Furniture Brands Peer Financial KPI Analysis

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  • 1. SAP in the Furniture Industry September, 2009
  • 2. Peer Group Comparison on Key Financial Indicators Peer Best Peer Worst Furniture Brands International peers include Ethan Allen Interiors, Kimball International, Herman Miller, Flex Steel and Basset Furniture Note 1: Based on March 2009 TTM financial data; Financial year ending in Dec for Furniture brands, Basset Furniture; June for rest of the peers Source: Annual Reports, SEC filings, SAP analysis Herman Miller 175 days DII Ethan Allen 13 days Ethan Allen 83.1% CoGS as % of Revenue Kimball International 47.1% Kimball International 47.5% SG&A as % of Revenue Basset Furniture 14.8% Ethan Allen DSO 5 days Basset Furniture 52 days Kimball -23.3% Revenue Growth 1 (YoY) Ethan Allen -5.8% -19.0% 82.5% 18.2% 88 days 38 days
    • What Moving the Needle Could Mean to Furniture Brands:
      • Every percentage point improvement in revenue growth will result increase of = $ 0.4 M in operating income
      • Every 1% reduction in CoGS will result increase of = $ 13.4 M in operating income
      • Every 1% reduction in SG&A will result increase of = $ 3.0 M in operating income
      • Every one day reduction in DII will result in = $ 3.7 M in freed up working capital
      • Every one day reduction in DSO will result in = $ 4.4 M in freed up working capital
  • 3. Improve Data Integrity, Minimize Working Capital and Reduce Administrative Expense Key Observations SG&A as % of Revenue (%, March 09 TTM) DSO (Days, March 09 TTM) Source: Annual/Interim Reports; SAP analysis
      • Closing this gap would lead to $ 6 M in incremental operating income per year
      • One day Improvement in DII would lead to $ 4.4 M in freed up working capital
    • Peer analysis indicates significant scope for improvement in the SG&A expense and days sales outstanding position of Furniture Brands
    • Enterprise integration improves data integrity, analysis and insights, and web-based deployment can simplify administration, access & implementation, reducing total cost of ownership and improving margins
    • Real time visibility across the supply chain from customer to suppliers can reduce forecasting, planning costs and optimize orders and delivery schedule
    • A central repository of employee data with advanced features of employee administration such as payroll administration, transfers and employee status changes, and with the ability to integrate with the financial system, could help reduce employee administration costs
    • Ability to record all business transactions in a system that is fully integrated with all other operational areas of the company, could help ensure accounting data is always complete and accurate, and could reduce days sales outstanding
    • Potential areas of opportunity:
      • Enterprise Performance Management
      • Supply Chain Management
      • Business Planning and Consolidation
      • Financial Management
      • Human Capital Management