LIQUOR STORES N.A. LTD. Information... · LIQUOR STORES N.A. LTD. Investor Presentation March ... such as future financial performance and operating results of Liquor Stores N.A

LIQUOR STORES N.A. LTD.Investor Presentation March 2016

Investor Presentation

Caution Concerning Forward-Looking StatementsThis document (and oral answers to questions arising from this document) may contain forward-looking information that reflects management’scurrent expectations related to matters such as future financial performance and operating results of Liquor Stores N.A. Ltd. (“the Company”).Forward-looking statements are presented for the purposes of providing information about management’s current expectations and plans andallowing investors and others to get a better understanding of the Company’s anticipated financial position, results of operations and operatingenvironment. Readers are cautioned that such information may not be appropriate for other purposes.All statements, other than statements of historical facts, included in this document may constitute forward-looking information, including but not limitedto, statements concerning management's expectations relating to possible or assumed future prospects and results, the Company’s strategic goalsand priorities, the Company’s actions and the results of those actions and the economic and business outlook for the Company. Often but not always,forward-looking information can be identified by the use of forward-looking terminology such as "may", "will", "expect", “intend”, "believe", "estimate","plan", "could", "should", "would", "outlook", "forecast", "anticipate", "foresee", "continue" or the negative of these terms or variations of them or similarterminology. Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light ofits experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to berelevant and reasonable at the date that such statements are made.By its very nature, forward-looking information requires us to make assumptions and is subject to inherent risks and uncertainties, which give rise tothe possibility that the Company's assumptions may not be correct and that the Company's expectations and plans will not be achieved. Although theCompany believes that the forward-looking information in this document is based on information and assumptions which are current, reasonable andcomplete, this information is necessarily subject to a number of factors that could cause actual results to differ materially from management’sexpectations and plans as set forth in such forward-looking information for a variety of reasons. Some of the factors that could affect future results andcould cause results to differ materially from those expressed in the forward-looking statements contained herein include, but are not limited to: risksrelating to government regulation and changes thereto (whether by court decisions, citizen referenda, or otherwise); competition; the state of theeconomy; the unpredictability and volatility of the Company’s common share price; restrictions on potential growth; restrictions on potential growth asa consequence of the payment of cash dividends by the Company representing a substantial amount of its operating cash flow; changes in commoditytax rates and government mark-ups; risks relating to future acquisitions and development of new stores; the Company’s ability to locate and secureacceptable store sites and to adapt to changing market conditions; poor weather conditions; dependence on key personnel; labour costs, shortagesand labour relations including the Company’s ability to hire and retain staff at current wage levels and the risk of possible future unionization; supplyinterruption or delays; reliance on information and control systems; income tax changes; leverage and restrictive covenants in agreements relating tocurrent and future indebtedness of the Company; credit risks arising from operations; dilution and future sales of the Company’s common shares; andthe potential lack of an active trading market for the Company’s common shares and convertible debentures. These factors should not be construedas exhaustive.For more information on the risks, uncertainties and assumptions that could cause the Company's actual results to differ from current expectations,please refer to the "Risk Factors" section of our Annual Information Form for the fiscal year 2015, our 2015 Management's Discussion and Analysis,and our Management’s Discussion and Analysis for the three months and year ended December 31, 2015, as well as the Company’s other publicfilings, available at www.sedar.com and at www.liquorstoresna.ca.Statements that include forward-looking information do not take into account the effect that transactions, or non-recurring or other special itemsannounced or occurring after the statements are made, have on the Company’s business.The forward-looking statements and information contained herein are based on certain factors and assumptions as of the date hereof. The Companydoes not undertake to update any forward-looking information, whether written or oral, that may be made from time to time by it or on its behalf, toreflect new information, future events or otherwise, except as is required by applicable securities laws.

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Agenda

Value Proposition

Our Opportunity

Our Growth Plans

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Compelling value proposition Largest publicly traded liquor retailer offers exposure to stable and growing industry with significant potential upside

Attractive business today

• Strong management team, with robust Canadian and U.S. retail experience

• Quality asset base – prime & strategic locations

• Solid balance sheet

• Leading brands in Alberta, British Columbia, Alaska and Kentucky

• Increasing overall profitability despite market challenges in Alberta

Well positioned for future growth

• Hard to replicate competitive advantages –locations, scale and vendor relationships

• Fragmented industry ripe for expansion

• Experiential new store concept – industry game changer

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Significant market opportunity

* Canadian beer, liquor store and agency sales (year ended March 31, 2015, Stats Can)** U.S. retail sales of alcoholic beverages (2015, Beverage Information Group) 5

Our total sales in 2015

$746million

~21billion ~$220

billion

US Market Size

**

*

Canadian Market Size


Proven strategy – our 7 Point Plan is working

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Enhance the Senior Leadership Team

Invest in Our People

Implement an Industry Leading IT Platform

Invest in Our Store Network

Increase Brand Awareness and Loyalty

Increase Operating Margins

Pursue Expansion

1 2 3

4 5 76


Our 7 point plan is working – top line growth

7

2.0%

6.5%4.9%

5.5%

7.1%

24.5%

25.0%

25.5%

26.0%

26.5%

$300,000

$350,000

$400,000

$450,000

$500,000

$550,000

$600,000

$650,000

$700,000

$750,000

$800,000

2011 2012 2013 2014 2015

Gro

ss M

argi

n %

Sale

s

Sales GM%

Percentage sales growth

over prior year


Multiple growth avenues

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Organic Acquisitions Greenfield New Markets

1 2 3 4

18.5% increase in sales

50 bps growthin gross margin

13% of stores remodeled

50% of stores have been planogrammed/reset

Successover last 3 years

Plans

2016 - 51% interest in Birchfield (2 NJstores)

2015 – Edmonton store, converted to Wine and Beyond

22 new stores* – mix of large format and convenience stores

2016: Connecticut2016/17: Massachusetts

Open 4 - 7 new stores over next 24 months Renovate 8 to 12 stores per year

Ongoing evaluation of opportunities

* Over same period, we also closed/consolidated underperforming stores resulting in net increase of 5 stores


Investments in stores are paying off

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BeforeDense merchandising and dated fixtures

AfterModernized signage, lifestyle imagery and flooring enhance the shopping experience to build loyalty

20%ROCE

Average same store increase


Investments in stores are paying off, continued

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BeforeDated fixtures and decor

AfterModernized and enhanced shopping experience to build loyalty


Preferred label increasing margins and loyalty

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Strategy• Source, sell and promote exclusive private-

label products• Grow as percentage of respective product

categories (wines, spirits & beer) to deliver higher margins

Implementation• Training staff, aligning incentives • Customer sampling programs

1 McGrath’s sold for every 4

Baileys

#1 selling Pinot Grigioin Alberta

Top 10 Vodka in the Alberta

chain

90pt rating from International Wine Review

95pt rating from James Suckling

90pt and ‘Best Buy’

rating


Preferred label: innovation to drive sales

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Investor Presentation 13

• Convenience formats• Highly visible and accessible stores• Great selection• Prime locations near grocery stores

• Destination shopping• Large format offers unparalleled value• 8000+ SKUs of wine, beer and spirits

Combination of Destination and Convenience stores expand consumer reach


Convenience formats – easy in + out, with the right selection and value

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Convenience formats – easy in + out, with the right selection and value

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Destination formats - winning on price and selection

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Destination formats - winning on price and selection

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Designed to spark new interest & educate

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Designed to engage & provide an experience

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Designed to inspire & grow basket size

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New game-changing store concept designed with key customer types in mind

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BRAND POSITIONING: For alcohol enthusiasts thirsty to celebrate everyday occasions, LQR MKT is an affordable luxury liquor destination, that is your go-to daily celebration catalyst, who provides a spirited experience and curated offering which is all about you.


Store layout aligned to customer experiences

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Spark ZoneInspiration for celebration, featuring new products from around the store

Curated OfferingsSpecial product, artisanal spirits and cross-merchandising

Power AisleA compelling path to reveal the range of store offerings

Destination Draw “Store within a store” Comprehensive and educational wine experience

Unique, Flexible & ValueMix-and-match, local breweries, and growler fills. Convenience, flexibility and range of options for beer offerings


Invest + Grow + Celebrate

• Invest • Solid balance sheet and means to invest in the business• 7 Point Plan initiatives proven to deliver

• Grow• Multiple avenues for growth• Measured and flexible approach to growth

• Scale up/down in light of market conditions

• Celebrate • Exciting growth strategy and opportunities for team• Transformation of retail experience for customers• Value creation for shareholders

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Supporting Details

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Capital markets profile

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IPO:TSX:

Analyst Coverage

LIQ (common shares)LIQ.DB.A (convertible debentures)

Shares outstanding:

Market capitalization:

27.5 millionRecent price (March 18, 2016):

$7.51 ~$207 million

Liquor Stores Income Fund, Sept., 2004Corporate conversion: Dec., 2010

Dividend:

52-week high / low:

$0.03Current yield: ~ 4.8%

$15.58 / $6.40

/ month ($0.36 annualized)


($C millions) 2015 2014

Number of Stores 243 243

$ % of sales $ % of sales

Canadian store sales 528.7 70.8% 514.0 74.0%

US store sales 217.7 29.2% 180.2 26.0%

Total sales 746.4 100% 694.2 100%

Gross margin 191.4 25.6% 176.4 25.4%

Adjusted operating margin 40.9 5.5% 37.9 5.5%

Long-term debt 129.6 92.0

Working capital 113.2 98.5

Year ended December 31,

2015 Annual Financial Results

• Consolidated sales increased 7.5% due to growth in same-store sales, new store expansion, and positive impact from foreign exchange rate changes;

• Same-store sales increased by 1.4% in Canada and by 1.0% in the U.S.; and

• Adjusted operating margin increased by $3.0 million as a result of growth in sales and gross margin while keeping head office costs flat to prior year.

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Diversified & strategic locations

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In approx. 60% of our store locations we are either the anchor tenant or the location is anchored by a major retail tenant

AlaskaAnchorage: 19Secondary Markets: 4

Total: 23

KentuckyLexington: 6Louisville: 6Secondary Markets: 3

Total: 15

British ColumbiaLower Mainland: 13Vancouver Island: 11Interior: 11

Total: 35

AlbertaEdmonton: 83Calgary: 45Secondary Markets: 52

Total: 180

MASSACHUSETTSBerlin (suburb of Boston): 1 (2016/2017)Total: 1

CONNECTICUTNorwalk: 1 (2016)Total: 1

NEW JERSEYPrinceton: 1Woodbridge: 1

Total: 2


Non-IFRS Measures• Operating margin as a percentage of sales, adjusted operating margin, adjusting items, and same-store sales are not

measures recognized by IFRS and do not have a standardized meaning prescribed by IFRS. Investors are cautioned thatoperating margin as a percentage of sales, adjusted operating margin, adjusting items, and same-store sales should notreplace net earnings or loss (as determined in accordance with IFRS) as an indicator of the Company's performance, ofits cash flows from operating, investing and financing activities or as a measure of its liquidity and cash flows. TheCompany's method of calculating operating margin as a percentage of sales, adjusted operating margin, adjusting items,and same-store sales may differ from the methods used by other issuers. Therefore, the Company's operating margin asa percentage of sales, adjusted operating margin, adjusting items, and same-store sales may not be comparable tosimilar measures presented by other issuers.

• Same-store sales include sales for stores that have been open 12 full months at the beginning of the reporting period.This is one of the key metrics that we use to assess our performance and provides a useful comparison between periods.Same-store sales exclude: (i) all sales to wholesale customers, (ii) stores where same-store sales have been negativelyimpacted due to sales being shifted to closely-located convenience-focused stores we’ve opened in the last 12 fullmonths, and (iii) stores where same-store sales have increased due to the closure of closely-located stores in the last 12full months.

• Operating margin as a percentage of sales is calculated by dividing operating margin (derived by subtracting Operatingand Administrative expenses from Gross Margin) by sales.

• Adjusted operating margin represents operating margin adjusted for unusual, non-recurring or non-operating factors onboth a consolidated and segmented basis. These factors, referred to as adjusting items, are reconciled and discussed inthe Company’s MD&A for the year ended December 31, 2015.

• Management believes the presentation of adjusted operating margin provides for useful information to investors andshareholders as it provides increased transparency and predictive value. Management uses adjusted operating margin toset targets and assess performance of the Company.

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LIQUOR STORES N.A. LTD. Information... · LIQUOR STORES N.A. LTD. Investor Presentation March ... such as future financial performance and operating results of Liquor Stores N.A