Transcript Document

The Business
Turnaround
The Business Turnaround
Case Study
Define Current Business State
Define Desired Business State
}
Be
Realistic
Key Considerations of Current & Future States
• Brand
• Category
• Competitive Situation
• Consumer
• Channel Dynamics
• Company
-Key Strengths & Competencies To Be Exploited
-Key Problems & Opportunities for Significant Improvement
Brand
• Global
• Leading
• Growing
Category Dynamics
• Growing – Worldwide – Mature and Emerging Markets
• Category Will: -Be Around for a Long Time
-Continue to Grow
Competition
• No Truly Global Competitor
• Weak Competition – None More Than 15% Samsonite’s Size
• Very Fragmented; Susceptible to Global Consolidation
Consumer Needs
• Product Features:
- Best in Class
• Styling:
- Consumer-Preferred
-Ease of Mobility
-Ease of Handling
-Internal Organization
-Traditional
-Casual
-Fashion Forward
Channels of Distribution
• Luggage Specialty and Department Stores
• National, Mid-priced Department Store Chains
• Mass Merchandisers
• Club Stores
• Samsonite Owned Stores
Company
Already Has: -Proven Record of Innovation
-Proven Ability to Expand Into New Geography
-Proven Products, Marketing, Sales & Distribution
Needs:
-Clearly Defined Programs to Reduce SG&A
and Cost of Sales
-Clearly Defined Programs to Globalize Best
Practices, Including Product and Brand
Marketing, as well as Manufacturing,
Sourcing, and & Operational Systems
Samsonite Situation Summary
• Leading Global Brands
• Growing Worldwide Category
• Multiple Channel Strategy Opportunities
• Winning Competitive Position
• Broad Consumer Appeal
• Proven Innovative Global & Successful Company
But…
-Poor Cost Structure
-Poor Global Competitor
-Poor Global Best Practices
-Poor Global Business Building Strategies
Define Desired Business State for Company/Brand
• From the Standpoint of the Consumer
• From the Standpoint of Wall Street
Consumer Vision of Samsonite
An innovative, state of the art, best quality, luggage and travel
accessory global leader, Samsonite does the best job of making
travel easy and stylish for everyone in the world, at each key price
point within the category. The brand is readily accessible for
purchase, conveniently, on a global basis.
Wall Street Vision of Samsonite
A highly competent, trustworthy, innovative and successful, global
company, possessing a healthy global leadership brand, capable
of reliably generating sustained, double-digit earnings growth, at a
strong return on equity, for the foreseeable future.
Net…A Healthy, Growing and Very Profitable
Global Luggage Brand/Company
Define Measurable Criteria Necessary to
Achieve Consumer and Wall Street Vision
Define Measurable Criteria Necessary to Achieve
Consumer and Wall Street Vision
Consumer Criteria:
-Brand Positioning
-Target Audience Definition
-Advertising & Media Plan
-Products
> By
-Features
> Trade
-Styling
-Price Points > Channel
-Customer Service Requirements
-By Trade Channel
GLOBALLY BENCHMARKED VERSUS COMPETITION
Define Measurable Criteria Necessary to Achieve
Consumer and Wall Street Vision
Wall Street Criteria:
-P&L Double-Digit Growth
-Double-Digit Top Line
Performance
-Return on Equity
-Free Cash Flow & Accretive
Plan for Use
-Collaborative, Communicative
and Helpful
-No Disappointments
-Consistent Pleasant Surprises
GLOBALLY BENCHMARKED VERSUS COMPETITION
Define Measurable Criteria Necessary to Achieve
Consumer and Wall Street Vision
Consumer Criteria:
-Brand Positioning
-Target Audience Definition
-Advertising & Media Plan
-Products
> By
-Features
> Trade
-Styling
-Price Points > Channel
-Customer Service Requirements
-By Trade Channel
Wall Street Criteria:
-P&L Double-Digit Growth
-Double-Digit Top Line
Performance
-Return on Equity
-Free Cash Flow & Accretive
Plan for Use
-Collaborative, Communicative
and Helpful
-No Disappointments
-Consistent Pleasant Surprises
GLOBALLY BENCHMARKED VERSUS COMPETITION
Define the Plans and Strategies Necessary
to Achieve Vision
Top Management Priorities
Top Management Priorities – Define the Plans and
Strategies Necessary to Achieve Vision
• Organizational Effectiveness
• Financial Considerations
• Business Growth Opportunities
Organizational Effectiveness
•Top Management Priorities – Define the Plans and
Strategies Necessary to Achieve Vision
Leadership Team
-Pick the Winning Team ASAP
-Typically a Combination of the Best Inside the
Company and Key Proven Executives Chosen from
the Outside – Ideally People You Know and Trust
-Senior Management Team
> Top
-Fill Core Competency Outages > Priorities
Organizational Effectiveness
•Top Management Priorities – Define the Plans and
Strategies Necessary to Achieve Vision
Organizational Structure
-Simplify, Make Flexible, Nimble & Responsive
-Design to be the Best Capable of Implementing
Strategies Successfully and to Achieve Objectives
-Eliminate Redundancies
“An organization is Perfectly Designed to Get the Results it Achieves.”
“Organizational Design Must Consistently Reflect Strategic Results to
be Achieved.”
Organizational Effectiveness
•Top Management Priorities – Define the Plans and
Strategies Necessary to Achieve Vision
Organizational Incentives
-Consistent with Shareholder Value
-Consistent with Strategic Objectives
Organizational Effectiveness
•Top Management Priorities – Define the Plans and Strategies Necessary
to Achieve Vision
Leadership Team
-Pick the Winning Team ASAP
-Typically a Combination of the Best Inside the Company and Key Proven
Executives Chosen from the Outside – Ideally People You Know and Trust
> Top
-Senior Management Team
-Fill Core Competency Outages > Priorities
Organizational Structure
-Simplify, Make Flexible, Nimble & Responsive
-Design to be the Best Capable of Implementing Strategies Successfully and to
Achieve Objectives
-Eliminate Redundancies
“An organization is Perfectly Designed to Get the Results it Achieves.”
“Organizational Design Must Consistently Reflect Strategic Results to be Achieved.”
Organizational Incentives
-Consistent with Shareholder Value
-Consistent with Strategic Objectives
Top Management Priorities
•Financial Considerations
Cost Structure Improvements
-Cost of Sales
-SG&A
Top Management Priorities
•Cost of Sales
-Raw Material Costs
-Manufacturing Costs
-Stocking or Warehousing Costs
-Freight Costs
Top Management Priorities
•Raw Materials
-“Ask and You Shall Receive” – Put Pressure on
Vendors for Lower Costs
- Concentrate Your Business with Fewer Suppliers –
Trade More Business for Lower Costs
- Learn What Causes Supplier Costs to be High on
Our Raw Materials – If Possible, Eliminate These
Specifications
Top Management Priorities
•Manufacturing
-Benchmark Global Best Practices
-Search and Reapply These
-Insure all Processes Operated with Statistical Control
and Measurement
-Insist on Improving Reliability, Line Efficiencies, and
Preventive Maintenance
-Insist on a State-of-the-Art, High Commitment Work
System – Skill Based, Team Based, and Outcome Based
Top Management Priorities
Net: Examine:
Every Way Money is Spent
Ask:
How to Eliminate or Lower Cost
Consider:
Outsourcing Anything That can be
Done Cheaper Yet at Right Quality
and Reliability
Top Management Priorities
•Balance Sheet
-Increase Payables
-Decrease Receivables
-Monetize ALL Non-Strategic Assets
-Manage Capital Spending Down to a Level Equal to Depreciation
-Reduce “Work in Progress”
-Globally Standardize Component Products Whenever Possible
-Have Suppliers Carry Raw Material Inventories
-Consider Outsourcing Components and/or Small Parts
-Manage Finished Product Inventories to 45 Days or Less
-Consider Moving More Toward Just-in-Time Manufacturing,
Sourcing and Forecasting Systems
-Reduce SKUs by 20-40%
-Analyze SKU Profitability & Realization Contribution
-Manage Debt Down and Reduce Cost of Debt
Top Management Priorities
•Business Growth
Top Line Growth Acceleration Plan
-Product Architecture
-Pricing
-Margin Mix
-Expansion into New but Related Category Segments
-Marketing/Sales Initiatives
-Brand Positioning/Advertising/Target Audience
-Trade Channel Strategy
-Vertical Integration Into Retail
-Geographic Expansion
Top Management Priorities
•PDCA – Plan, Do, Check, Act
Establish, Monitor, and Control Systems
-Insure Information Systems are Accurate and
Credible
Samsonite
Game Plan
Samsonite Game Plan
•New Management Team
•Structural Cost Improvements
•Significantly Improved Product and Pricing Global
Line-up
•Accelerated Top-Line Growth
•Improved Balance Sheet
•Strengthened Financial Position
•Exceptional Earnings Potential
Structural Cost Improvements
•Streamlining Organization
•Global Sourcing of Products/Raw Materials
•Product/Component Standardization
•Cost Control Measures
Structural Cost Improvements
Streamlining Organization
Old Samsonite
New Samsonite
Samsonite
Lark
American Tourister
Design/R&D
Design/R&D
Design/R&D
Hardside
Softside
Design/R&D
Design/R&D
Marketing
Marketing
Marketing
Sales
Sales
Sales
Marketing
Distribution
Distribution
Distribution
Sales & Distribution
Structural Cost Improvements
USA Wholesale
USA Retail
Other Americas
Europe
Far East
Headcount
10/31/96
1,550
729
3,481
2,354
72
8,186
4/33/97
1,393
813
2,526
2,306
141
7,179
1,007 Positions
•12% Worldwide Reduction
•33% Worldwide Core Corporate Reduction
•Expected Savings of $10+ Million
Structural Cost Improvements
Global Sourcing
High Cost Market
Low Cost Markets
Fiscal ‘97
Fiscal ‘98
Taiwan
34%
Philippines
Thailand
Dominican Republic
Other Lower Cost Countries
Taiwan
16%
31%
33%
15%
5%
Structural Cost Improvements
Softside Global Component Standardization
Description
Fiscal Year ‘96
Upright Handle Systems
31
TM
EZ Cart Handle Systems
3
Wheels
23
Carry Handles
52
Sewn Handles
100
Fabrics (Exterior-Interior)
56
Vinyls
35
Hardware
75
Films
20
Mesh
10
Zippers
20
Locks
20
Webbing
30
Hang Tags/Collateral
100s
Total Projected Fiscal Year Savings vs. FY ’97
Hardside Projected Fiscal Year Savings vs. FY ‘97
6/97
7
2
10
10
100
25
15
25
10
5
6
6
12
50
$1.7 Million
$2.0 Million
1/98
5
2
8
10
20
15
10
20
5
2
3
3
6
30
$4.0 Million
$2.0 Million
Structural Cost Improvements
}
•Streamlining of Organization
•Global Sourcing of Products/Raw Materials
•Product/Component Standardization
•Cost Control Measures
$30 - $35 +
Million Savings
In Year 1
$50 - $55
Million
In Year II
Significantly Improved Product & Pricing Global
Line-Up
•Broaden Range of Product Features and Price Points
•Move to Global Product Line
•Drive Enhanced Margin Structure
Accelerated Top-Line Growth
•Accelerate Introductions – New Global Product & Features
•Strengthen Marketing & Innovation
•Expand Product Offerings
-Business Bags
-Casual Bags
•Broaden Channels of Distribution
•Continue Worldwide Expansion
Accelerated Top-Line Growth
•Accelerate Introductions – New Global Product & Features
•Strengthen Marketing & Innovation
•Expand Product Offerings
-Business Bags
-Casual Bags
•Broaden Channels of Distribution
•Continue Worldwide Expansion
Accelerated Top-Line Growth
•Accelerate Introductions – New Global Product & Features
•Strengthen Marketing & Innovation
•Expand Product Offerings
-Business Bags
-Casual Bags
•Broaden Channels of Distribution
•Continue Worldwide Expansion
Accelerated Top-Line Growth
•Accelerate Introductions – New Global Product & Features
•Strengthen Marketing & Innovation
•Expand Product Offerings
-Business Bags
-Casual Bags
•Broaden Channels of Distribution
•Continue Worldwide Expansion
Accelerated Top-Line Growth
•Accelerate Introductions – New Global Product & Features
•Strengthen Marketing & Innovation
•Expand Product Offerings
-Business Bags
-Casual Bags
•Broaden Channels of Distribution
•Continue Worldwide Expansion
Broaden Channels of Distribution
•U.S. Luggage Sales/Market Share ($ MM)
$300
$273
Millions of Dollars
$241
$250
$210
$200
$150
52%
$120
$84
$100
$50
13%
23%
$84
61%
$31
52%
43%
$0
Traditional
Mass
Merchant
National
Chains
Outlet Stores
Catalog
Showrooms
Direct
Marketing
Warehouse
Clubs
Accelerated Top-Line Growth
•Accelerate Introductions – New Global Product & Features
•Strengthen Marketing & Innovation
•Expand Product Offerings
-Business Bags
-Casual Bags
•Broaden Channels of Distribution
•Continue Worldwide Expansion
1997 Key Expansion Areas
Accelerated Top-Line Growth
•Accelerate Introductions – New Global Product & Features
•Strengthen Marketing & Innovation
•Expand Product Offerings
-Business Bags
-Casual Bags
•Broaden Channels of Distribution
•Continue Worldwide Expansion
Improved Balance Sheet
•Successful equity offering completed on February 6, 1997
•Total debt reduced by $162 million to $163 million
•Accounts payable has increased 32.1%
•Accounts receivable and other receivables have
decreased 3.6%
•Inventories increased consistent with growth of business
•Total equity to debt ratio has improved to (1.1 to 1) from
(.05 to 1)
•Credit rating has been raised by S&P and Moody’s
Samsonite Game Plan Update
Status
•New Management Team
•Structural Cost Improvements
•Significantly Improved Product
and Pricing Global Line-Up
•Accelerated Top-Line Growth
•Improved Balance Sheet
Complete
Ahead of Target
Ahead of Target
On Target
Ahead of Target
Samsonite Corporation First Half Net Revenue
$450
$400
Millions of Dollars
$345
$366
$349
$350
$300
$250
6%
Growth
$200
$150
1%
Growth
$100
$50
$0
'97 (Adjusted)*
'98
'98 (Adjusted)**
Fiscal
*First Half Fiscal ’97 Excludes $4 Million Non-Recurring Trademark Sale
**First Half Fiscal ’98 Excludes $17 Million of Foreign Currency Translation Losses
Samsonite Corporation Gross Profit Margin Trend
Percentage
43.6%
44.00%
43.00%
41.4%
42.00%
39.4%
41.00%
40.00%
38.6%
39.00%
38.00%
First Six Months FY '97
'Second Six Month FY '97
First Quarter FY '98
*First Half Fiscal ’97 Excludes $4 Million Non-Recurring Trademark Sales
Second Quarter FY '98
Samsonite Corporation SG&A as a % of Sales
Percentage
34.00%
32.2%
31.2%
31.9%
31.8%
32.00%
30.00%
28.00%
26.00%
24.00%
22.00%
20.00%
First Half FY '98
Second Half FY '97
First Quarter FY '98
Second Quarter FY '98
Samsonite Corporation EBIT Margins
12.00%
10.7%
Percentage
10.00%
8.00%
8.5%
5.1%
7.1%
6.00%
4.00%
2.00%
0.00%
First Six Months FY '97
Second Six Month FY '97
First Quarter FY '98
*First Six Months FY ’97 Excludes $4 Million Non-Recurring Trademark Sale
Second Quarter FY '98
Samsonite Corporation First Half Net Revenue
$90
$82
$80
$66
$70
$60
$77
$80
Millions of Dollars
$65
$56
$47.90
$50
$32.70
$40
$30
6%
Growth
$20
$10
$0
'92
'93
'94
'95
Fiscal
'96
'97
'97
'98
First Half
*EBITDA, Excluding Non-Recurring Royalty Income, is Calculated as Operating Income Plus
Depreciation, Amortization and Restructuring Costs
Trend of Earnings Per Share from Continuing Operations
.96
$1.00
Dollars
$0.80
.41
$0.60
$0.40
$0.20
.22
<.39>
.14
$0.00
-$0.20
-$0.40
Second Quarter
Third Quarter
FY ‘97
Fourth Quarter
First Quarter
Second Quarter
FY ‘98
Samsonite Game Plan
•Organizational Effectiveness
-New Management Team
-Streamlined Category-Based Organization Structure
-Stock Option Program Broadened and Senior
Executive Restricted Stock Program
Samsonite Game Plan
•Structural Cost Improvements
-Global Sourcing
-Product and Component Standardization
-Organization Streamlining
-Cost Control Measures
Samsonite Game Plan
•Balance Sheet Improvements
-Sold Excess Assets
-Extended Supplier Payment Terms – Higher Payables
-Reduction in Receivables
-SKU Reductions
>
Lower Working Capital
-Tightened Inventory Control >
Samsonite Game Plan
•Product Architecture/Pricing
-Moved to Global Product Line
-Globalized Only Best-In-World Product Lines
-Price Points Responsive to Consumer and Channel
Strategy Needs
Samsonite Game Plan
•Top-Line Growth
-Accelerated Global Introductions of New ConsumerPreferred Features Across All Brands/Product Lines
-Expanded Penetration in Casual Bag and Business
Bag Segments
-New Global Advertising
-Strengthened Point of Sale Support
-Significantly More Reliable Customer Service
-Broadened Retail Distribution Including Mass
Merchandisers
-Accelerated Company-Owned Retail Store Growth
Samsonite Game Plan
•Organizational Effectiveness
-New Management Team
-Streamlined Category-Based
Organization Structure
-Management Stock and Option Incentives
•Structural Cost Improvements
-Global Sourcing
-Product and Component Standardization
-Organization Streamlining
-Cost Control Measures
•Product Architecture/Pricing
-Moved to Global Product Line
-Globalized Only Best-In-World Product Lines
-Broadened Range of Products, Features,
Styles & Price Points Responsive to
Consumer and Channel Strategy Needs
•Top-Line Growth
-Accelerated Global Introductions of New
Consumer-Preferred Features Across All
Brands/Product Lines
-Expanded Penetration in Casual Bag and
•Balance Sheet Improvements
Business Bag Segments
-Sold Excess Assets
-New Global Advertising
-Extended Supplier Payment Terms –
-Strengthened Point of Sale Support
Higher Payables
-Significantly More Reliable Customer Service
-Reduction in Receivables
-Broadened Retail Distribution Including
>
-SKU Reductions
Lower Working Capital
Mass Merchandisers
-Tightened Inventory Control >
-Accelerated Company-Owned Retail
Store Growth