Insights into Patagonia's Financial Performance and Industry Standing
Patagonia's internal financial analysis reveals significant investments in eco-friendly initiatives, product line profitability, and sales channel performance. The company's focus on sustainability and affluent customer base has led to impressive revenue and profit growth, outperforming industry averages. Despite low sales per employee and a conservative debt-to-equity ratio, there are opportunities for strategic growth through product rationalization and improved inventory management.
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Presentation Transcript
INTERNAL ANALYSIS FINANCES
Cost/ Expenses $3.8 million for eco-friendly commitment in 2009 $100k annually on field testing $350k to repair 12k garments/yr ($29 per garment) Less than 1% revenues on marketing 1% revenues on environmental causes $200k in kind donations to eco-causes
VAST MAJORITY OF REVENUES COMES FROM 3 MAJOR PRODUCT LINES Contribution Margin per product line $100,000 $82,134 $80,000 $52,426 $60,000 $40,000 $20,970 $10,485 $8,738 $20,000 $- POTENTIAL TO RATIONALIZE PRODUCTS IN ORDER TO ENHANCE INVENTORY MANAGEMENT
DIRECT SALES HAVE HIGHEST MARGINS, BUT GENERATE THE HIGHEST % RETURNS 80% 68% 65% 60% 45% 40% 12.9% 20% 2.6% 2.6% 0% Gross margins Return % OPPORTUNITY TO IMPROVE DIRECT SALES CHANNEL OR FOCUS ON RETAIL
PATAGONIA HAS BEEN PERFORMING EXTREMELY WELL COMPARED TO THE INDUSTRY YoY % Revenue Growth 10.0% 8.0% 7.0% 6.0% 5.0% 4.0% 5.0% 0.0% 2005 2006 2007 2008 2009 CND Industry -5.0% Patagonia -10.0% -9.6% -9.7% -11.9% -15.0% -14.2% -15.2% -20.0% FOCUS ON SUSTAINABILITY AND WEALTHY CUSTOMERS HAS PAID OFF
PATAGONIA HAS BEEN PERFORMING EXTREMELY WELL COMPARED TO THE INDUSTRY YoY % Growth in profits 30.0% 23.1% 20.0% 10.3% 8.9% 10.0% 5.2% 4.1% 2.7% 0.0% 2005 2006 2007 2008 2009 -10.0% CND Industry Patagonia -3.7% -20.0% -10.1% -1.5% -30.0% -40.0% -50.0% -51.2% -60.0% PATAGONIA WAS ABLE TO PROTECT PROFITS EVEN DURING RECESSIONARY TIMES
MAINTAINING GROWTH AND EMPLOYEE SATISFACTION COMES AT A COST 1800 1602 1600 1400 1200 Sales ('000$)/ Employ ee 1000 800 400 559 600 513 400 238 226 200 0 PATAGONIA HAS SOME OF THE LOWEST SALES PER EMPLOYEES IN ITS INDUSTRY
PATAGONIA MAINTAINS 4X BELOW AVERAGE D/E RATIO 31.0% 35.0% 30.0% 25.0% 20.0% 15.0% 9.0% 10.0% 2.5% 2.0% D/E Ratio Average 5.0% 0.0% INCREASING DEBT TO AVERAGE COULD YIELD 14M$ IN CAPITAL TO FUEL GROWTH
INTRODUCTION OF RECYCLING PROGRAM DID HAVE A POSITIVE IMPACT ON SALES YoY % Sales Growth 10% 8% 7% 8% 7% 6% 5% 6% 4% 4% 2% 0% -1% 2003 2004 2005 2006 2007 2008 2009 -2% PROGRAM ENHANCEMENT HAS THE POTENTIAL TO FUEL TOP LINE GROWTH
HISTORY SHOWED THAT NEW INITIATIVE CAN HURT PROFITABILITY 12% 46% Ope ratin g Mar gins as% Sale s 10% 44% 8% 42% 6% 40% 4% 38% 2% 36% 0% 34% NEED TO FOCUS ON KEEPING COSTS UNDER CONTROL
