4 q13 earnings presentation final

FY13 and 4Q13 Earnings Conference Call

October 9, 2013

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.

2 Published on October 9, 2013

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

FY13 Highlights

Howard Levine Chairman & CEO

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


FY14 Focus

• Managing near-term challenges

– Adapting to slower sales environment

• Investing for longer-term growth

– 525 new stores

– 850 renovations


Operational Update

Michael Bloom President & COO

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

4Q13 Highlights

• Strong refrigerated and frozen food sales

• Tobacco

• Stabilization of discretionary categories

• Gross margin improvement


FY14 Operational Focus

• Customers face continued financial challenges

• Anniversarying strong consumable comp growth in fiscal 2013

• Key areas of focus

– Drive sales

– Increase profitability


Driving Sales

• Increase relevancy and trips

– Optimize consumables

– Stabilize discretionary

• Enhance value perception

• Optimize marketing programs

• Improve shopability


Increasing Profitability

• Global sourcing

• Private brands

• Supplier partnerships

• Inventory shrinkage

• Supply chain efficiencies


Long-Term Investments

• New stores

• Renovation program

• Process improvement

– Pallet delivery program


Bright Future

• Stabilizing key financial metrics

– Gross margin

– Inventory productivity

– Store Manager turnover

• Sales drivers

• Long-term investments to support growth


Financial Review and Outlook

Mary Winston CFO

Fourth Quarter Revenues

$2.4

$2.5

Net Sales (billions)

4Q12 4Q13

5.4%

0.0%

Comparable Store Sales Growth

4Q12 4Q13


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


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*

Gro

ss P

rofi

t ($

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


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


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&

A E

xpen

se (

$M

)

SG&A Trends

SG&A SG&A (% of Sales)


*Average selling square feet over the quarter

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**

Op

erating M

argin

Op

erat

ing

Pro

fit

($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


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


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


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*

(per

cen

t o

f sa

les)

Consumables Discretionary

24



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

Gro

ss P

rofi

t ($

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



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


SG&

A E

xpen

se (

$M

)

SG&A Trends

SG&A SG&A (% of Sales)

• Lower incentive compensation expense

• Higher store occupancy costs



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



$149 $152 $164

$192 $185

$0

$25

$50

$75

$100

$125

$150

$175

$200

$225

$250

FY09 FY10 FY11 FY12 FY13*

(th

ou

san

ds)

• Anniversary of FY12 consumables expansion

• Well-managed discretionary inventories

28



Capital Expenditures

$155

$212

$345

$603

$744

$0

$100

$200

$300

$400

$500

$600

$700

$800


(mill

ion

s)

• More new store openings ($385M) – New fee development

program

• Renovation program ($149M)

• Supply chain expansion ($76M)

• Corporate/ IT ($81M)

• Existing stores ($53M)


Investing Activities

$603

$744

$360 $345

FY12 FY13

(millions)

Capital Expenditures Sale Leaseback Proceeds


Returning Capital to Shareholders

73 79 83 91 108 71

332

670

192 75

$0

$100

$200

$300

$400

$500

$600

$700

$800


(mill

ion

s)

Dividends Share Repurchases


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

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


FY13 and 4Q13 Earnings Conference Call

October 9, 2013

Appendix

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



37


% of Net


% of Net

Sales

Gross profit 3,554,745$ 34.21% 4,953 3,549,792$ 34.16%



Income taxes 247,122 2.38% 1,778 245,344 2.36%

Net income 443,575$ 4.27% 3,175$ 440,400$ 4.24%



For the Year Ended August 31, 2013



38


% of Net


% of Net

Sales

Litigation charge 11,500$ 0.49% (11,500) -$ 0.00%



Income taxes 45,619 1.93% 4,360 49,979 2.11%

Net income 80,931$ 3.42% 7,140$ 88,071$ 3.73%



For the Fourth Quarter Ended August 25, 2012



39


% of Net


% of Net

Sales

Litigation charge 11,500$ 0.12% (11,500) -$ 0.00%



Income taxes 241,698 2.59% 4,360 246,058 2.64%

Net income 422,240$ 4.53% 7,140$ 429,380$ 4.60%



For the Year Ended August 25, 2012


Date post:	08-May-2015
Category:	Business
Upload:	familydollar22
View:	37,561 times
Download:	0 times

4 q13 earnings presentation final

Business