!

""#$%#&'(#)*+$",
-*,#./0#.122
Pershing Square Capital Management, L.P.
3$45"*$+(6
The analyses and conclusions of Pershing Square Capital Management, L.P. ("Pershing Square") contained in
this presentation are based on publicly available information. Pershing Square recognizes that there may be
confidential information in the possession of the companies discussed in the presentation that could lead
these companies to disagree with Pershing Squares conclusions. This presentation and the information
contained herein is not a recommendation or solicitation to buy or sell any securities.
The analyses provided may include certain statements, estimates and projections prepared with respect to,
among other things, the historical and anticipated operating performance of the companies, access to capital
markets and the values of assets and liabilities. Such statements, estimates, and projections reflect various
assumptions by Pershing Square concerning anticipated results that are inherently subject to significant
economic, competitive, and other uncertainties and contingencies and have been included solely for
illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of
such statements, estimates or projections or with respect to any other materials herein. Actual results may
vary materially from the estimates and projected results contained herein.
Funds managed by Pershing Square and its affiliates have invested in common stock of Family Dollar Stores
Inc. (FDO). Pershing Square manages funds that are in the business of trading buying and selling
securities and financial instruments. It is possible that there will be developments in the future that cause
Pershing Square to change its position regarding FDO. Pershing Square may buy, sell, cover or otherwise
change the form of its investment in FDO for any reason. Pershing Square hereby disclaims any duty to
provide any updates or changes to the analyses contained here including, without limitation, the manner or
type of any Pershing Square investment.
)*+$",#37""*6#
2
Ticker:
FDO
Stock Price:
$54
Market Cap:
~$6.6B
EV:
~$6.7B
FY2012 P/E:
14x
(August FY)
________________________________________________
Note: Pershing Square EPS esimtate of $3.88
All stock prices and financials are as of May 24, 2011 close
894$%(44#:;(6;$(<
4
894$%(44#3(456$=&$7%
Fam||y 0o||ar
!"#$%&'(#(" )*'(+,"-' .-/0/12 3/4
5 -7,000 stores
5 -7k se|||ng sq ft
per un|t
5 $8.50|sq ft avg.
rent, short-term
|eases
5 -07 of sa|es |n
rura| or sma||
town |ocat|ons
5 -557 of sa|es
are to <$40k
|ncome
househo|ds
5 -87 are over
age 45
5 -57 of sa|es
are consumab|es
5 -137 home
products
5 -117 appare|
5 -117 seasona|
5 h|gh ve|oc|ty,
genera||y non-
d|scret|onary
8KUs
5 Lower pr|ces
than drug stores,
gas stat|ons, and
grocery stores
5 6omparab|e to
mass merchants
5 Avg. basket |s
-$10 and 4 to 5
|tems
This hedge fund presentation brought to you by MarketFolly.com
5
>*"9(#?67=74$&$7%@#?6$5(#*%A#B7%;(%$(%5(
Dollar stores offer pricing comparable to Wal-Mart in a more convenient format.
Lower income customers use dollar stores as weekly fill-in trips between
supercenter destination shopping. The average FDO store visit is 8 minutes
Dollar stores offer pricing comparable to Wal-Mart in a more convenient format.
Lower income customers use dollar stores as weekly fill-in trips between
supercenter destination shopping. The average FDO store visit is 8 minutes
Wal-Mart and dollar stores can coexist. Management believes FDO has ~3%
share of their core customers wallet compared to WMTs ~35% share
Wal-Mart and dollar stores can coexist. Management believes FDO has ~3%
share of their core customers wallet compared to WMTs ~35% share
Concept Price Index Store Size ('000)
Dollar Stores 100 7
Drug Stores ~120 40
Grocers ~115 40
Mass Merchants ~95 125
6
C'*6(#D*$%#$%#E(&*$"#
High unit and same store sales growth have led to significant share gains for
the dollar store channel
High unit and same store sales growth have led to significant share gains for
the dollar store channel
________________________________________________
Source: Bernstein, 2009
Recess|on
?9F"$5#37""*6#C&76(4#C'*6(#7G#B76(#E(&*$"#C*"(4#HE7""$%I#JK#!;ILM
Recess|on
Bill Ackman has since doubled his position in Family Dollar (FDO). Click here for details
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
7
B7%4$4&(%&#C*+(#C&76(#C*"(4#D67<&'
Family Dollar, like other dollar store retailers, has consistently grown SSS over
the last decade even during recessions
Family Dollar, like other dollar store retailers, has consistently grown SSS over
the last decade even during recessions
C*+(#C&76(#C*"(4#D67<&'
________________________________________________
Note: Years are Fiscal Year Ending August
Recess|on
Recess|on
8
C*"(4#-$N
Consumables make up a growing percentage of Family Dollars sales volume.
Growth in consumables is responsible for most of FDOs recent traffic and
same-store sales growth
Consumables make up a growing percentage of Family Dollars sales volume.
Growth in consumables is responsible for most of FDOs recent traffic and
same-store sales growth
B7%49+*F"(4#C*"(4#-$N C*"(4#F,#B*&(I76,
57.0%
59.0%
61.0%
63.0%
65.0%
67.0%
2007 2008 2009 2010
Home Products,
13%
Apparel and
Accessories,
11%
Seasonal &
Electronics, 11%
Consumables,
65%
9
C9F4&*%&$*"#O7%IPQ(6+#D67<&'#:==76&9%$&,
The three major dollar store retail chains (Family Dollar, Dollar General, Dollar
Tree) operate ~20k units today. We believe there is room for 10k to 12k
additional stores or a decade of store growth at the current industry build rate
The three major dollar store retail chains (Family Dollar, Dollar General, Dollar
Tree) operate ~20k units today. We believe there is room for 10k to 12k
additional stores or a decade of store growth at the current industry build rate
________________________________________________
Source: For research see Morgan Stanley, 2010; Bernstein, 2009; Dollar General management comments
Map: UBS, 2010
R$I'#E*&(4#7G#E(&96%#7%#
B*=$&*"
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
11
R$4&76$5*"#E(&96%4#7%#B*=$&*"
Family Dollar has a strong track record of earning high returns on capital
Family Dollar has a strong track record of earning high returns on capital
207 Avg.
________________________________________________
Note: Years are Fiscal Year Ending August
ROIC Defined as: (Taxed EBIT)/Average (Assets Cash A/P Accrued Expenses)
?(65(%&#E(&96%#7%#B*=$&*"#H<$&'79&#5*=$&*"$S$%I#"(*4(4M
MarketFolly.com: Your source for hedge fund tracking on a daily basis
12
C'*6('7"A(6P:6$(%&(A#B*=$&*"#!""75*&$7%#C&6*&(I,
! New Store Growth (~$60mm Capex, ~$15mm SG&A):
! 300 new store openings and 80-100 store closings, 3% net growth
! Long-term, management expects to grow store count 5-7% annually
! Store Renovation Program (~$60mm Capex, ~$30mm SG&A):
! Over 800 stores in FY2011
! Going forward, management expects to renovate 1,000+ stores per year
! Share Repurchases & Dividends:
! Management has committed to buyback $750mm of shares by fall 2011
! FDO raised its dividend this year to $.72/share ($85mm)
In FY2011, Family Dollar plans to invest $300-$350mm of capex and repurchase
nearly $750mm of stock
In FY2011, Family Dollar plans to invest $300-$350mm of capex and repurchase
nearly $750mm of stock
-
2,500
5,000
7,500
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E 2013E
#

U
n
i
t
s
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
%

A
n
n
u
a
l

G
r
o
w
t
h
13
T(<#U%$&#D67<&'
New unit growth is accelerating after a pause that allowed management to
refocus on improving core operations. Management now believes that with the
current model FDO can grow units 5-7% per year by FY2013
New unit growth is accelerating after a pause that allowed management to
refocus on improving core operations. Management now believes that with the
current model FDO can grow units 5-7% per year by FY2013
Acce|erat|ng to
57 -77 growth
________________________________________________
Note: Years are Fiscal Year Ending August
V%A$%I#U%$&#B79%&
14
T(<#U%$&#V57%7+$54#
New units are generally inexpensive to build and highly profitable. On average,
units are 90% productive in their first year
New units are generally inexpensive to build and highly profitable. On average,
units are 90% productive in their first year
Estimated New Store Investment
Capex 200,000 $
SG&A 50,000
Inventory, net 75,000
Estimated Investment 325,000 $
New Store Earnings Low High
Mature Revenue 1,200,000 $ 1,200,000 $
Estimated Mature 4-wall EBIT Margin 10.00% 15.00%
Estimated EBIT 120,000 $ 180,000 $
% Pre-Tax Return 37% 55%
15
R$I'#E(&96%#7%#E(%7;*&$7%#B*=$&*"#
Management began an ambitious renovation program this year. While the
company has not disclosed detailed data, it has revealed that renovated stores
achieve at least a 10% sales lift
Management began an ambitious renovation program this year. While the
company has not disclosed detailed data, it has revealed that renovated stores
achieve at least a 10% sales lift
FDO plans to renovate 6,000 stores
FDO plans to renovate 6,000 stores
Lower than
company average
(35.77} to account
for |ncreased
consumab|es m|x
Renovation ROIC Estimate
Capex 77,000 $
SG&A 38,000
Estimated Investment 115,000 $
Low Mid High
Base Store Sales 1,200,000 $ 1,200,000 $ 1,200,000 $
Sales Lift % 10.00% 12.50% 15.00%
Incremental Gross Margin 30.00% 30.00% 30.00%
Estimated Incremental EBIT 36,000 45,000 54,000
% Pre-Tax Return 31% 39% 47%
?67A95&$;$&,#:==76&9%$&,
)*+$",#37""*6#;4L#37""*6#D(%(6*"
In many ways, Family Dollar and Dollar General are very similar companies:
In many ways, Family Dollar and Dollar General are very similar companies:
! Number of Stores
! Sales per Store
! Size of Average Store
! Consumables Mix
! Properties
Despite these similarities, the two business performance has diverged
Despite these similarities, the two business performance has diverged
-7,000
-9,500
-$1.2mm
-$1.4mm
-7k sqft -7k sqft
57 727
Leased,
Host|y rura|
& suburban
Leased,
Host|y rura|
& suburban
18
)*+$",#37""*6#;4L#37""*6#D(%(6*"#HB7%&LM
For many years, the two companies had very similar performance:
For many years, the two companies had very similar performance:
________________________________________________
Note: Family Dollar results are calendarized to year end Feb.
V8WQ#=(6#4X9*6(#G77&#
$-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
2000 2001 2002 2003 2004 2005 2006
Dollar General
Family Dollar
Dollar General Family Dollar
$-
$5.00
$10.00
$15.00
$20.00
$25.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Dollar General
Family Dollar
19
)*+$",#37""*6#;4L#37""*6#D(%(6*"#HB7%&LM
In July 2007, KKR bought Dollar General. Less than four years later, lets
compare the two companies:
In July 2007, KKR bought Dollar General. Less than four years later, lets
compare the two companies:
V8WQ#=(6#4X9*6(#G77&#
________________________________________________
Note: Family Dollar results are calendarized to year end Feb.
KKR uyout
Ju|y 2007
Dollar General Family Dollar
$-
$5.00
$10.00
$15.00
$20.00
$25.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Dollar General
Family Dollar
20
!%A#&'(#Y$%%(6#$4@#37""*6#D(%(6*"
V8WQ#=(6#4X9*6(#G77&#
________________________________________________
Note: Family Dollar results are calendarized to year end Feb.
KKR uyout
Ju|y 2007
377
Performance
Cap
Dollar General Family Dollar
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
2003 2010
Dollar General Family Dollar
$100
$120
$140
$160
$180
$200
$220
2003 2010
Dollar General Family Dollar
21
?67A95&$;$&,#D*=#
Family Dollars lower profitability is a result of both lower sales per square foot
growth and lower margins
Family Dollars lower profitability is a result of both lower sales per square foot
growth and lower margins
________________________________________________
Note: 2003 Family Dollar results are calendarized year end Feb. 2004
F00 87 |ower F00 157 |ower F00 70bps h|gher F00 250bps |ower
Sales Per Square Foot EBIT Margin
0C
F00
0C
F00
0C
F00
0C
F00
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Dollar General
Family Dollar
22
E("*&$;(#-*6I$%#Q6(%A4
Under KKRs ownership, Dollar General has dramatically improved margins
Under KKRs ownership, Dollar General has dramatically improved margins
V8WQ#-*6I$%
________________________________________________
Note: Family Dollar results are calendarized to year end Feb.
KKR uyout
Ju|y 2007
Dollar General Family Dollar
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Dollar General
Family Dollar
23
E("*&$;(#C*"(4#Q6(%A4
After years of similar SSS results, since the KKR deal, Dollar General has
grown at a much faster rate than Family Dollar
After years of similar SSS results, since the KKR deal, Dollar General has
grown at a much faster rate than Family Dollar
C*+(#C&76(#C*"(4
________________________________________________
Note: Family Dollar results are calendarized to year end Feb.
KKR uyout
Ju|y 2007
Dollar General Family Dollar
24
37""*6#D(%(6*"#?74&#ZZE
Despite similar sales mix, geography, unit count, and store size:
Dollar General has -
Despite similar sales mix, geography, unit count, and store size:
Dollar General has -
! Higher sales per square foot
! Higher margins
! Faster profit growth
-*%*I(+(%&#$4#Y76[$%I#&7#
B"74(#&'(#D*=
26
)3:#$4#?"*,$%I#B*&5'#U=
FDO has launched gross margin enhancement initiatives that are similar to the
ones DG has successfully implemented
FDO has launched gross margin enhancement initiatives that are similar to the
ones DG has successfully implemented
! Private Label Penetration
! Dollar Generals consumable private label penetration is ~22%
! Family Dollars consumable private label penetration is ~14%
! Family Dollars goal is to get to 20%
! Global Sourcing
! Bypassing a broker and directly sourcing unlabeled and private labeled goods can offer
1,000bps to 1,500bps of margin improvement
! Currently, only 9% of FDOs goods are directly imported. We believe this number could
approach 15% in the future
! Improved Pricing
! FDO recently implemented sophisticated pricing software allowing management to better
manage regional pricing zones and elasticity data
! Reduced Shrink
27
)3:#$4#?"*,$%I#B*&5'#U=#H57%&ML
We estimate FDO will benefit significantly from its gross margin initiatives
We estimate FDO will benefit significantly from its gross margin initiatives
FDOs substantial gross margin opportunity and high percentage of sales in low-
priced necessities, provide a margin of safety against commodities inflation
Estimated Gap
2010 Potential
Global Sourcing 9% 15%
Private Label - Consumables 14% 20%
Estimated Margin Improvement
% of Sales Delta Total
Global Sourcing 6% 1250 bps 75 bps
Private Label - Consumables 4% 1250 bps 50 bps
Shrink, Pricing 100 bps
Offsets - Private label reinvestment, inflation, mix ?
Total <225 bps
________________________________________________
Note: Consumables are ~2/3 of sales a 6% change in consumables sales corresponds to a 4% change in total sales
28
CD\!@#R$I'",#O(;(6*I(*F"(
Two thirds of Family Dollars SG&A expense is composed of occupancy and
store payroll costs, which are highly leverageable. Management believes core
SG&A costs, excluding growth initiatives, will grow modestly at 2 to 3% per
year
Two thirds of Family Dollars SG&A expense is composed of occupancy and
store payroll costs, which are highly leverageable. Management believes core
SG&A costs, excluding growth initiatives, will grow modestly at 2 to 3% per
year
8C&A |nc|udes -$45mm
(-50bps of sa|es} of
renovat|on and new store
pre-open|ng expense
CD\!#B7+=74$&$7%#H)]#.11^M#
29
C*"(4#D67<&'#:==76&9%$&,
Family Dollar has several initiatives in place to support managements 4-6%
medium-term SSS growth guidance
Family Dollar has several initiatives in place to support managements 4-6%
medium-term SSS growth guidance
! Expanded hours
! FDO completed its expanded hours rollout Q2 FY2010
! New store growth and renovations
! Could contribute 1.5% to 2.0% SSS at the current build rate
" New stores can contribute a ~10% comp in the second year
" Renovated stores are growing SSS at a double digit rate
! New fixtures to support continued consumables growth
! FDOs consumable mix trails DG by ~700bps
! Managing to lower stock outs
! Improved marketing
>*"9*&$7%
31
)3:#C'*6(4#*6(#B'(*=
! Stable, secular sales
growth
! The opportunity to invest in
an existing store base at
high rates of return
! 10+ years of high return
new unit growth
What you get What you pay
! The option that FDO closes
a large productivity gap
with its closest competitor,
Dollar General
! A modest forward multiple
on consensus numbers
(7.6% EBIT margin)
! 14.7x FY2012 EPS
(August)
! Nothing FDO trades at
nearly the same consensus
forward EBIT multiple as
DG (~9x), a company with
similar growth prospects,
excluding the productivity
gap
DG FDO % Diff '12 EPS
FY 2012 Sales/sqft 210 $ 180 $ 17% 0.65 $
FY 2012 EBIT Margin 10.5% 7.6% 38% 1.46
EBIT/sqft 22.05 $ 13.65 $ 62% 2.36 $
FY 2012 EPS - Consensus 3.68 $
FY 2012 EPS - Pro Forma 6.03 $
Price at 15x EPS (Including 1.5yrs of dividends) 92 $
% Return 70%
32
Y'*&#W4#&'(#?67A95&$;$&,#D*=#:==76&9%$&,#Y76&'_#
________________________________________________
Note: Estimates for DG are FY ending Jan. 2013, and for FDO FY ending Aug. 2012
6onsensus
If Family Dollars square footage were as productive as Dollar Generals, the
company would earn ~$6 of EPS and be worth ~$90 per share at a 15x P/E
If Family Dollars square footage were as productive as Dollar Generals, the
company would earn ~$6 of EPS and be worth ~$90 per share at a 15x P/E
% of DG Profit Gap Closed
FDO 2012 EBIT Build 0% 50% 100%
2012 Selling Sqft (mm) 51 51 51
Sales/sqft 180 $ 195 $ 210 $
EBIT Margin 7.6% 9.1% 10.5%
Pro Forma FY 2012 EBIT 692 $ 893 $ 1,118 $
Pro Forma FY 2012 EPS 3.68 $ 4.79 $ 6.03 $
2012 P/E 14.7x 11.3x 8.9x
Price @ 15x EPS 56 $ 73 $ 92 $
% Return 4% 35% 70%
33
Y'*&#$G#)3:#7%",#?*6&",#B"74(4#&'(#D*=_#
________________________________________________
Note: Estimates for DG are FY ending Jan. 2013, and for FDO FY ending Aug. 2012
Price includes 1.5yr of dividends
C&6*&(I$5#!"&(6%*&$;(4
$20
$25
$30
$35
$40
$45
$50
$55
$60
1/4/2010 4/4/2010 7/4/2010 10/4/2010 1/4/2011 4/4/2011
35
)3:#$4#U%A(6#?6(4496(#&7#?(6G76+
JCP shares are down 75% since early 2007. At this point, cash on balance sheet
Disappointing first quarter results and the rejection of Trians $55 - $60 per
share offer have raised shareholders performance expectations
Disappointing first quarter results and the rejection of Trians $55 - $60 per
share offer have raised shareholders performance expectations
R$4&76$5*" C&75[#?6$5(
Tr|an F||es 13-0
Tr|an makes a host||e
offer between $55 - $0
Tr|an f||es a |etter
urg|ng management to
accept |ts offer or
comm|t to c|os|ng the
performance gap w|th
0o||ar Cenera|
oard rejects
Tr|an's offer
Hanagement
reports 01 earn|ngs
and reduces top end
of FY2011 gu|dance
36
)*+$",#37""*6`4#C'*6('7"A(6#8*4(#$4#B'*%I$%I
Since Trians February 15
th
bid, the shareholder base has changed to more
opportunistic investors:
Since Trians February 15
th
bid, the shareholder base has changed to more
opportunistic investors:
Persh|ng 8quare
purchased |ts pos|t|on
start|ng |n February at
pr|ces between $43 and
$54
FDO has implemented a poison pill at 9.9% that expires on March 2, 2012.
FDO has implemented a poison pill at 9.9% that expires on March 2, 2012.
________________________________________________
Note: Pershing Shares as of May 24, 2011
Holder Name Shares Held % Of Company
Change Since
12/31/10
TRIAN FUNDS 9,966 8.2% 1,130
HOWARD LEVINE (CEO) 9,691 7.9% 0
PERSHING SQUARE CAPITAL MGMT 8,369 6.9% 8,369
VANGUARD GROUP INC 6,725 5.5% 36
BANK OF AMERICA CORP 5,654 4.6% (498)
LONE PINE CAPITAL 5,633 4.6% 900
FRANKLIN RESOURCES 5,288 4.3% 208
STATE STREET CORP 4,661 3.8% (167)
CREDIT SUISSE AG 4,657 3.8% 489
PAULSON & CO 3,455 2.8% 3,455
BLACKROCK 3,272 2.7% 228
INTECH INVESTMENT 3,164 2.6% 824
ADAGE CAPITAL 2,448 2.0% (970)
BANK OF NEW YORK 2,248 1.8% 528
YORK CAPITAL MANAGEMENT 1,962 1.6% 1,962
ETON PARK CAPITAL 1,782 1.5% 1,782
RENAISSANCE TECHNOLOGY 1,782 1.5% (602)
D E SHAW & COMPANY 1,476 1.2% (1,248)
NORTHERN TRUST 1,350 1.1% (93)
37
Q'(6(#*6(#-9"&$="(#Y*,4#&7#!5'$(;(#)9""#>*"9(@
! Current management
! Operational Opportunity
" Margin improvement initiatives and renovation program
! Capital Structure Opportunity
" FDO remains under leveraged. A leveraged buy back would
create meaningful value for shareholders
! Sale of the company
! Strategic Buyer
" Another retailer would bring synergies to the combined company
and possibly accelerate the closing of the productivity gap
! Financial Buyer
" A private equity firm could optimize the capital structure and work
with management to improve the business
Leveraged Buy Back Accretion Analysis:
Incremental Debt Raised ($mm) 1,000 $ 1,500 $ 2,000 $
Base EPS: Consensus
FY2012 EPS 3.91 $ 4.04 $ 4.19 $
Accretion 0.23 $ 0.37 $ 0.51 $
Value per share at 14x EPS 55 $ 57 $ 59 $
Base EPS: Pro Forma Closing 50% of Productivity Gap
FY2012 EPS 5.22 $ 5.47 $ 5.76 $
Accretion 0.42 $ 0.68 $ 0.96 $
Value per share at 14x EPS 73 $ 77 $ 81 $
Assumptions:
Incremental Debt Raised 1,000 $ 1,500 $ 2,000 $
Total Net Debt (End FY2011) 1,385 1,885 2,385
Net Debt/EBITDAR 3.8x 4.2x 4.6x
Assumed Cost of Total Debt (Gross) 5.6% 5.9% 6.1%
38
R7<#!556(&$;(#Y79"A#*#O(;(6*I(A#89,#8*5[#F(_#
If FDO raised an incremental $1.5bn of debt, bought back stock at $60, and
closed only half the productivity gap, the company would earn ~$5.50 of 2012
EPS and trade in the high $70s at a 14x P/E
If FDO raised an incremental $1.5bn of debt, bought back stock at $60, and
closed only half the productivity gap, the company would earn ~$5.50 of 2012
EPS and trade in the high $70s at a 14x P/E
Trian has sourced $5bn dollars of debt financing for their proposed deal
Trian has sourced $5bn dollars of debt financing for their proposed deal
Low Mid High
Credit for Productivity Gap (% of total) 25% 50% 75%
$ Value per share @15x EPS 9 $ 18 $ 27 $
Reduction in Overhead 20.0% 30.0% 40.0%
% Shared with Seller 50.0% 50.0% 50.0%
$ Value per share @15x EPS 3 $ 5 $ 6 $
Gross Margin Expansion 0.5% 1.0% 1.5%
% Shared with Seller 50.0% 50.0% 50.0%
$ Value per share @15x EPS 2 $ 4 $ 6 $
Total $ Premium to Market 14 $ 26 $ 38 $
% Premium to Market 26% 48% 71%
Implied Takeout Price 68 $ 80 $ 92 $
39
Y'*&#B79"A#*#C&6*&(I$5#89,(6#?*,_
A strategic buyer could justifiably pay a ~50% premium to market
A strategic buyer could justifiably pay a ~50% premium to market
-157 of 8C&A |s
corporate expenses.
0|str|but|on expense |s
a|so a potent|a| source
of 8C&A synergy
Poss|b|e 60C8
synerg|es |nc|ude:
conso||dat|ng d|rect
sourc|ng operat|ons,
pr|vate |abe| brands,
and nat|ona| brand
buyer power
40
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A financial buyer could pay 40% to 55% above the current stock price and still
earn a high teens to low 20s% rate of return over four years
A financial buyer could pay 40% to 55% above the current stock price and still
earn a high teens to low 20s% rate of return over four years
Returns assume a 10% terminal EBIT margin, $230 sales sqft in 2015, and
$5bn of leverage (7x FY2011 EBITDAR) at 7.5%
Returns assume a 10% terminal EBIT margin, $230 sales sqft in 2015, and
$5bn of leverage (7x FY2011 EBITDAR) at 7.5%
IRR Sensitivity (2015 Exit)
Exit EBITDA Multiple (FY2016)
40.3% 7.0x 7.5x 8.0x 8.5x
67 $ 9.5x 24% 27% 30% 33%
70 10.0x 21% 24% 26% 29%
74 10.5x 17% 20% 23% 26%
78 11.0x 15% 17% 20% 23%
81 11.5x 12% 15% 17% 20%
85 12.0x 10% 13% 15% 17%
88 12.5x 8% 10% 13% 15%
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Even if were wrong on both the value of the standalone operating opportunity and the
transaction value, we believe shareholders will still make money owning FDO due to the
companys attractive growth opportunities and modest forward earnings multiple
Even if were wrong on both the value of the standalone operating opportunity and the
transaction value, we believe shareholders will still make money owning FDO due to the
companys attractive growth opportunities and modest forward earnings multiple
6urrent 8tock Pr|ce
0perat|ng
|mprovements
(507 to 1007'}
0perat|ng
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$1.5bn uy ack
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Decreasing Timing and Execution Risk
% of performance gap closed
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