Hewlett is a general merchandise retailer based in Greece. This report will analyze the companys credit worthiness by reviewing its recent financial performance while considering the influence of the Greek economic climate in the same timeframe. According to the financial statements for the year ended 30 June 2012, both sales and gross profitability have grown steadily over the last three years, although less so between 2011 and 2012 as compared to the 2010/2011 figures.
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Sales revenue grew 18.9% from Ã¢â€šÂ¬1.85B in 2010 to Ã¢â€šÂ¬2.2B in 2011 and then 13.6% to Ã¢â€šÂ¬2.5B in 2012. Similarly gross profit grew 16.7% from Ã¢â€šÂ¬600M to Ã¢â€šÂ¬700M and then 7.1% to Ã¢â€šÂ¬750M. These growth figures however, are put into perspective by the rising costs incurred in their sales process. Operating costs have risen 16.3% from Ã¢â€šÂ¬550M in 2010 to Ã¢â€šÂ¬640M in 2011 and then 9.3% to Ã¢â€šÂ¬700M in 2012, causing operating profit (profit before interest and taxes-PBIT) to drop from Ã¢â€šÂ¬60M in 2011 to Ã¢â€šÂ¬50M in 2012. Not surprisingly, a dividend of Ã¢â€šÂ¬20M has been proposed for 2012, down from Ã¢â€šÂ¬30M the previous year. Again, to put this in perspective, consider that the company only has Ã¢â€šÂ¬20M in profit after tax and interest for 2012; just enough to pay the proposed dividend. The current market size for Greek store-based retailing stands at about Ã¢â€šÂ¬37B down from Ã¢â€šÂ¬40B in 2011 and Ã¢â€šÂ¬47B in 2010 as shown in figure 1 below. With prosperity indexes being at record lows, it is no surprise that Greek retailing has suffered in recent years. The 5 biggest retailers in Greece by sales are AB Vassilopoulos, Sklavenitis, Lidl, Carrefour-Marinopoulos and Masoutis. While these 5 have maintained growth in total sales numbers over recent years, a look further down the list indicates companies with stagnant or reduced sales numbers from the “Greek Wal-Mart”, Jumbo, to Germanos and IKEA. With consumers becoming increasingly price conscious, retailers needing to keep the total sales level as high as possible have resorted to different tactics. In this regard, Hewlett has increased credit sales from Ã¢â€šÂ¬300M in 2010 to Ã¢â€šÂ¬400M in 2011 and then Ã¢â€šÂ¬600M in 2012. Figure 1: Total market size of Greek store-based retailing (Euromonitor 2012) Even with these measures, the strain of the recession on retailers has caused a streak of consolidations as a number of retailers have closed down stores. For example, Atlantic Supermarket closed its doors and a number of its former outlets were acquired by Masoutis, Lidl Hellas and AB Vassilopoulos. Similarly, outlets under the Dia brand are now Carrefour supermarkets. In a clear indication of the extent to which finances have been strained, “since mid-2009, when the global economic slowdown began to bite, until mid-September last year, some 65,000 stores have been forced to shut their doors” (The Guardian UK, 2012). Even with prices reduced by about 70% at the end of 2011,
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