Finance: Hypermarket situation in Spain
The basic strategy of big supermarkets would be based on the bulk buying of the goods they retail. By doing this they have a lot of power in the negotiations with their suppliers which accept longer term paying conditions. Now, the supermarkets have lots of inventory on credit this means they haven’t played for, and they sell it really fast. This way they are making profits without using their money. Allowing them to have big positive cash flows and inventory rotation, while having high current liabilities from the debt to their suppliers.
This strategy however has a down side especially when the economy slows down, this means that hypermarkets can face a situation where their sales reduce thus slowing down inventory rotation and their cash flow. This might make it a bit difficult to face their current liability affecting the company’s liquidity. In this type of situation would be better for the hyper markets to take a more of a just in time approach in their strategy making sure that what they are buying gets sold immediately, besides a lot of the products their dealing with are perishable goods.
Comments Off on Finance: Hypermarket situation in Spain /
01 Dec 2011
por
Javier Solano Palacios
IMSD /
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