Primary reason for both of companies having comparatively low net profit was high cost of good sold ?V it took out almost 70% of its net revenue of Sears; 80% of the net sales for Wal-Mart.
Except low profitability, for Sears, there was a significant increase in uncollectible account ?V Referring to exhibit 1, it kept increasing at a rate of 50% year after year... displayed 300 characters
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Sharpe increase from the uncollectible amount could been further explained by looking at the balance sheet of Sears ?V 50% of the total current asset was Net credit card receivable during year 1997. This might suggest that Sears need to revise their terms on repayment of the credit card bill or had to establish a more strict credit background check on their customer... displayed next 300 characters
However, SHC forgot that they also share a common input and raw material with other rivals. Customers can easily take their business to Wal-Mart or Target, who have lower prices because not everybody is a “higher-come shopper”...
After all these years it will be very difficult for Sears to pull back from D&M and go after another supplier.
Sears is very conscious of its customers' desire for to quality at an affordable price, because Sears knows that the price value trade off is still number one motivation...
Provision for uncollectible accounts was 31% of credit revenues, and the delinquency rate went up to 7% from 5.4% the previous year. At 200 days Sears’ average receivables collection period was very high when compared to Wal-Mart’s 3 days...
Cost of sales was equivalent to 65% of total revenues.
Bad debts cost Sears approximately $1.5 billion. Provision for uncollectible accounts was 31% of credit revenues, and the delinquency rate went up to 7% from 5...
In response, Lampert choose to focus on the company’s retail prospects, stating; it’s an opportunity to transform two companies that once were great-to transform them into a great company relative to the 21st century (USA Today 2005)...
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