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Icr x change conference

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  • 1. January 13, 2014 Orlando, FL ®
  • 2. 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 heading “Cautionary Statement Regarding Forward-Looking Statements“ or “Risk Factors” in "Management’s Discussion and Analysis of Financial Condition and Results of Operation" in the Company’s annual report on Form 10-K and quarterly report 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 January 13, 2014. 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. ®
  • 3. • Founder: Leon Levine • First stored opened in November 1959 in Charlotte, NC • Self-service • Value and convenience ®
  • 4. 8,000+ Locations in 46 States New Hampshire – 35 Vermont – 15 18 1 76 41 144 25 29 335 413 36 43 307 32 68 250 138 98 51 155 112 132 117 121 247 211 412 253 113 225 158 1,018 475 212 169 391 284 579 Denotes distribution center Store counts as of November 30, 2013 ® 61 Massachusetts – 112 Rhode Island – 28 Connecticut – 58 New Jersey – 113 Delaware – 23 Maryland – 102 Washington DC – 3
  • 5. Consumables ® Discretionary
  • 6. 56% Earn less than $40K a year 50% 46% Rely on government assistance Older than 55 68% 44% Regularly use coupons Have a smartphone 31% Have kids under 18 ® Source: WSL/Strategic Retail, How America Shops® MegaTrends 2012, National Internet Survey and internal FDO data
  • 7. Offer Customers Great Values and a Convenient Shopping Experience Convenience Value • Consumables and discretionary items • Small, easy-to-shop stores • Nationally recognized brands • Quick, fill-in trip • Average basket around $10 • Quality, private label merchandise • Most items priced at $10 or less ®
  • 8. Earnings Before Income Taxes* $800 $700 $600 (millions) $500 $400 9/11 $300 Housing / Subprime $200 Manufacturing $100 $0 ® OPEC Iran Recessionary periods FY73 FY75 FY77 FY79 FY81 FY83 FY85 FY87 FY89 FY91 FY93 FY95 FY97 FY99 FY01 FY03 FY05 FY07 FY09 FY11 FY13 *FY06 excludes litigation charge of $45 million or $0.18 per share *FY12 excludes litigation charge of $11.5 million or $0.06 per share *FY13 is a 53-week year
  • 9. • Economic pressures facing our customers • More promotional environment • Digesting significant business changes ®
  • 10. Trips per FDO Shopper in Total Market 185 • Elevated unemployment levels 184 • Higher taxes 180 175 173 • Reductions to key government assistance programs • Healthcare uncertainties 170 Source: Nielsen Homescan Data, 52 weeks ending ® 10
  • 11. Circular Growth 2012 vs. 2013 November and December Combined 19% 8% 12% 9% 10% 4% -4% -13% Drug Food Pages Source: MarketTrack: Circular Volume Report ® Department Stores Inserts Mass
  • 12. • 1,000 new Food and HBA SKUs • Tobacco • Significant fixture and layout changes • Capturing more trips • Greater share of wallet • Margin pressure • Store manager turnover • Shrink • Inventory productivity ® 12
  • 13. Mix Shift of Consumables (basis points) Gross Margin Trends (basis points) 88 491 332 362 14 364 -17 171 105 -113 -114 -145 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 ® 4Q12 1Q13 2Q13 3Q13 4Q13* 1Q14 *4Q13 excludes a one-time $5.0 million favorable adjustment related to a change in accounting for certain vendor allowances
  • 14. Comparable Store Sales 6.6% EPS Growth 14.7% 13.6% 5.4% 2.9% 2.9% 4.8% 0.0% 2.0% -2.8% 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 ® ® -1.1% -1.9% 4Q12* 1Q13 2Q13* 3Q13 4Q13* 1Q14 *4Q12 excludes a litigation charge of $11.5M *2Q13 includes an extra week *4Q13 excludes a one-time $5.0 million favorable adjustment related to a change in accounting for certain vendor allowances
  • 15. • Re-accelerate traffic • Invest in key traffic-driving consumables • Strengthen our value proposition • Enhance marketing efforts • Reduce costs and enhance productivity • Invest in long-term growth while returning capital to shareholders ®
  • 16. Food 115 Household Health, Beauty & Personal Care Tobacco 48 39 19 Source: Nielsen Homescan Panel – FDO Shoppers in FDO Trade Area, 52 weeks ended 11/30/13 ®
  • 17. • Food • Pepsi • Grocery & cooler expansion • McLane partnership • Health & Beauty Aids • Beauty • Over-the-counter • Personal care • Tobacco 17 ® 17
  • 18. • Food • Refresh assortment • Redeploy space • Realign adjacencies and product flow • Household • Expand space • Leverage innovation ®
  • 19. • Getting back to our roots • Commitment to everyday low prices and great values • Select price investments ®
  • 20. Number of Circulars 33 30 • Optimize marketing tools 24 22 12 FY09 ® FY10 FY11 • Reinforce value proposition FY12 FY13
  • 21. • Re-accelerate traffic • Invest in key traffic-driving consumables • Strengthen our value proposition • Enhance marketing efforts • Reduce costs and enhance productivity • Invest in long-term growth while returning capital to shareholders ®
  • 22. Percent of Annual Purchases* 4% 11% • Accelerate conversion of replenishment programs 13% 8% 15% 70% • Expand international presence 11% • Enhance global logistics capabilities 68% • Expand into new businesses FY12 US FY15P Domestic Importer Agent *Purchases at retail ® Direct
  • 23. • Improved quality standards Private Brands as a Percentage of Net Sales 25% • 20% growth in private brand consumables in FY13 25% 25% 22% 17% 17% 18% 14% • 500 new private brand consumables SKUs in FY13 FY10 FY11 FY12 FY13 Total PB Penetration Consumables PB Penetration ®
  • 24. • Simplify store operational tasks • Improve processes • Stabilize workforce • Reduce inventory shrinkage • Leverage supply chain efficiencies ®
  • 25. • Re-accelerate traffic • Invest in key traffic-driving consumables • Strengthen our value proposition • Enhance marketing efforts • Reduce costs and enhance productivity • Invest in long-term growth while returning capital to shareholders ®
  • 26. (millions) $890 $941 $821 $748 $617 $671 $75 $332 $83 $71 $73 $155 FY09 $108 $91 $79 $345 $212 FY10 $192 FY11 1) Re-invest back into business • FY14 CapEx plan: $450-500M 2) Support dividend program $399 $243 FY12* Net CapEx Dividends Share Buyback 3) Share repurchases FY13** • FY14 plan: $250M EBITDA *Excludes a litigation charge of $11.5 million in 4Q12 **FY13 was a 53-week year and results are adjusted for a one-time $5.0 million favorable adjustment related to a change in accounting for certain vendor allowances in 4Q13 ® Note: Net capex is capital expenditures net of sale leaseback proceeds
  • 27. • New process to ship and deliver good to our stores • Improves supply chain efficiency • Simplifies unloading and replenishing for our Team Members • Plan to roll-out to four distribution centers in FY14 ®
  • 28. BEFORE • Create a more consistent customer experience • Improve our competitiveness • Establish a foundation for future assortment expansion ®
  • 29. ®
  • 30. 10,000 Number of Stores 8,000 6,000 4,000 2,000 0 FY10 Traditional ® FY11 FY12 Concept Renewal FY13 FY14P FY15P Renovated Stores FY16P New
  • 31. New Store Opportunities 19,000 • Expanding customer base • Improving store productivity • New markets 7,916 End of FY13 ® New Store Opportunities Total Store Potential
  • 32. 10% • Opened 500 new stores in fiscal 2013 8% 6% • Plan to open 525 new stores in fiscal 2014 4% 2% 0% FY09 FY10 FY11 Gross Store Growth ® FY12 FY13 FY14 Net Store Growth
  • 33. January 13, 2014 Orlando, FL ®