BACKGROUND
Luxury goods have large margins. Buyers are not just paying for the quality but also for the brand. In this project, we will look at two luxury brands: Tiffany & Co. and Canada Goose.
Most of the brands are owned by groups. For example, LVMH has at least six divisions that own 75 brands in total. To withhold business-sensitive content, the groups often disclose the financial information in one set of consolidated statements. The segment breakdowns are vague, let alone the performance of an individual brand. It is difficult to disentangle the financial information.
Fortunately, Tiffany and Canada Goose are single-brand companies, making them easier for us to study. Tiffany is specialized in jewelry, while Canada Goose sells clothes. Tiffany has a much longer history and a much larger market cap, whereas Canada Goose is younger and smaller. Despite these differences, you may find interesting similarities between the two.
Requirement:
*Discuss what SG&A includes for each company.
*Canada Goose has one more line item listed above operating income. What is it? Because it is listed along with SG&A, it is not part of the manufacturing cost. If Canada Goose were to make short-term production plans, would that line item have any effect on the decision-making process?
*A huge portion of Tiffany's SG&A is associated with Advertising, Marketing, Public and Media Relations Costs. What are those costs in 2019, 2018, and 2017 in dollar amount and as a percentage of net sales? If we want to assign these costs to "Jewelry collections," "Engagement jewelry," "Designer Jewelry," and "All other," how would you assign? (Hint: Look at the page marked K-60.)