Words from Director/CEO Tom Shull: Strengthening the Benefit in 2021

Team Exchange,

Congratulations on a challenging and successful 2021! You provided exceptional service to service members and their families, honored Veterans and welcomed thousands of new shoppers home to their hard-earned benefit.

Tom Shull
Exchange director/CEO

As year three of the COVID-19 pandemic approaches, your focus on the best associates in the world is steadfast. Together, we have avoided layoffs and furloughs, all while recognizing teammates for going above and beyond with an unprecedented series of Hero Bonuses as shoppers returned to their PXs, BXs, Expresses and food courts, driving healthy operating results and earnings growth. Although the final results for FY 2021 won’t be available until the audit is complete, we are on pace to exceed the budgeted sales and earnings targets, and most importantly, providing higher than planned dividends for quality-of-life programs.

Military resale saw a milestone in September as the Department of Defense concluded consolidating the exchanges and commissary was not feasible and cost-prohibitive. The Department intends to concentrate its efforts on structured collaboration and cooperative efforts. The Exchange has long recognized the value of collaboration within the DoD resale community. One example is the joint buying alliance formed in 2019 with the Navy Exchange Service Command, Marine Corps Community Services, Coast Guard Exchange and Defense Commissary Agency has provided $80 million in savings to the military community.

From serving Afghan guests to hiring heroes, Team Exchange remained resilient. Here’s a look at some of our greatest accomplishments in 2021:

From left, John McGhee, Silvia Stoudemire and Ray Stewart. All three returned from retirement to support Operations Allies Welcome.

Critical support for Afghan guests

As about 50,000 at-risk Afghan civilians who supported the U.S. mission arrived with their families in the States and at installations in Germany, Kosovo and Qatar, the team quickly assembled and fully stocked mobile field PXs and temporary stores. More than 500,000 units of merchandise were shipped to overseas outposts, associates deployed to Operation Allies Welcome installations and some of our teammates even came out of retirement to support this extraordinary mission of compassion.

A hiring milestone for Veterans and military spouses

The Exchange achieved its goal of hiring 50,000 Veterans and military spouses and set a new goal to hire a total of 75,000 by 2026.  We have long been a leader in hiring Veterans and military spouses, who understand what it means to serve those who serve. In 2021, Military Times named the Exchange a Best for Vets Employer and U.S. Veterans Magazine named us among its “Best of the Best”—for the eighth consecutive year in both instances. It is an honor to call Veterans and military spouses teammates, and we look forward to offering even more meaningful career opportunities to these great Americans as we forge ahead to the next milestone.

Expanding patronage, strengthening the benefit

PXs and BXs welcomed more than 575,000 Department of Defense and Coast Guard civilians and retirees who now have access to tax-free shopping in stores and at ShopMyExchange.com. The patronage expansion strengthens Quality of Life support for Soldiers, Airmen and Guardians, as 100% of earnings go back to the military communities we are honored to serve. The expanded access marks the third time since 2017 that the shopping base has grown.

The 210,000-square-foot shopping center at JBSA-Fort Sam Houston delivers the Exchange benefit— tax-free shopping and military-exclusive pricing on goods and services—to active-duty service members, Guard members, Reservists, military families, retirees and Veterans with service-connected disabilities in San Antonio.

Getting the big jobs done

Two long-awaited projects were completed during the year. In April, a $54 million, 210,000-square-foot shopping center opened at Joint Base San Antonio-Fort Sam Houston—the post’s first new shopping center in 50 years.  At Joint Base Lewis-McChord, a $70 million renovation at Fort Lewis was completed in late 2021. Ground was broken on the project, which expanded the Exchange from 173,000 square feet to a 280,000 square-foot mall, in fall 2018. The project, which was done in phases, included the 2020 openings of the Exchange’s first Petco and Bath & Body Works. A grand opening is planned after the Exchange’s latest Wahlburgers location opens in 2022. The Exchange—not taxpayers—funded the majority of these projects, which improve the quality of life for those who live and work at these installations.

QOL Plus Up

New services and offerings are fueling military Quality of Life improvements.

The introduction of TOP TIER™-certified branded fuel at 180 gas stations on Army and Air Force installations in CONUS began in November at Fort Hood’s Clear Creek Express, which is dispensing Valero fuel. Depending on their location, military shoppers will soon be able to fill up with Valero, BP/Amoco or Marathon fuel. Branded fuel improves the Exchange’s already-secure supply chain, enhancing our support of military communities during emergencies and natural disasters.

Keeping military shoppers healthy is crucial to readiness, and we have expanded services such as dental and chiropractic care. The first Joint Chiropractic clinic recently opened at Luke Air Force Base, with additional clinics expected to open throughout 2022.

More than 50 restaurants opened in 2021, and nearly two-thirds of them are better-for-you brands. This includes our first Panera Bread, which opened in October at Fort Campbell. 2021 was the sixth straight year that more than half of restaurant development was with better-for-you brands.

We also launched DoorDash delivery service, which provides on-installation restaurant delivery from Exchange restaurants. Delivery capability is more important than ever, and its addition helps keep our restaurants competitive.

A successful transition in South Korea

The  Exchange cuts the ribbon on a new, 255,800-square-foot distribution center and bakery Nov. 19 at U.S. Army Garrison Humphreys, the culmination of the Department of Defense retailer’s nine-year effort to make Humphreys home for Warfighters and their families.

The teamwork that is a hallmark of AAFES was exemplified in fall 2021 as operations in South Korea were relocated to U.S. Army Garrison Humphreys, where a new distribution center and bakery opened on Nov. 19. The grand opening was the culmination of a nearly decade-long effort to relocate most of the Exchange’s Korea operations in support of the Yongsan Relocation Plan, a U.S. Army initiative to move most forces and command operations in Korea to Humphreys. The new location is estimated to reduce travel distances by 31%, saving about $225,000 in transportation costs over five years and reducing our carbon footprint.

Robotic efficiency

Associates in Information Technology and Logistics worked together to ensure the smooth launch of the Logistics Autonomous Robotics Initiative (LARI) in December at the Dan Daniel Distribution Center. Phase one of the $1.3 million initiative is doubling productivity as robots assist warehouse associates with order fulfillment. The robots guide merchandise pickers to picking locations and display item information, including a description and image. The associate then loads the item onto the robot for shipping. Phase two, which will focus primarily on e-commerce replenishment and restocking, is scheduled to launch this month. All totaled, we fully expect to realize a projected five-year benefit of $5 million through LARI.

Heroism in the face of the storm

Amid the challenges of the pandemic, a winter storm brought record-breaking low temperatures to Dallas in February, causing pipes to burst in the north building of headquarters, leading to catastrophic flooding on the first and second floors. Teams in IT and Real Estate worked nonstop to heroically save our data center—the heartbeat of the organization—and other mission-critical areas. As flooding occurred, the team swept the water away from critical equipment. Their selfless service got us back in business when we were minutes away from having major parts of the organization shut down.

Family serving family

Associates continue to go the extra mile, adapting to new duties and situations, solving unprecedented problems and taking care of one another and our shoppers. Across the organization, associates have leaned forward to support those who serve and each other. Adversity has made us stronger.

Challenges will continue into 2022, but we are up to the task and on solid footing. Team Exchange is agile and strong—we will build on the successes of 2021 to do even more to support the best customers in the world.

The way ahead

Thank you for your resilience. You uphold an incredible 126-year legacy of service and support. Looking forward to seeing what we accomplish together in 2022.

It is a privilege to serve with you and truly an honor to serve those who serve and have served!

Tom