Mercury Footwear Questions

Among the first companies to offer fashionable walking, hulking and yachting footwear. Its mother company immovable to extend the steel by creating complementary line of app bel. Because of the poor surgical operation, it was decided to change. Style Logo is marked with prosperous, active and fashion-conscious lifestyle. Its master(prenominal) customers ar not interest in its apparel. fiscal performance Among the most profitable firms. Had poor performance later on encyclopaedism by WAC. Revenue office 42% of revenue from gymnastic shoes and counterpoise from casual footwear.Revenue and operational Income were 470. Million and 60. 4 jillion In 2006. Revenue and EBITDA were 431. 1 million and 518 million.. Products acrobatic shoes developed from high-performance footwear to gymnastic fashion wear. Four main segments mens and womens athletic and casual footwear. In order to emphasizing separate yields, it began to monitor styles and images from global culture Focus on smaller portfolio of classic products with longer lifestyles and could maintain undecomposable production and supply chains.Sales channels Mainly sold in department stores, potency retailers, wholesalers and independent distributors. micro percentage is sold through website. Department stores, specialty stores, catalogs, bank discount retailers and internet. Inventory steering Good at list management in the industry. Inventory management performance is worse than the average level. source Outsource manufacture in China. Outsource main materials in foreign suppliers. Advantages &Disadvantages It takes small size as its competitory disadvantages.And it faced with some problems in the consolidation of manufacturers. legal injury cuts and promotion in apparel line hurts operating margins but helped to the emersion in sales. Sales growth is lower than the average because of there is circumstantial discount in price. We could learn that managers of conk want to rarify the sc ale of its company and gain larger marketplace share because of the stable profit margin. And since the revenue is about the same, it is a good choice to merge with hectogram, which intend that revenue would be doubled after acquisition.And these deuce companies have some similar factors, such as (1) They could use the same sale channels after acquisition, and internet channel could be enlarged. (2) They could combine manufacturers to require a powerful bargain in suppliers. 3) The product segments are almost the same, which means that there should be little work to do after acquisition in product adjustment. (4) Thanks to the profitable superpower of GAG, it is much easier to make a amend pecuniary performance of Mercury. (5) It is good for them to increase the performance of inventory management if they merge together. 6) Although their target customers are different, peculiarly in ages, which means that style and brand are different in the very beginning, this factor co uld bend dexter into an advantage for the new company could have a fully segment of customers with wider age ranges. Therefore, take into to a higher place factors into account we think that Mercury should be an leave target for GAG. 2. Review the projections formulated by Little. ar they appropriate? How would In the case, we could find that Little utilise historical averages to assume the overhead-to-revenue ratio.However, historical data is ordinarily useless for future. Some studies found there is little evidence that firms grew warm continued to grow fast in the next period. And sometimes there are even negative correlations between growth grade in the two periods. Besides, smaller firms tend to be to a greater extent volatile than others, which we could find the same characteristics in these two firms we are talking about. And Just as we mentioned in the question 1, revenue may be doubled after acquisition, it Just fits the theory that it is gruelling to maintain his torical growth rates as firms double or triple in size.Therefore, found on the above analysis, we think that it is not likely to use historical data for future projections. And sometimes, analyst should be better than the historical growth. Considering that there are five main channels for analyst forecasts firm-specific data, macroeconomic information, information revealed by competitors on future prospects, offstage information about the firm and public information other than earnings, we think Little could find more information from above channels to get more accurate assumption.And since performance of Mercury is poorer than the average of the industry, it is better to use industry average level for the benchmarking of Mercury when predicting, instead of a discount rate of GAG for example. And from the comparison of 2007 to 2006, we can find Ileitiss forecast expect great input from GAG to support the knowledge of Mercury, whether he has taken this into consideration? And he hazard debt/equity ratio remains the same as GAG, that is also unreasonable, for it is not possible to change that in short period.