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It’s December & the Budget isn’t finalized…?

December 10th, 2008 Comments off

Needless to say the last month has been extremely hectic trying to reengineer the financials of a new company, as well as trying to finalize the 2009 Budget. While it’s kept me from regular updates on the blog, it’s been a great exercise in a truly unique economic environment. As of now, I am looking to present the final 2009 Budget to the Board next week for approval. If this was any of the prior years I had gone through the budgeting process I would have been infuriated if the Budget had not been completed by the beginning of Q4, but then again, this is no ordinary year.

Considering that we are focused within the Retail / Apparel sector, we have obviously been closely watching the retail comp results of the last quarter and trying to anticipate the impact to our own business. Fortunately, one of our larger customers, Journeys, has been posting positive retail comps, which has been a bright spot in the Genesco portfolio. However, others have not been so fortunate. We also distribute product through the “Core” channel, which is primarily comprised of “Mom & Pop” shops, which have exhibited some surprising resiliency over the last half-year. Clearly, this holiday season will be the true test for them. Regardless, we have ended up using every bit of time in this calendar year so that we can finalize and commit to a 2009 Budget that is as accurate as possible and not having to explain obvious variances for the remainder of the year.

One of the more challenging fronts has been the International side where we distribute product through more than 45 countries and negotiate our transactions in both the U.S. Dollar and Euro. For our Euro accounts, although we have had discussions with some of our customers about decreased purchasing power and weakened markets, those customers have also shown surprising resiliency. However, for those subject to exchange rates based on their native currency, there’s a different story. We’ve seen decreases of any where from 25% in the U.K., to 40% in Australia, and outright currency freezes in a number of other countries. Will the currency situation reverse as the oil situation did from its highs this year? Hard to say, but at this point we’re planning for an “As-Is” scenario.

So as we move into the final weeks of 2008 and prepare the final Budget for submission to the Board, I’ve been able to effectively incorporate the conditions currently reflected in our sector, which would not have been included were the Budget completed at the beginning of Q4. We’ve made changes to all aspects of the Budget and will be moving into 2009 with a degree of confidence knowing we’ve been able to reflect all aspects of the current environment. We’ve also had the luxury of being a smaller company and having the agility of moving quick to adapt to market conditions, which is much more difficult in a larger entity. So yes, it is December and only now is my Budget being finalized. When was your Budget completed? Are you going to spend the year explaining countless variances or have you been able to incorporate current market conditions?

Thanks for reading . . . .

Jeffrey Ishmael