DISCLAIMER. Disclaimer STRATEGY UPDATE PG 02

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2 DISCLAIMER Disclaimer STRATEGY UPDATE PG 02

3 Inspiring the limitless potential of people

4 AGENDA Agenda 01. Background 02. Inspiring: Insights i. Market ii. Customer iii. Profitability 03. Inspiring: Strategy i. Customer cog methodology ii. Customer and brand iii. Integrated Loyalty and Financial Service iv. Right product, right place, right price v. Value chain and efficiency vi. Omni channel, clicks vii. Omni channel, bricks 04. Inspiring: Progress to date 05. Close STRATEGY UPDATE PG 04

5 BACKGROUND Background Last year in August, Woolworths, Country Road Group and David Jones came together to form one of the largest retailers in the Southern Hemisphere. At the time of the acquisition we presented an inspiring strategic hypothesis about the potential future of David Jones, and our initial view on the key initiatives that could transform the business. Since then those hypotheses have been validated, we have commenced the implementation of our business transformation initiatives and identified additional value enhancing strategies. Business transformation is now embedded in our strategic roadmap. Our roadmap for the future is clear and our inspired team will deliver the limitless potential of David Jones. STRATEGY UPDATE PG 05

6 INSPIRING: INSIGHTS 02. Inspiring: Insights STRATEGY UPDATE PG 06

7 INSPIRING: INSIGHTS - MARKET Our customers are spending and the market is growing! Department store nominal sales growth % 10 CAGR: : +2.5% Clothing and accessories nominal sales growth % 10 CAGR: : +4.1% CAGR: : -0.8% -2.3 CAGR: : +1.7% -4-4 STRATEGY UPDATE PG 07

8 Speciality stores Department stores David Jones INSPIRING: INSIGHTS - MARKET We are performing well against the department store sector and now shift our focus to specialty Market share Year on year growth in sales There are three markets which we compare David Jones to: Competing, Relevant and Specialty 8% $28b 6% $35b David Jones Specialty David Jones Dept. Stores Specialty We have defined our relevant market as specialty and competing department stores: Myer, Target and Harris Scarfe Relevant market David Jones 5% 6% 5% $44b David Jones Dept. Stores Specialty Disc. Dept. Stores Intl. Dept. Stores Online Variety Dept. Stores Specialty 2% 7% Our market share Specialty dominates our relevant market Growth in market share Our share is increasing. The opportunity for growth is stealing from speciality 6% David Jones -1% Dept. Stores -4% 74% 20% Specialty 1% STRATEGY UPDATE PG 08

9 Band 3 per person spend Band 5 per person spend INSPIRING: INSIGHTS - CUSTOMER Our customer is firmly positioned in the top two of five spend bands in Australia Our customers are in the upper tier of Australians Over 70% of DJs customers are in spend band 4 and 5 Affluence and Age Band (Top affluence) is younger than once thought DJs Customer is in line with the Australian population + over indexes w yr age group x 4 index in premium fashion 30% 30% $7,800 $15,200 Band Yrs Old Band Yrs Old Active Customers* New customers New Customers growing at 2% yoy Dormant customers* Spend per person growing at 10% 41% 3.1M people $13.6B Spending Skews to yrs old *As of September 2014 Their focus is premium womenswear, fashion, mums Resulting in total spend increase of 12% Yrs Old Total customers = 3.63M 1.3M people $3.6B $ Spending not with us *As of September 2014 Their focus is mid + affordable fashion STRATEGY UPDATE PG 9

10 2% 7% 17% 27% 2% 5% 7% 10% INSPIRING: INSIGHTS - CUSTOMER Our customer spend is tracked in each segment of our 16 Box Grid. They are predominantly shopping between contemporary and modern fashion in better, bridge and luxury brands Fashion Preferences Fashion Preferences Contemporary + Modern make up 67% of business $74 Spirit $354 $419 Market Share Column1 Spirit Contemporary Modern Classic Contemporary Modern Classic $432 Sales (A$ in millions) Our customers prefer better, bridge & luxury brands Better & bridge is 70% of our business $248 $143 Luxury $267 Bridge Market Share Column1 Good Better Bridge Luxury Better Good $626 Sales (A$ in millions) STRATEGY UPDATE PG 10

11 INSPIRING: STRATEGY 03. Inspiring: Strategy STRATEGY UPDATE PG 11

12 INSPIRING: STRATEGY Customer cog methodology Loyalty and Financial Services Introduction of integrated loyalty & FS - program Merchandise Optimise brand assortment CRG expansion WHL launch Omni Channel Optimise store portfolio Revise format strategy Launch new stores Grow online and transform profitability Customer and Brand Customer insights Brand repositioning Service proposition Theatre and experience Communications strategy The Customer Good Business Journey Build on strong foundation Align to Group GBJ People Focus on DJS culture Alignment structure to corporate strategy Learning & development Big Analytics Value Chain Single Platform Reduce CODB STRATEGY UPDATE PG 12

13 INSPIRING: STRATEGY Customer and brand Inspiring the limitless potential of people Key strategic shifts Business transformation initiatives: The 16 box grid market size and opportunity ensures our marketing communications strategy: Reflects our brand Focuses on our defined customer segments (Tier 4 and 5 customer) Is balanced between fashion (including shoes and accessories), beauty and home Shift in brand positioning from David Jones for Everybody Successfully launch WHL Brands into the Australian market Bau initiatives: Deliver relevant, accurate customer and market insights Transform VM execution, increase competence, centralise and increase resource Deliver a world class new store design which will inform refits & mini mods Introduce Theatre and Experience to all stores Renew our focus on targeting the Asian customer STRATEGY UPDATE PG 13

14 INSPIRING: STRATEGY Integrated Loyalty and Financial Services We will launch an integrated regional loyalty and financial service program Key strategic shifts Business transformation initiatives: Launch an integrated and tiered David Jones and Regional Loyalty and Financial Services program Leverage data and insights to provide personalised, relevant and targeted communications Bau initiatives: Our future strategy will be inspiring, customer centric and will be based on investing to build a sustainable and bigger business Improve Financial Services customer application journey via the introduction of tablet technology STRATEGY UPDATE PG 14

15 INSPIRING: STRATEGY Right product, right place, right price We are well underway in delivering a transformation in our assortment and value chain Key strategic shifts Business transformation initiatives: Optimise brand assortment using the 16 box grid Quantium insights to understand market size, growth and share, forming the basis of the revised brand assortment Drive space, productivity & profit utilising new space management model Rollout of all CRG brands and WHL brands into all doors Value Chain and new systems for Merchandise planning, and replenishment Bau initiatives: Increase market dominance & exclusivity in Bridge & Luxury Reduce year end aged stock to 1% Increase stock turn & GMROI STRATEGY UPDATE PG 15

16 INSPIRING: STRATEGY CRG Expansion By June 2015, CRG Brands will occupy c. 22,500 sqms in DJS stores. Currently it accounts for c. 6,800 sqms Project is tracking ahead of the business case Trenery has launched and has been well received by customers The roll out has commenced, all divisions launched with the exception of home All brand footwear concepts will launch in August 2015 Country Road Home will launch 8 stores in August 2015 and a further 8 stores in October. The remaining stores will follow in February 2016 Sales to date vs budget and MAT Forecast are in line with expectations Further opportunities identified including: Additional outposting/parent department opportunities, The expansion of the Country Road home concept. STRATEGY UPDATE PG 16

17 INSPIRING: STRATEGY WHL brand and private label We continue to evolve our phased strategy that will see the combined WHL and DJS Private Label offering grow from 3.5% to 20.0% of total sales STRATEGIC APPROACH Introduce existing WHL Brands Develop and introduce new WHL Brands from existing ranges Co-sourcing existing DJS private label key value lines in conjunction with WHL and CRGs Grow existing DJS private label brands, in some cases cosourcing key value lines with WHL Grow CRG Brands to replace existing DJS private label product DESCRIPTION Studio W, Re, JT One, Distraction Magic Shapewear and Soaps Classic Good Mens and Womens Walkmates JT One Beauty Classic Better Mens and Womens Studio W Home Activewear Good Contemporary Mens and Kids = EST Mens underwear Mens socks and sleep Womens intimates Home, Beauty and Agenda Accessories Milana Collette by Collette Dinnegan CRG Modern Better Career Alta Linea and Shoes STRATEGY UPDATE PG 17

18 Value chain and efficiency INSPIRING: STRATEGY Key strategic shifts Information Technology: IT strategy to shift towards providing and maintaining enabling platforms ahead of business initiatives, rather than with them. (i.e. move IT strategy from a two year horizon to a four to five year horizon) Commence move to Oracle Platform to enable Cost Accounting, Single View of Customer & Single View of Inventory, merchandise planning and replenishment Deliver initiatives within the current business strategy (e.g. CRM, WHL Brands Launch, OCR) Finance: Group NTP function established to deliver savings from a larger procurement base Fully align David Jones reporting calendar, governance structure and processes with WHL Efficiency: Ongoing regional / Group restructuring initiatives and transformation projects Unlock benefits of supply chain Non-trade procurement Group efficiency project STRATEGY UPDATE PG 18

19 INSPIRING: STRATEGY Omni-channel, clicks: Digital Key strategic shifts Business transformation initiatives: Implementation of platform update and/or re-platform in order to: Enable more flexibility/greater control Deliver immediate improvements in user experience to increase conversion Share and receive best practice learnings with CRG (eg. moto never lose a sale) Bau initiatives: Further collaboration with online merchandise team to improve: Product availability and profitable ranging Brand expansions Endless aisle Further utilise online channel for aged merchandise within the Company Continued development of targeted promotions in order to increase repeat purchase frequency Continued development of content strategy to drive qualified traffic and conversion Continued development of range initiatives such as multi-buys, online only promotions and trend edits to drive conversion STRATEGY UPDATE PG 19

20 INSPIRING: STRATEGY Omni-channel, bricks: Retail operations Key strategic shifts Bau initiatives: We are restructuring our retail operations to inspire the potential of our people to offer a transformation in customer experience and delivering operational brilliance. We will: Introduce a new staffing structure Full time, supported by permanent part time and casual base Transform our service proposition by developing our 5 Star Standards service model to deliver world class standards Fitting room and POS location to be reviewed Redesign Sales Manager role, moving from 70/30 admin/sell to 70/30 sell/admin Separate sell and non-sell tasks to ensure focus & dedication to the customer Frontline Incentive Scheme: will move from solely individual to Group & Individual STRATEGY UPDATE PG 20

21 INSPIRING: STRATEGY Omni-channel, bricks: Real estate Key strategic shifts Business transformation initiatives: Our real estate strategy is designed to expand and optimise our store footprint and drive improved productivity and profitability. We will: Grow retail footprint Explore new formats supported by enhanced margins Develop clear format strategy Group bargaining power and portfolio packaging will be used to optimise store sizes (reduce and increase) as well as secure new sites Investment in store of the future concept, refits and mini mods We will transform the profitability of our stores by the enhanced: Vertical margin delivered by CRG and WHL brands Trading performance delivered by new space planning methodology, clearly defined format strategy and store of the future concept STRATEGY UPDATE PG 21

22 INSPIRING : PROGRESS TO DATE 04. Inspiring: Progress to date STRATEGY UPDATE PG 22

23 INSPIRING : PROGRESS TO DATE Achievements to date Inspire our team Inspire our customers Inspire our partners Inspire our community Engagement survey score of 80% Revised communications strategy Leadership development Increased sales, service, VM and product training Bold new AW season launch Key events to all stores Move to magalogues and increased sophistication and consistency Brand not Discount marketing Significant re-assortment in Tier B, C and D stores. More fashion across all categories Increased stock in Basics. 98% in stock Increased OTB in key luxury accessories brands Launched Beauty Tribe and more joint events Improved VM in all stores with transformation in Home room sets Reduction in aged inventory Store of the future concept Alignment of GBJ to Group Strategy Ethical sourcing initiative Expansion of breast cancer Rose Clinics Engaging with suppliers Improvement in NPS since initial measurement: +18 STRATEGY UPDATE PG 23

24 CLOSE 05. Close STRATEGY UPDATE PG 24