1. Outdoor Specialty Retailer Operational Report Realizing Growth And Profitability Part 1 January 27, 2007 Jay Townley The Gluskin Townley Group, LLC

2. SROR 127 Realizing Growth And Profitability Introduction to the Outdoor Specialty Retailer Operational Report Nuggets from the Report – different tomorrow How to effectively use the benchmarks contained in the Report – different case studies today and tomorrow Summary and how to order the Report Q&A

3. SROR 127 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 to grow your business –Tomorrow…strategies to grow your business

4. SROR 127 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 Top-line growth cannot be taken for granted & does not guarantee profitability!

5. SROR 127 Realizing Growth And Profitability Nugget: Average revenue growth was 8.5% over a year period. 75% of retailers reported revenue growth. –What has your growth rate been compared to a year ago? –Are you higher or lower than the 8.5% average benchmark?

6. SROR 127 Realizing Growth And Profitability Nugget: Business expenses averaged 39% of total revenue, with a gross operating margin of 44%. –Retailers averaged a 5% net operating profit These three ratios are key benchmarks! –What are your key ratios?

7. SROR 127 Realizing Growth And Profitability Other Outdoor and Indoor active sports specialty retailers –Bike Shops –Backpacking/Camping Source: Outdoor Industry Association SROR Report National Bicycle Dealers Association (NBDA) Note: NSGA conducts NBDA Cost Of Doing Business Survey = uniform reporting

8. SROR 127 Realizing Growth And Profitability Typical Backpacking/ Camping Specialty Bicycle Retailer Total Revenue Per Store $1,240,010$549,000 Gross Margin (As a % of revenue) 44%45.3% Total Operating Expenses 39%43.3% Net Operating Profit 5.0%2.1%

9. SROR 127 Realizing Growth And Profitability Nugget: Apparel accounts for an average of 32% or revenue – but contributes 35% of margin share. –Equipment categories tend to under perform their space allocation in terms of share of gross margin –What are your apparel ratios?

10. SROR 127 Realizing Growth And Profitability Nugget: Inventory turns vary across product categories – –Accessories 4.3 x –Footwear 3.4 x –Apparel3.2 x –Equipment categories tend to have lower levels of inventory turns. –What are your inventory turns?

11. SROR 127 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?

12. SROR 127 How To Effectively Use Benchmarks Select four to eight key benchmarks that can make the biggest positive impact on your business. –Examples: Total operating expense Operating gross margin Gross margin - key categories Mark-on vs. Realized GM Net operating profit Inventory turn by category

13. SROR 127 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)

14. SROR 127 How To Effectively Use Benchmarks Weekly reporting (timely) is preferred for the most important ratios, foot-lines and benchmarks because – weekly allows you to adjust and amend your plan with your managers and staff in time, during a month, to really make a difference and positively impact the business. Some ratios are better reported monthly – so you will have a mix of frequency.

15. SROR 127 How To Effectively Use Benchmarks Case Study: B & L Bike Shop Davis, California

16. SROR 127 How To Effectively Use Benchmarks Case Study: Bicycles, Accessories, Clothing, Shoes, Service

17. SROR 127 How To Effectively Use Benchmarks Case Study: Population: 64,259 and stable Median Income: $74,948 (above US) Seven bike shops within short walk Grown last 4-years = $940,000 48.5% average gross margin No top-tier bike brands

18. SROR 127 How To Effectively Use Benchmarks Case Study: Part of success is – benchmarking Goals set for year: Operating Expenses, Realized Gross Margin Operating system is geared to reporting against benchmarks Consistent staff training and education

19. SROR 127 How To Effectively Use Benchmarks Benchmarks and performance against them can be very important to staff and staff morale. –How much do you share? As much as you are comfortable with, but benchmarks are most effective when established as achievable goals for the whole business, and identified with individual performance where ever possible.

20. SROR 127 Summary Introduction to the Outdoor Specialty Retailer Operational Ratio Report Nuggets from the Report How to effectively use the benchmarks contained in the Report Summary and how to order the Report Part 2 tomorrow covering Retailing Strategy

21. SROR 127 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 www.outdoorindustry.org Phone: 303-444-3353 Booth 56000 at the Show Drop your card to be part of the next report

22. SROR 127 Q & A Thank You! Jay Townley Partner The Gluskin Townley Group, LLC jay@gluskintownley.com