Kick Shoe Company Annual Shareholder Essay - Year 13.

Executive Summary

Annual Shareholder Report (Kick Shoe Company)

It has been a long business year, many activities, strategies, plan executions, and most of all, the fact that we have reached at this point in business. Over the years, we have measured our progress, learnt from our past, and made plans on how to forge the future as a company and have established strategies that have made us hold onto business for this while. Some fail, some are successful and others extremely successful. This is so, because of the structure of our company, cooperation from all stakeholders and the belief in quality and positively contributing to the society. Part of our building pillars as a company is responsibility towards stakeholders. This way we manage to be steadfast to our task and be able to meet our goals. Our stakeholders include:

1. Government
2. Shareholders.

• Consumers

1. Workforce
2. Business community.

According to BDC business article, in order to determine whether your business is a success or not, you need to measure the value of your strategies over the cycle period of your business, BDC (2018). This has been true for Kick Shoes Company. Each year we generate a report for our business status, activities, and a plan for the succeeding year. As part of our responsibility to our investors who need to know whether their money is meeting its value and the progress of the business they are financing and whether they are benefiting for their financial input.

In year 12, Kick Shoes Company outlined plans it intended to see come into fruition in year 13, this among others included:

1. Increase in the return on equity
2. Increasing its market share

• Lowering the cost of production

1. Improving its product quality
2. Raising the revenue rates through increase of sales
3. Increasing worker knowledge and Skills

• Increasing its product output
• Promoting its image

1. Raising product awareness through, among other means: advertising and sales support for retailers

As it is with all plans, not everything planned happens, but the percentage of achieving the ones stated is what defines success and failure. Kick Shoes achieved a number of the year 12 plans however it failed in some.

In this report, we will outline the key indicators of business performance, analyze the result, draw inferences, and reach into conclusions. We will then determine the year 14 plans. Moreover, strategize on how to achieve them.

We will include graphs to show relationship over the business years and show the change: whether positive or negative. From the data that gathered over the year, we will outline our strengths, weaknesses and seek to use our strengths and heal our weaknesses.

MARKET SHARE

Company Market distribution

Kick Shoe company ventures the sale of its footwear products in three distinctive markets:

1. Internet market
2. Wholesale market

• Retail market (private-label)

However, retail market is often under private-label market category. In year 13, unlike other business years, the internet share market saw a higher market share than wholesale market by about 3%. While the internet stood at 9% of the company’s market share, wholesale had 6% market share.

Data and Interpretation

The company market share dropped by over 5% from 11% to 6%. This was majorly due to lower wholesale venture and lower image rating. This can be attributed to consumer change and more products that are competitive.

Due to a drop in market share, Kick feet company recorded a drop in its year 13 total sales from 6389 to 5893. However, the internet sales remained relatively the same at 1022 units while the whole sale units dropped, holding at 4237 units.

Table 1: Selected financial statistics

Warehouse cost	$19,073
Total marketing expenses (wholesale & internet)	$53403
Admin expenses ($)	$7,966
Operating Profits %	15.7
Net Profit %	9.5
Current Ratio	2.38
Invdays	164

The cost of operation for the company was 48,587 in year13 a decrease of 3.271% from year 12, showing a positive effect of workforce skills and specialization.

The operation profits for year 13 was 15.7%

The warehouse cost in year 13 was averagely 19,073, which is 3.63 per pair, however this differed on individual type of product, i.e.:

• Private label
• Branded

Hence, in total, the cost of warehousing was $19,073 in year 13.

The current ratio of year 13 stood at 2.38%, while the inventory days were 164. In addition, the total expenses for administration was $7,966

Table 2: Summary balance sheet for Kick Shoe Company

	Balance sheet summary ($, 000)
Cash On Hand		326299
Total Assets		292,500
Current Liabilities		50,915
Long-Term Debt		36792
Beginning Equity		177,698
Stock Sale (Purchase)		9,700
Earnings Retained		29,387
Ending Equity		207,085

The company had total assets of $292,500 while the cash on hand as per end of inventory year was $326299. The earnings that retained by the company totalled to $207,085, the return on equity for year 13 was$ 29,387 indicating a return of 15.3% for year 13.

Table 3 Company financial performance

SUMMARY OF KEY PERFORMANCE INDICATORS:
YEAR	10	11	12	13	Changes
Revenues (000’s)	239147	265185	273715	309,451	Increased
Net Profit (000’s)	25000	27445	23620	36066	Increased
Percentage profit	14.9%	19.1%	17.3%16.1%		Decreased

In year 13, fortunately, Kick Shoe Company recorded a increase in revenue from a record $273,715,000 to $ 309,451,000 this was on average a 7.24 % increase in revenue. Consequently, this saw the company profits rise from $23620to $3606

The company had a shaky image in year 13; this is due to an increase in credit rating and a decrease in image rating.

The credit rating for the company remained at a high of A-, indicating the company is able to pay its credit on the operating finances; this is good for our credit generation in case we need to come up with funding for our business operations.

Despite a good credit rating, the company recorded a drop in its image rating by almost 5 points; this is attributed to a lower advertisement strategy adopted in year 12 for year 13.

In year 13 Kick Shoe company saw a decrease on its average return on equity from 18.7% to 15.3%, this indicates that the market shares for each stock dropped in the dividend attraction.

Market Share

Due to the seemingly slump on return on equity, the company’s stock quote on the stock market went down from $51.35 to $34.48. However, the investor expectation was still up, expecting an increase stock price to get back their profits.

Terms	Year 10	Year 11	Year 12	Year 13	Changes in year 13
Earnings per Share (EPS)	$3.89	3.21	3.17	3.03	Increased
Return on Equity %(ROE)	17.3	19.7	17.7	15.3	Increased
Credit Rating	B+	A-	A-	A -	Same
Image Rating	70	76	74	66	Decreased
Stock Price	55.57	61.35	51.35	34.48	Decreased

Table 5: Company financial ratio

RATIOS/YEAR	10	11	12	13	Changes
Interest Coverage Ratio	4.74%	5.94%	5.87%	9.95%	Increased
Debt to Asset Ratio	38%	33%	29%	22%	Decreased
Default Risk Ratio	1.96 (medium)	1.94 (medium)	2.57 (high)	1.60 (medium)	Decreased
Credit Rating	B+	B	A-	A-	Same

The company had a positive financial ratio in the year 13, where the interest coverage ratio increased by 4.08% from 5.87% in year 12 to 9.95% in year 13. However, the debt to asset ratio went down a little by 7% from 29% in Y-12 to 22% in Y-13 this was due to increased borrowing and in-flexible asset expansion policy for the year 13 while the company was adopting an increased production policy per worker, hence had to put in more resources into worker-expenditure other than asset acquisition. In line of financial ratio, the company default risk ratio decreased by 0.9%, this indicates a positive improvement in tender acquisition and insurance.

One of the company strategic plans for the year 13 was to increase worker productivity through training, motivation i.e. by increase of incentives and increased supply to key markets. This was a success for the company.

Table 6: Company statistics on worker productivity and investment

Year	10	11	12	13	Changes
Workers Productivity pairs per worker (000’s)	6, 857	6,687	6,579	6,564	Increased
Number of Workers	1,847	1,876	2057	2054	Increased
Net footwear production	4,526	5,986	6,431	6,758	Increased
Annual Base Wages  (000’s per worker) Ø  North America Ø  Asia-Pacific	17.3 6.9	17.67 7.6	21.2 5.1	21.4 5.3	Increased Increased
Incentive Pay (000’s per worker) Ø  North America Ø  Asia-Pacific	1.43 0.68	1.60 0.9	1.30 0.75	1.30 0.80	Increased Increased
Best Practice Training per worker	1,576	1,723	1,765	2049	Increased

The company recorded a decrease in average per worker output (000’s) from 6,579 to 6,564 this hindered the company long-term plan of increased worker productivity slightly.

The company also cut the number of its plant workers from 2057 to 2054, consequently, this saw a production in branded footwear of 6,758 units.

In order to increase worker training and skills, the company ensured an increase in expenditure in both the worker-training program and the sigma quality program, as in.:

• Incentive pay per worker in North America was $21,400 an increase from 12’s $21,200 in year 13, While in the Pacific Asia region was $5,300 per worker an increase from $5,100 in year 12
• The company spending on TQM/6-Sigma Quality Program was $10,200,000. This was to ensure quality product output by the company production segment.

In the of incentive year 12, the company had a strategic plan to increase affordability of its shoe products, this was part of the goal of increasing the market share. Therefore, the company adopted he discount on product policy hence decreasing its pricing of its market segments:

• Internet
• Wholesale
• Private label

Table 7: price comparison year 12 and 13

Price per Pair (currency in AUD)
	North America	Europe Africa	Asia Pacific	Latin America
Internet          Year 12                         Year 13	$70.25   $72.00	$70.25   70.32	$70.25   77.58	$70.25   75.08
Wholesale    Year 12                         Year 13	$55,52   $61.00	$52.43   $50.89	$63.66   $78.66	$51.33   $57.35
Net Revenues                          Year 13 Wholesale internet	71,248         10,296	99,228         9,775	28,789           7,758	73,815         8,034

• The company internet price over all its regions was averagely $70.25 in year 12, while that in year 13 was $73.34
• Wholesale pricing ranged between $50.89 and 78.66 across the company market share as in:

61. North America- 61.00
62. Europe Africa- 50.89

• Asia pacific- 78.66

57. Latin-America-57.35

Averagely due to decrease in sale prices, the revenues generated from internet sales was approximately $35,863 in year 13, and sale revenues from wholesale totalled $273,080

The company had a good sales record for both the internet segment and wholesale. However, the private label segment saw a slump in its sales record:

 Table 8: Sales revenue

TOTAL SALES REVENUES ($000s)	YEAR
	10	11	12	13	Changes
Internet	$32,769	$28,536	$31,425	35,863	Increased
Wholesale	$324,037	$333,932	$321,106	273,080	Increased

• The total sales over internet increased from 31,425 to 35,863
• Wholesale sales increased from$ 321,106 to $ 273,080 indicating a 17.58% increment

In a bid to increase customer product awareness, promote sales and ensure customer loyalty. The company adopted an advertising approach towards sales and a customer aftersales support approach such as sales rebate, to increase customer loyalty.

 Table 9: Advertising and aftersales support

Description/ year	10	11	12	13	Results
Total advertising expenses- internet and wholesale ($000s)	17,500	16,900	21,760	26,000	Increased
Retailer support ($000s)	4,900	4,900	4,720	5,365	Increased
Rebate redemption	4,700	4,885	4,200	3,450	Decreased
Inventory clearance (revenue after clearance $000)	387	479	463	508	Increased

Inventory ending pairs

1674

1539

1587

1,898

increased

• Generally, the advertising expenses increased, this was in bid to increase product awareness in the company market regions and increase sales as a result.
• The ending inventory revenue after clearance increased from$ 463,000 to $508,000
• Ending inventory pairs was 1898 in year 13.

As it is with our aims, in year 13, we managed to keep track and be steadfast on our year 12 plans and goals for coming year 13. Through following through our strategies, we recorded a number of successes:

1. We managed to increase per worker output
2. We increased our cash in hand at the end of the fiscal year 13

• The product rejection rate dropped, this is due to increase in product quality and aftersales customer support

1. We put more into advertising and celebrity endorsements to help boast our sales index.
2. We managed to lower our product prices for our customers.
3. Our internet and wholesale market segments sale returns went up.

• The operating and advertising expenses recorded a decrease.
• The company return on equity saw an increase record

However, we had a few record drops:

1. Our net revenue dropped relatively in year 13 compared to year 12
2. The company image rating also dropped a little by approximately 5 points.

Generally, kick Shoe Company had a good business year. This was due to the cooperation from all our stakeholders and our steadfast positive and optimistic approach in making a positive mark in our market share and down to our fundamental unit.

Conclusively, the company can venture into wider business areas, since it is in a position to increase its capacity and finance its business operations

Despite the vicissitudes and the unpredictability of the market as an entity, we nevertheless succeeded in maintaining high integrity data and business records. In addition, we stayed on course of our previous years goals for the succeeding years. This amongst other principles has ensured our stability as a company and enabled the company predict and plan for its subsequent move. The companies guiding principles of quality products, responsibility and inclusive participation of all the stakeholders always hold, this has enabled the company and will enable it to achieve its goals.

Our future goals for coming years include:

• Regulate our internet prices and wholesale prices to match the quality of footwear we are manufacturing.
• Increase our worker skill training for our workers program to increase the worker output
• Increased advertising over internet and wholesale.
• Provide more worker incentives for motivation
• Sell company stocks for clearance with reasonable discounts
• Improve our footwear quality.
• Make our products available as per demand in different regions.
• Promote our Image and Credit rating
• Increase our return on equity for coming year 14

In order to achieve this, we will focus on increasing our market share through increased sale incentives and increase our productivity index boast our net revenue. We will improve the quality of our shoe products and engage more in green incorporation program. Further, we will focus on lowering expenses by utilizing all our plant capacity to meet our expenses- productivity ratio.

In year 14, we will focus on expanding our market to other regions such as North America, through product promotion and introduction in the new market venture. We will increase the stock share cost by $3, to enable boast our company image and increase finances.

BDC. (2017).Business Strategy and Planning. ( Online). Available from: https://www.bdc.ca/en/articles-tools/business-strategy-planning/define-strategy/pages/how-to-measure-success-strategic-plan.aspx

IFAC.(2018). Business Reporting. Online. Available from: https://www.ifac.org/global-knowledge-gateway/business-reporting?overview