Navy Exchange Service Command

Navy Exchange Dual Mission Providing Sailors and Navy Community Quality Goods and Services at a Savings Supporting Navy Quality of Life Programs “The creation of supplemental source of funding for the military MWR Program is to be considered a secondary mission when establishing pricing” - DoD Instruction 1330.9 Our Navy Mission is codified within DoD Directives. In an early speech, ADM Mike G. Mullen, Chief of Naval Operations said, “I am really convinced that family readiness, in great part, lies at the heart of Fleet readiness.” We believe this is particularly important for our Navy family who endure long deployments. We are focused to be more than just a store for the Navy spouse and family left behind as the fleet sails. DoDD 1330.9 states “Armed Services exchanges have the dual mission of providing authorized patrons with articles of merchandise and services and of generating NAF earnings as a source of funding for DoD military programs.” Merchandise Pricing. ASER says, “Merchandise and services sold through the Armed Services exchanges, whether by direct or concession sale, should be priced in a substantially uniform manner at the lowest practicable level consistent with the mission to provide authorized patrons with articles and services necessary for their health, comfort, and convenience. The creation of a supplemental source of funding for the military MWR program is to be considered a secondary mission when establishing prices.” A Critical Non-pay Benefit for the Navy Family

$2.7B $43M 23% Our Navy Exchange… Caring, Committed, Connected Sales $43M Active Duty, Retirees, Reservists, Guard, Family Members to MWR 23% 27% Navy Family Members Savings 14,000 Associates Worldwide 2,257,738 Total Navy Eligible Shoppers 160 Navy 37 MSC 104 42 104

2011 Store Performance - Total Segment Sales % of Sales ‘11 Sales Growth ’11 GM% ‘10 GM% GM $ Variance Main $1,295.5M 63.8% 2.8% 23.02% 23.40% +3.2M Small $351.2M 17.3% 3.2% 26.05% 25.93% Specialty $353.5M 17.4% 4.9% 26.96% 26.95% +4.5M Total $2,030.0M 100.0% +3.2% 23.96% 24.20% +10.9M

Consumables: Candy, Food, Tobacco, Beverage, Spirits 2011 Store Performance Consumables: Candy, Food, Tobacco, Beverage, Spirits Segment Sales % of Sales ‘11 Sales Growth FY 11 GM% FY 10 GM% GM$ Variance Main $181.8M 34.8% +0.9% 23.71% 24.21% -500K Small $232.2M 44.4% +4.4% 27.43% 27.34% +3M Specialty $100.4M 19.2% +8.2% 26.39% 26.17% +2.2M Total $523.1M 100% 4.0% 25.53% 25.65% $4.5M

CANDY & NUTS DEPARTMENT SUMMARY May 2-4, 2011

CANDY & NUTS DEPARTMENT SUMMARY Opportunities: Power Wing Shippers (Power Panels) One-time Buys Seasonal Candy- 4 Main Seasons- Huge Business trending at about 20% of total Innovation in Nuts/Trail Mix for One-time Buys Main Store Customer- Seasonal, Larger Pack Sizes Mini-Marts- Convenience, single packs- instant consumables

DRY GROCERY, SNACK, AND PERISHABLES FY 2011 GROCERY, SNACKS, & PERISHABLES DEPARTMENT SUMMARY DRY GROCERY, SNACK, AND PERISHABLES FY 2011 Sales $ Sales $ LY % Sales $ vs LY Sales Units Sales Units LY % Sales Units vs LY Total   76,298,913 70,499,461 8.23% 35,212,487 33,977,623 3.63% SNACKS 50% 22,983,793 20,546,127 11.86% 10,997,749 10,588,752 3.86% DRY GROCERIES 47% 21,574,334 20,360,673 5.96% 11,668,374 11,204,711 4.14% OTHER GENERAL GROCERY 0% 201,905 219,109 (7.85%) 113,602 90,901 24.97% SEASONAL FOODS 3% 1,483,381 1,160,178 27.86% 282,758 204,723 38.12% 61% 46,243,413 42,286,087 9.36% 23,062,483 22,089,087 4.41% FROZEN 48% 12,365,979 12,013,774 2.93% 4,656,245 4,660,680 (0.10%) CHILLED 37% 9,628,422 9,181,741 4.86% 4,443,423 4,446,855 (0.08%) PRODUCE 4% 1,072,217 913,350 17.39% 765,702 647,271 18.30% FRCUT FISH/POULTRY 1% 207,640 97,926 112.04% 28,576 15,991 78.70% FRCUT BEEF 137,808 77,510 77.79% 16,323 7,601 114.75% FRCUT PORK 55,903 36,619 52.66% 5,033 2,849 76.66% OTHER PERISHABLE 9% 2,431,003 2,169,143 12.07% 1,047,378 1,003,938 4.33% 34% 25,814,734 24,425,195 5.69% 10,927,551 10,750,905 1.64% 0.1% 84,238 64,868 29.86% 35,129 34,280 2.48% PREPARED 100% 4,156,529 3,723,311 11.64% 1,187,324 1,103,351 7.61% 5%

GROCERY, SNACKS, & PERISHABLES DEPARTMENT SUMMARY Mini Mart and Fleet: Impulse and immediate consumables focused Grocery and Housing: Focus on both grocery and convenience with depth of core grocery items Seek : Innovation Convenience packaging One time buy opportunities Power Wings / Panels Shippers Top Locations and Segmentation   Total Sales $ Sales $ LY % Sales $ vs LY 76,298,913 70,499,461 8.23% NEX FACILITY BAH GROCERY 9% 7,070,633 6,091,440 16.07% ORLANDO MCCOY ST 6% 4,744,721 4,437,989 6.91% PEARL HARBOR MALL MAIN 3% 2,177,427 2,027,116 7.42% GUAM HOSP MM/GAS (6) HOUSING 2% 1,447,870 1,179,308 22.77% GREAT LKS STUDENT ST FLEET 1,310,801 1,500,584 (12.65%) PEARL HOLOMOKU MM 1,212,399 1,139,267 6.42% PEARL HALSEY MM 1,202,025 1,218,743 (1.37%) SAN DIEGO MURPHY MM 1,145,917 1,137,751 0.72% PENSACOLA FLEET ST 1% 1,132,589 1,067,647 6.08% SINGAPORE MAIN ST 1,116,711 975,116 14.52% NEX ROTA GATEWAY MAL 1,067,622 987,907 8.07% SAN DIEGO QMART CLSD 1,048,210 1,550,016 (32.37%) S DIEGO QUICK MART 1.8% 1,381,907 NA YOKO MAIN STORE 986,317 1,024,436 (3.72%) NORF AIR STATION MM MINI MART 969,698 699,331 38.66% GUAM NCTS MAIN (20) 900,618 693,463 29.87%

Partners Delivering Qualify of Life MWR and NEX Partners Delivering Qualify of Life CNO Senior Navy Leadership Balances Programs Joint MWR/NEX BoD Strategic Direction Financial Goals and Objectives Profit Distribution Joint Base Events Name Brand Food Telecommunications/ Internet Internal Audit Support Wounded Warrior Support NEX Net Profit 30% NEXCOM Share 70% MWR Share 100% NEX Profits Support Sailor Programs Construction/Renovations Information Systems Equipment 25% To Installations Connection More Than Dividend Distribution

Unique NEX Strategy Overlaps into Four Major Retailing Segments Discount Mass Retailer Wal*Mart, Target, Kohl’s, TJ Maxx, Clubs Department Stores and Specialty Macy’s, Penney’s, GAP, Coach, Limited NEX Focused Discounter Home Depot, Best Buy, Sports Authority C-Stores 7-11, WAWA, Sheetz, am pm No Other Retailer does what we do! Any other retailer would only focus on one area Due to our diverse customer base, we must try to offer each area 11 11 11

Navy Exchange Customer New to the Navy, single, male and enlisted, they have disposable income they spend mainly on themselves. Brand name oriented and generally not price sensitive. Married and single active duty enlisted, no children, primarily 18-44, not price sensitive; brand and style conscious. Live off base or in on-base housing. Active Duty married and single with children, primarily 25-44. Limited disposable income, working to make ends meet with family needs. Retired from the military, almost all 45-64. Receiving multiple retirement incomes . Half do not have children living at home. Seek quality and value and are above average spenders. Retired, 65+. Receiving military retirement and social security. Loyal to shopping at the Exchange. Many have significant disposable income and prefer high quality and brand names.

NEXs Operate Differently from Commissaries Commissaries are subsidized with taxpayer dollars that pay salaries and operating costs NEXs operate like civilian retailers … profits must pay salaries, insurance, retirement benefits, the cost of renovating and building new stores and purchase inventory

Exchanges & Commissaries Navy Exchange Commissary Non-appropriated fund program (NAFI) Self-supporting except overseas transportation costs Prices included markup to cover operating expenses and provide MWR dividend Broad assortment Appropriated fund program Operating costs supported by taxpayers Prices based on cost plus 5% surcharge Limited non-food assortment

Social Connection Facebook YouTube Video Twitter Digital Flyer 15

Social Media 124,145 Likes 580,000 Flyer Sign-Ups 310,000 Email Sign-Ups 27,000 Text Message Sign-Ups Demographics: 56% Female 44% Male 26% Ages 18-24 27% Ages 25-34 20.3% Ages 35-44 46 Countries 46 Languages

Vendor Community-Points of Interest NEX Offers: A unique channel of trade to try different ideas and offers A trading partner that is not going out of business An A-1 Credit Rating An outstanding repeat clientele A customer base that develops lifetime brand loyalties during their time in service.

It is the men and women that serve our country! Bottom Line Is……… If ANYONE deserves the NEWEST PRODUCTS, the BEST DEALS, the BEST SERVICE, and SPECIAL CONSIDERATIONS… It is the men and women that serve our country! YOU play an important role in delivering this to our customers!!!