Hamilton Beach 2008 Annual Report Download - page 12

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The Kitchen Collection® store in Lancaster,Ohio,features higher-margin, brand-name kitchen gadgets, small electric appliances and a variety of other kitchen-
and housewares-related products.
Kitchen Collection
2008 Results
During 2008, the two retail formats operated by Kitchen
Collection experienced weak sales at both outlet malls and
traditional enclosed malls as consumers’ discretionary
spending contracted. Given the effect of the economic
downturn, the Kitchen Collection® stores, which sell more
basic kitchen items, performed satisfactorily in 2008 with a
small increase in sales and positive operating results. The
Le Gourmet Chef® stores, which sell higher-end, more
discretionary items for entertaining, had extremely poor
results primarily as a result of significant markdowns on
discontinued products related to a change in store format,
which included a substantial updating of the product offering,
coupled with the very difficult consumer environment. For
both the Kitchen Collection® and Le Gourmet Chef® store
formats, fourth-quarter holiday sales were disappointing.
A slight surge during the last two weeks of December was not
enough to overcome earlier shortfalls. Importantly, however,
a new, revitalized store format for the Le Gourmet Chef®
stores was implemented in 2008 and is now in place. Also in
2008, a new distribution center for Le Gourmet Chef came
on line, which added efficiency to its supply chain system.
Market Outlook for 2009
Uncertainty in the U.S. economy and in financial markets
and a reduction in consumer confidence are expected to
continue to affect consumer traffic to outlet and traditional
malls and negatively affect retail spending decisions in
2009, all of which make forecasts of revenue very uncertain.
Nevertheless, Kitchen Collection expects a modest increase in
revenues in 2009 compared with 2008 because of an anticipated
improved holiday selling season in late 2009 and expected
improved sales volumes and margins at the Le Gourmet Chef®
stores as a result of the completion of new product enhance-
ment and store merchandising programs. These programs,
coupled with the completion of the large product clearance
program in the Le Gourmet Chef® stores which significantly
reduced margins in 2008, are expected to improve results at
the Le Gourmet Chef operations in 2009.
Actions Being Taken to Move Forward in 2009
Kitchen Collection is committed to improving financial
results despite this difficult retail environment. Kitchen
Collection has taken specific actions to control costs, including
capital expenditure restraints, wage freezes, benefit reductions,
suspension of incentive compensation and spending and
travel restrictions, which are expected to affect results favorably
in 2009. Importantly, the implementation of the new
Le Gourmet Chef® store format and the related sale of
discontinued products, which reduced profits significantly,
were completed in 2008. Accordingly, those implementation
expenses will not recur in 2009 and the full effect of the
improved format and products on sales is expected to occur
increasingly over 2009.
Kitchen Collection will continue to focus on improving
product mix, merchandising promotions and pricing in order
to sustain the Kitchen Collection® store format and refine