JAS Jo-Ann Stores Dec 2010 Corporate Presentation Slides Deck PPT
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Transcript of JAS Jo-Ann Stores Dec 2010 Corporate Presentation Slides Deck PPT
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2010december
2010december
Investor Presentation
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This presentation contains forward-looking statements within themeaning of the safe harbor provisions of the Securities LitigationReform Act of 1995. Terms such as "expect," "believe," "continue,"and "grow," as well as similar comments, are forward-looking innature. Although the Company believes its plans are based uponreasonable assumptions, it can give no assurances that suchexpectations can be attained. Factors that could cause actualresults to differ materially from the Company's expectations include:general business and economic conditions, competitive factors, rawmaterials purchasing, and fluctuations in demand. Please refer tothe Company's Securities and Exchange Commission filings forfurther information.
Forward Looking Statement
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History1943 Founded as Cleveland Fabric Shop
1976 Listed on the NYSE
1994 Acquired 342 Clothworld stores
1995 First large-format store
1998 Acquired 261 House of Fabrics stores
2007 Acquired Joann.com
Today Leading specialty retailer of sewingand craft products in the U.S.
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National Presence756 stores48 states
234 large-format54 % of revenues35,900 sq. ft. avg.
522 small-format44 % of revenues14,900 sq. ft. avg.
Joann.com2% of revenues
Overview
*As of 10/30/10
Distribution Center
CT
10
MA24
NH
8
WY
MT
7
ND
4
WA
29
OR
24
CA
83
AZ
13
UT
11
NV
5CO
14
NM
6
TX
35
OK
4
KS
8
NE
4
SD
1
MN
19
IA
10
MO
11
AR
2
LA
4
MS
2
AL
4GA
13
FL
49
SC
2
NC
7TN 8
KY
4
OH
52IN
26IL
33
WI
19
PA
42
WV
5 VA
22
NY
36
ME
5
MD
16
DE
3
NJ
12
VT
4
ID8
MI
41
RI
1
>20 stores
10-20 stores
1-9 stores
AK
6
HI
AK
6
HI
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Industry Sewing and craft market is roughly
$27 billion with relatively flatvolume the past three years
Craft segment is approximately $20billion and has historically grown at
a faster rate than sewing
JAS share of the total industry lastyear was 7.4%; with a 16.6% shareamong specialty retailers
$27 Billion MarketCategory Mix
* Source: CHA Attitude and Usage Study December 2009
General Craft44%
Sewing &Needlecraft
26%
Painting &Finishing
20%
Floral10%
$2.7B
$11.9B
$7.0B
$5.4B
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Competition
*Source: CHA Attitude and Usage Study December 2009Parentheses represent change vs. last year
Other 37%
Specialty 43%
Discounters 20%
Fragmented market provides opportunity to capture share
Fabrics Crafts
Art StoresCraft Stores
Quilt ShopsFabric Stores
CatalogsInternet
(-2%)
(+5%)
(-3%)
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Customer 56% of U.S. households sew or craft
Favorable demographics: Women of baby boom generation College educated Higher than average income
Enjoys purchasing sewing and craftmerchandise at one store
Over 50% of purchases used to makehandicrafts for gift giving* Source: CHA Attitude and Usage Study December 2009, SIRS research and JAS data
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Customer Consumers have been changed by the economic crisis
Value systems shifting from conspicuous consumption
Consumers aspiring to a cost-effective life-better-lived
Emphasis on thoughtful purchases and products whichare customized, hand-crafted and eco-friendly
Recession has caused lasting behavioral change
JAS positioned to benefit from shift in consumer behavior
* Source: Wall Street Journal 12/17/2009
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Operating Priorities Accelerate new store growth
Accelerate remodel activity
Drive same-store sales
Expand gross margin
Invest in management training
Enhance technology
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Accelerate New Store Growth
30
55-60
2021
6
6070
80
0
20
40
60
80
100
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Store closures of roughly 30 - 40 per year
Net store growth of over 100 units by FY15 Estimated 3% square footage CAGR FY11 FY15 Long term build-out opportunity for 1,000 stores
# NewStores
Smaller prototype stores+/- 22,000 square foot standard prototype+/- 15,000 square foot small market or urban prototype
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Accelerate Remodel Activity 114 small-format remodels complete thru FY11
Remodels averaging incremental 10% same-store saleslift and generating strong returns
Opportunity for over 250 remodels in next four years
Approximately 60 remodels planned for FY12 40 small-format remodels
10 large-format remodels
5 small-format store expansions 5 downsizing of oversized stores
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Drive Same-Store Sales Dynamic new craft product lines
Enhanced in-store presentations Update fabric quality to match
consumer demands
Regionalized fabric assortments
Strategic targeted marketing
Focus on education and productdemonstrations
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Expand Gross MarginDirect Sourcing Initiative
Moving beyond high volume basic fabrics to fashion Moving into basic craft categories Direct imports to exceed half of total imports in FY11
71%
26%
3%
Domestic
Import
Direct Import
Merchandising Technology Investments
JDA Demand & Fulfillment FY10 Promotional Planning FY12 Pricing Optimization FY13
FY08 Sales
72%
15%
13%
Domestic
Direct Import
Import
FY11 Sales
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Invest in Management Training Management training
Developed new training programs for
store managers and assistants Performance management
New system provides on-line access toperformance reviews, compensation
management and succession planning Mystery shoppers
New secret shopper program initiatedin FY11
Provides independent feedback on storeconditions and service
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Enhance TechnologyCurrent Status SAP core enterprise software updated in FY08
Point of sale hardware and software replaced in FY09 New HR systems and labor management systems in FY09
New replenishment system in FY10
E-commerce platform and site updated in FY10
Future Enhancements IT hardware rationalization
Merchandising systems upgrades
HR performance management systems
Ongoing e-commerce investment
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FY10 ResultsFY 10 FY 09
Sales (millions) $1,991 $1,901
Total sales growth % 4.7% 1.2%
Same-store sales % 3.1% 0.5%
Gross Margin % 49.0% 46.4%
SG&A % 39.9% 40.8%
Operating Profit 5.7% 2.1%EPS $2.51 $0.86
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FY11 Q3 YTD ResultsFY 11 FY 10Sales (millions) $1,455 $1,389
Total sales growth % 4.8% 4.5%
Same-store sales % 4.2% 2.5%
Gross Margin % 50.9% 49.6%
SG&A % 41.2% 42.2%
Operating Profit 6.1% 3.8%
EPS $1.95 $1.12
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Positive Sales Trends
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3
Same-store sales Transactions Ticket
FY11FY10
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Gross Margin and SG&A
37%
39%
41%
43%
45%
47%
49%
51%
2006 2007 2008 2009 2010 Q3 LTM
Fiscal Year
%
o f S a l e s
Gross Margin SG&A
45.6%46.4% 46.4%
49.0%49.9%
46.5%
41.1%
42.7%
41.2% 40.8%39.9%
39.2%
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Operating Profit
$1,851$1,879
$1,901
$1,991
$1,883
$2,057
7.3%
5.7%
2.1%2.0%
0.5%1.0%
$1,700
$1,750
$1,800
$1,850
$1,900
$1,950
$2,000
$2,050
$2,100
2006 * 2007 2008 2009 2010 Q3 LTM
Fisc al Year
N e
t S a
l e s
0%
1%
2%
3%
4%
5%
6%
7%
8%
O p
e r a
t i n g
P r o
f i t %
Net Sales %Op. Profit
* Excluding FY06 goodwill impairmentOperating Profit defined as profit before interest and taxes
($s in millions)
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$65 $65
$98 $104
$181
$220
3.5% 3.5%
5.2%5.5%
9.1%
10.7%
-$25
$25
$75
$125
$175
$225
2006 * 2007 2008 2009 2010 Q3 LTM
E B I T D A
2.5%
4.0%
5.5%
7.0%
8.5%
10.0%
11.5%
E B I T D A %
EBITDA %EBITDA
EBITDA
* Excludes FY06 goodwill impairmentEBITDA defined as earnings before interest, taxes, depreciation and stock based compensation
($s in millions)
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$0.18($0.08)
$0.62$0.86
-$0.30
$0.20
$0.70
$1.20
$1.70
$2.20
$2.70
$3.20
2006 * 2007 2008 2009 2010 2011
Fiscal Year
E P S
Earnings Per Share
* Excludes FY06 goodwill impairment
$2.51
$3.35 - $3.45
Guidance
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Balance Sheet
$204
$125
$100
$66
$0$18 $18 $25
$81
$217
$98$112
$48
$0
$50
$100
$150
$200
$250
2006 2007 2008 2009 2010 2010 Q3 2011 Q3
Fiscal Year
Debt Cash
($s in millions)
Quarter
$48
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Return on Invested Capital
-5.4%
-1.7%
7.0% 6.4%
15.3%
18.8%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
FY06 FY07 FY08 FY09 FY10 FY11 Q3 LTM
ROIC = (Operating Profit Cash Taxes) / (Avg. Total Assets Avg. Cash Avg. Current Liabilities)
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Compelling Store Economics
Large SmallFormat Format Yr 1 Yr 4 Yr 1 Yr 4
Size 36,509 14,708 22,000 15,000
Sales (thousands) 4,706$ 1,699$ 2,622$ 2,865$ 1,647$ 1,800$Sales / Sq Foot 129$ 115$ 119$ 130$ 110$ 120$
Cash Flow (a) 663$ 268$ 341$ 423$ 254$ 303$Cash Flow % 14.1% 15.8% 13.0% 14.8% 15.4% 16.8%
Store Investment, net new:Capital, net (b) 592$ 531$Inventory, net (c) 466$ 288$Pre-opening costs 160$ 130$Total 1,218$ 949$
(a) Excludes depreciation, corporate margin items, distribution center expenses and corporate administrative expenses(b) Net of landlord allowances(c) Net of Accounts Payable support
Existing Stores 22,000 Sf Pro Forma 15,000 Sf Pro Forma
Proforma sales represent minimum required to achieve 16% IRR
FY11 openings exceeding proforma targets by a double digit percentage
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Long-Term Outlook Same-store sales growth of 2% to 4% per year
Annual improvement in gross margin rate
Annual improvement in SG&A leverage
Open approximately 290 stores over next five years
Remodel approximately 300 stores over next five years
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Thank You