DBApparel (Dim Branded Apparel) is the European leader in the textile sector. It designs, manufactures, and distributes products in categories such as lingerie, men's underwear, and hosiery (tights, socks, knee-highs). The DBApparel Group has a portfolio of own-brand or licensed brands with strong local and international reputation. For example, brands such as Dim, Nurdie, Abanderado, Playtex, Wonderbra, and Lovable. The various brands are by far the market share leaders in their distribution channel in their respective categories. The DBApparel Group was sold by Sun Capital Partners to Hanesbrands Inc. in August 2014, a global leader in textiles.
Caroline-Emilie Schuster, Group Treasury Director, tells us about the actions undertaken since taking up her position in the textile sector.
Caroline-Emilie, what is your role at DBApparel?
As Treasury Director, my mission is to ensure the sustainability of both operational and strategic activities. I must ensure that working capital is financed through adequate financing lines, while also monitoring financial debt.
Indeed, the DBApparel Group must be able to generate sufficient added value to repay its financing lines. It must also allow us to reinvest in our operations. Although we are leaders in several segments and countries, the textile market has become increasingly strained in recent years. The weak economic climate isn't helping. Achieving our annual revenue targets is always a challenge.
Cash is the key indicator of the financial health of all businesses. and that is why all employees must be involved.
Every action has an impact on cash.
The financing put in place, particularly for working capital requirements, must be flexible enough to respond to potential fluctuations in activity. These fluctuations are due to climate variations, a contrasting economic environment, or adverse developments in the financial markets. These various reasons have made it one of my priorities to set up working capital financing lines capable of keeping up with the level of activity. The three key words to always keep in mind are: solvency, liquidity and profitability.
What are the main challenges you have encountered in your role?
“Several issues exist, which has led to strengthening, reviewing or implementing procedures concerning:
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Sales forecasts
"On a weekly and monthly basis, each entity establishes a sales forecast, called a Business Forecast. These are then transformed into internal production plans through the Group's factories. Or via purchasing forecasts from external suppliers (outsourcers)."
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Inventory management
"It is important to have sufficient, high-quality inventory coverage to satisfy customer orders. The Group has decided to increase inventory levels for certain so-called "blockbuster" products, particularly in order to ensure impeccable customer service.
In the event of failure to deliver the agreed goods on the scheduled date, penalties may apply. To compensate for possible delays, goods are sometimes shipped by air rather than by sea. This method is only used in cases of force majeure due to its cost and environmental impact. All of this applies to outsourcing. But we are also fortunate to have in-house factories that allow us to constantly monitor production based on customer orders."
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Obsolete stock management
“Good purchasing management is essential.
In the textile industry, there is a six to nine month lead time between placing an order with a supplier and final delivery to the customer. Therefore, it is important to be very careful, as having too much inventory can seriously harm the company's health. We are talking about the scissors effect. Stored and unsold products gradually become obsolete. These stocks are subject to provisions for depreciation in the accounts. Thus, to recover cash used inappropriately, the disposal of stocks can be done via factory outlets within the Group. Also, via " players " destocking, for example online or from external partners. The provisions made in the accounts are thus at least partially recovered. In any case, in terms of cash flow, this remains money that will have been mobilized and a sale of products with a low margin. "
What are the main actions you have taken in recent years?
“When Hanesbrands Inc. acquired DBApparel Group, the motto was clear: ‘Strengthen the company’s cash culture with existing tools,’ namely:
A cash flow management and monitoring tool.
Cash flow reporting that includes a forecast over several weeks for all legal entities of the Group:
- Weekly monitoring of cash position, availability and consolidated debt capacity at the level of the DBApparel Group.
The cash position of all entities is reported to management, with a focus on availability (cash + unused financing lines). Each cash flow forecast and monitoring includes:
- cash receipts (factored or non-factored customer collections),
- details of operational expenses (salaries, social security contributions, product purchases, transport costs, logistics costs, media, marketing expenses, selling, etc.)
- and non-operational costs (capex, taxes, financial costs, etc.).
Then,
- Monitoring of net financial debt, that is, the volume of financing used, from which we subtract the cash position (money available in accounts + investments).
This calculation is performed at the end of each month. However, the evolution of this debt can also be monitored using the weekly cash flow report.
And finally,
- Legal entity reporting and consolidation is carried out on Excel in order to have the Group's cash position available each week. But also in real time, with a view of the coming months by week.
Upon receipt of this document, it is my responsibility to challenge all the assumptions made within it. Particular attention is paid to the use of financing lines, particularly factoring, but also to the balance between receipts and disbursements. The item that requires the most attention is product purchases because they involve cash flow and have an impact on inventory.
Funding that meets the needs of the activity:
Based on the forecast, cash flow requirements are adjusted using the various financing lines within each legal entity. Most of these are factoring lines supplemented by CMT working capital financing lines.
DBApparel also has an innovative tripartite supplier financing solution. It's a payment tool grafted onto our supply chain tool. Our partner, American Express, pays suppliers on the contractual date. And returns to the relevant legal entity 58 days later. In addition to factoring lines, each entity has bank overdraft lines. Or working capital financing lines via commercial paper drawdowns.
After more than two and a half years in this position, what are the key elements that you consider essential for effectively disseminating cash culture with a view to good cash flow monitoring?
“In my opinion, the key elements are:
- Have a perfect knowledge of all the mysteries of the company.
My previous experiences have contributed greatly to this (i.e. management control, financial manager of a division, consolidation, audit, operational project management). And making operational staff understand the role of the treasury department. This can involve phases of precise performance monitoring (i.e. even "policing"). The work carried out is not always recognized at its fair value. However, it allows the Group to meet its working capital financing needs in a delicate context.- Anticipate and understand financing needs via forecasts and cash flow monitoring. Not forgetting net debt monitoring.
- Present the results clearly and transparently from the Group to various financial third parties (banks, credit insurers, etc.)
- Anticipate working capital levels and in particular stocks.
It’s a mix of simple actions and ensuring that any action/project carried out has a positive return on investment. Educating operational staff on the slogan “cash is king” requires time, teaching and support from management.”
In summary, could we conclude on 3 main areas of work?
“In summary, it is necessary to:
- Train / Educate: what is the WCR? What are the current funding methods? Explain clearly by adopting a speech adapted to each individual
- Establish a cash flow monitoring and management table (i.e., the importance of cash flow from operations). Treasury is the key arm of a financial director and acts as a true business and strategic partner. This is true not only for the financial department, but also for the President and shareholders.
- Know how to innovate and implement appropriate financing solutions.
These would be the three main areas of work for me.”
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