As we head into the home stretch of 2018, wanted to update you on our success to date and thank you for all you are doing to make the holidays special for the best customers in the world—our Soldiers, Airmen, military families and Veterans.
Because of your dedication, the Exchange is performing very well against our annual financial plan. Through the third quarter, earnings of $266 million exceeded plan by $14 million and sales of $4.9 billion are 3 percent above plan. Additionally, we are aggressively controlling costs with general & administrative expenses almost $26 million below plan.
We are on solid financial ground.
Balancing sales, margin
From Veterans Day–the beginning of the holiday season–through Cyber Monday, main store sales dropped 2.3 percent and online sales declined 13.1 percent compared to 2017. Please know that this sales drop was the result of a strategic shift from focusing on sales in 2017 to balancing sales and margin in 2018.
In 2017, the Exchange focused on generating excitement as we opened our doors online to 15 million honorably discharged veterans. We deeply discounted sales to attract these shoppers and as a result, 2017 sales generated lower earnings than historical levels.
“The bottom line is that operationally and financially the Exchange is performing even better than last year for the holiday period.”
-Director/CEO Tom Shull
From 2018 Veterans Day to Black Friday, with sales and margin balancing, margin increased by 13 percentage points. This is a stunning accomplishment from the shift in strategy.
Equally important, 2018 inventory is lower by more than $100 million compared to last year, a good indication that the higher margins can be maintained as there is less inventory to clear and more room for new merchandise deliveries.
Enhancing eCommerce delivery
Teams across the enterprise (IT, EC, LG, MD and our Ship from Store facilities) have worked tirelessly to enhance the eCommerce delivery. Over Thanksgiving weekend, Exchange distribution centers shipped 90 percent of ShopMyExchange.com orders on time, compared to 52 percent during the same period last year.
Additionally, the regions have done an incredible job keeping up with the significant volume of Ship from Store orders. Fort Hood, Fort Campbell and Joint Base San Antonio-Fort Sam Houston were among the stores that did fabulous over the holiday weekend.
The bottom line is that operationally and financially the Exchange is performing even better than last year for the holiday period. Our performance reflects the work you do each day to preserve and strengthen the 123-year-old Exchange benefit.
No other retailer can do what we do. Working as a team, we will continue to accomplish our mission to serve and improve the lives of our Warfighters and their families, past, present and future.
Shining brightly as the holiday spirit
The fourth quarter is when you shine as brightly as the holiday spirit. The great care you give our Warfighters and families—especially those who are far away from loved ones— makes the holidays special for them. Thank you for your dedication!
It is an honor to serve with you.
Onward and upward!