Situation
A leading European luxury consumer goods house faced compounding business model pressures: channel fragmentation across retail and boutique partners, growing pricing tension in key markets, and limited visibility into where capital was actually performing.
The leadership team needed rigorous valuation tools to support decisions on market expansion and product diversification. Internally, the finance function lacked a consistent framework for evaluating investment trade-offs. Capital was being allocated without a clear model tying spend to expected return, which made strategic prioritization difficult.
Objective
The engagement had three defined goals: build a business model to quantify the impact of pricing strategies and channel mix on revenue and gross profit; develop a DCF valuation model to support investment decisions around new markets and product categories; and implement a capital allocation framework (FLIRT) to make investment performance visible and improve resource optimization across the portfolio.
Approach
We engaged stakeholders across finance, commercial, and operations to validate assumptions before building any model. That cross-functional alignment shaped the structure of each tool and ensured the outputs would be used, not archived.
Business ModelWe built a multi-year P&L model covering retail sales, returns, gross profit, and operating expenses by line item, spanning FY21 actuals through FY28 forecast. The model tracks year-over-year growth rates in basis points and percentage of net sales for each cost line, giving the commercial team a direct read on margin impact from pricing and channel decisions.
DCF Valuation ModelThe DCF model runs from FY22 actuals through a terminal forecast, with user-configurable assumptions (discount rate, perpetuity growth rate, working capital, tax rate, and depreciation). It projects net income, operating cash flow, CAPEX, and cash positions annually, outputting a total implied enterprise value. The model was designed to support investment committee reviews and M&A screening.
FLIRT Model (Flexible Investment and Resource Tracking)We built a global expense model covering marketing, advertising, talent, G&A, and product development across an eight-year horizon. The model surfaces operating profit by year as a percentage of net sales and tracks basis-point changes against prior periods, giving leadership a structured view of where the company is over- or under-invested relative to revenue growth.
Figure 1DCF model with FY22–FY37 forecast horizon. Total implied enterprise value: 84,375. Blue cells are model inputs.
Figure 2Company P&L spanning FY21–FY28. Gross profit held at ~69–80% of net sales; net operating profit turns positive in FY25.
Figure 3Global expense model with eight-year horizon, tracking operating expenses and net operating profit as a percentage of net sales.
Impact
The three models gave the leadership team a connected view of the business for the first time. The DCF model supported a board-level review of international expansion options, with precise cash flow forecasts tied to specific market scenarios. The P&L and FLIRT models surfaced the trade-off between marketing investment and gross margin protection, a conversation the company had not been able to hold quantitatively before.
The company expanded its global footprint to Asian and Middle East markets through a mix of company-operated outlets and boutique retailers, reaching 82 countries and territories. It introduced product customization options and moved into newer product categories to strengthen competitive positioning. These initiatives contributed to a revenue CAGR of 7.6% over three years, achieved despite COVID headwinds and a broader luxury market slowdown.
Figure 4 below shows how the three models connect.
Figure 4Three-model framework: stakeholder-validated assumptions feed the Business Model, DCF, and FLIRT tools, converging on strategic decisions for expansion and capital allocation.