Investor Presentation – May 2015
Performance for All
Select Financials
Ticker: DDFW – NYSE
Price: $73.27
Market Cap: $600 mil
1Yr Tgt Est: $130.25
Beta:1.57
Price-Earnings(ttm): 20.03
Yield: %1.36
Profile
Sector: Consumer Goods
Industry: Textile-Apparel
Footwear
Headquarters: Mahwah, NJ, USA
Founded: 1997
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F O OT WEAR IN U D S T RY S TO CK P ER F O R AN CE
DigDeep Industry Composite Index
Robert Schaefer
Chief Market Strategist
Asa Whittaker
Chief Operations Officer
Brianne Bernardo
Chief Marketing Officer
Ryan Konrad
Chief Financial Officer
Anna DePalma
Chief Information Officer
Firm
Vision and
Goals
1st
Half
Operations
and
Strategy
2nd
Half
Analysis
and
Summary
Post
Game
1st Half
Stock Price - At least 15% average annual growth rate
Growth in earnings available for shareholders
Share repurchase program by year 14
Cash Dividend – Small but consistent and increasing
Dividends by year 14
Market Share – Overall Leader
International average of at least 20% wholesale; 25% internet
Particular focus on N.A. and Asian markets
Image Rating – No specific goal delineated
Aim to reach expectation of “70” consistently
Initial Strategy
“Cost” Strategy
Low Cost, low/moderate quality,
moderate breadth
Use aggressive pricing, to assert
a dominant cost strategy
Revised Strategy
“Best Value” Strategy
Relatively low cost, moderate/high
quality, moderate breadth
Leverage existing cost saving
practices
Price & Quality
Product Breadth
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Score By Year
- Price War
- High Capacity Requirements
- Razor Thin Margins
- Sacrifice Ethical Necessities
- Less Congested Market
- Better Pricing Power
- Leverage Scale/Higher Margin of Safety
- Increase CSR Spending
To become the
international leader in
athletic footwear by
offering high performance
shoes at a fair price;
and embrace our motto
“Performance for All” by
performing at the highest
level for our customers,
stakeholders, and the
environment.
2nd Half
Strategy
Efficient and low cost per unit
production without sacrificing
quality, worker welfare.
Tactic
Employ proactive demand forecasting
Leverage economies of scale; high
capacity utilization
Invest in plant upgrades; highest ROI
Over $15 million
Labor & Compensation
$750 annual best practice training
Consistent 1%-2%yoy wage increases
Incentive pay 15% of total comp
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Total Plant Capacity
NA Asia
Efficient Wholesale
Logistics
Prioritize key distribution
channels keeping in mind
shipping costs, tariffs,
and exchange rates
Maintain high inventory
turnover
Accurately forecasting in
the first place
Clearing leftover inventory
at discount
Consumer Friendly Internet
Purchasing
Shipping is always free
Shipped in “green” packing
Up to 30% annual sales
Private Label Bidding Inherently
Risky
Generally did not engage in private
label except to use up excess
capacity; avoid uncertainty
Beginning in year 16, began to sell
roughly 10% in Private Label
Image Rating
Sometimes Higher Margins
Consistently Higher than Average:
Advertising Spending
Particularly in emerging markets
Retailer Support
Celebrity Endorsements
Celebrity Monopoly
Some celebrities with no bids
No explicit spending cap, submit low
bids for all available contracts
Increases celebrity appeal
Diminishes competitor advertising efforts
Increases competitor contract costs
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Celebrity Endorsement Contracts
DigDeep Competitors
Wide Range of Initiatives
Recycled Materials
Energy Efficiency Investments
Charitable Contributions
Ethics Training for all employees
Workforce Diversity Program
Commitment to Our Vision
Consistently ranked in top half of industry
As much as $1.05 per pair went towards CSR
expenditures
Capital Expenditures
Investments in plant and capital
were judged based on NPV or IRR
analysis
Financed using mix of cash and
debt
As operating profits grew and
stabilized, shift towards higher
proportion of debt in financing
mix, no stock
Higher degree of financial
leverage – optimal capital
structure
Stock Price:
Outperformed Index
Substantially
Returning Shareholder
Profits
Beginning in year 14,
small but steadily
increasing cash
dividends
Beginning in year 14,
annual stock
repurchases
Preferred Method, Tax
Policy $-
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F O OT W EAR IN U D S T RY S TO CK P ER F O R AN CE
DigDeep Industry Composite Index
Post Game
Stock Price - At least 15% average annual growth rate
Growth in earnings available for shareholders
Share repurchase program by year 14
Cash Dividend – Small but consistent and increasing
Dividends by year 14
Market Share – Overall Leader
International average of at least 20% wholesale; 25% internet
Particular focus on N.A. and Asian markets
Image Rating – No specific goal delineated
Aim to reach expectation of “70” consistently
Stock Price 15% Yoy:
Successful; exception year 18
FY guidance; $130.25
Cash Dividend & Share Repurchase:
Successful; current yield of 1.36%
Successful; over 1.4 million shares
Market Share:
Wholesale 20%: Generally met
Internet 25%: Consistently met
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Stock Price (Expected) Stock Price (Actual)
Image Rating:
Specific targets; specific
initiatives
Better utilization of
Private Label Sales
CSR Spending
Generally higher quality
Private Label Sales
Repurpose PLS segment
Not merely capacity filler
High margin opportunities
Affects image rating
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GTD Performance
Arches Atheletics Beyond Footwear Conquer Atheletics
DigDeep Footwear Empire Footwear Fancy Feet
Closest Competitors:
Performance: Empire
Footwear/Beyond Footwear
Market Position: Beyond
Footwear