ELLER CONSULTANTS

Sonae SR International Expansion Plan SERRA CRAWFORD

JUHYUNG SUN

MEGAN SHULBY

TIERNAY MARSH

ELLER CONSULTANTS

Strengthen Local Venture, Grow Internationally

Spain not profitable

International expansion uncertainty

Insufficient brand resonance

Key Challenges

Rapid capital light expansion strategy

ELLER CONSULTANTS

Strengthen Local Venture, Grow Internationally

Streamline operations in

Portugal

Expand competencies

in Spain

Explore JVs internationally

Strengthen existing positioning and explore promising markets

ELLER CONSULTANTS

Analysis

Recommendation

Financial Analysis

Risk Evaluation

Conclusion

ELLER CONSULTANTS

Expand on Existing Strengths

• Efficient store operations

• Streamlined value chain

• Capital light models

• Easily accommodates new business partners

Core Competencies

• Comprehensive IT system

• Local knowledge

• Higher profit sharing

• Brand development

Areas of Improvement

Explore international ventures by leveraging existing efficiencies

ELLER CONSULTANTS

Evaluate International Opportunities

• International price differential

• Disposable income in emerging markets

• Brand acquisition Opportunities

• Customer acquisition

• Existing market competition

• Brand perceptions Threats

Evaluate opportunities against entry costs and risk

ELLER CONSULTANTS

Sonae SR Brand Analysis Worten, 40M €

• Sells other brands

• Success in: Portugal, Canary Islands

• Capital Model: Organic Growth, Joint Venture

Sport Zone, 10M €

• 50% own brands

• Success in: Portugal, Canary Islands

• Capital Model: Organic Growth, Joint Venture

Zippy, Breakeven • 100% own brands

• Success in: Portugal, Canary Islands

• Capital Model: Organic Growth, Joint Venture

MO, Breakeven • 100% own brands

• Success in: Portugal, Canary Islands

• Capital Model: Organic Growth, Joint Venture

ELLER CONSULTANTS

Expanding Sport Zone Abroad

Joint Ventures Franchises

Capital intensive O O

Risk sharing O O

Profit sharing O O

Local partnerships O O

In-house brands O O

Track record O O

Sport Zone’s 50% own brand mix and need for local knowledge make JVs the best choice

ELLER CONSULTANTS

Alternatives Analysis

Local knowledge International opportunity

Revenues Risks

IT investment O O O O

Acquire high end brand O O O O

Enter JV O O O O

IT, high end, JV O O O O

Status Quo O O O O

Investments in IT, partnerships, and brand acquisition.

ELLER CONSULTANTS

Analysis

Recommendation

Financial Analysis

Risk Evaluation

Conclusion

ELLER CONSULTANTS

Geographic Expansion Strategy

Worten Sport Zone Zippy MO

Portugal X X X X

Spain X X

India X

China X

MENA X

Continue successful ventures and expand into similarly promising markets

ELLER CONSULTANTS

PORTUGAL – Streamline operations

Derive efficiencies and customer insights

Contract with Salesforce

Standardize across brands and locations

Position for future growth Rapid expansion

Local analytics

Implement leading CRM

Improve profit margins and strengthen brand identity

Corporate branding strategy

Differentiate and strengthen image

Promote common brand identities

Integrate acquired local knowledge

Future brand development Brand awareness

Streamlined communications

ELLER CONSULTANTS

SPAIN – Expand on competencies

Leverage Joint Venture model

Identify potential JV partners

Expand to Madrid, Seville, Barcelona, Granada

Build stand alone stores Sports Zone: 10 stores

Worten: 5 stores

Cater to fashionable Spanish customers

How:

Identify M&A opportunities from within Spain Leverage brand & customer base

Develop fashion brand suite

Sport Zone & Worten Acquire Luxury Brand

Build brand portfolio with Spain by leveraging proven competencies

ELLER CONSULTANTS

INTERNATIONAL – Store Expansion

Joint Venture model

Stores: rent space within stores

Expand to India, China

Build stand alone stores Sports Zone: 10 stores

Worten: 5 stores

Sport Zone in India, China

Expand Sport Zone to emerging markets through local partners

Zippy in MENA

Franchise model

Stores: large retail

Expand to MENA

Expand partnership with Alhoair

ELLER CONSULTANTS

Analysis

Recommendation

Financial Analysis

Risk Evaluation

Conclusion

ELLER CONSULTANTS

Timeline

Q1 Q2 Q3 Q4

PORTUGAL

Corporate Brand Strategy

Contract CRM CRM Bids

SPAIN

Expand Sport Zone, Worten ID JV Partner Store Expansion

Acquire Luxury Brand ID brands Negotiate Acquire

INTERNATIONAL

Sport Zone in India, China ID locations Store-in-Store Expansion

Zippy in MENA Optimize Expand

ELLER CONSULTANTS

Financial Status

Lower debt ratio

Low cost of capital

High industry turn over: 1290 M €

Low EBITDA margin: 1.2% in 2014

0

100

200

300

400

500

600

700

800

900

1000

2013 2014

Turnover, in Millions

Portugal International

Profit, in Millions

Overall Revenue

Worten 40 68%

Sport Zone 10 18%

Zippy Breakeven 14%

Mo Breakeven

ELLER CONSULTANTS

Expected Return Joint Venture

EXPECTATION: Full Size Store: $10M Pop-Up Store: $1M

Year 1 Year 2 Year 3 Year 4 Year 5

PORTUGAL

Costs $500,000 $50,000 $50,000 $50,000 $50,000

Revenue $150,000 $190,000 $230,000 $290,000 $320,000

SPAIN

Costs $150M $40M $42M $45M $47M

Revenue $10M $80M $120M $180M $220M

INTENATIONAL

Costs $55M $10M $11M $12M $13M

Revenues $4M $10M $15M $40M $60M

NPV = $15.5B

ELLER CONSULTANTS

Analysis

Recommendation

Financial Analysis

Risk Evaluation

Conclusion

ELLER CONSULTANTS

Risk and Risk Mitigation

• Seek out and strengthen local partnerships Low customer adoption

• Partner with strong CRM partner Poor IT integration

• Integrate local knowledge and strengthen brand Aggressive competitor response

• Streamline operations and pursue low profit sharing Low ROI

Imp

act

Likelihood

Strengthen local position and expand internationally to distribute risk

ELLER CONSULTANTS

Measuring Success

Total profits

Customer adoption rates

Brand awareness

Strength of partnerships

Quality of IT infrastructure

ELLER CONSULTANTS

Analysis

Recommendation

Financial Analysis

Risk Evaluation

Conclusion

ELLER CONSULTANTS

Conclusion

Success in Spain

Streamline operations

Leverage core competencies

International Expansion

Sport Zone expansion

Joint Ventures

Brand resonance

Brand acquisition

Comprehensive marketing

ELLER CONSULTANTS

Thank you