REI inc,

At REI, we inspire, educate and outfit for a lifetime of outdoor adventure and stewardship.

H a r i n d e r S a m r a I J o h n H e l l e r I L i n d s e y R e e s e I T i t u s K i m b o w a

History

Goals Recommendation Implementation Financials Conclusion

• Opened in 1938 by Lloyd Anderson and his wife Mary• 23 members started co-op with $1 investment• 2011

117 stores 8,000 employees 4 million members $ 1.7 billion in income (before dividends and taxes) $30 million net income

Goals

Goals Recommendation Implementation Financials Conclusion

Company wants to maintain growth while following core principles of environmental stewardship.

GOALS

Grow company by 5 stores a year while:Lowering Greenhouse Gas EmissionLowering Energy UseEliminating Waste

Company Goals: BY 2020 REI to become CLIMATE NEUTRAL and ELIMINATE WASTE

Recommendations

4-2-0 PLAN:

1. Social Responsibility E-Conference (SREC)2. E- Commerce3. REI Adventures® footprint reduction program (AFRP) 4. New distribution center

Goals Recommendation Implementation Financials Conclusion

SREC

Social Responsibility E-Conference• Following Kaizen principle• Empowering employee contribution to reduce carbon footprint in stores• Yearly Conference over the web

Employee Commuting Emission • Eco Punch Program• Free Bike Loans

Store Expense $200 X 10 = $2,000$2,000 X 117 Stores=

$234,000

Goals Recommendation Implementation Financials Conclusion

The Paper Problem

77%

(24.4)%

30.1%

Overall (11.5)%

Proj 2020

Goals Recommendation Implementation Financials Conclusion

E-Commerce

E-CommerceDirect Mail• Create opt-in program for catalogs • Reduce frequency of catalogs from 3 to 2 by 2015 Goal• Eliminate direct mail and catalogs by 2020

(24.4)%

Proj 2020

Goals Recommendation Implementation Financials Conclusion

E-CommerceShipping• Customer shipping box return program• Incentive for the programGoal• Design standard shipping boxes• Reduce box usage by 50% by 2015

E-Commerce Cont’d…

Proj (50%)

Proj 2015

Goals Recommendation Implementation Financials Conclusion

874

REI Adventures® Footprint Reduction Program

Largest Contributor to GHG Emission

• Customers pay Carbon Credit which is matched by REI• Partnership with TerraPass

Seattle – Sydney 15,489 miles 6,499lbs CO2

$41.54

Seattle – Lima 9,912 miles 4,316lbs CO2

$29.74

Goals Recommendation Implementation Financials Conclusion

New Distribution Center

Boulder, CO ( LEED GOLD)

Build new distribution center in St. George Utah• Reduce GHG• Reduced transportation costs to Southwest region• Allow for future Expansion of 5 stores per year

NEW DC

Sumner DC

1,111 miles

400 miles

Savings Per TruckCO2 output from

SumnerCO2 output from

UtahMiles Saved

between DC’sCO2 Reduction between DC’s

3 trip/wk Average

Lbs CO2Year Saved

Tons CO2/yr Saved

Houston, TX 5820 3637.5 1059 2182.5 6547.5 340470 170.235Los Angeles, CA 2667.5 970 711 1697.5 5092.5 264810 132.405

Goals Recommendation Implementation Financials Conclusion

With new DC projected savingTotal Saving= $ 887,328 Gas savings for California

New Distribution Center

Boulder, CO ( LEED GOLD)

Goals Recommendation Implementation Financials Conclusion

Savings Per TruckCO2 output from

SumnerCO2 output from

UtahMiles Saved

between DC’sCO2 Reduction between DC’s

3 trip/wk Average

Lbs CO2Year Saved

Tons CO2/yr Saved

Houston, TX 5820 3637.5 1059 2182.5 6547.5 340470 170.235Los Angeles, CA 2667.5 970 711 1697.5 5092.5 264810 132.405

Proj 2016

6,000

New Distribution Center

Boulder, CO ( LEED GOLD)

Fort Pierce Industrial Park550,000 SqFt45 Acres Design Cost $1 /Sqft $ 550,000

Land Cost $120,000 /acre $ 5,400,000 Const Cost $109.09 /sqft $ 60,000,000

Total Construction Cost (gross): $ 65,950,000

Cost of LEED

Increased Design Cost (10% of design cost): $ 55,000

Increased Construction Cost (25% of Construction Cost): $15,000,000

Estimated Total Cost of LEED Certification: $15,055,000

Total Cost of Construction $81,005,000

Goals Recommendation Implementation Financials Conclusion

Completion by 2016

Timeline of Implementations

Boulder, CO ( LEED GOLD)Evaluation of 4-

2-0 Plan

1 2Short Term Long Term

2012 2014 2016 2018 2020

Planning of new DC

Building of new DC

Implementation of 4-2-0 Plan

5 New stores a year LEED Certified

Social Responsibility E-Conference (SREC) held yearly

Eliminate Mailers• Reduce Mailers by 50%

• Reduce Shipping boxes by 50%

Bike Loan Program

Goals Recommendation Implementation Financials Conclusion

Financials

Boulder, CO ( LEED GOLD)

(In millions) 2009 2010 2011 2012 2013 2014 2015 2017 2020Net Sales 1,455 1,658 1,774 1,899 2,032 2,174 2,326 2,663 3,263

COGS 804 929 985 1,044 1,107 1,173 1,244 1,398 1,665 Gross Profit 650 728 789 854 924 1,000 1,082 1,265 1,597

Op Expenses:Payroll 281 331 357 386 417 450 486 567 714

Occ, G&A 268 282 304 329 355 384 414 483 609 549 613 662 715 772 834 901 1,051 1,324

Operating Income 100 115 126 138 151 165 180 214 273 Other Income, Net 14 14 14 14 14 14 14 14 14

Income before Patronage Funds and Income Taxes 114 129 140 152 165 179 194 228 287

Patronage Refunds 67 80 85 91 97 104 112 128 157 IBIT 47 49 55 61 67 74 82 99 130

Tax Provision 17 20 22 24 27 29 33 39 52 Net Income 30 29 33 36 40 44 49 59 78

Goals Recommendation Implementation Financials Conclusion

Financials with Implementations

Boulder, CO ( LEED GOLD)

Goals Recommendation Implementation Financials Conclusion

Team Recommendations2012 2013 2014 2015 2017 2020

ExpensesBicycle Program($200x10bikesx117stores (in thousands) 234 244 254 265 288 326Distribution Center 4.1 4.1 4.1 ($81 million; 3.2%int; capitalized 30 years)5 New Stores per Year 20 20 20 20 20 20Total Cost of Implementing Plan 21 21 21 25 25 25 Gain from Tax Incentives(national avg for certified buildings)(est 30% of Tax Provision) 7.3 8.1 8.9 9.9 11.9 15.6 Net Expense of Recommendations (12.9) (12.1) (11.3) (14.5) (12.4) (8.85)Net Income with Recommendations 23.83 28.57 33.68 37.88 47.33 69.17

Conclusion

Boulder, CO ( LEED GOLD)

By implementing our recommendations, REI will• Maintain its core values• Encourage Corporate Responsibility with employees• Reduce their Carbon footprint• Eliminate Waste

Goals Recommendation Implementation Financials Conclusion

THANK YOU

Index

Boulder, CO ( LEED GOLD)

1 Introduction 9 REI Adventures® Footprint Reduction Program

2 History 10 New Distribution Center

3 Goals 11 New Distribution Center

4 Recommendations 12 New Distribution Center

5 SREC 13 Timeline of Implementation

6 The Paper Problem 14 Financials

7 E-Commerce 15 Financials with Implementation

8 E-Commerce Cont’d… 16 Conclusion

Reference

Boulder, CO ( LEED GOLD)

"Best Carbon Offset Provider." TerraPass. Web. 25 Feb. 2012. <http://www.terrapass.com/>."ChiefExecutive.net." Best/Worst States for Business. Web. 26 Feb. 2012. <http://chiefexecutive.net/best-worst-states-for-business>. "City of St. George | News & Press Releases ." City of St. George | Welcome! . Web.

26 Feb. 2012. <http://www.sgcity.org/news/>."Economic Development Corporation Utah." Economic Development Corporation Utah.

Web. 25 Feb. 2012. <http://www.EDCUtah.org/>.Hoover's. Web. 25 Feb. 2012. <http://subscriber.hoovers.com.offcampus.lib.washington.edu/H/home/index .html>. "Kaizen." Wikipedia. Wikimedia Foundation, 26 Feb. 2012. Web. 26 Feb. 2012.

<http://en.wikipedia.org/wiki/Kaizen>. "Maps." Fort Pierce Industrial Park. Web. 26 Feb. 2012. <http://www.fortpierceindustrialpark.com/index.php>. "Suresites - Welcome." Suresites. Web. 26 Feb. 2012. <http://www.utahsuresites.com/index.php>."Stewardship at REI." REI Stewardship. Web. 25 Feb. 2012. <http://www.rei.com/stewardship>."St George Utah Chamber of Commerce." St George Utah Chamber of Commerce. Web.

26 Feb. 2012. <http://www.stgeorgechamber.com/index.html>.lauth.net/Includes/Docs/LEED_CaseStudy_REI_11808.pdf. [Accessed: 26/1/2012].