Investor Presentation
January 2012
FORWARD-LOOKING STATEMENTS
This presentation includes forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, which reflect management’s current views and estimates regarding our industry,
business strategy, goals and expectations concerning our market position, future operations, margins,
profitability, capital expenditures, liquidity and capital resources and other financial and operating information.
You can identify these statements by the fact that they use words such as “anticipate,” “assume,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future” and
similar terms and phrases. We cannot assure you that future developments affecting us will be those that we
have anticipated. Actual results may differ materially from these expectations due to risks relating to our
strategy and expansion plans, the availability of suitable new store locations, risks that consumer spending may
decline and that U.S. and global macroeconomic conditions may worsen, risks related to our continued retention
of our senior management and other key personnel, risks relating to changes in consumer preferences and
economic conditions, risks relating to our distribution center, quality or health concerns about our teas and tearelated merchandise, events that may affect our vendors, increased competition from other tea and beverage
retailers, risks relating to trade restrictions, risks associated with leasing substantial amounts of space, and
other factors that are set forth in the Company’s filings with the Securities and Exchange Commission (“SEC”),
including risk factors contained in the final prospectus relating to the IPO included in the Company’s
Registration Statement on Form S-1 (File No. 333-173775) filed with the SEC and available at www.sec.gov. If
one or more of these risks or uncertainties materialize, or if any of our assumptions prove incorrect, our actual
results may vary in material respects from those projected in these forward-looking statements. Any forwardlooking statement made by us in this presentation speaks only as of the date on which we make it. Factors or
events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to
predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a
result of new information, future developments or otherwise, except as may be required by any applicable
securities laws.
.
1
INTRODUCING TEAVANA
– Large, rapidly growing specialty
retailer of premium loose-leaf
teas and tea-related
merchandise
2010 SALES BREAKDOWN
Prepared
Beverages
– One of the world’s largest
branded, multi-channel specialty
tea retailers
– Currently operate 196 stores in
leading malls and lifestyle
centers in the US
4%
Tea-Related
Merchandise
40%
56%
– Brand associated with:
Premium
Loose-Leaf
Teas
– Premium tea products
– “Heaven of Tea” store
ambiance
– East Meets West healthy
living lifestyle
Average Ticket of $36
2
POWERFUL GROWTH & PROFITABILITY
NET SALES
KEY 2010 STATISTICS
$125
Sales per Comparable Store
$90
$64
2008
$862,000
Comparable Store Sales Growth
2009
8.7%
Gross Margin
62.9%
Operating Margin
18.8%
2010
OPERATING INCOME
$23
$12
Net Income Growth
126.9%
**All stores profitable in 2010
$5
2008
2009
2010
With opportunity to grow store base to 500 stores in the US by 2015
Note:
Dollars in millions, except sales per comparable store.
3
INVESTMENT HIGHLIGHTS
Market-Defining Brand Driving Category Growth
World’s Finest Teas and Tea-Related Merchandise
“Heaven of Tea" Retail Experience
Powerful and Consistent Store Model
Significant and Tangible Growth Opportunities
Superior Profitability
Deep Rooted Culture Driven By Experienced Management Team
4
Driving the Tea
Revolution
LARGE & GROWING MARKET
– Tea is the second most consumed
beverage in the world
GLOBAL TEA SALES (1)
US
$5.2BN
– US tea market is a small portion of
total market
– US tea consumption significantly lags
rest of world
– #22 in per capita consumption (2)
– Strong projected growth in US of +6%
per year through 2014
– Key growth drivers include:
– Increasing focus on health and
wellness
– Growing consumer awareness of
tea
Rest of World
$51.4BN
STRONG PROJECTED GROWTH (2)
US Tea Market
$6.6BN
$5.2BN
– Epicurean preferences in food and
beverage
(1)
(2)
Source: Euromonitor 2009.
Source: Mintel, May 2010.
Historical
2014
5
DRIVING THE TEA REVOLUTION
Leading Retail Presence
196 high-traffic locations
(Multiple times greater
than next largest US
specialty tea retailer)
World’s Finest Teas & Teawares
World’s finest selection of
premium loose-leaf teas
and tea-related
merchandise
Heaven of Tea Retail Experience
Deep-Rooted Culture
Interactive, informative
and immersive retail
experience
Passionate teaologists
promoting enjoyment
of tea
6
LEADING RETAIL PRESENCE IN HIGHTRAFFIC LOCATIONS
– Locate stores in high-traffic locations in
leading malls and life-style centers
– Focus on premium anchors and cotenants
KEY STORE STATISTICS 2010
Average Store Size
2010 Store Openings
– Leverage our highly experienced real
estate team and sophisticated store
development process
Sales per Gross Square Foot
– Disciplined, highly analytical approach
utilizes proprietary database and
regression model
Average Ticket
Sales per Comparable Store
888 sq. ft.
38
$994
$862,000
$36
**All stores profitable in 2010
– 500+ store sites already identified in
the US
7
WORLD’S FINEST TEAS & TEAWARES
LOOSE LEAF TEAS (56%)
TEA-RELATED MERCHANDISE (40%)
– Over 100 varieties of premium looseleaf teas
– Artisanal teawares and other tearelated merchandise
– Sourced globally from world’s premium
tea gardens, estates and brokers
– Carefully selected assortment
– Single Estate = 20%; Blended = 80%
– Development of Teavana branded
products
– Selected from global tea cultures
Selected Products
Origination
Single
Estate
Originate from individual tea plantations,
estates or gardens
Single
Estate
Blends
Single estate teas blended with spices,
herbs, flower petals, essential oils of fruit
Herbal
Blends
Herbal infusions made from various
brushes, shrubs, fruits, herbs and
flowers
Note:
Teapots
Tea Cups
& Mugs
Cast-iron Tetsubin teapots from Japan,
Yixing clay teapots
Handcrafted ceramic tea cups, Petite
Fleur Suspendu Tea Set
Teavana Perfect TeaMaker, Zojirushi
Tea
Accessories Hybrid Water Heater
Décor, Food Tea-infused aromatic candles, Asianinspired statues, artisanal honeys
& Media
Percentages represent 2010 sales. Excludes prepared beverages, representing 4% of sales.
8
OUR WALL OF TEA
ORIGIN
TASTES
PRICE
PER 2OZ.
POPULAR FLAVOR
Fujian Province
(China)
Subtle, complex,
delicate
$10 – $22
Silver Yin Zhen Pearls
White Ayurvedic Chai
China, Japan
Aromatic and
fresh-tasting
$5 – $20
Jasmine Dragon Phoenix Pearls
Gyokuro Imperial
China, Taiwan
Light, rich liqueur
$8 – $25
Monkey Picked Oolong
Maharaja Chai Oolong
India, Sri Lanka,
China
Light-to-strong
and
full-bodied
$3 – $40
Golden Monkey
Black Dragon Pearls
South Africa
$5 – $8
Rooibos
Naturally sweet,
nutty
Rooibos Tropica
Blueberry Bliss
South America
$6 – $7
Maté
Woody,
invigorating
body
Samurai Chai Maté
Raspberry Riot Lemon Maté
Global
Smooth, gentle,
roasty
$5 – $9
Wild Orange Blossom
Pineapple Kona Pop!
White
Green
Oolong
Black
Herbal Infusions
Two ounces brew approximately 20 – 25 8 oz. cups
9
DEEP ROOTED CULTURE EMBRACING A
PASSION FOR TEA
Our Culture
Passion For Tea
Allows Us To:
– Attract and retain committed team
members
– Build a talent pipeline to support our
store growth
Extensive
Training
Career
Development
& Individual
Enrichment
– Inspire in our team members a passion
for tea and the tea lifestyle that drives:
– Acquisition of new customers at our
stores
– Strong customer loyalty
– Experience minimal turnover among our
regional and area managers
10
COMMITTED AND PASSIONATE
MANAGEMENT TEAM
(1)
NAME
TITLE
YEARS AT TEAVANA
Andrew Mack
Co-Founder, Chairman and
Chief Executive Officer
14
Dan Glennon
EVP, Chief Financial Officer
6
Peter Luckhurst
EVP, Operations
6
Robert Shapiro(1)
Senior Vice President, Real
Estate
6
Carol Joyner
Vice President, Real Estate
<1
Juergen Link
Vice President, Distribution
6
Jay Allen
Vice President, e-commerce
3
Patrick Farrell
Vice President, Merchandising
3
Robert Shapiro is retiring at the end of fiscal 2011.
11
Growth Opportunities
MULTIPLE ATTRACTIVE GROWTH
OPPORTUNITIES
New Stores
– 500 US store opportunity achievable by 2015, up from 196 stores
at the end of Q3 2011
Comp Store
Sales
– Introduce new customers to tea
e-Commerce
– Grow to 10%+ of sales (7% currently)
Increase
Margins
– "Trade up" of existing customers
– Merchandise mix naturally shifts towards higher margin
loose-leaf tea sales as stores mature
– Increase scale with suppliers and leverage fixed cost base
International
Expansion
– Pursue opportunities for franchise and Company owned stores
12
HIGHLY CONSISTENT STORE BASE
NATIONAL PRESENCE
RECENT STORE OPENINGS
Q311 Store Count
– Anchorage, AL
58
47
46
45
– Chattanooga, TN
– Chicago, IL
– Clearwater, FL
– Grand Rapids, MI
Central
West
Southeast
Northeast
CONSISTENT PERFORMANCE
2010 Sales / Store
– Indianapolis, IN
– Lincoln, NE
– Los Angeles, CA
Average
$862,000
– Norfolk, VA
– Nashua, NH
– Staten Island, NY
Central
West
Southeast
Northeast
13
ATTRACTIVE NEW STORE ECONOMICS
NEW STORE ECONOMICS
Avg. Store Size (sq. ft.)
Annual Sales
4 Wall Contribution
Net Cash Investment (1)
Cash on Cash Return
Payback Period
(1)
900 -1,000
$600,000 - $700,000
~25%
$200,000 - $250,000
~75%
~18 Months
Includes store build out (net of tenant allowances), inventory and cash pre-opening costs.
14
CLASS OF 2011 STORES: PRODUCTIVITY
–
Productivity of the 2011 class is tracking at or above the top of the new store model range
of $600,000 - $700,000
2010
Store Sales
Other Sales
(1)
Total Sales
Comp Sales (Stores Only)
Number of Stores
2011
Q1
Q2
Q3
Q4
Q1
Q2
Q3
22.8
20.7
22.4
46.0
31.7
29.1
31.0
91.8
3.0
2.3
2.4
5.2
3.3
2.2
2.4
7.9
25.8
23.0
24.7
51.2
34.9
31.3
33.4
99.7
15.7%
6.9%
5.9%
7.5%
6.0%
6.9%
6.0%
6.2%
118
128
141
146
161
179
196
196
91%
85%
83%
85%
New Store Productivity
–
Note:
(1)
YTD
If we used a 12 month comp methodology, rather than our current 15 month methodology,
the new store productivity YTD would be 87%, rather than 85%
Dollars in millions
Includes e-commerce, franchise, and sales from SpecialTeas brand that ceased operation on the last day of fiscal 2010.
15
CLASS OF 2011 STORES: SQUARE FOOTAGE
–
Store sales and contribution do not correlate with the size of our stores
–
The average size of the stores opened in 2011 is higher than the average size for the
existing stores(1), however…
–
…the occupancy cost as a % of sales for the stores opened in 2011 is projected to be
slightly less than that of the existing stores
2011 STORES COMPARED TO EXISTING STORES
Average Gross Square Feet
Occupancy Cost as a % of Sales(2)
Total Occupancy Cost $
Occupancy Cost per Gross Square Foot
(1)
(2)
Existing stores represent stores opened in 2010 and prior.
Projected on an annualized basis.
15% higher
1,023 vs. 888 sq. ft.
Slightly Lower
Lower
Much Lower
16
DRIVE INCREASED COMPARABLE STORE
SALES
Introduce New
Customers
To Tea
Transition To Higher
Grade Teas And
Merchandise
Consistency In
Product Offering
–
Introduce new customers to the benefits and enjoyment of tea
– Educate customers on healthful qualities and pleasures of tea
–
Customers more familiar with teas tend to trade up to higher priced teas and
purchase increased quantities of tea
– Continual experimentation
–
Continue to provide high quality tea and tea-related merchandise to enhance
customer loyalty and introduce new customers to tea
HISTORICAL COMPARABLE STORE SALES
8.4%
3.7%
2006
6.9%
8.7%
3.0%
2007
2008
2009
2010
17
CONSISTENTLY POSITIVE SAME STORE
SALES
QUARTERLY COMPARABLE STORE SALES (EX ECOMMERCE) SINCE 2009
15.7%
10.7%
8.7%
7.5%
6.9%
6.9%
6.0%
5.9%
5.5%
6.0%
1.4%
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
Q2'10
Q3'10
Q4'10
Q1'11
Q2'11
Q3'11
18
COMP SALES: TRANSACTIONS OR UNITS
Total Comp(1)
Ticket / Transactions
Sales
Average Transactions Sales
Ticket
10%
Price per
Unit
Units
Sales
-
6.2%
2011
YTD(2)
Price / Units
OR
+
+
+
10%
8.7%
+
2010
+
+
+
10%
2009
-
6.9%
+
+
-
–
Units contributed more to comp sales than price for the period from 2009 to 2011 YTD
–
Unit comps have been positive every year since at least 2007
–
–
(1)
(2)
Unit comps for tea only (all sold on a per ounce unit basis) have been positive every
year since at least 2007
Customers are buying significantly higher units per transaction
Store comp only, excluding e-commerce and including beverage sales.
2011YTD is through Q3.
19
AVERAGE TICKET: AUR / UPT
Average Ticket(1)
10%
AUR / UPT
Price per Units per Average
Unit
Transaction Ticket
2011
YTD(2)
+
+
10%
2010
+
+
10%
2009
+
-
–
UPT contributed more to average ticket than price for the period from 2009 to 2011 YTD
–
UPT has been positive every year since at least 2007
–
(1)
(2)
UPT for tea only (all sold on a per ounce unit basis) has been positive every year
since at least 2007
Store comp only, excluding e-commerce and including beverage sales.
2011YTD is through Q3.
20
EXPAND OUR ONLINE PRESENCE
– Powerful tool for branding, marketing
and driving sales
E-COMMERCE AS % OF SALES
– 7% of total sales in 2010
10%+
– 46% Y-o-Y growth in 2010
– Customer database with over
300,000 email addresses
7.0%
5.8%
2008
2010
2015E
21
INCREASE OUR HIGHLY ATTRACTIVE
MARGINS
GROSS MARGIN EXPANSION
–
–
–
–
Customers graduate from merchandise
purchases to replenishment of favorite teas and
experimentation with new varieties
Gross margin of tea is significantly higher than
merchandise
As store matures, naturally experience gross
margin expansion
Realized margin gains due to shift in supply
chain from wholesale to direct sourcing
ECONOMIES OF SCALE
–
–
Leverage corporate and other fixed costs
Gross margin benefits from growing scale with
suppliers
Gross Margin and Teas as % of Net Sales
Operating Margin
18.8%
57.4%
51%
2008
Gross Margin
59.6%
62.9%
13.5%
7.5%
54%
2009
56%
2010
2008
2009
2010
Tea as % of Net Sales
22
SELECTIVELY PURSUE INTERNATIONAL
EXPANSION
–
Compelling opportunity to further expand internationally through franchised and companyowned stores
–
Utilize franchise arrangements with local partners in key regions
–
Expand Teavana brand globally and participate in strong tea growth internationally
First directly owned
Canadian store
opened in December
2011
196 Stores
16 Stores
2 Franchise
Stores
16 Franchise
Stores
Partner - Casa
Internacional
Existing Presence
Alshaya franchise agreement
announced September 2,
2011
Near-Term Potential Future Markets
Agreement covers 8 MiddleEastern countries-first store
expected in fiscal 2012
Long-Term Potential Future Markets
23
Superior Financial
Performance
POWERFUL TRACK RECORD OF GROWTH
$125
$90
Net Sales
$34
2006
Number of
Stores
$47
2007
47
59
2006
2007
$64
2008
87
2008
8.4%
Comparable
Store Sales
3.7%
2006
’06 – ’10
CAGR
39%
2009
108
2009
6.9%
2010
146
33%
2010
8.7%
3.0%
2007
2008
2009
2010
$23
99%
(1)
$12
Operating
Income
Note:
(1)
($0)
2006
$3
$5
2007
2008
2009
2010
Dollars in millions.
Represents CAGR from 2007 – 2010.
24
SUPERIOR PROFITABILITY
GROSS MARGIN
OPERATING MARGIN
18.8%
62.9%
59.6%
13.5%
57.4%
7.5%
2008
2009
2010
2008
2009
2010
25
STRONG BALANCE SHEET TO
SUPPORT GROWTH
AS OF OCTOBER 30, 2011
– Historically funded new store growth
out of cash flow from operations
Total Debt
Total Liquidity(1)
– Strong liquidity supported by
Revolving Facility
$4.5mm
$35.3mm
(1)Cash plus availability on $40mm revolver facility
– Revolver used for seasonal working
capital requirements
Strong liquidity profile expected to continue given strong cash flow
26
MOMENTUM CONTINUING IN 2011
Thirty –
Nine
weeks
ended Oct
30, 2011
Thirty –
Nine
weeks
ended Oct
31, 2010
Y-o-Y ∆
Sales
99.7
73.5
36%
Ending store count
Comparable Store sales
-Including e-commerce
-Excluding e-commerce
196
141
55
8.7%
6.2%
10.6%
8.7%
Gross Margin
62.5%
59.6%
+290 bps
Operating Income
Operating Margin
10.4
10.5%
6.9
9.4%
50%
+110 bps
5.3
2.8
86.0%
5.3%
3.8%
+150 bps
Net Income
% Sales
27
FISCAL 2011 OUTLOOK: REITERATING
GUIDANCE
– For 2011 Q4, net sales are expected to be in the range of $62 million - $66 million
based on comparable store sales, including e-commerce, increasing in the mid-single
digits
– Net income is expected to be in the range of $11.2 million - $12.0 million, or $0.29
to $0.31 per diluted share
– For fiscal 2011, net sales are expected to be in the range of $162 million - $166
million
– Net income is expected to be in the range of $16.5 million to $17.3 million, or
$0.43 to $0.45 per diluted share
28
INVESTMENT HIGHLIGHTS
Market-Defining Brand Driving Category Growth
World’s Finest Teas and Tea-Related Merchandise
“Heaven of Tea" Retail Experience
Powerful and Consistent Store Model
Significant and Tangible Growth Opportunities
Superior Profitability
Deep Rooted Culture Driven By Experienced Management Team
29
Opening the Door to Health,
Wisdom & Happiness