• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Sweet Homes Inc. was founded in 1978 by Diamond Inc. to bring the warehouse retailing concept to the home center industry. The company operated retail do-it-yourself (DIY) warehouse stores

Extracts from this document...

Introduction

SWEET HOMES INC. The difference between a company with a concept and one without is the difference between a stock that sells for 20 times earnings and one that sells for 10 times earnings. Sweet Homes Inc. is definitely a concept stock and it has he multiple to prove it- 27 to 28 times likely earnings in the current fiscal year. On the face of it, Sweet Homes might Seem like a tough one for concept managers to work with. It is a chain of hardware stores. These Hardware stores are huge warehouse outlets - 60,000 - 80,000 feet space. You can fit a awful lot of saws in these and still have plenty of room left over to knock together a very decent concept. The truth is, the warehouse notion is the hottest thing in retail these days. Sweet homes buys in quantum quantities which mean its suppliers are eager to keep within its good graces and hence provide it with lot of extra service. The company , as it happens is a master in promotion and pricing. It has 22 stores, all of them located where the sun shines all the time. Growth has been sizzling, Revenues are mere $22millon is fiscal '80 shot past the quarter billion mark three years later. As to earnings, they have climbed from 2 cnts in fiscal '80 to 60 cents in the fiscal year coming to an end [in Jan, 1985] They're confidently estimating 30% growth in the new fiscal year as well. ...read more.

Middle

The company pursued a number of policies to address this need. Approximated 90% of the company's employees were on a full-time basis. To attract and retain a strong sales force, the company maintained salary and wage levels above those of its competitors. All the sales personnel attended special training sessions to gain through knowledge of the company's home improvement products and their basic applications. This training enabled hem to answer shoppers' questions and help customers in choosing equipments and materials appropriate for their projects. Often the expert advice the sales personnel provided created a bond that resulted in continuous contact with the customer throughout duration of the customer's project. Finally, to attract customers Sweet Homes Inc. pursued an aggressive advertising program utilizing newspapers, television, radio and direct mail catalogues. The company's advertising stressed promotional pricing, the broad assortment and depth of its merchandise and he assistance provided by its sales personnel. The company also sponsored in-store demonstrations of do-it-yourself techniques and product uses. To increase customer's shopping convenience the stores were open seven days a week, including weekday evenings. Fortune Magazine commented on Sweet Home Inc's strategies as follows - "Warehouse stores typically offer shoppers deep discounts with minimal service back-to-basics ambience. Sweet Home Inc had all the charm of a freight yard and predictably low prices. But they also offer unusually helpful customer service. ...read more.

Conclusion

During 1985, the company implemented its most ambitions expansion plan to date by adding 2 new store chains which was in financial difficulty. As Sweet Homes engaged in major expansion, its revenue rose 62% from $432 million to in 1984 to $700 million in 1985. However, the company's earnings declined in 1985 from the record levels achieved during the previous year. In 1985, it earned $8.2million, or $0.33 per share, as compared with $14.1 million or $0.56 per share in 1984. As fiscal year 1985 came to a close, Sweet Homes faced some critical issues. The competition in the DIY industry heated up. The fight for market dominance was expected to result in pressure on margins and industry analysts expected only the strongest and most capable firms in the industry to survive. Also Sweet Homes has announced plans for further expansion that included the opening of nine new stores in 1986. The company estimated that site acquisition and construction would cost about $6.6million for each new store and investment in inventory would require additional $1.8million per store. The company needed significant additional financing to implement these plans. Sweet Homes relied on external financing - both debt and equity - to fund its growth in 1984 and 85. However the significant drop in its stock price in '85 made further equity financing less attractive. While the company could borrow from its line of credit, it had to make sure that it could satisfy the interest coverage requirements. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Case Studies and Analysis section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Case Studies and Analysis essays

  1. Market entry strategy of Aldi and Lidl. Plans for expansion.

    Countries in which Lidl operates at the moment. This map shows in which countries Lidl operates at the moment. There is a list of countries in which ALdi operates at the moment: � Australia � Austria � Belgium � Denmark � France � Germany � Great Britain � Hungary �

  2. The Diversity of Distribution Channels in the Retailing Industry

    electrical goods and its goes faulty a certain period of time then the customers will not be satisfied so for that reason Tesco is a able to refund or repair or replace goods. Supply chain A supply chain has three key parts which are: * Manufacturing * Supply * Distribution

  1. Marketing Mix of Carphone Warehouse

    This may be for convenience i.e. people don't want a mobile phone which weights a lot, especially if they have to make long phone calls, but also the size. Mobile phones have somewhat become a faction statement, especially to teenage customers, it is common knowledge that a customer does not want a large sized phone as it looks old.

  2. Unit 9: Marketing Strategy

    By setting this marketing objective, I was aiming in particular to meet the business objectives "to break even within the first twelve months" and "to have made, in profit, all start up costs within the first eighteen months". By increasing sales at a rate of 10% each month, the objectives

  1. Business plan. The business that I am going to produce is a personalised logo ...

    This brief and focused statement is needed so that you know what aims and objective you have or are going to need to complete. - This is vitally important to include into my plan, so that I know what I am aiming for within the business and how the on going process is working.

  2. The international business environment of Apple Inc

    There are many forms of barriers of trade that can take place. These are: 1. Import duty 2. Subsidies 3. Tariffs 4. Import licences 5. Voluntary export restraints The import duty and tariffs can affect Apple Inc from trading their products overseas.

  1. Describe how visual merchandising techniques are applied to goods in different types of retail ...

    Many teenagers and high school students wear Hollister products just because they want to become piece of the fashion and style, by showing a great fashion sense. 1. Price - Hollister Co, keep the price points of their goods, affordable to its targeted group of customers, high school students aged 14-18.

  2. Unit 32 P3 explain how the developments in the consumer market have impacted on ...

    Top up/ home essential store- top up stores are stores that allow the customer to come to the store and top up their mobile phones, which makes stores like Tesco become more convenient for customers and also allow them to do their normal shopping alongside topping up their phones, a

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work