GODIVA CHOCOLATIER

Godiva Chocolatier



Godiva Chocolatier

Question 1

The company began operations in North America in 1966 as an importer and distributor of Godiva chocolates from Belgium. Godiva is owned by Turkish confectioner Ülker Bisküvi Sanayi? which acquired it from Campbell Soup in 2008. The company has reflected the results of this business as discontinued operations in the consolidated statements of earnings. The company used approximately $600 million of the net proceeds to purchase company stock. See Note (b) to the Consolidated Financial Statements for additional information. In 1994? following a successful test at its Chicago boutique? Godiva began a chain-wide redesign of its stores? which now numbered more than 110. Abandoning the jewelry-store look of pink marble and black lacquer? a new Art Nouveau-inspired combination of bleached wood floors? creamy white marble? and richly-finished cherry wood cabinets was introduced. At the same time? the shops were made more welcoming? with the layout changed to encourage browsing while prices were displayed in public view. New? affordable treat items were introduced including Bouches? single-serving chocolates priced below $3. In 1995? the company gained Kosher certification? with most of its chocolates now manufactured in accordance with Jewish dietary laws.

While these changes were taking place? Godiva also revamped its direct-marketing unit? which had never heretofore turned a profit. Catalogs were redesigned and other elements of the operation were restructured? which helped produce profits as well as a sales increase of 15 percent in 1995 and 20 percent in 1996. The mail-order division? which still accounted for less than 10 percent of the firm's total earnings? targeted both corporate accounts as well as the general public. A survey done via Godiva's Web site? which had been launched in 1995? found that a typical customer was a woman who earned $60?000 per year. In the third quarter of fiscal 2009? the company recorded pre-tax restructuring related costs of $6 million ($4 million after tax or $.01 per share) in Cost of products sold associated with the previously announced initiatives to improve operational efficiency and long-term profitability. In the nine-months ended May 3? 2009? the company recorded pre-tax restructuring related costs of $21 million ($14 million after tax or $.04 per share) in Cost of products sold. Net earnings per share in the current quarter benefited from a reduction in the weighted average diluted shares outstanding? primarily due to share repurchases utilizing the net proceeds from the divestiture of the Godiva Chocolatier business and the company's strategic share repurchase programs. For the nine-months ended May 3? 2009? earnings from continuing operations were $663 million compared to $582 million a year ago. Earnings per share from continuing operations were $1.84 compared to $1.51 a year ago. After factoring in the items impacting comparability? earnings from continuing operations increased compared to the prior year primarily due to lower interest expense and reduced administrative costs? which were partly offset by the negative impact of currency translation. After factoring in the items impacting comparability? earnings per share from continuing operations increased in the current ...