Wesfarmers Limited · ASX:WES
Wesfarmers — Investor Day (December 2012)
70 slides from Wesfarmers's investor day presentation, Dec 4, 2012
Slide 1: Kmart Investor Site Tour ASX announcement cover letter
4 December 2012 The Manager Company Announcements Office Australian Securities Exchange Dear Sir, Kmart Investor Site Tour The following presentation is to be given at a Kmart Investor Site Tour on 4 December 2012. Yours faithfully, L J KENYON COMPANY SECRETARY
Slide 2: Kmart Investor Site Tour
Kmart Investor Site Tour 4 December 2012
Slide 3: Agenda
Agenda 9.15 Registration 9.30 Introduction – Guy Russo 9.40 Profit – Marina Joanou 9.50 Product, Price, Promotion – Ian Bailey 10.10 People, Customer & Supply Chain – David Matheson 10.30 Place – Emmett Sheppard 10.40 Growth Summary & Introduction to Southland Store – Ian Bailey 10.50 Conclusion – G
Slide 4: Flip That
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Slide 5: Guy Russo, Managing Director
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Slide 6: Kmart Leadership Team
5 Kmart Leadership Team Guy Russo Managing Director Ian Bailey Marina Joanou Emmett Sheppard David Matheson Tracie Walker [TBA] John Sink Chief Operating Chief Financial General Manager Chief Operations General Manager General Manager Managing Director Officer Officer Business Dev. Officer Corporate
Slide 7: Vision
Vision Where families come first for the lowest prices on everyday items SS WY. We \ZM RICK 9 aca
Slide 8: Our Values
7 Our Values • Customers come first • Deliver results • Integrity • Teamwork • Boldness
Slide 9: Kmart Today
8 Kmart Today Quick Facts 190 Kmart stores 263 KTAS centres 2 5 5 Distribution centres + 28,000 Employees 39 56 1 21 28 14 19 1 50 75 1 12 1 44 75 1 5 5 3
Slide 10: Kmart Strategy
Kmart Strategy / ; | P \rofit 10/10/20 ; \romotion more customers, more of ften
Slide 11: Value Creation Model
10 Value Creation Model Where families come first Lowest price, for the lowest prices on every day Lowest everyday items price Increased sales & Volume profit Great in-store Lowest execution cost Lower operating costs
Slide 12: Sustainability & Community Engagement
11 Sustainability & Community Engagement • Kmart’s commitment to sustainability spans across many areas: – Focus on sustainable purchasing – Continually identifying ways to reduce energy, gas, water & packaging use • Kmart plays an active role in the communities in which we operate: – Salvation Army
Slide 13: Ethical Sourcing
12 Ethical Sourcing • Kmart’s ethical sourcing team works closely with suppliers & provides continuous education & support • Our ethical sourcing code ensures compliance with local laws on issues such as child labour, bribery, wages & benefits, working hours, & health & safety • Suppliers are period
Slide 14: Kmart Tyre & Auto
13 Kmart Tyre & Auto • Australia’s largest retail automotive service, repair & tyre business • Network of more than 263 stores & 1,300 team members • Recently completed store reimage program • Strong growth in car servicing • Corporate Fleet opportunity
Slide 15: Marina Joanou, Chief Financial Officer
Marina Joanou Chief Financial Officer
Slide 16: Kmart Strategy
15 Kmart Strategy
Slide 17: Our Journey So Far
16 Our Journey So Far • Cleaned up our stores • Rationalised distribution centre network • Moved away from Hi-Lo pricing to EDLP • Simplified range to everyday items & exited unprofitable categories • Focused on mums & families • Expanded direct sourcing capabilities
Slide 18: Significant Underlying Change
17 Significant Underlying Change Sales $4b Exited Invested in Price Categories to Drive Volume Exited Introduced Brands New No more Simplified Categories Promo Range Sales 2009 2012
Slide 19: The Results So Far
18 The Results So Far Index Average sell Index SKU count 120 120 100 100 80 60 80 40 20 60 0 2009 2010 2011 2012 2009 2010 2011 2012 Index Units sold Index Customer transactions 140 120 115 120 110 105 100 100 95 80 90 2009 2010 2011 2012 2009 2010 2011 2012
Slide 20: EBIT & Return on Capital
19 EBIT & Return on Capital EBIT CAGR of 35% EBIT ROC from 7.2% to 18.8% $m ROC % 300 20 18 250 16 200 14 12 150 10 8 100 6 50 4 2 0 0 2009 2010 2011 2012 EBIT (LHS) ROC (RHS)
Slide 21: Comparative Performance
20 Comparative Performance EBIT growth since 2009 Kmart EBIT Index growth of 145% 300 250 200 Avg. Peer EBIT 150 growth of (21%) 100 50 - 2009 2010 2011 2012 Kmart Average Peer Performance
Slide 22: Working Capital & Investment
21 Working Capital & Investment $m Capital employed • Capex previously limited to ‘fixing 1,500 the basics’ & DC network consolidation 1,000 • Capital investment provides a 500 material growth opportunity as the network is renewed & 0 2009 2010 2011 2012 extended Days working capital Index • Credito
Slide 23: Going Forward
22 Going Forward • Value creation model remains focus • Transition from ‘fixing the business’ to ‘growing the business’ – Volume retailer – Operational excellence – Adaptable stores – High performing culture • Focus on being end-to-end lowest cost
Slide 24: Vision
Vision /° Where families come first for the lowest prices on everyday items SS WY. We \ZM RICK 9 aca
Slide 25: Ian Bailey, Chief Operating Officer
Ian Bailey Chief Operating Officer
Slide 26: Vision
Vision /° Where families come first for the lowest prices on everyday items SS WY. We \ZM RICK 9 aca
Slide 27: Leadership Team
26 Leadership Team Ian Bailey Chief Operating Officer General Manager General Manager General General Manager Sourcing General Manager Planning General Manager Apparel Marketing Merchandise
Slide 28: Kmart Strategy
27 Kmart Strategy
Slide 29: DDS Shopping Behaviour
28 DDS Shopping Behaviour • Approximately 57% of consumers share their DDS purchasing at more than one retailer Kmart • Material opportunity Approx. 57% Comp 1 Comp 2 Source: Roy Morgan Single Source: In the 12 months to June 12
Slide 30: Market Share Opportunity
29 Market Share Opportunity • Significant opportunity remains to capture greater market share Kmart Potential Market (Aust) c. $78b Kmart Share of Potential Market - FY12 $ billion 90 Department stores 5.3% 80 Other recreational goods 70 retailing 60 Newspaper and book retailing Kmart 50 Market Foot
Slide 31: Communicating 'Low Price' Remains the Priority
Communicating ‘Low Price’ Remains 30 the Priority • Customer perception research confirms Kmart’s pricing is consistently lowest Has the lowest prices Consistently low prices everyday Kmart Comp1 Kmart Comp1 Jan Feb Mar Apr May Jun Jul Aug Sep Jan Feb Mar Apr May Jun Jul Aug Sep 2012 2012 Source: Fo
Slide 32: High Velocity Product
31 High Velocity Product • Still focus on the basics – Be in-stock of the right products • Improve our ability to process volume – High volume product from ‘Flow Through’ to ‘Pick & Pack’ – Late allocations process – More product on ‘replenishment’ • More desirable, high volume own brand products –
Slide 33: Driving Volume – Bulk Ends
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Slide 34: Driving Volume – Table Lines
33 Driving Volume – Table Lines
Slide 35: Lowest Price
34 Lowest Price • Be lowest price • Optimise price architecture • End-to-end lowest cost
Slide 36: Sourcing
35 Sourcing • Direct sourcing is important to Kmart • Offshore team is fully integrated into our buying departments • Our retail prices & sourcing costs are internationally competitive • Growth in volume has enabled access to suppliers of high volume international retailers • Always looking for new
Slide 37: 260 Team Members Across Five Offshore Offices
260 Team Members Across Five Offshore 36 Offices
Slide 38: More Customers More Often
37 More Customers More Often • Continue to invest aggressively in our OK campaign – Real Mums experiencing real price revelations • Exploit our depth of range at key price points – Source of significant competitive advantage • Actively promote our price reductions throughout the year – The visible p
Slide 39: 1,000 Mums TVC
1,000 Mums TVC ° On July 11, Kmart invited 1,000 mums to a store with no price tags. 7 Wesfarmers
Slide 40: Price Sculptures TVC
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Slide 41: Connect More Customers With Kmart
40 Connect More Customers With Kmart
Slide 42: David Matheson, Chief Operations Officer
David Matheson Chief Operations Officer
Slide 43: Leadership Team
42 Leadership Team David Matheson Chief Operations Officer General Manager Supply Chain General Manager Store Operations National Store Operations Manager Store Replenishment Manager Store Support Business Improvement
Slide 44: Kmart Strategy
Kmart Strategy 1C| ustomer outstanding customer experience People best people, great company
Slide 45: The Journey
44 The Journey 2012/2013 2010/2011 • Safety leadership • Volume retailer 2009/2010 • Safety focus • Adaptable stores • More disciplined execution • Operational excellence • Reduced ranges • Cleanliness • High performing culture • Lower inventory • L50M • Clear aisles • Kmart Way • Fewer promotions •
Slide 46: Productivity Initiatives – Last 50 Metres
45 Productivity Initiatives – Last 50 Metres • Efficient truck to shelf
Slide 47: Productivity Initiatives – Kmart Way
46 Productivity Initiatives – Kmart Way • Simple & efficient operations
Slide 48: Supply Chain - International
47 Supply Chain - International • Continue to source from new origins • Increase offshore processing • Optimise costs & supplier reliability • Simplify flow of product
Slide 49: Supply Chain - Local
48 Supply Chain - Local • Maintain focus on safe operations • Improve end-to-end operational efficiency (costs & service) • Capitalise on culture of innovation • Continue network consolidation Lytton Eastern Creek Canningvale Truganina (Toll 3PL) Wiri
Slide 50: All About The Customer
49 All About The Customer • Customers come first • Deliver results • Integrity • Teamwork • Boldness
Slide 51: Emmett Sheppard, GM Business Development
Emmett Sheppard General Manager Business Development
Slide 52: Kmart Strategy
Kmart Strategy / " lace every site a success
Slide 53: Every Site A Success
52 Every Site A Success • Improve the existing estate – Only 3 store closures necessary since 2009 • Store design which grows sales & profit – 10 refits in the last 12 months • Open profitable new stores – 6 new stores in F13 & pipeline continues to grow • Ability to renew stores, creating flexible
Slide 54: New Store Pipeline
53 New Store Pipeline 190 Kmart stores +33 New stores over next 5 years 2 1 39 8 21 4 14 3 50 6 12 44 8 3 5 3
Slide 55: Fitting Rooms…From This
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Slide 56: … To This
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Slide 57: Walkways…From This
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Slide 59: Lighting…From This
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Slide 61: Presentation…From This
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Slide 63: Store Entrance…From This
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Slide 65: Ian Bailey, Chief Operating Officer
Ian Bailey Chief Operating Officer
Slide 66: Growth Summary
65 Growth Summary Volume Operational Adaptable High retailer excellence stores performing culture
Slide 67: Southland Visit
66 Southland Visit • Different to our competitors • Great base standards – Clean tidy stores, good presentation standards, clear aisles • Flexible format – More aligned to how a customer shops – Set up by rooms, flexible categories – One fixture type, one floor, flexible lighting
Slide 68: Guy Russo, Managing Director
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Slide 69: A Current Affair October 2012
68 A Current Affair October 2012
Slide 70: Questions
IRRESISTIBLY LOW PRICES. EVERYTHING. EVERY DAY. 40s Wesfarmers