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