Director/CEO Update: Winning Strategies Strengthening Hard-Earned Exchange Benefit

Team,

Your amazing work to advance our strategic priorities is creating incredible momentum as we head into the final stretch of 2024.

Team Exchange’s commitment to outstanding execution is fueling impressive results. Earnings year-to-date are $271 million, up 20% over plan. These strong earnings are the result of aggressive cost savings implemented over the past year as well as critical initiatives that have significantly strengthened the benefit we are honored to provide our heroes who serve and have served.

Military Star expansion

In a July Exchange Post column, our Exchange Credit Program Senior Vice President Tommy Ward provided details of a collaboration with Discover® Global Network that marks a historic step toward making the MILITARY STAR®  card the one card for the military community. This collaboration will allow the card to be more widely used across our Nation’s military installations.

By leveraging the Discover network, the MILITARY STAR card will be more easily accepted by additional services and providers, including concessionaires, name-brand restaurants, third-party vendors as well as an increasing number of Morale, Welfare and Recreation and Services activities.

The new MILITARY STAR card is debuting this fall. It will have a modern design, chip technology for security, tap-to-pay capability and mobile wallet options. It will continue to provide military-exclusive benefits such as an industry-leading low APR; rewards program; food and fuel discounts; and special promotions.

This collaboration is the result of more than a year of tireless research and beta testing by the ECP team, with the support of IT, General Counsel, Contracting, Merchandising and Corporate Communication. It is a milestone in the Exchange’s nearly 45-year history of operating military-specific credit services, and an important Quality-of-Life enhancement.

The best tastes of home

Exemplifying the Exchange’s “We go where you go” motto, the Services and Food Directorate brings the best tastes of home and innovative services to Warfighters near and far.

The food team continues to fine-tune the Exchange’s restaurant portfolio by collaborating with restaurant partners to expand training, increase operating hours when necessary, and bring the most successful brands to additional locations.

Since the beginning of FY24, the food team has made significant additions to the Exchange’s dining portfolio.

Highlights include:

Panda Express: In early June, a new Panda Express opened at Sheppard AFB, generating more than $13,000 in sales on its first day. Earlier in the year, Grafenwoehr and Fort Carson welcomed this brand to their restaurant lineups. Panda Express plans to open six additional Exchange locations in FY24, including its first Pacific Region location.

Panera Bread: On July 17, Fort Drum opened the Exchange’s third Panera, adding to locations at Fort Campbell and Fort Liberty. Also aligned with the Exchange’s BE FIT 360 program, Panera offers low-calorie meals, such as sandwiches, salads and soups, with a focus on clean eating and responsible sourcing. In February, Fort Liberty opened the Exchange’s second Panera (the first with a drive-thru). The Exchange plans to open 17 more Paneras during the next three years, including two more in FY24.

Qdoba: The fast-casual Mexican restaurant opened at Fort Eisenhower in May, and already has a jump on the third quarter with its first restaurants in the Pacific Region, at Kadena Air Base and Camp Foster. These are the first Qdobas in the region, on or off an installation. Two more are scheduled to open in September, both at U.S. Army Garrison Humphreys in South Korea. Since the first Exchange Qdoba opened in 2016 at Fort Carson, the brand has expanded to more than 30 locations within the Exchange.

Other 2024 restaurant openings include:

Fresh Kitchen by Robert Irvine: The first location of celebrity chef Irvine’s restaurant opened May 31 at Joint Base Andrews. Known for such Food Network programs as “Restaurant: Impossible” and “Worst Cooks in America,” Irvine is a former member of the UK’s Royal Navy and a military supporter. He joined our team for the August grand opening of the restaurant, which features electronic self-order kiosks and food portions that are prewashed, precut and preseasoned at a central kitchen then cooked sous-vide on site. This model means simpler prep, no food waste and easy, better-for-you options without sacrificing taste or quality, aligning with the Exchange’s BE FIT 360 initiative.

Five Guys: The hamburger-focused restaurant opened an Exchange location in May at Vicenza Ederle, serving U.S. Army Garrison Italy. This is the second Five Guys on a military installation, with the first opening at Ramstein Air Base in 2022.

Sbarro: The pizza restaurant opened in May at Fort Liberty’s Smoke Bomb Hill Express. Besides pizza by the slice, the restaurant offers salads, stromboli, lasagna and spaghetti and meatballs. Five more Sbarros are tentatively scheduled to open in FY24.

Potbelly: The sandwich chain opened its first Exchange location in the spring at Fort Liberty, which also debuted the first Starbucks Military Family Store on a military installation earlier this year.

Coming up: Buffalo Wild Wings GO, a delivery-and-takeout version of the popular wings restaurant, plans to open an Exchange location in the fall at Fort Riley. This will be the Exchange debut of BWW’s “GO” concept.

At our Expresses, the Merchandising directorate continues to make quick-serve restaurants (QSRs) a priority. Hunt Brothers Pizza, which celebrated its 100^th Exchange location in April at Tyndall Air Force Base, has not slowed down: During the first half of FY24, Hunt Brothers opened more than a dozen locations worldwide. The brand has been expanding in Pacific Region, with Korea Northern and Yokota Air Base Exchanges opening locations in the second quarter.

In Europe, Hot Stuff Kitchen, one of the Exchange’s newest QSRs, opened seven locations. The restaurant, which offers chicken sandwiches, wraps and more, now has nearly 20 locations worldwide. As a grab-and-go option, Hot Stuff Kitchen has a small footprint that makes it versatile for Expresses, and stores can curate their own menu for different mealtimes.

Innovative services

The Services team continues to improve Quality of Life, emphasizing advanced telecommunications and unattended retail units (URUs).

At the beginning of the year, the Services team set a goal of opening 81 URUs by the end of FY24. The team has exceeded that goal, with 107 opened through July for a total of 541 throughout the Exchange! An additional 50 are planned before year-end, and the team is exploring expanding URUs overseas.

These self-serve stores offer an assortment found in most convenience stores, including snacks, drinks and better-for-you food options. They are especially well-received at smaller installations or inside buildings such as barracks, hospitals or large HQs, providing increased 24-7 access to products for service members and their families.

Several Army installations are enjoying improved cellular and internet connectivity, thanks to new cell tower infrastructure managed by the Exchange. During the second quarter, a Verizon rooftop cellular tower was installed at Tripler Army Medical Center in Hawaii, improving coverage for hospital patients and command. At Joint Base Lewis-McChord, a tower dubbed “Whispering Firs” was installed, improving T-Mobile coverage to address community requests for better coverage. And the first 11 of 57 Verizon small cells (mini-cell sites that augment cellular service) were installed at Fort Cavazos during the second quarter.

SFD expects to add a total 30 towers and nearly 70 small cells during 2024.

 

Retail optimization

The Exchange is delivering the best brands to authorized shoppers tax-free. Recent additions include Athleta, Wrangler, Casper, Sleep Number, Stanley and much more in stores and online at ShopMyExchange.com as well as expanded national brands, such as Old Navy and The Home Depot, at our PXs and BXs.

Merchandising and eComm are working closely with region teammates to evaluate and redefine assortment selection processes in support of improving gross margins and inventory turns. Direct-to-consumer agreements and collaborations such as Bass Pro and others are increasing our sales and total product offering online while we adjust brick and mortar inventories to be more productive.

IT infrastructure improvements

IT teams, working in conjunction with MD, eCommerce and Exchange Credit Program teams, recently completed a ShopMyExchange.com upgrade that enables the Exchange to continue to expand to more direct-to-consumer strategic partnerships and dramatically increase the product offering available for customers on the website.  The upgrade employs a cloud-based technology platform that is more easily integrated with future technologies and will provide the ability to more quickly add capabilities to further improve the customer experience.

With the conclusion of self-checkout implementation in May, IT is shifting its focus to improve point-of-sale (POS) systems. For the new POS, a successful proof-of-concept test at the headquarters Express was completed in the spring. Project discovery is underway to map out the balance of the project.

A partnership with an IT service management company is providing a more secure password-reset process, which was detailed by our Executive Vice President/Chief Information Officer Chad Lucas in a recent Exchange Post column. The new system provides upgraded security, to protect users’ information—and the Exchange’s. The new process employs two-factor authentication, a cybersecurity best practice.

Reinvesting in the shopping experience

The Real Estate directorate has had a busy and productive first half of 2024, with more than $90 million in completed projects.

Major projects include:

• A new $17.2 million, 14,000 square-foot Express at Fort Irwin with new food options, a 20-pump gas station and more. The facility replaces two Expresses and a Class Six, bringing a new level of convenience to the remote California installation.
• A $13.5 million upgrade to the Davis-Monthan Air Force Base Exchange, including renovation of all departments on the nearly 200,000 square-foot sales floor, a new The Home Depot showroom and food court improvements.
• A new $11 million, nearly 13,000 square-foot troop store at Fort Eisenhower (formerly Fort Gordon), providing added convenience for Soldiers, students in advanced individual training, Airmen, Guardians, Sailors and Marines.
• The new Glider Express, a $13.3 million, 12,272 square-foot store, the 15^th Exchange Express at Fort Liberty (formerly Fort Bragg). Addressing the needs of America’s largest military base, the store, which is in the heart of the 82^nd Airborne Division training area, provides greater accesses to fuel and dining options on post.

Family serving family

Your dedication to our mission continues to set the high bar. The passion and grit you bring every day makes a difference strengthens our military community’s readiness and resilience. It is truly an honor to serve those who serve with you.

Wishing you a happy and successful Q3!

With respect,

Tom Shull

Director/CEO