Instructions Please copy page 8 "Benchmarking the Financial s " on to a new word document for part one. Then add part 2 and 3 below on the same word document. Note: you will be benchmarking This Year to Last Year of the company you are analyzing and comparing to the Industry Norms given./n Annual Industry Norms 2019 Results Annual Gross Industry Segment SG&A % Sales Var Margin % Net Profit Inventory % Tum Current Ratio Total Debt Quick Ratio to Equity Ratio Specialty -0.3% 31.2% 25.0% 1.3% 4.8 1.66 0.83 3.33 Department Store -5.6% 32.7% 35.5% -1.3% 3.7 1.26 0.42 2.44 Mass Market 2.9% 23.1% 20.8% 2.9% 9.0 0.90 0.34 1.18 Off-Price 7.0% 28.5% 17.9% 7.8% 6.3 1.24 0.50 1.93 Ecom 14.1% 28.1% 8.6% 7.0% 12.7 1.39 1.11 0.56 Shelley E. Kohan Pronouns: She/Her/Hers Associate Professor Achiever, Relator, Learner, Arranger, Maximizer Fashion Institute of Technology Jay and Patty Baker School of Business and Technology Fashion Business Management Program/n One World Fashion Favorites (Jane'sStore) Name: Ten years ago, the Cherry Valley of Wisconsin was a retail anomaly. It had bustling downtown, no mass merchant retail chains and online retailing was just getting started. When Jane Mason opened her apparel store for misses and juniors at that time, she found instant success in downtown Pine Bluff. She quickly added stores in the downtown areas of both Oakland and Centerville. Each of these stores also quickly became popular and profitable. Within her business, the misses' size range accounted for 70% of sales revenues, juniors for 30% of sales. Jane's had only one major competitor, Anderson's Apparel, run by Alice Anderson. Alice also carried both misses and juniors sizes, but overall her styles were somewhat more conservative and less expensive than those at Jane's. Alice financial backing was more limited than Jane's, so she was not able to expand beyond downtown Pine Bluff even though her business was healthy. Three years later, based on input from her sales staff, Jane tested plus sizes (sizes 14W - 24W) on some key missy styles. Sure enough, there was an immediate response from customers who had not been able to find their sizes anywhere else. Jane quickly added plus sizes to all her missy styles in all three stores, and these sizes became 35% of total misses sales penetration. Not one to let an opportunity go by, Alice Anderson also added missy plus sizes to her Pine Bluff store as well. About five years ago Jane noticed a series of articles in WWD about the emergence of another plus-sized opportunity: junior plus. On her next market trip, she scoured the Chicago Mart and came up with several vendors that could supply both regular sized and plus sized juniors in the fast, edgy fashion that had become the foundation of Jane's junior's business. The reaction was immediate. Plus sized juniors quickly amounted to 30% penetration of total juniors revenues. And of course, Alice Anderson copied Jane once again. Meanwhile, the economic picture in the Cherry Valley started to shift. While business was strong for the paper industry in Pine Bluff and Oakland, the sausage plants in Centerville started closing due to new competition from lower-cost operations in Alabama. Jane noticed a fall-off in sales in Centerville for the first time. Also the stock was not turning and added to the markdowns which eroded the gross margin. Two years ago however, a huge change came to this isolated corner of Wisconsin. A large shopping mall, the Monroe Center Mall, opened in the middle of the trading area. Overnight, competition for Jane's and Alice's missy ready-to-wear business included Kohl's, and Ann Taylor Loft. Of course on-line businesses were starting to flourish even 1 2 among the Wisconsin target market. Jane found herself having to compete on price by adding promotions. Both her sales and gross margin started to erode. Hardest hit was the regular-sized misses business. The sales ratio of regular to plus misses' sizes changed 50/50. And the proportion of misses to junior's sales shifted radically 40/60. Since the mall and on-line business was capturing so much of the traffic that used to be in the downtown areas, Jane decided that she had to open a store there. Funding came from new bank loans. The local competition Alice Anderson was financially unable to add a second store, so she stayed put in downtown Pine Bluff. With her business falling off, Alice decided that she really didn't have the expertise or funding to run both misses and juniors. Her feminine, traditional juniors business was profitable from vendors such as Darling Dresses, Radishes and Roses, and Sweet Home Carolina. But Andersons Apparel had always been a bit more successful in anticipating the needs of her misses' customers. As a result, she reluctantly started phasing out the juniors department. During this period, Jane's daughter Michelle was attending FIT in New York, planning to return to Cherry Valley and help her mother run the business. During break, she convinced her mother to test a look she was seeing in New York – a trend back to wearing blazers and tops with interesting sleeve details. Also ruffles, prints and just fun young looks. She was able to find these styles from a vendor Gabriella. They were quite trendy, brand-oriented junior styles that dominated Jane's junior's inventory. Michelle's bet was right! The test order from Gabriella sold right out and more was ordered. In the past year even more changes came to the Valley. Other national retailers moved in: Zara, H&M and Kohl's expanded all their apparel departments to extended sizes for women. Plus many on-line retailers are now carrying plus or extended sizes. Now, Jane was panicked! Scrambling to meet the competition, Jane saw an immediate negative impact in sales and profitability. The proportion of misses to juniors shifted again. A week ago, Jane and Michelle had this conversation over breakfast: “Michelle, I sure am glad that you'll be graduating next month! We really need some creative thinking to help save this business before you take over! This new competition is murder!" "Mom," said Michelle, "We've got to stay calm. Look at the facts. Think of various strategies. Examine their pros and cons... There is bound to be something that we can do." Jane replied, “Well, I guess. First off, I worry about the fall-off in traffic at our original 3 stores. What can we do to bring more customers back into our stores?" "Yes and let's focus on our core customer” added Michelle. “I know we are a small chain and you do not want to compete by selling on-line. We cannot afford it but then we 3 have to focus on the customer coming into our stores. Who is she today? I will analyze the sales and stock by vendor for you and we can decide on a new strategy." "Good because I also worry about our inventories... Stock seems to be piling up. We have too much of some looks but not enough of others. The misses business has been harder hit than juniors and yet I still get a gross margin that is about 0.5% higher in misses than in juniors. In addition, I've been shaving expenses wherever I can to slow the decline in the bottom line but the cost of running the stores this year has skyrocketed. Take a look at our operating expenses! Michelle suggested, “How about opening an outlet store to clear out the excess inventories? We could make a much nicer presentation in our regular stores. Or maybe it is finally time to get started selling on-line. I know that can be really expensive to begin but I will look in to it. Maybe we can cut our expenses in other areas? I also worry about our prices! Now that Amazon is focusing on clothing, I don't see how we can continue to carry these price points! I know that we have better brands and better fashion than Amazon, but their prices are incredible, especially in the Missy categories!” Look at the stock to sales ratio in Missy vs. Juniors; we have to clear out some inventory! “OK, mom. Let's try something I learned at FIT. Let me go out and do some comparison shopping. Find out who's got what, and at what prices. In the meantime, why don't you collect your annual 2019 figures and selling reports? Let's see where the sales are coming from this year as compared to last year. I think if we cross-reference all this information, we will find a strategic solution to this current challenge." Jane agreed. “Great idea. It looks like I got my money's worth at FIT! Let's sit down next Monday and take a close look at all the facts and figures. I really want you to inherit a healthy business, Michelle, not one that is going down the tubes!" One World Fashion Favorites- Annual 2019 Financials Income Statement Figures in 000's Annual 2019 Annual 2018 Annual 2017 Net Sales 475. 485. 490. Cost of Goods Sold 272. 267. 250. Gross Profit 203. 218. 240. S, G, & A 130. 117. 127. (Operating Expenses) Other Expenses 50. 67. 69. Net Profit 23. 34. 44. Continued next pages... Balance Sheet (Figures in 000's) Assets 4 Annual 2019 Annual 2018 Cash 20. 15. Accts. Receivable 35. 50. Inventories 152. 121. Other 10. 5. Total Current 217. 191. Assets: Equipment, Lease 83. 89. Rights, other Total Assets 300. 280. Liabilities Accts Payable 20. 22. Wages Payable 16. 12. Other 12. 10. Total Current 48. 44. Liabilities Long-term debt 112. 96. Total Liabilities: 160. 140. Stockholders' Total 140. 140. Stockholders' Equity Equity Total Liabilities Total Liabilities 300. 280. and Stockholder's and Stockholder's Equity Equity $ Sales History by Location, in retail dollars Figures in 000's 5 Pine Bluff Fiscal 2019 150. Fiscal 2018 155. Fiscal 2017 215. Fiscal 2016 Fiscal 2015 190. 165. Oakland 145. 155. 185. 150. 135. Centerville 30. 55. 90. 100. 100. Monroe 150. 120. Not open Not open Not open Mall Total 475. 485. 490. 440. 400. Sales by Department and Vendor, in retail dollars Figures in 000's Vendor Name Fiscal 2019 Fiscal 2018 Your Sportswear 40. 85. Connection Blouses and Bows 25. 45. Orbit Slacks 20. 45. The Sweater Source 10. 20. Total Misses Department 95. 195. NYC Urban wear 80. 60. 4U Separates 90. 85. California Red 45. 35. T's That Please 65. 60. Gabriella 100. 50. Total Juniors Department 380. 290. Total Store 475. 485.

Fig: 1