Hamilton Beach 2010 Annual Report Download - page 16

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store format. Despite fewer customer visits and
reduced number of sales transactions at both store
formats due to weakness in mass-consumer markets,
Kitchen Collection was able to increase revenues
from $213.9 million in 2009 to $219.6 million in 2010
and deliver improved gross margins primarily from
new store sales and an increase in the average sales
transaction value at comparable stores for both store
formats. However, net income and cash flow before
financing activities declined slightly. Net income
decreased to $3.5 million in 2010 from $3.9 million in
2009 largely due to higher employee-related costs,
while cash flow before financing activities was $3.6
million in 2010 compared with $4.3 million in 2009.
The Kitchen Collection®stores, which sell a wide
variety of basic kitchen items, had very strong results
in 2010, benefitting from newly opened stores, an
increase in the number of seasonal stores, a refreshed
store format with improved product assortments, and
enhanced merchandising, all of which resulted in
improved margins. However, higher employee-related
costs and unfavorable comparable store results
reduced Kitchen Collection®store income compared
with the prior year. The Le Gourmet Chef®stores,
which sell higher-end goods focusing on cooking and
entertaining themes, achieved a strong turnaround as
an increase in sales at comparable stores, lower rent
and the closing of unprofitable stores improved results
to break-even levels. A new, revitalized store format
and an enhanced website for the Le Gourmet Chef®
stores, both focused more on food, tabletop and
on-trend merchandise and both fully implemented
late in 2009, helped drive an increase in sales volumes
and improved margins for the Le Gourmet Chef®stores.
Outlook for 2011
Kitchen Collection expects the economic recovery
to continue in 2011, although consumer spending
levels are likely to reflect financial concerns and high
unemployment rates in Kitchen Collection’s target
consumer base. In addition, increasing fuel costs
could continue to affect the number of customer
visits in 2011. Nevertheless, due to the opening of
new Kitchen Collection®stores, enhanced product
offerings and the continued strength of the Kitchen
Collection®and Le Gourmet Chef®store formats,
Kitchen Collection expects a modest increase in
revenue in 2011 compared with 2010.
Favorable sales and margin trends that occurred
in both store formats during 2010 are expected to
continue into 2011. In addition, the company plans
to continue to refine its promotional offers and
merchandise mix in the Le Gourmet Chef®stores.
Because of Kitchen Collection’s prior actions to improve
product selection, the company does not anticipate
significant markdowns in 2011. These factors are
expected to further enhance sales and margins.
A layout of products
available at Kitchen
Collection’s Le Gourmet
Chef® stores. Le Gourmet
Chef® stores feature
higher-margin, brand-
name kitchenware and
gourmet foods.