This document summarizes different methods for luxury brands to manage their finances and operations: licensing, duty-free shops, and directly-operated stores. Licensing requires low investment but generates income from royalties. Duty-free shops have a moderate investment and decrease taxes. Directly-operated stores require a high investment but allow full control and can increase overall operating profits. Each method affects companies' financial statements differently and targets various profit margins.

1. Financial management
Licensing, Duty-Free Shops, and Directly-
Operated Stores
Done by: Sarah, Anastasia, MariaIsabel

3. Introduction
Licensors (Gucci) grant licensees (external businesses)
permission to use, create or sell its products under its
brand name. In return, they receive royalties.
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4. Introduction
Duty-free shops are exempt from the payment of taxes
and duties, on the requirement that the goods sold will be
sold to travelers.

5. Introduction
Directly-operated stores (DOS) are owned and run by the
company and allow luxury houses to maintain complete
control over presentation, service, pricing, and the range of
products that were sold.

6. Risk VS reward

7. Investment needed
● Licensing: Low
● Duty-free shops: Moderate
● Directly-operated stores: High

8. Revenue
Cost of goods sold
Gross profit
Expenses
Operating profit
Effects on financial statements
Increase in sales volume + royalties
Decrease in marginal cost
Decrease in rent and fixed expenses
Licensing: income statement

9. Effects on financial statements
Licensing: balance sheet
Assets
Liability
Shareholder’s equity
Decrease in fixed asset
investment
Increase in return on
capital invested

10. Effects on financial statements
Duty-free shops: income statement
Revenue
Cost of goods sold
Gross profit
Expenses
Operating profit
Decrease in taxes

11. Effects on financial statements
Directly-operated stores: income statement
Revenue
Cost of goods sold
Gross profit
Expenses
Operating profit
Increase in sales volume
Increase in expenses
Overall increase in
operating profit

12. Effect on profit margins
Licensing:
● Brands acquire rights
to design and
distribute products
● The easiest way to
expand a brand
○ Handbag collection

13. Effect on profit margins
Duty Free Shops:
Duty Free Sales before 2000
1990 1992 1994 1996 1998 2000PROFIT
YEAR
● In the early 90s big
companies relied on sales
by tourists
now their goal is to
establish local relationships

14. Effect on profit margins
Directly Operated Stores:
● A risky investment
● Cutting cost
● Allows for complete control
○ pricing
○ service
○ creative
○ profit!$$$

15. THE END