3Q13 Earnings Presentation

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3Q13 Earnings Presentation

  1. 1. 3Q13 Earnings Conference Call July 10, 2013
  2. 2. A Word of Caution Certain statements contained in this presentation which are not historical facts are forward- looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address the Company’s plans, activities or events which the Company expects will or may occur in the future. A number of important factors could cause actual results to differ materially from those expressed in any forward-looking statements. Such factors, risks and uncertainties are set forth under the headings “Cautionary Statement Regarding Forward-Looking Statements,” or “Risk Factors” or "Management’s Discussion and Analysis of Financial Condition and Results of Operation" in the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q filed or to be filed, respectively, and which are expressly incorporated herein by reference. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of July 10, 2013. The Company does not undertake to update or revise its forward-looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law. 2July 10, 2013
  3. 3. Agenda Introduction & Safe Harbor Kiley Rawlins, CFA VP – IR & Communications 3Q13 Highlights Howard Levine Chairman & CEO 3Q13 Financial Review and Outlook Mary Winston Chief Financial Officer Operational Update Mike Bloom President & COO Closing Remarks Howard Levine Questions & Answers Howard Levine Mike Bloom Mary Winston 3July 10, 2013
  4. 4. 3Q13 Highlights Howard Levine Chairman & CEO
  5. 5. 3Q13 Highlights • Diluted EPS of $1.05 vs. $1.06 in 3Q12 • Comparable store sales increase 2.9% • Market share growth over the last 4, 12, 26 and 52-week periods 5July 10, 2013
  6. 6. Economic Headwinds $5,800 $5,900 $6,000 $6,100 $6,200 Annual Spend on Consumables 6July 10, 2013 Source: Nielsen Homescan $85 $89 $93 $97 FDO Share of Wallet
  7. 7. Focused on What We Can Control • Control expenses • Increase inventory productivity • Stabilize gross margin • Drive operational efficiencies 7July 10, 2013
  8. 8. Investing for Our Future • Assortment • 500 new stores in FY13 • 60% of stores renovated by end of FY13 • Management team 8July 10, 2013
  9. 9. 3Q13 Financial Review and Outlook Mary Winston Chief Financial Officer
  10. 10. 3Q13 Results 3Q12 Actual April 10, 2013 Guidance 3Q13 Actual Comp sales 5.0% Lower end of 2% - 4% 2.9% Diluted EPS $1.06 $0.98 - $1.08 $1.05 July 10, 2013
  11. 11. Third Quarter Revenues $2.4 $2.6 Net Sales (billions) 3Q12 3Q13 5.0% 2.9% Comparable Store Sales Growth 3Q12 3Q13 11July 10, 2013
  12. 12. Store Activity FY12 FY13 Openings Closings Openings Closings 1Q 101 4 125 1 2Q 83 32 126 17 3Q 103 7 129 3 YTD 287 43 380 21 Ending Store Count 7,267 7,801 Selling square footage (M) 51,945 55,994 Renovations, Relocations and Expansions 583 556 12July 10, 2013
  13. 13. Sales Growth by Category 10.6% 12.2% 14.8% 2.5% 4.1% -3.7%-5% 0% 5% 10% 15% 20% 3Q11 3Q12 3Q13 Consumables Discretionary 13July 10, 2013
  14. 14. Third Quarter Gross Profit 68.9% 72.5% 11.4% 10.3% 9.6% 8.0% 10.0% 9.2% 3Q12 3Q13 Category Sales Mix (% of Sales) Consumables Home Products Apparel & Accessories Seasonal & Electronics 14 36.2% 36.6% 36.2% 35.8% 34.7% $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 3Q09 3Q10 3Q11 3Q12 3Q13 (GrossProfit($M) Gross Profit Trends GM$ GM Rate July 10, 2013
  15. 15. Third Quarter Gross Margin 15 Negative Pressures • Stronger sales of lower- margin consumables • Increased inventory shrinkage • Higher markdowns Positive Impacts • Higher merchandise mark- ups • Lower freight expenses July 10, 2013 35.8% 34.7% 3Q12 3Q13 Gross Margin
  16. 16. Third Quarter SG&A Expense 16 28.7% 28.1% 27.6% 27.6% 27.4% 26.0% 26.5% 27.0% 27.5% 28.0% 28.5% 29.0% 3Q09 3Q10 3Q11 3Q12 3Q13 (percentofsales) SG&A Expense As a percent of sales: • Lower advertising expenses • Lower distribution center expenses • Higher store occupancy expense • Higher store labor expense July 10, 2013
  17. 17. Third Quarter Earnings Results (in millions except for per share amounts) 3Q12 3Q13 Change Net Income $124.5 $120.9 -2.9% Diluted Earnings per Share $1.06 $1.05 -0.9% Weighted average shares - diluted 117.6 115.5 17July 10, 2013
  18. 18. $163 $191 $189 $0 $50 $100 $150 $200 $250 3Q11 3Q12 3Q13 (thousands) • Anniversary of FY12 consumables expansion • Well-managed discretionary inventories 18 -1% July 10, 2013
  19. 19. Capital Deployment Priorities $391 $600 $67 $78 $92 $75 0 100 200 300 400 500 600 700 800 FY12 YTD FY13 YTD (millions) CapX Dividends Share Repurchases Investment priorities: • Invest in the business • Dividend growth • Share repurchases 19July 10, 2013
  20. 20. Third Quarter Capital Expenditures $53 $93 $40 $42 $15 $19 $47 $36 0 50 100 150 200 3Q12 3Q13 (millions) Other Supply Chain Renovation Program New Stores • New store investments – Fee Development program • Chain-wide renovation program • New distribution center in St. George, Utah 20 $155 $190 July 10, 2013
  21. 21. Investing Activities $603 $360 FY12 FY13P (millions) Capital Expenditures Sale Leaseback Proceeds 21 $750 - $800 $330 - $340 July 10, 2013
  22. 22. Outlook* 4Q13 Comparable Store Sales Growth around 2% Gross Margin minimal pressure SG&A Expense minimal leverage Tax Rate around 36% Diluted Earnings per Share $0.82 - $0.87 FY13 Diluted Earnings per Share $3.77 - $3.82 22 *As provided in 3Q13 earnings press release dated July 10, 2013 July 10, 2013
  23. 23. Operational Update Mike Bloom President & Chief Operating Officer
  24. 24. Becoming More Relevant July 10, 2013
  25. 25. Continued Strong Growth in Consumables 12.2% 16.1% 18.5% 16.9% 14.8% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 3Q12 4Q12 1Q13 2Q13* 3Q13 Net Sales Growth • Refrigerated and frozen food – McLane • Tobacco • Health aids 25 *Results adjusted for the extra week in 2Q13 July 10, 2013
  26. 26. Discretionary Sales Remain Challenged 15.4% 1.1% -1.8% -0.5% -8.9% -2.1% -15% -10% -5% 0% 5% 10% 15% 20% Seasonal & Electronics Apparel & Accessories Home Products Net Sales Growth 3Q12 3Q13 26July 10, 2013
  27. 27. Unusual Weather Trends 27July 10, 2013
  28. 28. Managing Discretionary Categories • Manage receipts • Optimize space • Strengthen the team 28July 10, 2013
  29. 29. Laser-Focused on Expanding Profit Margins • Improve inventory productivity • Expand merchandise markup • Increase efficiency • Store simplification 29July 10, 2013
  30. 30. $171 $191 $192 $210 $200 $189 $100 $125 $150 $175 $200 $225 $250 (thousands) Average Inventory per Store • Consumables expansion – Food – HBA – Tobacco • Ongoing SKU rationalization 30July 10, 2013
  31. 31. Expand Merchandise Markup • Strong supplier relationships • Global sourcing capabilities • Private brands 31July 10, 2013
  32. 32. Increase Efficiency • Shrink • Store manager turnover • Store simplification – Schematic resets – In-store marketing – Door-to-shelf 32July 10, 2013
  33. 33. Bright Future for FDO • Moving the business forward • Adjusting to near-term environment • Investing for our future • Focused on customer 33July 10, 2013
  34. 34. 3Q13 Earnings Conference Call July 10, 2013

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