Outdoor Specialty Retailer Operational Report Realizing Growth And Profitability Part 2 January 28, 2007 Jay Townley The Gluskin Townley Group, LLC

SROR2 Jan 28 Realizing Growth And Profitability Introduction to the Outdoor Specialty Retailer Operational Report Nuggets from the Report How to effectively use the benchmarks contained in the Report Summary and how to order the Report Q&A

SROR2 Jan 28 Realizing Growth And Profitability The First Outdoor Specialty Retailer Operational Report published by OIA Objective – to provide a benchmarking resource for retailers: –Compare performance with national averages and with similar stores –Generate ideas and strategies to grow your business

SROR2 Jan 28 Realizing Growth And Profitability Outdoor Specialty Retailers face significant challenges: –All the leverage in the marketplace has shifted from sellers to buyers –The over-educated consumer is empowered by the Internet The strategies and benchmarks of yesterdays marketplace – don’t work or apply in the evolving consumer-centric marketplace.

SROR2 Jan 28 Realizing Growth And Profitability Nugget: 81% of retailers reported revenue was up compared to 5 years ago – with an average growth of 32%! –What has your growth rate been over the last 5 years? –Are you higher or lower than the 32% average benchmark?

SROR2 Jan 28 Realizing Growth And Profitability Nugget: Business expenses were lower, at 36% for retailers with under $1 million in revenue, compared to 41% for retailers with $2 million and over. –Your total operating expense is a key benchmark! –What is your operating expense as a percent of your total revenue?

SROR2 Jan 28 Realizing Growth And Profitability Other Outdoor and Indoor active sports specialty retailers –Exercise/Fitness –Ski/Snowboard Source: National Sporting Goods Association (NSGA)

SROR2 Jan 28 Realizing Growth And Profitability Typical Exercise/Fitness Equipment Ski/Snowboard Total Revenue Per Store $1,781,764$1,197,183 Operating Margin (As a % of revenue) 38.2%44.3% Total Operating Expenses 36.2%38.7% Net Operating Profit 2.0%5.6%

SROR2 Jan 28 Realizing Growth And Profitability Nugget: 85% of single stores and 93% of multi-store operations have a website –46% of single stores and 73% of multi-store operations have E-commerce sites –An average of 7% of annual revenue is generated for stores with E-commerce sites! –Your web site is your lowest cost and most effective marketing communications tool.

SROR2 Jan 28 Realizing Growth And Profitability Nugget: 82% of all stores have POS systems and 85% of all retailers use accounting software. However… –Less than 30% have open-to-buy systems –Less than 25% book orders via vendors web sites! –Are you in the 30% and 25%? You should be!

SROR2 Jan 28 Realizing Growth And Profitability Nugget: Single store operations reported an average of 13 full-time equivalent employees,while multi-store operations reported an average of 54. –Sales per employee (all employees) averaged $110,000. –Wages, not surprisingly, are the largest expense at 31% of operating expense and 12% of gross sales! What are your ratios?

SROR2 Jan 28 Realizing Growth And Profitability Nugget: 33% of retailers track sales by individual sales floor staff – but 71% operate an incentive scheme based on sales by individuals! –What is your close rate? How many shoppers that walk into your store actually purchase something? An increase in close rate can be an incremental profit contribution! –New employee compensation strategies demand benchmarks.

SROR2 Jan 28 How To Effectively Use Benchmarks Start with accurate and timely monthly reporting on the key financial and operating elements of your business – as a minimum. –Many retailers are on timely weekly reporting with month to date against their budgets and previous year. –What is your current reporting frequency?

SROR2 Jan 28 How To Effectively Use Benchmarks Select what you can control, and don’t but time and effort into what you can’t control. –Examples: Total operating expense Sales per selling square foot Gross margin - key categories Mark-on vs. Realized GM Sales per employee Inventory turn by category Start with one, if that is what it takes to get started, and add one or two at a time until you have six to eight key benchmarks.

SROR2 Jan 28 How To Effectively Use Benchmarks Talk to your accountant or bookkeeper and set-up a reporting format that is as compatible as possible with your financial reporting system – but make sure you will receive timely reports of your stores performance against: (1) Benchmarks; (2) Budget; (3) Previous year(s)

SROR2 Jan 28 How To Effectively Use Benchmarks Weekly reporting (timely) is preferred because – it allows you to adjust and amend your plan with our managers and staff in time to really make a difference and positively impact the business.

SROR2 Jan 28 How To Effectively Use Benchmarks Case Study: The Bike Shack Dubuque, Iowa

SROR2 Jan 28 How To Effectively Use Benchmarks Case Study: Bicycles, Fitness and Running/Walking/Hiking

SROR2 Jan 28 How To Effectively Use Benchmarks Case Study: Population: 57,686…and falling Median Income: $36,785 Grown last 7-years = $1.2 million Close rate = 80% 97% of revenue from repeat clients

SROR2 Jan 28 How To Effectively Use Benchmarks Case Study: Part of success is – benchmarking Goals set by half-day! Operating system is geared to reporting against benchmarks + (2)&(3) Managers and staff are plugged in.

SROR2 Jan 28 How To Effectively Use Benchmarks Benchmarks and performance against them can be very important to staff and staff morale. –How much do you share? –How often do you hold staff meetings? –Customer satisfaction and benchmarks

SROR2 Jan 28 Summary Introduction to the Outdoor Specialty Retailer Operational Report Nuggets from the Report How to effectively use the benchmarks contained in the Report Summary and how to order the Report

SROR2 Jan 28 Summary Copies will be mailed to all OIA members. You can order your copy of the Outdoor Specialty Retailer Operational Ratio Report by contacting: Outdoor Industry Association Phone: Booth at the Show Drop your card to be part of the next report

SROR2 Jan 28 Q & A Thank You! Jay Townley Partner The Gluskin Townley Group, LLC