Orchard Presentation January 2012 NASDAQ: OSH January 2012 Exhibit 99.1 |
Orchard Presentation January 2012 2 This presentation (including information incorporated or deemed incorporated by reference herein) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those involving future events and future results that are based on current expectations, estimates, forecasts, and projects as well as the current beliefs and assumptions of our management. Words such as “outlook”, “believes”, “expects”, “appears”, “may”, “will”, “should”, “intend”, “target”, “projects”, “estimates”, “plans”, “forecast”, “is likely to”, “anticipates”, or the negative thereof or comparable terminology, are intended to identify such forward looking statements. Any statement that is not a historical fact, including estimates, projections, future trends and the outcome of events that have not yet occurred, is a forward-looking statement. Forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed under the section entitled “Risk Factors” in our reports filed with the Securities and Exchange Commission. Many of such factors relate to events and circumstances that are beyond our control. You should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Safe Harbor Statement |
Orchard Presentation January 2012 3 • Strong brand heritage and 80 year history • Uniquely positioned between big boxes and small independent hardware stores • Differentiated operating model focuses on high margin categories • A new, experienced management team is in place and focused on five key priorities: • Project a consistent and compelling brand identity • Drive sales through merchandising and marketing initiatives • Improve operational efficiencies • Align resources and talent • Strengthen the Company’s financial position • 2012 plans call for up to 3 new stores, renovations of up to 6 existing stores and continued positive comps; Approximately 15% of Orchard stores are expected to be in our new format by the end of fiscal 2012 About Orchard |
Orchard Presentation January 2012 4 Strong Brand Heritage – Serving Customers for 80 Years 80 YEARS |
Orchard Presentation January 2012 5 Orchard History 1931 Founded as a Farmer’s Purchasing Cooperative 1979 W.R. Grace acquires Orchard 1986 Wickes acquires Orchard from W.R. Grace 1989 Freeman Spogli acquires Orchard from Wickes 34 stores 1993 Orchard IPO 43 stores 1996 Sears acquires Orchard 65 stores 2005 Ares acquires 20% stake 85 stores 2009/10 Opened new stores and launched e-commerce 89 stores 2011 New management team, transition to stand- alone public company, new store prototype 87 stores |
Orchard Presentation January 2012 6 Orchard geographic footprint (as of January 5, 2012) 87 locations in California 63 leased; 16 Company-owned 64 in Northern California 23 in Southern California 42,000 – 75,000 gross sq. ft. 45,000 SKUs 1 Distribution Center (458,000 square feet in Tracy, CA) |
Orchard Presentation January 2012 7 Service • Knowledgeable and experienced associates • Genuine customer hospitality • Engaging shopping environment Selection • Extensive selection of national brands • Large assortment in recurring maintenance & repair items • High in-stock levels • Unique assortments tailored to customer segments and geographic location Convenience • Prime locations in densely populated areas • Easy in-and-out • Easy-to-shop format • Efficient checkout and customer pick-up across all channels Orchard has a Powerful Operating Model |
Orchard Presentation January 2012 8 Our Operating Model Is Aligned with Industry Forces • Meeting the need for smaller, personalized spaces to shop • Combining global market savvy and sourcing with local market delivery and know how • Leveraging the retail evolution – going back to specialty retailing’s roots and getting closer to the customer |
Orchard Presentation January 2012 9 Orchard Competes in a $36 Billion Home Improvement Market Total Home Improvement Market $277B CA Home Improvement Market $36B Source: HIRI and California GDP data |
Orchard Presentation January 2012 10 % of Fiscal 2010 Revenue Repair and Maintenance • Hardware • Plumbing • Electrical & industrial • Hand & power tools In Home • Paint & home décor • Housewares & seasonal Lawn & Garden We are Focused on High Margin Categories *Lumber and building materials do not represent a significant portion of revenue |
Orchard Presentation January 2012 11 A New High Performance Management Team is in Place Home Improvement and Retail Expertise Hire Date Years in Retail Prior Experience Mark Baker Chief Executive Officer, President and Director March 2011 31 years Chris Newman Executive Vice President, Chief Financial Officer October 2011 12 years Steven L. Mahurin Executive Vice President, Merchandising May 2011 30 years Mark A. Bussard Senior Vice President, Operations June 2011 22 years Thomas J. Carey Senior Vice President, Chief Marketing Officer July 2007 17 years David I. Bogage Senior Vice President, Human Resources April 2011 17 years Stephen W. Olsen Senior Vice President, Supply Chain, IT and Chief Strategy Officer June 2010 15 years Michael Fox Senior Vice President, General Counsel October 2011 6 years Scotty’s Home Improvement Centers Knox Hardware And Lumber Golf & Tennis Pro Shop, Inc. Meridian Point Properties |
Orchard Presentation January 2012 12 1. Project a consistent and compelling brand identity 2. Drive sales through merchandising and marketing initiatives 3. Improve operational efficiencies 4. Align resources and talent 5. Strengthen the Company’s financial position We’re Focused on Five Key Priorities |
Orchard Presentation January 2012 13 • Differentiated through service • Rationalized and localized assortments • Provides solutions • Neighborhood convenience • High repeat shopping in garden category drives traffic • Quick in-and-out • Key home improvement do-it-yourself category Emphasizing High Impact Categories Repair & Maintenance Backyard Paint |
Orchard Presentation January 2012 14 Old Brand New Brand (logo, colors, look/feel) New Brand Identity |
Orchard Presentation January 2012 15 New Paint Area |
Orchard Presentation January 2012 16 Old Paint Area |
Orchard Presentation January 2012 17 New Nursery and Garden Center |
Orchard Presentation January 2012 18 Old Nursery and Garden Center |
Orchard Presentation January 2012 19 New Tools Area |
Orchard Presentation January 2012 20 Old Tools Area |
Orchard Presentation January 2012 21 New Workbench Area |
Orchard Presentation January 2012 22 Sales will be Driven by New Merchandising and Marketing Strategies • Implementing product line reviews designed to strengthen product assortments and drive margin growth • Further improving inventory in-stock levels • Emphasizing three key categories: repair & maintenance, backyard and paint |
Orchard Presentation January 2012 23 We’re Reaching New and Existing Customers to Drive Traffic and Conversion 1. Targeting New Customers • Radio program & local television throughout California • Unique campaign with “cult” following; fun, quirky and informative • Digital media – reaching a younger audience • Mobile billboards – vendor partnerships advertise Orchard/brands on trucks across the state 2. Driving Increased Purchasing Among Existing Customers • New Loyalty Program • Print programs emphasize project help and “how-to” • Strategic shift away from being promotionally-based to being advice-oriented |
Orchard Presentation January 2012 24 |
Orchard Presentation January 2012 25 New Strategies Are Generating Positive Comparable Store Sales Momentum Comparable Store Sales* Growth by Quarter *Comparable store sales are calculated using sales of stores open at least twelve months and exclude e-commerce. |
Orchard Presentation January 2012 26 Key Accomplishments: • Improved inventory in-stock levels • Enhanced customer service and store support • New floor zone coverage • 2-way radios • Increased effectiveness of promotional dollars • Better managed store and regional leadership • Increased average ticket • Developed new, productive store format • Reinforced sales and service culture Operational Efficiency is Improving |
Orchard Presentation January 2012 27 • Reorganized regional leadership team • Moved from 8 districts to 4 regions • Home improvement and specialty retail experience includes Home Depot, Whole Foods, Office Depot, Safeway, Gander Mountain and Macy’s • Set higher expectations for store management • New playbook of standards across the store network • Migrating from operations to sales and service focus for store teams We are Aligning and Better Managing Resources and Talent |
Orchard Presentation January 2012 28 • Took actions to deleverage the Company through recent sale-leaseback transactions on 5 properties • Generated gross proceeds of $57.8 million • Paid down Real Estate Term Loan by $21.6 million • Paid down Senior Secured Term Loan by $34.4 million • Renegotiated Financing Arrangements in December 2011 • Goal of enhancing operating flexibility and extending term • Reduced total outstanding debt, including capital leases The Company Lowered its Debt Source: Form 8-K filed on December 29, 2011 |
Orchard Presentation January 2012 29 Fiscal 2012 Growth Plans • Roll-out new, store format • Open up to 3 new stores • Remodel up to 6 locations • • Continue to drive comp store sales through new merchandising and marketing initiatives • Leverage e-commerce platform (launched November 2010) |