Coldwater Creek Solutions Provider / Server Manufacturer Sales … · 2014. 2. 5. · Coldwater...

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Coldwater Creek Solutions Provider / Server Manufacturer Sales Intelligence 07/2007

Transcript of Coldwater Creek Solutions Provider / Server Manufacturer Sales … · 2014. 2. 5. · Coldwater...

Page 1: Coldwater Creek Solutions Provider / Server Manufacturer Sales … · 2014. 2. 5. · Coldwater Creek Inc. sold more than $1 billion worth of women's apparel last year -- marking

Coldwater Creek

Solutions Provider / Server Manufacturer Sales Intelligence 07/2007

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BUSINESS PROFILEThe SWOT Management Group (SWOTmg) Business Profile iscomprised of a general business and financial overview of the targetcompany.

It includes such pertinent information as:

• Company Address• Business Summary and Key Highlights• Major Markets• Financial Summary

SWOTmg provides this information in order to gain a generalunderstanding of the inner workings of the business.

The information contained in this document is confidential and intended solely for the use of the named recipients. Any reproduction, dissemination or distribution without the expressedwritten consent of SWOTmg and the named recipients is strictly prohibited.

This document may reference trademarks, logos, and service marks owned by third parties, and these marks are the property of their respective owners. SWOTmg includes this material forinformational purposes only.

Target Account Strike Plan 2 Date: Jun-07

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Address: One Coldwater Creek DriveSandpoint ID 83864

Phone: 208-263-2266Fax: 208-263-1582Web: www.coldwatercreek.com

No. Employees: 3,000+No. Employees loc:Ownership: PublicIndustry: RetailStock Ticker: NASDAQ: CWTRStock Price: $24.85 (06/1/07)52 Week High: $31.25 (11/21/06)52 Week Low: $16.77 (03/14/07)Headquarter/Sub: Headquarters

Company Description

Established in 1984, Coldwater Creek has emerged as abillion dollar player in the retail clothing industry byfocusing exclusively on selling proprietary labelmerchandise to women between 35 and 60 years old.Within this segment Coldwater Creek targets women witha median household income of $75,000 - a large marketsegment the company believes is woefully under served byexisting retailers who are focusing on younger customers.

Headquartered in Sandpoint, Idaho, the companydescribes its location as "tucked away between the Selkirkand Cabinet Mountains on the shores of Lake PendOreille." But the tranquil and idyllic setting belies theblistering pace of growth underway at Coldwater Creek.The company began 23 years ago as a home-basedbusiness with one phone and merchandise stored in anextra closet. Since then, the company has expanded tomore than 10,000 employees (more than 3,000 full-time)with headquarters on a sprawling 20-acre campus. In2000, the company the was primarily a catalog operationwith only eight retail locations. While the direct catalogbusiness is still strong, there are now more than 250 retaillocations supplemented by an expanding e-commercechannel. Management described its strategy astransitioning from being a catalog merchant to becomingan "integrated triple-channel retailer."

The retail market for women's clothing, the company said,was $97.4 billion in 2006, with 90 percent of thosepurchases made in brick and mortar stores. Therefore,Coldwater Creek executives felt it was very important toadd store locations if it wanted to achieve significantgrowth. The company said the segment of the market itseeks to conquer - 35+ - accounted for $48.4 billion of

the market, or about half of the market. This is significantbecause the age group makes up only 40 percent of thefemale population, indicating that the segment spendsmore on a per capita basis.

The company describes its merchandise as current, butnot trendy. It seeks to offer proprietary designs thatappeal to women in four basic categories:

• Casual weekend wear• Soft career wear• Special occasion• Casual sport apparel

The strategy is also to offer merchandise that can bepurchased in versatile fabrics that are suitable foryear-round use. To improve the quality of its fabrics andmerchandise, Coldwater Creek developed a new GlobalSourcing infrastructure. Additionally, to remaincompetitive with fashionable designs, the company hasinvested more in style research and opened a new designstudio in New York in 2006.

*Radar Alert* Managing a company during so muchexpansion presents technical challenges forColdwater Creek; presenting solutions that suggestinnovative ways to manage these challenges will bethe cornerstone for building a new businessrelationship.

Business Profile SWOT Management Group, Inc."Strategy. Alignment. Execution."

Target Account Strike Plan 3 Date: Jun-07

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Key highlights of important press releases and news articles

Press Releases

• 3/27/2007: Coldwater Creek Names Griesemer President & COO; Retail industry experience, leadership in sales & marking citedfor promotion (Coldwater Creek announced that Daniel Griesemer has been promoted to the position of President &Chief Operating Officer. In that capacity, he will be continue to be responsible for the company's sales, marketingand national retail store expansion plans, as well as all distribution center and customer contact center operations.Griesemer, whose career spans 24 years in the retail apparel industry, joined Coldwater Creek in 2001 as Senior VicePresident of Retail. In 2004, he was named Executive Vice President of Retail and the following year was promotedto Executive Vice President of Sales and Marketing, where he was responsible for all aspects of sales and marketingfor the company's Catalog, Internet and Retail sales channels. Prior to that, he held upper management and executiveposts for firms such as Gap Inc. and Federated Department Stores.)

• 12/05/2006: Coldwater Creek Receives 2006 Green Power Leadership Award; Company Is Recognized by EPA and DOE for ItsCommitment to Renewable Power (Coldwater Creek has received a 2006 Green Power Leadership award from the U.S.Environmental Protection Agency (EPA) and the U.S. Department of Energy (DOE) for being the largest purchaserof renewable energy in the apparel industry. The company will offset 100% of its energy usage through wind powerpurchased through renewable energy certificates totaling 45,000 Megawatts this year alone. The annual awardrecognizes leading national green power purchasers and suppliers for their commitment and contribution to helpingadvance the development of the nation's green power market.)

• 6/27/2006: NASDAQ Confirms Coldwater Creek Has Cured Filing Deficiency (Coldwater Creek announced that it hasreceived notice from the NASDAQ Stock Market that the filing delinquency in connection with its Form 10-Q forthe quarter ended April 29, 2006 has been cured and the hearing the Company requested has been canceled.)

News Articles

• 3/9/2007: Coldwater Creek hits milestone: Sales reached $1 billion in 2006; new marketing details unveiled (Spokane Review)Coldwater Creek Inc. sold more than $1 billion worth of women's apparel last year -- marking a major milestone forSandpoint's homegrown retailer. The company, founded in 1984 as a small mail-order retailer, has grown into anational brand with 239 stores. Chairman and CEO Dennis Pence has been angling toward the $1 billion sales markever since 2003, when Coldwater Creek announced aggressive plans to open 400 to 500 stores within the decade. Buteven as Pence heralded the achievement this week, he announced new looks for the company's Web site, catalog andstore appearance, all aimed at bolstering sales. The changes should result in stronger revenue during the second halfof the year, Pence told analysts during a conference call. Coldwater Creek failed to meet sales expectations during thefourth quarter, which included the all-important Christmas shopping season. Though the company outperformedmany of its peers, more clothing sold at clearance prices, reducing the company's profitability, according to Pence.Coldwater Creek's net income declined by 3 percent during the fourth quarter to $15.9 million, compared with lastyear's fourth-quarter results. Gross profit was down 4 percent. Coldwater Creek's fiscal year ended on Feb. 3. "Onetheory is that it was an electronic Christmas, that she (the customer) was more focused on the color of her iPod thanthe color of her apparel," Pence said.

Business Profile SWOT Management Group, Inc."Strategy. Alignment. Execution."

Target Account Strike Plan 4 Date: Jun-07

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• 9/06/2006: Stores chase online market: They know where you are (The State, the newspaper in Columbia, S.C.) Jan Chandlersaid she has bought her Sunday and everyday clothes from Coldwater Creek's catalogs for the past four years. "Theyhave more for my age group," said the Northeast Richland resident in her late 50s. On Friday, it was different.Chandler was shopping at the new Coldwater Creek store at the Village at Sandhill, near home. Coldwater Creek,which also has a store in Harbison, used catalog and online orders from Chandler and other shoppers to determinewhere its newest Midlands store was to be located. The Idaho-based women's apparel and housewares retailer foundit had more than 50,000 catalog and online customers within an hour's drive of the Village at Sandhill, spokesmanDavid Gunter said. Coldwater Creek is not alone. As online sales are expected to top $2 billion this year, anincreasing number of retailers are using their Internet sales data to help them plan store openings -- and evenin-store services, the National Retail Federation reported recently during a conference call. In addition to helping todecide location, Internet sales data has helped the retailer identify a wider range of women shoppers, Jenna Belfanti,manager of the new Coldwater Creek store, said.

• 6/26/2006: NASDAQ warns Sandpoint-based Coldwater Creek (Idaho Business Review) NASDAQ notified ColdwaterCreek that the Idaho company could be delisted, but the company believes it is already back in compliance with thestock exchange. The notice was sent to Coldwater June 14 because the company's form 10-Q for the first quarter of2006 was incomplete. The company's new accounting firm, Deloitte & Touche, hadn't finished reviewingColdwater's financial information for last year and therefore wasn't able to certify that section of the form, accordingto a statement from Coldwater Creek. The problem centers on $8.5 million in revenue that, according to Deloitte &Touche, shouldn't have been counted last year. The company amended its 10-Q for the first quarter, including thecertifications, and on June 21 amended a form 10-K and two forms 10- Qs for 2005. Deloitte's practices for statingmarketing fee revenues from the store's branded credit cards were different than Coldwater's former accountingfirm's, said David Gunter, the company's vice president of investor relations. Instead of counting the $8.5 millionone time in 2005, Coldwater will count the $8.5 million gradually over the next few years as those marketing feescome in.

Major Markets/Customers Major Competitors

Coldwater Creek is a retailer of women's clothing through threemain channels:

• Retail locations• Internet• Catalog

The company targets a specific demographic within women's retail:

• Between 35 and 60 years old• Household median income of $75,000+

• Talbots• Chico's• Ann Taylor• Christopher & Banks

Business Profile SWOT Management Group, Inc."Strategy. Alignment. Execution."

Target Account Strike Plan 5 Date: Jun-07

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External business challenges facing the company

• Competition: Although the market for women's apparel is very large, it is also very competitive and subject tofashion changes and swings in the economy. The company said its competitors range from specialty apparel retailcompanies such as Ann Taylor, Chico’s and Talbots to small single-sales channel catalogs as well as stand alonee-commerce sites and other retail store companies. National department store chains such as Macy’s, Nordstrom,Dillard’s and JC Penney, along with discount retailers that offer women’s apparel and accessories, such as Kohl’sand Target are also considered competitors. Nevertheless, management states that Coldwater Creek is poised toincrease its share of the women’s apparel market by appealing to potential customers who may be dissatisfied withthe merchandise selections and customer service offered by department store chains and other retailers. "Once acustomer becomes familiar with our brand, we believe she will be continually drawn to our distinctive merchandiseassortment and exceptional customer service," the company said in its annual report. During fiscal 2006, ColdwaterCreek increased the number of national publications in which it placed advertisements introducing the ColdwaterCreek brand to a greater number of potential customers. The investment in national magazine advertisementsincreased to $24.2 million in fiscal 2006 from $13.6 million in fiscal 2005. During the second half of fiscal 2006, thecompany tested a television advertising campaign in several markets. In fiscal 2007, the plan is to continue to investin national branding through national magazine advertising and testing of television advertising. During fiscal 2007,the plan calls for spending $32 million on the national branding campaign.

• Regulatory Compliance: Coldwater Creek received a black-eye last year when it failed to meet established time lineswith NASDAQ regarding certain financial filings. The company was threatened with a delisting notice, but quicklyrebounded by providing the appropriate materials and avoiding a hearing with the exchange that could haveproduced even more embarrassing headlines. The incident underscores how complicated regulatory compliancecan be even for companies generally regarded as well-managed. Coldwater Creek as a public company is alsosubject to the rules of the Securities and Exchange Commission. It also said it is subject to oversight by the FederalTrade Commission as well as U.S. Customs, due to the import nature of its business. It is also subject tocompliance with a variety of international regulatory authorities involving tariffs and import quotas. Additionally,the company said in its public filings with the SEC that the background of one of its senior executives may lead toadditional scrutiny. The following is from the most recent annual report: "Prior to joining our company, MelvinDick, our Executive Vice President and Chief Financial Officer, served as the lead engagement partner for ArthurAndersen LLP’s audit of WorldCom’s consolidated financial statements for the fiscal year ended December 31,2001, and its subsequent review of WorldCom’s condensed consolidated financial statements for the fiscal quarterended March 31, 2002. The ongoing investigation of the WorldCom matter may require Mr. Dick’s attention,which may impair his ability to devote his full time and attention to our company. Further, Mr. Dick’s associationwith the WorldCom matter may adversely affect customers’ or investors’ perception of our company."

• Increasing Reliance on Foreign Sources: The company said as it expands its direct sourcing program, moremerchandise will come directly from foreign vendors, particularly those located in Asia, India and Central America.The company said it will be the importer of record on 50 percent of total merchandise purchased during fiscal 2007and on 70 percent by the end of fiscal 2008. The company said in its annual report this "will expose it to new andgreater risks and uncertainties." For example, the company will have greater direct exposure to swings in the valueof the dollar and the financial stability of the countries from which it imports merchandise.

*Radar Alert* Sales reps should explore the challenges facing a target account as an opportunity to identifyways to map solutions to problems. In the case of Coldwater Creek, expansion in the face of intensecompetition presents an opportunity to suggest solutions that offer cost efficient ways to manage data centergrowth - especially virtualization solutions.

Business Profile SWOT Management Group, Inc."Strategy. Alignment. Execution."

Target Account Strike Plan 6 Date: Jun-07

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Internal business challenges facing the company

• Retail Expansion: The company is at the half-way point of its goal of operating 450 to 500 retail locations. Thecompany said the process of choosing the locations is complex. In its annual report, it described the process thisway: "Each new store location is identified, analyzed and presented for approval through a collaborative processbetween our real estate and business intelligence departments. The real estate department uses its experience andcurrent market knowledge to identify potential locations based upon an overall market plan. The businessintelligence department then analyzes each location by using data and information gathered through a combinationof our own extensive customer database and external sources. This comprehensive analysis includes suchinformation as projected sales, consumer age, income level, buying habits and the location of competitors withinthe same trade area."

• Managing a Brand Extension: The company is attempting to expand its brand into a new type of operation bytesting a concept called Coldwater Creek ~ The Spa. In fiscal 2006, it opened six day spa locations offering anassortment of spa treatments, including massages, facials, body treatments, manicures and pedicures. In addition tospa treatments, these locations carry an assortment of apparel and personal care products. The experiment has metwith enough success so far to warrant additional locations, the company said. It has plans to open three additionalday spa locations during fiscal 2007.

• Distribution: The company has said that for its expansion plans to succeed, it must invest in adequate warehouseand distribution capacity. To that end, the company decided to expand its Mineral Wells, West Virginia distributioncenter. During fiscal 2006, construction of a 350,000 square foot addition was completed, which increased thecenter’s size from 610,000 square feet to 960,000 square feet.

Key management messages

• "We . . . navigated a challenging fourth-quarter in terms of holiday season traffic, and although additional clearanceactivity had a negative impact on gross margin, we delivered on our commitment to end the period with a cleanand current inventory position," said Dennis Pence, chairman and chief executive officer, in commenting on theyear-end financial report (March 7, 2007, www.coldwatercreek.com).

• "Dan Griesemer's tenure at Coldwater Creek has been marked by achievement, innovation and strong leadership.His experience in the retail arena acted as the catalyst for our successful store expansion strategy, while hismarketing skills have played a key role in the effectiveness of our national advertising campaigns. Now that wehave passed the $1 billion milestone in sales and reached the mid-point toward our goal of operating 450-500stores across the country, I'm extremely pleased to put his many strengths to work overseeing the importantoperational aspects of our business," said Dennis Pence, chairman and chief executive officer, in announcingGriesemer's promotion to Chief Operating Officer (March 27, 2007, www.coldwatercreek.com).

• "Coldwater Creek remains absolutely committed to joining the increasing number of companies that are working,collectively, to make a positive impact on global climate change by supporting cleaner technologies and helpingdevelop the green power market," said Dennis Pence, chairman and chief executive officer, in commenting onColdwater Creek receiving the 2006 Green Power Leadership award from the U.S. Environmental ProtectionAgency (EPA) and the U.S. Department of Energy (DOE) for being the largest purchaser of renewable energy inthe apparel industry (Dec. 5, 2006, www.coldwatercreek.com).

Business Profile SWOT Management Group, Inc."Strategy. Alignment. Execution."

Target Account Strike Plan 7 Date: Jun-07

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Management's growth strategy

• Continue to add retail locations: In 2000, the company had only eight retail stores. That number had increased to239 stores by the end of 2006 and is now at more than 250. Revenue from the retail locations totaled $663 millionlast year and is now more than the catalog and Internet channels combined. Management told Wall Street analyststhat it expects to have 304 stores opened by the end of 2007, but the current objective is to reach between 450 and500 stores in the next few years. These stores will be be placed in high-traffic locations and feature a open-floordesign that relies heavily on warm wood tones.

• Invest in store management: Coldwater Creek is recruiting experienced retailers to manage its store locations. Thecompany said that its store managers have an average of 16 years of experience as retail managers. Additionally, thecompany funds extensive management training through its Coldwater Creek University training program.

• Expand the Internet channel: The company believes the Internet channel can be leveraged effectively by offeringmore and different products than can be found in the stores. The Internet is also viewed as a way to maintain anongoing dialog with key customers through email and special promotions. The company said it maintains an activedatabase of over 3 million customer email addresses. The Internet channel has also emerged as an effectiveclearance medium, meaning that stores locations do not have to hold as many sales to reduce overstockedmerchandise. The Internet contributed $263 million of the company's total revenue last year.

• Maintain the catalog as a vital channel: Although catalog sales are now the smallest of the three channels -contributing $127 million last year - management believes there is significant value in the catalog as a promotionalvehicle for the stores and the internet. The company will mail 119 million catalogs this year containing more than 9billion pages.

*Radar Alert* Management's strategies for growth can trigger ideas about product positioning; in the case ofColdwater Creek the need for channel integration makes the IT management team alert to new ideas aboutsystem integration. Presenting solutions that facilitate the sharing of data and resources among the variouschannels would be the correct positioning for a Server Manufacturer/Solutions Provider partnership.

Business Profile SWOT Management Group, Inc."Strategy. Alignment. Execution."

Target Account Strike Plan 8 Date: Jun-07

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Financial Summary

Numbers are expressed in thousands.

2007* 2006

Excerpts from Income Statement

Total Revenue 1,054,611 779,663

Cost of Goods Sold 583,604 424,478

Operating Expenses 387,112 289,465

Operating Income / Profit: 83,895 65,720

Operating Margin: 7.96% 8.43%

Net Income (after taxes): 55,372 41,570

Excerpts from Cash Flow Statement

Cash from Operations: 110,586 103,275

Capital Expenditure 106,215 80,792

Excerpts from Balance Sheet

Total Assets 580,475 458,410

Total Liabilities 263,019 210,013

(includes current) 153,329 136,299

Total Stockholder Equity 317,456 248,397

*Coldwater Creek's fiscal year ended on February 3, 2007.

Additional Financial Summary Details

The company spent nearly all of its cash from operations on capital expenditures in the past fiscal year. Consequently,the company's total liabilities increased by more than $50 million as it took on more debt to fund operations.

Business Profile SWOT Management Group, Inc."Strategy. Alignment. Execution."

Target Account Strike Plan 9 Date: Jun-07