EXCERPTS OF RECENT MEDIA COVERAGE AND CONSUMER PRODUCTS PRACTICE

A SAMPLING OF BDO THOUGHT LEADERSHIP IN THE MEDIA FOR Q2 2014

While many retailers have remained on u WALL STREET the sidelines on the minimum wage issue JOURNAL despite Obama publicly “rewarding” Gap for its decision to raise hourly workers’ pay, RETAILERS’ TOP WORRIES it’s a key concern of retailers. Labor issues, IN 2014: INTEREST RATES, including health coverage and unions, were BREACHES, cited by 91% of retailers as a business risk, up from 74% in 2009, the study showed. MINIMUM WAGE Retailers also are worried about increased By Andria Cheng staff turnover as the job market improves.

Target Corp.’s nasty security breach. BDO has been a valued Investors fretting over interest rates. The business advisor to retail and national debate on whether to hike the u FORBES minimum wage… consumer product companies VS. BUYING: for more than 100 years. The In its eighth annual study of the risk factors WHAT’S BEHIND RETAIL cited in the 10-K annual filings by the M&A? Retail & Consumer Products 100 largest publicly traded U.S. retailers, By Greg Petro Practice of BDO works with accounting and BDO USA found that for the first time in the study’s Anyone paying attention to the retail a wide variety of retail and history, the interest rate has jumped to lately has been seeing the constant consumer oriented clients, the No. 1 economic risk for U.S. retailers, stream of merger and acquisition news, and overtaking unemployment or fuel prices. it’s only expected to increase. In fact, nearly ranging from multinational all retail CFOs (96 percent) expect M&A Fortune 500 Higher interest rates are activity to accelerate or remain the same in a double-edged sword 2014 compared to 2013’s very strong year to more entrepreneurial for retailers, according for deals, according to a recent BDO USA, businesses, providing a to Doug Hart, partner LLP survey… in the Retail & myriad of accounting, tax and Consumer Products In the BDO USA survey, CFOs indicate other . practice at BDO. that consolidation, strong competition For one, higher rates and a need to increase market share are translate to higher mortgage costs and the driving forces behind the increase in student loan payments, things that could mergers. Retailers are under increasing hurt consumer spending. It also increases pressure to grow their offerings and reach, retailers’ borrowing costs. Most retailers and some are taking the faster route of rely on some form of debt financing, Hart buying versus building. All this while foot said. traffic in malls and stores across the country is down. MEDIA COVERAGE OF THE BDO RETAIL & CONSUMER PRODUCTS PRACTICE 2

at the possibility of a jump in labor costs if security breaches, according to a survey u FORTUNE political leaders act on calls to increase the released Wednesday by consulting firm minimum wage… BDO USA. STUDY: LABOR CONCERNS VEX TOP RETAILERS Retailers also appeared to be increasingly An analysis of the regulatory filings of the By Tom Huddleston worried about risks associated with sluggish 100 largest U.S. retailers revealed that 91 economic growth, as the U.S. GDP grew by percent have cited risk factors related to Labor issues, interest rates and security only 0.1% in the first quarter of 2014. The security breaches, according to BDO. The breaches are among the concerns keeping number of retailers who listed economic number of retailers concerned over security the top U.S. retailers awake at night. growth as a risk increased by 22 percentage breaches has increased in each of the last points from the previous year, to 78%. five years and jumped 45 percent since That’s according to professional services 2009, the survey says… firm BDO USA, which released on Friday its eighth annual look at the top risk factors State and federal lawmakers have taken the 100 largest public traded U.S. retailers u LAW 360 notice. Since December, several states named in their most recent regulatory including California, Florida and New filings with SEC. DATA BREACHES GROWING Jersey have enacted, tweaked or proposed WORRY FOR RETAILERS, amendments to laws that lay out what Concerns about workforce issues cracked REPORT SAYS businesses must do if they discover a breach that has compromised customers’ personal the top-five risk factors for the first time, By Jonathan Randles according to BDO, with 94% of retailers data... including that factor on their list of risks, Although concerns over the economy and Lawmakers in California, the first state up eight percentage points from last government regulation remain at the top to enact a data breach law, introduced year’s study. The study says the retail of U.S. retailers’ minds, a growing number a bill in April that would make retailers industry, which is the largest private sector of companies are worried about potential employer in the U.S., is currently staring responsible for customers’ financial losses after a business data breach. That proposal comes less than a year after the state enacted a different set of changes to its data breach standard that expanded the definition of personal information to trigger notification if a user’s login credentials are compromised.

The BDO survey was not all gloomy for retailers. Data showed that companies appear more ready to take advantage of higher levels of consumer confidence, BDO said. It was the eighth annual survey BDO has released analyzing perceived risks in the retail industry. MEDIA COVERAGE OF THE BDO RETAIL & CONSUMER PRODUCTS PRACTICE 3

another. Men are more intent on making u SOURCING JOURNAL their purchase and getting out. Even if they CONTACT: ONLINE want to do their own shopping — which is a departure from the past when most DAVID BERLINER, New York OMNICHANNEL RETAIL men had their mother, wife, girlfriend or 212-885-8347 / [email protected] significant other do it for them — it’s still a THE GENDER AL FERRARA, New York DIVIDE much more focused experience.”… 212-885-8000 / [email protected] By Tom Huddleston Kotlyar points out that men have adapted RANDY FRISCHER, New York as easily as women to buying online 212-885-8445 / [email protected] The more things change among male and because it’s hassle-free, open 24/7 and, DOUGLAS HART, San Francisco female shoppers, the more they stay the among those who use social networking, 415-397-7900 / [email protected] same. Men might be taking more of an it provides feedback on an item prior to interest in than their dads did, but purchase. NATALIE KOTLYAR, New York they still tend to shop on a need basis. 212-885-8035 / [email protected] And women might be busier than ever “That feeds into brand engagement for ISSY KOTTON, Los Angeles juggling and home life, but they still Millennials,” she says, “and how critical 310-557-0300 / [email protected] find apparel shopping more fun than their it is for them to be engaged with social male counterparts. Shrewd retailers are networking.” RICK SCHREIBER, Nashville continually deciphering these differences 615-493-5641 / [email protected] to appeal to both groups in today’s omni- channel world. ALAN SELLITTI, New York 212-885-8599 / [email protected] BDO USA’s Natalie TED VAUGHAN, Dallas Kotlyar, partner in 214-969-7007 / [email protected] the firm’s Retail & Consumer Products practice, says most women don’t view apparel shopping as a chore, whereas men do. So merchants would do well to inject a sense of fun into their shopping experience, from store layout to online offerings.

“For women, there’s an enjoyment of shopping and it’s a way to relax,” Kotlyar says. “It’s a non-sport pastime. They get to be with friends, spend time with one

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