1. RETAIL - CLOTHING INDUSTRY Group 2 Stefanie Moegle Dovile Narutaviciute Basak Copuroglu Ingah Kutesa Carolina Martin-Leyes

2. AGENDA Presentation of the Retail - Clothing Industry Evaluated Companies Retail - Clothing Industry Matrix Chosen Companies A deeper look at the Companies chosen. Comparison of the Ratios Conclusion Questions

3. World Clothing Retail Industry

4. Clothing sales reached US$850 billion in 2006. Growth of 3% over 2005. Volume sales growth by 8%. no. of working women - key factor driving sales in 2006. Womens outerwear - 60% of overall 2006 value sales. Gap Inc - leadership position in the clothing market. The single largest brand in the sector was H&M. $ sales expected by 2011 - US$ 968 billion. # sales will grow indicating vibrant midrange market.

5. WE LOOKED AT THE FOLLOWING…

6. SMILEY CHART Corporation Corporate GovernanceCSR Risk Management Up to date timing Shareholder Friendly Info + Key Ratio AnalysisClarityTransparency Effectiveness of Managment Auditor Transparency Calarity of Bussines Strategy Inditex Primark Gap Helly Hansen Hugo Boss Apranga H&M / Benetton A&F Oilily Very good Could be better Not good or not all info is available

7. ELIMINATION OF COMPANIES…

9. Corporate governance Code benefit of employees,shareholders,customers sustainably increasing enterprise value CSR ecological, socialy sustainable concepts Work-Life-Balance

10. Risk management Risk Report Identify risks at an early stage and to respond quickly Audited at regular intervals Timing Without delay Managing Board reports regularly, promptly

11. Shareholder friendliness & key ratio analysis Benefit of employees, shareholders, customers Sustainably increasing enterprise value Clarity of business strategy Strategic focus on growth opportunities

12. Audit transparency Strategic focus on growth opportunities Standards for the audit Plan and perform the audit Clarity & Transparency Same information Reports regularly, promptly, and comprehensively on All topics of relevance

14. Corporate governance Corporate governance guideline Code of ethics Election Independence

15. Transparency Its own website Yahoofinance Income statement Balance sheet Cahs flow 10 year annual report 5 years summary 10 years summary

16. Up to date timing Informs all capital market at the same time by the same information. Updates its website information every week. Adds financial reports every quarter.

17. CSR Boycott australian wool Donating $10 million to the construction of a trauma center at Nationwide Childrens Hospital in Columbus, Ohio

18. AddsAdds

21. THE GAP INC. Sells casual apparel, accessories, and personal care products for men, women and children under the Gap, Old Navy, Banana Republic, and Piperlime brands.

22. The Gap History Founder Brands Don Fisher, Gap Inc. Founder and Chairman Emeritus

23. LOCATIONS United States Canada The United Kingdom France Ireland Japan

24. LOOKING AT THE COMPANY.. Listed on NYSE. (GPS) Clarity and Auditing Social cooperate responsibility. The gap report Code red.

25. Recognition.. 100 Companies with Conscience Audit Integrity Top 100 Business Ethics Awards: Social Reporting Award Ceres-ACCA Commendation for Social Reporting Ethisphere Magazines 2007 Worlds Most Ethical Companies2008

26. Revenue division.. As per 2007 revenue : 15 billon dollars. Old navy- 6.2 billion Gap direct – 903 million Banana republic- 2.5 billion International – 1.6 billion.

28. INDITEX FY 2007 4,258 stores in 72 countries Sales 9.4 Bn, 63% Intl Cash flow 1.8 Bn Net Income 1.3 Bn Inditex is one of the worlds largest fashion distributors, with eight independent sales formats: Pull and Bear

29. Strategic Direction Inditex has its unique management model based on: - innovation - flexibility - integrated business model Fashion philosophy: - creativity - quality design Rapid response to market demand Strategic growth : Fast international expansion Excellent response to sales concepts

30. Customer driven Compelling mix of latest fashions and quality at affordable prices Unique product strategy Customer interaction Attractive stores in prime locations Distribution and Logistics Central distribution Shipment to all stores twice a week Orders to stores in 24-48 hours

31. Economic Indicators - Ratios Inditex financial years is from 1 st February to 31 st january of the following year (1) in millions of euros. Economic indicators FY2007FY2006% 07/06 Net Sales 9,4358,19615% International sales62.5%60.4% Gross Profit 5,3494,60716% Gross margin 56.7%56.2% EBIT1,6521,35622% EBIT margin17.5%16.5% Net Income1,2501,00225% margin13.3%12.2% Key Ratios 20072006 31 Jan 08 31 Jan 07 Operating Margin17.51 % 16.51 % Return on Equity32.72 % 31.55 % Pretax Income to Sales17.44 % 16.34 % Current Ratio121.29 % 113.98 %

32. Corporate Governance Is part of three international stock exchange indexes that recognize Good Governance: - Dow Jones - Sustainability FTSE4 Good and - FTSE ISS Corporate Governance Save the same voting and financial rights No legal restrictions on the acquisition or transfer of shares. The majority of the Board Members are External The Audit and Control Committee presents its report independently Delegation and autonomy of the executive committee

33. Corporate Social Responsibility - CSR Inclusion of the guidelines into the internal corporate regulations, comprised by: - laws - rules and regulations - codes of conduct - other international initiatives & agreements

34. CSR Global environmental system: - Solid - Efficient - Adaptability - Control processes The general objectives of Strategic Environmental Plan 2007-2010 : - reduce the emission of greenhouse gases - increase the implantation of renewable energy sources - maximize the efficient use of energy in manufacturing areas - train the staff and raise their awareness

35. Risk Management Is the responsibility of: Board of Directors and the Senior Management Each and every member of the Organisation Integrated system Risks faced by Inditex: –Trends –Textile quotas –Exchange rates –Interest –Expansions to new markets –launch of new concepts

36. Shareholder Friendliness Good faith in relations with stakeholders & with society as a whole Continuous dialogue with stakeholders & social organizations Ethical commitment & responsible perspective Fair & honorable treatment All the activities of the Inditex Group shall be carried out in manner that most respects the environment

38. Fashion & Quality at the Best Price H&M - established in Västerås, Sweden in 1947 by Erling Persson H&M: 33 countries, 1700 stores, 68,000 employees. Turnover in 2007 - SEK 92,123 million H&Ms growth target - increase no.of stores by 10–15 %/year & increase sales at existing stores

39. Strategic Direction H&M succeeded in strengthening its position in the market through: constant innovation renovation Inviting top designers to create a product line for H&M, e.g. Karl Lagerfeld, Viktor and Rolf, Madonna. Strategic growth – to international countries. H&M: Operational Indicators:

40. Corporate Governance (CG) H&M applies with the Swedish Code of Corporate Governance which is described in the CG Report in the annual report. CG is basically about how the company is to be run in order to safeguard the shareholders interests.

41. The share is traded on the OMX Nordic Exchange Stockholm, Sweden. The symbol is H&M B

42. Corporate Social Responsibility Code of Conduct & Sustainability Policy – the backbone of H&Ms work It includes the following requirements: compliance with local labor law statutory pay and working hours ban on child labor ban on discrimination ban on forced labor health & safety in the workplace right to organize & bargain collectively compliance with local environmental legislation.

43. Corporate Social Responsibility Water samples from factories with water treatment Cooperating tightly with UNICEF Increased use of organic cotton Climate-smart transport solutions Since 2005 H&M has been licensed to use the European Unions official eco-label The Flower

44. Risk and Uncertainties Most dealt with through internal routines Financial risks Interest risk associated with liquid funds and short-term investments Currency risk associated with foreign currency flows Credit risk associated with financial assets and derivative positions Others are affected more by external influences: fashions weather textile quotas exchange rates expansion into new markets launch of new concepts changes in consumer behaviour handling of the brand

45. Transparency in H&M Auditing committee H&Ms Auditing Committee - appointed annually by the Board of Directors. Auditors - elected at the Annual General Meeting every 4 years From 2005 - Ernst & Young AB H&M publishes interim reports & annual reports in Swedish and English www.hm.com - a wealth of other information on H&M Investor Relations department H&M - participating company in the Fair Labor Association (FLA): demonstrates stakeholders good work follow-up in factories; ensures quality of internal monitoring programme.

46. Ratio Comparison HUGO BOSSA&FGAPIDITEXH&M 20062007200820062007 20082006200720062007 PROFITABILITY RATIOS: Gross Profit Margin57.10%57.90% 66.4866.57 35.5336.114607534958.5160.64 Net working Capital: Current Assets- Current liabilities 299397 22721653263.6523.5 SEK M 17504 SEK M 19359 INDEBTEDNESS RATIOS: Interest Cover N/A31,0006,285 N/A 28.7922 Earnings per share 1.842.22 161.3201.413.0516.42 455.53 581.45 81.37 47.34 3.84.78

47. Conclusions from ratios It is difficult to compare companies between each other, as the measures are different, so as the sizes of the companies are not the same. The Gross Profit Margins are changing through out the year, as it is very common for clothing companies, whose pricing policy and discounting changes very often.

48. Key trends in during the recession Pessimism inhibits shopping habits Consumers fearful of the future seek budget over brand Window shopping Research before purchasing The new natural look

49. Commercial opportunities during recession Advertise value for money and opportunities for bargain-hunters Create a feeling of togetherness in the downturn Advertise products through indicating that there are certain things that everyone needs Offer consumers: 'treating yourself' because 'you're worth it' Create an imaginary better world through your products – a way to escape from everyday hardships Show price comparisons of your products

50. Conclusions Presentation of the Retail - Clothing Industry Evaluated Companies Retail - Clothing Industry Matrix Chosen Companies A deeper look at the Companies chosen Comparison of the Ratios

51. Questions

52. Thanks for your attention.