Exhibit 4.22 presents selected operating data for three retailers for a recent year.

Exhibit 4.22 presents selected operating data for three retailers for a recent year. Macys operates several department store chains selling consumer products such as brand-name clothing, china, cosmetics, and bedding and has a large presence in the bridal and formalwear markets (under store names Macys and Bloomingdales). Home Depot sells a wide range of building materials and home improvement products, which includes lumber and tools, riding lawn mowers, lighting fixtures, and kitchen cabinets and appliances. Supervalu operates grocery stores under numerous brands (including Albertsons, Cub Foods, Jewel-Osco, Shaws, and Star Market).

Exhibit 4.22
Selected Data for Three Retailers (amounts in millions) (Problem 4.15)

Macys

Home Depot

Supervalue

Sales

$24,892

$71,288

$44,564

Cost of goods sold

15,009

47,298

34,451

Interest expense

588

624

633

Net income

(4,803)

2,260

(2,855)

Average inventory

4,915

11,202

2,743

Average fixed assets

10,717

26,855

7,531

Average total assets

24,967

42,744

19,333

Required

Compute the rate of ROA for each firm. Disaggregate the rate of ROA into profit margin for ROA and assets turnover components. Assume that the income tax rate is 35% for all companies.

Based on your knowledge of the three retail stores and their respective industry concentrations, describe the likely reasons for the differences in the profit margins for ROA and assets turnovers.