Just for Feet Case

Just for Feet case

1. The company’s operating strategies is to perform as a cost leader and offer large selection of goods to costumer combined with unique customer service. The cost would be high since Just for Feet has to buy and prepare large superstores selling all kinds of goods from different bands without concerning too much about marginal profit. The intense advertising on public and superstore extension also increased their cost incredibly. The benefit is to contract customer attention by offering dominant selection of brand that would meet all kinds of needs. The in-store warehousing could reduce shipping and maintenance cost, but it would also reduce the profit per square of store since it used 45% of store for storage.

2. The company’s profitability from 1997 to 1999 increased given the profitability measures provided. The return of asset and asset turnover ratio both increased steadily, which marked more efficiency in company’s normal operation. However, the profit margin decreased 156 basis points, highlighted the risk that company’s strategy was not able to cover its profit margin. In future the company may find it harder to maintain the return of equity by further lower its profit margin since its limitation.

3. The company’s current ratio is 3.38 while the quick ratio is 0.23. Its adjusted quick ratio is even worse at 0.04. There were high risks related with huge merchandise inventories hold by company. The FLEV ratio is also larger than 1. Given the negative CFO, the company may not be able to finance its operation in the future. Company must consider reduce their merchandise inventories by discount sales or disposal, and develop a new strategy to significantly increase its inventory turnover ratio.

4. The company’s underlying fundamental is weak give its liquidity and solvency matters. The current strategy hold by company generated too much inventories that cannot be digested by customers. Company offered large selection of brands for customers, but these also means that a large portion of goods could not be sold while company still need to buy new inventories to maintain its selection. Given the market competitiveness, this strategy could not lead company to financial healthy by highly leveraged.