Coldwater Creek Canada

Table of Contents

1.0 Executive Summary

1.1 Coldwater Creek the Corporation Coldwater Creek was founded in 1983 by Dennis and Ann Pence as a catalogue sales business in Sandpoint, Idaho as an escape from the big city to a pristine location known for its beautiful scenery. Sales through the retail channels began in 1995 and have grown tremendously. Through its initial public offering in 1997, $37.5 million was raised for further growth and to attract new talent through share offerings. Although stock prices have dipped to a low of $3.07 in the past months, they have traded as

Darlene Parsons & Sheila Head Page 2 Coldwater Creek Canada high as over $8.00. Coldwater Creek has also posted losses over the past few years due to the plight of the US economy and some mistakes made in products lines. Much effort and emphasis has been placed on improvement in products lines, reducing overhead and mitigating losses. As the US economy picks up the shares are expected to rise again.

Today Coldwater Creek has strong on-line and catalogue sales, 9 Spa locations and over 400 retail outlets in the US. Canada has been and still remains a source of sales for Coldwater Creek. Currently there are no plans to open retail stores in Canada but there has been some interest in expanding into the Canadian market. The goal is to convince the company to adapt to a franchise model and negotiate an agreement for a franchisee in Saskatoon.

1.2 Corporate Plan

Our goal is to bring the Coldwater Creek brand to Canada by opening a Coldwater Creek Clothing store in the University Heights area of Saskatoon. The store will have a relaxing, spa like feel with superior customer service. Our aim will be to make each shopper have an enjoyable experience while in our store. We will achieve this with an appealing store layout, attractive displays, and quality goods with above average service.

Over the short term we want to promote the store to bring in customers and develop the brand within Saskatoon and surrounding areas. By promoting the desirability of the products and the appeal of something new we want to bring as many customers into the store to see and experience the difference. The goal would be to have to store in place by fourth quarter of 2011 to secure the best possible retail location in the University Heights area. We would want to be ahead of any other international competitors entering the market since the location would be one of the most important factors in having a destination shopping place for the most optimum traffic.

After the first couple of years the plan is to develop a more personal selling method by using the CRM tool for email, mail outs and use social media to focus on our repeat customers while still promoting to the entire target market. Customers tend to become attached to their Coldwater Creek clothes and will be notified of the new arrivals, sales and in store events.

If the Coldwater Creek location in Saskatoon is meeting expectations and is a going concern, negotiation for Regina, Calgary and Edmonton locations would be undertaken. The Coldwater Creek Spa is another possible venture to expand into providing there is suitable space and a knowledgeable partner can be found.

Financially the business must provide the owner/operator with an income greater than what they are currently earning and then some to consider leaving her career for a much more demanding one. While it seems that this is possible there is a lack of experience in retail but the passion for the Coldwater Creek brand and strong sales experience would drive the business goals.

Darlene Parsons & Sheila Head Page 3 Coldwater Creek Canada

2.0 Mission Statement

The goal of Coldwater Creek is to be the leader in specialty retailers for women in Saskatoon by offering a striking merchandise choice with superior customer service.

3.0 Operations Plan

Coldwater Creek Canada will be an upscale retail women’s wear store located in University Heights in Saskatoon. The store will also sell accessories, such as jewelry, belts, handbags, scarves & hats and shoes, as well as a selection of home decor items such as candles, wall decor, giftware and seasonal decorations.

Darlene Parsons & Sheila Head Page 4 Coldwater Creek Canada 3.1 Organizational Structure

The organizational structure will be a franchise, as the current structure of Coldwater Creek in the US is all company owned stores. The advantage to the Coldwater Creek Corporation of this set up is the local knowledge and presence of the franchisee, as well as the financial stake she has in the venture, ensuring the motivation to succeed. Visits by head office can be less frequent, but reporting will still be timely as all transactions can be transmitted electronically. Also, any assistance required by the franchisee can be related electronically, so answers are instant and do not require costly travel. Daily sales reports will be forwarded to head office, so both parties are aware of the exact situation of the store. Day-to-day decisions will be made by the owner/manager, following the directives of the corporate head office.

3.1.1Organizational Chart

Figure 1- Organizational Chart

3.2 Store Hours Regular store hours will be Sunday, 10am – 6pm; Monday to Wednesday 9am – 6pm; Thursday and Friday 9am – 9pm, and Saturday 9am – 6pm. On statutory holidays, the store will open at noon, and close at 5pm. The store will be closed for New Years Day, Remembrance Day and Christmas Day. The manager or assistant manager will open & close the store, and set up or shut down the tills’ cash floats, tidy up any areas that require it, and generally make sure the store is ready for a day of sales. Only one person will be in until 10am, when the part time sales force will begin to arrive. Maximum staff will be from 11am until 4pm from Sunday to Wednesday; on Thursday and Friday maximum staff will be from 11am to 8pm; Saturday will have maximum staff from 10am until 5pm. The management and staff will put customer service as first priority for their tasks for the day, but when time allows they will steam new inventory, restock the store front, clean and rearrange displays, and clean the office and staff areas in the back of the store.

Darlene Parsons & Sheila Head Page 5 Coldwater Creek Canada 3.3 Reporting Every day a report will be automatically compiled and sent to head office, itemizing sales and revenue. The same software will be able to complete monthly and quarterly reports, taking all financial items into consideration. This will make the task of gathering information for submission for reporting of income taxes, staff sales performance, and future forecasting easier, less time consuming and more accurate. Management will review the financials each month and assess any changes that need to be made, such as changing number of hours for part-time staff, or modifying the number of part-time staff, modifying store hours, and re-evaluating the stock levels the store maintains.

3.4 Building and Floor Plan

The store will be laid out to maximize the sales floor as this is where the revenue is generated. The location will be in between two other units, so the opportunity for expansion in the future exists, if required. Space has been allocated for a wheelchair accessible change room, as well as an area for the staff to relax when on breaks. Large windows will provide plenty of natural light at the front of the store. Lighting will be laid out to carry the impression of natural lighting toward the back of the stores retail area.

3.4.1 Store Layout

Figure 2 - Store Layout

3.5 Suppliers Service providers for the business will mainly be Coldwater Creek head office, where all of the stock and sales accessories will originate. Lease fees will cover items like parking lot maintenance, upkeep of the building and its systems, snow removal, etc. An accountant will be hired to file income tax and oversee the bookkeeping systems within the business. Utilities will be purchased from the local providers.

Darlene Parsons & Sheila Head Page 7 Coldwater Creek Canada 3.5.1 Supply Analysis Our stock will all come from Coldwater Creek distribution. Our other suppliers will be local utilities, and general office supplies.

3.6 Capital Budget Plan Leasehold Improvements: Type Source Cost Electrical/Light Fixtures Moonlight Electrical 15,000 Flooring Father & Son Construction 14,600 Paint Car-Mel Painting 1520 Change Rooms Father & Son Construction 2,380 Counters Father & Son Construction 1,020 Countertop Father & Son Construction 2,120 Window Treatments Home Depot 500 Signage Sign Smith 3,000 Cabinets Father & Son Construction 900 Table/Chairs Leons Furniture 500 Appliances Superstore 600 Desk/Chairs Staples 500

TOTAL LEASEHOLD IMPROVEMENTS 42,640

Other Expenses: Cash registers Staples 1,400 Computer Computer Trends 2,000 Store Fixtures Eddies Hang Up Displays Edmonton 3,500 Lawyer Fees Hnatyshyn Gough 3,500 Inventory Coldwater Creek Head Office 350,257 Phone System SaskTel 2,500 Deposits on Utilities 1,200 Incorporation Expense 600 Franchise Fees 56,689 TOTAL OTHER EXPENSES 421,646

TOTAL CAPITAL EXPENSES 464,286 Figure 3 – Capital Budget Plan

3.7 Cost of Sales Cost of Sales 1 2 3 4 5 Beginning Finished 3 Goods Inventory 0 50,257 71,780 80,932 87,103 8 1,0 1,1 1,2 1,3 Purchases 52,293 03,821 31,808 18,108 10,989 Cost of Goods Available 8 1,3 1,2 1,2 1,3 for Sale 52,293 54,078 03,588 99,040 98,092 Ending Finished Goods 3 4 4 5 5 Inventory 50,257 12,529 65,127 00,592 38,763 5 9 7 7 8 Cost of Sales 02,036 41,549 38,461 98,448 59,329 Gross Profit Margins Clothing 1,1 1,3 1,4 1,5 1,7 Sales 07,720 05,725 72,205 84,461 05,276 6 8 9 9 1,0 Cost of Sales 97,864 22,607 27,489 98,210 74,324 4 4 5 5 6 Gross Profit 09,856 83,118 44,716 86,251 30,952 GPM Clothing 37% 37% 37% 37% 37% Accessories 1 2 2 2 2 Sales 82,448 15,061 42,481 60,970 80,869 1 1 1 2 2 Cost of Sales 44,134 69,898 91,560 06,166 21,886

Gross Profit 38,314 45,163 50,921 54,804 58,983 GPM Accessories 21% 21% 21% 21% 21% Home Decor

Sales 13,032 15,361 17,320 18,641 20,062

Cost of Sales 10,295 11,316 12,759 13,732 14,779

Gross Profit 2,737 4,045 4,561 4,909 5,283 GPM Home Decor 26% 26% 26% 26% 26% Figure 4 –Cost of Sales

3.8 Working Capital Planning As a retail store that has never been franchised before, there are a lot of variables to consider when planning for working capital, as well as a lot of speculation to be done.

Our projections seem to have some extra cash sitting idle, however that was by design. Saskatoon is still a city in the midst of evolving, and there is a high demand for contractors. We have allowed extra funds to be available in the event that a premium is required to contract trades to have the leasehold improvements completed as quickly as possible. This is justified as we don’t want to be paying a lease fee after taking possession, while waiting for trades to complete the work. Some of the seeming excess of cash will also go to wages when there is no revenue coming in; the store must be set up, stock unpacked and prepared to be displayed on the sales floor, and staff must be trained to standards that are typically higher than what some competitors hold themselves to. Another expense that isn’t recorded in our financial documents is the cost for the owner/manager to travel to the Coldwater Creek Head Office to be completely educated in the methods Coldwater Creek uses, as well as to be trained for sales and to be able to train others for sales. The last reason is that if the anticipated sales do not materialize, there may be a need for extra funding required to step up the marketing effort, to stimulate additional revenues. After all of these unpredictable expenses are taken care of, we may find there is still an excess of cash. In the event of this happy problem, bank debt will be paid down as the 7% rate is higher than what an investment would yield. There is not a lot of debt at this rate, so after it is dealt with excess cash may be invested in T-bills, taken out as dividends, and/or distributed as bonuses to the employees.

Inventory management will be a key area of the success of this venture. We want to maximize the impact of each shipment, as the shipping costs will be incurred by us, but at the same time we want to only hold as much inventory as we can sell. This is going to be a learning curve we will have to constantly evaluate for the first several quarters, and experience will enable us to better predict the needs of the store. Because our store can be cannibalized by the online store Coldwater Creek has, we may have to start out with a higher inventory than we’d like to, just to cement in our customers minds the selection available at the retail store is just as satisfying as the online version.

Being a retail firm, accounts receivable are not a concern – we don’t offer credit.

The majority of our accounts payable will be back to the Coldwater Creek Head Office, and will be managed electronically according to the terms negotiated in the franchise agreement. Other payables for utilities, etc. will be handled monthly by the owner/manager, and will not be able to be negotiated.

3.8 Operating Expenses Annual Operating Expenses Year 1 2 3 4 5 Natural Gas 1,500 1,538 1,576 1,615 1,656 Water 600 615 630 646 662 Electricity 3,000 3,075 3,152 3,231 3,311 Phone/Internet/Security 3,600 3,690 3,782 3,877 3,974 Interact 1,900 1,948 1,996 2,046 2,097

Inventory 852,293 1,003,821 1,131,808 1,218,108 1,310,989

Accounting/Bookkeeping 2,900 2,973 3,047 3,123 3,201 Business License 75 77 79 81 83 Insurance 3,000 3,075 3,152 3,231 3,311 Incorporation Renewal 30 31 32 32 33

Wages 167,912 177,273 205,841 217,317 229,432 Benefits 27,135 28,647 33,264 35,118 37,076

Total Annual Operating Expenses 1,063,945 1,226,761 1,388,359 1,488,425 1,595,826

Figure 5 – Operating Expenses

Darlene Parsons & Sheila Head Page 11 Coldwater Creek Canada 4.0 Human Resources Plan

4.1 Staffing and Job Descriptions The Coldwater Creek Canada store will have one manager/franchisee, a full-time assistant manager, and 4 part-time sales associates. At this time, projections indicate one more part-time employee will be required in year 3.

4.1.2 Daily duties of the Manager Serve customers

Open/close store

Supervision of staff

Banking, accounts payable, bill payments

Submit daily report to head office

Assess ageing merchandise for possible discount

Monitor stock levels

Order new stock, or reorder depleted stock

Hiring, terminating, coaching and training staff

Create weekly staff schedule

Promotions, advertising, charitable donations at her discretion

Maintenance and upkeep on all equipment and leasehold improvements

On call for staff to assist with customer disputes or other emergencies

4.1.3 Daily duties of the Assistant Manager Serve customers

Open/close store

Supervision of staff

Assist with scheduling

Main contact for sales associates to resolve customer issues and complaints

Night deposits

Replace manager when required

Assist in hiring process

Receive new stock upon arrival

Create displays

4.1.4 Daily duties of the part-time Sales Associates Serve customers

Steam newly received stock

Dust displays

Vacuum after close or when no customers in store

Stock cash area with bags, till tape, etc.

Clean windows/doors as required

Tidy sales floor

Restock clothes from change rooms

Clean staff room areas

4.2 Attraction and Retention Employee attraction and retention will be of prime importance, due to the cost of training new employees. Hiring a fulltime employee at the opening of the store, to be groomed for assistant manager will be paramount for the success of the business. Employees will be given raises every six months to aid in retention. Raises have been budgeted to include inflation at 2.5% as well as the raise portion of 1.5% for a total raise of 5.5% per year. Part time employees may be university students, who may have several years of availability, and find the flexible hours attractive. One part time employee can be accommodated to work around school aged children’s hours, and cover lunch/coffee breaks, and errands during the day. Discounts on Coldwater Creek merchandise will be offered to all employees, both to provide benefit to them as well as have them wearing the Coldwater Creek clothing while working. There will also be an incentive program for the employees, to increase sales for the store as well as their personal compensation.

4.3 Hours of Work

Part time Part time Part time Part time Asst. Sales Sales Sales Sales Daily Manager/Owner Mgr Associate Associate Associate Associate Total

Sunday 8 0 6 6 6 0 26

Monday 9 0 6 0 0 5 20

Tuesday 7 7 0 0 0 5 19

Wednesday 0 9 0 4 4 5 22

Thursday 4 8 6 4 4 5 31

Friday 4 8 6 3 0 5 26

Saturday 8 8 6 6 6 0 34

TOTAL HOURS 40 40 30 23 20 25 178

Total Part Time Hours 98 Hourly

Total Full Time Hours 40 Hourly

Total Manager Hours 40 Salary

Figure 6 – Hours of Work

5.0 Marketing Plan

5.1 Marketing Analysis

5.1.1 Past Performance - $1.039 Billion in net sales in the 2009 fiscal year in the US market

- An average of $371 sales per square foot last year in the US market

5.1.2 Market for Products -Currently underserved in quality clothing and shopping experience for affluent women

-Market is Saskatoon city and trading area with a total population of 400,000

-Demographics include approximately 60,000 women with household incomes over $70,000

-Saskatoon east, north and south, surrounding acreages have a high density of the target market

-Saskatoonians are very enthused for new stores and brands

-Retail sales are expected to rise from $5.1 billion in 2008 to $6.6 billion by 2013

- Saskatchewan economy remained strong during world recession and will continue to grow due to mining, energy and life science industries.

-Consumer confidence is very strong.

Darlene Parsons & Sheila Head Page 15 Coldwater Creek Canada 5.1.3 Market Share - Expected market share of 2.7% by the 5th year

- Estimated $72 million spent on retail by this group of customers

- We believe that at least 2% of this target market will become loyal Coldwater Creek customers, who will buy a minimum of 4 times a year, spending $100 each

- The remaining customers will purchase 1 -2 times per year spending an average of $60

5.1.4 Customers - Target market is women in the city of Saskatoon and trading area

- Approximately 60,000 mostly affluent women with household incomes of $70,000 per year or more

- Buyers who spend an average of $100 per month on clothing

- Influenced by brand awareness, perception of others and shopping experience

- Influences by current trends and styles, what others are talking about

- Prefers good fitting , comfortable wearing clothes with style and flare

5.2 Economic Outlook Canada has been experiencing a much stronger economy than many other developed nations over the last few years. Saskatchewan’s economy has outperformed most of the other provinces and continues to be strong. Saskatoon continues to build new residential areas with commercial development; these are the new “hotspots” for shopping.

The US economy has been recovering slower than anticipated with unemployment rates of as high as 9.8% so far in 2010. The company has posted disappointing third quarter results with sales lower than last year and lower than expected. This trend has caused the Coldwater Creek company shares to drop from over $8.00 to $3.10 over the last 52 weeks.

5.3 SWOT Analysis

5.3.1 Strengths - Owner/Manager has over 25 years of sales experience and extensive customer service training

-Owner/Manager well established in community with contacts in many organizations

-Extensive knowledge of the Saskatoon culture

-Dedicated corporate team for advice and expertise

-Ability to attract and retain quality staff with strong HR program

-National ad campaigns have been in Women’s magazines for many years

-Coldwater has both leading products and customer service. The competitors can only offer one or the other but not both.

5.3.2 Weaknesses -Owner/Manger does not have recent retail experience

-Brand is recognized but not widely known

-Coldwater Creek share prices have dropped and the corporation posting losses which could make it more difficult to get financing

5.3.3 Opportunities -Negotiate the right to open another franchise in Regina, Calgary and Edmonton

-Move Canadian on line order distribution centre to Saskatoon

-Negotiate to own/operate a Coldwater Creek outlet store in Canada

-Expand into the Coldwater Spa business as the Corporation has done with their own product lines.

5.3.4 Threats -Saskatchewan has been in the news because of the unfailing economy which is attracting international chains to open in Canada and it is easy to enter the market in Saskatoon

-On line sales are increasing, making it easier for shoppers to access desirable goods at competitive prices

-When customers become acquainted with sizing may choose to buy on line from Coldwater Corporate

-Coldwater Creek has posted losses the last few years. If the brand cannot survive the US recession we would go out of business along with the corporation.

5.4 Product

5.4.1 Clothing Coldwater Creek Clothing offers elegant, casual clothes with above average quality. The Coldwater Creek brand focuses on quality with a great emphasis placed on design details, exquisite tailoring and luxurious fabrics. Fabrics are out of the ordinary using boucle, tweeds, silks and chenille which are no longer found in most clothing stores. Antique-style fabrics with forgotten patterns were sourced for some of the latest designs.

The clothing is versatile as the jackets can be worn to work by professionals or thrown on with a pair of jeans for the weekend. The palettes are simple but can be paired with pieces to appear classic or styled to produce the latest trend.

Sizing and cut of clothing is tailored towards the North American mature woman’s figure. Why sell a woman a size 14 when you can make her look and feel good in a size 12? The clothes are designed to fit the target market of women 30- 65 of age with focus put on details such as making sleeves and shoulders proportioned for the average woman. There are three size ranges to cover all body types:

Misses Petites Women’s

5.4.2 Accessories Coldwater Creek offers a limited number of accessories such as jewelry, handbags, fashion boots and shoes, scarves and hats. The accessories are carefully chosen for quality and to enhance the clothing lines.

5.4.3 Jewelry Jewelry is above average quality and style and compares to that found in specialty gift shops and upscale home jewelry parties. Natural precious stones such as smoky quartz, agate, tourmaline, onyx, and jade are used in well designed pieces for every day and special occasion use. Hammered silver, cultured pearl and antique baubles are used to appeal to a wide variety of styles seekers.

5.4.4 Footwear Boots and Shoes – there maybe be only a very few pieces to choose from at any given time in the Coldwater Creek but they are definitely must have items. Again these are very high quality products aimed at fitting an average size North American woman. High top fashion boots will have a discreet stretch in the calf to fit the target market. Items are fashionable but at the same time very wearable which fits the Coldwater brand.

5.4.5 Handbags Handbags -one of kind items that cannot be found anywhere else such as a “saddle bag purse”, or a croc embossed bag with a cross body strap for ease of carrying. The items are current, following the latest trends but with more designer flare than what you would find in the competitor’s stores. Again there is not a huge selection but each item very appealing to Coldwater customers.

5.4.6 Giftware Giftware is mostly seasonal with candles, throw cushions, plates, pictures, mugs, and stuff animals. The theme sticks closely to nature which goes with the well dressed, outdoorsy lifestyle of the Coldwater Creek customer. The home décor line doubles in size for the Fall/Christmas seasons when customers are spending more time indoors and shopping for gifts.

5.5 Price Coldwater Creek products are priced to reflect their quality and uniqueness so are higher than some competitors.

Nationals – Cleo, Ricki’s, Reitmans – Coldwater Creek 20% - 30% higher

Laura’s, Winners – Prices are about the same

Designer Name Brands @ Sears, The Bay – Coldwater Creek 20% - 30% lower

Addition Elle, Penningtons – Coldwater Creek 10%-20 higher

5.5.1 Price Adjustments for Dollar Value Prices will be set by the Coldwater Creek Corporation and match those on the US based, corporate website. How closely the Canadian dollar matches the US dollar will determine if adjustments are needed. Currently the Canadian dollar has been on par or very close so that adjustments are not needed. If the difference between the dollars was to go above 0.10 either way then a new price structure for the Canadian store would be required and would not match the corporate website pricing.

5.6 Competitors

5.6.1 Analysis of Competition

Figure 7- Analysis of Competition

5.6.2 Reaction by Competition Competitors are mostly national chains and because of their size and organizational structures have difficulty in reacting quickly to a small market such as Saskatoon. However, they do have many resources to counteract with more aggressive marketing activities such as flyer drops and price cutting if they chose to do so. Coldwater will counter these activities by maintaining our lead in quality, specialty products and being the new store in the market to gain loyal customers.

As a leader in the quality and specialty clothing we will not compete on price if competition is to price cut. Being that our target market is more affluent, we will not compete on price but will create awareness of our brand and focus on inventory that is desirable to our customers.

5.6.3 Differentiating from the Competition The strong advantage over the competition is the newness of the brand and the pent up need for quality clothes aimed at our target market and a shopping experience. We will differentiate ourselves with a high level of in store service creating positive customer experiences that will generate repeat business. The competition is not targeting this specific market overall as Coldwater Creek does. Some of the

Darlene Parsons & Sheila Head Page 20 Coldwater Creek Canada competition has the sizing but not the quality, some have quality but sizing is all wrong. Coldwater has everything the affluent woman over the age of 35 needs with elegant clothing tailored for a mature woman’s body shape. The in store service that successful women want will also surpass our competitors such as Sears, The Bay and Winners who have products but no service.

5.6.4 New Market Entrants There is a growing interest in the Canadian market by international retailers and another store with similar products and service levels could open. Foreign specialty apparel retailers in Canada which currently hold 28.5% of the market are expected to grow to 51.4 % by 2016 and Saskatoon’s economy is sure to attract some new entrants. It would be beneficial to establish Coldwater Creek as the leader in the market and gain the best retail location as soon as possible.

5.7 Marketing Budget and Activities

Marketing Expenses: Grand Opening Radio Promo & Future Events $4,000 In Store Events $5,000 Radio - on going $8,000 Flyer drops/Mailouts $12,000 Billboard $3,000 Customer Contact Software $15,000 Total Marketing Costs $47,000

Figure 8 – Marketing Expenses

5.7.1 Promotion

5.7.1.2 Pre Store Opening and Grand Opening

Creating a buzz – At least one billboard will be set up 60 days prior to store opening. Saskatoon residents love brand names and having new places to shop. Much talk about town occurs when a new national or US chain is about to open in Saskatoon. A simple message of “Coldwater Creek – Saskatoon June 2011 will appear on one of the beautiful Coldwater Creek photos on or near Attridge Drive where a number of the targeted market lives and shops. Another billboard with different photo and same message will appear at the bottom of the Broadway Bridge where a lot of the targeted market works, shops and goes out in the evening. Enough people will see the billboards to word of mouth about the store opening. The use of powerful imagery and simple messages will be used throughout the campaigns.

Signage – on site signage will go up as soon as the site is confirmed to let people know where the store is going to be and anticipate its opening. By the time everything is ready for the soft opening there will be no doubt as to where the location is.

5.7.1.3 Radio Advertising Rawlco radio stations will be used to target customers at work, home, and driving in the car. We will get the demographics of listeners of the various radio stations and choose radio stations for the best coverage of our target market.

Radio Promo 2 weeks prior - Radio ads telling customers the first Coldwater Creek in Canada is due to open in Saskatoon. These add will focus on the brand name and store location while promoting the grand opening event. These will be mostly during the day focusing on the “at work listeners” and are short messages.

Radio Promo week leading up to opening event– there will be thirty-five – 30 second messages in that week leading up to the grand opening. These messages will be product specific and speak mostly to the distinct offerings Coldwater Creek will have.

Grand Opening Radio Promotion – takes place on the Saturday, grand opening of the store. On site radio hosts will be in the store sending broadcast about the location, sales, describing the products and any interviewing staff and shoppers. The radio host in on site for 4 hours during which time they will have three – 60 second live cut-ins per hour telling shoppers all about the store, location, products and promotions.

Darlene Parsons & Sheila Head Page 22 Coldwater Creek Canada 5.7.1.4 Flyers Quality flyers will be sent out to the east, south and north end of the city one week before grand opening. It will be a postcard version with an invitation to the grand opening. One of the beautiful Coldwater Creek photos showing a woman wearing the stylish clothes and a beautiful nature scene in the backdrop will carry a simple message - Coldwater Creek store in Canada opening in Saskatoon, the date and the address.

Flyers will continue to be sent out quarterly at the beginning of each new season advertising new inventory. Another flyer will be sent out halfway through each season advertising seasonal clearance items. In total, there will be eight flyer drops per year in the neighborhoods that our targeted customers live.

5.7.1.5 Social Media A Facebook page will be created announcing store opening in Saskatoon and will spread word through contacts on Facebook. The page will be updated with progress of the store including pictures of the progress being made towards to opening and “sneak peeks” at products.

Twitter will be used to announce new inventory and describe the latest must have item in the store. A tweet will be sent out once or twice a week by the store manager. Although our target market is not great users of Twitter yet, there may be more people using it every day and wouldn’t want to miss the opportunity to reach customers in a way that costs nothing. We cannot rule out that younger women may be interested in Coldwater Creek products and should use every means available to reach them as well.

5.8 Control and Evaluation If sales figures are not meeting numbers will have to evaluate marketing plans and make changes. Flyers will need to be sent out more often and perhaps sent to wider demographics to include surrounding areas such as Martensville, Warmen, and Corman Park areas where more of the target market lives.

Radio advertising will need to be assessed to see if the ads are indeed hitting target markets and if they are affected.

Sales figures will need to be analyzed before and after promotions to see if the revenues, number customers and buying rates are increased. As the Customer Relationship Management (CRM) software gathers more customer information, promotions involving email and direct mail out to customers can be used to generate customer loyalty programs.

Darlene Parsons & Sheila Head Page 23 Coldwater Creek Canada 6.0 Accounting/Financial Plan

6.1 Marketing, Operations and Human Resources Considerations The 5 year financial plan is detailed in the Excel spreadsheet and contains projections for income statements, balance sheets and cash flow.

Balance Sheet Summary, years 1 to 5

Year 1 2 3 4 5

Total Assets 620,151 575,502 550,954 684,391 841,129 Total Liabilities 390,525 265,968 135,463 138,309 141,395

Total Equity 229,626 309,533 415,491 546,082 699,734 Figure 9 – Balance Sheet Summary 6.2 Capital Requirements Coldwater Creek Canada will require $650,000 for initial set up. This will be provided by $50,000 in long term debt in the form of a line of credit provided by a financial institution, with a maximum capacity of $75,000. A loan from Coldwater Creek head office for the purchase of inventory will provide $400,000. The other $200,000 will be provided by the owner/manager as shareholders equity.

6.3 Capital Budget and Depreciation

Our capital budget is itemized in section 3.5; depreciation is set out at CCA rates and available in the Excel spreadsheet.

6.3 Financing Budget Financing Budget

Long Term Debt 50,000 Coldwater Creek HO Inventory Financing 400,000

Owner Equity 200,000

Total Financing 650,000 Figure 10 – Financing Budget

Financing will be provided by three sources: A bank line of credit will be set up and $50,000 of it will be budgeted for start up costs. Owner equity will provide an additional $200,000. Finally, a loan from Coldwater Creek Corporate Head Office will be negotiated for the purchase of inventory. This loan will

Darlene Parsons & Sheila Head Page 24 Coldwater Creek Canada last for 3 years, at a discounted 3% interest rate. We believe that the Corporation would be willing to make this loan due to the opportunity to establish a presence in one of North Americas’ hottest economies, without all of the costs they usually bear.

6.3.1 Debt Amortizations Schedules We have two kinds of debt, the bank loan and the Coldwater Creek HO financing. The bank loan is budgeted to be paid off in 10 years, and the Coldwater Creek HO financing in 3 years. The detailed amounts and interest payments are available on the Excel spreadsheet.

6.4 Dividend Policy Our dividend policy is currently set up to provide dividends when our cash account is over $250,000. In our projections, this means a dividend will not be paid until year 6. Because the owner/manager is drawing a salary, this is acceptable as the primary focus for the first few years is business growth and debt repayment. We set the number for dividends at $250,000 so that no dividends are anticipated in the first year when the cash is quite high, but so is the risk. Of course, any declaration of dividends can be done at the owner/managers’ discretion, as there is very little purpose in having a cash balance as high as our projections in the years after the Coldwater Creek HO financing is paid off. At that time, it would make good sense to lower the cash amount that determines the dividend payment to $60,000 to $75,000.

6.5 Economic Forecast We anticipate inflation will remain steady at 2.5% each year. Our projected growth in years 1 & 2 is higher due to the newness of our venture. After that, growth will be steady at an anticipated 5%. We have allowed for inflation for our inventory, utilities and wages, as well as raises for our employees over and above inflation. Our interest rates are projected to stay static, as a contract would be signed with the Coldwater Creek HO for the inventory financing specifying the 3% rate for the duration, and the bank debt is not substantial, so if interest rates were to spike there would be a priority placed to pay it off and avoid the higher than budgeted for interest.

6.6 Ratio Analysis A complete chart of ratio analyses is available in the appendix, with pertinent ratios for the base, best and worst case scenarios. As anticipated, the aggressive repayment plan for the inventory loan from Coldwater Creek Head Office negatively affects the first three years. In the analyses, this loan was considered as short term debt, which also skews the results, but gives the reader the very worst case of each scenario.

Darlene Parsons & Sheila Head Page 25 Coldwater Creek Canada 6.7 Management Information System Thanks to electronics, the gathering of data is easy and efficient. Each week, a report tallying the sales for the store, with a breakdown per employee would be generated for the manager to review. This will inform her if the goals are on target, and if there are any issues with any particular employee that need to be addressed, perhaps with further training. Every month an income statement would be printed, again, to make sure that goals are progressing on target. A monthly report for GST & PST will be required as well. A quarterly balance sheet would be helpful in overall appraisal of the situation of the business. An annual report for income tax would also be required. All of these reports would be copied to head office, for two reasons; to keep them in the loop of what the store north of the border is doing, as well as to have their expertise if there are issues that need to be dealt with – they might catch any problems before they are caught by the manager, since they have a better perspective of what the business should be achieving.

6.8 Financial Analysis

6.8.1 Net Present Value Our net present value is projected to be $239,842. This is enough to provide hope for the project to be viable, if all of our other numbers are within reason.

The IRR calculates out at 46% for this venture in the base case scenario. This is a good return on the equity, however the first three years of debt is high, and must be taken into consideration. Once the loan for the first years’ inventory is repaid, the bank debt is quite low and could be dealt with much quicker than the 10 years we have budgeted for.

6.8.2 Summary of Financial Results

Year 1 2 3 4 5

Sales 1,303,200 1,536,14 1,732,00 1,864,07 2,006,20

7 6 1 7

COGS 852,293 1,003,821 1,131,808 1,218,108 1,310,989

Gross Profit 450,907 532,326 600,198 645,963 695,217

Expenses 415,847 437,761 474,804 491,418 513,380 Net Income before Taxes 35,061 94,565 125,393 154,545 181,837

Income Tax 5,434 14,658 19,436 23,955 28,185 Net Income before Taxes 29,626 79,907 105,957 130,591 153,653 Net Present Value 239,842 IRR 46.00%

Figure 11 – Summary of Financial Results

6.8.3 Risk Analysis We are facing many risks, from many different angles. Our parent company is located in the United States, and they have been suffering in poor economic times for the last few years. This impacts us as even though our economy is robust, we cannot support the entire corporation, and their failure means our demise. On that same topic, if our economy suddenly dives, our business is certain to be impacted, as people will slow their shopping for high end goods, and focus more on survival type fare.

Our projections are based on information that is predominantly sales in America of Coldwater Creek goods. The shopping habits of Canadians may be somewhat different, and since there is no store identical to this in Canada, we are left making our best guess. Our customer per day number is a critical variable, and the one that could most affect our earnings. We have analyzed scenarios with much fewer customers per day and know the breakeven point. Close attention would have to be paid to sales and revenue to make sure the business is healthy.

Risk is added as we don’t have any retail managerial experience to draw on, but it is mitigated in the backing of Coldwater Creek Head Office; when we are at a loss for what action to take, they will be able to provide guidance and suggestions.

Our projections of the income that Coldwater Creek Canada generates are to start off aggressively, with substantial growth the first two years. Once we are established in the market, and competitors have

Darlene Parsons & Sheila Head Page 27 Coldwater Creek Canada modified their activities to counter us, the growth is forecast to be steady, but not as steep. Risk exists if our growth projections do not materialize, and our efforts to change it have no effect.

6.8.3.1 Revenue Projections Year 1 2 3 4 5 1,303,2 1,536,1 172,0 1,864,0 2,006,2 Revenues 00 47 06 71 07 29, 79, 105,9 130,5 153,6 Net Income 626 907 57 91 53 % Growth 38.4 17 15 11.3 Retained 29, 109, 215,4 346,0 499,7 Earnings 626 533 91 82 34 Figure 12 Revenue Projections

Contingency plans can be made for some of our risk variables, like fewer customers per day than estimated, or lower sales – additional efforts could be made by the marketing program to increase awareness and sales. However, the economies of Canada and the US are hard to plan for, so all that can be done is a careful analysis of the events in both economies and make a best-guess decision. At this time, this seems to be a promising, profitable business to invest in, for someone with the vision to endure the first few years.

Appendix

Coldwater Creek Annual Report 2009 www.coldwatercreek.com

“Are we there yet?” - America’s Economy - The Economist, September 16, 2010

“Canadian clothing retails brace for U.S. tide” – The Globe and Mail, December 7, 2010 www.sreda.com www.statcan.gc.ca http://canada.gc.ca/home www.reitmans.ca www.cleo.ca

www.laura.ca

Tables and Figures

Figure 4 – Cost of Sales………………………………………………………………………………………………………………………….12 Figure 5- Operating Expenses……………………………………………………………………………………………………………….14 Figure 6-Hours of Work………………………………………………………………………………………………………………………..17 Figure 7- Analysis of Competition………………………………………………………………………………………………………..23 Figure 8- Marketing Expenses……………………………………………………………………………………………………………..25 Figure 9-Balance Sheet Summary………………………………………………………………………………………………………..27 Figure 10-Financing Budget…………………………………………………………………………………………………………………28 Figure 11- Summary of Financial Results……………………………………………………………………………………………..30 Figure 12-Revenue Projections……………………………………………………………………………………………………………31

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