Hamilton Beach 2007 Annual Report Download - page 35

consolidated warehousing. The LGC logistics project has top
priority at KC, and benefits are expected to be realized in the
second half of 2008, with full benefits to be realized in 2009.
Key Programs to Ensure Unique, Affordable Products
Another KC strategy is to provide customers with a
continuous stream of innovative, high-quality products offered
at affordable prices. The company’s strong competency in
providing both analytical rigor and creativity to the product
selection process supports this strategy – for both KC stores
and LGC stores – through the following programs:
Innovative products and merchandising. This
growth program is designed to ensure
the latest products with the highest
sales potential are found on the
shelves of KC stores and LGC stores,
and the products are displayed in ways
that attract consumer attention. The
company continually tests and
implements new approaches to
increase traffic in its stores, to increase
the percentage of individuals who
make purchases after they enter a
store, to encourage customers to
purchase higher-margin items and to
increase the average purchase amount of those who buy items
in the stores. In fact, although total transactions at KC stores
were down in 2007, the average dollar value per transaction
was up for the year. At KC stores, special brand programs, “as-
seen-on-TV” items and special value close-outs are all part of
this program to increase revenue on an ongoing basis. At the
LGC stores, product demonstrations and sampling of gourmet
food items are particularly effective in driving consumer
interest and increasing sales. In 2008, the company will be
implementing new merchandise selections displayed more
consistently across LGC stores. In addition, the LGC stores have
in place a well-developed customer loyalty program, called
Le Club, which is expected to contribute positively to
performance at those stores.
Hamilton Beach® brand leverage. KC continues to
leverage its lines of sourced private label merchandise featuring
the Hamilton Beach® and Proctor Silex® brand names, which
are among KC’s most successful and profitable product lines.
These private label non-electric product lines, offered at KC
stores, feature nearly 500 items, including cutlery, cutting boards,
barbecue tools, bakeware and cookware. In addition, a new
upscale line of kitchen gadgets featuring the Hamilton Beach®
name is planned for 2008.
Economic Value Income. KC utilizes disciplined operating
controls to improve margins. The company continues to
use its proprietary Economic Value Income (“EVI”) business
tool to maximize return per cubic foot of retail space. When
combined with other revenue and margin enhancement
programs, EVI assists in optimizing profit from the mix of
products, the amount of space allocated to each product
and the most appropriate store size. As the LGC stores
become more integrated into the company’s operations,
EVI analysis will be utilized in those stores as well.
Key Programs for Store
Improvement and Expansion
KC’s primary strategy for
growth focuses on strengthening its
leadership position in outlet malls
with exciting store environments,
while working to reach customers
through other channels. KC has
developed a particular strength in
analyzing store data and creating
specialized programs for different
types of channels. KC has four
programs aimed at making this strategy successful.
Outlet mall format initiatives. With nearly 250 outlet
mall locations, KC stores and LGC stores can be found in a
variety of outlet mall types. The company utilizes mall profiling
information and segmentation analysis to assess new outlet
mall locations as well as improve profitability at existing outlet
malls. As a result, the company manages its outlet stores
differently depending on whether an outlet mall has high-end
retail tenants, is located near a tourist destination or is located
in an urban or rural area. With the LGC stores, the company
now has a solid complementary retail platform on which to
expand. KC believes there is significant potential for additional
LGC stores, particularly in outlet malls where there is a high-
volume KC store present and in higher-end outlet malls. In
2007, KC closed nine underperforming LGC stores and opened
six new LGC stores, five in outlet malls, four of which also have
KC stores, and one in a new traditional mall. However, KC will
be extremely cautious in opening new KC stores or LGC stores
in 2008 due to uncertainties related to consumer spending.
Traditional mall format initiatives. For some time, the
company has stated its belief that the development and
Gourmet foods and
product demonstrations
engage customers, drive
repeat visits and position
LGC as an exciting, reliable
resource for entertaining.
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