Retail (Apparel) APRIL 2020

Industry Surveys Retail (Apparel) APRIL 2020

Camilla Yanushevsky Xiong Jun Goon Equity Analyst Industry Analyst

C O N T E N T S Contacts Sales Inquires & Client Support 5 Industry Snapshot 800.220.0502 [email protected] 6 Financial Metrics Media Inquiries 7 Key Industry Drivers [email protected] CFRA 8 Industry Trends One New York Plaza New York, NY 10004 9 Porter’s Five Forces Analysis

19 How the Industry Operates Contributors 25 How to Analyze a Company in this Industry Beth Piskora Vice President, Editorial 30 Glossary Marc Bastow 31 Industry References Senior Editor

32 Comparative Company Analysis Raymond Jarvis Associate Editor

What’s Changed: The novel 6 Industry Median Same-Store Sales coronavirus outbreak has Industry Median Gross Margin changed everything. We have Industry Median Return on Equity (ROE) it covered from right in the Executive Summary, and 7 Consumer Confidence Index include a more detailed U.S. Real Disposable Personal Income overview on Page 13. U.S. Consumer Price Index

8 Profit Share Map: Multi-Line and Specialty Retail Sub-Industries Profit Share Map of the Consumer Discretionary Industries What’s Changed: Retail bankruptcies continue to 9 Announced U.S. Retail Bankruptcies impact the industry. Our U.S. Dividend Growth Retail Bankruptcies chart on Page 10 provides an up-to- 10 U.S. Retail Bankruptcies by Primary date look at this key trend Industry listed by primary industry.

11 Credit Ratings for the Consumer Discretionary Sector Credit Ratings for the Apparel Retail Industry What’s Changed: 12 Credit Ratings and Selected Ratios for the “Athleisure” is one of the new Constituents of the Apparel Retail Industry terms of art in the industry, and we discuss this trend in 16 U.S. Retail “Inclusivity” Volumes in Public depth starting on Page 17. Filings, Investor Presentations, and Transcripts. EXECUTIVE SUMMARY

Will Coronavirus Induce Retail’s Collapse? Retail started 2020 with solid footing. Year to date through March 22, retailers announced 2,910 openings and 1,883 planned closures, far under the 5,399 closures announced in the same year ago period, according to Coresight Research. Then came the coronavirus and now over 15,000 stores could permanently close this year, the global research firm forecasts. That is almost double the 9,548 announced store shutters in 2019, and we expect the tallies can be greater if the coronavirus stays longer.

Dividend Cuts, Ratings Downgrades, And Increased Corporate Borrowing Covid-19 is inducing collateral damage on retailers’ balance sheets, Dividends for constituents in the S&P Composite 1500 Apparel Retail are expected to experience a median decline of -17.1% in FY 2021 as compared to those in the S&P Composite 1500 Consumer Discretionary of -1.3%. CFRA believes that the numbers will be revised lower as analysts update their dividend estimates after fully considering the impact of the Covid-19 outbreak. Not surprisingly, as of April 7th, S&P Global Ratings downgraded the long-term credit rating of close to 200 consumer-related companies as companies were forced to limit or halt operations to protect their workers and help slow the spread of virus. Among the downgraded were nine apparel retailers, nine department stores and seven companies in the apparel, accessories and luxury goods industry. What’s more -- throughout the month of March, corporations have borrowed a whopping $98.9 billion to shore up short term liquidity amid a limited economic activity environment. To put into perspective, total corporate borrowing year-to-date by the end of March stood at $154.8 billion. Of the $98.9 billion borrowed, $86.3 billion were companies in the consumer discretionary sector. At $6.9 billion, apparel retailers were the third largest borrowers in the consumer discretionary sector. Department stores and apparel, accessories and luxury goods, on the other hand, were the sixth and seventh biggest borrowers in the consumer discretionary sector at $3.8 billion and $3.2 billion, respectively.

With Social Distancing, E-Commerce Will Continue to Reign Before the outbreak of the coronavirus, the proliferation of e-commerce and digital transformation was leading to a substantial decline in mall foot traffic. Mastercard reported that while overall sales during the holiday period (reported from November 1, 2019 to Christmas Eve) increased 3.4% year-over-year, physical stores sales grew only 1.2% during that period. Now with the alarming level of spread and severity of the coronavirus, we are witnessing a dramatic shift in consumer behavior and shopping patterns. The “cocooning” effect will undoubtedly hurt foot traffic for physical stores and accelerate e- commerce’s reign.

But Let’s Not Forget…The U.S. Consumer Was Losing Steam Before Covid-19 While the outbreak of the coronavirus has drawn a lot of concerns over the state of the services economy, we saw signs the U.S. consumer was losing steam much before. During the 2019 holiday season, much of retail spending was driven by higher gasoline prices, which lifted receipts at service stations, and consumers showed clear signs of dialing back on discretionary categories, notably in the month of November. What's more, the sluggish spending carried well into this year. In January, core retail sales, which excludes automobiles, gasoline, building materials, and food services, were unchanged, and in February, before the coronavirus struck the U.S. with force, the U.S. Census Bureau reported that retail sales declined 0.5% from January. We project same-store sales for constituents in the S&P Composite 1500 Apparel Retail index to decline 4.7% in FY 21 before growing by 6.0% in FY 22.

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 4 Industry Snapshot www.cfraresearch.com RETAIL (APPAREL) Outlook: Neutral

KEY TAKEAWAYS: FISCAL 2021/2022 PREVIEW

We project U.S. retail sales growing 2.5% Revenue Growth Forecast: -7.0% in FY 2021, 6.8% in FY 2022 in 2020 versus a 3.6% gain in 2019 and a 5.0% gain in 2018. We expect the off-price EBIT Margin Growth: -253 bps in FY 2021, +166 bps in FY 2022 apparel retailers to out-perform, and we expect department stores to under- perform. Amid the coronavirus outbreak, Consumer Discretionary Select Sector SPDR (XLY), Vanguard Consumer Discretionary we recommend apparel retailers with Industry-Focused Exchange (VCR), SPDR S&P Retail (XRT), Fidelity MSCI strong balance sheets, high digital Traded Funds (ETFs): penetration and higher exposure to Asia, a Consumer Discretionary (FDIS), VanEck region which is already seeing signs of Vectors Retail (RTH) normalization of supply and demand. *Note: Financial metrics in this table and throughout page 6 are estimated/calculated based on the companies listed in the “Comparative Company Analysis” section. MARKET CAP BREAKDOWN

(as of March 31, 2020) 2019 INDEX PERFORMANCE REVIEW RANK COMPANY MARKET Retail (Apparel) Industry 20.6% NO. NAME CAP S&P Composite 1500 28.3% ($ billion) 1 TJX 57.3 NEAR-TERM THEMES 2 Ross Stores 31.2 Declining Interest Rates Artificial Intelligence 3.2 3 L Brands  Lowering cost of borrowing  Driving the next frontier of

4 The Gap 2.6 loyalty Policymakers are attempting to 5 Foot Locker 2.3 stimulate additional consumer and Retail now surpasses most other Others* 7.1 investment spending. industries with regard to IT spend. Software is the fastest growing Source: CFRA, S&P Global Market Intelligence. *Others with at least 1% market cap include: Urban Outfitters and category. American Eagle Outfitters

20-YEAR INDEX PERFORMANCE 250% S&P Composite 1500 S&P Composite 1500 Apparel Retail 150%

50%

-50%

-150%

5 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS FINANCIAL METRICS

Median Same-Store Sales (percent change, Y-o-Y)  Same store sales have seen low to no growth in the 8.0 past few years partly due to a secular shift in 6.0 consumer shopping patterns to alternative avenues

4.0 such as apparel rentals, secondhand purchases, and just re-wearing of old clothes. 2.0 0.0  Baby boomers are buying less clothes as they age, -2.0 and younger generations are less inclined to buy as

-4.0 many clothes. -6.0  We project same-store sales for constituents in the FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17FY18 FY19 FY20 FY21 FY22 e-Estimate (e) (e) (e) S&P Composite 1500 Apparel Retail index to decline Source: CFRA; S&P Global Market Intelligence. 5.4% in FY 21 before growing by 5.7% in FY 22 due to lower sales estimates due to the outbreak of coronavirus.

Median Gross Margin (percent)  Gross Margin has been on a downward trend due to 42 high fixed cost of operating brick and mortars against

40 a backdrop of a low to no sales growth.

38  We project the median gross margin for industry

36 constituents to narrow to 34.3% in FY 21 and expand to 34.7% in FY 22. 34

30 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17FY18 FY19 FY20 FY21 FY22 e-Estimate (e) (e) (e) Source: CFRA; S&P Global Market Intelligence.

Median Return on Equity (ROE) (percent)  We project median ROE for industry constituents to 18 decrease to 10.4% in FY 21 before recovering to 16.4% in FY 22 due to positive sales expectations. 16

8 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17FY18 FY19 FY20 FY21 FY22 e-Estimate (e) (e) (e) Source: CFRA; S&P Global Market Intelligence.

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 6 KEY INDUSTRY DRIVERS

Consumer Confidence Index (index, 1985=100)  We project that the Consumer Confidence index will 160 average 124.2 in 2020. The Consumer Confidence 140 index averaged 128.3 in 2019. 120

100  The index dropped sharply to 120.0 in March due to

80 increasing fears about the spread of the coronavirus,

60 partly offset by the partial resolution of the U.S.-China

40 trade war.

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* *Data through February. Source: The Conference Board.

U.S. Real Disposable Personal Income (percent change, Y-o-Y)  We project U.S. real disposable personal income 8 growth of 2.2% in 2020. U.S. real disposable 6 personal income grew 2.9% in 2019. 4  Job openings fell to a 2-year low at the end of 2019, 2 reflecting a slowdown in hiring. We expect the 0 outbreak of the coronavirus to translate to a slew of -2 layoffs. We also expect consumers to be more

-4 cautious in their expenditures.

-6 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* *Data through Q4. Source: Federal Reserve Bank of St. Louis.

U.S. Consumer Price Index (percent change, Y-o-Y)  We project a U.S. consumer inflation rate of 2.3% in 5 2020. The U.S. consumer inflation rate was also 4 4 2.3% in 2019. 3  3 We expect inflation to be driven by rising food and 2 accommodation costs and partly offset by declining 2 gasoline prices and the potential increase in 1 unemployment rates due to the corona virus 1 pandemic. 0 -1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* *Data through February. Source: U.S. Bureau of Labor Statistics.

7 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS INDUSTRY TRENDS

We have a neutral stance on retail (apparel) industry. Here are the key themes we have highlighted.

Competitive Environment

INDUSTRY PROFIT SHARE MAP

In the past five years, the Multiline Retail industry (consisting Department Stores and General Merchandise Stores) and Specialty Retail industry (consisting Apparel Retail, Automotive Retail, Computer & Electronics Retail, Home Improvement Retail, Homefurnishing Retail, and Specialty Stores) averaged 11.9% and 29.1% revenues of the entire Consumer Discretionary sector, respectively. The EBIT margins for the industries are 6.7% and 9.1%, respectively.

PROFIT SHARE MAP OF THE MULTILINE AND SPECIALTY RETAIL SUB-INDUSTRIES (5-year average) 14 Department Stores Computer & Electronics Retail General Merchandise Stores Home Improvement Retail 12 Apparel Retail Homefurnishing Retail Automotive Retail Specialty Stores 10

EBIT EBIT (%)Margin 4

0 (Share of Revenue) Source: CFRA; S&P Global Market Intelligence.

The two largest revenue contributors within the retail industry are home improvement retail at 22.6% and general merchandise stores at 19.2%.

PROFIT SHARE MAP OF THE CONSUMER DISCRETIONARY INDUSTRIES (5-year average) 20 Auto Components Internet and Direct Marketing Retail 18 Automobiles Leisure Products Distributors Multiline Retail 16 Diversified Consumer Services Specialty Retail 14 Hotels, Restaurants and Leisure Textiles, Apparel and Luxury Goods Household Durables 12 10 8

EBIT EBIT (%)Margin 6 4 2 0 (Share of Revenue) Source: CFRA; S&P Global Market Intelligence. INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 8 PORTER’S FIVE FORCES FOR THE RETAIL (APPAREL) INDUSTRY

 Competitive Rivalry Among Existing Firms (Moderate) – Firms are required to either continuously innovate or adopt low pricing strategies to compete for market share.

 Customer Bargaining Power (High) – Customers are always seeking for the best possible product at the lowest possible price.

 Supplier Bargaining Power (High) – Firms generally obtain their raw materials from numerous suppliers. Suppliers in more dominant positions could lower a firm's margins.

 Threat of Substitutes (Moderate) – Products that offer new value proposition to customers will generally prevail.

 Threat of New Entry (High) – Firms lacking competitive advantage may see their business being replicated.

Competitive Environment

Will Coronavirus Induce Retail’s Collapse? Retail started 2020 with solid footing. Year to date through March 22, retailers announced 2,910 openings and 1,883 planned closures, far under the 5,399 closures announced in the same year ago period, according to Coresight Research. Then came the coronavirus which is inducing collateral damage on retailers’ balance sheets. Now over 15,000 stores could permanently close this year, the global research firm forecasts. That is almost double the 9,548 stores that announced store shuttering in 2019, and we expect the closure and bankruptcy tallies can be greater if the coronavirus stays longer.

Let’s recap -- in 2019, retail bankruptcy tallies were at a three-year low, according to data from S&P Global Market Intelligence. By category, bankruptcies in 2019 were led by apparel retailers and followed by distributors. In the first three months in 2020, however, retail bankruptcy stood at nine. Of them, four were filed during the period from late-February to mid-March, when Covid-19 started showing signs of a global outbreak. Following the long-term credit downgrade, layoffs, and store closures for various apparel retailers and department stores due to the outbreak of the coronavirus (discussed below), CFRA foresee bankruptcy counts can drastically increase in 2020.

ANNOUNCED U.S. RETAIL BANKRUPTCIES 60

50 48 44 40 40 33 32 30 31 30 24 21 20 20

9 10

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

*Year-to-date through March 18. Source: CFRA; S&P Global Market Intelligence.

9 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS U.S. RETAIL BANKRUPTCIES BY PRIMARY INDUSTRY (for the year ended 2019)

1 1 1 2 Apparel Retail 10 Distributors 3 Internet and Direct Marketing Retail Specialty Stores Homefurnishing Retail Home Improvement Retail Leisure Products 7 General Merchandise Stores 7

Source: CFRA, S&P Global Market Intelligence.

 Retail sales worsen. Retail store sales in the U.S. registered a month-over-month decline in February of 0.5% as companies cut back on operation amid an increased virus spread. Drastic cutbacks are all but certain to hurt sales figures for the months ahead. An overall decline in consumer confidence and increase in unemployment rates are likely to contribute to a further drop in sales as consumers hold back on discretionary spending.

 Dividend Cuts. According to the consensus estimate collected by S&P Capital IQ, dividends for constituents in the S&P Composite 1500 Apparel Retail are expected to experience a median growth of -17.6% in FY 2021 as compared to those in the S&P Composite 1500 Consumer Discretionary of -1.2%. CFRA believes that the numbers would be revised lower as analysts update their dividend estimates after fully considering the impact of the Covid-19 outbreak.

DIVIDEND GROWTH (percentage change) 40

-10

-20

-30 2015 2016 2017 2018 2019 2020 2021 S&P 1500 Apparel Retail S&P 1500 Consumer Discretionary

Source: CFRA; S&P Global Market Intelligence.

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 10  Ratings downgrade. As of April 7th, S&P Global Ratings reported that the long-term credit rating of close to 200 consumer-related companies have been downgraded as companies were forced to limit or halt operations to protect their workers and help slow the spread of virus. Among the downgraded were nine apparel retailers, nine department stores and seven companies in the apparel, accessories and luxury goods industry.

CREDIT RATINGS FOR THE CONSUMER DISCRETIONARY SECTOR 25

12/31/2019 4/10/2020 Source: CFRA; S&P Global Market Intelligence.

CREDIT RATINGS FOR THE APPAREL RETAIL INDUSTRY 2.5

1.5

0.5

12/31/2019 4/10/2020 Source: CFRA; S&P Global Market Intelligence.

11 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS CREDIT RATINGS AND SELECTED FINANCIAL RATIOS FOR CONSTITUENTS OF THE APPAREL RETAIL INDUSTRY

------RATINGS AS OF:------DIVIDEND ALTMAN COMPANY NAME DEBT/EBITDA 12/31/2019 4/10/2020 COVERAGE Z-SCORE Abercrombie & Fitch Co. BB- B+ 1.4 4.3 0.93 American Eagle Outfitters, Inc. No Debt No Debt 2.7 8.3 No Debt Boot Barn Holdings, Inc. NR NR N/A 3.1 2.23 Caleres, Inc. BB BB- -0.5 3.0 2.73 Chico's FAS, Inc. NR NR 0.8 4.9 0.39 Designer Brands Inc. NR NR -0.3 4.5 0.64 Express, Inc. NR NR N/A 4.0 0.54 Foot Locker, Inc. BB+ BB+ 3.4 6.7 0.14 Genesco Inc. NR NR N/A 4.3 0.48 Guess?, Inc. NR NR 0.2 4.4 0.22 L Brands, Inc. BB- B+ 1.0 2.8 2.85 Ross Stores, Inc. A- BBB+ 4.7 11.4 0.13 Shoe Carnival, Inc. No Debt No Debt 8.0 7.6 No Debt Tailored Brands, Inc. B CCC+ 2.3 2.4 3.43 The Buckle, Inc. No Debt No Debt 2.0 8.6 No Debt The Cato Corporation No Debt No Debt 0.9 4.5 No Debt The Children's Place, Inc. NR NR 3.1 6.8 0.26 The Gap, Inc. BB BB 2.7 5.0 0.64 The TJX Companies, Inc. A+ A 3.3 8.2 0.49 Urban Outfitters, Inc. No Debt No Debt N/A 7.7 No Debt Zumiez Inc. No Debt No Debt N/A 6.1 No Debt NR = Not Rated; N/A = Not Available Source: CFRA; S&P Global Market Intelligence.

 Increased corporate borrowing. S&P Global data showed that throughout the month of March, corporations have borrowed a whopping $98.9 billion to shore up short term liquidity amid a limited economic activity environment. To put into perspective, total corporate borrowing year-to-date by the end of March stood at $154.8 billion. Of the $98.9 billion borrowed, $86.3 billion were companies in the consumer discretionary sector. At $6.9 billion, apparel retailers were the third largest borrowers in the consumer discretionary sector after automotive manufacturers and hotels, resorts and cruise lines. Department stores and apparel, accessories and luxury goods, on the other hand, were the sixth and seventh biggest borrowers in the consumer discretionary sector at $3.8 billion and $3.2 billion, respectively.

As such, CFRA foresees that retail companies would either postpone or call off plans for additional store openings, at least until the pandemic could be contained. The impact of Covid-19 is discussed in greater detail below.

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 12 An Overview of Coronavirus On March 11, the World Health Organization (WHO) declared Covid-19 a global pandemic as the new coronavirus rapidly spread across the world. The WHO was reluctant to declare as such because of the political and economic repercussions it carries as more severe restrictions would be imposed on trades and travels. The Covid-19 virus, unknown to the world just three months ago, had swept the world under its feet, causing not just human harm, but also a potential worldwide economic catastrophe as it reveals the fragility of global supply chains and hidden costs for the over-reliance on China. Apparel retailers in the U.S. were also required to make major adjustments to production and delivery due to shortages of materials and trade restrictions.

The apparel retail industry is expected to fare worse during this pandemic compared to the Global Financial Crisis (GFC) more than a decade ago. Unlike the GFC, where impact was mostly centered around the U.S. and its counterparties, Covid-19’s effect is global. Consumer confidence was greatly affected as most economic activities were suspended and uncertainties loom. According McKinsey and Co., after a three-month-long closure, 75% of the U.S. listed apparel and fashion companies are expected to find themselves either in negative-EBITDA territory or with untenable net debt-to-EBITDA ratios. Retailers such as Gap, Macy’s, and Kohl’s had temporarily laid off thousands of their employees as the crisis is expected to prolong store closures.

Every cloud has a silver lining, however. According to McKinsey, companies with stores in regions that have yet to see significant impact from the virus, such as Latin America, or in regions where infection have possibly peaked, such as Hong Kong and China, are outperforming those in Europe and North America where infection are still on the grow and restriction on movement are most stringent. Additionally, companies with diversified portfolios (i.e. multiple brand ownerships), varied distribution channels, or have been engaging in programmatic M&A tend also to outperform their peers. Another research by McKinsey have also shown that apparel and fashion companies that make decisive choices and take bold move to vault from the middle of the pack tend to fare better than their competitors.

But Let’s Not Forget…The U.S. Consumer Was Losing Steam Before Covid-19 While the outbreak of the coronavirus has drawn a lot of concerns over the state of the services economy, we saw signs the U.S. consumer was losing steam much before. During the 2019 holiday season, much of retail spending was driven by higher gasoline prices, which lifted receipts at service stations, and consumers showed clear signs of dialing back on discretionary categories, notably in November. What's more, the sluggish spending carried well into this year. In January, core retail sales, which excludes automobiles, gasoline, building materials, and food services, were unchanged, and in February, before the coronavirus struck the U.S. with force, the U.S. Census Bureau reported that retail sales declined 0.5% from January.

13 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS Operating Environment

Here are we highlight the hottest trends in apparel:

Big Retailers, Small Stores It is no secret that consumers love to shop, and they’d love it even more if it meant being able to do so whenever and wherever convenient. On top of that, they also want flexibility on how their orders are fulfilled. Thankfully, e-commerce and all other supporting processes such as fast shipping and electronic data interchange (EDI) made such demands possible.

In capitalizing on such trends, big retailers the like of Nordstrom and Target had moved part of their businesses online in what is termed an omnichannel strategy. Part of doing so include setting up more stores to cover a wider geographical area. Those smaller format stores work not just to increase a retailer’s visibility, but also as part of a bigger plan to cater for the buy online, pick-up in store (BOPIS) and buy online, return in store (BORIS) model. BOPIS and BORIS are invaluable concepts in that they benefit both the retailer and their customers. Retailers would record higher in-store transactions while doing what traditional retailers struggle to do – bring shoppers into their store – where they are more likely make impulse purchases. Shoppers, on the other hand, get to skip the checkout line and save on delivery costs.

At the same time, an increasing number of retailers such as Tommy Hilfiger, Gap, and Ralph Lauren are closing their flagship stores in high-end shopping districts around the world. This comes as retailers found that the soaring leases can no longer justify benefits of a prime physical presence. In addition, leases saved could be channeled towards investment in the ongoing shift towards e-commerce. According to Financial Times, landlords defended their unwillingness to compromise on price, stating that rents usually make up less than one-tenth of a retailer’s operating expenses and they remain skeptical on how such miniscule reduction could help revive failing retailers.

And Malls Are Poised for Reinvention Mid-tier cookie-cutter malls that proliferated across the country from the 70s through the 90s had long relied on their striking mall entrances, overreaching carparks and extensive department stores to attract shoppers. All these had changed when large department stores like Sears and Macy’s started shuttering their stores and, in the process, bringing down with them malls they once anchored. CFRA, however, believe that malls in top-tier locations are not dead, just yet.

A study by the International Council of Shopping Centers (ICSC) found that in contrast to the 75% of millennials and 58% of Gen X, a staggering 95% of Gen Z still shop in malls, and they genuinely like it. While rather counter-intuitive, Centennials prefer to be in physical spaces despite growing up around digital connectivity. We forecast that Gen Z would make up the largest consumers in malls by the end of 2020. As such, mall operators should change mall environments to better suit their shopping patterns. There are, however, more malls than people interested in visiting them. Stronger malls are likely to be more successful while weaker ones would be weeded out eventually. It is the vast majority in the middle that survivability is questionable and of most concerned.

According to Amanda Nicholson, a professor of retail practice at Syracuse University, Americans have traditionally separated their shopping from living and recreation. This, however, had changed, and malls are aware that in order to get people out of their homes and in through their doors, they’d have to be more creative in incorporating those aspects while at the same time elevating the shopping experience. Some malls have even gone to extreme lengths to achieve this. The long awaited, $5 billion American Dream mall in New Jersey slated to be completed in Spring 2020 is one of those examples. In addition to housing a water park, an aquarium, and 350 stores, the mall also features a 160-foot slope, 26-degree incline indoor ski slope.

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 14

The Thrill of The Hunt Will Persist We see investment opportunities in off-price apparel retailers. We like the industries' gear toward a value- conscious consumer, notably during a softer macro environment, which will increase the allure of the hunt, we think. Shoppers feel the euphoria of spotting branded items at half their retail price and may be compelled to purchase (on impulse) knowing that it may no longer be available the next time they look for it. The success of off-price retailers lies very much on their ability to source the right goods at the right price. The idea of product scarcity and the ever-changing supply of inventory also work to a retailer’s advantage.

Department stores are even capitalizing on off-price's momentum. J.C. Penney and Macy's recently announced partnerships with second-hand women's clothing and handbags store ThredUP. In 2019, Macy's opened up 50 store-in-store off-price locations and said during the third quarter earnings call: "I don't think we see the limit yet in Backstage. We see Backstage could play in every single one of our Macy's mall footprints. And we're looking very carefully at freestanding as well… we have plans to open many more in the future."

Inclusivity Is Now In Fashion We also believe apparel retailers can differentiate themselves from the competition by embracing inclusivity. According to a CFRA analysis, 'inclusivity' boosts profitability and we expect EPS growth of 'inclusive' retailers to outpace the broader retail industry. In our view, retailers that align mission and product to convince consumers that brands are 'inclusive' will be the ones that survive and flourish. According to the 2018 Accenture Holiday Shopping survey, millennials have higher-than-ever expectations of retailers: 70% of millennials are more likely to choose one brand over another if that brand exemplifies inclusion with regards to offers and promotions; 54% of millennials think retailers have a duty to address political and social issues dealing with diversity; and 51% of millennials are more likely to make a purchase at a specific retailer that showcases awareness of such issues.

Abercrombie & Fitch, American Eagle Outfitters and Nike are the most 'inclusive' brands, according to a CFRA analysis. CFRA's conclusions are based on our assessment of the integration of varying body sizes, ethnicities, sexualities and socio-demographics in the merchandising, marketing and presentations across digital channels, social media, as well as in-store of 30 CFRA-qualitatively rated U.S. retailers. Campaigns launched by the three companies were among the most-viewed and liked Instagram posts on each of the respective retailer's social media platforms - an indication, we think, that inclusiveness is in fashion and fostering strong relations with customers.

Conversely, Google search trends for 'inclusivity' are on the rise and more companies than ever are trying to convince stakeholders that they feature 'inclusive' brands. CFRA found that Interest Over Time for 'inclusivity' has increased more than eightfold over the past five years. CFRA also examined SEC filings, investor presentations and transcripts of roughly 7,500 S&P Global Market Intelligence-covered U.S. retailing companies for the word 'inclusivity' and found that volumes have ticked up significantly over the past five years. The term 'inclusivity' has appeared in 89 SEC filings, investor presentations and retailing transcripts year to date as of September 2, and 97 times in 2018, compared to three times in 2015.

15 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS U.S. RETAIL: ‘INCLUSIVITY’ VOLUMES IN PUBLIC FILINGS, INVESTOR PRESENTATIONS AND TRANSCRIPTS 120 97 100 89

40 25 20 3 4 0 2015 2016 2017 2018 YTD* *Data through September 2, 2019. Source: CFRA; S&P Global Market Intelligence.

Sustainability Is Shifting Fashion The quest for an ever-increasing sales compelled fast-fashion retailers to deliver new styles at record pace. This has led to an undesirable effect for the environment as shoppers churn through clothes faster than ever. Despite an increasing number of used clothes, most of them would end up in the dumpsters as technologies to recycle and repurpose old textiles are still relatively inefficient. According to a study by the World Resource Institute, a staggering $400 billion worth of clothes were discarded prematurely every year. Fortunately, a growing consumer awareness on the impact fashion has on our planet had prompted fashion houses to respond by increasing usage of more sustainable materials. Stella McCartney, for example, started producing with organic cotton and recycled materials to lower the carbon footprint of their production. In addition to that, there had also been a growth in carbon-neutral runway shows in New York, Milan, and London with support from big names such as Burberry and Gucci.

The success of e-commerce and concerns over sustainability have given rise to a slew of online apparel subscription services. These businesses, led by companies such as Stitch Fix, Trunk Club (owned by Nordstrom), and Rent the Runway, are one of the fastest growing subsets of the online apparel universe. E-commerce subscription services could generally be categorized into three main categories: curation, access, and replenishment. Curation subscription (which most subscription apparel services fall under) provides subscribers with a selection of personalized items or experiences on a predetermined basis in various categories such as food, fashion, or beauty. Access subscriptions offers member-only privileges or lower prices on consumer goods. Lastly, subscribers to replenishment services will have their household products restocked on regular intervals.

According to a survey conducted by McKinsey, approximately 15% of online shoppers have signed up for at least one subscription services. Such services appeal to users – often well-to-do millennials living in cities – for their personalized, no-frills (hence, cheaper) way of getting what they wish. Attrition rates for subscription e-commerce services, however, are high as users are quick to terminate services that do not live up to expectations. Also, according to the same survey, women are more likely to subscribe to these services compared to their male counterparts.

Apparel rental services such as Rent the Runway and Le Tote are enhancing the sustainability aspect of the industry by offering a vast selection of outfits to cater for the ever-changing taste in fashion with the added benefit of providing access to otherwise unaffordable dresses. In response, various retailers such as Banana Republic, American Eagle Outfitters and Urban Outfitters had also announced plans to lunch their own apparel rental services to broaden existing customers' spending, attract new customers and keep their businesses relevant. With market growth rates of more than 20% a year, the rental subscription

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 16 market is forecasted to reach $2.5 billion by 2023, according to a report from data analytics firm GlobalData.

Sustainability concerns have also brought on a resale revolution. The so-called circular fashion movement is gaining traction as more shoppers were made aware of the environmental impact of clothing production as well as their own household budgets. There has also been an ongoing effort to promote re- wearing of outfits as women were often pressured to wear a different outfit to every occasion. In August last year, J.C. Penney and Macy’s announced partnerships with ThredUp that would allow the popular resale site to sell used clothing ranging from Gap to Gucci in their stores while they try to up-sell on jewelry, shoes and other accessories.

Private Labels Shape the Future Retailers with distinct and innovative private brands stand a better chance at staying ahead of competitors and flourish. Exclusivity could drive profitability. According to retail services firm Daymon Worldwide’s Private Brands Intelligence Report, 81% of U.S. consumers purchase private-brand products on every or almost every shopping trip, and 74% of consumers say that private brands are a better value for money. 85% of consumers trust private-brand products at least as much as national brands, and 53% of consumers said they shop at a specific store, specifically for its private brand.

Highlighting several players in the industry, Macy offers a range of proprietary and exclusive brands, including Alfani , I.N.C. International Concepts, and Style & Co, among others. Discount retailer, Target Corp, is also known for their extensive selection of private labels of more than 40 brands ranging from fashion wear to decor. When used effectively, private labels support margin expansion and are critical to building a retailer’s brand image, as well as customer loyalty. Not surprisingly, Amazon has also penetrated the private label space too. The e-commerce behemoth offers over 120 clothing, shoes and jewelry exclusive brands marketed across a wide assortment of prices and a diverse quality spectrum.

Growing Popularity of Athleisure Athleisure, derived from words athletics and leisure, first gained popularity about five years ago for its versatility and comfortability. To enhance usage of their products outside the gym, athletic brands worked on improving the durability, weather-resistance, and breathability of their offerings. A combination of performance, function, and style had provided increasingly active urbanites with a complete fashion solution to suit their everyday life.

Trends in fashion typically follow a similar lifecycle – growth explosion, market saturation and lastly, decline – all within the span of a few years. The athleisure trend, however, seem to defy such patterns. This activewear trend, still evidently strong till this day, thrived not just from celebrity endorsements, but more importantly, from the growing movement of wellness. Wellness is all about health, but not strictly from a medical point of view. The Global Wellness Institute defined wellness as “the active pursuit of activities, choices and lifestyles that lead to a state of holistic health.” Although not all buyers actively engage in healthy activities, many still prefer wellness-related apparels like yoga pants, tights or gym shoes as a choice of outfit to express the idea of healthy living and positivity.

Apart from clothing, a large part of the athleisure market is made up of footwear. According to retail market research firm NPD, “sport leisure” style footwear did not just make up a major share in the athleisure market, it also surpassed sales of performance-footwears to become one of U.S.’s largest sneaker categories. On top of that, Forbes forecasted that the athleisure footwear category would likely overtake dressier fashion shoes as the largest footwear category in 2020 as the “casual athletic” and “running-inspired” sub-category saw spectacular sales growth last year.

According to Vogue, however, a big part of the athleisure trend lies in the workplace culture. Companies are more likely to adopt a more relaxed approach for day-to-day wear as greater amount of work are done in front of screens rather than in front of clients. Brands like Lululemon and Athleta, for instance, are designing more stretchy and relaxed-fitting clothes appropriate for office environments to attract a more

17 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS professional market. While CFRA don’t foresee client-facing professionals switching over to athleisure any time soon, we expect the gig-economy, the increased adoption of Internet of Things, and the increased awareness on wellness to be a positive precursor for the athleisure trend.

The Digitalization of Clothes Imagine an online game where, main quests aside, players shower their avatars with cool outfits purchased with either in-game currencies or real-world cash. Now, picture that happening in real life but instead of styling avatars, people dress themselves up (more like a photo of themself). That, is digital clothing. Note, however, that just like in virtual worlds, buyers will not receive a physical version of that item.

Digital clothing created by companies such as the Norway-based retailer, Carlings, were catered for today’s digital age where people are obsessively sharing their outfits on social media. A quick check on Instagram for one of its most recognizable hashtags – the #ootd – spewed almost 300 million posts. In the world of social media where it is almost taboo to wear something more than once, most of these outfits would be relegated to the back of the wardrobe, worse so, to the dump fill, leaving a rather large negative footprint on the world. With clever use of technology, digital clothing could address such issues, thus making the fashion industry cleaner and more sustainable.

Being a rather greenfield project, digital clothing has its fair share of challenges. Despite the growing digital asset sales, most consumers still prefer the tangible joy physical outfit brings, not to mention the real purpose clothing serves. Fashion designers are also not traditionally trained in 3D modelling. Sample patterns require rendering by skilled 3D artists and this process could be costly and tedious (i.e. there are no templates or codes for fur or wool). In the opinion of Matthew Drinkwater, head of the Fashion Innovation Agency at London College of Fashion, digital clothing is still at least five to ten years away from seeing widespread use.

Regulatory Update

Global Trade Tensions Will Dent Demand In 2019, the U.S.-China trade war eroded business confidence, curbed domestic business investment and hurt U.S. manufacturing. Tariffs will stifle economic growth and mean higher prices for the U.S. consumer. The Phase One trade deal won't change that. To summarize, Phase One was signed between leaders of the two countries with an agreement that China would increase purchase of U.S. agricultural, manufactured goods, and energy by at least $200 billion over the next two years in exchange for a tariff reduction on their exports. Under the agreement, tariffs for Chinese imports under List 4B had been scrapped while tariff for approximately $120 billion worth of goods under List 4A had been reduced from 15% to 7.5%. Approximately $250 billion worth of imports under List 1, 2, and 3, however, will still be subjected to a 25% tariff.

A December 2019 study by the Federal Reserve, Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector, concluded that the tariffs enacted in 2018 have led to job losses, a reduction in foreign competitiveness due to retaliatory tariffs in U.S. export markets and increases in producer prices via rising input costs. Producer Price Index in the U.S. advanced 2.1% for the twelve months ended January 2020, the highest since May 2019, boosted by cost increases in the hospitality and health care industries.

A February 2019 study by Trade Partnership Worldwide found that the tariff of 25% on U.S. imports of selected goods from China (Lists 1, 2 and 3, which we expect to remain in place in 2020) will reduce the dollar value of U.S. GDP by 0.37% and impose an extra $767 for an average family of four for every year they are in effect. A follow-up June study found that consumers would pay $4.4 billion more for apparel and $2.5 billion more for footwear with the implementation of List 4 tariffs (25% on $300 billion).

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 18 HOW THE INDUSTRY OPERATES

Retailing includes all business activities that involve the sale of goods and services to consumers for personal, family, or household use. Retailers also sell their goods and services to businesses, large and small, for commercial and industrial purposes.

The Retailers

MULTILINE RETAIL

The multiline retail industry comprises two sub-industries: department stores and general merchandise stores.

Department Stores Department stores engage in retailing a wide range of merchandise, typically arranged in separate departments, with no single line predominating. Such merchandise includes apparel, furniture, home furnishings, appliances and selected additional items, such as paint, hardware, toiletries, cosmetics, photographic equipment, jewelry, toys and sporting goods.

The North American Industry Classification System (NAICS) categorizes department stores in terms of business structure – department stores and discount department stores.

 Department stores. Comprises establishments that sell various merchandise lines, such as apparel, jewelry, home furnishings and linens, and provide departmental customer checkout service and customer assistance.

 Discount department stores. Comprises establishments that sell a wide range of general merchandise, excluding fresh, perishable foods, and have central customer checkout areas, generally in the front of the store. Additional cash registers may be located in one or more individual departments. Kohl’s is an example of a discount department store.

CFRA categorizes department stores in terms of merchandise sold – full-line department stores and specialty department stores.

 Full-line department stores. These retailers offer a broader array of merchandise than do specialty department stores. In addition to apparel, such stores may also have departments selling appliances, electronics, cookware, sheets, towels and giftware. Sears and J.C. Penney are examples of full-line department stores.

 Specialty department stores. The focus at specialty department stores is almost solely on apparel, shoes and accessories for men, women and children. Nordstrom is an example of a specialty department store.

General Merchandisers General merchandisers carry a much broader assortment of merchandise than most department stores and are unique in that companies have the physical and human capital of retailing a large assortment of goods from a fixed point-of-sale location.

The NAICS categorizes general merchandisers as follows:

 General Merchandise Stores. Comprises establishments primarily engaged in retailing new goods in general merchandise stores (except department stores). These establishments retail a general line of

19 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS new merchandise, such as apparel, automotive parts, dry goods, hardware, groceries, housewares and home furnishings, with no one merchandise line predominating.

 Warehouse Clubs and Supercenters. Comprises establishments primarily engaged in retailing a general line of groceries, including a significant amount and variety of fresh fruits, vegetables, dairy products, meats and other perishable groceries, in combination with a general line of new merchandise, such as apparel, furniture and appliances.

 All Other General Merchandise Stores. Comprises establishments primarily engaged in retailing new goods in general merchandise stores (except department stores, warehouse clubs, superstores and supercenters). These establishments retail a general line of new merchandise, such as apparel, automotive parts, dry goods, hardware, housewares or home furnishings, and other lines in limited amounts, with none of the lines predominating.

CFRA does not further categorize general merchandisers.

SPECIALTY RETAIL

Specialty retailers sell products in specific merchandise categories, such as apparel, footwear, office supplies, home furnishings, sports equipment, books, jewelry and so forth.

Despite the proliferation of large chains and superstore formats, the specialty retailing landscape remains fragmented, with thousands of small- to medium-sized businesses, often catering to local tastes and preferences. Because specialty retailing generally requires less start-up capital than other industries, it continues to offer opportunities for entrepreneurs with new product ideas.

Given their heavy concentration in a particular product or service category, the performance of specialty retailing companies is often less sensitive to broader macroeconomic and retail trends than is the case for general merchandisers. On the other hand, specialty retailers may be more susceptible—for better or worse—to shifts in narrowly defined cultural, lifestyle, or demographic factors.

The NAICS categorizes specialty retailers as follows:

 Clothing and Clothing Accessories Stores. Comprises establishments that retail new clothing and clothing accessories from fixed point-of-sale locations.

 Motor Vehicle and Parts Dealers. Comprises establishments that retail motor vehicles and parts from fixed point-of-sale locations. Establishments in this subsector typically operate from a showroom and/or an open lot where the vehicles are on display. The display of vehicles and the related parts require little by way of display equipment.

 Electronics and Appliance Stores. Comprises establishments that retail new electronics and appliances from point-of-sale locations. Establishments in this subsector often operate from locations that have special provisions for floor displays requiring special electrical capacity to accommodate the proper demonstration of the products.

 Furniture and Home Furnishings Stores. Comprises establishments that retail new furniture and home furnishings from fixed point-of-sale locations. Establishments in this subsector usually operate from showrooms and have substantial areas for the presentation of their products. Many offer interior decorating services in addition to the sale of products.

 Building Material and Garden Equipment and Supplies Dealers. Comprises establishments that retail new building material and garden equipment and supplies from fixed point-of-sale locations. Establishments in this subsector have display equipment designed to handle lumber and related products and garden equipment and supplies that may be kept either indoors or outdoors under covered areas.

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 20  Food and Beverage Stores. Comprises establishments that retail food and beverage merchandise from fixed point-of-sale locations. Establishments in this subsector have special equipment (e.g., freezers, refrigerated display cases, refrigerators) for displaying food and beverage goods. They have staff trained in the processing of food products to guarantee the proper storage and sanitary conditions required by regulatory authority.

 Health and Personal Care Stores. Comprises establishments that retail health and personal care merchandise from fixed point-of-sale locations. Establishments in this subsector are characterized principally by the products they retail, and some health and personal care stores may have specialized staff trained in dealing with the products.

 Gasoline Stations, Sporting Goods. Comprises establishments that retail automotive fuels (e.g., gasoline, diesel fuel, gasohol, alternative fuels) and automotive oils or retail these products in combination with convenience store items. These establishments have specialized equipment for storing and dispensing automotive fuels.

 Hobby, Musical Instrument and Book Stores. Comprises establishments that are engaged in retailing and providing expertise on the use of sporting equipment or supplies for other specific leisure activities, such as needlework and musical instruments. Book stores are also included in this subsector.

 Miscellaneous Store Retailers. Establishments in this subsector include stores with unique characteristics, such as florists, used merchandise stores and pet supply stores.

 Non-store Retailers. Comprises establishments that retail merchandise using methods, such as the broadcasting of infomercials, the broadcasting and publishing of direct-response advertising, the publishing of paper and electronic catalogs, door-to-door solicitation, in-home demonstration, selling from portable stalls, and distribution through vending machines. Establishments in this subsector include mail- order houses, vending machine operators, home delivery sales, door-to-door sales, party plan sales, electronic shopping and sales through portable stalls (e.g., street vendors, except food). Establishments engaged in the direct sale (i.e., non-store) of products, such as home heating oil dealers and newspaper delivery service providers, are included in this subsector.

CFRA categorizes specialty retailers as follows:

 Apparel Retail. Comprises establishments that retail new clothing and clothing accessories from fixed point-of-sale locations such as the TJX Companies and Ross Stores.

 Automotive Retail. Comprises establishments that retail new electronics and appliances from point-of- sale locations such as O'Reilly Automotive and AutoZone.

 Computer and Electronics Retail. Comprises establishments that retail new electronics and appliances from point-of-sale locations such as Best Buy and GameStop.

 Home Furnishing Retail. Comprises establishments that retail home furnishings from fixed point-of- sale locations such as Williams-Sonoma and Bed Bath & Beyond.

 Home Improvement Retail. Comprises establishments that retail home improvement products from fixed point-of-sale locations such as Home Depot and Lowe’s.

 Specialty Stores. Establishments in this subsector include stores with unique characteristics such as Ulta Beauty and Tiffany & Co.

21 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS The Merchandise

Merchandise is a retailer’s most valuable asset and can be classified as either soft goods or hard goods.

HARD GOODS

There are three types of hard goods: hardlines, hardline consumables and seasonal hardlines. The hardlines category is comprised of electronics, hardware and paint, small appliances, stationery/office supplies and impulse merchandise. Hardline consumables include health and beauty aids, over-the- counter medicines, cosmetics, candy and tobacco, paper goods, and pet supplies. In the seasonal hardlines category are sporting goods, toys, lawn and garden equipment, automotive supplies and seasonal and holiday merchandise.

SOFT GOODS

The soft goods category comprises apparel, accessories, sheets, towels and other linens. Apparel covers three types of merchandise: fashion, basic and fashion-basic.

 Fashion merchandise. This merchandise is subject to the whims of the customer and has a short selling season. Because individual fashions go in and out of style, demand is cyclical. To order fashion merchandise requires long lead times. Up to a year before a garment enters a store, buyers begin to search for pending fashion directions. With vendors, they explore themes, trends and colors, and analyze fashion markets the world over. Initial orders are placed months before the actual selling season. That said, with retailers focused on delivering newness to customers, order lead times are shortening.

 Basic merchandise. Basic or staple items are relatively unchanging in both style and demand, and include apparel such as underwear, T-shirts and jeans. Because basic merchandise is not subject to the whims of the latest “hot” fashion trends and is part of everyday use, demand remains steady. This predictable demand means that the ordering process for basic items does not require long lead times.

 Fashion-basic merchandise. This merchandise falls somewhere in between the other two categories. It comprises basic items with some fashion element, such as broken-in chinos or a t-shirt with a trim— characteristics that necessitate a production cycle longer than what is needed for a simple basic item.

Behind the Scenes: Inventory Management

Retailers form the link between the producer of goods and the consumer. Getting the merchandise that customers want to buy is critical to their success. Doing it profitably is essential for their survival. Today’s retail giants are large corporate structures with comprehensive merchandise and financial information systems that conform to their own strategic plans.

The type of products carried also affects the retailers’ inventory management in various ways, from order lead times to distribution methods. For instance, different product classes typically sell at different speeds and with varying predictability. In addition, while all retailers hold merchandise in their stores as inventory, large retail chains also keep goods in distribution centers.

Getting the Goods The ordering and tracking of some 100,000 individual items (stock keeping units, or SKUs) department by department, does not happen by chance. Merchandise must be ordered, shipped, delivered and stocked. Stores must be staffed, payrolls met and merchandise advertised. Financial management and real estate strategies are essential.

Because sales are derived from inventory, ensuring a large stock of well-selected merchandise is essential. A merchandise plan is developed by the retailer’s buyer based on the company’s corporate INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 22 objectives (i.e. goals for sales, expense levels, margins and profitability) while considering consumer spending patterns and the economic outlook. The buyer is then responsible for planning which goods to stock and in what quantities that are consistent with the merchandise plan. The company’s sales forecasts are based on three to five years’ worth of sales data that anchored to the retailer’s sales figures from the preceding year.

Other steps in formulating a merchandise budget include a plan for merchandise price reductions, such as markdowns for promotions, special sales and buying errors (merchandise that customers do not want). Variation in seasonal demand is another important consideration.

Technology-Guided Inventory Management The ability to anticipate fashion trends will always be key in retailing, and it is a distinctly human skill needed to succeed in this business. Nonetheless, quantitative accounting is also important. Successful retailing demands sophisticated planning and technology so that decisions can be made based on information rather than pure intuition. This is particularly true for large chains competing in major metropolitan markets across the nation.

As retailing technology has evolved, such technologies have become powerful competitive tools. Accurate information on retail prices, SKUs and the aging of inventory are being captured, and sales trend data are then used to plan procurement, thus shortening distribution cycles.

The computerization of purchasing orders, invoice processing and credit card authorization has significantly streamlined operations. Retailers improve their in-stock positions by sharing sales information with vendors and by allowing them to automatically replenish stocks. This ensures availability of merchandises while meeting customers’ buying patterns and preferences. Automatic replenishment increases profitability by boosting sales while lowering cost by enhancing vendors’ manufacturing cycle.

 Inventory planning/management. Perpetual inventory systems enable retailers to leverage point-of- sale (POS) data to improve sales forecasting, as well as merchandise planning and allocation. By collecting and analyzing sales at the SKU level—i.e., brand, size, style and color—and by location, retailers can improve in-stock levels on the most popular items, and reduce inventory positions on slower- selling assortments. The ability to lower markdown risk by planning assortments based on customer preferences is particularly important for fashion apparel retailers, as particular looks tend to be “in” for only one or two selling seasons.

The ability to deliver the right product, at the right time and in the right locations, enables retailers to drive full-price sales, improve profitability and build customer satisfaction and loyalty. Close collaboration with key vendors on assortment planning and inventory replenishment also provides retailers with opportunities to establish competitive advantages and to improve market share.

 Quick response programs. A quick response program is part of the inventory management system in which manufacturers assume responsibility to stock a retailer’s stores. The goal is to ensure availability of merchandises in store while maintaining a lean inventory. Vendors will assume part of the inventory expense, historically one of a retailer’s highest costs.

Electronic data interchange (EDI) is the technology used to support quick response programs and it employs interconnected computer terminals between retailer and vendor, allowing large amounts of information to be transmitted. This up-to-the-minute report on a store’s sales is then relayed to the manufacturer.

With access to precise retail sales data, the manufacturer can tailor its production to consumer demand. The data recorded by barcode scanners in an EDI system are also used for automatic (or just-in-time) reordering, enabling a manufacturer to restock a retailer’s shelves quickly. In addition to providing for automatic replenishment, EDI makes distribution and shipping information processing more efficient.

23 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS Intermediate Steps in the Supply Chain Retailers operate one or more distribution centers serving stores across the country which act as an intermediate point between manufacturers (vendors) and retail stores. As a retailer expands into new regions, additional distribution centers may be needed. In state-of-the art distribution centers, merchandise are sorted, tracked and distributed in a highly automated manner. Automation allows for a more accurate count of inventory and quicker reordering when goods are in short supply, thus maintaining optimal in-stock positions at the store level. Centralized purchasing and distribution systems also permit store employees to spend more time on customer service and store presentation.

Merchandise arrive from vendors pre-distributed by store location, ready to be split into shipments at the distribution center. From the distribution center, products are shipped to stores on an as-needed basis. This distribution system, called cross-docking, streamlines the supply chain from vendor to POS. Cross- docking reduces handling and storage of inventory, improves transit time, and lowers transportation costs.

Pricing the Goods In pricing merchandise, the retailer determines the “initial mark-on”—the difference between an item’s cost and its retail price, usually computed as a percentage of the retail price. For example, if an item costs $100 and the retailer sells it for $200, the initial dollar mark-on is $100 and the mark-on percentage is 50% ($100 ÷ $200 = 0.5 or 50%). Retailers can raise their merchandise margin by increasing the initial mark-on. In times of sharp price competition, they may lower it. In the case of a fast-selling item, a retailer may raise the price by adding another price increase, called a “markup.”

When merchandise does not appeal to customers, the retailer must reduce prices to move it and make room for new—and hopefully more salable—items. The term “markdown” is used when a retail price is lowered. Markdowns help to clear out inventories and to draw customers into stores. Merchants always plan for some price reductions, especially during season-ending clearances, but excessive markdowns erode profitability.

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 24 HOW TO ANALYZE A COMPANY IN THIS INDUSTRY

While individual companies’ sales depend on the specific products they offer, overall industry demand is driven by general economic trends. A good starting point when analyzing specialty and multiline retailers is to assess the current macroeconomic environment, with emphasis on trends in employment, and consumer income and spending. The state of the economy in general, and consumer income and spending in particular, influence the amount of money consumers are willing or able to spend on clothing and accessories. Demographic and lifestyle trends also can be important determinants of consumer demand.

At CFRA, we recommend a top-down approach to valuation. An examination of the industry drivers outlined on page 7 – consumer confidence, disposable personal income, and consumer inflation – is a good starting point.

Industry Drivers

 Consumer confidence. The Conference Board, a not-for-profit research group, conducts the most widely followed consumer confidence survey by polling 5,000 representative U.S. households to gauge consumer sentiment. This measure is expressed as an index, in which 1985 is used as a base year (1985=100). Compiled from monthly surveys of consumer attitudes, the index has two components: the present situation index, which measures consumers’ feelings about their current economic condition; and the expectations index, which tracks consumers’ feelings about the future. Any reading above 90 is considered strong, according to The Conference Board.

When consumer confidence is high or rising, it is often accompanied by increased spending and borrowing. Conversely, when consumers are uncertain about the future, they may reduce or postpone expenditures.

 Disposable personal income. Reported each month by the DOC, this measure tracks the growth in consumers’ after-tax income. When personal income is gaining ground, consumers generally become more willing to loosen their purse strings. Conversely, when disposable income levels advance at a lackluster pace or not at all, consumers are less willing to spend. They may trade down to less expensive products, or postpone or forgo purchases, particularly big-ticket items.

 Consumer price index. The consumer price index (CPI) is released monthly by the U.S. Bureau of Labor Statistics (BLS). It measures changes in the prices of commodities, fuel oil, electricity, utilities, telephone services, food, and energy in the U.S.. The core CPI smooths out the index by removing the volatile food and energy categories.

25 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS Company Analysis

After gaining an understanding of the industry’s drivers, an analyst should then focus on company- specific analysis. Company-specific analysis focuses on a range of factors—both qualitative and quantitative—and should be used to evaluate a firm’s strengths and weaknesses, as well as assess its overall position within the overall retail landscape.

QUALITATIVE MEASURES

Evaluating a Company’s Competitive Stance Investors evaluating companies in this industry have the advantages of being able to test merchandise quality, compare it with alternatives, and assess the selling environment in terms of customer service and visual accoutrements.

When visiting a retail location, things to note include how much square footage a store devotes to selling particular products compared with competitors, whether merchandise appears to be selling at full or discounted prices, merchandise display formats, and how complete collections appear. Also important are overall traffic trends and the average age of the typical shopper. In addition, one should observe the degree of merchandise differentiation from competing brands across distribution channels because consumers shop multiple channels—discount, specialty, luxury retailers, and mass merchandisers. Although the operations in one or two stores may not be indicative of the entire chain, the investor can get a general understanding of a retailer’s store concept and how effectively it is being implemented.

Because of the glut of apparel and accessories offerings, any characteristic that favorably distinguishes a company and its products gives it a competitive advantage in the marketplace. Such traits can include the following:

 Brand names. In this industry, a strong and recognizable brand name is the key to success and drives store (and website) traffic. Through marketing efforts, companies try to create a well-known brand name that consumers will identify with a high-quality or fashionable product. Brand loyalty is built over time as companies support advertising and promote brand awareness.

 Product differentiation. A company can also create a competitive advantage by differentiating its product line from that of its competitors. Differentiation allows a company to charge higher prices and generate brand loyalty among consumers. This practice is gaining in importance as basic merchandise becomes increasingly indistinguishable to consumers. In reality, a company does not have to create a markedly different product, but it must create a perception of difference. Companies can cultivate an aura of difference through marketing, using advertising to create a brand image.

 Customer demographics and target market. Growth potential depends primarily on three factors: the size of the target market for the company’s products, the market’s growth rate, and the company’s market share. It is important to identify the firm’s target customers and assess whether the company is successfully addressing their needs and wants from both a marketing and design standpoint. If the firm targets a narrow demographic group, such as senior citizens or teenagers, it is also crucial to evaluate the ramifications of expected changes in the segment’s population growth.

For category-dominant companies in an established segment, sales growth is typically driven by gains in market share rather than by overall market growth. Companies operating in emerging or fast-growing segments often benefit from growth in total market sales.

 Distribution. What distribution channels does the company use? Has it recently expanded or narrowed its distribution system? If it has consolidated its distribution infrastructure, has it realized any operating synergies by doing so?

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 26 Expanding the channels of distribution can reduce retailers’ reliance on any particular channel. Companies must choose channels with some thought to the targeted consumer groups, and the desired price points and brand images. For example, a company trying to sell first-quality designer clothes in a mass-market outlet could dilute its brand irreparably.

 Assessing management. In the specialty and multiline retail businesses, as in most industries, a company with a superior management team can distinguish itself from its peers by creating successful competitive strategies. For apparel and accessories companies, in addition to top management, lead designers and merchandising and procurement officers should also be evaluated.

When evaluating a management team’s ability to create, recognize, analyze, and act on market opportunities, several questions should be asked. What is management’s financial and operating philosophy? How long have the senior managers been with the company? What are the managers’ track records, both individually and working as a team? If managers have taken control recently, what was their previous experience? Has the company been adept at integrating acquisitions? Do growth strategies make sense considering the current environment and the company’s particular situation? Are management’s interests aligned with those of its shareholders?

QUANTITATIVE MEASURES

Quantitative factors in the company analysis include trends in same-store sales, revenues, gross profit and operating margins, inventory, receivables and payables.

Same-Store Sales Specialty and multiline retailers typically report same-store (or comparable store) sales on a quarterly and annual basis. In theory, this metric allows investors to determine the level of sales growth from increased sales in existing stores versus the amount of sales growth from new store openings. Same-store sales growth is an important indicator of a company's longer-term growth potential, especially as the rate of new store openings begins to slow.

Watch Out! As a non-GAAP measure, same-store sales growth is subject to considerable company discretion both in terms of how it is calculated and how often the methodology is revised. Look out for changes in definition of same-store sales, lack of definition of same-store sales and unusual volatility in same-store sales.

Revenues A company’s sales growth should be compared with that of its competitors and the overall market. It is important to determine what is driving sales growth. Is it pricing, volume gains, or acquisitions? Is the sales growth broad-based or driven by only a few categories? Is the company gaining market share or just riding the market’s overall growth?

Watch Out! The estimates for establishing certain reserves can be used by management to manipulate revenue, earnings, and margins. Analysts should pay attention to allowance for doubtful accounts to gross accounts receivable, and inventory reserve (including spoilage) to total inventory. We view a decrease in any of these reserve metrics as an unsustainable boost to margins and could create tough year over year comparisons.

Gross Profit Margin Gross margin is calculated as gross profit (net sales minus the cost of goods sold) expressed as a percentage of net sales. It generally reflects a company’s product mix and its operational efficiency. The cost of goods sold comprises a number of items other than merchandise, including purchasing, warehousing, freight, occupancy, and insurance costs, and can vary from company to company.

27 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS Watch Out! The inventory obsolescence reserve is an estimate that is based on the expected salability of current inventory. Inventory obsolescence provisions are generally included in cost of sales and are subject to a high degree of management discretion. A large inventory charge would hurt earnings in the current period but could lead to higher margins and earnings if, as a result of the charge, a company reduces its inventory obsolescence provision in subsequent periods. Additionally, if a company sells this reserved inventory in later periods it would receive a boost to gross margins and earnings as the cost basis for the product would be artificially low.

Operating Profit Margin Operating profit margin is calculated as gross profit minus operating expenses, expressed as a percentage of net sales. Operating expenses typically include selling, general, and administrative (SG&A) expenses, and exclude interest payments and other non-operating expenses. Companies can widen their operating margin by using resources more efficiently, allowing fixed costs to be spread across greater volumes.

Watch Out! Some companies offer credit to some of their customers through store branded credit cards. Companies who offer such credit cards derive additional revenues from finance charges, late fees and other credit card related activities, as well as third-party merchant fees to the extent that the credit cards are accepted by other merchants. There are significant expenses, primarily bad debt expense and operations and marketing expenses associated with these revenues. Look out for any changes in classification policy in which selling, general and administrative expenses may be understated due to inclusion of expenses for credit card operations.

Inventory The importance of the planning, buying, and controlling of merchandise inventory cannot be overstated. An analyst should consider inventory growth and turnover to assess how well the company is managing its inventory.

 Inventory growth. Merchandise held in inventory is an asset on the balance sheet, and its year-over- year change can be measured. Any growth in inventory should be in line with that of same-store sales and units. A significant rise from the year-earlier quarter might reflect the opening of new stores, which would require additional inventory. However, if new store growth has been minimal, it may be a warning that stores are overstocked and vulnerable to a high level of markdowns.

 Inventory turnover. The speed with which inventory is sold—or “turns”—indicates whether goods are selling well relative to the average amount of inventory kept in stock and is calculated as cost of goods sold divided by year-end inventory. The turnover rate should be consistent with the company’s business and comparable to other manufacturers in the same business segment.

 Inventory-to-forward sales. The level of inventories can also be assessed by comparing current inventory levels against the six-month forward revenue guidance or consensus estimates.

Watch Out! U.S. GAAP allows considerable flexibility in choosing an inventory costing method, including the first-in, first-out (FIFO) method, the last-in, first-out (LIFO) method and the average cost method. During inflationary periods, a company using FIFO will report higher margins and higher inventory than those using LIFO or average cost. Analysts should further note that a decline in the LIFO reserve (a LIFO liquidation) generally represents an unsustainable boost to earnings as older, lower-cost inventories flow through the income statement. Look out for a change in inventory accounting policies and rising inventory levels relative to cost of goods sold.

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 28 Watch Out! Shrink (the difference between recorded amount of inventory and physical inventory; especially pertinent in the Specialty Retail industry) and inventory reserves are subject to management estimates and can be used by companies to manipulate earnings. It is important to determine whether there have been any significant declines in inventory reserves relative to gross inventory or changes in shrink reserve as a percentage of sales, as it may suggest earnings manipulation absent an alternative explanation from the company.

Receivables Receivables are the lifeblood of cash flow. An analyst should consider receivables turnover and allowance for doubtful accounts relative to gross receivables to assess how well the company is issuing credit to its customers and collecting funds in a timely manner.

 Receivables turnover. Receivables turnover is calculated as net sales divided by year-end accounts receivable. It generally reflects how efficiently a firm is collecting its sales that were made on credit. A decrease in receivables turnover could signify late quarter sales, extended payment terms or increased collection risk, while an increase could signify an aggressive collections department or a conservative credit policy.

Watch Out! There are many available tactics management can use to accelerate revenue, some of which include allocating a higher proportion of transaction price to elements delivered upfront in contracts with multiple deliverables or performance obligations, faster recognition of deferred revenue, large shipments at period-end, a change in revenue recognition policy and a change in interpretation of the revenue recognition policy. Often times, the acceleration of revenue can be identified by monitoring changes in accounts receivable. Look out for growth in accounts receivable

Payables Accounts payable management is crucial to ensure suppliers and credits receive timely payments and maximum capital is freed up for other purposes.

 Payables turnover. Payables turnover is calculated as total purchases made from suppliers divided by year-end accounts payable. It generally reflects the speed with which a company pays its suppliers. A decrease in payables turnover signifies that a company is taking longer to pay off its suppliers than in previous periods, perhaps an indication of an increase in bargaining power or a worsening of the company’s financial condition. An increase in payables turnover signifies a company is paying off its suppliers at a faster rate than prior periods, perhaps a reflection of tighter collection policies, or a discount of rebate from vendors for earlier payment.

Watch Out! Some companies engage in supplier financing, aka reverse factoring. There are several variations of these programs, but basically, a company arranges for a financial institution to pay its suppliers and the company repays the financial institution later. This effectively lengthens the supplier payment terms and thus improves working capital. However, operating cash flows can be overstated if the cash payment to the financial institution is presented as financing outflows rather than operating cash flows, which would be the case if the company pays the supplier directly. Furthermore, companies may not reclassify accounts payable under reverse factoring programs into

29 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS GLOSSARY

Athleisure —The summation of athletics and leisure and refers to activewear designed for athletic activities but worn for casual purposes.

Brand—A name that identifies the goods of one seller.

Brick-and-mortar stores—Traditional or physical stores where products can be marketed and sold.

Buyer—The person responsible for the merchandising operations of a retail outlet or of a specific department.

Digital clothing—3D-rendered garments that only exist virtually. It offers much greener, zero-waste alternatives in a world with growing fears over waste and concerns about the negative effects of manufacturing.

E-commerce—Marketing and selling of products and services via the Internet or online social networks.

Electronic data interchange (EDI)—The technology used to support quick response programs and employs interconnected computer terminals between retailer and vendor.

Hard goods— Refers to less personal items, such as appliances or sports equipment. Hardlines are essentially synonymous with consumer durables.

Markdown—A reduction in the retail price of an item, expressed as a percentage of the original price of the merchandise.

Markup—An increase in the retail price of an item, expressed as a percentage of the original price of the merchandise.

Omnichannel—A multichannel approach that gives consumers greater flexibility and options in how, when and where they shop (i.e., mobile phones, tablets, social media).

Point-of-sale (POS) terminal—A kind of cash register that transacts and monitors all sales at checkout through a computer database.

Quick response programs—A part of the inventory management system in which manufacturers assume responsibility to stock a retailer’s stores.

Soft goods—Refers to goods that are literally soft, such as clothing and bedding.

Stock keeping unit (SKU)—A single merchandise item, as measured for inventory management purposes.

Superstore—A retail store that is larger than a traditional retail store and offers a wide assortment of products, typically at prices favorable to the consumer

Upcycling— Also known as creative reuse, is the process of transforming by-products, waste materials, useless, or unwanted products into new materials or products of better quality and environmental value.

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 30 INDUSTRY REFERENCES

MARKET RESEARCH FIRMS GOVERNMENT AGENCIES

Accenture Federal Reserve Bank of St. Louis https://www.accenture.com/ https://www.stlouisfed.org/ Accenture is a multinational professional services The Federal Reserve Bank of St. Louis is one of 12 company that provides services in strategy, regional Reserve Banks that, along with the Board of consulting, digital, technology and operations. Governors in Washington, D.C., make up the United States' central bank. Alexa Internet https://www.alexa.com/ Federal Reserve Board Alexa Internet, Inc. is an American web traffic analysis https://www.federalreserve.gov/ company based in San Francisco. It is a subsidiary of The Federal Reserve System is the central bank of Amazon. the United States. It promotes the effective operation of the U.S. economy and, more generally, the public Boston Consulting Group interest. https://www.bcg.com/ Boston Consulting Group is a management consulting New York City Department of Consumer Affairs firm and is one of the three most prestigious (DCA) employers in management consulting. www.nyc.gov/consumers The DCA protects and enhances the daily economic Coresight Research lives of New Yorkers to create thriving communities. It https://coresight.com/ licenses more than 81,000 businesses in more than Provides future-focused analysis and consulting to 50 industries and enforces key consumer protection, organizations navigating the intersection of retail, licensing, and workplace laws. technology and fashion. U.S. Bureau of Labor Statistics (BLS) Daymon Worldwide http://www.bls.gov https://www.daymon.com/ A division of the U.S. Department of Labor. The BLS Provides consumables retailing services and primarily is the principal fact-finding agency of the federal engages in branding, sourcing and commercializing government in the broad fields of labor, economics customized retail solutions. and statistics. Its major programs include the consumer price, producer price and employment cost International Council of Shopping Centers(ICSC) indices and the national compensation survey. https://www.icsc.com/ The global trade association of the shopping center U.S. Department of Commerce (DOC) and retail real estate industry. http://www.commerce.gov Cabinet-level department responsible for various McKinsey & Company government agencies that monitor and regulate U.S. https://www.mckinsey.com/ commerce. Among its many divisions are the Census McKinsey & Co provides strategy and management Bureau and the Bureau of Economic Analysis. consulting services, such as providing advice on an acquisition, developing a plan to restructure a sales CORPORATE INFORMATION force, creating a new business strategy or providing advice on downsizing. U.S. Securities and Exchange Commission (SEC)—EDGAR The Conference Board Inc. (CB) http://www.sec.gov/edgar/searchedgar/companysearc http://www.conference-board.org h.html A private research organization that publishes the Archive of corporate filings with the federal SEC, consumer confidence index. including 10-Ks and 10-Qs. In addition, most general retailers operate their own corporate and e-commerce The NPD Group, Inc. websites. http://www.npd.com Market research firm specializing in consumer purchasing and behavior.

31 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS

COMPARATIVE COMPANY ANALYSIS

Operating Revenues Million $ CAGR(%) Index Basis (2011=100) Ticker Company Yr . En d 2019 2018 2017 2016 2015 2014 2013 10-Yr. 5-Yr. 1-Yr. 2019 2018 2017 2016 2015 2014 APPAREL RETAIL A NF § A BERCROMBIE & FITCH CO. # FEB 3,623.1 3,590.1 3,492.7 3,326.7 3,518.7 3,744.0 4,116.9 0.3 (2.7) 2.8 88 87 85 81 85 91 A EO † A MERICA N EA GLE OUTFITTERS, INC. # FEB 4,308.2 4,035.7 3,795.5 3,609.9 3,521.8 3,282.9 3,305.8 3.2 4.1 6.3 130 122 115 109 107 99 A SNA § BOOT BA RN HOLDINGS, INC. # MA R 0.0 776.9 677.9 629.8 569.0 402.7 345.9 NA 17.6 14.6 0 225 196 182 165 116 CA L § CA LERES, INC. # FEB 2,921.6 2,834.8 2,785.6 2,579.4 2,577.4 2,571.7 2,513.1 2.2 2.4 1.8 116 113 111 103 103 102 CHS § CHICO'S FA S, INC. # FEB 2,037.9 2,131.1 2,282.4 2,476.4 2,660.6 2,693.9 2,586.0 3.0 (3.8) (6.6) 79 82 88 96 103 104

DSW § DESIGNER BRA NDS INC. # FEB 3,492.7 3,183.7 2,810.7 2,718.3 2,620.2 2,496.1 2,368.7 8.1 6.1 13.3 147 134 119 115 111 105 EXPR § EXPRESS, INC. # FEB 2,019.2 2,116.3 2,158.5 2,204.4 2,350.1 2,165.5 2,219.1 2.0 (0.9) (2.0) 91 95 97 99 106 98 FL [] FOOT LOCKER, INC. # FEB 8,005.0 7,939.0 7,782.0 7,766.0 7,412.0 7,151.0 6,505.0 4.2 4.1 2.0 123 122 120 119 114 110 GCO § GENESCO INC. # FEB 2,197.1 2,188.6 2,127.5 2,020.8 3,022.2 2,859.8 2,625.0 3.5 (3.6) 2.9 84 83 81 77 115 109 GES § GUESS?, INC. # FEB 2,678.1 2,609.7 2,363.8 2,190.5 2,184.5 2,417.7 2,569.8 2.2 0.3 10.4 104 102 92 85 85 94

LB [] L BRA NDS, INC. # FEB 12,914.0 13,237.0 12,632.0 12,574.0 12,154.0 11,454.0 10,773.0 3.9 4.2 4.8 120 123 117 117 113 106 ROST [] ROSS STORES, INC. # FEB 16,039.1 14,983.5 14,134.7 12,866.8 11,940.0 11,041.7 10,230.4 8.7 7.9 6.0 157 146 138 126 117 108 SCV L § SHOE CA RNIV A L, INC. # FEB 1,036.6 1,029.7 1,019.2 1,001.1 984.0 940.2 884.8 4.7 3.1 1.0 117 116 115 113 111 106 TLRD § TA ILORED BRA NDS, INC. # FEB 2,881.3 3,004.5 3,053.0 3,378.7 3,496.3 3,252.5 2,473.2 4.3 4.0 (1.6) 116 121 123 137 141 132 BKE § THE BUCKLE, INC. # FEB 900.3 885.5 913.4 974.9 1,119.6 1,153.1 1,128.0 1.1 (4.7) (3.1) 80 79 81 86 99 102

CA TO § THE CA TO CORPORA TION # FEB 825.3 829.7 850.0 956.6 1,011.1 986.9 920.0 (0.3) (2.0) (2.4) 90 90 92 104 110 107 PLCE § THE CHILDREN'S PLA CE, INC. # FEB 1,870.7 1,938.1 1,870.3 1,785.3 1,725.8 1,761.3 1,765.8 1.7 1.9 3.6 106 110 106 101 98 100 GPS [] THE GA P, INC. # FEB 16,383.0 16,580.0 15,855.0 15,516.0 15,797.0 16,435.0 16,148.0 1.3 0.5 4.6 101 103 98 96 98 102 TJX [] THE TJX COMPA NIES, INC. # FEB 41,717.0 38,972.9 35,864.7 33,183.7 30,944.9 29,078.4 27,422.7 7.4 7.3 8.7 152 142 131 121 113 106 URBN † URBA N OUTFITTERS, INC. # JAN 3,983.8 3,950.6 3,616.0 3,545.8 3,445.1 3,323.1 3,086.6 8.0 5.1 9.3 129 128 117 115 112 108

Z UMZ § ZUMIEZ INC. # FEB 1,034.1 978.6 927.4 836.3 804.2 811.6 724.3 9.1 6.2 5.5 143 135 128 115 111 112

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 32

Net Income Million $ CAGR(%) Index Basis (2011=100) Ticker Company Yr . En d 2019 2018 2017 2016 2015 2014 2013 10-Yr. 5-Yr. 1-Yr. 2019 2018 2017 2016 2015 2014 APPAREL RETAIL A NF § A BERCROMBIE & FITCH CO. # FEB 39.4 74.5 7.1 4.0 35.6 51.8 54.6 (12.1) 6.4 950.8 72 136 13 7 65 95 A EO † A MERICA N EA GLE OUTFITTERS, INC. # FEB 191.3 261.9 204.2 212.4 218.1 80.3 83.0 3.9 25.8 28.3 230 316 246 256 263 97 A SNA § BOOT BA RN HOLDINGS, INC. # MA R 0.0 39.0 28.9 14.2 9.9 13.7 5.4 NA 48.6 35.1 0 726 537 264 184 255 CA L § CA LERES, INC. # FEB 62.8 (5.4) 87.2 65.7 81.5 82.9 38.1 (27.4) NM NM 165 (14) 229 172 214 218 CHS § CHICO'S FA S, INC. # FEB (12.8) 35.6 101.0 91.2 1.9 64.6 65.9 NA (11.6) (64.7) (19) 54 153 138 3 98

DSW § DESIGNER BRA NDS INC. # FEB 94.5 (20.5) 67.5 124.4 136.0 153.3 151.3 NA NM NM 62 (14) 45 82 90 101 EXPR § EXPRESS, INC. # FEB (164.4) 9.6 18.9 58.3 116.5 68.3 116.5 NA (39.3) (49.0) (141) 8 16 50 100 59 FL [] FOOT LOCKER, INC. # FEB 491.0 541.0 284.0 664.0 541.0 520.0 429.0 NA 4.7 90.5 114 126 66 155 126 121 GCO § GENESCO INC. # FEB 61.4 (51.9) (111.8) 97.4 94.6 97.7 92.7 NA NM (53.6) 66 (56) (121) 105 102 105 GES § GUESS?, INC. # FEB 96.0 14.1 (7.9) 22.8 81.9 94.6 153.4 (23.8) (38.0) NM 63 9 (5) 15 53 62

LB [] L BRA NDS, INC. # FEB (366.0) 644.0 983.0 1,158.0 1,253.0 1,042.0 903.0 11.3 (6.5) (34.5) (41) 71 109 128 139 115 ROST [] ROSS STORES, INC. # FEB 1,660.9 1,587.5 1,362.8 1,117.7 1,020.7 924.7 837.3 17.9 13.6 16.5 198 190 163 133 122 110 SCV L § SHOE CA RNIV A L, INC. # FEB 42.9 38.1 18.9 23.5 28.8 25.5 26.9 21.8 7.3 101.4 160 142 70 88 107 95 TLRD § TA ILORED BRA NDS, INC. # FEB (82.3) 83.2 96.7 25.0 (1,026.7) (0.4) 83.8 3.5 (0.1) (13.9) (98) 99 115 30 NM (0) BKE § THE BUCKLE, INC. # FEB 104.4 95.6 89.7 98.0 147.3 162.6 162.6 (0.9) (10.1) 6.6 64 59 55 60 91 100

CA TO § THE CA TO CORPORA TION # FEB 35.9 30.5 8.5 47.2 66.8 60.5 54.3 (1.0) (10.9) 256.7 66 56 16 87 123 111 PLCE § THE CHILDREN'S PLA CE, INC. # FEB 73.3 101.0 84.7 102.3 57.9 56.9 53.0 2.1 13.7 19.2 138 190 160 193 109 107 GPS [] THE GA P, INC. # FEB 351.0 1,003.0 848.0 676.0 920.0 1,262.0 1,280.0 0.4 (4.8) 18.3 27 78 66 53 72 99 TJX [] THE TJX COMPA NIES, INC. # FEB 3,272.2 3,059.8 2,607.9 2,298.2 2,277.7 2,215.1 2,137.4 13.3 7.4 17.3 153 143 122 108 107 104 URBN † URBA N OUTFITTERS, INC. # JAN 168.1 298.0 108.3 218.1 224.5 232.4 282.4 4.1 1.1 175.3 60 106 38 77 80 82

Z UMZ § ZUMIEZ INC. # FEB 66.9 45.2 26.8 25.9 28.8 43.2 45.9 10.1 (0.3) 68.7 146 98 58 56 63 94

33 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS

Return on Revenues (%) Return on Assets (%) Return on Equity(%) Ticker Company Yr . En d 2019 2018 2017 2016 2015 2014 2019 2018 2017 2016 2015 2014 2019 2018 2017 2016 2015 2014 APPAREL RETAIL A NF § A BERCROMBIE & FITCH CO. # FEB 1.1 2.1 0.2 0.1 1.0 1.4 1.1 3.1 0.3 0.2 1.5 2.1 3.9 6.4 0.8 0.6 2.9 3.3 A EO † A MERICA N EA GLE OUTFITTERS, INC. # FEB 4.4 6.5 5.4 5.9 6.2 2.4 5.7 13.8 11.2 11.9 13.5 4.7 15.1 20.7 16.7 18.8 19.5 7.7 A SNA § BOOT BA RN HOLDINGS, INC. # MA R 0.0 5.0 4.3 2.3 1.7 3.4 NA 6.1 4.9 2.5 1.8 4.2 0.0 16.3 14.6 8.3 6.5 12.1 CA L § CA LERES, INC. # FEB 2.2 NM 3.1 2.5 3.2 3.2 2.6 NM 5.9 4.5 6.3 6.8 9.7 NM 13.1 10.9 14.3 16.3 CHS § CHICO'S FA S, INC. # FEB NM 1.7 4.4 3.7 0.1 2.4 NM 3.5 9.3 8.2 0.2 4.5 NM 5.8 16.0 14.6 0.2 7.0

DSW § DESIGNER BRA NDS INC. # FEB 2.7 NM 2.4 4.6 5.2 6.1 3.8 NM 4.7 8.7 9.9 10.7 12.2 NM 7.1 13.5 14.2 15.2 EXPR § EXPRESS, INC. # FEB NM 0.5 0.9 2.6 5.0 3.2 NM 0.9 1.6 4.9 9.9 5.3 NM 1.6 2.9 9.3 19.8 13.3 FL [] FOOT LOCKER, INC. # FEB 6.1 6.8 3.6 8.6 7.3 7.3 7.5 14.2 7.2 17.3 14.3 14.5 19.7 21.5 10.9 25.2 21.4 20.8 GCO § GENESCO INC. # FEB 2.8 NM NM 4.8 3.1 3.4 3.7 NM NM 6.8 6.1 6.2 9.1 6.5 4.2 7.8 9.8 10.4 GES § GUESS?, INC. # FEB 3.6 0.5 NM 1.0 3.7 3.9 4.0 0.9 NM 1.5 5.3 5.9 13.3 1.9 NM 2.5 8.0 8.6

LB [] L BRA NDS, INC. # FEB NM 4.9 7.8 9.2 10.3 9.1 NM 8.0 12.1 14.2 14.8 13.9 NM NM NM NM NM NM ROST [] ROSS STORES, INC. # FEB 10.4 10.6 9.6 8.7 8.5 8.4 17.8 26.1 23.8 21.1 21.0 19.7 49.8 50.0 47.0 42.8 43.0 43.1 SCV L § SHOE CA RNIV A L, INC. # FEB 4.1 3.7 1.9 2.3 2.9 2.7 6.8 9.1 4.6 5.1 6.0 5.5 14.3 12.5 6.0 7.1 8.6 7.9 TLRD § TA ILORED BRA NDS, INC. # FEB NM 2.8 3.2 0.7 NM NM NM 4.6 4.8 1.2 NM NM NM ###### NM NM NM NM BKE § THE BUCKLE, INC. # FEB 11.6 10.8 9.8 10.0 13.2 14.1 12.0 18.1 16.7 16.9 25.7 29.9 26.7 24.4 21.8 23.2 38.4 45.3

CA TO § THE CA TO CORPORA TION # FEB 4.3 3.7 1.0 4.9 6.6 6.1 5.2 6.1 1.7 7.8 10.4 9.9 11.3 9.5 2.4 11.9 16.9 15.7 PLCE § THE CHILDREN'S PLA CE, INC. # FEB 3.9 5.2 4.5 5.7 3.4 3.2 6.2 13.9 9.0 11.2 6.4 5.9 26.7 25.6 17.5 20.0 10.4 9.4 GPS [] THE GA P, INC. # FEB 2.1 6.0 5.3 4.4 5.8 7.7 2.6 12.5 10.6 8.9 12.3 16.4 10.2 30.0 28.0 24.8 33.3 41.8 TJX [] THE TJX COMPA NIES, INC. # FEB 7.8 7.9 7.3 6.9 7.4 7.6 13.6 21.4 18.6 17.8 19.8 20.2 59.5 60.0 54.0 52.1 53.1 52.2 URBN † URBA N OUTFITTERS, INC. # JAN 4.2 7.5 3.0 6.2 6.5 7.0 5.1 13.8 5.5 11.5 12.2 12.3 11.4 21.4 8.3 17.8 18.2 15.4

Z UMZ § ZUMIEZ INC. # FEB 6.5 4.6 2.9 3.1 3.6 5.3 7.3 8.5 5.4 6.1 6.9 8.7 15.4 12.0 8.1 8.6 8.8 12.4

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 34

Current Ratio Debt/Capital Ratio(%) Debt as a % of Net Working Capital Ticker Company Yr . En d 2019 2018 2017 2016 2015 2014 2019 2018 2017 2016 2015 2014 2019 2018 2017 2016 2015 2014 APPAREL RETAIL A NF § A BERCROMBIE & FITCH CO. # FEB 1.6 2.4 2.5 2.3 2.2 2.4 17.8 19.6 19.3 19.8 20.5 19.7 51.6 38.2 39.7 47.4 51.8 50.3 A EO † A MERICA N EA GLE OUTFITTERS, INC. # FEB 1.4 1.9 2.0 1.8 1.6 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 A SNA § BOOT BA RN HOLDINGS, INC. # MA R 0.0 1.8 1.6 1.5 1.3 1.7 NA 39.7 51.3 60.5 68.2 41.1 NA 139.0 226.6 293.8 474.1 150.1 CA L § CA LERES, INC. # FEB 1.0 1.1 2.0 1.6 2.2 2.1 55.9 63.9 21.5 37.8 24.6 26.6 1510.1 432.9 47.4 97.1 40.5 46.8 CHS § CHICO'S FA S, INC. # FEB 1.0 1.8 1.9 1.6 1.6 1.8 7.4 9.0 7.5 10.1 11.4 0.0 249.2 27.4 21.7 39.2 49.2 0.0

DSW § DESIGNER BRA NDS INC. # FEB 1.3 2.1 2.7 2.4 2.5 2.6 20.9 16.1 0.0 0.0 0.0 0.0 86.1 32.5 0.0 0.0 0.0 0.0 EXPR § EXPRESS, INC. # FEB 1.0 1.9 1.9 1.8 1.7 2.3 0.0 0.0 0.0 0.0 0.0 26.4 0.0 0.0 0.0 0.0 0.0 54.4 FL [] FOOT LOCKER, INC. # FEB 2.0 3.3 4.1 4.3 3.7 3.5 4.7 4.7 4.7 4.5 4.8 5.0 10.2 7.1 6.5 6.3 6.8 7.4 GCO § GENESCO INC. # FEB 1.4 2.6 2.7 2.3 2.5 2.1 2.3 7.1 9.4 7.4 9.3 1.6 9.8 12.5 19.8 18.1 20.5 3.6 GES § GUESS?, INC. # FEB 1.7 2.0 2.4 3.0 3.2 3.6 28.6 2.1 2.1 2.3 0.2 0.2 62.5 3.4 3.2 3.4 0.3 0.2

LB [] L BRA NDS, INC. # FEB 1.4 1.6 1.6 1.7 2.2 1.9 137.4 117.7 115.2 114.6 104.7 99.6 628.5 450.5 452.2 392.8 250.5 310.7 ROST [] ROSS STORES, INC. # FEB 1.3 1.7 1.6 1.6 1.5 1.4 8.5 8.6 9.3 12.6 13.8 14.8 42.8 22.4 25.5 37.4 51.5 67.0 SCV L § SHOE CA RNIV A L, INC. # FEB 2.7 4.8 5.6 4.1 4.2 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 TLRD § TA ILORED BRA NDS, INC. # FEB 1.3 1.9 2.5 2.5 2.3 2.5 109.6 99.7 99.8 107.3 106.6 62.8 543.3 236.4 207.5 224.2 223.0 217.7 BKE § THE BUCKLE, INC. # FEB 2.2 4.1 3.7 3.9 3.4 2.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

CA TO § THE CA TO CORPORA TION # FEB 1.8 2.6 2.7 2.6 2.6 2.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 PLCE § THE CHILDREN'S PLA CE, INC. # FEB 0.8 1.3 1.8 1.9 2.1 2.2 72.6 15.5 4.5 3.1 0.0 0.0 NM 47.0 7.3 5.5 0.0 0.0 GPS [] THE GA P, INC. # FEB 1.4 2.0 1.9 1.8 1.6 1.9 27.4 26.0 28.4 30.1 44.4 30.9 95.6 60.1 59.3 67.0 117.9 63.9 TJX [] THE TJX COMPA NIES, INC. # FEB 1.2 1.5 1.7 1.6 1.5 1.7 27.3 30.7 30.2 33.1 27.3 27.6 128.5 76.0 66.4 74.4 68.1 61.3 URBN † URBA N OUTFITTERS, INC. # JAN 1.6 3.1 2.7 2.5 2.5 2.3 0.0 0.0 0.0 0.0 11.7 0.0 0.0 0.0 0.0 0.0 29.7 0.0

Z UMZ § ZUMIEZ INC. # FEB 2.6 3.5 2.8 2.9 2.9 3.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

35 RETAIL (APPAREL) / APRIL 2020 INDUSTRY SURVEYS

Price/Earnings Ratio (High-Low) Dividend Payout Ratio(%) Dividend Yield(High-Low, %) Ticker Company Yr . En d 2019 2018 2017 2016 2015 2014 2019 2018 2017 2016 2015 2014 2019 2018 2017 2016 2015 2014 APPAREL RETAIL A NF § A BERCROMBIE & FITCH CO. # FEB 26 - 14 222 - 86 557 - 193 55 - 32 62 - 33 77 - 45 131 72 767 1367 155 111 5.8 - 2.6 5.1 - 2.7 9.0 - 3.5 7.1 - 2.5 4.9 - 2.9 3.1 - 1.8 A EO † A MERICA N EA GLE OUTFITTERS, INC. # FEB 20 - 12 17 - 9 17 - 11 16 - 12 36 - 25 52 - 30 49 37 43 43 45 121 3.9 - 2.3 3.2 - 1.9 4.7 - 2.6 3.8 - 2.6 3.8 - 2.7 4.9 - 3.4 A SNA § BOOT BA RN HOLDINGS, INC. # MA R 23 - 11 18 - 6 31 - 11 90 - 15 46 - 31 NA - NA 0 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 CA L § CA LERES, INC. # FEB NM - NM 17 - 11 24 - 14 18 - 13 17 - 12 32 - 18 18 NM 14 18 15 15 1.9 - 0.9 1.0 - 0.7 1.2 - 0.8 1.3 - 0.8 1.2 - 0.8 1.2 - 0.8 CHS § CHICO'S FA S, INC. # FEB 38 - 17 19 - 9 24 - 15 ### - 689 43 - 34 48 - 37 NM 121 42 46 2247 71 13.9 - 5.7 7.1 - 3.1 4.6 - 2.2 3.2 - 1.9 3.2 - 1.6 2.1 - 1.7

DSW § DESIGNER BRA NDS INC. # FEB NM - NM 27 - 19 19 - 13 25 - 14 24 - 14 28 - 19 0 NM 95 52 51 44 7.1 - 3.4 4.8 - 2.9 5.1 - 3.6 4.2 - 2.8 3.7 - 2.0 4.1 - 1.9 EXPR § EXPRESS, INC. # FEB 87 - 38 48 - 22 29 - 14 15 - 10 23 - 15 18 - 12 0 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 FL [] FOOT LOCKER, INC. # FEB 13 - 9 35 - 13 16 - 10 19 - 14 16 - 12 15 - 11 33 29 55 22 26 24 4.5 - 2.3 3.4 - 2.3 4.2 - 1.5 2.1 - 1.4 1.9 - 1.3 2.3 - 1.5 GCO § GENESCO INC. # FEB NM - NM NM - NM 15 - 10 18 - 13 21 - 17 19 - 14 0 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 GES § GUESS?, INC. # FEB 155 - 88 NM - NM 85 - 45 24 - 17 28 - 16 19 - 14 44 522 NM 336 94 81 5.7 - 1.9 6.2 - 3.5 9.3 - 4.6 7.5 - 4.0 5.4 - 3.9 4.8 - 2.6

LB [] L BRA NDS, INC. # FEB 21 - 11 18 - 10 22 - 12 23 - 18 27 - 15 21 - 14 NM 103 70 60 47 38 8.9 - 4.2 9.8 - 4.8 7.5 - 3.8 7.5 - 4.1 5.1 - 1.6 2.7 - 1.6 ROST [] ROSS STORES, INC. # FEB 24 - 17 24 - 15 24 - 18 22 - 18 24 - 14 21 - 14 22 21 18 19 19 18 1.1 - 0.8 1.2 - 0.8 1.2 - 0.7 1.0 - 0.8 1.0 - 0.8 1.3 - 0.8 SCV L § SHOE CA RNIV A L, INC. # FEB 18 - 9 25 - 13 25 - 17 20 - 13 21 - 13 22 - 15 13 12 25 21 18 19 1.5 - 0.8 1.4 - 0.7 1.9 - 1.0 1.2 - 0.9 1.4 - 0.8 1.4 - 0.9 TLRD § TA ILORED BRA NDS, INC. # FEB 21 - 7 13 - 5 55 - 22 NM - NM NM - NM 31 - 16 NM 44 37 141 NM NM 19.3 - 0.0 6.2 - 2.0 7.6 - 2.8 6.4 - 2.5 6.7 - 1.1 1.8 - 1.2 BKE § THE BUCKLE, INC. # FEB 14 - 9 13 - 7 17 - 10 17 - 9 17 - 12 17 - 12 49 51 54 49 31 26 13.3 - 7.0 15.1 - 9.7 13.8 - 4.1 10.0 - 5.8 ## - 6.2 7.7 - 4.0

CA TO § THE CA TO CORPORA TION # FEB 21 - 9 77 - 32 23 - 14 19 - 14 21 - 12 18 - 12 91 107 395 75 50 56 10.9 - 6.8 12.1 - 5.0 11.1 - 4.9 5.3 - 3.0 3.7 - 2.7 4.7 - 2.7 PLCE § THE CHILDREN'S PLA CE, INC. # FEB 26 - 14 33 - 20 20 - 12 24 - 17 24 - 17 25 - 19 48 33 33 14 21 20 4.1 - 1.9 2.3 - 1.1 1.7 - 0.8 1.2 - 0.7 1.3 - 0.9 1.2 - 0.8 GPS [] THE GA P, INC. # FEB 13 - 9 16 - 10 18 - 10 19 - 10 16 - 12 17 - 12 104 37 43 54 41 30 6.3 - 3.3 3.9 - 2.8 4.3 - 2.6 5.4 - 3.0 4.1 - 2.1 2.5 - 1.8 TJX [] THE TJX COMPA NIES, INC. # FEB 23 - 16 20 - 16 24 - 20 23 - 19 22 - 16 21 - 15 33 30 29 28 24 21 1.8 - 1.5 1.9 - 1.4 1.9 - 1.3 1.4 - 1.1 1.3 - 1.0 1.3 - 0.9 URBN † URBA N OUTFITTERS, INC. # JAN 18 - 11 37 - 17 21 - 12 26 - 12 24 - 17 23 - 18 0 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

Z UMZ § ZUMIEZ INC. # FEB 17 - 10 22 - 11 25 - 13 38 - 13 28 - 16 22 - 14 0 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

Note: Data as originally reported. CAGR-Compound annual grow th rate. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year. Souce: S&P Capital IQ. Earnings per Share($) Tangible Book Value per Share($) Share Price (High-Low, $) Ticker Company Yr . En d 2019 2018 2017 2016 2015 2014 2019 2018 2017 2016 2015 2014 2019 2018 2017 2016 2015 2014 APPAREL RETAIL A NF § A BERCROMBIE & FITCH CO. # FEB 0.60 1.08 0.10 0.06 0.51 0.71 16.86 18.25 18.22 17.95 18.75 19.64 30.63 - 13.58 29.69 - 15.28 19.11 - 8.81 32.83 - 11.85 30.10 - 15.42 45.50 - 26.19 A EO † A MERICA N EA GLE OUTFITTERS, INC. # FEB 1.12 1.47 1.13 1.16 1.11 0.41 7.16 7.13 6.68 6.27 5.45 5.55 24.30 - 13.66 29.88 - 16.14 19.48 - 10.23 19.55 - 12.78 18.49 - 13.55 15.69 - 10.12 A SNA § BOOT BA RN HOLDINGS, INC. DEC 0.00 1.35 1.05 0.53 0.37 0.54 0.00 0.19 (1.53) (2.93) (3.66) (0.30) 45.15 - 16.24 31.62 - 15.01 17.68 - 5.90 17.26 - 5.20 34.43 - 9.11 23.12 - 16.91 CA L § CA LERES, INC. # FEB 1.53 (0.13) 2.02 1.52 1.85 1.89 2.23 1.62 8.27 5.57 10.02 8.42 32.28 - 14.30 41.09 - 26.63 34.34 - 22.39 36.61 - 21.27 33.83 - 26.15 33.67 - 22.30 CHS § CHICO'S FA S, INC. # FEB (0.11) 0.28 0.79 0.69 0.01 0.42 3.33 3.80 4.08 3.68 3.72 4.50 6.46 - 2.33 10.90 - 4.42 15.50 - 6.96 16.85 - 9.61 18.98 - 10.55 19.84 - 14.39

DSW § DESIGNER BRA NDS INC. # FEB 1.27 (0.26) 0.84 1.51 1.54 1.69 8.14 8.89 11.61 10.26 10.73 11.15 30.73 - 13.88 34.63 - 18.01 22.72 - 15.14 29.53 - 18.51 39.58 - 21.23 43.88 - 23.45

EXPR § EXPRESS, INC. # FEB (2.49) 0.13 0.24 0.74 1.38 0.81 6.36 5.75 5.87 5.58 5.19 4.24 6.24 - 1.83 11.69 - 4.83 11.70 - 5.28 21.57 - 10.37 20.72 - 11.90 19.35 - 11.80

FL [] FOOT LOCKER, INC. # FEB 4.50 4.66 2.22 4.91 3.84 3.56 22.11 20.80 19.41 19.19 17.26 16.34 68.00 - 33.12 59.40 - 38.17 77.86 - 28.42 79.43 - 50.90 77.25 - 51.12 59.19 - 36.65

GCO § GENESCO INC. # FEB 3.92 (2.66) (5.80) 4.83 4.11 4.12 31.28 32.01 34.83 28.29 26.67 25.17 53.20 - 31.65 51.85 - 31.25 65.70 - 20.90 74.21 - 47.66 80.63 - 50.64 89.58 - 68.52

GES § GUESS?, INC. # FEB 1.33 0.16 (0.11) 0.27 0.96 1.11 9.19 9.83 10.72 11.05 11.66 12.07 23.28 - 13.34 26.95 - 14.17 18.30 - 9.56 22.84 - 11.87 23.45 - 16.61 31.71 - 19.69

LB [] L BRA NDS, INC. # FEB (1.33) 2.31 3.42 3.98 4.22 3.50 (9.16) (9.56) (8.97) (8.70) (6.86) (5.86) 29.69 - 15.80 61.44 - 23.71 68.44 - 35.00 97.39 - 60.00 101.11 - 75.11 87.58 - 50.78 ROST [] ROSS STORES, INC. # FEB 4.60 4.26 3.55 2.83 2.51 2.21 9.79 8.98 8.03 7.01 6.14 5.49 117.58 - 81.80 104.35 - 73.76 81.48 - 52.85 69.81 - 50.42 56.68 - 43.47 48.10 - 30.92 SCV L § SHOE CA RNIV AL, INC. # FEB 2.92 2.45 1.15 1.28 1.45 1.27 21.23 19.80 18.13 17.58 17.29 16.32 41.84 - 21.47 45.00 - 21.01 28.38 - 15.08 31.79 - 20.98 30.00 - 17.36 29.75 - 16.68 TLRD § TA ILORED BRA NDS, INC. # FEB (1.65) 1.64 1.96 0.51 ##### (0.01) (6.06) (4.57) (5.82) (8.12) (8.20) (12.18) 15.19 - 3.70 35.94 - 12.53 26.20 - 9.40 28.76 - 9.95 66.18 - 13.19 59.10 - 39.77 BKE § THE BUCKLE, INC. # FEB 2.14 1.97 1.85 2.03 3.06 3.38 7.99 8.12 8.09 8.94 8.58 7.40 28.52 - 14.81 29.65 - 17.51 25.00 - 13.50 35.02 - 19.95 56.13 - 29.28 54.13 - 41.45

CA TO § THE CA TO CORPORA TION # FEB 1.46 1.23 0.34 1.72 2.39 2.15 13.55 13.30 13.48 14.71 15.06 13.89 19.73 - 11.85 26.88 - 10.76 31.35 - 12.20 40.51 - 28.40 44.89 - 30.94 43.24 - 25.67 PLCE § THE CHILDREN'S PLA CE, INC. # FEB 4.68 6.01 4.67 5.40 2.80 2.59 10.86 19.87 27.52 28.00 27.15 28.00 116.84 - 53.62 161.65 - 87.05 147.50 - 92.95 111.20 - 53.39 69.90 - 46.74 58.59 - 44.54 GPS [] THE GA P, INC. # FEB 0.93 2.59 2.14 1.69 2.23 2.87 8.32 8.87 7.56 6.77 5.73 6.42 31.39 - 15.11 35.68 - 24.25 35.24 - 21.02 30.74 - 17.00 43.90 - 24.55 46.85 - 35.46 TJX [] THE TJX COMPA NIES, INC. # FEB 2.67 2.43 2.02 1.73 1.67 1.58 4.77 3.95 3.90 3.22 2.99 2.89 61.69 - 43.80 56.64 - 36.41 40.46 - 33.22 41.82 - 32.82 38.47 - 31.77 34.92 - 25.96

URBN † URBA N OUTFITTERS, INC. # JAN 1.67 2.72 0.96 1.86 1.78 1.68 14.85 14.10 12.02 11.30 9.69 10.18 34.83 - 19.63 52.50 - 31.20 35.86 - 16.19 40.80 - 20.06 47.25 - 19.26 40.67 - 27.89

Z UMZ § ZUMIEZ INC. # FEB 2.62 2.62 2.62 2.62 2.62 2.62 15.27 12.79 10.94 9.48 8.98 9.88 35.68 - 18.38 32.70 - 17.57 23.10 - 11.43 26.55 - 13.50 41.81 - 11.53 39.77 - 20.68

The accuracy and completeness of information obtained from third-party sources, and the opinions based on such information, are not guaranteed.

INDUSTRY SURVEYS RETAIL (APPAREL) / APRIL 2020 36

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