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Reflections on 2016 and a Look Toward 2017

We Are All Doing Our Part to Provide Service, Support

Happy holidays! This month, we are privileged to celebrate this special time of year with you, our family, at home and at the Exchange. This is a time to reflect on the year that was and look forward to the new one ahead.

During 2016, we pulled together as a team and made it not only a good year, but one filled with outstanding achievements.

Listing each accomplishment here would take up more space than available, so I’ve narrowed them down to the following “magnificent seven.”

Magnificent seven

(Numbers are based on year-to-date September 2016)

  1. Intensify national brands (INB): INB sales: $370.5M, gross profit: $108.2M, 112 concept shops opened
  2. BE FIT program: 338 BE FIT items in the program generating $51.7M in sales
  3. Grow the Express: Gross profit including gas: $263.7M
  4. Transform the online experience: Gross sales: $129.2M  (up 25%)
  5. Grow concessions: $1.1B (4.1% over plan), earnings before depreciation are $148.7M (3.3% higher than prior year)
  6. First run movies: 59 theaters have the ability to show first run movies; 39 in OCONUS and 20 in CONUS.
  7. Optimize the supply chain: $10.9M in savings ($260M total cumulative expense reduction since 2011)

All of these efforts have yielded $275M in operating profits (versus $163M YTD Sept 2011, while active duty troops, Air Force and Army, have decreased -11.7 percent.)

Highlights from directorates

In demonstrating the benefits of the MILITARY STAR card, the Exchange recognized the patronage of our customers through a personal dividend that gave $22 million back to our customers in MILITARY STAR rewards. Additionally, associates helped sign up 21,000 new cardholders, exceeding initial forecasts by 146 percent.

Not only do we serve our military family on installations, our team takes the Exchange benefit to austere and dangerous locations around the world.

The Exchange continued to improve the online shopping experience as the shopmyexchange.com Logistics team increased internal capacity at our distribution centers by 120 percent and developed ship- from-store functionality.

These expansions afford the Exchange lower supply chain costs by controlling the manual packaging and presentation process, while reducing delivery time to the customer.

By reducing costs and improving speed of delivery, we are continuing to enhance the customer’s overall online experience. Pick, Pack and Ship Same Day is our commitment to our service members and their families.

Services, Food and Fuel expand portfolio

The Services, Food and Fuel team brought more than 100 name brands to Exchange food courts and malls. Several well-known brands were added to the portfolio including:

  • Claire’s
  • HAGGAR Outlet
  • Spirit Halloween
  • NAPA Auto Parts

New relationships were established with several “better-for-you” chains including:

  • Qdoba
  • McAlister’s Deli
  • Jimmy John’s
  • Freshens
  • Chipotle

More choices and name-brand services are in the works now.

Not only do we serve our military family on installations, our team takes the Exchange benefit to austere and dangerous locations around the world. In 2016, 65 associates voluntarily left the comforts of their friends and family to deliver a taste of home to troops in Poland, Ukraine, Cameroon, Australia, Afghanistan and Iraq. This willingness to go where our military goes is at the heart of the Exchange mission and provides a lifeline to those serving far from home.

Now that we are approaching the busiest time of year, we can hold our heads high knowing that we are providing service and support to our military that no other retailer can match.

Take pride in what you do

Each of you should be proud of your hard work and perseverance. Please accept my personal thanks for your individual contributions and your continued focus on taking care of service members and their families.

Every day, I’m so impressed and deeply inspired by your stunning examples of selfless service. You are on the front lines of our relevancy story, and your willingness to go above and beyond punctuates all we do with sincere affection and care for those who wear our Nation’s uniform.

Everyone has a role

In retrospect, 2016 found us all doing our part to make this year one of the most successful in Exchange history.

Now that we are approaching the busiest time of year, we can hold our heads high knowing that we are providing service and support to our military that no other retailer can match.

As we close out this magnificent year, I hope you will enjoy the holidays with your loved ones. Then, get ready to start 2017 with the same enthusiasm and service you exhibited throughout 2016.

One team, one fight!

Exchange History Fact

Director/CEO Tom Shull has bested a 55-year record at the Exchange. Serving four years and six months, Tom Shull is now the longest serving Director/CEO since Col. William Kendall. Long-serving CEOs are normal in commercial retailers as they can focus on building long-term value. Kendall served as the first chief of the Army and Air Force Exchange Service from 1947 to 1951. Tom Shull, a former infantry company commander, who served as military assistant to Robert C. McFarlane, National Security Advisor to President Reagan, was CEO for several retail and consumer packaged goods companies, including Barney’s New York, Wise Foods and Hanover Direct, before joining the Exchange team in June 2012. Tom looks forward to continuing his work with the talented Exchange family to further strengthen the Exchange’s mission of serving those who serve for years to come.

Director/CEO Tom Shull EUR_CommandChange2

Col. William Kendall

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