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Published by: Ivey Publishing
Originally published in: 1998
Version: 1998-11-06

Abstract

In 1997, Grupo Elektra was a Mexican retailer of home appliances and home electronic products via a network of stores throughout the country. In 1990, the company re-instated an instalment sales plan that granted credit to Mexican consumers for purchases made in Elektra''s stores. Since that time, credit sales, as a proportion of total sales, had continued to grow rapidly. In late 1994, the Mexican currency suffered a severe devaluation that resulted in short term interest rates that exceeded 100%. Inflation rates followed the same pattern. During that time, Elektra continued to successfully lend into the consumer market where Mexican commercial banks had failed miserably. Sales growth, measured in constant pesos, was constant from 1991 to 1994 with only a slight decrease in 1995. Earnings had grown steadily in constant terms including a small increase in 1995 over 1994.The student is asked to evaluate the company''s performance over time, taking into consideration the impact of inflation on Elektra''s financial statements. See 9A98B033 for a follow-up case of the same name.
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Abstract

In 1997, Grupo Elektra was a Mexican retailer of home appliances and home electronic products via a network of stores throughout the country. In 1990, the company re-instated an instalment sales plan that granted credit to Mexican consumers for purchases made in Elektra''s stores. Since that time, credit sales, as a proportion of total sales, had continued to grow rapidly. In late 1994, the Mexican currency suffered a severe devaluation that resulted in short term interest rates that exceeded 100%. Inflation rates followed the same pattern. During that time, Elektra continued to successfully lend into the consumer market where Mexican commercial banks had failed miserably. Sales growth, measured in constant pesos, was constant from 1991 to 1994 with only a slight decrease in 1995. Earnings had grown steadily in constant terms including a small increase in 1995 over 1994.The student is asked to evaluate the company''s performance over time, taking into consideration the impact of inflation on Elektra''s financial statements. See 9A98B033 for a follow-up case of the same name.

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