RETAIL - CLOTHING INDUSTRY

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RETAIL - CLOTHING INDUSTRY

• Group 2
• Stefanie Moegle
• Dovile Narutaviciute
• Basak Copuroglu
• Ingah Kutesa
• Carolina Martin-Leyes

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AGENDA

• Presentation of the Retail - Clothing Industry
• Evaluated Companies
• Retail - Clothing Industry Matrix
• Chosen Companies
• A deeper look at the Companies chosen.
• Comparison of the Ratios
• Conclusion
• Questions

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World Clothing Retail Industry
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World Clothing Retail Industry

• Clothing sales reached US850 billion in 2006.
• Growth of 3 over 2005. Volume sales growth by
  8.
• no. of working women - key factor driving
  sales in 2006.
• Womens outerwear - 60 of overall 2006 value
  sales.
• Gap Inc - leadership position in the clothing
  market.
• The single largest brand in the sector was HM.
• sales expected by 2011 - US 968 billion.
• sales will grow indicating vibrant midrange
  market.

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WE LOOKED AT THE FOLLOWING

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SMILEY CHART
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ELIMINATION OF COMPANIES
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Corporate governance

• Code
• benefit of employees,shareholders,customers
• sustainably increasing enterprise value
• CSR
• ecological, socialy sustainable concepts
• Work-Life-Balance

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Risk management

• Risk Report
• Identify risks at an early stage and to respond
  quickly
• Audited at regular intervals
• Timing
• Without delay
• Managing Board reports regularly, promptly

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Shareholder friendliness key ratio analysis

• Benefit of employees, shareholders, customers
• Sustainably increasing enterprise value
• Clarity of business strategy
• Strategic focus on growth opportunities

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Audit transparency

• Strategic focus on growth opportunities
• Standards for the audit
• Plan and perform the audit
• Clarity Transparency
• Same information
• Reports regularly, promptly, and comprehensively
  on
• All topics of relevance

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Corporate governance

• Corporate governance guideline
• Code of ethics
• Election
• Independence

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Transparency

• Its own website
• Yahoofinance
• Income statement
• Balance sheet
• Cahs flow
• 10 year annual report
• 5 years summary
• 10 years summary

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Up to date timing

• Informs all capital market at the same time by
  the same information.
• Updates its website information every week.
• Adds financial reports every quarter.

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CSR

• Boycott australian wool
• Donating 10 million to the construction of a
  trauma center at Nationwide Childrens Hospital
  in Columbus, Ohio

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Adds
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THE GAP INC.

• Sells casual apparel, accessories, and personal
  care products for men, women and children under
  the Gap, Old Navy, Banana Republic, and Piperlime
  brands.

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The Gap

• History
• Founder
• Brands

Don Fisher, Gap Inc. Founder and Chairman
Emeritus
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LOCATIONS

• United States
• Canada
• The United Kingdom
• France
• Ireland
• Japan

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LOOKING AT THE COMPANY..

• Listed on NYSE. ( GPS)
• Clarity and Auditing
• Social cooperate responsibility.
• The gap report
• Code red.

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Recognition..

• 100 Companies with Conscience
• Audit Integrity Top 100
• Business Ethics Awards Social Reporting Award
• Ceres-ACCA Commendation for Social Reporting
• Ethisphere Magazines 2007 Worlds Most Ethical
  Companies2008

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Revenue division..

• As per 2007 revenue 15 billon dollars.
• Old navy- 6.2 billion
• Gap direct 903 million
• Banana republic- 2.5 billion
• International 1.6 billion.

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INDITEX

• FY 2007
• 4,258 stores in 72 countries
• Sales 9.4 Bn, 63 Intl
• Cash flow 1.8 Bn
• Net Income 1.3 Bn

Inditex is one of the worlds largest fashion
distributors, with eight independent sales
formats
Pull and Bear
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Strategic Direction

• Inditex has its unique management model based
  on
• - innovation
• - flexibility
• - integrated business model
• Fashion philosophy
• - creativity
• - quality design
• Rapid response to market demand
• Strategic growth Fast international expansion
• Excellent response to sales concepts

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• Customer driven Compelling mix of latest
  fashions and quality at affordable prices
• Unique product strategy
• Customer interaction
• Attractive stores in prime locations
• Distribution and Logistics
• Central distribution
• Shipment to all stores twice a week
• Orders to stores in 24-48 hours

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Economic Indicators - Ratios
Inditex financial years is from 1st February to
31st january of the following year (1) in
millions of euros.
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Corporate Governance
Is part of three international stock exchange
indexes that recognize Good Governance - Dow
Jones - Sustainability FTSE4 Good and - FTSE
ISS Corporate Governance Save the same voting
and financial rights No legal restrictions on
the acquisition or transfer of shares. The
majority of the Board Members are External The
Audit and Control Committee presents its report
independently Delegation and autonomy of the
executive committee
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Corporate Social Responsibility - CSR

• Inclusion of the guidelines into the internal
  corporate regulations, comprised by
• - laws
• - rules and regulations
• - codes of conduct- other international
  initiatives agreements

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CSR

• Global environmental system
• - Solid
• - Efficient
• - Adaptability
• - Control processes
• The general objectives of Strategic
  Environmental Plan 2007-2010
• - reduce the emission of greenhouse gases
• - increase the implantation of renewable energy
  sources
• - maximize the efficient use of energy in
  manufacturing areas
• - train the staff and raise their awareness

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Risk Management

• Is the responsibility of
• Board of Directors and the Senior Management
• Each and every member of the Organisation
• Integrated system
• Risks faced by Inditex
• Trends
• Textile quotas
• Exchange rates
• Interest
• Expansions to new markets
• launch of new concepts

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Shareholder Friendliness

• Good faith in relations with stakeholders with
  society as a whole
• Continuous dialogue with stakeholders social
  organizations
• Ethical commitment responsible perspective
• Fair honorable treatment
• All the activities of the Inditex Group shall be
  carried out in manner that most respects the
  environment

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Fashion Quality at the Best Price

• HM - established in Västerås, Sweden in 1947 by
  Erling Persson
• HM 33 countries, 1700 stores, 68,000 employees.
• Turnover in 2007 - SEK 92,123 million
• HMs growth target - increase no.of stores by
  1015 /year increase sales at existing stores

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Strategic Direction

• HM succeeded in strengthening its position in
  the market through
• constant innovation
• renovation
• Inviting top designers to create a product line
  for HM, e.g. Karl Lagerfeld, Viktor and Rolf,
  Madonna.
• Strategic growth to international countries.
• HM Operational Indicators

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Corporate Governance (CG)

• HM applies with the Swedish Code of Corporate
  Governance which is described in the CG Report in
  the annual report.
• CG is basically about how the company is to be
  run in order to safeguard the shareholders
  interests.

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• The share is traded on the OMX Nordic Exchange
  Stockholm, Sweden. The symbol is HM B

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Corporate Social Responsibility

• Code of Conduct Sustainability Policy
• the backbone of HMs work
• It includes the following requirements
• compliance with local labor law
• statutory pay and working hours
• ban on child labor
• ban on discrimination
• ban on forced labor
• health safety in the workplace
• right to organize bargain collectively
• compliance with local environmental legislation.

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Corporate Social Responsibility

• Water samples from factories with water treatment
• Cooperating tightly with UNICEF
• Increased use of organic cotton
• Climate-smart transport solutions
• Since 2005 HM has been licensed to use the
  European Unions official eco-label The Flower

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Risk and Uncertainties

• Most dealt with through internal routines
• Financial risks
• Interest risk associated with liquid funds and
  short-term investments
• Currency risk associated with foreign currency
  flows
• Credit risk associated with financial assets and
  derivative positions
• Others are affected more by external influences
• fashions
• weather
• textile quotas
• exchange rates
• expansion into new markets
• launch of new concepts
• changes in consumer behaviour
• handling of the brand

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Transparency in HM

• Auditing committee
• HMs Auditing Committee - appointed annually by
  the Board of Directors.
• Auditors - elected at the Annual General Meeting
  every 4 years
• From 2005 - Ernst Young AB
• HM publishes interim reports annual reports in
  Swedish and English
• www.hm.com - a wealth of other information on HM
• Investor Relations department
• HM - participating company in the Fair Labor
  Association (FLA)
• demonstrates stakeholders good work follow-up in
  factories
• ensures quality of internal monitoring programme.

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Ratio Comparison
455.53
581.45
47.34
81.37
3.8
4.78
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Conclusions from ratios

• It is difficult to compare companies between each
  other, as the measures are different, so as the
  sizes of the companies are not the same.
• The Gross Profit Margins are changing through out
  the year, as it is very common for clothing
  companies, whose pricing policy and discounting
  changes very often.

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Key trends in during the recession

• Pessimism inhibits shopping habits
• Consumers fearful of the future seek budget over
  brand
• Window shopping
• Research before purchasing
• The new natural look

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Commercial opportunities during recession

• Advertise value for money and opportunities for
  bargain-hunters
• Create a feeling of togetherness in the downturn
• Advertise products through indicating that there
  are certain things that everyone needs
• Offer consumers 'treating yourself' because
  'you're worth it'
• Create an imaginary better world through your
  products a way to escape from everyday
  hardships
• Show price comparisons of your products

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Conclusions

• Presentation of the Retail - Clothing Industry
• Evaluated Companies
• Retail - Clothing Industry Matrix
• Chosen Companies
• A deeper look at the Companies chosen
• Comparison of the Ratios

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Questions
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• Thanks for your attention.