Ann: Goldman Sachs Conference Presentation, page-8

G'day Klogg,

I agree with the DSK comment. I am extremely bullish about the H2 prospects for Adairs based on comments from family members and my daughter who works in the fashion industry here in melbourne and is dialled in to the things that drive fashion customers and Adairs customers. The recent 2nd collaboration with Miimi and Jiinda has been a huge success.

Those website traffic numbers tell part of the story.

The other part of the story is the very strong management desire regarding banking gross profit dollars.

My belief is that if there was a deterioration in sales growth numbers Mark Ronan would have updated the market today. These guys are very conservative when it comes to continuous disclosure, a discipline rammed into them by the recently departed Chairman who I know personally.

In this case no news is good news.

The irony is that today's presentation shows just how deeply Adairs understands its customers and what their wants and needs are. That is such an important attribute for any company.

Success sometimes is a bitch. Miss Daicosisgod tells me that the roaring success of the latest Linen Lovers Sale has lead to despatch time sof up to 14 days versus the normal 2-4 days. No doubt this will cause a bit of a downer but it also tells me the Linen Lovers Sale was a runaway success. Roll on the new DC I say.

Below I have copied part of the Annual Shareholder Letter Jeff Bezos of Amazon wrote in 1997, the year Amazon floated on the NYSE.

Since 1997 Amazon has created shareholder value of US$1.6 trillion

Some of the values Amazon live by are the same as Adairs.

Cheers................Daicosisgod



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It’s All About the Long Term

We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital. Our decisions have consistently reflected this focus.

We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise.

Because of our emphasis on the long term, we may make decisions and weigh tradeoffs differently than some companies. Accordingly, we want to share with you our fundamental management and decision-making approach so that you, our shareholders, may confirm that it is consistent with your investment philosophy:
• We will continue to focus relentlessly on our customers.
• We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.
• We will continue to measure our programs and the effectiveness of our investments analytically, to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures.
• We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case.
• When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we’ll take the cash flows.
• We will share our strategic thought processes with you when we make bold choices (to the extent competitive pressures allow), so that you may evaluate for yourselves whether we are making rational long-term leadership investments.
• We will work hard to spend wisely and maintain our lean culture. We understand the importance of continually reinforcing a cost-conscious culture, particularly in a business incurring net losses.
• We will balance our focus on growth with emphasis on long-term profitability and capital management. At this stage, we choose to prioritize growth because we believe that scale is central to achieving the potential of our business model.
• We will continue to focus on hiring and retaining versatile and talented employees, and continue to weight their compensation to stock options rather than cash. We know our success will be largely affected by our ability to attract and retain a motivated employee base, each of whom must think like, and therefore must actually be, an owner.

We aren’t so bold as to claim that the above is the “right” investment philosophy, but it’s ours, and we would be remiss if we weren’t clear in the approach we have taken and will continue to take. With this foundation, we would like to turn to a review of our business focus, our progress in 1997, and our outlook for the future.

Jeff Bezos
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