Retail Clothing Business Financial Model – Case Study

Introduction

The OAK Business Consultant prepares a case study about a retail clothing business that wanted to acquire investments based on a clothing business financial model presenting detailed and realistic financial projections. The client has an operating retail clothing business in Jordan aiming to capture the country’s market and other regions, specifically Dubai.  

Our experts prepare the following case study. We have presented the process and analysis techniques for preparing our client’s detailed retail clothing industry financial forecast model. To provide flexibility to the client, we prepared a financial model with the feature to update the complete model from the input assumptions. 

Challenges 

• The client was already operating a retail clothing business in Jordan and wanted to determine the feasibility of the setup in Dubai.
• For the Dubai Market, past data regarding sales, revenue, costs, etc., was unavailable, so it was very challenging to find the historical data on which to rely and forecast the trend for the future years.    
• One of the other challenging tasks was to include different scenarios with detailed financial calculations. 

Solution  

• We examined several retail clothing and apparel industries worldwide and found the number of competitors and what portion of the market our client can capture.  
• We researched the industry trends for Dubai Market, and our experts formulated complex formulas to estimate the projection for the next five years. 
• We provided estimations and expected results to the client for the number of products they want to shift towards in-house production or operate on an outsourcing model. 
• We prepared a scenario analysis for our client to determine which strategy is the most Favourable for their retail clothing business. 

Market Validation 

As the client’s clothing business was operating successfully in Jordan, they wanted to maintain local sales growth while expanding in other favorable regions like Dubai. 

Business Highlight 

Our client operates in the clothing and apparel industry with a diverse product line. Our client’s setup is based in Jordan. Moreover, our client company produces a small portion of specific product categories in-house while outsourcing the rest. The client wanted to understand the difference between the two production methods and plan a strategy-based solid projection for a cost-effective expansion plan.

Our client’s clothing business already has some presence in Dubai through online marketing. The increasing customer base in that market and the immense growth potential make Dubai the perfect next expansion step. Hence, the feasibility study provided the client with the analysis required to make a cost-effective strategy for this move. 

Scenario Analysis 

As the client wanted to estimate the feasibility of different scenarios, our team made a dynamic and editable scenario analysis and incorporated it into three sections: 

• Operate the business in two different markets as separate entities
• Production in Dubai 
• Production in Jordan 

Moreover, we presented different scenarios and estimations for financial measures like gross and net profit margins under each scenario. From this table, our client can quickly identify the most profitable scenario for the company to attract investors. 

Financial Highlights 

Input Assumption

We developed the assumptions considering the clothing industry. Being a clothing business, one significant cost is capital expenditure investment, including equipment, fixtures, fittings, and other related costs. As the client business includes the sale of products in Dubai and Jordan, we incorporated the calculations of these two markets separately in two different sheets to make the calculation easier to understand and update for the client.  

Revenue Analysis

The revenue analysis represents all the data regarding the number of units sold and at what price. Moreover, revenue analysis shows the segmentation of the products of the business. From the revenue analysis, our client can identify the areas to improve, which means they can compare the sales unit and sales price with our competitors and market price. 

Financial Statements 

The company statements of our client showed a positive net profit margin for all five years of the project. It is due to the high sales price and lower cost of goods sold. This states that the clothing business is financially in a good position. 

Balance Sheet

The balance sheet represents the total assets of the company. The current and noncurrent assets are mentioned separately under the main heading of total assets. Likewise, the company’s total liabilities are represented in the balance sheet with the current and non-current liabilities division. Collectively, the balance sheet summarizes the company’s financial position at a given time. 

Breakeven Analysis

Break-even is when the company is at a stage with no loss or profit. Oak Business Consultant performs a breakeven analysis, as our client aimed to retail its product in different markets therefore, we forecasted both separately. Further, we estimated the minimum number of units sold to reach the breakeven point. It gives a roadmap for the company as it tells the number of units sold to remain profitable. 

Ratio Analysis

The ratio analysis represents a quick overview of company performance, profitability, and liquidity. Furthermore, it is also an important tool to represent in front of investors. Because it contains information about the return on assets and returns on equity. 

Pitch Deck

The Oak Business Consultant prepares an investor pitch deck for our client’s clothing business. Our experts design the pitch deck to represent the business’s critical information. The essential information about the business includes the sales trend, market trends, and profitability analysis, which helps the investor to make decisions about the investment. 

Conclusion

The clothing industry is one of the fastest-growing industries in the world due to the change in fashion rapidly. Moreover, as the standard of living improves, individuals tend to spend more on clothing and accessories.

Oak Business Consultant researches and offers our clients financial and business solutions. These financial and business solutions are customized per the client’s requirements. Our team covers every aspect of the business and financial services to help our clients achieve optimal business results and future growth.