Elizabeth arden executing global supply chain re engineering

Elizabeth Arden Case Study Group Assignment

Assuming the role of Pierre Pirard, how would you prioritize the effort? What would be your first, second, third steps?

ELIZABETH ARDEN: EXECUTING GLOBAL SUPPLY CHAIN RE- ENGINEERING Norman Gao wrote this case under the supervision of Professor David Wood solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2013, Richard Ivey School of Business Foundation Version: 2019-01-14 Pierre Pirard, senior vice-president of Global Supply Chain at Elizabeth Arden in New York City, was troubled with the challenges that lay before him. It was mid-2008 and less than a year after joining Elizabeth Arden, he had already made a significant impact in forecasting, inventory control and service performance. However, Pirard knew that the company would need much more. He was hired to make sweeping changes to how the company managed the supply chain and his next move would require a radical consolidation of suppliers, make dramatic changes to inventory management, have a far-reaching impact on product development and require major lead time reductions. Given such a disruptive move, could current suppliers be able to meet his expectations? Could Elizabeth Arden’s current employees keep up with the pace of change expected? And were significant results to shareholders really achievable? Pirard was determined to execute the re-engineering in a manner that would best address all these concerns. COSMETICS INDUSTRY “Cosmetics” are products used to enhance the appearance or odour of the human body. They are generally mixtures of chemical compounds, some derived from natural sources, many synthetic.1 The practice of caring, cleansing and decoration of the skin has been in existence for over a millennium. For instance, castor oil was used several thousand years ago in ancient Egypt as a protective balm. Galen of Pergamon (AD 129-199), a prominent Roman physician, surgeon and philosopher, developed one of the first precursors of modern skin creams from a mixture of beeswax, olive oil and rosewater (Aqua Rosae). Elizabeth Arden, Helena Rubinstein and Max Factor developed the modern cosmetics market in the United States during the 1910s. These firms were joined by Revlon just before World War II and Estée Lauder shortly after.2 In 2007, the worldwide cosmetics and perfume industry generated an estimated

1 Ullmann’s Encyclopedia of Industrial Chemistry, Wiley-VCH Verlag GmbH & Co. KGaA, Weinheim, Germany, 2012. 2 Company websites, www.revlon.ca/Revlon-Home/Revlon-Corporate/Corporate.aspx and www.esteelauder.com/cms/about/ index.tmpl, accessed July 15, 2013.

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Page 2 9B13D017 annual turnover of $170 billion.3 Europe was the leading market, representing approximately $86 billion.4 In comparison, the U.S. cosmetics revenue for 2007 was $51.52 billion.5 Market volume information by product category for 2005 in the United States, Europe and Japan is available in Exhibit 1. The manufacture of cosmetics is currently dominated by a small number of multinational corporations that were founded in the early twentieth century, but the distribution and sale of cosmetics is spread among a wide range of different businesses. As of 2004, the top 100 cosmetics manufacturing firms worldwide had a combined market share of $124.5 billion of which the five largest—L’Oréal Group ($17.7 billion), Procter & Gamble Company ($16.5 billion), Unilever ($9.3 billion), Shiseido Company Limited ($5.9 billion) and Estée Lauder Companies, Inc. ($5.8 billion)6—accounted for 44 per cent or $55.2 billion. There were many worldwide distribution channels for cosmetics manufacturers to choose from, including department stores, mass merchandisers, drug stores, TV shopping networks, Internet retailers, distributors, supermarkets and salons. Due to a large portion of the cosmetics industry power being concentrated among a few large companies who all possess significant resources, competition among leading cosmetics manufacturers is fierce. A deep understanding of the drivers of consumer demand (fashion trends, demographics and consumer spending) is needed to build successful brand portfolios, engage positively with consumers and manage available inventory. To capture revenue and market share, cosmetics manufacturers must not only have a clear focus on offering products that are valuable to the eyes of the consumer but also strategically decide between numerous channels to deliver their products to these consumers in an effective manner. Since consumer perception heavily impacts revenue generation, it is common to see dominant cosmetics players enter into licensing agreements or conduct acquisitions in order to obtain brands or to gain access to preferred distribution channels. The structure of these agreements and acquisitions can have a direct effect on materials management. For example, in terms of obtaining brands, Elizabeth Arden acquired Liz Claiborne’s fragrance portfolio in 2008, structured as a long-term licensing deal whereby Elizabeth Arden acquired inventory and hard assets and would pay a royalty stream to Liz Claiborne. In terms of obtaining distribution, a U.S. fragrance manufacturer, Inter Parfums Inc., signed a four-year licensing agreement with the clothing company Gap for international distribution of personal care products through Gap and Banana Republic stores in the United States and abroad as well as in select specialty and department stores internationally.7 A ranking of the top 10 personal care brands and their respective brand value is available in Exhibit 2. Unlike cosmetics manufacturers, suppliers in the cosmetic industry are very fragmented. Cosmetics supplies must comply with the standards of the Food and Drug Administration (FDA), which defines and regulates the extremely broad category of cosmetics in the United States. Even when considering only the cosmetic chemicals market, hundreds of suppliers provide the broad array of organic and inorganic chemicals that are the essential ingredients of cosmetics and toiletries.8 To be competitive, suppliers focus on the ability to produce exciting and innovative products, to deliver on time and to integrate with their clients’ supply chain preferences. Also as a result of the abundance of competitors, successful suppliers

3 www.clickpress.com/releases/Detailed/82987005cp.shtml, Eurostaf, May 2007. 4 2007 average Euro to US$ = 1.37, www.oanda.com/currency/average, accessed June 20, 2013. All monetary amounts are in US dollars unless stated otherwise. 5 Inflation adjusted. “Cosmetic Industry,” Statista Dossier 2012; “Cosmetic & Beauty Products Manufacturing in the US,” 2011, IBISWorld, p. 31. 6 “The Beauty—Top 100,” WWD Beauty Report International, www.scribd.com/doc/3027409/Top-100-Cosmetic- Manufacturers, accessed July 8, 2013. 7 International Cosmetics News (ICN), June 1, 2008, p. 8. 8 “Cosmetic Chemicals,” IHS Markit, accessed June 20, 2013, www.ihs.com/products/chemical/planning/scup/cosmetic.aspx, accessed June 20, 2013.

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Page 3 9B13D017 often seek to secure long-term relationships and contracts. For instance, Swiss flavour and fragrance manufacturer Givaudan has signed a creative partnership deal with U.S. consumer goods group Colgate- Palmolive that will establish a dedicated team to work directly with Colgate’s internal perfumery resources on fragrance development across all categories. Givaudan is hoping the partnership will help it secure a spot on Colgate’s list of preferred suppliers.9 However, large cosmetics manufacturers may not necessarily favour long-term contracts due to the cost savings associated with lower prices when many suppliers compete for business. Given the fierce rivalry in cosmetics manufacturing as well as the abundance of both channels and suppliers, operational success in the international cosmetics industry is increasingly dependent upon the ability to handle complexity in addition to effective brand management. Not only must companies align their operations in a way that allows them to benefit from multiple upstream and downstream choices in the cosmetics value chain, they must be able to do so in a way that capitalizes on the fast-moving trends of the international cosmetics market. For instance, sales of prestige beauty products, primarily sold in department stores, dropped 3 per cent following a 15-year low in U.S. consumer confidence at the end of 2007.10 However, despite weaker than normal global market conditions, Brazil’s cosmetics and toiletries industry is second fastest growing market worldwide with a growth of nearly 14 per cent in 2007.11 ELIZABETH ARDEN INC. Elizabeth Arden established the modern concept of the U.S. beauty industry a century ago. Born Florence Nightingale Graham, she traveled from rural Canada to New York City, where she opened her company, initially named the “Red Door” salon, on Fifth Avenue in 1910. Her fundamental belief was that beauty should not be a veneer of makeup but an intelligent cooperation between science and nature in order to develop a woman’s finest natural assets. She lived by her mantra, “To be beautiful is the birthright of every woman.”12 She was largely responsible for establishing makeup as proper and appropriate, even necessary, for a ladylike image, when before it had often been associated with lower classes and such professions as prostitution. She targeted middle-aged and plain women for whom beauty products promised a youthful, beautiful image.13 Elizabeth Arden’s company grew from a small start-up to an international corporate success. It was acquired in the 1970s for $38 million by the pharmaceutical company Eli Lilly & Co. It changed hands twice more until 1990 when Unilever PLC purchased it. Unilever then sold it in 2001 to French Fragrances, Inc. (FFI), a perfume marketer that dealt in prestige as well as mass-market products. FFI paid approximately $190 million in cash for Elizabeth Arden, plus an exchange of stock that gave Unilever an approximately 18 per cent stake in the publicly owned company. Shortly after the acquisition, FFI changed its name to Elizabeth Arden, Inc.14 Since its inception, Elizabeth Arden had become one of the world’s leading makers of prestige perfumes and cosmetics, goods that were sold in over 90 countries worldwide, with major markets in the United States and Europe. Examples of brands included Elizabeth Taylor’s White Diamonds, White Shoulders, Red Door, 5th Avenue, Visible Difference and Millenium. However, sales were in decline by the turn of

9 International Cosmetics News (ICN), June 1, 2008. 10 www.marketoracle.co.uk/Article3859.html, accessed June 20, 2013. 11 www.klinegroup.com/news/speeches/cosmeceuticals-27jun08.pdf, accessed September 14, 2013. 12 corporate.elizabetharden.com/about-elizabeth-arden/, accessed June 20, 2013. 13 womenshistory.about.com/od/fashion20th/p/elizabeth_arden.htm, accessed June 20, 2013. 14 www.fundinguniverse.com/company-histories/elizabeth-arden-inc-history/, accessed June 20, 2013.

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Page 4 9B13D017 the century—annual sales were estimated at $890 million, well below the company’s peak in the early 1990s—and under new ownership, things were about to change. SITUATION IN 2007 Under the direction of Chairman and Chief Executive Officer (CEO) Scott Beattie, fiscal 2007 was a milestone for Elizabeth Arden as it surpassed $1 billion in net sales. Total net sales increased by 18.1 per cent to a record $1.127 billion, and reported earnings per diluted share grew 18.2 per cent to $1.30 from $1.10.15 Main contributions to this net sales were from North American fragrances (23 per cent), international businesses (12 per cent) and branded skin care and colour cosmetics (16 per cent). Select financial information can be found in Exhibit 3. This achievement was driven by the successful integration of two strategic acquisitions in the year, continued successful innovation on product offerings and further expansion and development of international markets. The company aimed to continue this progress and to grow from approximately $1.2 billion to $2 billion in the next three years. However, a top-line focus was not in itself sufficient; the company must drive operational results and increase value for its shareholders. As CEO Beattie stated in the 2007 annual report:

Our business strategy is to grow our brand portfolio by investing behind our core brands and to acquire control of and develop additional prestige brands through brand development, acquisitions and new licensing and distribution agreements […] We are also focused on improving our cash flow and operating margins, particularly through improving our extended supply chain and logistics functions, managing the advertising spend behind our new fragrance launches and leveraging our global overhead structure more efficiently.

Elizabeth Arden offered more than 400 prestige fragrance, skin care and cosmetic brands to retailers in the United States,16 including department stores such as Macy’s, Dillard’s Saks, JCPenney, Belk and Nordstroms; mass retailers such as Wal-Mart, Target, Sears, Kohl’s, Walgreens, Rite-Aid and CVS; and international retailers such as Sephora, Marionnaud, Hudson’s Bay, Shoppers Drug Mart, Myer and Douglas, as well as several travel outlets. It also sold online via e-commerce. In 2007, the 10 largest customers accounted for more than 39 per cent of net sales; the only customer that accounted for more than 10 per cent of net sales was Wal-Mart (Sam’s Club).17 See Exhibit 4 for categories of customers and their respective contribution to 2007 net sales. As was customary in the industry, Elizabeth Arden generally did not have long-term or exclusive contracts with retail customers but relied instead on purchase orders. The cosmetics industry competed primarily on brand strength, merchandise selection, reliable order fulfillment and delivery. Elizabeth Arden therefore focused on product recognition, quality, performance, price and providing value-added services to certain retailers (e.g., category management services).

15 Elizabeth Arden Annual Report 2007. 16 Of Elizabeth Arden’s distribution, 100 prestige brands were owned or licensed and 300 additional prestige fragrance brands were manufactured by other beauty companies. 17 Wal-Mart (including Sam’s Club) represented approximately 15 per cent of consolidated net sales and approximately 25 per cent of the North American fragrance segment net sales.

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Page 5 9B13D017 The Challenge of Translating Growth into Profit In 2007, the supply chain was performing sub-optimally compared to both industry benchmarks and internal aspirations.18 For instance, logistics costs (i.e., distribution, outbound freight) as well as supply chain overhead (i.e., demand and materials planning labour, purchasing labour) had been increasing as a percentage of net sales. The existing supply chain processes and infrastructure were determined to be manually intensive and inefficient and created an unnecessary amount of low value-added work. However, even though these processes were necessary for the business at the moment, focus would have to be on a fundamental shift in the operating model for the future. It was clear this change wasn’t just a supply chain initiative but rather a transformation of Elizabeth Arden, involving more pieces of the company. Since being hired a little less than a year earlier, Pirard had already completed improvements on production planning and sales forecasting. Forecasting and demand planning at Elizabeth Arden had been tedious and focused on the short term without extensive use of market intelligence and strategic account management. The company had been using a forecasting practice that enabled each division along a product delivery chain to add its own contingencies to forecasted numbers. This led to overestimation of necessary product as contingencies accumulated with only 33 per cent of the top 100 stock-keeping units (SKUs) in FY2006 forecasting “well” (within plus or minus 25 per cent error), resulting in a total accuracy of only 70.5 per cent. To improve the inventory accuracy and order fulfillment rate, Pirard utilized a single, more accurate forecast and sold off slow and obsolete products to make room for faster moving SKUs. Although progress was being made, Pirard knew that the internal process improvements conducted to date would not be sufficient for Elizabeth Arden to meet the expectation of CEO Beattie and the board. He believed that a complete re-engineering initiative would be necessary, centring on a “turnkey strategy.” In this new approach, Elizabeth Arden would seek to consolidate suppliers and the suppliers that remained would be given additional responsibility for undertaking the entire manufacturing process from materials procurement to product completion. Ideally, this would enable Elizabeth Arden to simplify procurement efforts. However, Pirard was concerned about the enormity of this change and wondered how to best approach the transformation. MANUFACTURING, SUPPLY CHAIN AND LOGISTICS Materials Management Elizabeth Arden used independent suppliers to obtain substantially all raw materials, components and packaging products and contract fillers to manufacture finished products relating to owned and licensed brands. As was customary in its industry, Elizabeth Arden also generally did not have long-term or exclusive agreements with contract manufacturers.19 Purchases were made through purchase orders, and Elizabeth Arden believed it maintained a good relationship with numerous manufacturers of brands and, although costly, could replace manufacturers should some become unavailable. Since individual purchase orders were made to many independent suppliers, Elizabeth Arden had to assume the responsibility of orchestrating a large portion of the product completion process. For instance, for a bottle of perfume, Elizabeth Arden bought the fragrance, pump, box, glass, cellophane wrap and

18 Company files. 19 Exception: Cosmetic Essence Inc. (third-party) manufacturing agreement ending January 31, 2010.

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Page 6 9B13D017 label separately from six independent suppliers and then had all these purchased materials shipped to a third-party manufacturer. After the third-party manufacturing was completed, Elizabeth Arden then arranged for the finished product to be shipped to either distribution centres around the world or directly to a customer. In an effort to minimize logistics complexity and reduce delivery time, “drop shipping” (sending product directly from source to customer) was used wherever possible. Although Elizabeth Arden hoped to be more flexible and have lower risk with a diversified independent supplier base, Pirard was concerned that the orchestration efforts detracted from the company’s strategic strengths. In 2007, material and indirect purchases of $350 million20 were converted into more than 9,000 items of finished goods SKUs. At a quick glance, 12 per cent of SKUs sold in 2006 made up 80 per cent of total sales (see Exhibit 5). A high level of complexity and customization in addition to the numerous SKUs put a burden on the fulfillment group. In addition, Pirard was concerned that even though direct spend from purchasing was increasingly concentrated with the Top 10 suppliers21 (see Exhibit 6), it was not translating into volume benefits. In FY2007 the top 10 suppliers were estimated to represent 40 per cent of all items purchased. The high level of customization, slow moving SKUs and long lead times all led to extremely large inventory levels. Inventory days of supply (DOS) were 225 days, well above industry standard (approximately $340 million inventory investment). Finished goods alone accounted for 120 DOS. Inventory carrying costs were estimated to be 4.2 per cent of net sales and 7.2 per cent of cost of goods sold (COGS). As well, almost 30 per cent of unit volume forecast changes occurred within the supply lead time period, which drove logistic costs well above average. In 2007, Elizabeth Arden spent $3.2 million on airfreight costs and 0.3 per cent of sales on materials planning. Despite the high level of inventory and an increase in the expediting of finished goods, the current fill rate was only 85 per cent, 10 per cent below the industry. Although Pirard had already done some work to improve the fill rate by focusing on selling off some slow moving SKUs to make room for faster moving product, he was still very concerned with the very poor fill rate. He wondered how the re-engineering effort could not only further alleviate fill rate concerns but also help address the multitude of other materials management problems. How much impact could this re- engineering have on delivering bottom-line operational results? Organizational Design and Full-Time Equivalents (FTE) As of September 4, 2007, Elizabeth Arden had approximately 2,250 full-time employees and approximately 600 part-time employees in the United States and 17 foreign countries. Within the scope of the supply chain re-engineering, there were 217 full-time equivalents (FTEs) across 18 locations and six process areas (see Exhibit 7). Pirard was worried about the very manual and labour-intensive purchasing process—buyers spent most of their time on purchase order generation and expediting for both the individual components and finished goods, leaving limited time for strategic sourcing and value analysis. There was also no centralized management to perform strategic purchasing, resulting in a high direct material spend and an inability to consolidate spend across brands/commodities and utilize volume leverage to negotiate better pricing with

20 As of January 2008. 21 Top 10 suppliers, by volume order: Jackel, Matic Plast, IFF, Pochet, Givaudan, Arkay Packaging, Heinz, Rexam, Quest and Interasia.

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Page 7 9B13D017 suppliers. Pirard was concerned that this purchasing issue might only get worse as changes to the organization unfolded. Elizabeth Arden’s organizational design was functionally organized with employees interacting through hand-offs. It had already been determined that a more “customer oriented” approach to the organizational design might align more with a turnkey approach (e.g., in the Skin & Color Department). Pirard wondered if employees could handle the ambitious rapid re-engineering effort, and if so, what the best way of managing the workforce to deliver the expected results would be. MOVING FORWARD Beattie had hired Pirard because he knew he could make the changes necessary. The supply chain needed work, and there were many areas of proposed improvement that included, but were not limited to enhancing the effectiveness of demand management; developing a more collaborative, turn-key approach with key suppliers; simplifying material flows and collaborations with key accounts; utilizing strategic sourcing; and developing more cross-functional ability. However, many questions still remained unanswered with respect to Pirard’s task of carrying out the re-engineering and turning Elizabeth Arden’s tremendously successful growth into operating results. Pirard wondered which execution initiatives should be prioritized. Would the execution of the re-engineering vary by product type (e.g., glass sourcing versus fragrance sourcing)? As well, would the organizational design change, and if so, how much would it change and what would the end result look like? Would the savings be direct savings, indirect savings or both? Pirard knew that the supply chain re-engineering effort would be critical to the future success of Elizabeth Arden—more importantly, he knew that how he chose to execute the changes to the various components to the supply chain would directly affect the level of impact that the effort would have. He wanted to remain “results oriented” and therefore be able to tie the supply chain strategy to quantifiable outcomes. He turned his attention to three main questions in the turnkey strategy: how to effectively manage the consolidation of suppliers; how to execute the optimal organizational structure for this change; and lastly, how to maximize the monetary impact of the re-engineering for Elizabeth Arden and its shareholders. How much money would be saved; where would the savings come from; and when would they be realized?

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Page 8 9B13D017 EXHIBIT 1: MARKET FOR COSMETIC PRODUCTS IN THE UNITED STATES, JAPAN AND EUROPE

(2005)

Market for Cosmetic Products (2005) Product Market volume, (€B)

U.S. Japan Europe Skin and face 5.6 6.8 8.7

Body care 3.8 1 4.7 Hair treatment agents 5.5 4.2 6.2

Perfume 2.4 0.2 3.2 Decorative cosmetics 3.2 3.1 3.3

Other 2.6 1.4 4.1 Total 23.1 16.6 30.3

Source: Ullmann’s Encyclopedia of Industrial Chemistry 33, Section 15, Table 2.

EXHIBIT 2: TOP 10 PERSONAL CARE BRANDS (2008) IN BROAD CATEGORY OF “COSMETICS”

Top 10 Personal Care Brands (2008)

Rank Brand Parent Company Brand Value ($B) Brand Momentum

1 Gillette Procter & Gamble 18 7.5 2 L’Oréal L’Oréal 12.3 6.5 3 Colgate Colgate-Palmolive 7.7 5 4 Avon Avon Products Inc. 6.6 5.5 5 Garnier L’Oréal 4.2 5 6 Nivea Beiersdorf 3.2 4.5 7 Lancôme L’Oréal 3.1 6.5 8 OralB Procter & Gamble 2.6 5.5 9 Crest Procter & Gamble 2.3 5.5

10 Olay Procter & Gamble 2.3 6 Source: Millward Brown Optimor (including data from Brandz, Datamonitor, Bloomberg), International Cosmetics News, June 1, 2008.

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Page 9 9B13D017

EXHIBIT 3: SELECT FINANCIAL DATA (IN $ THOUSANDS)

Years Ended June 30,

2007 2006 2005

Selected Statement of Income Data Net Sales* $1,127,476 $954,550 $920,538

Gross Profit $461,319 $404,072 $411,364 Income (loss) from operations $74,006 $68,257 $78,533 Debt extinguishment charges $– $758 $– Net income (loss) $37,334 $32,794 $37,604 Accretion and dividend on preferred stock $– $– $– Accelerated accretion on converted preferred stock $– $– $– Net income (loss) attributable to common shareholders $37,334 $32,794 $37,604

Selected Per Share Data Earnings (loss) per common share Basic $1.35 $1.15 $1.35

Diluted $1.30 $1.10 $1.25 Weighted average number of common shares

Basic 27,607 28,628 27,792 Diluted 28,826 29,818 30,025

Other Data EBITDA** $98,524 $89,608 $100,038

Net cash from operating activities $58,816 $65,276 $35,549 Net cash from investing activities $110,518 $24,335 $17,508 Net cash provided by (used in) financing activities $53,120 $(37,584) $(15,785)

Years Ended June 30,

2007 2006 2005

Selected Balance Sheet Data Cash $30,287 $28,466 $25,316 Inventories $380,232 $569,270 $273,343 Working capital $298,165 $280,942 $275,628 Total assets $939,175 $759,903 $719,897 Short-term Debt $97,640 $40,000 $47,700 Long -term-debt, including current portion $225,655 $225,951 $233,802 Convertible, redeemable preferred stock $- $- $- Shareholder’s equity $320,927 $277,847 $259,200

* Comparison of U.S. and international net sales = 63:37 (2007), 60:40 (2006), 62:38 (2005). ** EBITDA: earnings before interest, taxes, depreciation, and amortization Source: Company files.

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EXHIBIT 4: ELIZABETH ARDEN CUSTOMER BREAKDOWN BY SALES VOLUME (2007)

Region SBU* Total FY06 Sales ('000) No. of

Customers in SBU

No. of Customers Making up Top

80% of SBU Sales

Percent of Total Sales

North America

Mass $483,647 361 17 46% Prestige $182,065 82 23 17%

Mid-Tier $59,593 127 4 6% International All Other $317,073 2016 177 30% TOTAL $1,042,378 2586 242 100%

*SBU: strategic business unit Source: Company files.

EXHIBIT 5: ELIZABETH ARDEN TOP 40 SELLING BRANDS IN FY2006

1–10 11–20 21–30 31–40 CURIOUS PROVOCATIVE HALSTON Z14 IN CONTROL WHITE DIAMONDS TOMMY GIRL DESIGN LADIES RED DOOR REVEALED FANTASY DRAKKAR NOIR TRUE STAR OTHER CHEEK RED DOOR FIFTH AVENUE AFTER 5 BLOCKBUSTER ARDEN CORP/COFFRET SIGNATURE TOMMY BOY OTHER EYE ETERNITY LADIES CERAMIDE SKINCARE EIGHT HOUR MILLENIUM OTHER MAKEUP FOUNDATION SUNFLOWERS ARDENBEAUTY POLO SPORT MEN 5TH AVENUE PAUL SEBASTIAN COFFRET WOMEN A/ANAIS GREEN TEA LIPSTICK WHITE SHOULDERS ETERNITY MENS

PREVAGE PASSION WOMEN PROVOCATIVE INTERLUDE OSCAR LADIES

Source: Company files.

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EXHIBIT 6: PERCENTAGE OF TOTAL DIRECT SPEND IN THE TOP 10 SUPPLIERS (APRIL 2007)

Note: FY2007 amount was a forecast based on the quarterly spend pattern of FY2006, materials and indirect purchases actually amounted to $350 million as of January 2008. Source: Company files.

EXHIBIT 7: FULL-TIME EQUIVALENTS (FTE) BREAKDOWN BY LOCATION AND PROCESS

Note: FTE = Total dedicated staff + documented part time staff contributions. 217 in-scope full time equivalents Source: Company files.

FTE by Process ($ million)

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