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Table of Contents
Page
Table of Contents
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ReHabiliments
After purchasing $500 in clothing (e.g., tee shirts and sweat shirts), Mr. Emlynes had the
apparel designed and silk-screened and then negotiated with two clothing stores in the
Sandybar Harbour area to carry the clothing. In less than one week, both stores were sold out
of the apparel.
Mr. Emlynes conceived the idea of carrying the music group's marketing strategy one step
further and developing an entire clothing line around the concept of "harmony." After brief
negotiations with the group, it was mutually agreed that since Mr. Emlynes was the brainchild
behind the idea, the clothing line known as "ReHabiliments," and the company (e.g.,
ReHabiliments), would belong solely to Mr. Emlynes.
The underlying foundation of ReHabiliments, and its clothing line is based upon the principle
of harmony - harmony of thought, harmony of purpose, and harmony in humility. When people
are of one mind, they are supported in their purpose and are accepted despite their
weaknesses. By purchasing "ReHabiliments," consumers make a conscientious decision to
become an integral member of a community dedicated to the greater good of humanity.
Lately, Mr. Emlynes has explored the potential of the "ReHabiliments" concept, expanding the
line to include a variety of apparel and, built upon personal marketing efforts and out-of-pocket
funds, has sold over $6,000 in products to various venues such as the New York City Jacob
Javits Convention Center; the "Black Expo" in Atlanta, GA; multicultural expositions at the
Anaheim Convention Center, CA; at street fairs in Englewood, NJ; and through various online,
e-commerce sales.
1.1 Mission
ReHabiliments, (ReHabiliments) is a clothing and apparel business with principal offices located
in Sandybar Harbour. The company sells trendy clothing and apparel, such as casual and active
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ReHabiliments
wear, head gear, work-out gear, leather coats, and baseball jackets to an international market
consisting of individuals of all ages, from all walks of life. ReHabiliments markets its product
line as, "ReHab Your Wardrobe-ReHab Your World," and commits itself to programs that
transform the lives of the less fortunate.
The company's first responsibility is to the men, women, and children who use its products. As
a customer oriented business, ReHabiliments recognizes that customer satisfaction is the key to
success and strives to deliver the highest quality customer service and superior products.
ReHabiliments supports the success of its employees, community, and investors, and will
conduct its operations prudently to ensure adequate financing and resources necessary to
achieve business objectives for future growth. The company promotes a spirit of sharing and
caring, where people eagerly contribute their time, knowledge, and experience towards a
successful community. As a socially responsible company, ReHabiliments contributes to the
world's obligation for the protection of the environment, contributes to the economic strength of
society, and functions as a good corporate citizen on a local, regional, national, and global
basis.
1.2 Objectives
ReHabiliments' management recognizes that the company must establish concrete goals that
assist management in determining whether or not the company is achieving corporate
objectives. ReHabiliments' chance of implementing those goals depends upon management's
ability to track progress toward goals and to measure results in conjunction with those goals.
To ensure implementation of the company's goals, management has established the following
corporate objectives:
Securing start-up funding and subsequent funding through a combination of investment and
debt strategies.
Establishing marketing and sales initiatives to expand the company's clothing line and
capture 10% of the branded urban apparel industry.
Reinvesting corporate profits for market share growth in the international apparel industry.
ReHabiliments recognizes that the idea of keys to success is based upon the need for focus. To
establish itself as a global leader, the company must display extraordinary competence and
intelligent foresight. By making the company's keys to success the corporate vision,
management can ensure the success of ReHabiliments.
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ReHabiliments
Establish and commit to "best practices" in all significant business processes, including
ethical production practices (no child labor), through extensive training programs, tools,
measurement, and sophisticated self-assessment reporting systems.
Create, nurture, and enhance customer relationships through problem and opportunity
awareness, assessment of desired goals and results, and through routines and
communications that constantly reinforce target relationships.
Chart: Highlights
Highlights
$11,000,000
$10,000,000
$9,000,000
$8,000,000
$7,000,000 Sales
$3,000,000
$2,000,000
$1,000,000
$0
Year 1 Year 2 Year 3
ReHabiliments' roots can be traced back to 1994, when Mr. Emlynes managed an up-and-
coming, music performance group. To promote the group and increase revenues, Mr. Emlynes
developed a clothing line bearing the group's name, logo, and slogan, "There is Strength in
Harmony." While the group performed, T-shirts and sweat shirts were sold to the public. In
addition, Mr. Emlynes negotiated an agreement with two local clothing stores to carry this
unique line of clothing, and within one week, $500 worth of T-shirts and sweat shirts were
completely sold out in both stores. Unfortunately, shortly after implementing this marketing
strategy, Mr. Emlynes resigned his position as their manager; however, he continued to
maintain a strong relationship with the group.
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ReHabiliments
Mr. Emlynes conceived the idea of carrying this marketing strategy one step further by
developing an entire clothing line around the concept of "harmony." After brief negotiations it
was mutually agreed that since Mr. Emlynes was the originator of the idea, the clothing line,
known as "ReHabiliments," and the company (e.g., ReHabiliments), would belong solely to Mr.
Emlynes.
The underlying foundation of ReHabiliments, and its clothing line is based upon the principle
of harmony - harmony of thought, harmony of purpose, and harmony in humility. When people
are of one mind, they are supported in their purpose and are accepted despite their
weaknesses. By purchasing "ReHabiliments," consumers make a conscientious decision to
become an integral member of a community dedicated to the greater good of humanity.
This principle has deep-seated meaning to Mr. Emlynes, who serves as a worldwide advocate
for the weakest members of society - children. He represents an ongoing mission to abolish the
exploitation of children forced into activities such as scavenging, rag-picking or marginal
economic activities in the streets, drug trafficking, criminal activities, physical and sexual
abuse, forced labor, debt bondage, and prostitution.
In fighting this exploitation, Mr. Emlynes donates a portion of the company's proceeds to
programs that transform the lives of the less fortunate, such as "Feed the Children" and
UNICEF. Additional donations are given to other causes that support child education and the
eradication of life-threatening diseases. These donations foster social responsibility within the
company and represent the company's commitment to its vision of harmony. In addition,
ReHabiliments is committed to sourcing its original inventory (sweatshirts, T-shirts, pants, etc.)
only from manufacturers who can demonstrate use of ethical production practices, with no child
labor or forced labor.
ReHabiliments, is a privately held corporation that is solely owned by its founder, Mr. L. Owerd
Emlynes. The company was incorporated as a Limited Liability Corporation.
Total start-up expenses for ReHabiliments are estimated in the tables below. To date, the
majority of these expenses have been financed by direct owner investment; however,
ReHabiliments is seeking to secure additional first round funding through a combination of
investment and debt strategies that will cover the majority of the company's start-up
expenses. In addition, the founder, Mr. Emlynes, is working with the Social Security
Administration to qualify for the Plan for Achieving Self-Support (PASS) Program, which will
provide the company with additional funding.
Most expenses are typical start-up expenses and include, but are not limited to, the following
items:
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ReHabiliments
Postage/Shipping
Business Insurance (Initial Policy)
Initial Rent
Decorating/Remodeling/Repairing
Office Equipment
Office Setup/Vehicles
Manufacturing/Distribution
Web Design
Reference Materials
Business Travel
Expensed Equipment
To date, Mr. Emlynes, the founder, has received $10,000 through grant monies (e.g., DVR),
plus an additional $7,000 from other investors to assist with start-up expenses. Total Capital
and Liabilities after start-up costs amount to $580.
Inventory: $50,000
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Table: Start-up
Start-up
Requirements
Start-up Expenses
Legal (Business Incorporation Filing and Taxes) $1,200
Business Planning/Development $850
Consulting Fees $120
First month salaries (Design & Admin) $7,150
Advertising/Marketing $213
Conferences/Expositions $1,475
Research and Development $3,500
Business Cards, Letterhead, Stationery $20
Telephone/Internet Expense $335
Postage/Shipping $122
Business Insurance (Initial Policy) $200
Office Supplies $242
Computer Equipment $216
Copies $118
Printing/Silkscreening $822
Graphic Design $812
Web Design and Implementation $6,000
Business Travel $1,303
Parking $20
Petty Cash $65
Other $0
Total Start-up Expenses $24,782
Start-up Assets
Cash Required $388,783
Start-up Inventory $50,000
Other Current Assets $24,950
Long-term Assets $34,485
Total Assets $498,218
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ReHabiliments
Assets
Non-cash Assets from Start-up $109,435
Cash Requirements from Start-up $388,783
Additional Cash Raised $0
Cash Balance on Starting Date $388,783
Total Assets $498,218
Liabilities
Current Borrowing $0
Long-term Liabilities $500,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $500,000
Capital
Planned Investment
Investor 1 $2,500
Investor 2 $1,500
Investor 3 $1,500
Investor 4 $1,000
Investor 5 $500
Grant Money (DVR) $10,000
Grant Money (Pass Program) $6,000
Additional Investment Requirement $0
Total Planned Investment $23,000
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ReHabiliments
Chart: Start-up
Start-up
$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Expenses Assets Investment Loans
3.0 Products
ReHabiliments offers a full collection of apparel that is classy, upscale, and versatile. This
apparel line includes casual and active wear, headgear, workout gear, leather coats, and
baseball jackets. Clothing sizes range from toddler to 5XL (in most items).
ReHabiliments will start out by adding logos and branding to pre-made items selected from
ethically-sound producers abroad, and gradually shift to producing more whole items in-house,
using our team of designers.
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ReHabiliments
Casual Wear
"Casual wear" is only one of the phrases used to describe the trend away from pin stripes and
high heels. Other terms include "business casual" (usually means the Dockers-khakis-polo
shirt look), "business appropriate" (a step-up from casual), "business ready" (meaning that a
"traditional" suit must be ready to wear at all times), "corporate casual," "clearly casual,"
"resort casual" (definitely not allowed in the office), "refined casual wear" (acceptable provided
that you understand what it is), and, perhaps most appropriately, "casual confusion."
--CNet News.com, "Casual Wear: Dressing for Success or For Stress?" June 10, 2000
ReHabiliments carries a variety of products to suit the needs of every individual, whether they
are dressing for success or for an afternoon of leisure. Some of the company's products
include:
In 2004, staying at home to relax will become an important lifestyle choice that will continue
throughout the decade. As dress becomes less formal and more casual most of the time, even
at work, so does the desire for differentiation between leisure wear and casual wear.
Consumers will require clothes to "cocoon" in. These clothes will be soft and comfortable,
stretching and retaining shape. Today, over 50% of consumers require comfort over other
qualities in their clothing, as well as wear-easy care.
--Source: "Fashion Trends 2004: Part 1 - General Changes Affecting Textiles," by Pauline
Weston Thomas.
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ReHabiliments
Activewear/Sportswear
Athleisure lifestyle apparel, from yoga pants to terry track suits, is on the rise, and
ReHabiliments offers a range of high-performance clothing for active sport, trekking, climbing,
and travel that is suitable for the street, and practical for the gym. The collection is
characterized by modern, comfortable, high-tech fabrics and functional, ergonomic designs.
The company's active wear products include:
Sports styling will continue to dictate many casual designs throughout 2004, although natural
looks where the fabric makes the statement will also be important. Sportswear and sports
styling will continue to grip consumers who desire comfort in everyday wear, yet, as couch
potatoes, hardly ever indulge in the activities for which the clothes were originally designed.
(Source: "Fashion Trends 2004: Part 1 - General Changes Affecting Textiles," by Pauline
Weston Thomas)
Workout Gear
The return of the Olympic Games will help maintain strong sports fashion influences in city wear
for both sexes. This will be more and more popular as the 2004 Olympic fever gains a grip on
individuals globally. Colorful fashion trainers, rather than traditional running trainers, will
accommodate the massive shift in shoe buying habits. Keyholes, zip inserts, and satin contrast
strips and bindings will continue to feature in mass casual wear emphasizing the sporty feel.
(Source: "Fashion Trends 2004: Part 1 - General Changes Affecting Textiles," by Pauline
Weston Thomas)
ReHabiliments offers a line of workout gear that brings together a combination of high-end,
high-tech, and unique fabrics with today's hot fashion trends. The company's workout gear
includes:
Smart consumers are driving the performance fabrics of today. They want products with more
comfort, more durability, and more fashion, which in turn will make their lives easier. In
answer to the consumers' needs, companies such as DuPont, Milliken & Co., and Mylstar, Inc.
are developing techniques that manage moisture better, so it dries faster; improving dye-
techniques to enhance color-fastness; and designing garments that keep people warm without
weighing them down. (Source: "Arresting Odor and Moisture," by Michael Fickes, SportsEdge,
December 2002)
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ReHabiliments
Leather Garments
The leather motorcycle jacket is much more than a coat - it's a mentality. From the early
twentieth century, airplanes, automobiles, and motorcycles redefined freedom, idealized speed,
and captured the hearts of men and women alike. The leather jackets developed to protect
pilots, racers, and motorists from the elements came to symbolize a romantic sense of rugged
adventure. In particular, motorcycle jackets maintained this ideal for decades to come.
ReHabiliments carries on this American-made tradition of the classic, leather, motorcycle
jacket.
Leather jackets are the most versatile and classic article of clothing the consumer can own.
They may be extremely stylish and popular, following fashion trends from year to year, but the
truth is that they are never out of style.
Consumers can find leather jackets in various shapes and sizes or different lengths (e.g., such
as trench coat, knee, three quarter, and hip), depending upon the consumer's body type,
height, style, and taste. Even square-shaped, leather bomber jackets have made their return
and continue to be popular. All leather jackets are stylish. (Source: "The Look of Leather," by
Karin Eldor, AskMen.com)
Baseball Jackets
Ever since hip-hop innovators and style aviators Outkast appeared on MTV sporting old school
Houston Astros jerseys with rainbow colors and 70s flavor, the rap world has seen a
trend toward old school/vintage sports apparel. Since then, others have been seen in videos
"discovering" forgotten logos and athletes. Retail stores' shop windows of showcase styles that,
by today's standards, would be considered out of place for men playing on the field. Vibrant
colors and rainbow designs that were once the norm in the seventies and eighties have been
replaced with more conservative color schemes, or with shades of gray and black.
ReHabiliments carries a line of new, satin baseball jackets that mimic those worn by teams of
the past. They are made of thick, lined satin with attention to the finest details.
The love affair with the retired logo is merely another trend in hip hop's long evolution. A
sports symbol can symbolize far more than one might expect. While wearing the traditional,
current logo of a local team can still symbolize an artist's claims of his/her roots, recent styles
of sporting wear attest to more than locality, signifying pure fashion for fashion's sake in an
ever-changing culture.
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ReHabiliments
Headgear
During the summer, fedoras and mesh caps made of natural grasses found favor among both
men and women. Another common sight was unlikely combinations of feminine clothes and
baseball caps, while, as an extension of the layered look, turbans were also a hit. This fall has
witnessed the renewed popularity of the rounded, visored berets known as "caskets" that have
been a conspicuous presence since last year. Hats and caps are coming out in a variety of
materials, colors, and shapes, including woolen caps with designs knitted in and hats made of
furry materials like angora.
As to why hats have become entrenched as a fashion accessory over the past few years, we
believe that headwear offers the easiest means of self-expression in the context of a general
trend for casual fashion. Even a person dressed in a simple outfit like pants and a T-shirt can
instantly express his or her personal style just by putting on a hat.
Hats are becoming as much an integral part of young people's wardrobes as other fashion
items, and ReHabiliments carries a variety of hats to suit everyone's taste. These include:
Hats have always combined fashion with practicality, offering protection from both the summer
sun and the winter cold. Right now, hats are experiencing a boom in popularity that has made
them an essential item regardless of the season. More and more people are wearing hats of
distinctive designs that, unlike the past hat booms, are not constrained by fashion trends.
Rather than famous brand boutiques, it is specialty shops stocking hats created by daring
young designers that are the forefront of the current craze.
3.2 Sourcing
Intense competition has placed garment retailers in higher income countries under constant
pressure to reduce costs. This has encouraged buyers to favor low cost countries and, in
particular, to seek out locations which offer ever lower labor costs.
Few countries today have lower labor costs than major apparel manufacturers, such as
Bangladesh or India; however, this low cost labor is obtained at the expense of children. The
U.S. Department of Labor's 1994 international child labor study, By the Sweat and Toil of
Children (Volume I): The Use of Child Labor in U.S. Manufactured and Mined Imports,
catalogued existing information on child labor in the garment industries of Bangladesh, Brazil,
China, Guatemala, India, Indonesia, Lesotho, Morocco, the Philippines, Portugal and Thailand.
While the report noted that more research was necessary to confirm the extent and working
conditions of child workers, in some cases it stated that children were involved in the
production of garments for export to the United States.
With the exception of Bangladesh, where children regularly worked in large-scale, formal
factories, the report found that children were more likely to work in small subcontracting shops
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ReHabiliments
or homework situations. In some cases, children were found to work in locked shops, with
armed guards preventing entrance and exit during work hours. Children worked on tasks such
as sewing buttons, cutting and trimming threads, folding, and moving and packing garments.
In small shops and homesites in the Philippines, children were also found embroidering and
smocking (making pleats). In some cases, children worked long hours sometimes six or seven
days a week. Some children received less than the minimum wage and were not paid for
overtime work.
The recent proliferation of codes of conduct can be attributed to several factors. With media
reports and exposés on child labor becoming more frequent, consumers - and therefore
companies - are becoming increasingly concerned about the conditions under which the
garments they purchase are made. Companies' adoptions of codes of conduct serve to ease
consumer concerns - and their own - that they may be contributing to the exploitation of child
labor. Often companies adopt codes to project a positive image and protect their brand-name
or quality reputation. Some are motivated by good intentions; some by bottom-line
considerations - many by both.
T-Shirt Manufacturing
Garment Labels
Miscellaneous Garments
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ReHabiliments
Costs per garment vary depending upon the number of garments ordered at any given time.
Bulk shipments cost less than items ordered piecemeal.
3.3 Technology
Other technologies affecting the apparel industry include computerized equipment and material
transport systems. Computers and computer-controlled equipment aid in many functions, such
as design, marking, and cutting. Overhead conveyor systems transport material between
sewing machine operators and between processes. Despite these changes, however, the
apparel industry - especially its sewing function - has remained significantly less automated
than many other manufacturing industries.
Computer aided design (CAD) is used to design anything from an aircraft to knitware.
Originally, CAD was used in designing high-precision machinery; however, in the 1970s, the
technology made its entry into the textile and apparel industry. Today, most companies abroad
have integrated some form of CAD into their design and production process.
According to the National Knitwear Association of the United States, of 228 apparel
manufacturers:
The apparel industry traditionally has consisted of production workers who perform a specific
function in an assembly line. Increasingly, this organizational philosophy is being replaced by a
team concept, in which garments are made by a group of sewing machine operators organized
into production "modules." Each operator in a module is trained to perform nearly all of the
functions required to assemble a garment. Each team is responsible for its own performance,
and individuals usually receive compensation based on the team’s performance. These
changes have greatly altered the atmosphere and responsibilities from those of the traditional
assembly line.
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Fierce competition from abroad has prompted these changes in work structure and technology.
Apparel firms have also responded to growing competition by merging and employing workers
in other countries to perform some production functions. Workers in lower-wage countries are
increasingly being hired to assemble garments—the most labor-intensive step in the production
process—whereas U.S. workers now perform a greater share of the pre-assembly functions
and coordinate the process. Such changes in the nature of the domestic apparel industry will
certainly continue as globalization proceeds.
ReHabiliments' long-range objectives include venturing into an apparel line for college
graduates and professionals, with further opportunities in licensed and branded cologne and
perfume, bedding, underwear, small leather goods, jewelry, and eyewear. Beginning in Fall
2004, ReHabiliments will offer a line of clothing marketed as apparel to "Clothe Tomorrow's
Professionals."
The recent economic slowdown, combined with the tragic events of September 11, 2001,
reduced consumer confidence, which led to declining sales in the apparel industry as a whole.
The impact of the economic slowdown is felt differently by various sub-sectors of the fashion
industry, with some being more greatly affected than others, such as the men's wear industry,
in which the demand is more elastic than in the women's wear industry.
In general, the apparel market is positive due to the immensity and strength of the industry.
However, manufacturers who want to enter the market, will have to be extra-prudent and
prepared to make greater investments in promotions and resources to do observation visits,
conduct preliminary market tests, and increase their visibility by taking part in trade shows and
other activities. Industry specialists strongly advise using specialized brokers to increase one's
chances of success.
ReHabiliments intends to target men, women, and children in the Tri-State Area who require
competitively priced, branded clothing. Within all groups, there are no color barriers and
customers have diverse backgrounds. Briefly stated, these consumers range between one year
and 59 years of age.
According to the NPD, women spend about 80% of all money that goes for sportswear. They
control 96% of the dollars spent on their own clothes, 93% of those spent on children's, and
60% of those spent for men's sports apparel.
During 1999, the women's consumer segment, a constant consumer group, dominated the
U.S. apparel sales market. Women's apparel sales growth was 3.7% and represented 52% of
all apparel sales, whereas men's apparel growth was 4.1% and accounted for 31% of total
apparel sales. Women tend to buy at a constant rate, whereas men's apparel sales have been
growing.
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Individuals under the age of 20 wear about 43% of sports apparel, but individuals aged 45 and
older accounted for 25% of the market in 1999. Girl's and boy's apparel rose 0.5% and 3.8%,
respectively.
The Market Analysis table and chart, below, show potential customers in the Tri-State Area by
gender and age groups, as well as potential Internet sales.
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Men (20 to 49 Years) 1% 202,693 204,719 206,765 208,831 210,918 1.00%
Women (20 to 49 Years) 1% 207,075 209,151 211,247 213,364 215,503 1.00%
Boys (5 to 19 Years) 1% 98,462 99,440 100,428 101,425 102,432 0.99%
Girls (5 to 19 Years) 1% 93,859 94,790 95,730 96,679 97,638 0.99%
Infants & Toddlers (0 to 4 1% 60,577 61,180 61,789 62,404 63,025 1.00%
Years)
Internet 13% 225,000 254,250 287,303 324,652 366,857 13.00%
Total 4.45% 887,666 923,530 963,262 1,007,355 1,056,373 4.45%
Boys (5 to 19 Years)
Girls (5 to 19 Years)
Internet
According to the Yale School of Management (November 6, 2002), larger branded apparel
manufacturers with diversified product lines and self-owned outlets report revenue growth of
between 2% and 9%. Mass manufacturing and rapid creative copying of fashion catwalk
designs means that many of us can afford innovative looks at high street prices without the
couture price tag. Age is no barrier to following a fashion trend or making a fashion statement,
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as 10 becomes the new 18 and 50 the new 35. Consumers are craving new and different
products, actively seeking new fashion-forward items on each shopping expedition.
Adult Apparel
The production of adult apparel, particularly women's clothing, occupies the largest sector of
the apparel industry. In 1990, over 1,000,000 workers were employed to produce an almost
infinite variety of dresses, suits, coats, and sportswear.
Traditionally, the women's apparel business has operated on a five-season basis: fall line
merchandise is usually offered to retail store buyers in April; holiday collections in June; early
spring, resort, and cruise wear in October; spring and summer clothes in January; summer and
early fall fashions in March and April.
Men's clothing design and sales are in a state of upheaval. In the past, manufacturers
presented two new lines of classic clothing each year, changing fabrics for seasons. Today,
many firms produce highly styled clothes for department store boutiques and small specialty
shops which cater to the fashion-conscious man. Their problems with seasons, lines and style
acceptance parallel those of women's wear producers.
Other than children's wear, the market for men's clothing has grown faster than any other sales
category in the industry. The introduction of state of the art permanent-press fabrics probably
initiated this sales increase, but the acceptance of casual fashion in men's wear, spurred by the
growing youth market, has been the main factor.
Although the larger firms are continuing to gain ground compared to smaller firms, and brand-
name merchandise already has a large share of the market, the preference for major brands is
not longer unanimous. Retailers are now much more open to adding new product lines. The
current interest in personalized trends, which more closely reflect the consumer's identity,
provides an opening for small and lesser-known collections.
The "cheap chic" trend is also spurring consumers to expect more at a lower cost, seeing little
difference in style from one brand to another.
Sportswear
Individuals under the age of 20 wear about 43% of sports apparel, but individuals aged 45 and
older accounted for 25% of the market in 1999. The widening age gap between youthful and
not-so-youthful wearers represents a multitude of challenges in designing, marketing, and
branding for sportswear manufacturers.
The growth of the sportswear industry is particularly marked among female consumers, who
now see themselves as more athletic and have begin to wear these collections as street
clothes. Since women are more "outfit-oriented" than men when it comes to exercise clothing,
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they represent a target clientele for this industry. The junior market segment is also of primary
important in this industry, as sportswear is often tied in to fashion.
A product's technical characteristics are also very important in this industry, competing with the
"sport-fashion" factor in the final buying decision. Technical consumers are much more
consistent in their buying habits and provide stability during economic slow downs. Technical
fabrications, whether relating to textiles or processes (e.g., sneakers) are therefore popular.
Junior Clothing
The strong growth in demand in the junior clothing industry has, so far, been able to minimize
the unfortunate effects of the economic slowdown, but heavy competition in the market makes
retailers very conscious of fluctuations in demand. Competition in the junior market segment
has shot up in recent years, with a twofold increase in the number of junior clothing chains.
Popularity and brand visibility are very important factors in buying decisions made by this
market segment; this reduces the maneuverability of small manufacturers who want to position
themselves in the market. It is crucial to follow trends because this segment follows fashion
cycles closely. It is possible to position one's self with very up-to-date collections at lower
prices than well-known collections; however, this means following the market closely and
providing the resources necessary for product visibility.
Children's Wear
Manufacturers of children's clothing produce large lines from which the store buyer makes
purchases three times a year to cover the main selling seasons of spring and summer, back-to-
school and holidays. Although children's apparel is a basic family requirement, the fashion
revolution is affecting even these styles. Mothers (controlling 93% of all apparel dollars spent
on children's wear) want their children to have the latest "look." Children's wear manufacturers
are becoming highly skilled at producing high fashion apparel. Kid's fashions have been one of
the the fastest growing category of apparel. To keep pace with this trend, manufacturers have
adopted the production and sales techniques used in women's apparel. This has led to
enormous numbers of children's wear departments and specialty stores throughout the nation.
The children's wear industry has grown considerably in recent years, but still remains a small
market segment and can be difficult for small manufacturers to enter. Since children's wear
trends increasingly mirror those of adult apparel, children's collections must not only
please children, but also be very similar to current trends in the adult market. This calls for
constant monitoring of the market and a high degree of flexibility and quick adaptation. Major
firms that market adult collections at the same time as children's copies have a head start in
this regard. Price, nonetheless, remains a decisive factor in making purchases, given the speed
at which children outgrow their clothes. Manufacturers who are competitive in this regard and
have the flexibility to adapt their products to fashion trends can find worthwhile niches.
Interest in apparel remains high even though there are a number of discouraging factors. It is
the number one choice of items for which to shop, beating out groceries in second place - 34%
to 32%.
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In general, women 45 to 64 spend more on clothing per capita than any other group. The
50+ market spends $26.6 billion a year on women's apparel and $27 million per day on
personal care products.
The so-called beauty and fashion industry has traditionally focused on white America;
however, the new "multi-cultural" math is leading experts to re-think based on these
statistics: 35 million African-Americans spend $646 billion a year; 35 million Hispanic-
Americans spend $581 billion; 10 million Asian-Americans spend $297 billion. These
individuals currently make up 35% of America. By 2050, it is estimated that these
individuals will make up 50% of America. This audience is basically untapped when it
comes to hair care, skin care, nail care, and cosmetics.
By 2010, the teen population is expected to grow to 34 million; however, recent recession
has put a strain on that spending pattern. The industry is not sure whether teens are
poorer than in previous years or if their parents are forcing them to spend on more practical
items in line with the family budget. Total teen spending in 2002 dropped 3.7% to $20.9
billion. "Tween" shoppers spent $10.1 billion.
More and more clothing purchases are planned rather than being impulse/spur-of-the-
moment purchases. A survey conducted in the spring of 2003 revealed that 60% of the
respondents say purchases are planned. This compares to 55% in 2002; in the mid-1990s
it was at 53%.
Shopping trips are getting shorter. Women are said to spend 88 minutes today (2003)
compared with 95 minutes in 2000. The number of times to shop for clothing per month is
holding steady at approximately 1.7 times per month.
In response to increased competition from new market participants, retailers are exercising
a variety of strategies, including downsizing and restructuring, changing their merchandise
mix, adding services, and adapting the quick response system for controlling inventory
management costs.
The Internet has become another tremendous advantage to the industry. With the Internet,
consumers can get updated and almost instantaneous information. The great e-commerce
websites of many retailers are helping to ensure global business. Internet sales are guiding
retailers into just the right international and domestic cities in which to build stores, and
allowing apparel companies to make their brands known internationally even before they
have any physical presence in the international market.
Women have a great deal of "casual" clothing in their wardrobes. According to Cotton,
Inc.'s Lifestyle Monitor, 56% say they own more casual clothing than work clothing, while
35% say the reverse.
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Accessories have gained fashion status during the past couple of years. Consumers
unwilling to purchase big-ticket items to update their wardrobes have seen and used
accessories as an inexpensive way to achieve a new, updated appearance.
Sixty percent of American women are full-figured (size 14 and above). Expenditures on
apparel by plus-sized consumers grew 8% from 1998 to 2001, while those by regular-sized
women grew 3%.
Many manufacturers and retail stores are leveraging their products by licensing their brands
for accessories such as sunglasses, watches, fragrances, wallets, and footwear. This
strategy is increasing exposure for well-known brands and building consumer confidence in
a specific brand.
The challenge for many apparel retailers continues to be anticipating the coming trends and
deciding how those trends will or won't fit into the company's image. Companies in the
apparel industry are becoming more tuned in to what their customers want and giving them
what they want.
Performance fabrics are not new, but continue to get better and more sophisticated. New
developments are emerging in moisture management and climate control.
In fashion, novelty prints are on the rise. Some specifics include abstracts, graffiti, photo
prints and Asian-inspired looks. Textures continue to be extremely good with such looks as
crinkled suedes, stretch combinations, etc. Embellishing will continue with embroidery,
lace, and like items.
Apparel Production/Sewing
The ready-to-wear apparel industry is suffering from cheaper imports and heavy
discounting. According to several experts, "there are too many stores and too much stuff,
driving competitor's use of lower prices as a primary weapon for growth." Although
consumers benefit initially from this situation, retailers are facing the worst of both worlds -
deflation on the revenue side, and inflation on the cost side. Ultimately, the consumer is
hurt when a trusted retailer must sell or go out of business. Quality is frequently sacrificed
in the end.
A critical element for long-term success in the apparel industry is global expansion.
Companies have to be deliberate in international expansion and expand into countries
where the greatest potential exists, as the international sector of the industry becomes
more important.
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Sources:
"Apparel and Textile Trends," compiled by Linda Heaton, Extension Professor Textiles &
Clothing, Cooperative Extensive Service, University of Kentucky - College of Agriculture,
November 2003
Adult Apparel
The apparel market, as a whole, has been suffering from a deflationary trend in prices as
manufacturers move to independent contract manufacturing overseas. Another reason for price
weakness is the casual trend in clothing - casual is less expensive and generally lasts longer
than dressier clothing. These factors set retailers on something of a promotional spree.
The U.S. fashion industry had a modest 2% increase in apparel sales for 2000. According to
leading market information provider NPD Group, Inc., total apparel sales reached $182 billion
last year, compared to $180 billion the previous year. While still a small percentage of total
apparel sales, online/Internet sales showed double-digit growth in 2000.
Across all channels of distribution, sales of women’s apparel outpaced total market growth,
driven by strong sales in both the large size and petite markets. In contrast, men’s apparel, the
industry winner in 1999, lagged in 2000, decreasing in both dollar volume and market
share. The infants’ and toddlers’ business experienced record-breaking growth from 1999 to
2000.
In 2003, the market showed some signs of recovery, and at least a little evidence that dressier
clothing is selling again. However, the long-term deflationary trend in clothing will continue to
challenge the men's outwear market.
Sportswear
In the challenging U.S. retail environment, casual sportswear, one of the top categories of the
past few years, has been steadily narrowing its appeal, not least for its lack of imagination in
attracting youth.
However, women and men over the age of 35 renewed their allegiance to sports and active
lifestyles by buying up to 24% and 19% more, respectively, in 2002 than in the previous year,
according to U.S. analyst STS Market Research.
Women's casual sportswear in the U.S. in 2002 registered a slight contraction compared to
2001, falling to US $38.8 billion from $39.6 billion, while men's sportswear showed less
dramatic growth than in past years, rising to US $26.8 billion.
The most significant gains were made with consumers over 35 years of age, with men's
shopping at specialty stores up 6% to US $1.7 billion and purchases by women over 35 up
14%, to more than US $4.7 billion, compared to 2001.
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Junior's Clothing
Marketers are competing to provide these age segments desired products. Unfortunately, less
of teens' and tweens' money is being spent on clothing than manufacturers and retailers would
like. From 2001 to 2002, teen and tween apparel purchases fell 3.7% and 4.6%, respectively.
When looking at clothing purchase drivers for consumers aged 13 to 17, price is a highly
ranking attribute for jeans purchases, with 40% of dollar share in 2002, up almost 10% versus
2001.
Children's Wear
The $28 billion children's apparel market experienced continuous growth from 1998 to 2003,
with the exception of the key 2001 holiday season, which was depressed due to the 9/11
terrorist attacks. This performance stands in contrast to the overall clothing market, which has
been noticeably weak in this period. However, even within children's clothing, sales of infant
and toddler clothing have grown while those for older kids have declined.
There has been further change in the American consumer's profile during 1998-2003, which
began in the early 1990s: a majority of consumers shop at a small number of mass
merchandise or national department stores, in which they expect to find a combination of
trendy products and value prices. Leading brand manufacturers are able to retain market share
only through alliances with the increasingly dominant clothing retail stores, such as Wal-Mart,
Target, Sears, and J.C. Penney's. To follow the trend of consumer traffic, even premier brands
in the children's apparel market are approaching the discount channel, while specialty stores
are competing by launching less expensive concept stores. Yet, demonstrating that children's
clothing is a complex market with a large and distinct group of consumers outside the typical
consumer profile, specialty clothing stores gained significant market share in 2001 to 2003.
Branded Products: Men are more up front about their desire for branded goods, while
women are more subtle. Men's sportswear, for example, often carries enormous logos,
while the logo on the expensive lipstick worn by many a woman remains at the bottom of
the handbag, to be flashed only discreetly, in the powder room.
In a survey, "Brand New On Thursday," conducted by Victoria and Albert Museum, nearly half
of all male respondents claimed that, "you can learn a lot about a person from the brands they
buy." In addition, when the research is broken down into 16 to 34-year-olds and those 35 or
older, there is a marked difference in responses. Among the younger age group, 35% admit
that they are influenced by brand image, while only 13% of the over-35s claim susceptibility.
Many apparel brands, including proprietary retail brands, see performance as the future too,
and they're going forward with more apparel that's comfortable and easy to care for. This
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includes the older, wrinkle-resistant or wrinkle-free technology, along with newer technologies,
such as stain resistance, stretch, moisture management, and UV protection. (Source: "Getting
Technical" by Brenda Lloyd, DNR, August 2003)
Comfort/Easy-Care: Women avoid wrinkles on their skin, and they don't want them on
their clothes either. While the Fountain of Youth may be elusive, in the ongoing quest for
comfortable cotton clothing that won't wrinkle, women (and men) are winning the battle.
Technological advances have ushered in a new generation of wrinkle-resistant, 100% cotton
garments that deliver on comfort, style, and wear, while retaining a crisp appearance
throughout the day. (Source: "A Pressing Matter," in Lifestyle Monitor, Fall 2003)
Apparel Sizing: The discrepancy in the actual size of women who may all - accurately -
claim to wear the "same" size is one of the many fit anomalies that is a reality today for the
U.S. clothing industry. Little analysis of body shapes and sizes has been conducted since
the 1940s for women, and since the Civil War for men.
This lack of research, along with a lack of sizing standards, added to the growing practice of
vanity sizing - adding inches to clothing to make it appear that a woman wears a size smaller
than she actually does - has created a disparity between the clothes available to the consumer
and their actual body shapes and sizes. (Source: "A Fitting Solution," by Terri Ross, Apparel,
August 2003)
Sportswear: Until very recently, even if you got women into the stores looking for
sporting goods and apparel, there was nothing for them to buy. There is a definite void in
the market for women's related merchandise, such as feminine looking garments rather
than unisex.
Female athletes and enthusiasts in a number of sports have complained about a lack of
selection. For example, Kate Gengo, a professional inline skater, finds apparel offerings for
aggressive inline skating to be very slim. "There is never any selection for women. Cool
clothes are available from small manufacturers. Buyers aren't putting it in their stores or
defining their customer needs," say Kate.
Women are the primary sporting goods buyers, responsible for four-fifths of all athletic apparel
purchases. As clothing options for the female athlete become more targeted, women looking
for athletic clothing and shoes will patronize those shopping environments that understand the
apparel requirements specific to their sport. The woman's sportswear market raked in nearly
$25 billion in 2000 and is expected to top $38 billion by 2005. (Source: "Girl Power Boosts
Female Sportswear Industry to $25 Billion in 2000," PR Newswire, New York, January 10, 2004)
Senior Clothing: Fitness-oriented boomers and Title IX generation athletes are teaming
up to give women's athletic apparel, a market estimated at $23 billion in 2000, strong
growth potential within an otherwise flat sporting goods arena.
Mature consumers are increasing their spending on apparel, as baby boomers reach peak
earnings levels and their household expenses decrease, with children beginning to support
themselves. Women aged 50 to 64 surpassed female teens between 13 and 18 as the largest
spenders on casual sportswear in 2002.
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Fashion: With fashion continuing to drive the children's apparel market, industry players
are attempting to work more quickly and efficiently to make sure they have the right looks
on the floor at the right time. According to Robert K. Futterman, CEO of Robert K
Futterman & Associates, "Junior's clothing - young, urban, and hip fashion retailers - like
Forever 21, Wet Seal, Arden B, and H&M are poised for growth."
Children's and parents' ever-louder cries for kids' apparel with looks that mirror juniors, young
men's, and even adult clothing is also inducing retailers to commit to pint-sized incarnations of
older styles, without waiting to see how the latter fares with customers. Tops with spaghetti
straps and multicolored shimmering or sequined borders are gaining ground with girls. Boys
are gravitating toward athletic silhouettes: brightly colored, printed camp shirts worn over
muscle T-shirts, zip-off pants and shorts that extend several inches beyond the knee./FONT>
Style is important to these young adults, but style comes in many different packages - cellular
phones, cars, and vacation destinations are among them. In addition, the teen and tween
segments appear to find individuality appealing.
Ethnic Designs/Colors: By 2005, at least 40% of the designs and colors seen on
children's clothing will be tailored to appeal to African Americans and Hispanics. According
to The U.S. Market for Infant, Toddler, and Preschool Clothing, a newly published Packaged
Facts report available at MarketResearch.com, children's clothing companies have identified
ethnic markets, and specifically African American and Hispanic segments of the population,
as their most important audience.
According to Don Montuori, Acquisitions Editor for Packaged Facts, "Hispanics and African
Americans are already making a vast percentage of children's clothing purchases. We have
found that these ethnic demographics are more than twice as likely to purchase infant, toddler,
and preschool clothing. When you consider this finding in tandem with demographic growth
trends of recent years, there can be little doubt that success in the kid's clothing market rests
upon a company's ability to market effectively to a diverse population."
The apparel and fabricated textile products industry is a mature, slow growing industry.
Intense competition characterizes this industry and drives its ever-changing structure and
operations. The market is highly fragmented, particularly in the Tri-State Area. The complexity
of this market calls for a high level of research and specialization prior to any attempt at market
penetration.
The fashion industry in the Tri-State Area mainly looks to New York City, with its multiple
opportunities, in particular the famous Garment District, an area of the city between 35th and
42nd Street and 5th and 9th Avenue. This district is the main gathering point for buyers and
designers in the United States and is beginning to rival the major international fashion capitals
of Paris and Milan. In addition, many firms place their head offices and/or buying offices in
New York City.
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The rest of the Tri-State Area follows fashion, but in longer cycles, and can serve as the
springboard for manufacturers who don't feel ready for the major challenge represented by the
New York City market.
Overall, the U.S. apparel industry is large, mature, and highly fragmented. Apparel sold in the
United States is produced both domestically and in foreign locations. According to estimates
from the American Apparel Manufacturers Association (AAMA), an industry trade group based in
Arlington, Virginia, the dollar value of domestic apparel production was $39 billion at the
wholesale level in 1997 (latest available), which was less than the $46 billion (U.S. wholesale
value) of goods imported into the United States. In addition, $15 billion of goods were
produced in both the United States and another country.
In 1998, Americans purchased approximately $215 billion of apparel and footwear. According
to NPD Group, Inc., approximately $177 billion was spent on clothing in 1998. The remaining
$38 billion was used to purchase more than 1.1 billion pairs of shoes. With the U.S. population
at 270 million, this accounts for roughly $800 a year per capita spent on apparel and footwear.
In addition to the traditional channels, New York has a unique trade structure that enhances
business opportunities. In addition to having six to eight market weeks each year during which
buyers can place their orders, several showroom representatives offer opportunities for placing
orders throughout the year. This market characteristic creates openings for designers who
want to enter the market and want good visibility for their products.
In general, traditional distribution channels are followed. The products are bought from
distributors and/or direct from the manufacturers, who have little say in how products are
marketed. Since competition in the apparel industry is extremely intense, the use of a sales
representative is strongly recommended to facilitate entry into the market. Direct distribution
in this market can require a very extensive investment of time and money with no assurance of
positive results.
Competition in this industry currently turns on prices. The first two quarters of 2001 were
particularly difficult for U.S. textile manufacturers, leading them to shift to a push strategy.
After two years of rising prices, pressure from foreign competition, and shaky economic
conditions, leading textile manufacturers are being forced to lower their prices.
In a broad view, the retail apparel industry competes with all other sectors in the retail
industry. These different sectors include electronic retailers, wholesalers, other discount stores,
shoe stores, convenience stores, and others. Many of these different sectors have combined
together, and often, a company may operate in various divisions to increase profitability.
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1999 Data indicate that the largest retailers in the apparel industry were:
Wal-Mart: $166,809,000
Sears, Roebuck, and company: $41,071,000
K-Mart company: $35,925,000
Target Corporation: $33,702,000
J.C. Penny: $32,510,000
Many experts point to changes in consumer attitudes as a driving force behind the restructuring
that is occurring in the retail apparel industry. Not only have consumers become more cautious
in their buying habits, but they have been reducing the portion of disposable income that they
spend on apparel. In addition, consumers are increasingly demanding quality goods at low
prices, which forces retailers to permanently sell merchandise at "sale" prices, with promotions
occurring throughout the year. Economists and sociologists have attributed increasingly volatile
consumer demand to growing numbers of new products, the rise of fashion-consciousness for
even the lowest-cost apparel, and more selling seasons. (Source: "Codes of Conduct in the
U.S. Apparel Industry," U.S. Department of Labor, Bureau of Internal Labor Affairs)
Although the apparel industry is mature and slow growing, it exists in a dynamic and
competitive environment. Many companies are restructuring to create leaner organizations and
adopt new technologies, with consolidation prevalent as larger companies gain leverage in
market position and cost cutting measures.
ReHabiliments' competition in the apparel industry is widely varied and comes from a variety of
sources, including Tommy Hilfiger, Inc.; The Gap, Inc.; Abercrombie & Fitch; the Jones Apparel
Group, Inc.; Polo Ralph Lauren Corp.; Liz Claiborne, Inc.; and Nautica Enterprises, Inc. The
closest competitor in terms of popularity, growth, and product line is the FUBU Corporation.
Tommy Hilfiger Corporation, through its subsidiaries, designs, and sources, markets men's and
women's sportswear, jeanswear, and children's wear under the Tommy Hilfiger trademarks.
Through a range of strategic licensing arrangements (almost 40 product lines), the company
also offers a broad array of related apparel, accessories, footwear, fragrance, and home
furnishings. The company's products can be found in leading department and specialty stores
throughout the United States, Canada, Europe, Mexico, Central and South America, Japan,
Hong Kong, and other countries in the Far East, as well as the company's own network of
specialty and outlet stores in the United States, Canada, and Europe.
Tommy Hilfiger's clothing company, TOM Inc., is among the leading exponents in the intensified
process of mass customization over the last few years. Beginning with a line of preppy looking,
clean-cut, and conservative sportswear - similar to that offered by The Gap, Inc., but
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somewhat more expensive - Hilfiger set out in the early 1990s to compete against department
store staple lines like Ralph Lauren and Liz Claiborne, who were essentially Young Republican
clothing. In the course of only a few years, this basically khaki, crew and button-down WASP
style, while remaining a constant theme in Hilfiger collections, has been submitted to variations
which are intended to bring the product closer to Hip-Hop style - bolder colors, bigger and
baggier styles, more hoods and cords, and more prominent logos and the Hilfiger name. TOM's
corporate strategies have been ahead of those of many of its competitors and have always
stressed the acceleration of product delivery, new forms of retailing partnership, innovative EDI
usage for inventories and customer tracking, and speedy and timely introduction of new lines
and redesigned goods, assuring consumers a wide range of product choices. (Source: "Tommy
Hilfiger in the Age of Mass Customization," in No Sweat by Paul Smith, edited by Andrew Ross)
For the nine months ended 12/31/03, Tommy Hilfiger's net revenues fell 2% to $1.37 billion.
Net income before accounting change rose from $30.2 million to $105.3M. Revenues reflect
fewer Wholesale segment sales in the men's, women's, and children's product categories. Net
income reflects the absence of $84.9 million in store closure-related special charges.
The Gap, Inc. is a global specialty retailer operating stores selling casual apparel, accessories
and personal care products for men, women and children under the Gap, Banana Republic and
Old Navy brands. The company operates stores in the United States, Canada, the United
Kingdom, France, Germany and Japan. As of February 1, 2003, the company operated a total
of 4,252 store concepts at 3,117 locations. The company's stores aim to offer a shopper-
friendly environment with an assortment of casual apparel and accessories that emphasize
style, quality and good value. Gap stores are generally open seven days per week (where
permitted by law) and most holidays. All sales are tendered for cash, personal checks, debit
cards or credit cards, including Gap, Banana Republic, and Old Navy private label credit cards,
which are issued by a third party. Gap designs virtually all of its products, which in turn are
manufactured by independent sources, and sold under the company's brands.
Since The Gap's founding in 1969, the company has been built upon a culture of passion,
creativity, energy, and entrepreneurial flexibility. These characteristics have helped The Gap
continually evolve, to learn from its challenges, and to make the changes necessary to create
long-term, quality growth. The Gap, Old Navy, and Banana Republic are three exceptional
brands with strong emotional appeal. These clothing lines provide customers with clothes and
accessories that enhance personal style - clothes that are simple, sexy, and cool. The power of
these brands and the important place they hold in the everyday life of people around the world
provide the company with tremendous opportunities to maximize this unique brand affinity.
For the fiscal year ended 1/31/04, The Gap's net sales rose 10% to $15.85 billion. Net income
totaled $1.03 billion, up from $477.5 million. Results reflect an increase in comparable store
sales, improved merchandise margins and lower occupancy expenses.
Abercrombie & Fitch Co. is a specialty retailer that operates stores selling casual apparel,
personal care, and other accessories for men, women, and kids under the Abercrombie & Fitch,
Abercrombie and Hollister Co. brands. As of February 1, 2003, the company operated 602
stores in the United States. The company's stores and point-of-sale marketing are designed to
convey the principal elements and personality of each brand. The store design, furniture,
fixtures and music are all carefully planned and coordinated to create a shopping experience
that is consistent with the Abercrombie & Fitch lifestyle.
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The company has become the clothier of choice for the young and fashionable, and is no longer
"your father's Abercrombie & Fitch." The music alone does as much to repel undesirables - say,
anyone over 25 - as attract target customers. Once a respected retailer, the company has
attracted controversy with these objectives. Issues of A&F Quarterly read like a cross between
a catalog and hustler magazine. Featuring nude models in suggestive poses, A&F Quarterly has
carried reviews of erotic books and an interview with a porn star, complete with professional
tips. The catalog comes enclosed in shrink-wrap and stamped "XXX," you must be 18 to buy a
copy. Recently, the company's bottom line was hit hard by a nationwide boycott and bad press
generated by the pornographic catalog, A&F Quarterly.
For the fiscal year ended 1/31/04, Abercrombie and Fitch's net sales rose 7% to $1.71 billion.
Net income rose 5% to $205.1 million. Revenues reflects the addition of new stores and
continued increases in the women's market. Net income was partially offset by higher general,
administrative and store operating expenses.
Jones Apparel Group, Inc. designs and markets branded apparel, footwear and accessories.
The company's brands include Jones New York, Lauren by Ralph Lauren, Ralph by Ralph Lauren
and Polo Jeans company licensed from Polo Ralph Lauren Corporation, Evan-Picone, Rena
Rowan, Norton McNaughton, Gloria Vanderbilt, Erika, l.e.i., Energie, Todd Oldham, Nine West,
Easy Spirit, Enzo Angiolini, Bandolino, Napier and Judith Jack. Jones Apparel also markets
costume jewelry under the Tommy Hilfiger brand licensed from Tommy Hilfiger Corporation and
the Givenchy brand licensed from Givenchy Corporation, as well as footwear and accessories
under the Espirit brand licensed from Esprit Europe, B.V. Each brand is differentiated by its
own distinctive styling, pricing strategy, distribution channel and target consumer. Jones
Apparel operates four segments: wholesale better apparel, wholesale moderate apparel,
wholesale footwear and accessories and retail.
Jones aims to gain stability in the apparel industry as well as retail markets through building
"complete lifestyle brands serving a wide breadth of consumers in a wide range of income levels
and shopping destination preferences." (Source: PR Newswire, 2/7/01.) The company has a
multi-brand, multi-distribution business strategy.
For the fiscal year ending 12/31/03, Jones' net sales rose 1% to $4.38 billion. Net income
before accounting change decreased 1% to $328.6 million. Revenues reflect the acquisition of
Gloria Vanderbilt which provided healthy sales. Earnings were offset by a decrease in gross
margin and a decrease in operating margin.
Polo Ralph Lauren Corporation designs, licenses, contracts for the manufacture of, markets and
distributes men's and women's apparel, accessories, fragrances, skin care products and home
furnishings. The company's sales are principally to major department and specialty stores
located throughout the United States and Europe. It also sells directly to consumers through
full-price and outlet Polo Ralph Lauren and Club Monaco stores located throughout the United
States, Canada, Europe and Asia. Polo is also a party to licensing agreements, which grant the
licensee exclusive rights to use its various trademarks in connection with the manufacture and
sale of designated products in specified geographical areas.
The Polo Ralph Lauren company was established in 1967 with a line of men's ties. From the
onset, founder Ralph Lauren believed in defying convention to bring about unique, yet timeless
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styles that decades later have become the company's trademark. What began with a tie 33
years ago has grown into an entire world and lifestyle that has redefined how American style
and quality are perceived. Polo Ralph Lauren has built an international mega brand by selling
fashions and fragrances to the well heeled through department stores.
In 1999, the company acquired Toronto-based Club Monaco after learning that "something is
considered in vogue when it reflects a prevailing social mood - these days, 'corporate' is
definitely not cool." The acquisition of Club Monaco, a much smaller business, was the door to
the younger consumers' market and presented an effective way for the company to capture
customers not normally attracted to the clean all-American look of the Ralph Lauren line,
without alienating its loyal base of supporters. The Club Monaco chain offers fashion basics
with a European flair at prices well below name designer wear.
For the 39 weeks ending 12/27/03, Polo Ralph Lauren revenues rose 5% to $1.83 billion. Net
income decreased 7% to $94.4 million. Revenues reflect an increase in retail net sales. Net
income was offset by higher S/G/A expenses due to increased selling salaries and related costs
and higher restructuring charges.
Liz Claiborne, Inc. designs and markets an extensive range of branded women's and men's
apparel, accessories and fragrance products appropriate to wearing occasions ranging from
casual to dressy. The company operates the Wholesale Apparel, Wholesale Non-Apparel and
Retail business segments. Wholesale Apparel consists of businesses that design, manufacture
and market to the company's wholesale customers women's and men's apparel. Wholesale
Non-Apparel designs, manufactures and markets accessories, cosmetics and jewelry products.
Retail consists of businesses that sell merchandise designed and manufactured by the
Wholesale Apparel and Wholesale Non-Apparel segments to the public through company-
operated specialty retail and outlet stores, and concession stores where its products are sold in
third-party-owned locations.
The company, founded by Elizabeth Claiborne Ortenberg in 1976, designed and produced
moderately priced sportswear for women. The company's aim was to provide clothes
appropriate for either work or leisure, and Elizabeth's designs were marked by cleanly
sculptured silhouettes and splashes of color; these quickly supplanted the dark, tailored suits
then popular. In 1980, Claiborne was named the fashion industry's first Entrepreneurial
Woman of the Year. A year later, her firm made a public stock offering, after which the
company began to diversify, adding petite, dress, and shoe divisions. In 1986, the company
was listed among the Fortune 500 for the first time.
For the 40 weeks ended 10/4/03, Liz Claiborne net sales rose 18% to $3.21 billion. Net income
increased 19% to $206.6 million. Revenues reflect the addition of stores and the acquisition of
MEXX. Net income also reflects an increased gross profit margin due to improved company-
wide inventory management and improved product performance.
Nautica Enterprises sails the deep blue seas of men's apparel. The upscale clothier designs and
markets sportswear, outerwear, and sleepwear for men, as well as jeans, and childrenswear.
Nautica also globally licenses products such as fragrances, watches, dinnerware, eyewear,
rainwear, swimwear, and home furnishings. The company's brands include Nautica, Earl Jean
(women's denim), John Varvatos (men's sportswear), and E. Magrath and Byron Nelson (golf
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apparel). Nautica sells through some 2,300 retailers in the US, 1,500 in-store shops, its
flagship store in New York, a handful of direct retail stores, and over 100 of its own outlet
stores. On August 28, 2003, a merger between Nautica Enterprises, Inc. and VF Corporation
(NYSE: VFC) was completed. As a result of the merger, Nautica is now a wholly-owned
subsidiary of VF Corporation.
Since its founding, Nautica has taken pride in an authentic American heritage that draws people
together. The foundation for the connectedness is rooted in the company's core values -
classic, confident, adventurous, approachable. Nautica, a modern American classic, offers
quality, design and value while capturing the essence of an active, adventurous and spirited
lifestyle. Earl Jean offers uniquely styled women's denim and apparel collections with particular
appeal to fit-conscious, fashion-savvy teens and urban professionals. The John Varvatos
Collection of apparel and accessories for men reflects a modern attitude. Combining the
highest-quality European fabrications and design details, this collection redefines American
style.
V.F. Corporation, the parent corporation for Nautica Enterprises, Inc., through its operating
subsidiaries, designs, manufactures and markets branded jeanswear, intimate apparel,
occupational apparel, knitwear, outdoor apparel and equipment, children's playwear and other
apparel. The consumer apparel segment includes jeanswear and related products, women's
intimate apparel and children's apparel, all having similar characteristics of economic
performance, product type, production process, method of distribution and class of customer.
The occupational apparel segment is distinguished from the other segments because of a
different class of customer. The outdoor apparel and equipment segment consists of the
company's outerwear and adventure apparel, plus daypacks and technical equipment, and is
therefore distinguished from the other segments by type of products. The all other segment
consists primarily of the company's licensed sports apparel and distributor knitwear operations.
For the fiscal year ended 1/3/04, Nautica's sales rose 2% to $5.21 billion. Net income from
continued operations before accounting change rose 9% to $397.9 million. Revenues reflect
higher Outdoor Apparel and Equipment segment sales. Earnings also reflect lower interest
expense.
FUBU took the fashion industry by storm when its label, specializing in urban gear, helped
define the look of young America. FUBU - "For Us, By Us" - is considered one of the hottest
urban clothing lines in the fashion industry. Its owners are neighborhood friends Daymond
John, Carl Brown, J. Alexander Martin and Keith Perrin. The FUBU label was established in
1992 when John, the company's CEO, began working out of his mother's home in Queens to
make tie-top hats embroidered with the FUBU logo. John later recruited Brown, Martin and
Perrin, took out a $100,000 mortgage on his mother's house and moved his operation into the
basement. The partners gradually expanded their line to include hockey jerseys, T-shirts and
baseball caps. After finding it difficult to market their clothing through traditional advertising
channels, the foursome succeeded in promoting its line by using celebrities and hip hop artists.
The company's newest licensed lines include Platinum FUBU; FUBU Footwear for Ladies;
Intimate Apparel & Activewear; Swimwear; Watches; the FUBU suit, shirt, and tie collection;
and for those special occasions, the FUBU tuxedo. FUBU has received several honors for their
entrepreneurial achievements, including two Congressional Awards, two NAACP Awards, Pratt
Institute Award, Christopher Wallace Award, Online Hip Hop Award, and a Citation of Honor
from the Queens Borough President.
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FUBU's headquarters are now in New York's Empire State Building, and the company has added
womenswear, footwear, suits, and accessories. The label is carried in more than 5,000 retail
stores in 26 countries. In 1999, FUBU reported an annual sales volume of $200 million from its
menswear business and $150 million from its licenses.
Style Piracy: Because design and styling ideas are such important competitive weapons, they
are often stolen. Fashion piracy is so common that it is considered an integral part of the
garment trade. While trademarks and names can be registered, laws against style piracy are of
little practical value.
Copying creative work is standard practice for some firms, especially the smaller and budget
houses. A style produced by many manufacturers and "knocked-off" at successively lower price
levels is often referred to as a "ford." This term is often applied to runaway best-sellers as well.
To mitigate risk from style piracy, ReHabiliments will ensure that all of its designs are copyright
protected. To date, this is the best solution to design piracy because the application process is
cheap and expeditious, and the copyright protects the creative works of fashion designers for a
limited term under copyright law. Due to the short life span of apparel designs, patent
protection is neither available nor appropriate.
Market Risk: Market risk is the risk of loss due to adverse changes in investment from market
fluctuations directly related to ReHabiliments' products, services, and market segments. As the
complexity of the business increases, risk management becomes increasingly important and
difficult. Market fluctuations could aversely affect the results of ReHabiliments' operations and
financial conditions. To mitigate exposure to market risk, ReHabiliments will use various
econometric and statistical analysis tools to monitor the movement of the market interest,
perform analyses on the current trends, and forecast results. In this manner, management can
make the necessary adjustments in the asset and liability structure of the company.
Economic Stability Risk: Changes in the economy will require that the company adjust its
operations to account for financial and economical fluctuations. ReHabiliments will pursue
various business strategies, including horizontal integration and economies of scale, geared
toward reducing economic risk. To ensure continued profits during economic instability, the
company will control the environment in which it operates by reducing uncertainty, minimizing
expensive competition, and capturing a larger share of the market.
Operational Risk: ReHabiliments, like all large companies is exposed to many types of
operational risks, including the risk of fraud by employees or outsiders, unauthorized
transactions, and errors relating to computer or telecommunications systems. To mitigate
operational risks, ReHabiliments will maintain a system of controls that is designed to keep
operating risk at a minimum, such as limiting authority to conduct business activities to the
appropriate functional departments/branches .
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Supply Chain/Merchandising Risk: Due to recent events, such as terrorist attacks and
political instability in third world countries, supply chain risks have been introduced or
heightened, with pressure to enhance productivity, eliminate waste, remove supply chain
duplication, and drive for cost improvement. To mitigate supply chain risk, management will
construct and optimize "what if" scenarios about the company's future. These "what if"
scenarios will serve as models by which ReHabiliments can refine and extend managerial
intuition about major strategic decisions. Statistical models and methods for developing long-
term, supply chain forecasts will support these scenarios.
Early Stage Business: As a start-up company, ReHabiliments has limited operating history
beyond the industry experience gained by the founder. To mitigate risks relating to
inexperience, the company will leverage the experience of external advisors to provide support
for management decisions, as well as industry expertise and day-to-day operations.
Brand Identity: Since brands do not live in vaults without time or threat, brand risk is
threatened by the loss of value due to a change in consumers' perceptions of the company.
Establishing, building, strengthening, and maintaining ReHabiliments' brand, regardless of
product or service, is important to its ability to attract and retain customers. Brand recognition
is key to the success of ReHabiliments in local, regional, national, and international markets.
To mitigate the risk associated with brand, ReHabiliments will ensure that the company's brand
is clear, specific, and unique to its product and service offerings, and will build brand strength
through leadership, stability, market, geography, trend, support, and protection.
The Apparel Industry is made up of small firms. The average number of employees in an
apparel business is 38, and two-thirds of all establishments employ fewer than 20 workers.
The average establishment size, however, varies considerable across product sectors. With 109
employees, the average men's wear establishment is more than three times the size of the
average women's wear establishment. Establishment size had been growing until the early
1980s, when this trend reversed across all product categories. Firms with fewer than 20
employees now account for less than 10% of the industry's workforce, while 37% of the
workforce is employed in establishments with 250 or more employees. (Source: "U.S.
Industry in 2000: Studies in Competitive Performance (1999)," Peter Doeringer and Audrew
Watson, Boston University)
The U.S. apparel market can be divided into two tiers: national brands and other apparel.
National brands are produced by approximately 20 sizable companies and currently account for
some 30% of all U.S. wholesale apparel sales. The second tier, accounting for 70% of all
apparel distributed, comprises small brands and store (or private-label) goods.
Apparel is sold at a variety of retail outlets. Based on data from NPD Group, discount stores,
off-price retailers, and factory outlets accounted for 30% of 1998 apparel sales, while specialty
stores and department stores accounted for 22% and 18%, respectively. Another 17% were
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sold at major chains, and direct mail/catalogs accounted for 6%. The remaining 7% of apparel
sales occurred through other means of distribution.
The major players in the apparel industry are the large manufacturers headquartered in the
U.S. There are also many local manufacturers that are much smaller and who usually
specialize in a particular area of apparel. Sports wear, active wear, and other related products
are offered for sale at specialty outlets as well as in retail stores nationwide. Such outlets are
able to cut one-third off the garment price at a retail store. Apparel is available to consumers
through multiple avenues: e-commerce, retail stores, outlets, and wholesale through the
manufacturer for mail order catalogues and smaller boutique style outlets.
The company has developed a strategy that will ensure the long-term growth and success of
ReHabiliments in the apparel industry. This strategy will continue to evolve and initially
includes:
Focusing on target markets and aggressively marketing the full-range apparel collection as
an alternative to existing clothing lines.
Differentiating the company's products through exclusiveness and brand awareness, thereby
fulfilling the promise of "ReHab Your Wardrobe-ReHab Your World."
Developing partnerships with both industry leaders and competitors. In this manner, the
company can neutralize its competitors by treating them as allies.
Fostering social responsibility within the company through commitment to programs that
transform the lives of the less fortunate. In support of this strategy, ReHabiliments donates
5% of all proceeds towards "Feed the Children" and other charities.
The debut of the FUBU Corporation in 1992 was based upon the a slogan, "For Us, By Us"
(FUBU), that expressed the founder's purpose of creating a line of popular clothing designed for
African-Americans, by African-Americans. At the time of FUBU's inauguration, numerous
clothiers were targeting black consumers for their urban wear; however, none of these
companies was black-owned or operated. The company's earliest collection consisted of T-
shirts, rugby shirts, hockey jerseys, and baseball caps, all embroidered with the FUBU logo. By
1999, the company reported an annual sales volume of $200 million from its menswear
business and $150 million from its licenses. What had originally begun as a clothing line for
African Americans had developed into a multi-cultural base of customers, all wearing FUBU's
clothing.
The underlying foundation of ReHabiliments, and its clothing line is based upon the principle
of harmony - harmony of thought, harmony of purpose, and harmony in humility. The
company's name, ReHabiliments, and its clothing line, ReHabiliments Apparel, are competitive
advantages in themselves. The name is not attached to any particular group of customers,
which allows the company entry into different segments of the apparel industry. Another
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competitive advantage stems from ReHabiliments' partnership with the entertainment industry
and the use of mainstream celebrities in advertising and promoting the company.
In a market where consumers are barraged by advertising and marketing campaigns delivering
an onslaught of lifestyle and fashion messages, a brand name is a powerful weapon.
Established brand names, with a quality image, make the consumer's shopping experience
easier and faster. For manufacturers, brands build consumer loyalty, which translates into
repeat business.
People want to think of themselves as belonging to a group that they admire or respect, and
will dress as they think a member of that group would dress. Although they may believe
their object is to reflect their individuality, the differences they stress in choosing a clothing
style are really between their own chosen group, and all others.
ReHabiliments' brand and marketing message are not directly attached to any particular group
of customers, but rather to a diversified community of consumers who believe in
humanitarianism and equal opportunities and choices for everyone. The company does not
simply offer products that clothe the body, but rather products that clothe the soul - clothing
that supports people, either directly or indirectly, through difficult situations.
The company's primary marketing strategy is to establish itself as the "Apparel Company of the
Future." With management's deep roots in humanitarianism coupled with a firm belief
in harmony and honesty in business and advertising, ReHabiliments will greatly increase the
marketability of its apparel line.
ReHabiliments' pricing strategy remains competitive with all other high quality apparel
companies , but offers much more in terms of meeting the company's mission and purpose for
existing. As a general rule of thumb, 50% of each garment's cost is consumed in actual
manufacturing, divided among labor and materials. The other 50% is allocated overhead and
shipping expenses.* Average mark-up is 40% of cost.
Currently, all of the company's products are on target in price, as compared to other similar
branded apparel. ReHabiliments with regularly monitor its operating expenses, delivery costs,
cost of sales, trade discounts offered, damage allowance, hazards, and other variables to
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ensure that the company's pricing strategy remains competitive with industry standards and
expectations.
*Note: overhead includes non-payroll operating expenses as well as purchase and replacement
of production equipment, included here as part of start-up assets.
ReHabiliments will depend upon several promotion strategies to reach new customers. These
strategies include:
Direct Mail - ReHabiliments will explore the benefits of incremental, coordinated, direct
mail campaigns which ensure that the company's advertising is:
o Targetable: When using direct mail, each customer is carefully selected. This
enables ReHabiliments to "speak" to the customer in their own language and about
their individual needs. In addition, the company can time its direct mail efforts to
coincide with critical points in the customer's buying cycle.
o Efficient: Direct mail ensures that ReHabiliments knows that every dollar spent is
being directed at people who are genuine prospects for the company's services.
o Flexible: Direct mail is capable of handling a variety of advertising or marketing
tasks. In addition to being able to sell directly, it is a medium that can deliver a
sample right to the customer regardless of whether the sample is an actual product
or a demonstration of a product.
o Measurable: With a direct mail campaign, there is no guesswork when it comes to
the results and virtually no waiting - when ReHabiliments has a winning product,
management will know immediately!
o Accountable: As responses pour in, the value of the direct mail campaign speaks
for itself.
E-Mail - ReHabiliments' e-mail campaign will extend the company's marketing reach and
visibility with minimal resource allocation. As ReHabiliments builds its customer database, it
will gather e-mail addresses with opt-in permission to contact current customers and
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prospective customers via e-mail and other electronic means. Many of the benefits of a
direct e-mail advertising campaign include:
o Great Direct Response Vehicle: If the customer is receiving the e-mail, the
customer has already demonstrated his/her interest in the content they are
receiving.
o Timely: E-Mail is the perfect tool for targeting specific dates.
o Placement: ReHabiliments' advertising will have little competition.
Media - ReHabiliments will initially develop a local media campaign, including radio and
television, built around service innovation. This campaign will begin with a "Who We Are"
statement and be supported by other advertisements that reinforce the company's
marketing message to consumers of casual, active, and sports apparel.
The primary distribution channel in the apparel industry is still the bricks and mortar store,
augmented by catalogues and direct selling. The incredible success realized by other industries
in Internet e-commerce has not followed into apparel. Existing limitations from product
licensing and distribution agreements to fit and trial issues have stunted the growth of the
industry in the Internet space. The most successful players tend to be those with a 'click and
mortar' strategy such as The Gap, or those companies with a strong background in catalogues
and direct selling such as Lands' End. The fit and trial issues and difficulties with color and
texture perception on computer monitors, however, continue to be issues that keep Internet
sales relatively low compared to the total market for companies. Another area to see some
success is that of off-price and discount clearing houses like Bluefly. This is an example of how
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the inefficiencies of the existing industry model for apparel has spawned a whole new category
of retail both on-line and off-line in factory outlets and clearing houses.
ReHabiliments will begin with options 1 and 2, above, and open a store when we have the
available resources and growth to warrant it. For now, the company plans to use a direct sales
force, the entertainment industry, retailers, and the Internet to reach its target markets. These
channels are most appropriate because of time to market, reduced capital requirements, and
fast access to established distribution channels.
For men, women, and children seeking clothing with style, selection, differentiation, and
"substance," ReHabiliments offers a unique clothing line that is affordable, trendy, exclusive,
and fashionable while meeting both the physical and emotional needs of the consumer. Unlike
ReHabiliments' largest competitor, FUBU Corporation, the company offers affordable, trendy
"ReHab Your Wardrobe-ReHab Your World" clothing that promotes the principle of harmony and
dedicates a portion of the company's clothing proceeds towards ongoing humanitarian efforts.
ReHabiliments' sales team will be tasked with generating sales leads on a local, regional, and
national basis. They will also be responsible for establishing connections with other wholesaler
and retail outlets.
A key factor in the success of ReHabiliments will be its distribution. The company plans to use
the following retail distribution channels:
Consumers buy apparel from a variety of retail outlets. In 1998, discount, off-price, and
factory outlet stores accounted for 30% of apparel sales, specialty stores accounted for roughly
22%, department stores for 18%, and major chains for 17%, according to data from NPD
Group Inc. The remaining 13% was sold through mail order and other means.
Differences exist in the distribution mix for men's, women's, and children's items. For example,
more women's apparel is purchased in specialty and department stores than is the case for
men's apparel. Men's apparel is more prevalent in discount stores and general merchandise
chains. In the children's segment, a considerably higher portion of apparel is purchased in
discount stores.
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Catalogues are another important method of distribution. Consumers have less time to shop,
and for some, catalogue shopping offers a more convenient and pleasant alternative. In 1996
(latest available) an estimated 13.3 billion direct mail catalogs were printed in the United States
- more than 50 for every man, woman, and child in the nation. According to NPD Group,
approximately 6% of apparel retail sales were through direct mail/catalogs in 1998,
representing a 29% decline from 1997.
The distribution channel that has received the most attention recently is the Internet. Although
it now represents only a small portion of apparel sales, this distribution channel has the most
potential for growth. Consumers like the convenience of being able to shop from anywhere and
at anytime they wish. Manufacturers with websites use them for marketing and informational
purposes. With expected technological advances in hardware, software, and data pipelines in
the future, shopping for apparel should gain popularity.
Currently, however, due to technological and infrastructure limitations, consumers are not fully
satisfied with the speed, quality, security, and cost of Internet shopping. Another hindrance to
wider acceptance is the fact that consumers cannot see and touch the product. Although some
manufacturers have started to sell directly to consumers on the Internet, many of them are
being cautious not to alienate their retail (brick-and-mortar) customers. ReHabiliments expects
these issues will be resolved eventually, which will make the Internet an important method of
distribution in the future.
The following table shows our projected yearly Sales revenues. Cost of Sales here represents
only inventory purchases (including shipment of inventory from abroad); totals for labor,
shipping, and overhead can be found in the Profit and Loss statement.
Sales Forecast
Year 1 Year 2 Year 3
Sales
Men's Apparel $1,094,972 $1,880,106 $1,957,191
Women's Apparel $1,719,582 $3,067,151 $3,180,636
Boy's Apparel $240,122 $446,537 $463,505
Girl's Apparel $229,944 $383,065 $386,896
Infants'/Toddlers' Apparel $306,592 $538,061 $572,497
Internet Sales $1,970,950 $3,641,013 $4,077,934
Total Sales $5,562,162 $9,955,933 $10,638,658
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3 M
2 Month
ReHabiliments
1 Month
Month
Month
Chart: Sales Monthly
Sales Monthly
$600,000
Men's Apparel
$500,000
Women's Apparel
$400,000
Boy's Apparel
Infants'/Toddlers' Apparel
$200,000
Internet Sales
$100,000
$0
Sales by Year
$11,000,000
$10,000,000
Men's Apparel
$9,000,000
$8,000,000
Women's Apparel
$2,000,000
$1,000,000
$0
Year 1 Year 2 Year 3
ReHabiliments currently has strategic alliances with both Music Records and the Entertainment
Group. These alliances are critical to the company's marketing strategy, as they provide the
exposure for the company's apparel line and associate ReHabiliments' products with celebrities.
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Celebrities are valuable strategic allies, as they receive free apparel for their participation in
interviews, concerts, and music videos.
Current and potential product line representation and advertising contracts are as follows:
Wal-Mart
Infinity Broadcasting
WMCA 570 & 970 DJ
Crystal Blue Media
BulkWorks.com
K's Corporation, Japan
Shop America Network, Inc.
In addition, ReHabiliments has a promotional collaboration with one of the hottest disc jockeys
in America, "Degas VanGO." He travels throughout the world entertaining listeners, aged 13 to
40, on New York Radio 107.5 WBLC, FM. Degas VanGO has his own radio show and is very well
known. He is well connected in the music industry, which is one of ReHabiliments' primary
target market areas, and has used his connections to forge a relationship between
ReHabiliments and Virgin Records America, Inc.
Through our affiliation with Degas VanGO, Virgin Records has allowed ReHabiliments to use
their famous logo on promotional items, such as leather jackets, hats, and T-shirts.
This affiliation sends a very powerful message to investors and customers alike.
ReHabiliments has the earning potential to become the fastest growing, most universally
accepted clothing line since FUBU. The partnership with Degas VanGO is the golden key to
countless hundreds of thousands of dollars in sales, as well as a direct promotional channel.
5.5 Milestones
The following table lists important program milestones, with projected start and finish dates,
the names of the individuals in charge of completing each milestone, and budgets for each
milestone. The milestone schedule indicates the company's emphasis on planning and
implementation of the business.
What the table doesn't show is the commitment behind each milestone. ReHabiliments'
business plan includes complete provisions for plan-versus-actual analysis, and the company
will hold monthly follow-up meetings with key management to discuss any variances and to
plan a course of action to resolve those variances.
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Table: Milestones
Milestones
Chart: Milestones
Milestones
2/29/2000
8/31/2000
2/28/2001
8/31/2001
2/28/2002
8/31/2002
2/28/2003
8/31/2003
2/29/2004
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Clearly defining the goals and plans for ReHabiliments' website are important steps toward the
company's success. Implementing a web presence as part of the company's active marketing
plan is critical to the visibility of the company in its local, regional, national, and global markets,
and allows the company to inexpensively advertise its products and promote sales to a variety
of "virtual" customers.
To provide current and potential customers, public relations, and media entities with an
efficient, secure, interactive means by which to communicate with ReHabiliments and obtain
relevant information about the Company, its mission, and its products.
To provide customers with efficient, user-friendly, automated processes that allow them to
easily browse the company's products and to place orders for products through the website,
thereby effectively reducing administrative costs associated with mailing product
information.
ReHabiliments foresees its Internet presence as a tool that will allow the company to effectively
manage its customers and their buying patterns and to track and manage corporate activities
as they relate to different market opportunities. Through the company's website,
ReHabiliments will be able to swiftly respond to sudden shifts in demand, new market trends,
and changes in customer needs and demands.
It is not enough for ReHabiliments to build a website and then expect customers to flood to the
company's new online presence. Since the Internet is growing exponentially, ReHabiliments'
direct competitors are also vying for pole positions in their respective markets and doing their
utmost to advertise and promote their sites to the Internet's global audience.
ReHabiliments' business strategy will lead the way in determining the company's online
objectives for promotion and development of the website. The Internet and the technology
behind it will provide business opportunities to create customer services and develop
promotional opportunities that would be impossible in the "physical world."
The company will rely upon a combination of offline and online methods to promote its
website. Offline methods include:
Business Cards
Printed company Materials
Local Newspapers
Presentations
Conferences/Events/Seminars
Radio/Television/Press/Cinema
Internet/Web Journals
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Usenet Groups
Reciprocal Links
E-Mail Signatures
Search Engines
Web Directories
company Specific Domain Name
Portal Sites
Banner Advertising
E-Mail Marketing
Online Competitions
Affiliate Partnerships
ReHabiliments will ensure that the company's website carries masses of useful product and
company information that is not only interesting, but informative. This will contribute to the
customer's overall experience of the website, as well as internally promote other sections of the
site through relevant links that are strategically placed on the page and allow customers to
"chase up" information. For example, if ReHabiliments provides a series of web pages that
describe the company's products in detail, at the bottom of each page will be included a
standard set of useful, follow-through hyperlinks, such as:
By investing time, effort, and money to maximize ReHabiliments' business presence on the
Internet, management can ensure that the company's website effectively promotes its products
and positively contributes towards the success of the company. Build it, market it, and they
will come.
Realizing that every business is different, with different e-commerce needs, ReHabiliments has
opted to contract out its web development services to ensure that the company's final website
meets specific e-commerce needs. Once completed, the website will include:
A secure SSL Certificate that allows the browser to create an encrypted connection to
ReHabiliments' website and the shopping system.
A merchant account that is tied to ReHabiliments' checking account and allows the company
to accept credit card payments.
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A payment gateway account that allows ReHabiliments to take credit cards using automated
processing and approval with the shopping cart.
Final development costs for the entire e-commerce website will range between $5,000 and
$8,000 for a fully enabled, e-commerce website.
Exceptional People
Social Responsibility
Uncompromising Commitment to Customer Service
Excellence
Commitment to Core Values
Mr. L. Owerd Emlynes - Chief Executive Officer (CEO). As the CEO, Mr. Emlynes will
report to the Board of Directors and/or be assisted by a Board of Advisors. He will have overall
responsibility for all aspects of the company, including operations, marketing, strategy,
financing, company culture, human resources, compliance regulations, sales, and public
relations. Mr. Emlynes’s most important role is in setting the strategy and vision for
ReHabiliments. In addition, he will be responsible for steering the organization in budgets,
partnerships, making final decisions on product/service lines, and industries. Mr. Emlynes has
over thirteen years in the music and production industry in capacities ranging from bass
guitarist musical director to choreographer and production manager. In addition, he has
extensive experience in fashion and design, working for Bonds Men’s Clothing Store for a
number of years. Although paralyzed from the chest down, L. Owerd is a motivational speaker,
a professional racecar driver, a professional musician, an amateur body builder, a teen mentor,
and an entrepreneur.
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Unfilled positions
Other management positions have not yet been filled. We are currently talent scouting, and
will begin the hiring process in April, 2004. All management positions will be filled by June 1st,
2004.
ReHabiliments lacks "seasoned" professional management (e.g., what investors call the "gray
haired factor") with experience in the retail apparel industry. The company will require a strong
finance manager to closely guard cash flow to ensure potential partners and investors that
ReHabiliments' finances are strong and support future growth. As the company matures, it will
actively pursue adding more experienced individuals to the team that meet "gray haired factor"
requirements.
Additional, senior level positions that are currently open and have yet to be filled include:
Chief Financial Officer (CFO). This position is currently open within ReHabiliments. As the
CFO, the potential candidate will be responsible for day-to-day operations, including
development of guidelines, distribution of resources authority consistent with planning,
continuous review, and evaluation of performance, as well company overview of commitments
against available financial resources and established schedules. He will direct the development
of and implement changes to financial reporting and management systems that are subject to
frequent and major modifications, as well as recommend financial policies and procedures. This
individual will provide professional consultation to management regarding financial matters and
in the application of information technology to support the operation of various accounting,
auditing, or budgeting reporting systems and requirements. In addition, he will serve as the
primary contact for investors and investor-related issues.
Vice President of Product Management (VP/PM). This position is currently open within
ReHabiliments. As the VP/PM, the potential candidate will establish current and long range
objectives, plans, and policies, subject to approval by the Board of Directors, to create a
technical vision for ReHabiliments. This individual will plan for implementation of new products
and/or product lines, dispense advice, guidance, direction, and authorization to carry out major
plans and procedures consistent with established policies. He will work with product/service
development, sales, and marketing to discern competitiveness of new products, review
operating results of ReHabiliments, and compare them with established objectives, create
technical budgets, allocate resources, and determine schedules.
Vice President of Marketing. This position is currently open within ReHabiliments. As the VP
of Marketing, this individual will be responsible for developing and implementing marketing
programs to drive sales and raise community awareness. The person in this position will
define, analyze, and implement print and media programs and monitor the results of such
programs; mentor and train operations personnel on marketing terms, rationales, and
strategies with emphasis on the operations role in effective marketing execution; and support
new product/service rollouts with strong unit communications and public relations activities.
This individual will develop and implement new unit opening programs and grand re-openings,
as well as be aware of new industry trends, economic factors, new marketing
programs/strategies, and media tools. The VP of Marketing will provide assistance with new
sites, relations, and closings, as well as develop subordinates such as Marketing
Supervisors/Assistants. This individual will be a brand and position expert and manage both
internal and external public relations. In addition, he will possess relevant marketing emphasis
and Internet experience including sponsorships, affiliate programs, search engine optimization,
e-mail, and electronic newsletters.
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ReHabiliments
Vice President of Sales. This position is currently open within ReHabiliments. As the VP of
Sales, the potential candidate will be responsible for developing the company's sales strategy,
acquiring of customers, planning sales compensation, and building the sales organization and
infrastructure to support the sales strategy. This candidate must have experience executing
the entire sales cycle, from generating prospects, to closing the sale, and must have the ability
to sell strategically to key decision makers (CFO, CTO, CIO, VP IT) as well as tactically at the
operational level.
The following table summarizes the company's personnel expenditures for the first three years.
The company believes this plan is a compromise between fairness and expedience, and meets
the commitment of the company's mission statement.
Table: Personnel
Personnel Plan
Year 1 Year 2 Year 3
President/CEO $94,090 $108,802 $115,330
Chief Financial Officer $71,500 $84,000 $90,000
VP of Product Development $38,273 $40,569 $43,003
VP of Business Development $38,150 $48,526 $51,438
VP of Supply Chain Management $39,442 $50,170 $53,181
VP of Sales and Marketing $43,787 $55,697 $59,039
Executive Assistant $28,800 $28,800 $29,664
Senior Fashion Designer $57,000 $57,000 $58,710
Design Assistant $26,400 $28,800 $29,664
Seamstress $21,120 $23,040 $23,731
Assistant Seamstress $19,360 $21,120 $21,754
Pattern Cutter 1 $17,600 $19,200 $19,776
Pattern Cutter 2 $17,600 $19,200 $19,776
Warehouse Manager $48,636 $50,750 $52,272
Heavy Truck Driver/Warehouse Assistant $17,280 $23,040 $23,731
Packer/Shipping & Receiving Clerk 1 $16,720 $18,240 $18,787
Packer/Shipping & Receiving Clerk 2 $15,200 $18,240 $18,787
Packer/Shipping & Receiving Clerk 3 $13,680 $18,240 $18,787
Packer/Shipping & Receiving Clerk 4 $13,680 $18,240 $18,787
Other $0 $0 $0
Total People 19 19 19
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ReHabiliments
ReHabiliments' Financial Plan has the potential of providing expansion of the business, paving
the way for new investments or loans, or changing the way in which the company conducts
business.
Financial projections are based upon sales volume at the levels detailed in the sales forecast
and represent, to the best of management's knowledge and belief, the company's expected
assets, liabilities, capital, revenues, and expenses. Furthermore, these projections reflect
management's judgment of the expected conditions and the company's expected course of
action, given the financial assumptions.
The following chart shows some key benchmarks for the business. We anticipate gross margin
remaining relatively steady, despite increasing sales, because of our commitment to secure raw
materials from ethically sound producers.
Chart: Benchmarks
Benchmarks
2.0
Year 1
Year 2
1.0
Year 3
0.0
Sales Operating Expenses Inventory Turnover
Gross Margin% Collection Days
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ReHabiliments
The company's break-even analysis is based on the first year of operation, from April 1, 2004
through March 31, 2005. ReHabiliments' estimated fixed costs include, but are not limited
to, the following items:
Salaries
Rent
Utilities
Insurance (Vehicle and Business)
Depreciation on Equipment
Meetings/Dues
Advertising/Business Promotion
Office Supplies
Miscellaneous Repairs
Taxes
Legal/Professional Fees
Average percent variable cost takes into consideration variable costs of inventory that will
fluctuate with the products provided to the customer.
Break-even Analysis
$80,000
$60,000
$40,000
$20,000
$0
($20,000)
($40,000)
($60,000)
($80,000)
($100,000)
$0 $40,000 $80,000 $120,000 $160,000 $200,000
$20,000 $60,000 $100,000 $140,000 $180,000 $220,000
Break-even Analysis
Assumptions:
Average Percent Variable Cost 20%
Page 48
10 M
9 Month
ReHabiliments
Month 8 Month
Month
Estimated Monthly Fixed Cost $103,619
MonthMonth
6 7
8.3 Projected Cash Flow
Month 5
The Projected Cash Flow table represents ReHabiliments' cash flow for the next four years (e.g.,
4
2004, 2005, 2006, and 2007). The related bar chart illustrates monthly cash flow in the first
Month
year, with one bar representing cash flow per month and the other representing the monthly
Month 3
balance. Annual cash flow figures are included in the Projected Cash Flow table, with monthly
cash flow projections included in the appendices.
MonthMonth
1 2
Chart: Cash
Cash
$2,100,000
$1,800,000
$1,500,000
Net Cash Flow
$1,200,000
Cash Balance
$900,000
$600,000
$300,000
$0
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ReHabiliments
ReHabiliments is in its early stages of development. Therefore, initial projections are based
upon industry statistics, demographics in the Tri-State Area, and on the most important market
segments believed to drive the income statement. As the company matures and gains
operational history, management will track planned versus actual financial figures.
The following table and associated charts illustrate ReHabiliments' projected profit and loss.
Monthly projections are included in the appendices.
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ReHabiliments
Profit Monthly
$240,000
$210,000
$180,000
$150,000
$120,000
$90,000
$60,000
$30,000
$0
($30,000)
Month 1 Month 3 Month 5 Month 7 Month 9 Month 11
Month 2 Month 4 Month 6 Month 8 Month 10 Month 12
Profit Yearly
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
Year 1 Year 2 Year 3
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ReHabiliments
$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Month 1 Month 3 Month 5 Month 7 Month 9 Month 11
Month 2 Month 4 Month 6 Month 8 Month 10 Month 12
$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
Year 1 Year 2 Year 3
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ReHabiliments
Expenses
Payroll $638,317 $731,674 $766,217
Temporary Staff $35,874 $6,240 $510,656
Depreciation $4,311 $4,311 $4,310
Office Supplies $2,537 $2,856 $2,942
Travel/Entertainment $30,000 $32,595 $34,551
Marketing/Promotion $96,000 $96,000 $100,000
Maintenance $3,000 $4,200 $4,452
Dues/Subscriptions $1,200 $1,800 $2,400
Photocopies $12,683 $14,295 $14,724
Cellular Phone $3,805 $4,291 $4,549
Telephone $5,073 $5,529 $5,861
Vehicle Expenses $12,683 $13,835 $14,250
Internet Fees $4,800 $5,088 $5,393
Rent $42,000 $43,200 $44,500
Utilities $10,400 $11,433 $11,776
Insurance $1,518 $1,564 $1,610
Payroll Taxes $0 $0 $0
Consulting Accountant $1,500 $1,500 $1,500
Consulting Attorney $1,500 $1,500 $1,500
Charitable Donations $247,240 $477,417 $531,933
Bad Debt Expense $88,995 $159,295 $170,219
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ReHabiliments
All assumptions made about the company's market are supported by industry standards,
relevant market research, market trends, surveys, and personal interviews.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 4.00% 4.00% 4.00%
Long-term Interest Rate 3.50% 3.50% 3.50%
Tax Rate 0.00% 0.00% 0.00%
Other 0 0 0
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ReHabiliments
The Projected Balance Sheet shows healthy growth of ReHabiliments' net worth and strong
financial position. Monthly projections are included in the appendices.
Current Assets
Cash $2,119,915 $5,994,817 $11,651,275
Accounts Receivable $600,068 $988,373 $1,056,150
Inventory $135,821 $225,493 $208,417
Other Current Assets $24,950 $24,950 $24,950
Total Current Assets $2,880,753 $7,233,632 $12,940,792
Long-term Assets
Long-term Assets $34,485 $34,485 $34,485
Accumulated Depreciation $4,311 $8,621 $12,931
Total Long-term Assets $30,174 $25,864 $21,554
Total Assets $2,910,927 $7,259,496 $12,962,345
Current Liabilities
Accounts Payable $319,926 $502,938 $316,681
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $319,926 $502,938 $316,681
Standard business ratios for ReHabiliments are included in the following table, along with ratios
for the Women's and Children's Clothing Industry (SIC Code 5137) for comparison.
ReHabiliments differs from these industry standard ratios in a number of ways, since no
industry code exactly matches our business type.
These ratios show a plan for balanced, healthy growth. One of the more important indicators is
the increase in working capital, which is critical to the growth and financial health of the
company. Although there are significant differences between ReHabiliments' ratios and the
standard industry ratios, these differences reflect our mixed business type. We manufacture,
distribute (wholesale) and sell our products directly to consumers (retail). Our asset structure,
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ReHabiliments
in particular, reflects that of a manufacturer rather than a retailer or distributor, since we need
both inventory (raw materials) and production equipment.
Table: Ratios
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 78.99% 6.86% 3.65%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 77.50% 77.50% 77.50% 22.63%
Selling, General & Administrative Expenses 5.00% 4.97% 9.72% 13.94%
Advertising Expenses 4.83% 0.00% 0.00% 0.64%
Profit Before Interest and Taxes 55.14% 61.24% 56.51% 1.44%
Main Ratios
Current 9.00 14.38 40.86 2.10
Quick 8.58 13.93 40.21 1.06
Total Debt to Total Assets 26.70% 12.58% 5.23% 56.17%
Pre-tax Return on Net Worth 142.98% 95.84% 48.83% 3.45%
Pre-tax Return on Assets 104.80% 83.78% 46.27% 7.88%
Activity Ratios
Accounts Receivable Turnover 4.63 5.04 5.04 n.a
Collection Days 57 58 70 n.a
Inventory Turnover 10.08 11.02 9.81 n.a
Accounts Payable Turnover 8.97 10.05 12.17 n.a
Payment Days 27 30 39 n.a
Total Asset Turnover 1.91 1.37 0.82 n.a
Debt Ratios
Debt to Net Worth 0.36 0.14 0.06 n.a
Current Liab. to Liab. 0.41 0.55 0.47 n.a
Liquidity Ratios
Net Working Capital $2,560,827 $6,730,694 $12,624,111 n.a
Interest Coverage 183.62 402.91 444.98 n.a
Additional Ratios
Assets to Sales 0.52 0.73 1.22 n.a
Current Debt/Total Assets 11% 7% 2% n.a
Acid Test 6.70 11.97 36.87 n.a
Sales/Net Worth 2.61 1.57 0.87 n.a
Dividend Payout 0.00 0.01 0.01 n.a
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ReHabiliments
9.0 Conclusion
In such a climate, the best investment opportunities will be awarded to companies that have
the ingenuity and creativity to meet the customers' demands for fashion in an industry driven
by economic conditions, demographic trends, and pricing. The industry has moved from a "buy
now, wear later" consumer to a "buy now, wear now" consumer.
The company's management is confident that the ReHabiliments can achieve its aggressive
sales forecasts, generating total sales of approximately $5.5 million $9.9 million and $10.6
million in years, 2005, 2006, and 2007, respectively. In addition, ReHabiliments' management
has carefully considered its market, potential customer base, and its ability to grow its sales
average to capture 10% of the branded urban apparel industry.
ReHabiliments has the potential to become a highly regarded resource in local, regional,
national, and international markets. Due to the company's aggressive marketing strategy,
establishment of the company as a "unique" entity in its industry, careful development of its
products coupled with strategic partnerships with some of the industry's retail clothing outlets,
and the company's profitable revenue model, ReHabiliments has the potential to provide
lucrative returns to potential investors.
For ReHabiliments to achieve status as an industry leader, it must secure initial capital. This
capital will be used for start-up costs, to establish a reputable storefront, and to further develop
the business, business infrastructure, internal systems, product development, and extensive
marketing and geographic positioning. Providing that the company is able to acquire its
funding requirements, ReHabiliments should be able to achieve operational success for many
years to come.
Page 57
Appendix
Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Men's Apparel 0% $0 $0 $100,000 $102,000 $104,040 $106,121 $108,243 $110,408 $112,616 $114,869 $117,166 $119,509
Women's Apparel 0% $0 $0 $150,000 $154,500 $159,135 $163,909 $168,826 $173,891 $179,108 $184,481 $190,016 $195,716
Boy's Apparel 0% $0 $0 $20,000 $20,800 $21,632 $22,497 $23,397 $24,333 $25,306 $26,319 $27,371 $28,466
Girl's Apparel 0% $0 $0 $21,000 $21,420 $21,848 $22,285 $22,731 $23,186 $23,649 $24,122 $24,605 $25,097
Infants'/Toddlers' Apparel 0% $0 $0 $28,000 $28,560 $29,131 $29,714 $30,308 $30,914 $31,533 $32,163 $32,806 $33,463
Internet Sales 0% $0 $0 $180,000 $183,600 $187,272 $191,017 $194,838 $198,735 $202,709 $206,763 $210,899 $215,117
Total Sales $0 $0 $499,000 $510,880 $523,059 $535,544 $548,344 $561,467 $574,922 $588,717 $602,863 $617,368
Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
All Product Lines $0 $0 $99,800 $102,176 $104,612 $107,109 $109,669 $112,293 $114,984 $117,743 $120,573 $123,474
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $0 $0 $99,800 $102,176 $104,612 $107,109 $109,669 $112,293 $114,984 $117,743 $120,573 $123,474
Page 1
Appendix
Table: Personnel
Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
President/CEO 0% $0 $8,554 $8,554 $8,554 $8,554 $8,554 $8,554 $8,554 $8,554 $8,554 $8,554 $8,554
Chief Financial Officer 0% $0 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500
VP of Product Development 0% $3,189 $3,189 $3,189 $3,189 $3,189 $3,189 $3,189 $3,189 $3,189 $3,189 $3,189 $3,189
VP of Business Development 0% $0 $0 $3,815 $3,815 $3,815 $3,815 $3,815 $3,815 $3,815 $3,815 $3,815 $3,815
VP of Supply Chain Management 0% $0 $0 $3,944 $3,944 $3,944 $3,944 $3,944 $3,944 $3,944 $3,944 $3,944 $3,944
VP of Sales and Marketing 0% $0 $0 $4,379 $4,379 $4,379 $4,379 $4,379 $4,379 $4,379 $4,379 $4,379 $4,379
Executive Assistant 0% $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400
Senior Fashion Designer 0% $4,750 $4,750 $4,750 $4,750 $4,750 $4,750 $4,750 $4,750 $4,750 $4,750 $4,750 $4,750
Design Assistant 0% $0 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400
Seamstress 0% $0 $1,920 $1,920 $1,920 $1,920 $1,920 $1,920 $1,920 $1,920 $1,920 $1,920 $1,920
Assistant Seamstress 0% $0 $1,760 $1,760 $1,760 $1,760 $1,760 $1,760 $1,760 $1,760 $1,760 $1,760 $1,760
Pattern Cutter 1 0% $0 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600
Pattern Cutter 2 0% $0 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600
Warehouse Manager 0% $2,115 $4,229 $4,229 $4,229 $4,229 $4,229 $4,229 $4,229 $4,229 $4,229 $4,229 $4,229
Heavy Truck Driver/Warehouse Assistant 0% $0 $0 $0 $1,920 $1,920 $1,920 $1,920 $1,920 $1,920 $1,920 $1,920 $1,920
Packer/Shipping & Receiving Clerk 1 0% $0 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520
Packer/Shipping & Receiving Clerk 2 0% $0 $0 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520
Packer/Shipping & Receiving Clerk 3 0% $0 $0 $0 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520
Packer/Shipping & Receiving Clerk 4 0% $0 $0 $0 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520 $1,520
Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total People 4 12 16 19 19 19 19 19 19 19 19 19
Total Payroll $12,454 $40,422 $54,080 $59,040 $59,040 $59,040 $59,040 $59,040 $59,040 $59,040 $59,040 $59,040
Page 2
Appendix
General Assumptions
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Long-term Interest Rate 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0
Page 3
Appendix
Gross Margin $0 $0 $386,725 $395,932 $405,370 $415,046 $424,966 $435,137 $445,564 $456,256 $467,219 $478,460
Gross Margin % 0.00% 0.00% 77.50% 77.50% 77.50% 77.50% 77.50% 77.50% 77.50% 77.50% 77.50% 77.50%
Expenses
Payroll $12,454 $40,422 $54,080 $59,040 $59,040 $59,040 $59,040 $59,040 $59,040 $59,040 $59,040 $59,040
Temporary Staff $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,120 $3,120 $29,634
Depreciation $359 $359 $359 $359 $359 $359 $359 $359 $359 $359 $359 $359
Office Supplies $200 $202 $204 $206 $208 $210 $212 $214 $217 $219 $221 $223
Travel/Entertainment $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Marketing/Promotion $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000
Maintenance $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250
Dues/Subscriptions $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100
Photocopies $1,000 $1,010 $1,020 $1,030 $1,041 $1,051 $1,062 $1,072 $1,083 $1,094 $1,105 $1,116
Cellular Phone $300 $303 $306 $309 $312 $315 $318 $322 $325 $328 $331 $335
Telephone $400 $404 $408 $412 $416 $420 $425 $429 $433 $437 $442 $446
Vehicle Expenses $1,000 $1,010 $1,020 $1,030 $1,041 $1,051 $1,062 $1,072 $1,083 $1,094 $1,105 $1,116
Internet Fees $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400
Rent $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500
Utilities $600 $600 $800 $800 $800 $800 $800 $800 $1,100 $1,100 $1,100 $1,100
Insurance $127 $127 $127 $127 $127 $127 $127 $127 $127 $127 $127 $127
Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Consulting Accountant $1,500 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Consulting Attorney 15% $1,500 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Charitable Donations 15% $0 $0 $0 $24,950 $25,544 $26,153 $26,777 $27,417 $28,073 $28,746 $29,436 $30,143
Bad Debt Expense $0 $0 $7,984 $8,174 $8,369 $8,569 $8,773 $8,983 $9,199 $9,419 $9,646 $9,878
Total Operating Expenses $34,190 $59,187 $81,058 $111,188 $112,006 $112,845 $113,705 $114,586 $115,788 $119,833 $120,781 $148,266
Profit Before Interest and ($34,190) ($59,187) $305,667 $284,744 $293,364 $302,201 $311,262 $320,551 $329,776 $336,423 $346,438 $330,194
Taxes
EBITDA ($33,831) ($58,828) $306,026 $285,104 $293,723 $302,560 $311,621 $320,910 $330,135 $336,782 $346,797 $330,553
Interest Expense $1,448 $1,438 $1,428 $1,418 $1,408 $1,398 $1,387 $1,377 $1,366 $1,356 $1,345 $1,334
Taxes Incurred ($10,692) ($18,188) $91,272 $84,998 $87,587 $90,241 $92,962 $95,752 $98,523 $100,520 $103,528 $98,658
Net Profit ($24,947) ($42,438) $212,967 $198,328 $204,369 $210,562 $216,912 $223,422 $229,887 $234,547 $241,565 $230,202
Net Profit/Sales 0.00% 0.00% 42.68% 38.82% 39.07% 39.32% 39.56% 39.79% 39.99% 39.84% 40.07% 37.29%
Page 4
Appendix
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Net Cash Flow ($16,255) ($55,629) $180,656 ($88,948) $192,708 $198,659 $204,761 $211,017 $217,424 $223,725 $228,358 $234,656
Page 5
Appendix
Cash Balance $372,528 $316,899 $497,555 $408,606 $601,315 $799,974 $1,004,735 $1,215,751 $1,433,175 $1,656,901 $1,885,259 $2,119,915
Current Assets
Cash $388,783 $372,528 $316,899 $497,555 $408,606 $601,315 $799,974 $1,004,735 $1,215,751 $1,433,175 $1,656,901 $1,885,259 $2,119,915
Accounts Receivable $0 $0 $0 $249,500 $496,623 $508,455 $520,584 $533,018 $545,766 $558,836 $572,237 $585,978 $600,068
Inventory $50,000 $50,000 $50,000 $109,780 $112,394 $115,073 $117,820 $120,636 $123,523 $126,483 $129,518 $132,630 $135,821
Other Current Assets $24,950 $24,950 $24,950 $24,950 $24,950 $24,950 $24,950 $24,950 $24,950 $24,950 $24,950 $24,950 $24,950
Total Current Assets $463,733 $447,478 $391,849 $881,785 $1,042,573 $1,249,792 $1,463,327 $1,683,339 $1,909,990 $2,143,445 $2,383,606 $2,628,817 $2,880,753
Long-term Assets
Long-term Assets $34,485 $34,485 $34,485 $34,485 $34,485 $34,485 $34,485 $34,485 $34,485 $34,485 $34,485 $34,485 $34,485
Accumulated Depreciation $0 $359 $718 $1,078 $1,437 $1,796 $2,155 $2,515 $2,874 $3,233 $3,592 $3,951 $4,311
Total Long-term Assets $34,485 $34,126 $33,767 $33,407 $33,048 $32,689 $32,330 $31,970 $31,611 $31,252 $30,893 $30,534 $30,174
Total Assets $498,218 $481,604 $425,616 $915,192 $1,075,622 $1,282,481 $1,495,657 $1,715,309 $1,941,602 $2,174,697 $2,414,499 $2,659,350 $2,910,927
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $0 $11,729 $1,601 $281,661 $247,241 $253,237 $259,385 $265,687 $272,148 $278,976 $287,879 $294,844 $319,926
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $0 $11,729 $1,601 $281,661 $247,241 $253,237 $259,385 $265,687 $272,148 $278,976 $287,879 $294,844 $319,926
Long-term Liabilities $500,000 $496,604 $493,181 $489,730 $486,252 $482,746 $479,212 $475,650 $472,059 $468,439 $464,791 $461,113 $457,406
Total Liabilities $500,000 $508,333 $494,782 $771,392 $733,493 $735,983 $738,597 $741,337 $744,207 $747,415 $752,670 $755,957 $777,332
Paid-in Capital $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000 $23,000
Retained Earnings ($24,782) ($24,782) ($24,782) ($24,782) ($24,782) ($24,782) ($24,782) ($24,782) ($24,782) ($24,782) ($24,782) ($24,782) ($24,782)
Earnings $0 ($24,947) ($67,385) $145,582 $343,911 $548,280 $758,842 $975,754 $1,199,176 $1,429,063 $1,663,610 $1,905,175 $2,135,377
Total Capital ($1,782) ($26,729) ($69,166) $143,801 $342,129 $546,498 $757,060 $973,972 $1,197,394 $1,427,281 $1,661,828 $1,903,394 $2,133,596
Total Liabilities and Capital $498,218 $481,604 $425,616 $915,192 $1,075,622 $1,282,481 $1,495,657 $1,715,309 $1,941,602 $2,174,697 $2,414,499 $2,659,350 $2,910,927
Net Worth ($1,782) ($26,729) ($69,166) $143,801 $342,129 $546,498 $757,060 $973,972 $1,197,394 $1,427,281 $1,661,828 $1,903,394 $2,133,596
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