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1
Annual Shareholder’s Meeting
April 23, 2008
Executives:
Cierra Crowder
Kesha Haley
Justin Hearon
Vien Nqyuen
Andre Pardue
DESIGNER FOOTWEAR
Mission Statement
2
Designer Footwear strives to focus on the needs of
the modern day consumer when selecting materials,
introducing designs, and manufacturing its quality
footwear.
3
Designer Footwear Overall Goals
• Maintain credit rating of A-– Debt payoffs with each debt issuance
– Year 12: Borrowed $100,000K, Paid off Y7 $112,000K loan and Y9 $24,000K loan
– Year 13: Borrowed $130,000K, Paid off Y12 $100,000K loan
• EPS 20% higher than investor expectation every year
• ROE 5% higher than investor expectation every year
• Reach and maintain at least 80 image rating– Price
– Branded Distribution
– Revenues
– Private Label
• Steadily gain market share while maintaining a positive profit margin per shoe
• Maintain celebrity appeal of at least 100 in each region
• Higher S/Q rating than industry average– Implement Plant Upgrade Option C
– Right combination of:• Superior Materials
• TQM / Six Sigma Quality Program
• Enhanced Styling Features
4
S/Q Rating:Designer Footwear vs. Industry
Average
0
1
2
3
4
5
6
7
8
9
10S
/Q R
atin
g
Designer Footwear
Industry Average
Y11 Y13Y12 Y14 Y15 Y16 Y18Y17 Y19
Proj.
Y20
Proj.
5
Implementation Strategies
• Focus on direct competitors
– Best Brand Footwear
– Innovative Footwear
• Indirect competitors
– Happy Feet Footwear
– Gains Shoe Footwear
6
Strategic Group Maps
YEAR 11 YEAR 18
FewProduct Line Breadth
ManyModels Models
Low
End
Pri
ce a
nd
S/Q
Rat
ing
Strategic Group Map
High
WHOLESALE SEGMENT
End
FewProduct Line Breadth
ManyModels Models
Low
End
Pri
ce a
nd
S/Q
Rat
ing
Strategic Group Map
High
WHOLESALE SEGMENT
End
Year 11 “The Beginning”
• Differentiation
Strategy
• Designer Footwear
value-chain activities
– HR Management
– Inbound/Outbound
logistics
• Designer footwear
focused on
– Pricing
– Quality
– Advertising/Celebrity
Endorsement
– S/Q rating
7
8
Year 12
• Goal: Build Capacity for use in Year 14
• Actions
– Implemented Plant Upgrade option A in North
America and Asia-Pacific
– Issued $.10 dividend
– Took advantage of exchange rates
• NAFTA
• Shift production to L.A
9
Year 12
• Took out a loan $100 million
– Took advantage of lower interest rates
• Consolidated debt
– Opened plant in L.A
• 1,000,000 pairs self-construction
• Inventory clearance 50%
10
Year 13 Initiatives• Increased S/Q rating by 1 star in each region
– 10 Star S/Q rating/Competitive Advantage
• Reduced Asia-Pacific production run set-up cost
by 50%
• Additional Construction L.A. and A.P.
– Increased capacity by 700K to meet demand
• 130 Million to Finance Construction and pay off
existing loan
11
Year 14 Initiatives
• Reduced production set-up costs by 50%
– $8 Million capital outlay to Latin America
• Significant celebrity endorsement
– Highest market share in each region
– 13.1% N.A, E.A., A.P. and 13.9% in L.A.
– Highest celebrity appeal in each region
12
0
20
40
60
80
100
120
140
160
180
N.A. E.A. A.P. L.A.
DesignerFootwear
IndustryAverage
Y14 Celebrity AppealDesigner Footwear vs. Industry Average
• North America– Designer Footwear: 155
– Industry Average: 71
• Europe-Africa– Designer Footwear: 130
– Industry Average: 73
• Asia-Pacific– Designer Footwear: 160
– Industry Average: 67
• Latin America– Designer Footwear: 165
– Industry Average: 73
13
Year 15 Strategies
• Constructed additional 1.2 million capacity- 700,000 in Latin America
- 500,000 in Asia Pacific
• Increase superior materials to 90 percent
- Achieve 9 S/Q rating
14
Year 16
• Huge increase in spending for celebrity
endorsements
• First in Industry to achieve 10 S/Q rating
• Increase models available from 250 to 350
15
Year 17 – Building More Capacity• Past Results and Goals Met/Achieved.
– Increase in product demand.
– Meeting demand.
• Goal – Building and buying capacity at a discount. – Based on 13-15% market share of wholesale segment in year
16• Increased capacity in AP (800,000 pairs) and LA (1,000,000 pairs)
• Result - Competitive Intelligence Report for Y17 showed loss of sales for all regions (as expected).– Bought 2,000,000 pairs in LA at a discount.
16
Year 18 – Continue to Reduce
Production Cost• Main goal
– to stay competitive in our strategic group
– gain back some market share lost in Year 17 due to lack of capacity.
• To reduce cost – sold NA plant (2,000,000 pairs) and produce solely
out of LA and AP (total capacity including overtime = 13,080 pairs)
• Stock Repurchase of 1,900,000 shares.
17
Pro Forma Income Statement
• Refer to Shareholder’s guide
• Expect Net Sales – Year 19: $607,000,000
– Year 20: $634,000,000
– Year 21: $656,000,000
• Estimated net profit will be $86,000, $92,000, and
$96,000 in years 19, 20, and 21 respectively
• Net profit Margin – 14% in years 19-21
Projected Income StatementProjected Income Statement
Year 19 Year 20 Year 21
Net
Revenues $ 608,238 $ 637,545 $ 661,759
Operating
Expenses $ 479,376 $ 499,494 $ 516,461
Operating
Profit $ 128,862 $ 138,051 $ 145,298
Taxes and
Interests. $ 41,294 $ 43,639 $ 45,400
Net Profit $ 87,568 $ 94,412 $ 99,898
Outstanding
Stocks 7900 7900 7900
Earnings Per
Share $ 11.08 $ 11.95 $ 12.65
18
Going Forward
“In the future, we plan to continually implement
our differentiated strategy through TQM,
enhanced styling and features, S/Q rating and
reduced production costs.”
19
20
THANK YOU.
Questions?