With this case, we review the profitability of several specialty retail stores. The companies reviewed and the year-end dates are as follows:
1. Abercrombie & Fitch Co.
(January 31, 2009—52-week; February 2, 2008—52-week; February 3, 2007—53-week)
‘‘Abercrombie & Fitch Co. .is a specialty retailer that operates stores and websites selling casual sportswear apparel.’’ 10-K
2. Limited Brands, Inc.
(January 31, 2009—52-week; February 2, 2008—52-week; February 3, 2007—53-week)
‘‘We operate in the highly competitive specialty retail business.’’ 10-K
3. GAP, Inc.
(January 31, 2009—52-week; February 2, 2008—52-week; February 3, 2007—53-week) ‘‘We are a global specialty retailer offering clothing, accessories, and personal care products.’’ 10-K
Required
a. Comment on the difference between net cash provided by operating activities and net income.
Speculate on which number is likely to be the better indicator of long-term profitability.
b. Comment on the data reviewed for each firm.
c. Do any of these firms appear to have a cash flow problem? Comment.