Coles Group Limited operates many brands of retail as the publicly traded corporation of Australia. Key nosiness of this company includes distribution of food products and groceries mainly through its particular iconic chain of supermarkets named Coles Supermarkets and also the gasoline and alcohol sales through the stores of Coles Express and Coles Liquor. For the last five years, the company has gone through maximization in the margin of gross profit. But, the margin of net profit has been going down gently over the last five years. Although gross profit is the revenue amount that is remained after deducting the cost of products that are sold mainly from sales and net profit displays the amount of money that a business has after sorting the entire allowable cost of business (Bionda & Mahdar, 2017).
On another hand, Woolworths Group is a company in Australia in a similar industry. As per the company’s financial statements for the last five years, its sales have been unstable. The margin of gross profit and net profit of the Woolworths Group have been reducing and maximizing at impulsive period. The performance of Woolworths Group is not continuously instantly connected with its ratio of gross margin. Other than assessing percentages of gross margin between business sectors, it is crucial for analyzing the between enterprises in similar industries. The margin of net profit of these two organizations is in a nearly similar range for this particular period. This mainly means that not of the organization is operating inefficiently following productivity(Bionda & Mahdar, 2017).
The key drivers of these trends
The key variance between the gross and net profits of Coles Group and Woolworths Group is that the expenditures are subtracted. Throughout the time for the two organizations, variance is there in the number of subtracted expenditures from mainly the gross profit of both organizations (Lukic, 2018).
This implicates the margin of net profit as it shows the balance mainly after entire subtractions are created. Operation income is attained after deducting the costs of office and staff members from the margin of gross profit. The order mainly in which the three fiscal processes seem on the income statements of the organization assists in highlighting their relevance and significance to mainly one another (Lukic, 2018).
Factors that are the most important under lying the difference in financial performance between the two companies over the 5 years
Many factors are mainly producing the variance concerning these organizations. Coles Group is one of the largest organizations in its sector of business, it owns many beneficiaries that assist in succeeding in the market. These beneficiaries assist the organization not only in maintaining the share of the market in previously-prevailing surroundings but also in enlarging into innovative ones. As these two organizations are self-determining, the team of management of these organizations is too distinct. Effective management makes sure that efficient staffing, organizing, planning and controlling are there in the enterprise (Mulyadi & Sihabudin, 2020).
Managers and other executives have different models of business that make this variance exist in the organizations, for instance, the business of cost leadership is concerned to offer sufficient products at a reasonable cost than a substitute for adding value mainly for their customers (Mulyadi & Sihabudin, 2020).
The key challenges the two companies are facing to maintain their profitability
Going ahead, the two organizations are vulnerable to challenges of financial management, the improbability of the upcoming period, and also the vitality of technology and the market (Faello, 2015).
For instance, these organizations have been mainly hit by the outbreak of COVID-19 that has implicated the revenues of the organizations. In the developing economy, it is important for being capable of anticipating the trends of the market and consumer (Faello, 2015).
Ineffective financial strategies have mainly affected the profitability ratio of the organization. Also, many new legislations are made and they might have negative implications on the performance of the organization specifically if these organizations are not ready for these changes (Galant & Cadez, 2017).
Another problem is less profitability mainly carried on by an imprudentselection of projects, infrequently taking on some projects with mainly large debt and ineffective management of the organization (Galant & Cadez, 2017).
Bionda, A. R., & Mahdar, N. M. (2017). Pengaruh gross profit margin, net profit margin, return on asset, dan return on equity terhadap pertumbuhan laba pada perusahaan manufaktur di bursa efek indonesia. Kalbisocio Jurnal Bisnis dan Komunikasi, 4(1), 34-49.
Faello, J. (2015). Understanding the limitations of financial ratios. Academy of accounting and financial studies journal, 19(3), 75.
Galant, A., & Cadez, S. (2017). Corporate social responsibility and financial performance relationship: A review of measurement approaches. Economic research-Ekonomska istraživanja, 30(1), 676-693.
Lukic, R. (2018). The analysis of the operative profit margin of trade companies in Serbia. Revista De Management Comparat International, 19(5), 458-475.
Mulyadi, D., & Sihabudin, O. S. (2020). Analysis of Current Ratio, Net Profit Margin, and Good Corporate Governance against Company Value. Systematic Reviews in Pharmacy, 11(1), 588-600.