a stitch in time case 06112014

This case was developed by Vineesh Chadha of Aumentis Consulting. All the brands, numbers, people and situations discussed in this case are hypothetical and have been specifically created to illustrate management concepts. This case has been developed for teaching and research purposes only. Similarity to any real situations, numbers, brands or people is coincidental and unintentional. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

IIMC ALUMNI ASSOCIATION Chennai Chapter

A STITCH IN TIME

Vineesh Chadha

Director, Aumentis Consulting

A Stitch In Time _____________________________________________________________________________________________

Case Study © Aumentis Consulting

Mr. Ram Lall’s assistant was on the phone. “Sir, Mr. Lloyd of Berksdale Investments has an appointment with you in fifteen minutes”. Ram answers “Thanks, Roy. Let me know when he comes in. Please ask Mr. Murthy to come in.”

Mr. Murthy, the Finance Director of Narnia enters the room in a few minutes. “You wanted to see me, sir.”

“Yes Mr. Murthy. Mr. Lloyd will be here in some time. This is about the women’s wear brand – Tiara that he wants me to buy. I have been thinking about this, but I have not made up my mind. There is no doubt that the women’s wear market is going to explode in a few years time and Tiara is certainly the brand which is leading the pack. Tell me, how have we actually done with our last acquisition of First Sports?”

“We have done ok sir. The top line has grown significantly. As a group we definitely have more brand strength and respect than our competitors today. “

“Ok, let’s hear what Mr. Lloyd has to say. We do need to figure out a way to get to the same scale as our international competitors.”

About Narnia Group

Narnia was a well established business group with a turnover of approximately Rs.600 crores in FY2008. Mr. Ram Lall had been the Chairman for 15 years. The group had been in existence for over 30 years and Mr. Ram Lall was from the second generation of promoters to run the group. The group’s main business is men’s wear. Narnia also had an industrial lubricants business which contributed to about 25% of the group turnover.

Narnia’s men’s wear business has two brands Best Formals and First Sports. Best Formals is as old as the group itself while Narnia bought First Sports in an all cash deal in 2006.

Best Formals

Over the years Best Formals has become the dominant brand in the category. A wide range of products at different price points coupled with extensive distribution and high salience ensured that most working men from trainees to chairmen of companies have at least some Best Formals products in their wardrobe.

Best Formals started with manufacturing white shirts for office wear in 100% cotton fabric, a novelty during the terry-cotton days. Over the years the shirts range has expanded significantly to include numerous designs and styles in different fabric bases. Best Formal also expanded its portfolio by introducing trousers, jackets and suits. To complement its clothing range the company started introducing men’s accessories about 15 years ago. The range today includes ties, belts, pocket squares, handkerchiefs, shoes, purses, portfolios, socks, shoes and suspenders.

Best Formals also offers a knits range (as against a woven range described above) in the form of T-shirts, inner wear, thermals, sweaters and cardigans. Most of the sales still come from the core categories. Accessories accounted for only 10% of the volumes in the last financial year.

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Best Formals has by far the widest offering as compared to competition. Within the company it is believed that the wide range ensures that Best Formals has the highest market share about 4% more than its closest competition- Smart. Smart is owned by Chokhani conglomerate which has 3 brands in the men’s wear space.

Best Formals introduces a new range of designs and products at least twice a year. Seasons drive merchandise changes in India. Summer sees the introduction of light and pastel colours and lighter fabrics like linens. Autumn/winter ranges have darker and brighter colours in thicker fabrics. In parts of the country where there is a distinct change in temperatures-consumers tend to change their wardrobes with change of season buying half sleeves shirts for summer and full sleeves for autumn / winter.

Marriages and other festivals-especially Dussera /Diwali still create spikes in demand though the increases in business are less with every passing year. Many people now buy right through the year. End of season sales is a recent phenomenon but have caught on very strongly with discounts up to 50% on MRP. Such sales now account for up to 25% of an apparel brands annual turnover in a normal year.

Best Formals-Design and Production

Narnia has an in house design and R&D team to create new fabrics, designs and styles. The R&D and design team work closely with fabric mills and other vendors to develop new products and designs. Since Milan and Paris are the key fashion capitals of the world for men’s formal fashion, the design team visits expositions in these cities at regular intervals. Narnia has been buying fabrics from international mills, but the strength of the euro and duty structure makes the purchases very expensive. Recognising the importance of India as growth market some Italian and Turkish mills have set up Indian operations in the last five years. Having international designs at slightly premium prices and has benefitted Narnia as well as competitors.

The Far East especially China with its sharp pricing for good quality fabrics and new innovations has also become a good source for interesting products and ideas.

Best Formals has always stood for high quality and innovation. Over the years this message has been continuously reinforced by introducing and communicating new products based on technology. Technology innovations include use of fabrics with interesting properties like wrinkle free, odour free and stain free. Different garmenting techniques are continually developed to improve the fit, fall, finish and durability of the garments. The trims used in garment making like buttons, threads, interlining are continually researched with the help of vendors in order to offer a better and a longer lasting product to its consumers.

Some of the successful innovations that Best Formals has launched over the years includes 100% cotton wrinkle free shirts, non yellowing whites, stain guard shirts/ trousers/ ties, trousers with adjustable waistbands, odour free shirts, suits with anti wrinkle properties, shirts and trousers with stretch, shirts with double ply yarn, shirts made from Giza cotton and yarn dyed cotton trousers

The company has continuously upgraded its factories and new machinery to ensure that it is offering the consumer a very high quality product at competitive rates.

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Every season Best Formals introduces a new innovation or a design story. This acts like a hook for both the channel intermediaries and the consumers to buy the merchandise. These stories are communicated through mass media and also BTL activities like posters and in shop displays. Store salesmen are also trained to highlight the features of the new offering.

Best Formals – Sales and Marketing

Since Best Formals is by and large an office wear and a special occasion wear brand a significant volume of the sales comes from the core and regular range. This range of faster selling merchandise (like white/cream/light blue shirts and black/grey/navy blue trousers) is always kept in stock both as readymade garments and fabrics. This range accounts for about 15% of Best Formals sales.

To cater to a wide spectrum of consumers Best Formals sells across a wide price range. The entry price points are Rs.750 for a shirt going all the way up to Rs.4000. Similarly, trousers start from Rs.1000 and go all the way up to Rs.5000. Jackets start at Rs.2100 and are available till Rs.10000. Suits start at Rs.3500 and sell up Rs.30000.

A few years ago Best Formals introduced a super premium customised offering across the core products in key markets at a 20% premium. Though launched with a high decibel campaign this had to be later discontinued due to lukewarm response from the consumers.

Best Formals was one of the early adopters of TV- entering the segment in early ‘90s when clutter was negligible and by going on DD or Star Plus significant chunks of the target audience were covered. This has helped built up strong salience and premium imagery for the brand. Advertising in magazines and newspapers has also been consistent and strong. While some communication is done by the brand right through the year, season times see a spike in spends to ensure top of mind salience and a competitive share of voice.

Keeping up with the times the brand is now present on the internet especially for extension Best Casuals which is targeted at a younger consumer.

A core strength of Best Formals is the extensive distribution network all across the country and in a few markets with strong Indian diasporas like the Middle East.

Best Formals was the first garments brand in India to come up with exclusive stores. Today, the company has a three pronged distribution network. Exclusive stores, multi brand outlets and large format stores.

Best Formals exclusive stores were mostly franchisee owned and run till the 2005. Being a Best Formals franchisee was a very prestigious thing. It was not only very remunerative but also brought social approval. Many franchisees had multiple exclusive stores in a city. The company had senior people looking at this channel to ensure that the becoming a franchisee with Best Formals remained a virtuous cycle.

Best Formals has about 188 exclusive stores in the country currently. Out of these, 87 of these have opened in the last 3 years and 18 have been opened by the company itself.

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Multi brand outlets stock and sell both Best Formals and other competition brands. They were the first retail format to come into existence. Their USP has been a convenient location and personalised service. The emergence of other formats has created significant pressure on the multi brand stores.

The large format or department stores have significant area dedicated to men’s wear brands. From the mid ‘90s large format stores have begun to expand at a faster rate. Their value proposition appeals most to consumers who prefer shopping in more modern settings with the option of shopping for the whole family at one location and being able to compare offerings across brands in a category. Additional facilities like parking, loyalty cards, discounts, etc. also serve to entice consumers to large format stores.

All the three formats exist on the value side of the business also. The value formats exist to clear manufacturing rejects and first quality stocks that have not sold through the normal channels within a reasonable period of time. In every city there are value clusters that have started coming up with value offerings across categories- shoes, furniture, clothes, sports goods, electronics, etc. Merchandise is available at discounts ranging from 25% to 60% in these formats.

Best Formals- Portfolio Expansion

About eight years ago, Best Formals launched a casual wear extension- Best Casuals. This was targeted at the younger consumers mostly employees of the IT /ITES sectors which we were growing rapidly. Also, as the Indian market matured people were asking for more choices. Wearing the “old fashioned dull formals” was perceived to be passé.

Best Casual was more American in its ethos. Best Casuals is retailed from the exclusive stores as Best Casuals. Some multi brand stores and large format stores are also beginning to keep Best Casuals. The range consists of wrinkle free chinos, cargos, jeans, t shirts, shirts, jackets and a range of accessories.

Narnia has also extended the Best Formals brand into women’s wear. The range consists of formal office wear like pant suits, jackets, shirts and trousers. The women’s wear is retailed from the Best Formal exclusive stores. Multi brand outlets or large format stores have not given the extension much support.

First Sports-The Origins

Narnia had acquired First Sports from its promoter Mr. Tathagat in 2006. First Sports is the leading Indian sportswear brand in the country. The brand was set up by the Mr. Tathagat in the late ‘90s. Mr. Tathagat had worked in the US for close to two decades first as the production director and then as the sourcing director for one of the most premium sports-wear brands in the world. In the mid ‘90s he decided to come back to India due to various family commitments. He dabbled in a couple of ventures without much success before deciding to set up his own brand. The inspiration came from his friends who kept on admiring the clothes that he wore. They convinced Mr. Tathagat that the Indian casual wear market was not just about smuggled jeans and export surpluses. His technical back ground along with exposure to the commercial aspects of the business actually made him a good fit to launch a new brand.

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Mr. Tathagat figured out that while he was very well versed in managing operations he did not have much idea about the consumers and the distribution channels in India. He recruited his nephew, Ramanuj who was working as sales manager in a large FMCG company to take care of the sales and marketing operations.

Tight availability of resources especially capital made First Sports extremely focussed on its consumers and delivering value to them. The merchandise was quite different from what the consumers in India had seen before. Even though the clothes were more expensive than anything else in the local market, consumers soon became loyal to the brand. The clothes were designed to have a sporty look and feel and came in interesting colours. The garment were made with unique fabrics and given special treatments that made them very comfortable and yet look smart and trendy.

Another key factor in First Sports success was the unprecedented attention to detail and quality. Mr. Tathagat convinced James, an old contact to come out of retirement. James had helped set up the sourcing chain for many US companies. The factory had about 1000 supervisors and workers and James knew most of them by name. First Sports products were acknowledged by all including consumers to be head and shoulders above competition in quality and innovation.

Starting with T-shirts the range of clothes was quickly extended across to shirts, cotton chinos and shorts. The accessories line consisting of socks, inner wear, sweaters, caps etc. was a significant success.

The team’s focus on the consumers and close interactions with the distribution channel partners ensured that early successes were built on and over the years First Sports evolved a unique signature style which was well appreciated and aspired to.

The salience and desire achieved in the initial years with the loyal brand consumers was continuously nurtured over the years by developing different product stories season after season. These stories were not just about technical innovations but also captured the looks and lifestyle aspirations of the target consumers.

Like any other promoter run start up the team size at First Sports was small but efficient. Systems and processes had evolved as the company grew and the staff had been well trained to make maximum use of the limited infrastructure and resources.

All key decisions were taken by Mr. Tathagat and Ramanuj with the rest of the staff providing the execution support.

First Sports- Sales and Marketing

Right distribution was also a key strength of First Sports. Since the range was unique, expensive and created with a lot of passion both Mr. Tathagat and Ramanuj felt that only people who understood and appreciated the range and were equally passionate about it could sell it. They approached only the best multi brand outlet in each town/area and displayed the range and explained the concept. The market did not have any similar brand or product range and most retailers were happy to have a new brand to cater to the exclusive and “what’s new?” demands of their top clientele. First Sports was thus able to build up a

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significant network of dealers across the country who gave dedicated space for the brand and acted as evangelists to convert the most rich and influential people who shopped with them. Most dealers also started wearing First Sports and acted as Brand Ambassadors. The dedicated space in multi brand outlets was appropriately branded with visual merchandising to create a separate distinct section.

Overtime new dealers were added but getting a First Sports dealership was like the ultimate badge of honour in the trade. Besides being extremely profitable with the best return on investments and space provided the dealership also increased the overall traffic into the shop-especially of the more moneyed and influential class. Over time First Sports also opened exclusive retail stores in key high street locations and also tied up with the large format stores to tap into consumers who frequented these relatively new formats.

To reinforce its image as a premium brand First Sports ran campaigns in lifestyle magazines in prominent positions. Campaigns were later extended to newspapers especially during the season time to create awareness about the new range and drive traffic into retail points. Keeping with the signature style of the brand the campaigns also developed a unique style with focus on the product but integrating the intended consumer’s lifestyles cues. The campaigns were very successful with many consumers coming with cuttings and/or asking for the product by name.

First Sports- The Sell Out

The tight operating structure and control on costs along with super premium pricing made First Sports was a very profitable brand. The company was the best in class on almost all operational and financial parameters. However, Mr. Tathagat could see that significant investments would be needed to scale the operations to the next level especially to expand the retail footprint for the brand with so many malls and new retail locations coming up. Additional retail space would also demand investments in capacity across the entire chain starting from production, warehousing, IT, office space and most importantly in people. This would definitely have an impact on the profit margins and overall financials and the valuation of the company. On the whole, Mr. Tathagat felt that if he got a good offer it might make sense to sell out at this point in time. Ramanuj though still felt that there was a lot of steam in the company.

Mr. Tathagat gave the mandate for sale to Mr. Lloyd of Bersksdale Investments. There were only two or three players in the domestic market who could be possible buyers. Mr. Lloyd did his role well and Mr. Tathagat got a deal which valued the company at about 1.5 times the turnover.

Narnia requested Mr. Tathagat to continue for another 3-6 months to help the new team settle down. This was especially critical to reassure the workers and staff who had been so integral to First Sports success story. The fact that Narnia was in the same business for the last 30 years was a source of comfort to the all stakeholders including the channel partners and vendors. Narnia deputed Mr. Lahiri as the CEO and Mr. Bhattacharya as the CFO to First Sports. Mr. Lahiri and Mr. Bhattacharya had joined Narnia within a month of each other about two years ago. Mr. Lahiri had been hired to work in the industrial lubricants business of Narnia. He had spent 15 years working in the industrial lubricants sector in the Middle East in marketing and sales. Mr. Bhattacharya had worked as Head of Finance with a vendor of Narnia for many years. Narnia was quite impressed with his capabilities and had made an offer to him once he had decided

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to move out. Since First Sports was located in a different part of the country, both of them would have had to shift families.

The transition went off smoothly and after 4 months of selling off the company Mr. Tathagat and Ramanuj both made a clean break with First Sports.

The Changing Retail Scenario

By 2004 the Indian market was growing at a rapid clip along with Indian and global economy. However, the costs of doing business grew at a much faster pace than revenues. The coining of the BRIC term added to the hype about Indian growth story and soon companies/brands and money from all over the world making a beeline for India.

Retail space in the form of malls started coming up in India from around the same time. Since it was a new concept few businessmen were willing to back them and the mall developers started directly dealing with companies. With the assets and the share market bubble building up rentals and property rates were increasing rapidly in spite of the significant increase in supply. Fuelled by the Indian growth story, salaries and valuations shot through the roof. Increasing electricity tariffs and imposition of service tax by the Government of India on franchisee commissions as well as rentals drove costs even higher.

The high rentals and salary costs made retail as a business almost unviable. Across the garment industry, the franchising concept started to unravel. Very few businessmen were willing to sign long term leases at these rates and pay their staff such high salaries and sell so much merchandise at discounts in end of season sales. Thus, franchisees found themselves under pressure from both ends and quietly withdrew from the market. The smarter ones became landlords, winding up their existing businesses and signing up long term leases with companies whose valuation depended on the amount of real estate under control.

The rapid build up of company owned stores also impacted multi brand outlets whose business shifted towards exclusive brand showrooms in malls. Most of the large multi brand stores were situated in old markets where it was no longer fashionable to shop.

Large format department stores have done better than multi brand outlets but these are again under the same pressures as franchisees.

The unprecedented growth in retail space along with the absence of channel partners to help created many other unanticipated problems for all retail companies. To make and sell enough merchandise from the increased retail space companies suddenly needed assets and competencies that they did not have starting fabric and trims, production and warehousing capacity, etc. There was a huge strain on the infrastructure like the IT system, office space, transport, etc. There was an even bigger gap in the competencies - mall negotiations, retail managers, merchandise buyers, recruiters, trainers, supply chain specialists, etc.

Since the scale of operations had shot up suddenly, the downsides of a bad decision increased dramatically and there was a lot of pressure on all departments.

The new model was also much more capital intensive with money being needed for rental deposits and investment in interiors.

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Though a lot of mall/retail construction was happening at a frantic pace there were significant delays in handing over the space for fit outs and start of operations. These made forecasting production and sales quite tricky. Plans were very difficult to make even tougher to execute.

First Sports-The last 3 years

Like the other players in the industry Mr. Lahiri focussed on growing First Sports. He thought it was more important to maintain market share even at the short term cost of profitability.

Growth was easy to come by in the first couple of years. First Sports expanded distribution through the existing Best Formal stores – both in the franchisee and the company run stores. This did upset the existing dealers but in many cases there were overlaps- with the same person or family having a First Sports dealership and Best Formals franchise .Some retailers felt that Best Formal stores catered to a different consumer segment so it would not matter.

First Sports also started opening retail stores especially in the new malls that were coming up and in the high streets that it had missed out earlier.

Narnia tried it’s best to retain First Sport’s independent culture. All financial matters were clearly subject to Narnia approval but the rules were deliberately loose regarding other operational matters. This stemmed from the fact that First Sports had been an independent company with its own policies, rules and more importantly own beliefs and culture. There were many processes and systems at First Sports which were different from what existed at Narnia-even though both were from the same industry.

However, not all senior managers at Narnia agreed with this policy. Mr. Murthy felt that there was an opportunity to considerably improve profits by integrating back end processes across both the companies. However, many other managers felt that the possible gains were limited and that this would limit their operational independence.

As with other companies in this category the rapid growth put a lot of strain on the infrastructure at First Sports and the absence of many critical competencies added to the pressure. As the market got more competitive and the economic growth subsided, a lot of these issues started bubbling up.

Feeling a loss of touch with the previous owners, some of the older retailers started complaining that merchandise being offered currently was lacking in innovation – despite the several new collections. According to them, there seemed to be nothing new to retain the existing customers who they felt may drift away to the many international brands entering the market.

The retailers also felt that the expansion in company leased and managed showrooms has lead to a shift in focus from the multi brand channel. The earlier service and commitment levels seemed to be missing. This was not helped by the frequent changes in staff – an unfortunate result of the talent crisis in the country.

Mr. Lahiri limited experience in the garments trade was initially an issue though he did manage to pick up the nuances and drivers with time. He had significant support from Mr. John Smith who had been hired as Head of Design within a few months of the Narnia take over. Mr. Smith was a senior designer from the

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UK. He had worked with the House of Eraser for many years and was responsible for many of the successes that made House of Eraser such a successful brand in its heyday. Prior to joining First Sports Mr. Smith had been teaching in the College of Design, Nottingham. Mr. Smith had lots of ideas for the brand but had issues with capabilities of local vendors and the First Casuals design team. He was keen to move the entire set up to Hong Kong as he felt that was the only way for First Casuals to retain its strong position in the market.

Like many other companies/categories in the Indian market the forecasts about the exploding consumer base in India had led First Sports to expand its repertoire and move beyond its original sporting platform. As a result, the customer base was now significantly broader than at the time of acquisition.

The First Sports Team also felt that the distinction between First Sports and Best Casuals was getting blurred and it did not make too much sense to have both the brands selling from the same counters.

The financial performance of First Sports has slipped over the years and all the operating parameters have deteriorated significantly. While Mr. Lahiri and Mr. Bhattacharya both believed that this was a function of the market conditions, the senior people in the organization seem to be equally split on the issue.

Questions

1) Do you think Narnia had done the right thing by acquiring First Sports? Please give the reasons to support your answer.

2) What do you think of Narnia’s post acquisition integration steps? Were they in line with the Narnia’s acquisition strategy? Would you do things differently-if so what and why?

3) What do you think is the way forward for First Sports?

4) What are the possible challenges that Mr. Ram Lall will face if he decides to acquire Tiara?

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EXHIBITS

Exhibit 3: Projected retail market size in India

Source: indexmundi.com

Source: Census data

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Products 2005 2006 2007 2008 2005 2006 2007 2008Shirts 1,033 1,065 1,121 1,205 1,159 1,194 1,257 1,352 Trousers 1,334 1,376 1,448 1,557 1,465 1,510 1,589 1,709 T shirts 560 577 607 653 967 997 1,049 1,128 Accessories 476 491 517 556 729 752 791 851 Jackets 2,321 2,393 2,518 2,708 Suits 6,961 7,177 7,554 8,123

2005 2006 2007 2008 2005 2006 2007 2008Full price sales (Rs. Cr.) 176 203 235 274 124 136 151 173 Co. showrooms 10 16 26 40 13 21 30 43 Franchisee Showrooms 68 74 79 94 1 1 2 2 MBOs 72 79 87 100 98 99 106 115 LFS 21 27 31 30 12 15 13 13 Exports 4 7 13 9 -‐ -‐ -‐ -‐ Value sales (Rs. Cr.) 20 23 20 30 8 12 15 15 Co. showrooms -‐ 2 5 9 1 3 5 6 Franchisee Showrooms 8 7 5 6 1 3 3 4 MBOs 6 7 5 6 3 3 3 2 LFS 6 7 5 9 3 3 3 4 Exports -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ Total sales (Rs. Cr.) 195 225 255 304 132 148 166 188 Co. showrooms 10 18 31 49 15 24 35 49 Franchisee Showrooms 76 81 84 100 3 4 5 6 MBOs 78 86 92 106 100 102 110 117 LFS 27 34 36 40 15 18 17 17 Exports 4 7 13 9 -‐ -‐ -‐ -‐

Best Formals (incl casuals and women wear) First Sports

Exhibit 5: Revenue by sales channels

Exhibit 6: Product-‐wise average MRP

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Avg. realisation % of MRP-‐Full price channel 2005 2006 2007 2008 2005 2006 2007 2008Co.Showrooms 96% 96% 96% 96% 96% 96% 96% 96%Franchisees 60% 60% 58% 58% 60% 60% 58% 58%MBOs 65% 65% 63% 63% 65% 65% 63% 63%LFS 60% 59% 58% 58% 60% 59% 58% 58%Exports 55% 55% 53% 53%

Avg. realisation % of MRP -‐ Value stores 2005 2006 2007 2008 2005 2006 2007 2008Co.Showrooms 60% 60% 52% 51% 60% 60% 52% 51%Franchisees 39% 37% 36% 33% 39% 37% 36% 33%MBOs 40% 40% 38% 38% 40% 40% 38% 38%LFS 39% 37% 36% 33% 39% 37% 36% 33%Exports

2005 2006 2007 2008 2005 2006 2007 2008Co.Showrooms 1200 1500 1750 2000 1500 1700 1870 2010Franchisees 1200 1200 1100 1000 1000 1000 1000 1000MBOs 400 400 375 370 350 330 325 310LFS 250 250 225 210 250 250 225 210Exports 1500 1500 1500 1500

Exhibit 7: Channel-‐wise average realisation

Exhibit 8: Average store sizes (Sq. Ft.)

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2005 2006 2007 2008 2005 2006 2007 2008Gross Sales 195 225 255 304 132 148 166 188

Sales tax 4 5 6 7 3 3 4 4 Returns 6 11 18 24 1 3 7 9 Discounts 10 16 20 30 1 4 8 15

Net Sales Value 175 193 211 243 126 137 147 159 Other income 1.2 1.3 1.5 1.8 0.6 0.7 0.9 1.0

Total income 176 194 213 244 127 138 148 160 COGS 95 103 113 127 61 68 74 82 Salaries 11 15 17 22 5 6 7 8 Advertising 18 19 19 20 13 14 13 13 Selling Expenses * 12 16 22 33 6 9 11 16 Administration & Travel Expenses 7 9 10 12 4 6 6 7 Interest Costs 2 2 3 4 1 2 2 3 Depreciation 2 9 10 12 4 6 6 7

Operating Profit 30 22 19 14 32 29 29 24 Operating Profit % 17% 11% 9% 6% 25% 21% 20% 15%

* incl. rentals and all running expenses for co. showrooms

Best Formal Including Best Casuals and WW First Sports

Exhibit 12: Profits & Loss Account

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Manpower new recruits 2005 2006 2007 2008 2005 2006 2007 2008Managers 16 33 28 22 6 24 30 28Staff 48 45 41 38 28 45 40 43Labour 169 776 205 197 119 550 150 110Total 233 854 274 257 153 619 220 181

Manpower Strength 2005 2006 2007 2008 2005 2006 2007 2008Managers 219 240 264 280 21 40 56 82Staff 597 638 653 676 99 136 154 189Labour 1303 2015 2180 2225 1183 1700 1763 1805Total 2119 2893 3097 3181 1303 1876 1973 2076

Exhibit 14: New Recruits and Manpower (Year end strengths)

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2005 2006 2007 2008 2005 2006 2007 2008 Inventory levels -‐ warehouse 2,331,585 2,765,843 3,449,384 3,766,618 1,050,535 1,265,006 1,621,587 1,685,886 First Quality 801,436 1,067,989 1,334,650 1,510,856 335,674 391,298 456,958 500,207 Shirts 242,062 304,462 460,902 559,211 121,732 142,944 176,678 202,715 Trousers 110,737 175,040 249,354 303,340 72,674 80,219 100,462 116,447 T shirts 147,406 199,271 188,865 222,547 56,576 68,616 77,465 80,901 Accessories 265,804 346,503 376,502 350,052 84,692 99,519 102,353 100,143 Jackets 28,005 33,102 46,741 58,935 Suits 7,421 9,612 12,286 16,772

Second Quality 96,386 113,551 112,095 191,018 35,017 55,106 73,172 75,730 Shirts 29,409 33,796 39,155 68,068 12,432 19,925 27,363 28,350 Trousers 18,744 22,876 21,686 35,941 6,626 10,527 14,062 16,480 T shirts 16,760 17,819 16,302 30,361 6,862 11,088 14,191 14,307 Accessories 27,495 34,763 29,915 46,010 9,096 13,566 17,556 16,593 Jackets 3,464 3,628 4,095 8,502 Suits 513 668 942 2,136

Other material in unit equivalents 1,433,764 1,584,303 2,002,639 2,064,744 679,844 818,602 1,091,457 1,109,949 Fabrics 500,150 641,266 761,003 817,294 220,490 279,523 398,801 369,983 Trims 266,747 264,051 360,475 387,139 110,245 139,761 188,906 174,110 WIP 600,180 603,544 761,003 774,279 330,735 379,352 461,770 522,329 Spare Parts 66,687 75,443 120,158 86,031 18,374 19,966 41,979 43,527

Inventory levels -‐ stores 899,036 1,061,933 1,259,575 1,545,256 352,534 444,346 506,923 578,439 First Quality 789,571 923,127 1,127,657 1,320,020 321,701 392,661 436,020 501,115 Shirts 242,062 283,465 361,248 450,096 115,325 142,944 163,087 181,744 Trousers 128,222 161,575 211,573 272,228 68,637 84,441 96,094 116,447 T shirts 147,406 164,398 183,895 211,949 56,576 65,757 74,486 87,373 Accessories 230,830 270,441 315,211 311,157 81,163 99,519 102,353 115,550 Jackets 33,391 34,170 44,344 58,935 Suits 7,660 9,078 11,387 15,654

Second Quality 109,465 138,806 131,917 225,237 30,832 51,686 70,903 77,324 Shirts 32,869 39,429 44,262 80,673 9,161 15,181 21,663 25,078 Trousers 21,868 28,896 27,882 48,880 6,626 11,146 15,542 17,229 T shirts 19,154 24,055 19,698 34,279 6,313 10,661 14,191 16,508 Accessories 32,494 42,320 35,898 51,762 8,732 14,697 19,507 18,508 Jackets 2,309 3,055 3,112 7,439 Suits 770 1,050 1,065 2,205

Exhibit 15: Inventory Levels-‐ Warehouse and Stores

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Full price sales 2005 2006 2007 2008 2005 2006 2007 2008Showroooms-‐Co.run 103,443 164,393 248,081 345,555 123,819 122,766 187,163 260,723 Shirts 35,405 53,937 87,700 129,820 47,469 48,072 78,165 115,705 Trousers 21,312 34,587 53,198 74,031 30,042 31,511 48,467 67,447 T shirts 16,334 25,594 34,992 50,434 19,913 14,816 20,257 29,196 Accessories 25,578 43,418 61,644 74,041 26,395 28,367 40,275 48,374 Jackets 3,939 5,486 8,438 13,682 -‐ -‐ -‐ -‐ Suits 875 1,372 2,110 3,548 -‐ -‐ -‐ -‐ Showroooms-‐Franchisee 1,158,561 1,239,992 1,272,914 1,363,889 11,365 12,978 13,805 14,969 Shirts 396,541 406,836 449,993 512,394 6,076 6,815 7,284 7,912 Trousers 238,695 260,884 272,961 292,198 2,103 2,450 2,701 3,035 T shirts 182,937 193,049 179,543 199,060 3,186 3,713 3,820 4,023 Accessories 286,470 327,497 316,299 292,235 -‐ -‐ -‐ -‐ Jackets 44,113 41,379 43,294 54,001 -‐ -‐ -‐ -‐ Suits 9,804 10,346 10,825 14,002 -‐ -‐ -‐ -‐ MBO 1,130,552 1,213,978 1,285,298 1,336,654 1,353,250 1,378,243 1,402,021 1,420,788 Shirts 386,955 398,301 454,371 502,162 518,797 510,858 523,061 511,628 Trousers 232,924 255,411 275,616 286,363 328,339 333,418 339,526 351,495 T shirts 178,515 188,999 181,289 195,085 217,637 229,614 241,127 258,201 Accessories 279,545 320,626 319,376 286,399 288,478 304,354 298,307 299,465 Jackets 43,047 40,511 43,716 52,923 -‐ -‐ -‐ -‐ Suits 9,567 10,129 10,930 13,722 -‐ -‐ -‐ -‐ LFS 364,119 458,549 492,741 439,964 178,300 226,627 190,361 177,097 Shirts 124,627 150,448 174,191 165,288 68,355 84,001 71,019 63,773 Trousers 75,018 96,475 105,662 94,257 43,261 54,825 46,099 43,813 T shirts 57,495 71,390 69,500 64,213 28,675 37,756 32,739 32,184 Accessories 90,034 121,108 122,438 94,269 38,009 50,045 40,503 37,327 Jackets 13,864 15,302 16,759 17,420 -‐ -‐ -‐ -‐ Suits 3,081 3,826 4,190 4,517 -‐ -‐ -‐ -‐ Exports 72,222 122,974 224,678 144,441 -‐ -‐ -‐ -‐ Shirts 24,719 40,347 79,427 54,264 -‐ -‐ -‐ -‐ Trousers 14,880 25,873 48,179 30,945 -‐ -‐ -‐ -‐ T shirts 11,404 19,145 31,690 21,081 -‐ -‐ -‐ -‐ Accessories 17,858 32,479 55,829 30,949 -‐ -‐ -‐ -‐ Jackets 2,750 4,104 7,642 5,719 -‐ -‐ -‐ -‐ Suits 611 1,026 1,911 1,483 -‐ -‐ -‐ -‐ All stores and exports 2,828,896 3,199,885 3,523,713 3,630,504 1,666,735 1,740,614 1,793,349 1,873,577 Shirts 968,248 1,049,869 1,245,681 1,363,928 640,697 649,746 679,529 699,017 Trousers 582,828 673,230 755,617 777,794 403,745 422,203 436,793 465,789 T shirts 446,684 498,177 497,014 529,873 269,412 285,899 297,943 323,604 Accessories 699,484 845,129 875,586 777,894 352,882 382,766 379,085 385,166 Jackets 107,712 106,781 119,849 143,744 -‐ -‐ -‐ -‐ Suits 23,939 26,699 29,966 37,271 -‐ -‐ -‐ -‐

Best Formals First Sports

Exhibit 16: Product-‐wise Sales Volumes

A Stitch In Time _____________________________________________________________________________________________


Value Sales 2005 2006 2007 2008 2005 2006 2007 2008Showroooms-‐Co.run -‐ 37,576 91,599 150,105 19,811 44,570 79,622 86,316 Shirts -‐ 12,328 32,382 56,392 7,595 16,520 29,705 31,082 Trousers -‐ 7,906 19,642 32,158 4,807 10,782 19,282 21,354 T shirts -‐ 5,850 12,920 21,908 3,186 7,425 13,694 15,686 Accessories -‐ 9,924 22,761 32,163 4,223 9,842 16,941 18,193 Jackets -‐ 1,254 3,115 5,943 -‐ -‐ -‐ -‐ Suits -‐ 314 779 1,541 -‐ -‐ -‐ -‐ Showroooms-‐Franchisee 203,703 182,800 132,310 154,654 30,479 72,276 76,673 88,932 Shirts 69,722 59,976 46,773 58,101 11,685 26,790 28,605 32,024 Trousers 41,968 38,460 28,372 33,133 7,395 17,485 18,568 22,001 T shirts 32,165 28,459 18,662 22,572 4,902 12,041 13,187 16,162 Accessories 50,368 48,280 32,877 33,137 6,497 15,960 16,314 18,744 Jackets 7,756 6,100 4,500 6,123 -‐ -‐ -‐ -‐ Suits 1,724 1,525 1,125 1,588 -‐ -‐ -‐ -‐ MBO 148,958 169,090 125,346 134,305 59,433 66,855 72,638 38,615 Shirts 50,984 55,478 44,312 50,456 22,785 24,780 27,099 13,905 Trousers 30,689 35,575 26,879 28,773 14,420 16,173 17,591 9,553 T shirts 23,521 26,325 17,680 19,602 9,558 11,138 12,493 7,018 Accessories 36,832 44,659 31,147 28,777 12,670 14,763 15,455 8,139 Jackets 5,672 5,643 4,263 5,318 -‐ -‐ -‐ -‐ Suits 1,261 1,411 1,066 1,379 -‐ -‐ -‐ -‐ LFS 152,777 182,800 132,310 231,981 60,957 72,276 76,673 88,932 Shirts 52,291 59,976 46,773 87,152 23,369 26,790 28,605 32,024 Trousers 31,476 38,460 28,372 49,699 14,790 17,485 18,568 22,001 T shirts 24,124 28,459 18,662 33,858 9,803 12,041 13,187 16,162 Accessories 37,776 48,280 32,877 49,706 12,994 15,960 16,314 18,744 Jackets 5,817 6,100 4,500 9,185 -‐ -‐ -‐ -‐ Suits 1,293 1,525 1,125 2,382 -‐ -‐ -‐ -‐ All stores 505,438 572,265 481,566 671,046 170,680 255,977 305,606 302,794 Shirts 172,997 187,758 170,240 252,102 65,434 94,880 114,014 109,037 Trousers 104,134 120,400 103,266 143,764 41,412 61,925 74,008 74,910 T shirts 79,809 89,094 67,924 97,939 27,450 42,646 52,560 55,027 Accessories 124,977 151,142 119,661 143,782 36,385 56,527 65,023 63,821 Jackets 19,245 19,097 16,379 26,569 -‐ -‐ -‐ -‐ Suits 4,277 4,775 4,095 6,889 -‐ -‐ -‐ -‐

Grand total 2005 2006 2007 2008 2005 2006 2007 2008Shirts 208,402 241,694 257,940 381,922 112,903 142,952 192,179 224,742 Trousers 125,446 154,987 156,464 217,795 71,454 93,435 122,475 142,356 T shirts 96,143 114,687 102,916 148,373 47,363 57,462 72,816 84,223 Accessories 150,554 194,560 181,306 217,823 62,780 84,894 105,299 112,195 Jackets 23,184 24,583 24,817 40,251 -‐ -‐ -‐ -‐ Suits 5,153 6,146 6,205 10,437 -‐ -‐ -‐ -‐ Brand total 608,881 736,658 729,647 1,016,601 294,500 378,743 492,769 563,517

Exhibit 16: Product-‐wise Sales Volumes (contd.)

A Stitch In Time _____________________________________________________________________________________________


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a stitch in time case 06112014

Automotive