Putting Distribution
Money in Their Jeans
Stephen Horak, Lucky Brand
Krish Nathan, SDI Industries
Jim DeVeau, Taylored Services
3
Lucky Brand Company
Overview & Strategic
Vision
4
Lucky Brand Timeline
• Lucky brand
founded in
Los Angeles
by Gene
Montesano &
Barry
Perlman
1990
• Sales peaked at $477
million
• 193 Specialty doors
• 39 Outlet doors
1999
• Brand acquired by Liz
Claiborne
• Brand sold primarily through
“mom & pop” specialty stores
and The Buckle
• 12 free standing stores
2010
2008
•
•
•
•
• Lucky Brand
acquired by LGP
and Carlos Alberini
in February 2014
• Revenues of $566
million
• Adjusted EBITDA of
$41 million
Sales of $387 million
New team joined Lucky brand
Gene M. and Barry P. exit
Adjusted EBITDA of ($8)
million
5
2014
Lucky Brand Business Overview


2015F Net Sales
LGP and Carlos Alberini acquired Lucky Brand on
February 3, 2014 for $225 million
Licensing
and Int'l
2%
Apparel lifestyle brand founded in 1990:

Wholesale
36%
Complete apparel offering, rooted in denim
(43% of sales)
E-commerce
9%

Multi-channel distribution network:
Full Price Specialty
Outlet
Wholesale
Specialty Accounts
LuckyBrand.com
1,050+ Doors
375+ Doors
Outlet 20%
2015F Operating Margins
172 Stores
82 Stores
Specialty
33%
Distribution Channel
Specialty
Operating Margin
9%
Outlet
19%
Wholesale
21%
International
30%
Licensing
97%
E-commerce
23% 6
Strong Brand Awareness in Excess of Current Scale
SALES
*$5.9B
$3.9B
$2.7B
$2.2B
$2.1B
$2.4B
$0.5B
UNAIDED
37%
37%
19%
11%
12%
5%
8%
3%
3%
2%
3%
10%
0%
7%
5%
0%
1%
*Fiscal 2012/2013 gross annual sales
*$6.9B
UNAIDED
67%
33%
10%
25%
Lucky’s brand awareness compares to that of multi-billion dollar brands and is significantly
stronger than other premium denim brands, demonstrating our unique lifestyle brand 7
positioning beyond denim
0%
Lucky Brand Positioning
We believe we exploit the white space in the market for “accessible premium” denim
How Do We Win
What We Inherited
Where We’re Headed
Four brand pillars
that resonate with
core customers
Aligned Aesthetic
Vision and Brand
Voice
Product Rooted in
Denim and
Weekend Wear
Domestic focused
business
Expanded footprint to
capture international
demand
Core
Traditional
marketing platform
Distributed via
specialty, outlet,
wholesale and ecommerce
Marketing that
engages the customer
in all touch points of
his / her life
+ $1 B
Plan
Premium lifestyle
brand offering a fullrange of products
Showrooms that
appropriately display
the expanded product
line
9
Key Strategies

Key Strategy #0 - Define the aesthetic vision of Lucky Brand

Key Strategy #1 - Develop product roadmap, identify licensing opportunities, and develop execution plan to own key categories / price points

Key Strategy #2 - Develop optimum Real Estate, Wholesale, E-Commerce distribution network; design “Store of the Future”

Key Strategy #3 - Develop comprehensive marketing/advocacy strategy and define the ultimate customer experience and engagement
program

Key Strategy #4 - Develop a people and culture plan

Key Strategy #5 - Develop plan to become an example of Conscious Capitalism

Key Strategy #6 - Develop international growth strategy

Key Strategy #7 - Develop a business model to achieve superior profitability

Key Strategy #8 - Become a highly efficient organization
10
Company Overview






Founded in 1992
Award Winning Retail Experts
 2015 Awards - Inbound Logistics TOP 100 3PL & USC Marshall 3PL Excellence
Award
 Expertise in Apparel, Footwear and Accessory distribution
 Extensive experience with all major retailers
Strategically located warehouses
 1,500,000 sf near the gateway ports of Los Angeles / Long Beach, CA and Newark,
NJ
Omni-Channel Distribution
Cross Dock, Transload, Case and Unit Fulfillment, Value Added Services and ECommerce
Transportation management services
11
Solution Design

Storage Concepts – Reduction in Footprint

Very Narrow Aisle (VNA) configured for carton storage versus pallet storage Reducing Linear Flow of warehouse and more efficient use of storage space.



Reduces the honeycomb effect found in pallet storage concepts.
Eliminates touches in picking, sorting and consolidation versus pallet
storage model.
Carton Level Controls - All inbound cartons receive a
license plate (LPN) which allows for carton level tracking
throughout the facility.

This reduces labor upon receipt by reducing the level of sortation required
on receipt by approximately 18%.
12
Case Storage Racking w/ Carton Level Control
13
Very Narrow Aisle w/ Case Level Storage
14
Standard Pallet Level Storage
•
•
As units per sku are
allocated, efficiency of
reserve storage
declines.
Utilization of reserve
storage space for unit
replenishment
business averages
below 75% in a pallet
level configuration.
15
Solution Design

Dedicated Operation



Lucky gets the benefit of a dedicated operation, while still utilizing
the benefits of a 3PL in a shared services, multi-client environment.
Better Labor Management over multiple shifts allows for LEVELING
OF DEMAND.
MHE is utilized over multiple shifts for dual purposes.
16
Dual Sorter Solution


Design Configuration to allow Taylored to run Wholesale and Retail waves
concurrently
OR, based upon volume can divert excess volume to other sorter to
increase capacity.


EQUALS = Better utilization of equipment and staffing by reducing
downtime, level loading pack out functions and providing for steady
outbound flow.
Greatly reduces need for OT to work peak volumes.
17
Duel Sorter Design
18
Krish Nathan – CEO of SDI
“We design distribution
centers. We are engineers
that utilize our creativity,
analytical skills and
industry knowledge to
develop world class, cost
effective and efficient
solutions for the
distribution of products “
Intelligent Design Solutions
19
SDI – 90 Seconds
20
Review Existing Parameters
•
•
•
•
•
•
Visit existing operations
Collect data
Document and understand
Draw comparison with similar other
operations
Used industry bench marks to create
ROI
Utilize industry knowledge and
experience to “Short Circuit” design
process and reach a solution
1. High quantity of SKUs
2. Existing storage technique inefficient
3. Poor utilization of outbound cartons
to stores
4. Technology incompatible with
requirements
5. Limited window for shipping to stores
Website: SDI.SYSTEMS
21
Case Study – Business Considerations
 Retail & wholesale distribution channels
 Unit level distribution business
 Reduce per-unit cost
 Necessity to exit existing structure and become
stand alone
 Tight deadline
 No existing infrastructure
Website: SDI.SYSTEMS
22
Solution Implemented
• Warehouse Controls Solution for one seamless interface with WMS
• Real-time decision process driven by SDI controls & SW solution
• Simple MHE process
• Automated unit sortation with flexibility to ramp
wholesale & retail
• Automated feed of sortation solution & shipping
combined for cost effectiveness
• Automated Print & apply machines
Website: SDI.SYSTEMS
23
Case Study – Video
Website: SDI.SYSTEMS
24
The Results and
Long-Term Outlook
25
Results
One year post-mortem:

Challenges:





Timing of implementation led to challenges at go-live
Going live at peak timeframe did not leave time for ramp up and learning within a
new facility…100 mph out of the gate
Port Strike in LA/LGB at time we relocated all operations to West Coast led to
inbound delays and pressure on outbound processing time
Benefits realized:

Dedicated facility

Proximity to port

Proximity to corporate
First Year Results:

Shipped 10% more units in our first year than in 2014

Supported the addition of 8% more stores to our fleet
26
Future Outlook
Introduce Distribution Initiatives that support Lucky’s Key Strategies:




Key Strategy #0 - Define the aesthetic vision of Lucky Brand
Key Strategy #1 - Develop product roadmap, identify licensing opportunities, and develop execution plan to own key categories / price
points
Key Strategy #2 - Develop optimum Real Estate, Wholesale, E-Commerce distribution network; design “Store of the Future”
Key Strategy #3 - Develop comprehensive marketing/advocacy strategy and define the ultimate customer experience and engagement
program

Key Strategy #4 - Develop a people and culture plan

Key Strategy #5 - Develop plan to become an example of Conscious Capitalism

Key Strategy #6 - Develop international growth strategy

Key Strategy #7 - Develop a business model to achieve superior profitability

Key Strategy #8 - Become a highly efficient organization
27
Social Q&A
28