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Supplier Conference May 2013

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1 Supplier Conference May 2013
This presentation contains information that is confidential to The Warehouse Group Limited. If you are not the intended recipient you must not peruse, use, disseminate, distribute or copy this report. Please notify Kerry Nickels, on phone to arrange for document retrieval. PRIVATE AND CONFIDENTIAL

2 Welcome – Mike Pook Feedback from last years conference Today’s Agenda
Your Expectations of Today Update on our strategy from last year We’re listening to you We need you to do some stuff now You get a sense of progress

3 Feedback from last year
We have repeated what you liked The store visit Hearing from the Leadership team Clarity on strategy We have improved what you didn’t like Simplified the slides Bigger room / better AV Less presentation; more Q & A What’s Next: This Presentation Pack will be ed to you along with a Survey Monkey to get your feedback

4 Agenda (and Housekeeping)
New Store walk through - TWL Royal Oak Strategy Mark Powell Red Shed Lead Team Category Support Initiatives – Raising the Bar Jon Adams Supplier Survey and Communications Tania Benyon Sir Stephen Tindall Q&A Session Wrap Up Question session – explain what we want them to do Finally if you liked todays conference Mike the warehouse if you thinks its terrible Mark Powell……speaking of which I’d now like to handover to Mark

5 Mark Powell – Group CEO

6 Group Strategy A Trading Group with:
multiple business units clear core competencies that can add value to each trading business unit Develop & Leverage Core Competencies Sourcing expertise Understanding New Zealand Customer, Market, and Channels Our people, and a best practice Way of Working/Culture Leveraging Group Synergy while still remaining “Customer Led, Store Focused and People Centered” Identify and grow business verticals where we can leverage core competencies to be number 1 or 2 in that business vertical A multi-focused group of companies leveraging our core competencies

7 TWG Retail Brands The Warehouse Warehouse Stationery Noel Leeming
Sales FY12: NZ$1.5b Team: 7,000 Stores: 92 + 55,000 SKUs online Foot Count: 1 million customers per wk Positioning:- - “House of Bargains” - “Home of Essentials” Markets: NZ The Warehouse Sales FY12: NZ$210m Team: 1,000 Stores: 60 + 8,000 SKUs online Foot Count: 200,000 customers per wk Positioning:- - “Work, Study, Create, Connect” Markets: NZ Warehouse Stationery Sales FY12: NZ$542m Team: 1,500 Stores: 75 + 4,500 SKUs online Foot Count: 279,000 customers per wk Positioning:- - “The Authority in specialty electronics and home appliances” Markets: NZ Noel Leeming Financial Services The Warehouse Financial Services Ltd, Various Consumer Finance products Multi Channel Seamless Multi-Channel:- The Warehouse, Warehouse Stationery, Noel Leeming Pureplay Online:- Red Alert, I Love Beauty, Torpedo 7, One Day Services Tech Solutions, Telecommunications, Connectivity

8 Clearly Defined Competitive Advantage
Customer Led, Stores Focused, People Centred Sourcing Expertise Understanding New Zealand (Market, Channels, Customers) - Way of Work ing - Cultu re - Peop le Both Leveraging Group synergies and remaining buy / sell trading dominated

9 Way of Working Framework – Giving Competitive Advantage
Customer Led, Front-line Focused, People Centred Leadership Framework Strategic Planning & Deployment Framework Business Principles Team Model Retail Principles Brand Strategy Thinking Smarter Support Principles Brand Specifics Brand Positioning & Personality Company Working Smarter Mark As you know, this is a view of our holistic way of working Drawn from Wal-Mart and Tesco – it’s in their DNA to think long term and to have a clear understanding of how to drive continuous improvement across the business This is about making the TWL business bigger than one individual – stronger than charismatic leadership Leadership framework, team model & thinking smarter – explicit models that we want to be a part of the business Business and retail principles & customer promise – are things that we should never change Explain we’re adding Support principles Inspiration through brainwaves The frame work is the anchor, the working smarter bit is how we execute our strategy Merchandise Working Smarter Buying Smarter Stores Working Smarter Selling Smarter People Policy, Process & Systems

10 Group Synergy Each retail brand in The Warehouse Group has and will continue to have its own distinct brand positioning and personality While the retail brands do have some category overlap there is a large degree of distinctness in customers, product range and sales process


12 Red Strategy Evolution – Key Result Areas
Brand and Price & Promo Framework Clear ‘Way of Working’ Framework Multi Channel and Direct Customer Engagement Category Strategies and Margin Dollar Growth Store Experience: Execution and Rejuvenation Now here is the updated strategy which has six key result areas. This is in line with what we presented last July but shows broadening and deepening. The first three parts of the strategy are a reaffirmation of the strategy we presented last July. Community and Environment Financial Services & Other Services

13 Warehouse Group Strategy
Building Long Term Sustainable Growth Building a 100 Year Business Building something we can all be proud of… For our Customers, our Team, our Shareholders, our Suppliers and for New Zealand

14 Store & Customer Experience: Execution & Rejuvenation
Simon Turner EGM Store Operations

15 It starts with the CUSTOMER This is what we want our customers to say……
The Prices are great I can get what I want, when I want, where I want Service is quick - I don’t wait too long The Quality is right I can get help, information and advice I need when I want it I am loyal to the Warehouse and tell others how great it is I enjoy the shopping environment

16 Store Experience : Execution and Rejuvenation
Strategy 2014 Store experience: Increased emphasis on productivity and customer service Strategy 2013 Store experience: Execution and rejuvenation Evolution Our primary goal is to improve our in-store customer experience Developing a ‘better (for customers) simpler (for our people) and cheaper (for profit)’ approach Stores Working Smarter to deliver increased productivity: Using Westgate as a ‘store of the truth’, with a focus on 3 areas - checkouts, ticketing, night filling Closing the gap between best and worst stores and driving all stores to excellence Accelerating the internal and external modernisation programme and refits 20 refits completed so far 16 modernisations completed Stores are improving, but now we have to do more (for customers), with less resources!

17 Suppliers can help us to deliver ‘Better, Simpler, Cheaper’
We are focused on Better for customers.... Love Your Customer (Behavioural and interaction training) Specialised training (product service, product knowledge) Developing a service style of leadership You can help us with Simpler for our people.... Productivity improvements e.g. shelf ready packaging, clear product descriptions on outers, appropriate case sizes etc Improving stock flows, replenishment and availability e.g. DIFOT, planning of FIS deliveries And Cheaper for profits... Continuation of focus on Shrinkage e.g. quality packaging to reduce damages in store and tagging

18 ‘Better, Simpler, Cheaper’ for Store Visits
Visiting & Servicing Stores… Merchandising, rep & vendor support in stores is appreciated The resource & financial commitment is high Stores need help in a consistent way How can we help each other… Develop a set of guidelines to use when servicing stores A set of workshops with our suppliers are planned, starting now, completed by end of July Build and agree guidelines - ready for launch 1st August Providing consistency of approach From you I need… Your attendance & feedback in workshops – let me know if you are interested in attending Once guidelines finalized, full communication to your team and eventual compliance Our primary goal is ‘better for customers PRIVATE AND CONFIDENTIAL 2 18

19 Brand and Price & Promo Framework
Tania Benyon EGM - Merchandise

20 Same Store Sales Trend Continues to Improve
The trend of improving Same Store Sales continues with now 8 consecutive quarters for the first time since 2004 We are very early in our transformation journey. The scale of change required is significant and there is still much to do – It’s all about Products & Quality, Price, Store Environment and Service, - The Strategy must address these areas

21 Brand & Price/Promo Framework
Strategy Establish and drive clear brand positioning, personality and approach to Price & Promotion Strategy 2014 & Beyond Embed brand positioning and Price & Promotion framework. Focus on Points of difference Evolution Clear Brand Positioning & Personality to drive “New Zealand's most loved retailer” = relevance Deeper understanding of customer perceptions/awareness through customer panel Drive brand re-appraisal = price + quality + service + patience: Understand and address inhibitors to re-appraisal ‘House of Bargains’ & ‘Home of Essentials’ = differentiation Home of Essentials: Dial Up House of Bargains: Continuous Improvement Embedding and Evolution of the Price and Promotional Framework = promotional excellence plus guides advertising, pricing & store execution Deeper understanding of customer perceptions/awareness, and inhibitors to re-appraisal Address inhibitors to re-appraisal Motherbrand activity, Promotional Framework and PR (see appendix) Major Events & campaigns reiterating HOB & HOE Home of Essentials: Dial Up “Always on” Price champion -, EDLP/’Red Price’, Price Perceptors Promote quality - credible house brands, supported by National brand halo House of Bargains: Continuous Improvement Strong TWL owned and seasonal events to mitigate Ho/Lo retailers and non-traditional channels Bargains: Sourcing (e.g. Parallels) and Channels (e.g. Online) HI-LO, WOW deals, Key Volume Drivers, Compare our Price, Price Breakthroughs Clear ‘Promotion & Price Framework’ guides advertising, pricing & store execution Understanding key promotional drivers to deliver reappraisal Whilst HOB & HOE have been increasingly embedded over the last 18 months, brand perception (sum of parts) takes a long time to change – to drive re-appraisal by customers

22 Competitive Positioning
Recent tracking shows positive improvements especially in store, but still requires significant, concerted focus on Product & Quality, Price, Store Environment and Service to really change customer perception, driving greater spend and frequency with existing customers, and reappraisal by those who have stopped shopping with us. We have a unique competitive positioning – and are famous for House of Bargains. We still need to embed Home of Essentials.

23 Category Strategies and Margin Dollar Growth
General Merchandise and Apparel

24 Category Strategies and Margin Dollar Growth
Strategy 2013 Category Strategies and Margin Dollar Growth Strategy 2014 Category Strategies and Margin Dollar Growth through continuous improvement Evolution Product the key to making TWL the “House of Bargains” and “Home of Essentials” Category Strategy Guidelines: Win-Lead, Play-Grow, Play-Dominate, Play-Show Clear Brand Matrix and Price Architecture (Very Basic, Basic, Better, Best) , Brand and Private Label Framework Trading Triangle Framework – commercial thinking to drive GMROI, reduce COGS and optimise retail price Focused on where we can leverage competitive advantage Price and Promotional Framework; clarity on traffic drivers, sales drivers and GP$ drivers Commercial Thinking Shape Changers Merchandise Zones A Unique Category Mix and Offer in the Market.

25 CSB High Level by Category
Some categories have shifted location within the CSB framework. More refinement (including at sub category level) will follow driven by continuous improvement and deepening of our strategic thinking.

26 Shape Change Strategies
Cross Category Defensible Themes Leverage multiple categories for an advantage in the marketplace Zones Leverage our ability to bring together consumables and general merchandise Technology and Entertainment For Everyone – Sales driver Helping everyone connect and entertain with their favourite ‘Big Brands’ at TWL prices Everything for Home – Sales and GM$ driver Everything you need and want for your home under one roof at a price you can afford Enjoying Outdoors – Sales and GM$ driver Delivering NZ’s best outdoors range under one roof making everything affordable for everyone to enjoy Celebrations For Everyone – Sales and GM$ driver Making it easy for people to celebrate the important events in their lives with everything available to make parties, gifting and treating themselves or others easy and affordable Home of Apparel Essentials – Sales driver All the family’s essential clothing and everyday footwear needs, of a fit-for-purpose quality at a price that excites Pet Zone – Sales and GM$ driver Providing a “One Stop Shop” for all your pet needs and wants, at prices you can afford with quality you can trust Book Zone - Sales driver The books your family wants at NZ’s lowest prices always available Baby Zone – Sales and GM$ driver Providing a “One Stop Shop” for all your baby needs, at prices you can afford with quality you can trust Accessories Zone – Sales and GM$ driver Creating a one-stop women’s accessories shop – the first choice for a woman to enhance her wardrobe. Jewellery Zone – Sales and GM$ driver Delivering NZ’s best value fine jewellery range, offering gifting solutions, for others and self, at affordable prices We have made good progress and the shape change strategies will continue to evolve

27 Quality Support Evolution
Strategy 2013 Build on Direct Sourcing, and stop the brand damage in quality Evolution Strategy 2014 Leverage sourcing strengths, and improve fit for use quality when sourcing Product Quality Improvement - immediate action taken & long term strategy developed Measurement and PARs drive continuous improvement in quality Simplify quality processes and ensure fit for use prior to purchase Market leading quality and ethical processes to be proud of Pre-qualification for quality and ethical sourcing in place for new sources, an accredited partner network beyond China, and QC in place for all sources Continue to reduce return rates (thresholds dropped to 5% from 20%, 52% (232k) less units returned Fit for use specifications in place prior to placing orders for priority categories Suppliers have a key role in delivering quality products that match our specifications and meet our Customers expectations

28 Multi Channel and Direct Customer Engagement
Multi Channel Strategy Andrew Buxton CEO – Multi Channel

29 Multi Channel Strategy 2013 Multi Channel and Direct Customer Programs Evolution Strategy 2014 Multi Channel Expansion Multiple new online stores and extended ranges Online entry into international sales Making the in-store/online brand experience seamless, including click & collect Retail principles still apply for customer experience Increasing speed of growth encouraging 135% increase in online sales in H1 F13 Multiple initiatives delivered in H1 F13 such as Red Alert, Your Warehouse, Longtail books. Fulfilment for full range online established – 3 store FC’s, apparel DC, Red Alert DC Margin, operations and operating costs learnings and challenges with high growth Bringing Essentials and Bargains through all channels to NZ

30 Multichannel Strategic Focus
Leverage existing stores and brands for online/offline growth Develop/acquire new online stores to capture market share Grow internationally with limited investment Alternative Channels Continue growth of bargain sourcing to support traditional/new businesses Develop event/pop-up physical channel whilst retaining profitability Invest for revenue and margin growth

31 Direct Customer Engagement
Strategy 2013 Multi Channel and Direct Customer Programs Evolution Strategy 2014 Customer Loyalty, Contact, Engagement Business focus using BizRewards across brands Growth of BizRewards by targeting segments Building consumer information to use for increased segmentation and business growth Developing deep customer interaction into a competitive strength Linking consumer info with services and financial services BizRewards growing at 40% more than the $43m in FY12 BizRewards launched and growing in TWL Developing target segments and initial acquisitions/comms for BizRewards Launched Your Warehouse as initial personalisation Developed contact centre improvement plan CRM being implemented but progress slow Customer database grown 50% in TWL (over 260k) Getting closer to our customers so they love us!


33 Category Strategies and Margin Dollar Growth Support Initiatives
Jon Adams EGM Merchandise Support & Logistics

34 Red Strategy Evolution – Key Result Areas
Brand and Price & Promo Framework Clear ‘Way of Working’ Framework Multi Channel and Direct Customer Engagement Category Strategies and Margin Dollar Growth Store Experience: Execution and Rejuvenation Now here is the updated strategy which has six key result areas. This is in line with what we presented last July but shows broadening and deepening. The first three parts of the strategy are a reaffirmation of the strategy we presented last July. Community and Environment Financial Services & Other Services

35 Category Strategy–Support Initiatives
Building and prioritising our plan, focusing on improved ways of working Strategy 2014 Delivery of key priorities of our plan ensuring they are embedded and sustainable Evolution Improve Merchandise Ways of Working Range and Space Reset Better Gross Profit Management Simpler Promotions and Ticketing processes Embed Value Streams and Better Stock Management Logistics Developments Improved Supplier Collaboration Year 1 of our 3 to 5 year journey is complete and we are broadly on track.

36 Supplier Challenge Get the Basics Right Delivery Frequency& Channel
Our Suppliers Are Critical to our Joint Success and We Need to Raise the Bar We are committed to working with suppliers to fix the basics and drive improvements. Distribution Centre Stores Supplier Inbound Transport Outbound Transport Supplier Challenge Get the Basics Right Delivery Frequency& Channel Lead Time EDI MOQ’s Service Levels On Time Delivery Stock Levels Shelf Life Pack Size Event Planning Supplier performance is very critical to our overall success. We are working with the suppliers to get the basics right and deliver fundamental capabilities that are core to our joint success. Without these basics Delivery frequency – increasing delivery frequency to drive improved stock levels, lower inventory, and improved freshness Lead times – shrink order lead-times to better align to actual demand requirements Minimum Order Quantities (MOQ) – Reducing minimum order quantities to enable frequent orders aligned to actual demand, improving availability and inventory levels EDI – implementing the basic EDI principles such as ASNs, etc, to improve product visibility and information sharing Service levels above 95% - basic requirement to serve our customers On-time deliveries

37 Supplier News – What’s Coming
Replenishment Review: Delivery Frequency and Lead times Pack sizes Unit pick Delivery channel Data integrity: Improved Supplier Data Capture Sheet Reverse Logistics: sign up to the CRC (if not already) Supplier Scorecard: Raise the Bar e.g. DIFOT E- Supplier: ramp up EDI and ASN roll out

38 E-Supplier – now LIVE in TWL
19 local suppliers are live on EDI and ASN’s which is over 20% of our local purchases Feedback from “live” suppliers is on-boarding has been easier than expected This is a win-win for TWL and our suppliers. Improving data accuracy Reducing ordering lead times driving availability and sales Reducing the cost of doing business for both supplier and TWL, Simplifying ordering and payments processes What’s next? Top 100 suppliers (accounting for around 90% of our local purchases) on line by the end of 2013. Trading electronically with all local suppliers by the end of 2014 We have contacted you already but if you have any queries please contact Ray Renner, our EDI On-Boarding Project Manager on

39 WE CAN DO BETTER FOR 2013! Christmas is Coming!
Last year we step changed our focus on jointly executing a successful plan. This included: Key contacts over peak period Staying open and delivering on time and in full Highlighted closed days Focus on post Christmas recovery Results were an improvement year on year but were still mixed 27 of our top 100 suppliers didn’t provide us requested details/plans 25 of top 100 suppliers still closed for 4 days or more On shelf availability dipped nearly 3% during January recovery period Flag up Marians ? WE CAN DO BETTER FOR 2013!

40 Suppliers and TWL: Working Together
Tania Benyon

41 THE WAREHOUSE Supplier Feedback Project – 2012 Strictly Private & Confidential

42 Overview The Warehouse conducted a survey of our suppliers to get a better understanding of how you rated us across various performance attributes. It was decided to use Coalface Consulting, an independent market research company, to carry out this research to ensure objectivity and confidentiality. We plan to make this an annual survey to allow comparisons to be made year-on-year. Warehouse Stationery have been doing this since 2008 and have made significant year on year improvements. Response Rate Total Response rate of 73% (83 of 113) By survey industry standards this is deemed to be a good response rate for a first survey – Thank you for your responses

43 Headlines Good set of results: you mostly are happy with our interaction (once you get hold of us!) Good Feedback from you regarding our direction - the future is bright! Some good ACHIEVABLE opportunities for us to work on Key Opportunities for the TWL teams: Speed of Response: respond to suppliers quickly even if its bad news for them Visibility of Strategy: share our strategy more effectively with you; we have a strategy but we don’t share it

44 Summary of All Survey Questions
Suppliers were asked to rate The Warehouse Store Support Office using a 5-point scale (Strongly disagree in RED to Strongly Agree in BLUE) Our objective is to move the BLUE further along the scale to the left next year Solutions: Sharing Strategies Speed to Market Communication

45 You were asked to list three things you think TWL should stop doing;
Your Comments included: Not involving key suppliers Little time to meet with suppliers Slow decision making Departments not communicating with each other Poor store compliance Making mistakes with data High staff turnover and use of inexperienced staff Parallel importing major brands Stop being so greedy on margin Discounting We are addressing these in our Action Plans Sorry but this is the way we work!

46 Next Steps for the TWL team We asked our teams to:
Review the detailed feedback as a team Agree an action plan for their team focusing on the big wins not individual comments Not take the feedback personally, and to use it as an opportunity to improve and work with suppliers more effectively Each team has built an action plan; ask about it next time you talk to us

47 Supplier Survey – Team Action Plan Highlights
Quick response to Supplier s/Phone calls – Implement a two day turnaround rule to reply to any and all supplier s and telephone calls even if to advise further time required Communicate how long things will take (in order to manage expectations). Calendar of Supplier meetings based on strategic importance of Supplier – some Supplier meetings to be in store Share Promo and Range strategies with key Suppliers so they can review and tailor submissions as appropriate Stop slow / no decision making; quick, direct answers. Stop taking so long to discuss & implement ideas through TWL

48 Supplier Engagement – New News for 2013
Supplier Promise Supplier Brainwaves Supplier Communication Plans

49 Supplier Promise What we expect from you What you can expect from us
We operate ethically We will treat you fairly and with respect We will support you to meet high labour standards We buy and sell our products responsibly We abide by our terms of Trade We will work with you in good faith to resolve any escalated disputes We will abide by our Ways of Working We will use language and behaviour that supports our guiding principles We seek to continuously improve our ways of working with suppliers by acting on Supplier Brainwaves We commit to responding to suppliers in a timely fashion Our answers will correspond to the successful delivery of our strategy Operate Ethically Employment is freely chosen Working conditions are safe and hygienic Child labour shall not be used Living wages are paid No discrimination is practiced No harsh or inhuman treatment is allowed To abide by our terms of trade; Be knowledgeable about the regulatory body that you are operating within Operate fairly and responsibly and with transparency Escalate disputes appropriately To support TWL in delivering our strategy Through appropriate price, product and promotion submissions Supply products that match our customer promise on quality standards

50 We will email registration instructions by the end of May
We want to hear your ideas! From the end of May we will have secured our brainwaves website so only existing suppliers can access it and submit ideas to us Supplier Brainwaves You can currently access the supplier brainwaves site via the supplier section on the TWL website BUT from the end of May to get access first you’ll need to register as a supplier. This password will also give you access to the Supplier notices section of the website which we will use to communicate any information to you. All brainwaves will be reviewed by Tania Benyon and allocated to the appropriate team member for a response We will registration instructions by the end of May

51 Other Supplier Communications
Strategic Supplier Sessions being planned:- Strategic touch points to foster closer working relationships, expedite feedback channels, improve access to TWL leadership group, work on issues and opportunities jointly. Supplier ‘check-ins’ – “The Breakfast Club” Strategic Supplier Focus Groups – targeted feedback sessions with small selected groups Topics such as eg. Ethical Sourcing, vendor refills Supplier “Ways of Working” Improving our way of working together, utilising group skills and expertise to drive continuous improvement “Thinking Smarter” for Suppliers – pilot in June But wait – there’s more!! The Supplier Website is being reviewed and revamped – watch this space! Next Supplier Survey - November 2013 Supplier Charity Dinner – November 2013 Charity Golf Day – March 2014 Next conference – May 2014

52 Sir Stephen Tindall

53 Q & A

54 Q&A with the Red Shed Leadership Team
Mark Powell – CEO Simon Turner – EGM Store Operations Tania Benyon – EGM Merchandise Jon Adams – EGM Merchandise Support and Logistics Andrew Buxton – CEO Multi Channel Mike Pook - MC

55 Q&A with the Red Shed Leadership Team
Questions answered on the day Why do our teams have to attend so many internal meetings? – it stops them doing stuff Our internal meetings are where we do our work – we don’t have any other forums to make decisions about trading the business or driving improvement. This is part of our way of working. We do recognise that suppliers would like more time with category managers/buyers which is why we would like to create calendars with you that set agreed frequencies for meetings relevant to your business with us. Any plans for gathering customer data similar to club card like Tesco in the UK? We have had some debate about this internally but no decision has been made. We recognise that we are a different business to Tesco (and other international brands) so we are careful that we assess ideas against our own criteria in order to translate for TWL, not transfer. Why do we do parallel imports? The primary reason is because this supports our House of Bargains positioning and allows us to bring NZers the low prices enjoyed by consumers in other countries. Another strong reason is that some brands have historically refused to supply The Warehouse and so PIs have enabled us to offer branded items to our customers at great prices. Do we plan to centralise more products from direct store deliveries to delivery via DC? The answer is we should supply in the most customer centric way. Usually this is via DC as it allows us to ensure product is delivered ‘store friendly’ (faster to shelf) and we can make sure it is delivered on time for promotional activity. FIS vs. FID delivery will also be assessed on a cost basis. Plans for delivery to customers for website? We are working through different delivery options and these will also evolve over time. Currently we pick from fulfilment centres for ranged items and drop ship from suppliers for other items.

56 Q&A with the Red Shed Leadership Team
Questions not read on the day Better, simpler, cheaper. The ticketing process should be owned by TWL. At the moment it is a 4-step process that involves suppliers - extra time; extra communication; extra complexity. Suppliers should concentrate on servicing. Sorry, we are not clear on the process you are referencing here. We really want to answer your question so please submit a brainwave with a bit more detail, or send me an and we will provide an answer. Over a number of years with changes of buyers we have noticed/experience quite large reduction sin key promotions & volumes, e.g. BTS – 5-6 years ago we would expect 20-30K units sales for BTS. With the course of time and changes in buyers, BTS 2013 volumes were 4-5k. Q: Is this information we should be alerting you to? And to who? From a supplier point of view, TWL is giving up market share without a fight or though ignorance? Any concerns you have with volumes changing should be initially raised to the category manager/buyer, and then to the merchandise manager if you do not think they have been addressed. There are many reasons for volume changes such as the market changing in size or trends. In the example above our BTS share has actually been growing so potentially the business may have shifted to another supplier. Your category manager would be able to confirm this for you and advise the reasons. Do you see any product lines/opportunities to be brought back to NZ, leading to job creation, investing in NZ We do not have any view currently on production that can be bought back to NZ. We remain supportive of NZ made items that fit with our category strategy.

57 Q&A with the Red Shed Leadership Team
Will BizRewards expand to Noel Leeming and Torpedo 7 products and ranges? BizRewards is a great scheme for businesses. Nothing has been decided yet but we are reviewing whether to extend BizRewards to Noel Leeming as it seems like a good fit. We don’t plan to expand BizRewards to Torpedo7 due to it’s sporting/adventure range not being relevant (largely) for businesses. Why did you buy Torpedo 7? Do you intend to use it as an online bridgehead into Australia? Torpedo 7 has the largest deals business in NZ with and has a great brand and existing sporting adventure business backed up by a great team with the opportunity for much more expansion from this base. Torpedo 7 has a significant portion of its business in Australia which we can learn from with other online retail brands we may launch there. With the acquisition of Torpedo 7, how do you see range differentiation? Torpedo 7 is a pure play online specialist with a different brand personality and range position strategy to TWL. Torpedo 7 has a wider, more branded, adventure sports range focus. TWL will continue to build category strategies and range plans based on our category strategy box thinking including very basic, basic, better and best brands delivering a range of price points across multiple segments. Will OEM brands be sacrificed (which TWL) built its business on in the quest for brands? No, within our brand matrix there is room for both house brands and national brands. Both are important to deliver our house of bargains and home of essentials positioning. We are working towards having strong house brands in almost every segment. Re: focus on training product knowledge. How do we support you? Online training; store after hours, during hours; training events? The PK training we need will vary by category. To date our approach has been ad hoc, supplier by supplier – particularly as we have rolled out brands. We will form a view on our preferred approach over the coming months and it is likely to include elements of all the options you have listed.

58 Q&A with the Red Shed Leadership Team
What categories are you looking to strengthen local supply base We are reviewing our sourcing to ensure that we are clear on the best way to source for each product i.e. buying or selling agent, direct , or local supplier. We have no view on which categories should be sourced locally, rather we want to source appropriately to ensure ethical, lowest COGS, quality and delivery standards are met. What is the strategy to use local supplier vs.. Shanghai buying office? %. Particularly in apparel. Our strategy is to use agents/local suppliers where they offer a clear advantage over SRO such as technical expertise in a particular segment. There is no set %. How do we as suppliers handle the quality price issue when there seems to be an obsession with Kmart whose margin expectations are much less than TWL? As suppliers you need to be honest with your category manager/buyer so we can make informed decisions. We are not obsessed with Kmart as we ‘follow our customer’, however we recognise they have engineered product to particular key price points – this is why it is important for us to establish the very basic segment in our brand matrix. We will have an (market) opening price point within our offer and it will be marketed authentically. I.e. fit for purpose and worth what I paid. Buyers still focus on themselves and are not leveraging efficiencies or productivity advantage with the suppliers This is not really a question but it sounds like you are frustrated. My suggestion is to contact either the merchandise manager or myself with your specific concern so we can understand the issue. It will be important to also understand where your category is located in the category strategy box as this could help explain some of our actions. Business strategy is great. Is there a plan to communicate the category strategy to suppliers. Our category strategies are detailed plans that support the overall business strategy – every category manager has a strategy and they will be able to talk you through the key points. I suggest you ask for the category strategy box placement and retail principles, the brand matrix, and the value cocktail to get a good overview. CRC return centres, are those being reviewed at all for performance (not good to date) We have one CRC (Centralised Returns Centre) which is a key part of our supply chain. This is operated by an experienced 3PL (TIC) who operate returns operations for major retailers across Australasia, but it is also managed closely by our Logistics team, including on site support. It has been open since September and we are pleased with progress to date, although as in all areas, there is always more to do. One challenge that has come through is returns stock from suppliers yet to sign up creates capacity issues – so it is critical that all suppliers sign up, as this forms part of the way we do business at TWL.

59 Closing Words Mark Powell – Group CEO

60 Conclusion: The Warehouse (Red Sheds)
No economic headwind or tailwind is expected Long term declines in sales have been reversed and market share stabilised Key customer concerns are Price, Store Environment, Service, Products & Quality Customer perceptions are very slow to change, but improvement is detectable We are very early in our transformation journey. The scale of change required is significant and there is still much to do – It’s all about Products & Quality, Price, Store Environment and Service, - The Strategy must address these areas and does… 60 60

61 Red Strategy Evolution – Key Result Areas
Brand and Price & Promo Framework Clear ‘Way of Working’ Framework Multi Channel and Direct Customer Engagement Category Strategies and Margin Dollar Growth Store Experience: Execution and Rejuvenation Now here is the updated strategy which has six key result areas. This is in line with what we presented last July but shows broadening and deepening. The first three parts of the strategy are a reaffirmation of the strategy we presented last July. Community and Environment Financial Services & Other Services

62 Warehouse Group Strategy
Building Long Term Sustainable Growth Building a 100 Year Business Building something we can all be proud of… For our Customers, our Team, our Shareholders, our Suppliers and for New Zealand

63 Thank You for Coming Have a Safe Journey Home

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