Hamilton Beach 2013 Annual Report Download - page 20

but also to reduce expenses through a number of cost
reduction programs at its headquarters, distribution
center and remaining core stores and by terminating
its medical benefit plan. This program is expected to
be largely implemented in the first half of 2014 and
generate significant improvements during the second
half of 2014. In addition, Kitchen Collection is
focused on driving consumer interest back toward
higher-margin products.
Longer-Term Perspective
Kitchen Collection’s vision is to be the leading
specialty retailer of kitchen, home entertaining and
gourmet food products mainly in outlet malls and
certain traditional mall types for consumers seeking
a large selection of unique, high-quality products at
an exceptional value. However, to achieve this vision,
Kitchen Collection must attract customers back to
its stores, which is difficult in a mall environment
in which consumers shopping at these malls, and
especially at the outlet malls, are financially stressed.
High unemployment and fewer two-income families
have resulted in fewer visits to many of the malls and
outlets where Kitchen Collection has store locations.
In addition, there is intense competitive pressure for
value which has brought margins under pressure as a
result of additional discounting. In this environment,
only certain malls where Kitchen Collection maintains
stores are doing well. In the strong malls in which
Kitchen Collection has a good store position, its stores
do well, but those in struggling malls with poor store
locations are not doing well.
The company’s core strength is its Kitchen
Collection® store format in outlet malls. Kitchen
Collection is moving to establish a strong core around
this store format in selected additional malls. As a
result, it plans on closing a number of mainly less
profitable traditional mall and Le Gourmet Chef®
store locations early in 2014 and open other stores,
primarily Kitchen Collection® stores in outlet malls,
very cautiously. By the end of 2014, essentially all
stores not contributing to corporate profitability are
expected to be closed. Further, at current mall and
store traffic levels, reaching the company’s 5 percent
operating profit margin target will be challenging.
Overall, Kitchen Collection is dealing with a
difficult environment and evolving in a constructive
manner. As the company improves its business around
At Left: A free-standing display of
products at the Kitchen Collection®
store in Jeffersonville, Ohio, makes
it easier for customers to shop and
select products.
Below: New display layouts and
signage at Kitchen Collection’s
Le Gourmet Chef®store in Aurora,
Ohio. Le Gourmet Chef®stores
feature brand-name kitchenware
and gourmet foods.