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FORECASTING
Background (Shelly)
Industry Analysis (Shelly)
Current Financials (Parm)
Forecasting (Hari)
Forecasting Verification (Tammy)
Reality Check (Tammy)
HISTORY
Bargaining Power of
Buyers (HIGH) Rivalry Among Existing Bargaining Power of
• Quality & Price Firms (HIGH) Suppliers (LOW)
• Taste • Highly fragmented • Vertical Integration
• Alternative products • Largest donut retailer
• Large competitors and
regional players
CONCLUSIONS:
Highly competitive environment with
exception of supply chain
To continue growth levels, high investments
in long-term assets and working capital
would be needed
Profitability outlook relies heavily on ability to
carry forth expansion plans (outside of U.S)
REVENUE SOURCE
CIBC forecast
What elements did you consider in their
forecast?
What assumptions would you make regarding
store expansion & sales per store?
CONDENSED BALANCE SHEET
Ratio Analysis
Publicly available information about:
Growth plans (new stores)
Profitability (per store)
Industry/environment assessment
FORECASTING KKD’s REVENUES
2002
Revenues
Gross Profit
Royalties
Markup of KK purchases
Capital Costs
Actual Forecast
Net Income/ Sales 0.03 0.05 0.07 0.08 0.08 0.08 0.06 0.05
Assets/Stockholders'
Equity 1.51 1.00 0.95 1.05 1.05 1.05 1.05 1.05
CIBC Reality
Income Statement 2003 2004 2003 2004
REVENUE (SALES) 494,818 606,197 491,549 665,592
COST OF GOODS SOLD 390,249 473,864 381,489 507,396
GROSS PROFIT 104,569 132,333 110,060 158,196
SELLING, GEN. AND ADM. 44,080 52,999 50,243 56,110
EBITA 60,489 79,334 59,817 102,086
NET INTEREST EXPENSE 14 1,000 5,044 7,409
EBT 60,475 78,334 54,773 94,677
INCOME TAX 22,991 30,527 21,295 37,590
NET INCOME 37,512 49,807 33,478 57,087
CHECK IT OUT
Back in 2002 By 2004
222 stores in 34 states 360 stores in 48 states
75 company owned 144 company owned
53 franchised 57 franchised
94 area developer 159 area developer
1 store in Canada 12 in Canada
3 in Australia
2 in the U.K
2 in Mexico
5 million doughnuts a day 7.5 million per day
2 billion doughnuts a year 2.7 billion per year
SUMMARY