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Transcript of Investor Presentation ICR XChange - January 14, 2014files.shareholder.com/downloads/SMRT... ·...
Investor PresentationICR XChange - January 14, 2014
Investor PresentationICR XChange - January 14, 2014
Forward Looking Statement
In the course of this presentation and in response to your
questions, statements may be made as to certain matters that
constitute forward-looking information that is subject to certain
risk and uncertainties. Additional information concerning those
factors that could cause actual results to differ from those in the
forward-looking statements can be found in the company’s annual
report on Form 10-K for the year ended February 2, 2013 and most
recent quarterly report on Form 10-Q.
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Investor PresentationICR XChange - January 14, 2014
COMPANY OVERVIEW
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Investor PresentationICR XChange - January 14, 2014
Company Profile and Fast Facts
• Service and presentation of a better department
store at discounted prices
• 264 stores in 29 states (approximately
70% in the Southeast and Texas)
• Became a public company - 1992
• Headquartered in Jacksonville, FLLadies’
67%
Men’s
20%
Home
13%
Sales by Category
2013 LTM*
Sales $1.27 Billion*
4
*Last twelve months ended 11/2/13; includes leased shoe dept. sales.
Investor PresentationICR XChange - January 14, 2014
Our Market Position
How we differentiate from the competition
vs. Dept. and Specialty Stores
• Value - every day low prices up
to 60% off brand name and
specialty merchandise
• Convenient off-mall locations
• Assortment edited for our
customer
vs. Off-Price Retailers
• More upscale shopping
experience
• Depth of assortment displayed
by category, brand, size
• Customer service
• Competitive value
5
Investor PresentationICR XChange - January 14, 2014
Our Customer
• Female 35 - 65 years of age
• Style conscious and value seeking
• Above average income
• Typically married and college educated
• May be multi-cultural
• Works at least part-time in professional
position
• Highly loyal
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Investor PresentationICR XChange - January 14, 2014
Store Network
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264 Stores in 29 States
Investor PresentationICR XChange - January 14, 2014
Our Stores
• Located in regional, community and
neighborhood shopping centers
where our customer lives and shops
• Average store 35,000 sf total (newer
stores average 32,000 sf)
• Optimal co-tenants:
o Other apparel retailers
o Higher-end grocers
o Better restaurants
8
Investor PresentationICR XChange - January 14, 2014
Our Merchandise - Fashion & Value for over 100 years
• Attractive department store appearance
• Appealing merchandise presentation
• Moderate to better fashion apparel
• Focus on designer and national brands
• Private label and proprietary/exclusive
merchandise
o Including Peck & Peck and Alan Flusser
• Shoe department exclusively supplied by DSW, Inc.
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Investor PresentationICR XChange - January 14, 2014
Merchandising Strategy
• Emphasis on every-day value
• Coupons on sale and clearance merchandise
o Limit use of coupons on regular-price items to
special instore events only
o Reinforce regular price value message
• Merchandise focused events (Boutique
Event, Home Event, Chairman’s Event,
Accessories Week, etc.)
• Short duration events (Mad Dash, Dash
of the Day, Door Busters)
10
Investor PresentationICR XChange - January 14, 2014
Marketing and Advertising
• Social Media to engage our customer
o We utilize Facebook, Twitter, Pinterest, Google Local and 4 Square
o Over 433,000 Facebook Fans and 4,750 Twitter followers
o Email to distribute product news and promotional messages
• Targeted marketing/our multi-cultural customer
o Spanish signing and announcements in 34 stores (representing
14% of total sales)
o Spanish language TV, radio and newspaper in designated markets
• Over 2.2 million Preferred & 270K Elite Customers
o Receive preview copies of select circulars
o Member-only shopping days
o Birthday discounts
o Special email announcements
o Provides useful database information regarding customer
preferences, habits and advertising receptivity
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Investor PresentationICR XChange - January 14, 2014
WHY WE ARE DOING SO WELL
12
Investor PresentationICR XChange - January 14, 2014
Stock Price – 2012 through 2013
13
5/3/13 ($8.59) -
Announced completion
of restatement and
FY2012 earnings.
5/23/13 ($12.35) -
Announced Q1-13
earnings.
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$12.00
$13.00
$14.00
$15.00
$16.00
$17.00
Investor PresentationICR XChange - January 14, 2014
Increased Comparable Store Sales
14
Quarterly comparable store sales 2009 through 2013:
*Q4-13 is not complete; represents November/December only.
Jan 2010 -New CMO
Early 2011 -New merchant team complete
Sept 2012 -Ecommlaunch
Sept 2011 -Jay Stein/CEO
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Investor PresentationICR XChange - January 14, 2014
New Merchandising Team
• January 2010 - New Chief Merchandising Officer
o Brian Morrow (Macy’s West, Marshall Field’s, Mervyns)
• New Vice Presidents/General Merchandising Managers in
early 2011
15
- Increased and improved national brands
- Re-invented Home area
Investor PresentationICR XChange - January 14, 2014
Designer & National Brands - Growth
Results
o Added 350 + brands since we started the program in 2009
o Grew National Brands to 65% of our sales from 33%
Next Steps
o Maintain Brand penetration at 65%-70% of total sales
o Upgrade brands
33.0%
42.0%
61.0%
65.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
2009 2010 2011 2012
National Brands % of Total Sales
% TTL Sales
16
Investor PresentationICR XChange - January 14, 2014
Designer and National Brands - Over 350!
17
Adrienne Vittadini Eileen Tracy Joseph A. Riedel
Alberto Makali Etienne Aigner Kasper Robert Graham
Anne Klein Evan Picone Kenneth Cole Robert Talbott
Ashworth Fairway & Greene Kut from the Cloth Romeo & Juliet
August Silk Free People Laundry by Shelli Segal Seven 7 Jeans
Avanti Towels Godiva Lenox (Linens) Sonny Leigh
BCBG MAXAZRIA Greg Norman London Fog Spanx
Betsy Johnson Hartmarx Lucky Brand Steve Madden
Big Buddha Hazel Luigi Bormioli Super Dry
Bobby Jones Hickey Freeman Maggie London Sweet Shop
Buffalo Jeans HOBO Margaritaville T Tahari
Bulova Watches Hollander Metrocane Tahari
Callaway Hudson Michael Kors Tallia
Calvin Klein HUE Muse Ted Baker
Carlos Santana Igloo Nautica The Sak
Coach Ike Behar Nicole Thomas Dean
Columbia Issac Mizrahi Nike Tommy Bahama
Core Bamboo Ivanna Trump Nine West Tommy Hilfiger
Daniel Rainn Izod Not Your Daughters Jeans Vaklco
Democracy “J” by Jones Original Penguin Vera Bradley
Dooney and Bourke Jack Nicklaus OXO Vince Camuto
DVF Jessica Howard Polo Vineyard Vines
Eagle Jessica Simpson Quicksilver Wacoal
Echo Jhane Barnes Ralph Lauren (Intimates) WRK
ECI Joan Vass Raymond Waites (Linens) XMI
Eileen West (Bath) Jones N.Y. Collection Report Collection Yankee Candles
Investor PresentationICR XChange - January 14, 2014
New Chief Executive Officer
• Jay Stein returned as CEO in September 2011
• Significantly impacted our sales strategy
o Reduced our reliance on regular price coupons
o Changed to a more product-driven and less sale-price
driven promotional focus
18
Investor PresentationICR XChange - January 14, 2014
RESULTS
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Investor PresentationICR XChange - January 14, 2014
Five-Year EPS
Earnings Per Diluted Share
20
*2010 EPS include two non-recurring items: the impact on the effective tax rate of the deferred tax valuation allowance, including reversal
of valuation allowance $0.48, and gift card cumulative breakage gain, net of inventory charge $0.11.
^LTM - Last twelve months ended 11/2/13.
$0.51 $0.59
$0.44 $0.57
$0.70
$1.26
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
2009 2010* 2011 2012 LTM 2013^
Investor PresentationICR XChange - January 14, 2014
First Nine Months Operating Results
First Nine Months 2013
• Diluted EPS: $0.40, up +74%
• Operating income: $30.1 million,
up +77%
• EBITDA: $51.0 million, up +49%
• Comp sales: +4.0%
• Total Sales: $902.8 million, up 4.5%
• Gross profit rate: 28.4%
First Nine Months 2012
• Diluted EPS: $0.26 ($0.23 adjusted*)
• Operating income: $19.1 million or
$17.0 million as adjusted*
• Adjusted EBITDA*: $34.2 million
• Comp sales: +1.3%
• Total Sales: $863.8 million, up 2.0%
• Gross profit rate: 27.4%
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* Excludes $2.1 million breakage income from change in breakage assumptions recorded in Q2-12 ($1.3 million after tax or $0.03 per diluted share).
Investor PresentationICR XChange - January 14, 2014
Strong Financial Position
• Paid special dividend of $1.00 per
share ($43.8M) in 2012
• Resumed our quarterly dividend in
July 2013
• Cash of $59.5 million at end of 3rd
quarter 2013 ($1.34 per share)
• No borrowings since early 2009
22
Investor PresentationICR XChange - January 14, 2014
Valuation
LTM^ at End of Third Quarter (11/2/13):
• EBITDA*: $79.1 million; 6.2% of sales
Market Valuation as of 12/31/13:
• EV/EBITDA*: 6.9 (based on $50 million excess cash)
• Market Cap: $599 million at $13.45 closing share price
*Excludes $4.0M of professional fees associated with last year’s financial restatement recorded in Q4-2012.
^LTM – Last twelve months ended 11/2/13.
23
Investor PresentationICR XChange - January 14, 2014
INITIATIVES
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Investor PresentationICR XChange - January 14, 2014
Capital Investments
• Capital expenditures for 2013 planned at $38 million
o $15 million for information systems upgrades
o $5 million for distribution center equipment and software
• Invested > $110 million in major systems enhancements and store
remodeling over the past three years:
2010 - $29 million 2011 - $38 million 2012 - $45 million
• Major single investment - Oracle merchandise information system (went
live June 2012)
• Store remodeling - upgraded fitting rooms, lighting, flooring and fixtures
o 35 stores in 2013
o 35 stores in 2012
o 40 stores in 2011
25
Investor PresentationICR XChange - January 14, 2014
Credit Card Program
• Private label card launched June 2012
• Added to existing co-branded MasterCard
• Issued by our business partner, GE Capital Retail Bank
• Customer cardholders earn rewards on cumulative purchases
and additional discounts on extra-savings days
• Customers who have our credit card spend at least 50% more
than non-cardholders
o Visit more often
o Spend more each visit
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Investor PresentationICR XChange - January 14, 2014
Supply Chain Changes
• Transitioned from third-party operated distribution centers
to company-operated
• Distribution centers/timeline:
o Dallas -completed in June2013
o Atlanta -completed in July 2013
o L.A. -completed in January 2014
• Moving in-house will provide both future cost savings and
operational opportunities and advantages
• Start-up costs in 2013, but excellent return on investment
with positive financial impacts expected in 2014
27
Investor PresentationICR XChange - January 14, 2014
E-commerce – Launched September 2013
• Offering a significant selection of our
stores merchandise online, plus offers
unique to online store
• A marketing tool to reach new customers
• Increase share of customer’s spending
with multi-channel approach
• Tie in online promotion with what we do
for stores
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Investor PresentationICR XChange - January 14, 2014
Real Estate
Note: all store locations are leased.
ACTIVITY - Stores New Relocated Closing
2014 Prelim. 8 6 2
2013 Actual 4 4 3
2012 Actual 6 4 5
2011 Actual 3 4 5
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OPPORTUNITY - Markets Current Potential
Chicago 4 10-15
DC/Baltimore 2 10-15
Miami/Fort Lauderdale 7 15-20
Northern Cal. - San Francisco
Bay Area 0 10-12
Southern Cal. - Los Angeles/San
Diego 14 35-40
Metro NYC (NJ, Boroughs, and
Long Is.) 4 20-25
Investor PresentationICR XChange - January 14, 2014
GOALS
30
Investor PresentationICR XChange - January 14, 2014
Sales Productivity
• Build on 2012 and 2013 sales momentum
o Positive comps since May 2012*
• Continue to add and improve brand names
• Deepen relationship with existing customers
and attract new customers
• Add special in-store events to drive incremental
traffic and volume
• Grow e-commerce business
• Add stores in existing markets
o Gain efficiencies in advertising and
operating expenses
*With March and April combined for this year’s Easter calendar shift.
31
Investor PresentationICR XChange - January 14, 2014
Goal - Increase Sales
32
We have an opportunity to return to, or exceed, historical peak
2005 sales and increase return on sales.
*Last twelve months ended 1/4/14.
$4,000
$4,500
$5,000
$5,500
$6,000
$6,500
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 LTM13*
Average Sales Per Store
Investor PresentationICR XChange - January 14, 2014
Goal - Increase Return on Sales
33
*Last twelve months ended 11/2/13.
^EBITDA in these calculations has been adjusted to exclude the following special items:
• 2010 - $8.5M gift card cumulative breakage gain.
• 2012 and 2013 LTM - $4.0M of professional fees associated with last year’s financial restatement.
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 2013 LTM*
EBITDA Percentage of Sales^
Investor PresentationICR XChange - January 14, 2014
Investment Opportunity
• Strong sales momentum since early 2012
• Substantial earnings growth from sales increases
driving higher margins against a lean expense
structure
• Sales growth initiatives
o E-commerce
o Credit card
o Real estate
• Strong cash flows
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Investor PresentationICR XChange - January 14, 2014 35
Investor PresentationICR XChange - January 14, 2014
Leadership Team
• President & CEO – Jay Stein
o Led company expansion
• Chief Merchant – Brian Morrow (January 2010)
o Macy’s West, Marshall Field’s, Mervyns
• Chief Financial Officer – Greg Kleffner (August 2009)
o Kellwood, Arthur Andersen
• Chief Operating Officer – Hunt Hawkins (1994)
o Genesco, Inc.
• S.V.P., Director of Stores – Gary Pierce (May 2010)
o Belk, Dillard’s
• S.V.P., Marketing – Glori Katz (April 2008)
o Sears, Jockey International, J. Walter Thompson
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Investor PresentationICR XChange - January 14, 2014
Linda Tasseff, Director of Investor Relations
Office: 904-858-2639
Cell: 904-910-1867
E-mail: [email protected]
Greg Kleffner, EVP, Chief Financial Officer
Office: 904-346-1500
E-mail: [email protected]
Contact Information
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