Applied Business Managment BoD PPT

transcript

Eternal ComfortBoard of Directors Meeting

MANAGEMENT TEAMMICHAEL CAMILLERI PRESIDENT. PRIVATE LABEL & NORTH AMERICAHANNAH DAVIS V.P. FINANCE & LATIN AMERICAANDREA PAREDES V.P. MARKETING & ASIA PACIFICLAURA MACRI V.P. PRODUCTION & EUROPE AFRICA

Agenda President

Global Market Overview Marketing Finance Production Private Label

Situation Analysis SWOT Y17-19 Plan / Objectives Strategy Action & Decisions

North America Europe Africa Asia Pacific Latin America

Situation Analysis SWOT Y17-19 Plan / Objectives Decisions & Actions

Summary

President MICHAEL CAMILLERI

Global Market Overview

Industry #27 Competitive market 6 Total companies

Company A B C D E F

Price $49 $58.50-$60 $53-$55 $50-$60 $58 $55-$59

S/Q 4 8 7 5-6 8 6-7

Situation Summary$ Millions Y14 Y15 Y16

Y16 Projectio

Y16 B/(W) PY16

% Y16 I.A.Y16

B/(W) I.A.

Revenue $

$395,657

$354,403

$451,868

$506,846

$(54,978)

-10.8%

$423,247

$28,621 6.8%

Market Share % 18.7& 14.6 17.8 19.1 -1.3 -6.9% 16.7 (17) -

98.9%Operating Profit

$$54,766 $63,278 $76,044 $98,571 $(22,52

22.9% $66,423 9,621 14,5%

Operating Profit

%13.8% 17.9% 16.8% 19.4% (0.03) -

13.4% 15.7% 0 7%

Earning Per

Share $$3.58 $4.34 $5.26 $7 $(2) -

23.5% $3.77 1 39.5%

Return on

Equity %15.1% 15.7% 16.2% 20% (0.04) -19% 9.8% 0 65.3%

Stock Price $ $47.25 $54.99 $68.42 n/a $68.42 n/a $53.30 15 28.4%

Credit Rating A+ A A- A+ n/a n/a B n/a n/a

SWOTStrengths Weaknesses

• High quality at an affordable price

• High image rating• Strong cooperate social

responsibilities• Meets or exceeds investor

expectation

• Credit rating on a decline• Maximized capacity

Opportunities Threats

• Growth• Market share • Take the high end shoe

market

• Large amount of competition• Similar company's • Anyone can under cut us

Y17-Y19 Plan/Objectives$ Millions Y16 PY17 PY19

Revenue $ $451,868 $560,378 $770,120

Market Share % 17.8% 25.8% 27.2%

Operating Profit $ $76,044 $105,682 $165,495

Operating Profit % 16.8% 25.8% 24.6%

Earning Per Shares $ $5.26 $7.17 $11.78

Return on Equity % 16.2% 18.5% 19%

Stock Price $ $68.42 $83.54 $92.30

Credit Rating A- A+ A+

Strategy

Maintain our high star for a reasonable price strategy

Take advantage of mimicking companies

Sell large amounts of shoes across all regions

Increase revenue yearly to keep up with plan

Action & Decisions

Implement our plan for the upcoming year 17 plan

Look over decision to ensure we are maximizing out profit for that year with our capacity

Eliminate other competition in our competing market

MarketingANDREA PAREDES

Situation Analysis$ Millions Y14 Y15 Y16 Y16

ProjectionsY16 B/(W)

PY16 % Y16 I.A. Y16 B/(W) I.A. %

Marketing ExpensesInternet

Advertising $ 5,001 $ 6,047 $ 6,884 $ 8,268 $ (1,384) -16.7% $ 5,317 $ 1,567 29.5%Web Site

Maintenance $ 4,260 $ 4,260 $ 4,260 $ 4,260 $ (8,520) -200.0% $ 4,256 $ 4 0.1%Celebrity

Endorsements $ 1,312 $ 282 $ 3,814 $ 4,598 $ (784) -17.1% $ 1,040 $ 2,774 266.8%Total Internet

Marketing Expenses

$ 10,573 $ 10,589 $ 14,958 $ 17,126 $ (2,168) -12.7% $ 10,613 $ 4,345 40.9%

% of Internet Revenues 18.6% 20.8% 20.1% 17.1% 3.0% 17.7% 22.1% -2.0% -9.0%

WholesaleAdvertising $ 29,499 $ 37,953 $ 41,116 $ 39,732 $ 1,384 3.5% $ 41,193 $ (77) -0.2%

Rebate Redemption $ 6,117 $ 4,075 $ 6,746 $ 7,369 $ (623) -8.5% $ 5,315 $ 1,431 26.9%

Retailer Support $ 7,488 $ 8,930 $ 14,647 $ 14,647 $ - 0.0% $ 20,087 $ (5,440) -27.1%On time delivery $ 9,980 $ 6,223 $ 9,308 $ 10,060 $ (752) -7.5% $ 14,730 $ (5,422) -36.8%Celebrity Endorse $ 7,744 $ 1,774 $ 22,896 $ 22,112 $ 784 3.5% $ 8,065 $ 14,831 183.9%

Total Wholesale Marketing Expenses

$ 60,828 $ 58,955 $ 94,713 $ 93,920 $ 793 0.8% $ 89,389 $ 5,324 6.0%

% of Wholesale Revenues

106.8% 116.1% 127.2% 93.6% 33.6% 36.0% 27.5% 99.7% 361.9%

Total Marketing Expenses

$ 71,401 $ 69,544 $ 109,671 $ 111,046 $ (1,375) -1.2% $ 100,002 $ 9,669 9.7%

% of Total Revenue 18.0% 19.6% 24.3% 27.6% -3.3% -12.0% 23.6% 0.6% 2.7%

SWOTStrengths Weaknesses

Consistent high image rating In year 16 – exceptionally strong

celebrity appeal; well above industry average

Days of inventory low; turnover rate high

Operating profit was consistently above industry average

On-time delivery was good (2 weeks)

Outbid in year 15 for celebrities; were unable to compete effectively in the four regions

Private label sales in year 16; did not have enough capacity

Low rebate redemptions in year 15

Opportunities Threats

Build a new plant Purchase more capacity Regain private label sales

Competition Being outbid for future celebrity

endorsements Companies copying our strategy Higher days of inventory

Net RevenueInternet $ 74,448 $ 90,072 $ 138,751

Wholesale $ 373,604 $ 375,956 $ 514,498 Private Label $ 3,816 $ 94,350 $ 116,871

Total Net Revenue $ 451,868 $ 560,846 $ 770,120Market Share

Internet 22.8% 23.9% 26.5%Wholesale 17.6% 17.5% 19.0%

Private Label 1.8% 36% 40.0%Total Share 14.1% 25.8% 27.2%

Shoe ProductionCost of Branded Pairs Sold/Pair $ 29.23 $ 28.22 $ 27.75

Strategy

Produce shoes in Asia Pacific and ship to Europe Africa

Produce shoes in North America and ship to Latin America

Increase private label sales

Acquire more celebrity endorsements

Decisions/Actions

Implement our plan for the upcoming year 17 plan

Produce shoes for a medium to low price for consumers, at a marginal cost

Decrease inventory days

Shock the market by tapping into the private-label market effectively and become private-label market share leaders

Finance HANNAH DAVIS

Situation Analysis$ Millions Y14 Y15 Y16 PY16 Y16 B/(W)

PY16 % Y16 I.A.Y16

B/(W)I.A.

INCOME STATEMENTRevenue $395,657 $354,403 $451,868 $506,846 $(54,978) -10.8% $423,247 $28,621 6.8%

COGS $234,413 $189,801 $227,378 $253,927 $(26,549) -10.5% $220,124 $7,254 3.3%

Operating Profit % 13.8% 17.9% 16.8% 19.4% -2.6% -13.4% 15.7% 1.1% 7.0%

EPS $ $3.58 $4.34 $5.26 $7.00 $(1.74) -24.9% $3.77 $1.49 39.6%BALANCE SHEET

ROE % 15.1% 15.7% 16.2% 20.0% $(0) -19.0% 9.8% 6.4% 65.3%Stock Price $47.25 $54.99 $68.42 $83 $(14) -17.1% $53.30 $15.12 28.4%Total Assets $305,886 $344,250 $439,030 $419,881 $19,149 4.6% $410,859 $28,171 6.9%

Total Liabilities $60,241 $56,796 $100,954 $66,193 $34,761 52.5% $102,243 $(1,289) -1.3%

CREDIT RATING METRICSCredit Rating A+ A A- A+ n/a n/a B n/a n/a

Interest Coverage 9.83 21.72 25.65 33.24 (7.59) -22.8% 26.92 (1.27) -4.7%

Debt to Assets Ratio 0.11 0.10 0.18 0.10 0.08 80.0% 0.23 (0.05) -21.7%

SWOTStrengths Weaknesses• Bank loans• Credit ratings• Default risk• Debt to asset ratio/interest

coverage

• Ending cash• Operating profit expenses• Costs of pairs sold

Opportunities Threats• Increasing ending cash

available• Reduce operating profit

margin• Reduce cost of pairs sold

• Competitors• Co. Blue Label• Co. Cartel Shoes

Revenue $ $451,868 $560,378 $770,120

COGS $253,927 $288,601 $399,095

Operating Profit $ $76,044 $105,682 $165,495

Operating Profit % 16.8% 25.8% 24.6%

Earning Per Shares $ $5.26 $7.17 $11.78

Return on Equity % 16.2% 18.5% 19%

Stock Price $ $68.42 $83.54 $92.30

Credit Rating A- A+ A+

Strategy

Use a portion of excess cash to pay off outstanding loans

Maintain a credit rating of A or A+

Keep bank loans minimum to none

Increase profit margin by reducing operating costs

Decisions/Actions

Shoes distributed to Latin America will be from North America plant instead of Asia Pacific plant

Increase corporate social responsibility financial efforts

Avoid 1-Yr loans, use only 5-Yr/10-Yr options

ProductionLAURA MACRI

Situation Summary$ Millions Y14 Y15 Y16

Y16 Projecti

Y16 B/(W) PY16

% Y16 I.A.Y16

B/(W) I.A.

Total Capacity 6,000 6,000 6,900 6,000 6,000 6,900 7,250 (350) -4.8%

Net Footwear Productio

n Total 2,301 2,301 2,308 2,308 - - - - -

Days of Inventory 18 54 58 - 58 - 121 (63) -52.1%

Capacity Utilization

N.A. 120% 120% 120% 120% 0% 0% 120% 0% 0%

A.P. 120% 112.4% 120% 120% 0% 0% 120% 0% 0%

Branded Production Cost Per Pair

N.A. $32.88 $30.81 $29.03 $29.17 $(0.14) -0.5% $28.11 $0.92 3.3%

A.P. $26.45 $25.88 $23.45 $23.83 $(0.38) -1.6% $21.57 $1.88 8.7%

Strengths Weaknesses• Branded production (AP)• Branded labour cost• Private label labour cost

• Plant capacity• Branded production

Opportunities Threats• Purchase more capacity• Build another plant• Reduce branded production

rate• Think about putting private

label in the other three regions

• Reduce days of inventory

• Not providing private label in EA, LA, AP

• Not utilizing all of capacity purchased

Capacity 6,900 8,700 8,900

Capacity Utilization 120% 120% 114%

Ending Inventory 1,155 465 424

Days Of Inventory 58 50 45

Branded Labour Cost $2.97 $3.43 $2.04

Cost Of Branded Pairs

Sold$29.23 $28.22 $25.00

Strategy

Provide a high quality shoe for an affordable price

Keep production cost low but also offer detailed training and incentives for all employees

Keep rejection rates at a minimum by purchasing and using more capacity

Decisions/Actions

Build more capacity that will allow for more production

Reduce days of inventory by providing inventory clearance sales

Private Label MICHAEL CAMILLERI

Situational Summary $

Million Y14 Y15 Y16 PY16Y16

B/(W) PY16

% Y16 I.A.

Y16 B/(W) I.A.

Revenue $35,222 $26,827 $3,816 $3,816 $ - 0.0% $35,452 $(31,636.17

) -89.2%

Direct Costs $32,718 $20,541 $3,968 $3,928 $ (39) -1.0% $29,170 $(25,202.71

) -86.4%

Direct Margin

$$2,504 $6,286 $(152) $(112) $ 39 -34.9% $6,282 $(6,433.46) -102.4%

Direct Margin

%7.11% 23.43% -3.97% -2.94% $ 0 -34.9% 17.7% -21.69% -122.4%

Private Label Cost/Pair

N.A. $29.11 $28.82 $36.24 $34.86 $1.38 3.96% $27.80 $8.44 30.4%

E.A. $33.11 $ - $ - $ - $0 0% $29.58 $(29.58) -100.0%

A.P. $0 $27.82 $ - $ - $0 0% $24.55 $(24.55) -100.0%

L.A. $35.11 $ - $ - $ - $0 0% $31.03 $(31.03) -100.0%

Strengths Weaknesses• High Shoe quality for a low

price• Always met projections for

coming year

• Little to no revenue• High cost per pair

Opportunities Threats• Drive the market

unexpectedly • Maximize sales at cheapest

costs• Drive competition out of the

market

• High competitive market• Unstable demand growth

Revenue $ 3,816 $ 94,350 $ 116,871

Direct Costs $ 3,968 $ 20,165 $ 36,297

Direct Margin $ $ (152) $ 74,185 $ 80,574

Direct Margin % -3.97% 78.63% 68.94%

Private Label Cost/Pair:

NA $ 36.24 $ 24 $ 23

EA $ - $ - $ -

AP $ - $ 23 $ 22

LA $ - $ - $ -

StrategyCatch competitors off guard with unexpected entry of private labelSteal all possible demand with the amount of capacity left overOffer a high star at a extremely low costUnder cut all company's so we make all possible salesSell private label in all regions Increasing capacity in both North America / Asia Pacific

Decisions/Actions

Implement strategy in year 17 and onward

Wider range of available market to offer private label

Keep our brand image as a company

No one will expect our plan and will be unable to compete with our action

North AmericaMICHAEL CAMILLERI

Situation Analysis$ Million Y14 Y15 Y16 PY16

Y16 B/(W) PY16

% Y16 I.A. Y16 B/(W) I.A. %

RevenueInternet $ 17,490 $ 15,164 $ 21,024 $ 28,440 $ (7,416) -26.1% $ 13,145 $ 7,880 59.9%

Wholesale $ 90,248 $ 82,364 $ 102,469 $ 108,965 $ (6,496) -6.0% $ 91,096 $ 11,373 12.5%Private Label $ 12,950 $ 8,853 $ 3,816 $ 3,816 $ - 0.0% $ 10,671 $ (6,855) -64.2%

Total $ 120,688 $ 106,381 $ 127,309 $ 141,221 $ (13,912) -9.9% $ 114,911 $ 12,398 10.8%Operating Expenses

Cost of Pairs Sold $ 74,301 $ 59,188 $ 66,462 $ 73,198 $ (6,736) -9.2% $ 59,174 $ 7,288 12.3%

Warehouse Expenses $ 7,793 $ 6,540 $ 7,788 $ 9,030 $ (1,242) -13.8% $ 7,189 $ 599 8.3%

Marketing Expenses $ 23,989 $ 21,297 $ 32,095 $ 32,313 $ (218) -0.7% $ 27,831 $ 4,264 15.3%

Administrative

Expenses$ 2,773 $ 2,718 $ 2,835 $ 2,802 $ 33 1.2% $ 2,861 $ (26) -0.9%

Operating Profit $ $ 14,853 $ 17,686 $ 18,129 $ 23,878 $ (5,749) -24.1% $ 17,857 $ 272 1.5%

ProductionCost of

Branded Pair

Sold/Pair$ 33.53 $ 31.90 $ 30.13 $ 31.10 $ (0.97) -3.1% $ 27.61 $ 2.52 9.1%

Cost of Private

Label Pair Sold/Pair

$ 29.11 $ 28.82 $ 36.24 $ 36.24 $ - 0.0% $ 27.80 $ 8.44 30.4%

Celebrity Appeal 165 70 310 n/a n/a n/a 141 169 119.9%

SWOTStrengths Weaknesses• Internet

• Shoe quality• Celebrity appeal• Advertisement

• Wholesale• Shoe quality• Celebrity appeal• Advertisement • Rebate offer

• Internet• Free shipping

• Wholesale• Retail outlets

Opportunities Threats • Internet

• Offer free shipping • Wholesale

• Utilize more retail outlets

• Wholesale• Co. B & C close to

similar in shoe offering

Y17-19 Plan/Objectives$ Million Y16 PY17 PY19

RevenueInternet $ 21,024 $ 24,408 $ 40,548

Wholesale $ 102,469 $ 105,166 $ 156,020 Private Label $ 3,816 $ 45,000 $ 39,871

Operating ExpensesCost of Pairs Sold $ 66,462 $ 93,453 $ 127,710

Warehouse Expenses $ 7,788 $ 9,948 $ 12,547 Marketing Expenses $ 32,095 $ 34,103 $ 39,571

Administrative Expenses $ 2,835 $ 3,197 $ 3,375

Operating Profit $ $ 18,129 $ 28,873 $ 45,215 Production

Cost of Branded Pair Sold/Pair $ 30.13 $ 28.60 $ 30.00

Cost of Private Label Pair Sold/Pair $ 36.24 $ 24.11 $ 22.50

Image RatingCelebrity Appeal 310 495 495

Decisions & Actions

Slightly lower wholesale price

Increase models availability

Increase retailer support

Reduce deliver time

Offer free shipping in internet segment

Europe AfricaLAURA MACRI

Y16 B/(W) PY16

% Y16 I.A. Y16 B/(W) I.A. %

Wholesale $ 81,100 $ 75,503 $ 99,921 $ 113,261 $ (13,340) -11.8% $ 90,865 $ 9,056 10.0%Private Label $ 11,772 $ - $ - $ - $ - $ 6,072 $ (6,072) -100.0%

Marketing Expenses $ 18,674 $ 19,598 $ 30,800 $ 31,637 $ (837) -2.6% $ 27,967 $ 2,833 10.1%

Administrative

Expenses $ 2,339 $ 2,389 $ 2,765 $ 2,865 $ (100) -3.5% $ 2,875 $ (110) -3.8%

Operating Profit $ $ 12,557 $ 14,133 $ 19,213 $ 26,370 $ (7,157) -27.1% $ 14,319 $ 4,894 34.2%

ProductionCost of

Branded Pair

Sold/Pair $ 32.38 $ 31.90 $ 29.63 $ 29.98 $ (0.35) -1.2% $ 28.51 $ 1.12 3.9%

Cost of Private

$ - $ - $ - $ - $ 29.58 $ (29.58) -100.0%

Celebrity Appeal 145 65 335 141 194 137.6%

• S/Q Rating• Celebrity Appeal• Dominate Market Share

• Wholesale• S/Q Rating• Rebate Offer• Celebrity Appeal

• Internet• Free Shipping

• Wholesale• Retail Outlets

Opportunities Threats• Internet

• Provide Free Shipping• Wholesale

• Open more Retail Outlets

• Internet• Offer Free Shipping

• Wholesale• Co. B & C having similar

S/Q Rating

Wholesale $ 99,921 $ 102,718 $ 116,548 Private Label $ - $ - $ 20,000

Cost of Private Label Pair Sold/Pair $ - $ - $ -

Decisions & Actions

Increase market share

Increase incentives

Asia PacificANDREA PAREDES

Y16 B/(W) PY16

% Y16 I.A. Y16 B/(W) I.A. %

Wholesale $ 62,384 $ 61,868 $ 70,760 $ 85,041 $ (14,281) -16.8% $ 71,836 $ (1,076) -1.5%Private Label $ - $ 17,974 $ - $ - $ - 0.0% $ 10,428 $ (10,428) -100.0%

Total $ 74,264 $ 91,062 $ 84,152 $ 107,001 $ (22,849) -21.4% $ 93,123 $ (8,971) -9.6%Operating Expenses

Cost of Pairs Sold $ 36,837 $ 47,052 $ 36,956 $ 44,828 $ (7,872) -17.6% $ 41,330 $ (4,374) -10.6%

Marketing Expenses $ 14,482 $ 14,501 $ 23,030 $ 24,037 $ (1,007) -4.2% $ 22,392 $ 638 2.9%

Administrative

Expenses $ 1,971 $ 2,115 $ 2,003 $ 2,158 $ (155) -7.2% $ 2,302 $ (299) -13.0%

Operating Profit $ $ 17,054 $ 21,753 $ 20,641 $ 28,705 $ (8,064) -28.1% $ 21,215 $ (574) -2.7%

ProductionCost of

Branded Pair

Sold/Pair $ 27.46 $ 26.90 $ 24.54 $ 29.40 $ (4.86) -16.5% $ 22.93 $ 1.61 7.0%

Cost of Private

$ - $ 27.82 $ - $ - $ 24.55 $ (24.55) -100.0%

Celebrity Appeal 140

55 260 141 68 48.2%

SWOTStrengths Weaknesses We decreased the cost of

production between years 14 and 16 to meet and surpass the industry average performance level

Celebrity appeal increase between years 15 and 16

Increased wholesale revenue by $10,000 million

We did not build enough capacity in year 15

We couldn’t afford to sell any private label shoes in year 14 or 16 because it was not feasible

Total market share in Asia Pacific is low

Opportunities Threats Private label segment in Asia

Pacific Producing more shoes in Asia

Pacific at a lower cost More celebrity appeal

Competition Reaching capacity in Asia

Pacific More competitors

manufacturing in Asia Pacific

Wholesale $ 70,760 $ 78,126 $ 125,560 Private Label $ - $ 49,350 $ 20,000

Cost of Private Label Pair Sold/Pair $ - $ 20.91 $ 21.50

Decisions & Actions

Build more capacity within Asia-Pacific region

Continue with low pricing strategy to consumers

Continue to produce high quality shoes within Asia-Pacific region

Latin AmericaHANNAH DAVIS

Y16 B/(W) PY16

% Y16 I.A. Y16 B/(W) I.A. %

Wholesale $ 65,286 $ 57,997 $ 98,121 $ 95,395 $ 2,726 2.9% $ 70,757 $ 27,364 38.7%Private Label $ 10,500 $ - $ - $ - $ - 0.0% $ 8,281 $ (8,281) -100.0%

Warehouse Expenses $ 5,731 $ 4,801 $ 7,187 $ 7,945 $ (758) -9.5% $ 5,695 $ 1,492 26.2%

Marketing Expenses $ 14,256 $ 14,148 $ 23,746 $ 23,059 $ 687 3.0% $ 21,747 $ 1,999 9.2%

Administrative

Expenses $ 1,993 $ 1,915 $ 2,495 $ 2,274 $ 221 9.7% $ 2,235 $ 260 11.6%

Operating Profit $ $ 10,136 $ 9,706 $ 18,010 $ 19,567 $ (1,557) -8.0% $ 8,877 $ 9,133 102.9%

ProductionCost of

Branded Pair

Sold/Pair $ 34.65 $ 33.45 $ 31.52 $ 31.89 $ (0.37) -1.2% $ 30.58 $ 0.94 3.1%

Cost of Private

$ 35.11 $ - $ - $ - $ - 0.0% $ 31.03 $ (31.03) -100.0%

Celebrity Appeal 135

60 380 141 239 169.5%

• S/Q Rating• Celebrity Appeal

• Wholesale• S/Q Rating • Celebrity Appeal• Delivery Time

• Internet• Free Shipping

• Wholesale• Retail Outlets

• No Private-Label

Opportunities Threats• Internet

• Provide Free Shipping• Wholesale

• Gain more Retail Outlets

• Private-Label• Create Strategy

• Internet• Provide Free Shipping

• Wholesale• Main competitors Co.B

Wholesale $ 98,121 $ 94,946 $ 105,390 Private Label $ - $ - $ 48,000

Cost of Private Label Pair Sold/Pair $ - $ - $ 30.00

Decisions & Actions

Put in private-label bid

Add free shipping to internet segment

Lower prices, offer more models, increase rebate offer & retailer support

Summary

Thank You

Questions

Applied Business Managment BoD PPT

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