STRATEGIES

Danier’s current business strategy includes, among other things:
  1. GROWTH OF ACCESSORIES – Accessory sales represented approximately 40% of total Company merchandise revenue during the first nine months of fiscal 2015.  Danier’s long-term objective is to continue to grow this line of business to 50% or more of total Company merchandise revenue by, among other things, improving marketing and merchandising activities and enhancing brand messaging to appeal to a broader range of customers.  In addition to typically having gross profit margins that are significantly higher than apparel, accessories offer versatility and attractive price points and provide an opportunity to add more fashion, colour and excitement in Danier’s stores.  Accessories are also less seasonal than outerwear and may promote more frequent store visits and make Danier more relevant to a broader base of customers.
  1. INCREASING OUTERWEAR AND SPORTSWEAR SALES – As the leader in leather outerwear and sportswear in Canada, Danier will continue to focus on being the dominant destination for better leather outerwear and sportswear. During the first nine months of fiscal 2015, outerwear represented approximately 53% of Danier’s merchandise revenue and sportswear represented another 7% of Danier’s merchandise revenue.
The Company believes it can compete in the broader outerwear category and increase outerwear and sportswear sales by among other things:
  • Complementing the core leather business with non-leather alternatives, including down, wool, shearling and cashmere.  The addition of non-leather alternatives enables the Company to further extend its offering of longer length jackets such as parkas.  Longer length jackets typically have higher price points than shorter length jackets;
  • Improving the styling and functional aspects of the collections, including the addition of more winter-weight linings and more colour;
  • Improving the flow of merchandise to add continuous “newness” to its store presentations;
  • Improving its process for managing markdowns and promotions; and
  • Enhancing the Company’s brand image and awareness through better communication of Danier’s leather quality, craftsmanship and heritage, as well as emphasizing the warmth aspects of Danier's jackets for a broad range of temperatures including extreme cold weather.
  1. IMPLEMENTATION OF OMNI CHANNEL STRATEGY – Danier’s omni channel strategy is intended to allow customers to shop seamlessly in Danier’s 58 shopping mall and street-front stores, 29 outlet locations (large format stores) and online, via computers or mobile devices and essentially makes all inventory available to all customers through whichever distribution channel(s) they choose to shop.  The Company beleives that this strategy will  promote brand awareness and sales growth through optimization of inventory. 
During fiscal 2014, the Company launched a direct shipment offering, whereby if a product in a particular size is not available in a store, the Company will ship the product directly from a store to a customer's home or office thereby maximizing invnetory availability and avoiding a loss of a sale.  Danier plans ot invest in information technology to achieve efficiencies in fulfilling direct to customer orders.
 
In February 2014, we launched our eCommerce click-to-buy store for orders within Canada and, while not currently a significant portion of Danier's overall sales, eCommerce revenue for the first nine months of fiscal 2015 increased by 137% compared to our phone order channel during the period last year..
  1. COST REDUCTION - In order to improve the Company’s financial performance, a cost reduction initiative has been implemented.  The Company’s objective is to achieve annualized savings of between $5 million and $7 million during fiscal 2016 as compared to fiscal 2014.  The cost reduction initiatives include, among other things,  reductions in head office staff and expenses, and in marketing and non-selling expenditures.  Capital expenditures are also being carefully monitored. 
During January 2015, head office staff was reduced by approximately 15%, four underperforming shopping mall stores andone underperforming outlet location was closed and other cost reductions have been implemented. During Q4 2015, the Company is planning to close underperforming outlet location. Underperforming stores are being closely monitored and may be closed or relocated as their leases expire.  Marketing strategies and activities have been reviewed for possible savings opportunities while not diminishing advertising effectiveness.  A zero-based budgeting process has been implemented and has identified reductions in non-selling expenses such as sourcing costs, travel, telephone, consulting and other expenditures.
 
5. EXPLORING STRATEGIC ALTERNATIVES – On February 6, 2015, the Company announced that it was exploring strategic alternatives, including, among other things, the sale of, merger or other business combination involving the Company, a private placement or other offering of equity or debt, the sale, lease or financing of certain assets of the Company,  or joint ventures or strategic alliances with the Company.  The strategic review process is currently ongoing, and in connection therewith, the Company and its financial advisor, Consensus Advisory Services, LLC, have held various discussions with potentially interested parties and the Company has entered into confidentiality agreements with a number of these parties in relation to a variety of possible strategic alternatives.  There can be no assurance that this process will result in any definitive agreement, or, if a definitive agreement is entered into, the nature, terms or conditions thereof, or whether any potential transaction will ultimately be consummated.  The Company is also exploring alternatives that may be available to refinance its existing credit facilities in order to increase liquidity and extend the maturity of available credit.  There can be no assurance as to whether the Company will be successful in refinancing its existing credit facilities or, if it does, that the terms of any alternative financing will be favourable to the Company.

We caution that our ability to implement our business strategy is subject to a number of risks and uncertainties, including those described on pages 28 through 34 of the Company’s 2014 Annual Report and to Danier's continuous disclosure materials filed from time to time with the Canadian Securities Regulatory Authorities, including the Company's most recent Annual Information Form, quarterly and annual reports, and supplementary information, which are available on SEDAR at www.sedar.com.

  Our current strategies and plans are also subject to certain specific underlying assumptions and risks, including:
  • A strengthening of the current retail and economic enviornment;
  • The Company increasing the number of customers that enter its stores and increasing sales in its various merchandise categories;
  • The Company being able to successfully grow revenues, gross profit, gross margin and generate net earnings;
  • The Company being able to achieve the anticipated savings from its cost reduction initiatives;
  • The Company being able to generate the necessary cash flow and earnings to fund anticipated operating and capital expenditures;
  • The Company being able to successfully develop, design, source, purchase, market, promote, display, price and sell the correct quantity, colours, styles and assortments of accessories, outerwear and sportswear that appeals to a broad range of customers;
  • No significant changes in foreign exchange rates, inflation, tariffs, taxes, leather prices, transportation costs and other costs that could affect cost of sales or selling, general and administrative expenses;
  • Danier being able to attract, integrate, retain and motivate the necessary staff in merchandising, sourcing, merchandise planning, marketing and store operations in order to implement the above strategies;
  • The Company successfully maintaining and implementing the information technology software and hardware processes and upgrades to achieve our desired effectiveness and efficiencies for inventory management and administrative processes;
  • The successful outcome of the Company's ongoing strategic review process, including an offering of equity or debt, the sale, lease or financing of assets or a sale, merger or similar strategic transaction involving the Company; and 
  • The Company generating sufficient cash from operations and having access to the necessary credit facilities or securing alternative sources of financing.
Should these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our strategies or relative priorities may change and our ability to execute our business strategy may be adversely affected.  Danier regularly reviews and evaluates its strategies and plans in light of changing conditions, trends and events.  There can be no assurance that our plans will not change or that we will be able to successfully achieve any or all of our strategic objectives or, even if substantially achieved, that they will have the expected consequences to, or effects on, the Company.