The solution on Myers Holding Ltd - Corporate Social Responsibility

Question: Discuss about the Corporate Social Responsibility for Myers Holding Ltd. Answer: Introduction Myer is considering as the biggest departmental store group of Australia and it has been closely associated with fashion and style for over 100 years. Over this time, it has also played a very crucial role in the life of all Australians that is from the international merchandising fashions and methods during the depression, celebrating fashion and establishing a memorable, ever changing, and retail experience. The company has a value footprint of around 66 stores in prime retail areas across Australia that is accompanied by its well-recognized brand and assisted by its recently developed digital, mobile, and online platforms (Myer, 2014). This combination facilitates a leading Omni-channel experience for the customers so that they can shop with the company. For this reason, Myer had generated $3.1 billion of total sales in 2014. Myer is a relevant employer and pursues a long history of local engagement of communities and philanthropy. It focuses on providing inspiration to everyone i ncluding customers, 54000 shareholders, 12500 team members, and around 1200 suppliers internationally. The merchandise offered by Myer comprises of eleven key categories of product that are mens wear, womens wear, childrens wear, intimate apparel, youth apparel, fragrance, cosmetics and beauty, electrical goods, home wares, footwear, handbags and accessories, toys and general merchandise (Myer, 2014). Mission Statement Myer aims to provide highest standards of service to the general people and it ensures to consistently meet and surpass the shopping anticipations of the customers. It also focuses on the maximization of shareholder value through its strategies. The company wants to make fuller utilization of its opportunities and therefore it continues to invest so that it can position itself at the front line of a quickly changing retail environment. Furthermore, it also focuses on strengthening its Omni-channel strategy, innovation of customer service, optimization of its exclusive brands strategy etc so that operational capabilities and importance can be delivered for long-term sustainable development (Myer, 2014). Myers vision As a market retailer in Australian retailing, its new owners, Newbridge/TPG, Myer management team and the Myer family, are reinvigorating the company. A crucial part of this journey includes the investment in the Myer brand so that the values and vision of its founder and the Myer family can be an international-quality retail business can effectively offer inspiration to each and everyone with a dynamic vision of the future for Myer. In the current scenario, Myers management is on right track through a well-articulated and clear strategy to develop the business globally (Myer, 2014). Triple Bottom Line Reporting (TBL) There is a growing requirement that businesses have a vital role in assisting Australia to become more sustainable. At Myer, sustainability is defined as a responsible business development and growth that addresses and considers the economical, social, and environmental impacts (TBL) of its strategies and operations. As a result, it is responding by minimizing its environmental risks and impacts by adhering to the compliance requirements of NGER (National Greenhouse and Energy Reporting) Act (Myer, 2014). For example, Myer reports publicly on minimization of greenhouse emissions, assessment of energy usage and energy saving opportunities. The company purposes to enhance the positive results and influences affixed on the stakeholders like investors, customers, suppliers, creditors, environment etc through its triple bottom line reporting. When such stakeholders consider social and environmental performance of the company in the investment and purchase decisions, they obtain robust inf ormation on the companys performance. Furthermore, when Myer reports on social and environmental performance, it achieves benefits like increased reputation, retaining and attracting staff etc that obviously adds to its financial bottom line. Concern for social and sustainable issues Myer wants its team to survive for the better performance of the company as a whole. It wants that its team members be filled with positive morale so that they do not feel bad about coming to work. Therefore, Myer had introduced a social group named as 800Thrive as a concern for social issues. In order to establish a sense of community, this group helps in organizing fun ways so that the team members can interact with each other apart from the day-to-day business activities. Myer also assists in protecting the rights of workers so that a better environment can be created. It has also established a whistleblower policy that encourages employees to report against immoral practices or breaches of its code of conduct. In relation to concerns for sustainable issues, the corporate commitment towards sustainability is clearly observable in the publicly disclosed standards of performance of the company like those provided by its GRI (Global Reporting Initiative). It follows the G4 index of s ustainable reporting that provides an effective understanding of its performance to the stakeholders. Furthermore, it reports about energy use, greenhouse emissions, and recycling of materials so that environmental impacts can be managed for long-term sustainable development (Myer, 2014). It also assures of International Standards Organization (ISO 31000) in its risk management framework so that strategies are frame to identify, evaluate, manage, and monitor risks consistent with AZ/NZS standards. General Financial Information The full-year sales of Myer had been very encouraging in the year 2014 but due to huge investments in the year, its performance and profitability were adversely affected. Moreover, on a comparable basis, Myer had obtained an increase of 1.2% of sales in 2014 that stands at $3143 million. Its NPAT (Net Profit after tax) reported a 22.6% decline in the year 2014 that indicates a drop in its operating gross profit and a formerly identified enhancement in cash CODB (cost of doing business). The operating gross profit margin reported a 57 basis point decline because of effect of the depreciation of Australian Dollar on the company, its exclusive brands, and investment in development of products. The cash cost of doing business of the company also grew by 3.3% and stands at $1033 million due to annualisation of variation in its store wage penalty structure as per the Fair Work Act and intended investment in labor hours of its additional stores. Considering the firm balance sheet and powerf ul cash generation of the company, it has decided to pay a fully marked final dividend of 5.5 cents per share that makes dividend for the whole year to 14.5 cents per share. On a whole, this portrays a dividend payout ratio of around 86% for the year 2014 that makes Myers confident for the upcoming years (Deggan, 2011). Financial Analysis Key Highlights and comparison with the previous year Particulars 2014 2013 percentage change ($) ($) Net Profit 98542 129887 -31.8 Total Assets (a) 19,32,664 19,39,705 -0.36 Total Liabilities (b) 10,39,251 10,34,063 0.5 Total Owners Equity 8,93,413 9,05,642 1.35 Dividend per share 16.6 21.6 23.1 Earnings per share 16.8 21.8 -22.9 Net Cash Flow from Operating Activities 1,91,576 2,25,525 -15.1 Net cash flow from financing activities -95232 -115157 -20.92 Net Cash Flow from Investing Activities -1,04,250 -66,956 55.7 As per the information provided in the above table, a fair estimate can be provide that the net profit decline by 31.8%. This indicates that the performance of the company dipped which is not a good indicator in terms of competition and performance. Further, the total assets declined and the liabilities increased which is not a good combination (Christensen, 2011). Cash flow from operating activities reduced indicating that the operations did not matched the last year performance and hence, a shortfall (Brigham Ehrhardt, 2011). Profitability Analysis Net Profit Margin 2013 2014 Net Income 1,29,877.00 98,542.00 Sales Revenue 31,44,904.00 31,43,027.00 Net Profit Margin [(Net Profit after tax/Sales Revenue)*100] 4.13 3.14 Gross profit Margin 2013 2014 Gross Income 13,04,530.00 12,85,870.00 Sales Revenue 31,44,904.00 31,43,027.00 Gross Profit Margin [(Gross Profit /Sales Revenue)*100] 41.48 40.91 In the profitability analysis, the major emphasis is on the gross profit margin, as well the net profit margin. As per the ratio computation, we can see that there is a decline in the gross profit margin and this can be attributing to an increment in the cost of sales (Horngren, 2013). The decline in net profit margin is due to the enhancement in the cost of overhead for the company like administration and selling expenses (Albrecht et. al, 2011). Liquidity Ratio Liquidity Ratio FY2014 FY2013 Changes Current Ratio 0.9 times 0.9 times NA Quick Ratio 0.14 times 0.17 times 0.03 times Cash Flow from Operations Ratio 0.48 times 0.57 times 0.9 times When it comes to liquidity, the major emphasis is on the current ratio, quick ratio. Liquidity analysis projects the ability of the company to repay the debt and meet the obligations. As per the analysis it is seen that the current ratio is stagnant that means the company has the same potential of the year 2013. It is not close to the standard ratio of 2:1 (Brealey et. al, 2011). This means that the current assets and liabilities varied in the same proportion. Hence, the same ratio is observed. However, the other two ratios, the quick ratio, and the cash flow from operations ratio indicates that both the ratio declined and is nowhere close to the base ratio (Horngren, 2013). The liquidity is weak and the management needs to take strong actions to improve it. Financial Gearing Analysis Financial Gearing Analysis 2014 2013 Percentage change Gearing Ratio 36.3% 36.1% 0.2% Interest cover ratio 131 times 129 times 3 times Financial gearing analysis projects the riskiness of the business (Brigham Daves, 2012). The gearing ratio is not very high for the company indicating that the company has persisted on consistency. This ratio implies the long-term lenders contribution to the capital structure of the long-term scenario. Hence, from the gearing analysis it can be predicted that the company is not a risky venture and hence, investment can be pour in it (Kaplan, 2011). The risk profile of the company is low which is a major advantage and will attract shareholders because the major concern always remains of the riskiness of the business (Graham Smart, 2012). Efficiency Analysis When it comes to efficiency analysis, average inventory turnover period, settlement period for debtors, asset turnover period. As projected from the table, the ratio has not shown a huge change and the difference comprises of few days that can be disturbed by a few debtors or creditors, as it is average ratio (Fields, 2011). The efficiency remain unchanged that operates the performance is in line. Efficiency Ratio 2014 2015 Difference Average Inventory Turnover Period 93 Days 95 Days 2 Days Average Settlement Period for Debtors 4 Days 3 Days 1 Day Asset Turnover Period 225 Days 224 Days 1 Day Comparison with Competitor Myers has a strong competition with the Target Corporation and some of the financial aspect of Target will be use to shed light on the functioning and operations of both. On the very first instance, it can be said that Target is a bigger concern and hence, the assets composition is huge and so the liabilities, equity, etc. As per the comparison, we can see that the liabilities composition in the total assets comprises of 66.2% whereas Myers constitutes only 53.8%. However, EPS and DPS are both negative in numbers for Target meaning it is incurring losses. This sheds light on the fact that the bigger companies face losses but the operations never discontinue (Choi Meek, 2011). However, as per fundamentals and overall scenario, it will be better that Myer will be selected as it has an edge over Target. Particulars Myer Target Difference Total Assets 1,932 41,404 (39,472) Total Liabilities 1,039 27,407 (26,368) Equity 893 13,997 (13,104) EPS 16.8 (258) 274.8 Ordinary Shares Issued 99 (1,205) 1304 DPS 16.6 (256) 272.6 EBIT 160 4,761 (4,601) Corporate Social Responsibility Myer aims to establish a socially responsible business by combining sustainability into its day-to day activities. It recognizes the significance of a meaningful and powerful CSR program. Its CSR initiatives include the following: Customers- Myer continues to develop several strategies so that its customers can be satisfied with the services provided and it rewards them for their faithfulness because they are consider very important for the success of its business (Albuquerque et. al, 2013). In the year 2014, Myer introduced a customer feedback initiative so that its quality of service can be evaluated. Such members of Myer one can provide feedback based on their experience through digital technology. Team members- Myer aims to establish a motivating and rewarding workplace that assists age, language, gender, and cultural diversity. In 2014, it gained a retention rate of around 75% and women comprised of 79.6% of the total members (Myers, 2014). Development and capability services are provided to team members through various courses. It also recognizes and rewards members based on their performance through recognition strategies. Myer gives safety concerns through safety hazard management, safety committees, awareness of team members etc. Even the LTIFR reduced from 14.5 since 2010 to 7 in 2014. Community- Myer continues to establish relationships with local communities and in 2014, it contributed around $2.3 million to them. Since 1924, the Myers Stores Community Fund assists disadvantaged youth, children, and women (Myer, 2014). For such purposes, the team members are offered $600,000 volunteer hours. Myer also supports fitted for work community partnerships by providing clothing donations, mentoring etc for disadvantaged women. Myer and Salvos Stores collectively introduced a national initiative for motivating customer-clothing donation for minimizing textile waste and enhancing clothing recycling. Environment- In 2014, Myer reported a 2.9% decline in energy usage through reporting requirements and system upgrades. It also minimized carbon emissions by 5% in comparison to 2013. For packaging stewardship, it purposes on minimizing consumer packaging and pursuing recyclable materials. Its Floor Ready Program aims to enhance packing design and minimize waste and in 2014, more than 70% merchandise complied with such floor ready requirements. Business- Myer aims for highest ethics, integrity levels in its operations and every member are bound to comply with its code of conduct, and they are inform about the prevailing whistleblower policy (Fields, 2011). In relation to ethical sourcing, Myer aims to produce merchandise in safe conditions where workers rights are respect and environmental effects are managing (Davies Crawford, 2012). Myer also pursues a shrinkage minimization program that purposes to lessen its losses. Furthermore, Myer assures of the quality and safeness of products provided and in 2014 such checks depicted a conformance of 95%. Conclusion The above report clearly implies that Myers is lacking in few ratios while in others it has remained unchanged. However, going by the current movement it can be commented that the management of Myers needs to lay stress on the ratio like liquidity that is one of the significant ratios when it comes to meeting the obligations. The other financial performance are just average and needs attention. However, on the social and environmental concerns Myer also complies with the Global Reporting Initiative (G4) requirements that assist it with easy and tangible methodologies so that its performance can be measured against the prime environmental indicators. This remains one of the unique factors in establishing a strong company. References Albrecht, W., Stice, E. and Stice, J 2011, Financial accounting, Mason, OH: Thomson/South-Western. Albuquerque, R., Durnev, A., Koskinen, Y 2013, Corporate social responsibility and firm risk: theory and empirical evidence, Boston University. Development Economics, vol. 5, no. 1, pp. 49-54. Choi, R.D. Meek, G.K 2011, International accounting, Pearson. Myers Holdings 2014, Myers 2014 Annual Report and accounts 2013, viewed 13 September 2016, file:///C:/Users/HP/Downloads/financial_report.pdf Brealey, R., Myers, S. and Allen, F 2011, Principles of corporate finance, New York: McGraw-Hill/Irwin. Brigham, E. Daves, P 2012, Intermediate Financial Management , USA: Cengage Brigham, E.F. Ehrhardt, M.C 2011, Financial Management: Theory and Practice, USA: Cengage Learning. Choi, R.D. and Meek, G.K 2011, International accounting, Pearson . Christensen, J 2011, Good analytical research, European Accounting Review, vol. 20, no. 1, pp. 41-51 Davies, T Crawford, I 2012, Financial accounting, Harlow, England: Pearson. Deegan, C. M 2011, In Financial accounting theory, North Ryde, N.S.W: McGraw-Hill. Fields, E 2011, The essentials of finance and accounting for nonfinancial managers, New York: American Management Association. Graham, J. Smart, S 2012, Introduction to corporate finance, Australia: South-Western Cengage Learning. Horngren, C 2013, Financial accounting, Frenchs Forest, N.S.W: Pearson Australia Group. Kaplan, R.S 2011, Accounting scholarship that advances professional knowledge and practice, The Accounting Review, vol. 86, no.2, pp. 367383.