Recommandé
Contenu connexe
Tendances
Tendances (20)
Similaire à Presentation by University of British Columbia - Runner Ups in the CBS Case Competition 2011
Similaire à Presentation by University of British Columbia - Runner Ups in the CBS Case Competition 2011 (20)
Dernier
Dernier (20)
Presentation by University of British Columbia - Runner Ups in the CBS Case Competition 2011
- 1. Ready, Steady, Grow Presented to Bjorn Magnusson By Jedi Consulting March 4th 2011
- 2. On December 7th 2012, H&M will begin 1 opening more than store every day 2
- 4. Agenda Introduction 4
- 5. Executive summary H&M needs to optimize it’s continued expansion Current growth trends will Address and ac6vely manage Ready stretch management capacity growth risks Integrate a channel strategy Steady Same store sales is stagnant to boost same-‐store sales Aggressive expansion goals Develop a coordinated and Grow need to con6nue to be met focused growth strategy These 3 strategies prepare H&M for 5 more years of solid growth 5
- 6. H&M’S VALUES Keep it simple We believe in people We are one team Straight forward and open minded Entrepreneurial spirit Cost-Conscious
- 7. Agenda Analysis 7
- 8. Background analysis How does this coincide What has driven H&M’s What trends are with compe6tor success? affec6ng the industry? ac6ons? H&M needs to optimize it’s continued expansion 8
- 9. Summary of H&M’s competitive positioning Things to leverage Things to mitigate Strengths Weaknesses Internal • High international brand • ate entry into Asia Pacific L awareness • ntegration of channels I • 35% ROIC • ong product cycles L • Selection of markets for growth • Lack of coordination in identifying • Strategic partnerships with high competitive threats profile designers Opportunities Threats External • Trends of trading up and trading • Low switching costs and low brand down loyalty in retail industry • Growing popularity of channel • Mature to declining growth in Western interaction Europe and North American markets • High growth markets • Innovating competitors are gaining a • Sustainable products technological advantage Sources: JEDI Analysis, 9
- 10. Geographic expansion: “We welcome competition” W. Europe Asia Eastern N. America Pacific Europe Eastern Europe provides an attractive and open market ZARA UNIQLO H&M must continue Asian expansion, or risk trailing competition GAP BENETTON Follow Zara Sources: JEDI Analysis, compiled 2009-10 annual report data for competitor companies 10
- 11. Post-recessionary consumer trends drive an opportunity for H&M to tailor strategy Uncertainty is driving Consumers are redefining spending in the their brands and values economic recovery Trading up is recovering Segmented store Recovery has been slightly, however heavily strategies should quicker in emerging weighted in developing be market markets markets (esp. China) dependent Developed markets Trading down s6ll are slower to predominant trend, but off respond peak H&M is well positioned to invest in a regionally targeted branding model Source: BCG White Paper – A new world order of consumption March 2010. 11
- 12. Agenda Recommendations 12
- 13. Ready, Steady, Grow H&M needs to optimize it’s continued expansion Current growth trends will Address and ac6vely manage Ready stretch management capacity growth risks Integrate a channel strategy Steady Same store sales is stagnant to boost same-‐store sales Aggressive expansion goals Develop a coordinated and Grow need to con6nue to be met focused growth strategy These 3 strategies prepare H&M for 5 more years of solid growth 13
- 14. Current growth trends will stretch Ready management capacity 4500 To con6nue to achieve ithose same numbers, H&M wiill H&M has only missed t’s store growth targets once n 4000 have to add 1928 stores in the next 5 years. the last two decades 3500 3000 2500 2000 1500 1000 500 0 Growth target achieved Growth target not achieved Future es6mated growth • Over 4100 stores On December 7th 2012, will begin opening more than a store H&M in 2015 • Greater than 200BB SEK in revenue a day • More than 160,000 employees Sources: H&M Annual Report, H&M Website, Company data, Jedi Analysis. Note: Assumes revenue growth strategies from this presentation are implemented 14
- 15. H&M must address and actively manage growth risks Ready A great brand must be opera6onally, geographically and dynamically consistent Internal considera6ons External considera6ons Keep talent engaged Create a guest experience Fresh minds offer through channels change with 6me Different flavours different needs Consumer and genera6on has offer access to New markets for different Consistency their tastes new talent new ideas Younger markets Sources: Harvard Business Review - Leadership that drives results 15
- 16. Ready, Steady, Grow H&M needs to optimize it’s continued expansion Current growth trends will Address and ac6vely manage Ready stretch management capacity growth risks Integrate a channel strategy Steady Same store sales is stagnant to boost same-‐store sales Aggressive expansion goals Develop a coordinated and Grow need to con6nue to be met focused growth strategy These 3 strategies prepare H&M for 5 more years of solid growth 16
- 17. Expanding online is the best way to drive growth in new and existing markets Expansion Strategy Attractiveness Value Expand online • Seamless integration of offline & offline channels 59.5Bn Kr External Growth presence through • Create new e-tailing sites to increase annual e-tailing value of customer Product Category • Acquisition of Parlux Fragrances Inc. adds 3.9Bn Kr expansion: Beauty touch point with teens in all markets and Cosmetics • Celebrity endorsement of lines Enterprise Updates • Capture growing market of consumers who will 3.7Bn Kr Increase sourcing of pay a premium for organic fibers organic cotton • “White is the new green” – accelerate to 2020 Decrease lead times • Increase touch points with consumers to better N/A to push “pure” fast- understand styles and forecast trends fashion 1 10 year NPV; 17
- 18. H&M’s online channel has the opportunity to become best-in-class Steady Source: Forresters’ Research. 2011 18
- 19. Coordinated changes will merge Steady offline and online strategy Online Metric Recommended ac4on Include search bar and filters by price, style, Naviga4on and search colour, collec6on Phone number for service clearly displayed, Service content online chat for support Enable seamless order and pick up in-‐stores, Mul4-‐channel show online availability of stock Online comment func6on, ra6ngs and Community sharing reviews Site clearly shows shipping rates, mul6ple Purchase process payment op6ons, minimize abandonment Sources: Forresters’ Research 19
- 20. H&M needs to successfully expand Steady and integrate its online channel Online Growth Strategy Now 2011 2012 2013, and beyond Currently in 8/38 Open 15 stores Open 15 Enter new stores in high opp. remaining stores markets first with markets online presence Financial Impact Customer Impact 24/7 H&M exposure NPV: SEK $59.3B Increased interaction Initial Cost: SEK $40M Increased satisfaction Takeaway box is centered nd doesn’t move 20
- 21. Outlining ambitious online store Steady growth First 15 countries for Next 15 countries for Next 15 countries for expansion expansion expansion • USA • Russia • Brazil • China • Slovakia • Indonesia • Switzerland • Greece • Malaysia • Japan • Ireland • India • Canada • Slovenia • Taiwan • Israel • Turkey • Future markets • Spain • Italy • Belgium • Middle East • France • Jordan • Czech Republic • Singapore • South Korea • Morocco • Hungary • Croatia • Luxembourg H&M will have an online presence in all its stores within 2 years Note: Countries were prioritized based on (1) internet penetration of population, (2) total size of internet-using population, (3) size of H&M presence in each country; Source: World Internet Stats (2010) 21
- 22. Ready, Steady, Grow H&M needs to optimize it’s continued expansion Current growth trends will Address and ac6vely manage Ready stretch management capacity growth risks Integrate a channel strategy Steady Same store sales is stagnant to boost same-‐store sales Aggressive expansion goals Develop a coordinated and Grow need to con6nue to be met focused growth strategy These 3 strategies prepare H&M for 5 more years of solid growth 22
- 23. World growth largely driven by emerging markets (Asia Pacific) Grow Revenue by market2 SEK (m) Western 24% European growth outpaced by 8% other regions North America presents rapidly 22% growing largely untapped market 38% Asia Pacific leads emerging markets in near-‐ term growth To achieve growth targets, H&M needs to continue expansion in non-traditional markets 23
- 24. Significant outliers exist in Japan, Grow Russia and China Revenue per store2 SEK (m) Japan is a European China and significant market is Russia are fast opportunity for exemplified by growing and growth in a slower growth small mature market Store growth1 Revenue is size of bubble Sources: H&M Annual reports, JEDI Analysis. Notes: 1. Store growth measured as average of trailing 3 years. 2. Revenue per store calculated using Annual Report data. 24
- 25. Similar dynamics exist on a smaller Grow scale within European market Revenue per store2 Italy, Poland, Greece, Ireland Slovenia Slovakia and and Czech Hungary are Republic are in early more development developed Store growth1 Revenue is size of bubble Sources: H&M Annual reports, JEDI Analysis. Notes: 1. Store growth measured as average of trailing 3 years. 2. Revenue per store calculated using Annual Report data. 25
- 26. H&M to segment its targeted Grow growth markets % of total poten6al revenue 100 5 Eastern Growth 75 4 Nascent Markets Mature markets Future markets New Markets Western Growth 50 3 25 0 1 2 Time 0 Time By breaking down markets by stage of development, H&M can better tailor their growth strategies. Source: Annual Reports, BCG Analysis, JEDI Analysis. 26
- 27. Segmented target geographies for 5 Grow year timeline 0 1 2 3 4 5 Future Nascent New Eastern Western Mature markets markets markets growth growth Brazil Israel Russia Greece UK Germany Example India Turkey China Poland USA Switz. countries Indonesia Singapore Japan Hungary Italy Sweden Large Not yet Set for Set for Key Newly established Limited room ready, rapid steady trends monitor entering growth growth market with for growth low share Par6al Consider Maintain Manage Shih focus to Current Access to online acquisi6on growth growth improving strategy e-‐tail demand for rapid plans decline profit genera6on expansion 2010 growth N/A N/A 81.25% 13.4% 11.6% 5% rate 27
- 28. Meters Bonwe: owning your Grow competitor 28
- 29. Breaching the global-local Grow partnership H&M METERSBONWE 29
- 30. H&M and M&A – a “run-a-way” Grow fusion Evalua4on Metric Meters Bonwe H&M Brands Brand & Customer Brand image • “Be Different” “Trendy”, “urban”, “priced right”, • “Cool”, “unique”, “hip” “funky”, “fashionable” Target market • 18-‐25 year old market • Core brand targets all ages, • Equal split men and women other brands target teenagers/ adults Price point Mid-‐low to intermediate Low to intermediate Cultural exper6se Geographical prowess, homeland 47 stores in China, mostly in large knowledge ci6es Market Access Local vs. global • Strong player in growing low-‐end • Global mid-‐market brand market • Highly fragmented market • most popular casual brand Real estate access Owns 523 loca6ons in 2 formats Overheated Chinese rental and property market makes entry difficult Source: Metersbonwe corporate site and annual reports, TODAYonline “China property prices rising despite curbs” 30
- 31. MW provides H&M with invaluable Grow asset access 1. Favourable, affordable M&A opportunity 2. Facilitates ambitious growth in China • Instant access to attractive locations • Real estate is immaterial on balance sheet 3. H&M core revenue growth • Leverage foot traffic from competitor presence 4. MW contributes significant revenue through franchise growth Source: Team JEDI analysis 31
- 32. Agenda Implementation 32
- 33. M&A implementation timeline Rollout of Combined vs. Unique Stores 120 105 105 105 105 103 100 Store Mix 80 75 44% Stores 60 65 65 56% 60 60 40 45 43 40 40 30 20 Combined H&M unique Total 0 2011 2012 2013 2014 2015 Source: Team JEDI analysis, Metersbonwe financial statements and corporate website, H&M corporate website and annual report 2010 33
- 34. Implementation of M&A strategy Months 0 6 12 18 24 30 36 42 48 54+ Target Acquisi4on Due diligence Nego6a6ons Store Format Conversion Market Research MB unique stores Combined stores Phase-‐out of combined H&M unique stores 34
- 35. Execution of Meters Bonwe deal has 15% IRR Grow Deal Summary Target Meters Bonwe Group IRR 15% CAPEX Required SEK 28.032 billion Expected Premium 25% Financing Options Synergies Cash Reserves 71% In Cost b SEK in 5 2.7 Retained Earnings 29% yrs) EBITDA (b SEK in 2.3 5 yrs) A deal of MOSTLY CASH is preferable to H&M shareholders Sources: Capital IQ, H&M Annual Reports, Meters Bonwe Annual Reports, Jedi Analysis. 35
- 36. Summary financial implications of Ready, Steady, Grow strategies Western Growth 8% Organic growth Eastern Growth 4% (H&M stores) New Markets 1% Store growth Meters Bowne Inorganic growth (EBITDA 4% contribu6on) Same-‐store From Steady SSSG % 4% sales growth strategy Summary result – 122% in 5 yrs Revenue growth Sources: Capital IQ, H&M Annual Reports, Meters Bonwe Annual Reports, Jedi Analysis. 36
- 37. ROIC and upside potential of strategies are attractive Organic store growth Upside ROIC poten6al Store growth through acquisi6on 40% 48% Increase in same-‐store sales 37
- 38. Risks and mitigation strategies Risk Mi4ga4on Real estate ownership • Sell real estate and contract for lease-‐back MW Partnership • Exit by selling company to PE firm unsuccessful Aggressive store growth not • Re-‐evaluate and shut down stores where unprofitable, shih to more profitable markets achieved Online contribu6on to SSG • Re-‐evalua6on of channel strategy and ability to meet best-‐in-‐class benchmarks not achieved • Supplement funding with MW franchise profits Middle market squeezed • Proac6ve partnering with luxury brands • Growth of Monki and Cheap Monday brands Too much change for • Ac6ve communica6on strategy and HR planning check-‐ups organiza6on Source: Team JEDI analysis 38
- 39. Detailed implementation plan Months 0 6 12 18 24 30 36 42 48 54+ Live H&M Expand cultural ambassador team Develop training materials for guest materials Online-‐Offline Integra4on Benchmarking Website redesign Online store roll-‐out 39
- 40. Thank you Presented to Bjorn Magnusson By Jedi Consulting March 4th 2011
- 41. Assumptions for H&M financial statements and proforma Total number of stores 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 0 1000 2000 3000 4000 5000 6000 7000 8000 41
- 42. EBITA Contribution from Meterbonwe M&A 42
- 43. Free Cash Flow (m SEK) 43
- 44. Income Statement 44
- 45. Balance Sheet 45
- 46. Industry is highly competitive driven by very low entry costs Suppliers Buyers • Employees • Direct to consumer • Materials • Indirect (eg. through a parent) • Supply chain • Designers Rivalry • Highly fragmented industry • Experiencing consolida6on Threat of new entrants Subs6tute products • Low cost of entry for designers • None • Higher costs for retailers • (non-‐branded clothing) • Brand is hard to replicate, and ohen experience high vola6lity Unanrac6ve market force Anrac6ve market force Sources: Jedi Analysis 46
- 47. Detailed analysis of H&M’s competitive positioning Things to leverage Things to mi4gate Internal Strengths Weaknesses • High interna6onal brand awareness • Weak posi6on in high-‐growth Asia Pacific markets • High ROIC (35%) to sustain constant new store • Lack of integra6on across offline and online channels investment • Product cycles that are 5x longer than best-‐in-‐class • Diversified brand poroolio with high growth poten6al benchmark • Strategic partnerships with high profile designers • Lack of coordina6on in compe6tor iden6fica6on • Sales stronghold in Western Europe • Lack of recrui6ng strategy for business students • Top 12 organic brand – focus on green ini6a6ves • Consistent customer experience and uniform branding across all markets • Lease loca6ons to enable flexibility • Experienced, talented employee pool External Opportuni4es Threats • Trends of trading up and trading down – disappearance • Low switching costs and low brand loyalty in retail of the middle market industry • Growing importance of expression and individuality in • Mature to declining growth in Western Europe and North clothing choice American markets • Growing popularity of e-‐commerce and online brand • Ver6cal integra6on of compe6tors decreases their lead interac6on 6me and cost pressure • Demand for innova6on in product dev’t • Barriers to entry are low for new designers • High growth in menswear and accessories • High growth in Asia-‐Pacific markets • Growing trend for sustainable products Source: BCG analysis, Team Jedi analysis, H&M annual report 2009 47
- 48. A strategy for defining H&M’s competitors in a new region Who are your compe6tors? Market Prevalence of Consumer taste concentra6on of indirect channels compe6tors E-‐tailers Luxury Mostly local Mostly global Define USP and market Define market poten6al of Department Stores Cosme6cs poten6al of H&M against H&M against direct comps local comps Make entry Make entry Discount Stores Sportswear decision decision Homeware Lingerie/Swimwear 48
- 49. Competitor Analysis Compe4tor % Global Expansion Strategy Core Competencies Share H&M 1.6% • Global expansion – equally in well Brand strength, affordable fast developed markets and emerging fashion, high adver6sing spend, markets partnerships with luxury designers • Focus on China, Poland, Russia and ME as major growth markets Zara 1.4% • Asia Pac (China, Japan, S. Korea) Ver6cally integrated, produc6on in (Inditex) • Russia, India – recent openings Spain, sophis6cated feedback • Italy, Germany, France and UK network, low adver6sing spend, fast crea6on cycle Uniqlo (Fast 0.7% • Focus on Asian expansion – China, HK, Low cost model, integrated NYC-‐ Retailing) South Korea Tokyo R&D, precision inventory • Focus on maintaining presence in Taiwan, system, Heat-‐tech innova6on UK, USA and Paris The Gap 1.4% • Franchise stores in top 10 apparel Growing online division, build off markets globally American Pop Culture, leverage • Enter China and Western Europe brand poroolio Benenon 0.2% • 80% concentra6on in Europe, Basic styles in many colours, • Focus on India, China and Mexico ver6cally integrated, investment into Italian produc6on Sources: Team JEDI analysis, Just-Style.com, company annual reports 49
- 50. Competitor Analysis Top 10 Global Apparel Brands by Revenue (2009) 120 100 Revenue (SEK billions) 80 60 40 20 0 Hennes & Zara Gap Limited Brands Uniqlo NEXT Polo Ralph Esprit Liz Claiborne Abercrombie Mauritz Lauren & Fitch Company Sources: Zara Annual Report 2009 , Fast Retailing corporate website 50
- 51. Driver tree analysis Current Who? Same store channels What? growth New H&M New channels Current locations Revenue markets growth Same store Other growth brands Grow global New profitability locations of H&M Potential New new markets brands Cost structure Supply chain opt. 51
- 52. Translate European success into mature growing nascent markets Revenue per store2 Leading markets can Newer markets can be used as benefit benchmarks A translation of current best practices offers profit growth potential Sources: H&M Annual Reports, Euromonitor data, JEDI Analysis 52
- 53. 2 for 1: complementarities between the online and offline channels Offline Online Goal • Brand and value communica6on • Communicate with new customers to s6mulate • Provide a pleasant, repeat-‐inducing nascent demand, build brand before entry shopping experience • Generate revenue synergies in cross-‐channel purchase • Remain front of consumer mind Change • Minimal, storefront has massive impact • Flexible, allows for reposi6oning, pricing permissible on customer brand percep6on differen6als, altera6ons in product mix Effect on • Most defini6ve brand shaper • Most easily accessible method of brand interac6on company • Total control over consumer s6muli • Must hold true to company values and brands Target • Primarily fashion-‐forward and • Young women (teens to young adults) who are customer professional women/men, trendy fashion forward, young savvy men children and preteen • Mid-‐low price range • Mid-‐low price range • Low risk-‐aversion customers • Risk –averse consumers (high-‐touch) • Wants the “social” experience without the hassle • Social shopper (with friends) Consistency • Should be consistent across ci6es and • Must be highly consistent with H&M core of countries to maintain uniformity • Low-‐touch and lack of immediacy mi6gated by experience interac6ve features 53
- 54. “White is the New Green” Current Share of Global OC Market 2.594Bn Kr Approx 5.8% Organic Cotton as % of Total Rev 2.6% Impact/store from altered mix Shih product mix from tradi6onal to OC ~ 1.5% 434 713 Kr Present Value (5yr) 3.7Bn Kr 10% discount rate Growth of OC line to 4% of total sales in 5 years makes H&M a leader in the OC purchasing market reroute to 2020 Cotton Goals 54
- 55. “White is the New Green” is worth 3.664Bn Kr (5yr NPV) 55
- 56. Appendix %%: 3.9Bn Kr Acquisition of Parlux Fragrances adds teen touch points in all markets PARLUX FRAGRANCES INC. Fort Lauderdale, FLA Est Sales ‘08: – $ 147 MILLION (EST.) -0.3% V. ’07 (EST.). Ranked 84th on Beauty’s Top 100* Brands: – Paris Hilton, Jessica Simpson, Guess, Nicole Miller, Josie Natori, Queen Latifah, Marc Ecko, Rihanna, Kanye West, XOXO, Ocean Pacific, Andy Roddick, BabyGund, Fred Hayman Beverly Hills, Marc Ecko Export Markets: – Canada, Mexico, the European Union, the Middle East and Asia. Future Growth: – Licensing deal with Shawn “Jay Z” Carter, Rihanna and Kanye West. Expected value: $150. • The hip-hop stars are to become partners with Parlux thanks to a deal with Iconic Fragrances LLC. In addition to royalties and profit share, each star is expected to get warrants to purchase 3 million shares of Parlux’s stock at $5 apiece. Source: WWD BeautyBiz Top 100 beauty and cosmetic companies (‘08) 56