publix. In contrast, other ones are likely to affect it more powerfully. Threats of new entrances, implying an increase in market players, are of a medium impact on Publix. Thus, the management should create a strategy for the case when many new companies enter the market.

This strategy should imply the most effective competition for the company (in this situation, this would be price competition). In this scenario, management should also consider the weaknesses of Publix listed in Table ‘SWOT Analysis of Publix Super Markets’ in Appendix B. They include, for instance, the lack of the company’s experience in applying digital marketing tools. In other words, to compete on a high level with new players, Publix would have to become more modern.

Five Forces analysis also showed that the risk of Rivalry Intensity is high for Publix. With the SWOT Analysis result, which states that Publix has no long-term partnerships with the companies of the same economic segment related to retail and grocery stores, this means failure. To be more exact, when there is a need to cooperate with the companies like Publix to avoid the negative consequences of young companies’ actions, Publix would have difficulties. The reason for it is there is no trust between the marketeers though they have been at the market for a long time. The management’s actions, in this case, should be connected with building relationships with big old companies in the same market and in others related to it.

One more consequent risk is that the influence of bargaining power of customers is strong. The management may react to this by implementing a new marketing campaign that would focus on building strong associations of Publix to something that strongly appeals to the customers. This may also imply changing the advertisements and becoming more digitally-oriented to be able to access the younger customers segment. Following these steps, the company would be able to avoid negative consequences of the customers’ preferences changing, which may also be caused by a growing number of marketers.

The threat of substitute products’ appearance is interrelated with the ones mentioned above. The industry of grocery stores and retail is not the one where innovations may be implemented. Thus, it is harder for the companies to make their products unique, as the customer understands their fake or true excellence. The main reason for it is that any other products cannot replace the products offered by grocery stores. However, this risk may affect the shareholders, especially if they find other companies with more preferable conditions and higher Payout Rates. Thus, the management should increase the Payout Rate of Publix to ensure the maintenance of the same range of shareholders.

One more risk of Publix is that it is not present in the evolving markets. As the company is no longer young, its status may be affected by more ambitious and flexible ones that enter the market. The management should compare the stage of Publix’s development to the stages of organizational development that Adizes has introduced (Management styles, I., n. d.). If the management reveals problems that Publix will face according to Adizes’s scheme, it should immediately prevent further negative consequences.

References

Management styles. (n. d.). Adizes Institute Worldwide. Web.

Thompson, A. A. Jr. (2016). Strategy: Core concepts and analytical approaches. McGraw-Hill Education.

Publix Super Markets. (n. d.). Web.

Cite this paper

Select style

Reference

BusinessEssay. (2022, December 1). Publix Company's Financial Ratio Analysis. Retrieved from https://business-essay.com/publix-companys-financial-ratio-analysis/

Reference

BusinessEssay. (2022, December 1). Publix Company's Financial Ratio Analysis. https://business-essay.com/publix-companys-financial-ratio-analysis/

Work Cited

"Publix Company's Financial Ratio Analysis." BusinessEssay, 1 Dec. 2022, business-essay.com/publix-companys-financial-ratio-analysis/.

References

BusinessEssay. (2022) 'Publix Company's Financial Ratio Analysis'. 1 December.

References

BusinessEssay. 2022. "Publix Company's Financial Ratio Analysis." December 1, 2022. https://business-essay.com/publix-companys-financial-ratio-analysis/.

1. BusinessEssay. "Publix Company's Financial Ratio Analysis." December 1, 2022. https://business-essay.com/publix-companys-financial-ratio-analysis/.


Bibliography


BusinessEssay. "Publix Company's Financial Ratio Analysis." December 1, 2022. https://business-essay.com/publix-companys-financial-ratio-analysis/.