Ctrl Consulting Sonae SR’s International Expansion€¦ · Ctrl Consulting Sonae SR’s International Expansion Presenting to Francisco Pimentel, ... Inditex, Mango, ... Final agreement

Ctrl Consulting

Sonae SR’s International Expansion

Presenting to Francisco Pimentel, Executive Director for International Development with Sonae SR

Montreal, January 3, 2016

Ctrl Consulting Driving Question

2017-01-03 Ctrl Consulting 2

Establish a further growth strategy for international business of Sonae SR

Become profitable internationally

Continue of Spanish business

Product placement

Ctrl Consulting Solution Preview


Pursue international growth in China and India with Fashion and Sports business 1

Joint Venture and Franchise Deals Close unprofitable businesses in Spain Implement IT system

2

Increase international revenue by 33% in five years 3

Recommended Strategy

Implementation Actions

Targeted Outcome

Ctrl Consulting Agenda

• Analysis of Status Quo

• Strategy Development

• Implementation Actions

• Future Outlook

• Conclusion


Ctrl Consulting Aim of Sonae SR


By 2017

• Overall international profitability • Break even in Spain

Ctrl Consulting Sonae SR is Seeking Rapidly Growth in the Future


Brands and Labels

• Sport Zone 18% of rev. • Zippy • MO • Worten 68% of rev.

• Own labels

• 28% of turnover • Other labels

• Nike, Adidas, Samsung etc.

Sonae SR making up around 24% of total Sonae’s turnover

Stores

• Square metres: • 385,000

• 590 locations • 417 locations in Portugal • 53 in other countries

Markets

• Portugal • Spain • Turkey • Franchising: 22 countries • Wholesale: 42 countries

14% of rev.

Ctrl Consulting Sonae SR’s Way to the Current Situation


Resources

• Big holding in the back

• Core competencies: • Logistics • Purchasing • Inventing

business models

Strategies

• “The strategic alignment is capital-light”

• International expansion

Actions

• Franchising, wholesale, joit-ventures

• Strong franchise business model

• Cooperation with Fawaz Alhokair Group in MENA

Outcome

• Negative EBIDTA in international sales

• Mostly depends on spain

• Positive EBIDTA in Portugal

Issues • IT System • More partnerships • Fine-tuning of franchises • Improve and strengthen competencies

Ctrl Consulting Fashion Market in Developed Countries is Highly Competitive


Customer needs

• High quality • Fashionable • Low prices

Nothing in between

Competitors

• High quality • Boss, GAP

• Fashionable and low prices

• Inditex, Mango, H&M, Fast Retailing

Competitors in every segments

Sonae’s offers

• Focus on quality • Low prices No differentiation

Seek growth in emerging countries

Markets

• Spain • Good as test

market for fashion

• Loss market • Portugal

• Saturated

Ctrl Consulting Electronic Retail Market in Developed Countries is Highly Competitive


Customer needs

• Service • All in one • Low prices

Nothing in between

Competitors

• Media-Saturn • Best Buy • Radio Shack

Strong competitors

Sonae’s offers

• Electronics and home appliances

• Only 10% own products

No differentiation

Seek growth in emerging countries

Markets

• Spain • Loss market

• Portugal • Saturated

Ctrl Consulting Entering New Markets Needs a lot of Knowledge


Knowledge

• Pricing • Needs • Trends • Behaviour • Local

Markets

• South America • Africa • Asia • Eastern Europe • North America

Possible ways

• Mergers • Aqusitions • Joint Ventures • Franchise

Ctrl Consulting Sonae SR is in a Comfortable Financial Position


For further investments, use the borrowing capacity

Decreased the debt acquired during the financial crisis in previous years

Ctrl Consulting Sonae SR is the Second Profitable Business Unit of Sonae SGPS

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Turnover (in m Euro) and EBITDA Margin (in %)

Turnover EBITDA


Due to international expansion, Sonae SR will grow drastically in coming years

Ctrl Consulting More than 70% of your Revenues are made in Portugal

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Turnover Sonae SR (in M Euro)


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Portugal International

International business needs to be improved by growth in emerging markets

Ctrl Consulting Wrap up

Strong financial position

Growth in developing countries

hardly feasible

Spain remains a complicated

market

New markets needs

fundamental knowledge


Ctrl Consulting Develop new markets with Sonae SR businesses


Electronics Fashion Sports

Ctrl Consulting Electronics business


Advantages

• Highest part of Sonae SR revenue

Disadvantages

• Investment-intensive • Fierce competition • Problems to sell products via Amazon • Lack of ability to franchise

Worten

Ctrl Consulting Fashion business


Advantages

• Focus in brand and quality aspects • Fastest growing children brand in

Europe • Substantial media attention • Affordable products

Disadvantages

• No profitable expansion in Turkey • Closed franchised stores in Chile and

USA

MO & Zippy

Ctrl Consulting Sports business


Advantages

• Winning industry awards for quality and performance

• Gaining international sponsorship deals • Profitable in Spain • Vary offerings and store concepts bz

region

Disadvantages

• Not a wide range of sports clothes • Selling 50% of other brands

Sports Zone

Ctrl Consulting Critical Success Factors


Criteria Electronics Fashion Sports

Growing brand awareness

Quality of products

Competition

Associated Costs

Ctrl Consulting Critical Success Factors


Criteria Electronics Fashion Sports

Growing brand awareness

Quality of products

Competition

Associated Costs

Ctrl Consulting Markets Sonae SR can expand to


Criteria Germany USA India China

Price Index

Birth rate

Market growth

Growing middle-class




Price Index

Birth rate

Market growth





Price Index

Birth rate

Market growth


Ctrl Consulting Conclusion





Product placement

Pursue international growth in China and India with Fashion and Sports business

Ctrl Consulting Possible Market Entrance Strategies to develop in to new markets


China

Joint Venture for fashion and sports products

India

Franchise for fashion and sports

Joint Venture

Franchise

Organic

M&A

Possible Market Entrance Strategies Potential Markets Reason for Decision

Joint Venture

• no established distribution network

• Strong partnership needed for entrance

Franchise

• One Sports shop available already

• Customer are aware of the new brand

Market Entrance in correspondence with your strategic goal of capital-light investments

Ctrl Consulting Close unprofitable businesses in Spain to increase your profitability


# of stores Sports Zone

Worten MO Zippy

Stores in Spain 35 44 6 35

Thereof profitable 35 6 0 0

Stores you sell 0 35 6 35

Key Facts

• Sell most of your stores in Spain to increase profitability

• Keep shareholders satisfied

• Reaching the goals you have set for your business

Be Break-Even in Spain by 2017

Ctrl Consulting Integrate MO & Zippy in one store to build house of brands


MO products Fashion & footwear for Women Men Children

Zippy products clothes for babies Children equipment

Entrance

Provide one-stop shop for

• Pilot one store in the US market

• Buy all of your clothes and equipment in one store

GiAFASHIONstore

Find your fashionable clothes for your whole family in one-shop

Ctrl Consulting Implement IT-system to oversee global operations to increase profit • Integrate entire value chain from manufacturing to franchisee

• Enable franchisees to order on-demand and on short notice (stock up JIT)

• Decrease bullwhip effects along the value chain


IT-system will decrease cost drastically along the value chain

$ 25 million Approximately

(initial)

Ctrl Consulting Implementation Roadmap


Develop growth strategy

Sell unprofitable businesses in Spain

Implement IT-system

Set up Joint ventures Provide franchise

Search buyer Negotiations Final agreement

Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

Ctrl Consulting Contingency Planning


Contingencies

• Loss of Synergies

• Political Crisis

• Economical Crisis

Mitigation

• Sell businesses one-by-one, starting with the most unprofitable

• Build a diversified business in a variety of countries

Ctrl Consulting Future Projections

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International Revenue (In Million Euro)


Ctrl Consulting Future Projections

• Spanish market will be break even in the short run due the sales of unprofitable stores

• Internationally profitable mainly due to the sales in Spain in 2017

• Costs per Joint Venture 3 m Euro

• Franchise 1 m Euro

• Sales of stores increase short-term liquidity


Ctrl Consulting Conclusion





Product placement

Pursue international growth in China and India with Fashion and Sports business

Joint Venture and Franchise Deals

Close unprofitable businesses in Spain

Implement IT system

Ctrl Consulting Monday Morning Actions


Look for potential purchaser 1

Set up a project team 2

Contact banks 3

Documents

Ctrl Consulting Sonae SR’s International Expansion€¦ · Ctrl Consulting Sonae SR’s International Expansion Presenting to Francisco Pimentel, ... Inditex, Mango, ... Final agreement