NASDAQ: OSH December 2012 Exhibit 99.2 |
2 December 2012 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 |
4 December 2012 Strong brand heritage and 80 year history Neighborhood hardware and garden store focused on paint, repair and the backyard Uniquely positioned between big boxes and small independent hardware stores Differentiated operating model focuses on high margin categories High performance management team in place with new vision Store conversion and opening plans expected to drive growth About Orchard |
5 December 2012 Strong Brand Heritage Over 80 Years Early Days Ownership Change Today (1931) (1970’s) (1990’s) (2011) 80 YEARS 80 YEARS Founded as a Farmer's Purchasing Cooperative W.R. Grace acquired Orchard Wickes acquired Orchard from W.R. Grace Freeman Spogli acquired Orchard from Wickes Orchard IPO Sears acquired Orchard Ares acquired 20% stake Opened new stores and launched e-commerce New management team, transition to a public and standalone company, new store design 1931 1979 1986 1989 1993 1996 2005 2009/2010 2011/2012 (34 stores) (43 stores) (65 stores) (85 stores) (89 stores) (89 stores) Spin-off from Sears |
6 December 2012 Orchard Owns the Niche Between Small Independents and Big Boxes Attractive Competitive Positioning Warehouse Convenience Local Hardware |
7 December 2012 Business Snapshot Highly attractive niche positioning between big box home improvement retailers and small independent hardware stores Neighborhood hardware and garden store focused on paint, repair and the backyard Efficient store footprint focuses on better quality, higher margin products Focus on consumers who are highly engaged and spend on home improvement projects High quality brands and expert, attentive service appeal to Orchard’s customer base Priced at parity to big box retailers on 100 high- visible products Slight premium in pricing vs. big box retailers on balance of assortment not as important as overall shopping experience New management team focused on leading Orchard to sustained profitability and growth Orchard Locations (as of Sept. 1, 2012) 89 locations in California 82 leased; 7 Company-owned 68 in Northern California 21 in Southern California 2 to open in Portland, Oregon 39,000 – 75,000 gross sq. ft. 39,000 SKUs 1 Distribution Center (458,000 sq ft) Key Statistics FY 2011 Sales ($mm) $660.5 Stores 87 Sales per store ($mm) $7.6 |
8 December 2012 Deep Product Knowledge and Global Sourcing Capability with Local Market Delivery and Know How Knowledgeable and experienced associates Genuine customer hospitality Engaging shopping environment New floor zone coverage and 2-way radios Increased sales training Extensive selection of national and regional brands Large assortment in recurring maintenance & repair items High in-stock levels Unique assortments tailored to customer segments and geographic location Prime locations in densely populated areas Easy in-and-out Easy-to-shop format Efficient checkout and customer pick-up across all channels Service Selection Convenience Powerful and Efficient Operating Model |
9 December 2012 Focused on Three Core Categories Backyard 40% of revenue; 36% of margin contribution High repeat shopping in garden category drives traffic Quick in-and-out More than 50% of Orchard stores have direct nursery access from the parking lot Repair 40% of revenue; 44% of margin contribution Differentiated through service Rationalized and localized assortments Provides solutions Neighborhood convenience Paint & Home 20% of revenue; 20% of margin contribution Key home improvement do-it- yourself category Strategic alliance with Benjamin Moore – exclusive paint supplier Orchard stores offer “how-to” and project advice |
10 December 2012 Strategic Alliance with Premier Paint Brand Benjamin Moore Exclusive supplier of paint to all Orchard locations |
11 December 2012 Differentiated Product Assortment Breadth Depth Value Offers products across major categories 8,000 sq ft dedicated to an exterior nursery 750 sq ft highly visible paint area – prominent placement of high quality Benjamin Moore paints 39,000 total SKUs Dominant assortment in key categories Multiple products and price points within each product category to appeal to all shoppers Average ticket: $26 Pricing comparable to big box retailers Products focused on higher quality at comparable value prices; not competing to be low price leader |
13 December 2012 Mark R. Baker Chief Executive Officer, President March 2011 31 years Chris D. Newman Executive Vice President, Chief Financial Officer & Treasurer November 2011 13 years Steven L. Mahurin Executive Vice President, Merchandising May 2011 30 years Mark A. Bussard Senior Vice President, Operations June 2011 22 years David I. Bogage Senior Vice President, Human Resources April 2011 17 years Steve Olsen Senior Vice President, Supply Chain, IT and Chief Strategy Officer June 2010 15 years Michael W. Fox Senior Vice President, General Counsel & Secretary October 2011 7 years Scotty’s Home Improvement Centers Knox Hardware And Lumber Meridian Point Properties # Years Retail Experience With Orchard Since Prior Retail Experience New Management Team With Deep Retail and Home Improvement Experience |
14 December 2012 Key Accomplishments Under New Management Team Developed new, highly productive store format Enhanced customer service and store support Upgraded store and regional leadership Implemented new floor zone coverage and 2-way radios Improved inventory in-stock levels Increased average ticket Heightened morale across the organization with energized field personnel |
15 December 2012 We’re in the Early Stages of Repositioning the Business Management is Focused on Five Key Priorities 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 |
16 December 2012 New Brand (logo, colors, look/feel) Old Brand New Brand Identity |
17 December 2012 New Paint Area |
18 December 2012 Old Paint Area |
19 December 2012 New Nursery and Garden Center |
20 December 2012 Old Nursery and Garden Center |
21 December 2012 New Tools Area |
22 December 2012 Old Tools Area |
23 December 2012 New Workbench Area |
24 December 2012 Reorganized regional leadership team Moved from 8 districts to 3 regions Home improvement and specialty retail experience includes Home Depot, Office Depot, Safeway, Gander Mountain and Macy’s Emphasis placed on training Set higher expectations for store management New playbook of standards across the store network Migrating from an operating focus to a sales and service focus among store teams We are Aligning and Better Managing Resources and Talent |
25 December 2012 • 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 - enhanced operating flexibility and extended term • Generated gross proceeds of $6.9 million • Paid down Real Estate Term Loan by $2.5 million • Paid down Senior Secured Term Loan by $1.2 million • Generated gross proceeds of $42.8 million • Paid off $25.2 million Real Estate Term Loan in its entirety • Paid down Senior Secured Term Loan by $7.6 million subsequent to quarter-end 6 properties in Q2 2012 The Company is Strengthening its Financial Position Significantly Deleveraged Over Past 12 Months Through Sale-Leaseback Transactions 5 properties in Q3/Q4 2011 1 property in Q1 2012, and the sale of a parcel of land Reduced total long-term debt, including capital leases, from $320.0 million at 10/29/11 to $228.4 million at 10/27/12 |
26 December 2012 Refinanced Senior Secured Credit Facility in October 2012 • Increased borrowing capacity from $100 million to $127.5 million • Finalized term sheet for $17.5 million LILO tranche in November 2012 Engaged Moelis & Co. to refinance the Company’s Senior Secured Term Loan • Obtained waiver from lenders of leverage ratio covenant for 10/27/12 measurement date The Company is Strengthening its Financial Position Financial Strategy Update Pursuing additional sales and/or sale-leaseback transactions on company-owned properties |
27 December 2012 New store design opened in September 2011 at Princeton Plaza location Innovative store layout and design developed by new management team Race-track layout Farmer’s market look and feel with upgraded product assortment Updated logo, colors and branding Larger nursery and garden center with direct parking lot access Prominent customer service center, the “Workbench”, concentrates all critical hardware services into one conveniently located area Eye-catching and distinct interior upgrades in easy-to-shop format Target trade area (3 miles), 100K population, $30K per capita income, more than 1 mile to big box competition New Store Target Model New Innovative ‘Neighborhood’ Store Format Description Store Performance: Sales $9.0-$15.0 4-Wall EBITDA Margin 15-25% Store Investments: Fixed Asset Investment $3.2 Less: Landlord Contribution 1.0 Net Investment $2.2 Inventory, net of Payables 0.9 Total Investment $3.1 Payback Period: 18 - 36 months Return on Investment (IRR): 40%+ ($ in millions) |
28 December 2012 New Store Opening and Conversion Plans New Stores Conversions Partial Remodels Two new stores opened in fiscal 2012 Figarden (Fresno) – April 2012 Torrance (South Bay) – September 2012 At least four new stores are scheduled to open in fiscal 2013 Five Orchard locations will be remodeled in fiscal 2012 Three were completed in the third quarter: Two in San Jose, one in L.A. One was completed in November: Pismo Beach One additional location will be completed in the fourth quarter At least six Orchard locations will be remodeled in fiscal 2013 Refresh initiatives executed at a number of stores 50% of stores will have new/updated external signage and paint by fiscal 2012 year-end 65% of stores will have direct entry to the nursery from the parking lot by fiscal 2012 year-end |