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4 q13 earnings presentation final

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  • 1. FY13 and 4Q13 Earnings Conference Call October 9, 2013
  • 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 October 9, 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. In addition, a reconciliation of non-GAAP financial measures discussed in this presentation to the comparable GAAP financial measures is included in the appendix to this presentation and in our earnings release, which is available on our website. 2Published on October 9, 2013
  • 3. Agenda Introduction & Safe Harbor Kiley Rawlins, CFA VP – IR & Communications FY13 Highlights Howard Levine Chairman & CEO Operational Update Mike Bloom President & COO Financial Review and Outlook Mary Winston Chief Financial Officer Closing Remarks Howard Levine Questions & Answers Howard Levine Mike Bloom Mary Winston 3
  • 4. FY13 Highlights Howard Levine Chairman & CEO
  • 5. FY13 Key Accomplishments • Exceeded $10B in total net sales – 3% increase in comparable store sales – Increased market share • Adjusted FY13 diluted EPS increased 4.4% to $3.80 • Adjusted 4Q13 diluted EPS increased 14.7% to $0.86 • Opened 500 new stores and renovated, relocated or expanded 830 stores • Launched McLane partnership • Increased direct-to-factory purchases • Increased private brand consumables penetration • Opened 11th distribution center in St. George, UT • Strengthened our management team 5Published on October 9, 2013
  • 6. FY14 Focus • Managing near-term challenges – Adapting to slower sales environment • Investing for longer-term growth – 525 new stores – 850 renovations 6Published on October 9, 2013
  • 7. Operational Update Michael Bloom President & COO
  • 8. 4Q13 Results • Expanded gross margin • Controlled expenses • Increased profitability • Flat comparable store sales o 2% consumable comp in 4Q13 on a 10.5% comp increase in 4Q12 • Increased market share 8 Adjusted Diluted EPS Increased 14.7% Published on October 9, 2013
  • 9. 4Q13 Highlights • Strong refrigerated and frozen food sales • Tobacco • Stabilization of discretionary categories • Gross margin improvement 9Published on October 9, 2013
  • 10. FY14 Operational Focus • Customers face continued financial challenges • Anniversarying strong consumable comp growth in fiscal 2013 • Key areas of focus – Drive sales – Increase profitability 10Published on October 9, 2013
  • 11. Driving Sales • Increase relevancy and trips – Optimize consumables – Stabilize discretionary • Enhance value perception • Optimize marketing programs • Improve shopability 11Published on October 9, 2013
  • 12. Increasing Profitability • Global sourcing • Private brands • Supplier partnerships • Inventory shrinkage • Supply chain efficiencies 12Published on October 9, 2013
  • 13. Long-Term Investments • New stores • Renovation program • Process improvement – Pallet delivery program 13Published on October 9, 2013
  • 14. Bright Future • Stabilizing key financial metrics – Gross margin – Inventory productivity – Store Manager turnover • Sales drivers • Long-term investments to support growth 14Published on October 9, 2013
  • 15. Financial Review and Outlook Mary Winston CFO
  • 16. Fourth Quarter Revenues $2.4 $2.5 Net Sales (billions) 4Q12 4Q13 5.4% 0.0% Comparable Store Sales Growth 4Q12 4Q13 16Published on October 9, 2013
  • 17. Store Activity FY12 FY13 Openings Closings Openings Closings 1Q 101 4 125 1 2Q 83 32 126 17 3Q 103 7 129 3 4Q 188 13 120 5 Full Year 475 56 500 26 Ending Store Count 7,442 7,916 Selling square footage (M) 53,206 56,846 Renovations, Relocations and Expansions 854 830 17Published on October 9, 2013
  • 18. Fourth Quarter Gross Profit 18 34.5% 34.7% 34.0% 33.8% 34.7% 34.5% $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 4Q09 4Q10 4Q11 4Q12 4Q13 4Q13* GrossProfit($M) Gross Profit Trends GM$ GM Rate Improvements • Higher initial markups • Lower freight costs Headwinds • Mix pressure • Higher inventory shrinkage • Higher markdowns *Adjusted for a one-time $5.0 million favorable adjustment related to a change in accounting for certain vendor allowances Published on October 9, 2013
  • 19. Sales Mix Trends 72.5% 74.2% 9.5% 9.0% 8.6% 7.8% 9.4% 9.1% 4Q12 4Q13 Category Sales Mix (% of Sales) Consumables Home Products Apparel & Accessories Seasonal & Electronics 19 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 +360 bps +170 bps Published on October 9, 2013
  • 20. Fourth Quarter SG&A Expense 20 $11.33 $11.76 $12.05 $12.60 $12.63 $0 $2 $4 $6 $8 $10 $12 $14 $16 4Q09 4Q10 4Q11 4Q12 4Q13 SG&A Expense (per average selling sq.ft.) 29.5% 28.8% 28.1%28.0% 28.5% 27% 28% 28% 29% 29% 30% 30% $0 $100 $200 $300 $400 $500 $600 $700 $800 4Q09 4Q10 4Q11 4Q12 4Q13 SG&AExpense($M) SG&A Trends SG&A SG&A (% of Sales) Published on October 9, 2013 *Average selling square feet over the quarter
  • 21. Fourth Quarter Operating Profit 5.1% 5.9% 5.9% 5.8% 6.0% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% $0 $20 $40 $60 $80 $100 $120 $140 $160 4Q09 4Q10 4Q11 4Q12* 4Q13** OperatingMargin OperatingProfit($M) Operating Profit Trends Operating Profit Operating Margin 21 *Excludes a litigation charge of $11.5 million in 4Q12 **Adjusted for a one-time $5.0 million favorable adjustment related to a change in accounting for certain vendor allowances in 4Q13 Published on October 9, 2013
  • 22. Fourth Quarter Earnings Results (in millions except for per share amounts) 4Q12 4Q13 Change Net Income $80.9 $102.2 +26.3% Adjusted Net Income $88.1 $99.0 +12.5% Diluted Earnings per Share $0.69 $0.88 +27.5% Adjusted Diluted Earnings per Share $0.75 $0.86 +14.7% Weighted average shares - diluted 117.3 115.6 22Published on October 9, 2013
  • 23. Annual Revenues $9.3 $10.4 Net Sales (billions) FY12 FY13* 4.7% 3.0% Comparable Store Sales Growth FY12 FY13 23 *FY13 is a 53-week year Published on October 9, 2013
  • 24. Sales Growth by Category 11.8% 7.5% 11.1% 13.2% 16.9% -3.1% 4.2% 4.2% 1.2% -0.9% -5% 0% 5% 10% 15% 20% FY09 FY10 FY11 FY12 FY13* (percentofsales) Consumables Discretionary 24 *FY13 is a 53-week year Published on October 9, 2013
  • 25. Annual Gross Profit 25 34.8% 35.7% 35.5% 34.9% 34.2% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 FY09 FY10 FY11 FY12 FY13 GrossProfit($M) Gross Profit Trends GM$ GM Rate Improvements • Higher initial markups • Lower freight costs Headwinds • Stronger sales of lower- margin consumables • Higher inventory shrinkage • Higher markdowns *FY13 is a 53-week year Published on October 9, 2013
  • 26. Annual SG&A Expense 26 28.7% 28.4% 28.2% 27.7% 27.6% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 FY09 FY10 FY11 FY12 FY13 SG&AExpense($M) SG&A Trends SG&A SG&A (% of Sales) • Lower incentive compensation expense • Higher store occupancy costs *FY13 is a 53-week year Published on October 9, 2013
  • 27. Annual Earnings Results (in millions except for per share amounts) FY12 FY13* Change Net Income $422.2 $443.6 +5.1% Adjusted Net Income $429.4 $440.4 +2.6% Diluted Earnings per Share $3.58 $3.83 +7.0% Adjusted Diluted Earnings per Share $3.64 $3.80 +4.4% Weighted average shares - diluted 118.1 115.8 27 *FY13 is a 53-week year Published on October 9, 2013
  • 28. $149 $152 $164 $192 $185 $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 FY09 FY10 FY11 FY12 FY13* (thousands) • Anniversary of FY12 consumables expansion • Well-managed discretionary inventories 28 *FY13 is a 53-week year Published on October 9, 2013
  • 29. Capital Expenditures $155 $212 $345 $603 $744 $0 $100 $200 $300 $400 $500 $600 $700 $800 FY09 FY10 FY11 FY12 FY13 (millions) • More new store openings ($385M) – New fee development program • Renovation program ($149M) • Supply chain expansion ($76M) • Corporate/ IT ($81M) • Existing stores ($53M) 29Published on October 9, 2013
  • 30. Investing Activities $603 $744 $360 $345 FY12 FY13 (millions) Capital Expenditures Sale Leaseback Proceeds 30Published on October 9, 2013
  • 31. Returning Capital to Shareholders 73 79 83 91 108 71 332 670 192 75 $0 $100 $200 $300 $400 $500 $600 $700 $800 FY09 FY10 FY11 FY12 FY13 (millions) Dividends Share Repurchases 31Published on October 9, 2013
  • 32. Outlook* FY14 Total Sales Mid–single-digit growth Comparable Store Sales Low –single-digit growth Gross Margin Expansion SG&A Expense De-leverage Tax Rate 36% - 36.5% Diluted Earnings per Share $3.80 – $4.15 Capital expenditures $550M - $600M Sale-leaseback transactions $200M - $250M 32 *As provided in earnings press release dated October 9, 2013
  • 33. Outlook* 1Q14 Total Sales 3% to 5% increase Comparable Store Sales Low-single-digit decrease Gross Margin 30-40 basis points of expansion SG&A Expense De-leverage Diluted Earnings per Share $0.65 - $0.75 33 *As provided in earnings press release dated October 9, 2013
  • 34. FY13 and 4Q13 Earnings Conference Call October 9, 2013
  • 35. Appendix
  • 36. Reconciliation of Non-GAAP Disclosures* 36 (in thousands, except per share amounts) GAAP % of Net Sales Adjustment Adjusted % of Net Sales Gross profit 868,443$ 34.71% 4,953 863,490$ 34.51% Operating profit 155,591 6.22% 4,953 150,638 6.02% Income before income taxes 157,040 6.28% 4,953 152,087 6.08% Income taxes 54,827 2.19% 1,778 53,049 2.12% Net income 102,213$ 4.08% 3,175$ 99,038$ 3.96% Net income per common share - diluted 0.88$ 0.86$ Weighted average shares - diluted 115,610 115,610 For the Fourth Quarter Ended August 31, 2013 *As provided in earnings press release dated October 9, 2013
  • 37. Reconciliation of Non-GAAP Disclosures* 37 (in thousands, except per share amounts) GAAP % of Net Sales Adjustment Adjusted % of Net Sales Gross profit 3,554,745$ 34.21% 4,953 3,549,792$ 34.16% Operating profit 687,957 6.62% 4,953 683,004 6.57% Income before income taxes 690,697 6.65% 4,953 685,744 6.60% Income taxes 247,122 2.38% 1,778 245,344 2.36% Net income 443,575$ 4.27% 3,175$ 440,400$ 4.24% Net income per common share - diluted 3.83$ 3.80$ Weighted average shares - diluted 115,805 115,805 For the Year Ended August 31, 2013 *As provided in earnings press release dated October 9, 2013
  • 38. Reconciliation of Non-GAAP Disclosures* 38 (in thousands, except per share amounts) GAAP % of Net Sales Adjustment Adjusted % of Net Sales Litigation charge 11,500$ 0.49% (11,500) -$ 0.00% Operating profit 125,620 5.31% 11,500 137,120 5.80% Income before income taxes 126,550 5.35% 11,500 138,050 5.84% Income taxes 45,619 1.93% 4,360 49,979 2.11% Net income 80,931$ 3.42% 7,140$ 88,071$ 3.73% Net income per common share - diluted 0.69$ 0.75$ Weighted average shares - diluted 117,267 117,267 For the Fourth Quarter Ended August 25, 2012 *As provided in earnings press release dated October 9, 2013
  • 39. Reconciliation of Non-GAAP Disclosures* 39 (in thousands, except per share amounts) GAAP % of Net Sales Adjustment Adjusted % of Net Sales Litigation charge 11,500$ 0.12% (11,500) -$ 0.00% Operating profit 664,213 7.12% 11,500 675,713 7.24% Income before income taxes 663,938 7.12% 11,500 675,438 7.24% Income taxes 241,698 2.59% 4,360 246,058 2.64% Net income 422,240$ 4.53% 7,140$ 429,380$ 4.60% Net income per common share - diluted 3.58$ 3.64$ Weighted average shares - diluted 118,058 118,058 For the Year Ended August 25, 2012 *As provided in earnings press release dated October 9, 2013

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