The Business Turnaround

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The Business Turnaround
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The Business TurnaroundCase Study
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Define Current Business StateDefine Desired
Business State

Be Realistic
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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
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Brand

• Global
• Leading
• Growing

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Category Dynamics

• Growing Worldwide Mature and Emerging
  Markets
• Category Will

-Be Around for a Long Time -Continue to Grow
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Competition

• No Truly Global Competitor
• Weak Competition None More Than 15
  Samsonites Size
• Very Fragmented Susceptible to Global
  Consolidation

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Consumer Needs

• Product Features

• Ease of Mobility
• Ease of Handling
• Internal Organization

- Best in Class

• Styling

• Traditional
• Casual
• Fashion Forward

- Consumer-Preferred
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Channels of Distribution

• Luggage Specialty and Department Stores
• National, Mid-priced Department Store Chains
• Mass Merchandisers
• Club Stores
• Samsonite Owned Stores

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Company

• Proven Record of Innovation
• Proven Ability to Expand Into New Geography
• Proven Products, Marketing, Sales Distribution

Already Has

• Clearly Defined Programs to Reduce SGA
• and Cost of Sales
• Clearly Defined Programs to Globalize Best
• Practices, Including Product and Brand
• Marketing, as well as Manufacturing,
• Sourcing, and Operational Systems

Needs
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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
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Define Desired Business State for Company/Brand

• From the Standpoint of the Consumer
• From the Standpoint of Wall Street

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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.
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NetA Healthy, Growing and Very Profitable Global
Luggage Brand/Company
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Define Measurable Criteria Necessary to Achieve
Consumer and Wall Street Vision
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Define Measurable Criteria Necessary to Achieve
Consumer and Wall Street Vision
Consumer Criteria
-Brand Positioning -Target Audience
Definition -Advertising Media Plan -Products
gt gt gt
By Trade Channel
-Features -Styling -Price Points
-Customer Service Requirements
-By Trade Channel
GLOBALLY BENCHMARKED VERSUS COMPETITION
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Define Measurable Criteria Necessary to Achieve
Consumer and Wall Street Vision
Wall Street Criteria
-PL 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
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Define Measurable Criteria Necessary to Achieve
Consumer and Wall Street Vision
Consumer Criteria
Wall Street Criteria
-Brand Positioning -Target Audience
Definition -Advertising Media Plan -Products
-PL 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
gt gt gt
By Trade Channel
-Features -Styling -Price Points
-Customer Service Requirements
-By Trade Channel
GLOBALLY BENCHMARKED VERSUS COMPETITION
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Define the Plans and Strategies Necessary to
Achieve Vision Top Management Priorities
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Top Management Priorities Define the Plans and
Strategies Necessary to Achieve Vision

• Organizational Effectiveness
• Financial Considerations
• Business Growth Opportunities

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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 -Fill Core Competency
Outages
Top Priorities
gt gt
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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.
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Organizational Effectiveness

• Top Management Priorities Define the Plans and
  Strategies Necessary to Achieve Vision

Organizational Incentives
-Consistent with Shareholder Value -Consistent
with Strategic Objectives
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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
gt gt
Top Priorities
-Senior Management Team -Fill Core Competency
Outages
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
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Top Management Priorities

• Financial Considerations

Cost Structure Improvements
-Cost of Sales -SGA
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Top Management Priorities

• Cost of Sales

-Raw Material Costs -Manufacturing
Costs -Stocking or Warehousing Costs -Freight
Costs
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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
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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
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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
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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 -Globall
y 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
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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
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Top Management Priorities

• PDCA Plan, Do, Check, Act

Establish, Monitor, and Control Systems
-Insure Information Systems are Accurate and
Credible
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SamsoniteGame Plan
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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

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Structural Cost Improvements

• Streamlining Organization
• Global Sourcing of Products/Raw Materials
• Product/Component Standardization
• Cost Control Measures

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Structural Cost Improvements
Streamlining Organization
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Structural Cost Improvements
Headcount
USA Wholesale USA Retail Other
Americas Europe Far East
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

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Structural Cost Improvements
Global Sourcing
High Cost Market
Low Cost Markets
Fiscal 98
Fiscal 97
Philippines Thailand Dominican Republic Other
Lower Cost Countries Taiwan
16 31 33 15 5
Taiwan
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Structural Cost Improvements
Softside Global Component Standardization
Description Upright Handle Systems EZ CartTM
Handle Systems Wheels Carry Handles Sewn
Handles Fabrics (Exterior-Interior) Vinyls Hardwar
e Films Mesh Zippers Locks Webbing Hang
Tags/Collateral Total Projected Fiscal Year
Savings vs. FY 97 Hardside Projected Fiscal Year
Savings vs. FY 97
Fiscal Year 96 31 3 23 52 100 56 35 75 20 10 20 2
0 30 100s
6/97 7 2 10 10 100 25 15 25 10 5 6 6 12 50
1/98 5 2 8 10 20 15 10 20 5 2 3 3 6 30
1.7 Million 2.0 Million
4.0 Million 2.0 Million
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Structural Cost Improvements

30 - 35 Million Savings In Year 1 50 -
55 Million In Year II

• Streamlining of Organization
• Global Sourcing of Products/Raw Materials
• Product/Component Standardization
• Cost Control Measures

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Significantly Improved Product Pricing Global
Line-Up

• Broaden Range of Product Features and Price
  Points
• Move to Global Product Line
• Drive Enhanced Margin Structure

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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

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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

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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

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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

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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

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Broaden Channels of Distribution

• U.S. Luggage Sales/Market Share ( MM)

273
241
210
52
120
84
84
61
31
23
52
13
43
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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

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1997 Key Expansion Areas
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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

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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 SP and Moodys

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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
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Samsonite Corporation First Half Net Revenue
366
349
345
6 Growth
1 Growth
Fiscal
First Half Fiscal 97 Excludes 4 Million
Non-Recurring Trademark Sale First Half Fiscal
98 Excludes 17 Million of Foreign Currency
Translation Losses
66
Samsonite Corporation Gross Profit Margin Trend
43.6
41.4
39.4
38.6
First Half Fiscal 97 Excludes 4 Million
Non-Recurring Trademark Sales
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Samsonite Corporation SGA as a of Sales
32.2
31.9
31.8
31.2
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Samsonite Corporation EBIT Margins
10.7
8.5
7.1
5.1
First Six Months FY 97 Excludes 4 Million
Non-Recurring Trademark Sale
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Samsonite Corporation First Half Net Revenue
82
80
77
66
65
56
47.90
32.70
6 Growth
Fiscal
First Half
EBITDA, Excluding Non-Recurring Royalty Income,
is Calculated as Operating Income
PlusDepreciation, Amortization and Restructuring
Costs
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Trend of Earnings Per Share from Continuing
Operations
.96
.41
.22
.14
lt.39gt
FY 97
FY 98
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Samsonite Game Plan

• Organizational Effectiveness

-New Management Team -Streamlined Category-Based
Organization Structure -Stock Option Program
Broadened and Senior Executive Restricted Stock
Program
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Samsonite Game Plan

• Structural Cost Improvements

-Global Sourcing -Product and Component
Standardization -Organization Streamlining -Cost
Control Measures
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Samsonite Game Plan

• Balance Sheet Improvements

-Sold Excess Assets -Extended Supplier Payment
Terms Higher Payables -Reduction in
Receivables -SKU Reductions -Tightened Inventory
Control
gt gt
Lower Working Capital
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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
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Samsonite Game Plan

• Top-Line Growth

-Accelerated Global Introductions of New
Consumer- Preferred 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
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Samsonite Game Plan

• Product Architecture/Pricing

• Organizational Effectiveness

-New Management Team -Streamlined Category-Based
Organization Structure -Management Stock and
Option Incentives
-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

• Structural Cost Improvements

• Top-Line Growth

-Global Sourcing -Product and Component
Standardization -Organization Streamlining -Cost
Control Measures
-Accelerated Global Introductions of New
Consumer-Preferred 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

• Balance Sheet Improvements

-Sold Excess Assets -Extended Supplier Payment
Terms Higher Payables -Reduction in
Receivables -SKU Reductions -Tightened Inventory
Control
gt gt
Lower Working Capital