Inter-co Case Solution
Interco started its business as a shoe company in 1911, and since then,it started-expanding its business into different consumer services and products. Inter-co business has increased its business through the acquisition strategy. Interco is financially conventional and the debt level of the firm is relatively low. Company has come across huge success and has improved in different sectors. The main focus of the company is footwear division and aims to meet the objective through acquisition. Interco is also planning in the furniture division. Company is highly liquid and the current year ratio was 3.5.
It was renamed as Interco due to a different nature of business. Interco had developed into a manufacturer and retailer. The operations of the company were independent and its corporate management served as its support system. The company’s debt level was fairly low, which means that it was surviving on equity and soon it became one of the biggest manufactures of furniture and shoes. The company was focused, and its goal was aimed at improving its long term sales. Interco management wanted to increase its earnings on asset returns and equity. The company worked in 4 major divisions, i.e. Shoes / Footwear, Apparel, Furniture / Home Furnishings and Retail Merchandising.
Footwear and furniture divisions were generating more profit, and the other two divisions’ performances were not up to the mark. Despite of such setbacks; the company’s overall financial performance was still very healthy. In comparison to the performance of the year 1987; Interco’s sales and net income had increased around 13.4% and 15.4% in the year 1988. This indicates that the company had a significant amount of cash to cover any liabilities.
Interco management was concerned that its stock price might get undervalued. The management felt that the bad performance in the apparel division was excessively dragging Interco’s stock price downwards, and because of this “undervaluation,” the management was afraid of becoming a takeover target.
Inter-co business climate in 1988
The industry was operating at low rates for imports and the revenues of company was adversely affected due to the profitability. Meanwhile the customer demand decreased and that affected the profitability of retail. The overall industry was facing the downfall along with that apparel business was also striving hard but its revenues was also affected by $6.7 Million. But the footwear industry is increasing, the in 1987 stock market and the sales are also increasing. The overall performance of the company was increasing but the divisions need attention. The objective of the Interco is
- To improve the ling-term revenues and growth
- Increase the returns on assets.
Interco has four divisions:
- Apparels division
This division of the company contain 11 different companies. These companies are responsible for the designing, manufacturing, labelling and distribution of these apparels. Like casual apparels, and other garments. Retail merchandising
Retail merchandising was operating on the 201 locations and 15 states. The retailing includes these merchandising include the merchandising stores, branded houses, store departments and do it yourself home improvement centers.
This division in responsible for the designing, manufacturing and the distribution of the footwear for women and men in different countries. i.e. Australia, united States, Canada, and Mexico……………
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