1. Presented by: Mary Brett Whitfield Senior Vice President Apparel Webinar Series February 14, 2014 A Not-so-Basic Look at Apparel Basics … and other current topics in Apparel Retailing

2. © Copyright 2014 Kantar Retail Copyright © 2014 Kantar Retail. All Rights Reserved. 501 Boylston Street, Suite 6101, Boston, MA 02116 (617) 912- 2828 howard.zimmerman@kantarretail.com No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Kantar Retail. The printing of any copies for back up is also strictly prohibited. Disclaimers The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion. This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides.

3. © Copyright 2014 Kantar Retail Agenda Holiday Wrap-Up and a Look Ahead A Tour of Apparel Basics Shopping Approaches 3

4. © Copyright 2014 Kantar Retail Happy Valentine’s Day! 4

5. © Copyright 2014 Kantar Retail Agenda Holiday Wrap-Up and a Look Ahead A Tour of Apparel Basics Shopping Approaches 5

6. © Copyright 2014 Kantar Retail Holiday 2013: Online Led Sales Growth 6 * Holiday is measured as fourth quarter: October, November and December **Topline measure excludes auto, fuel, & food service channels; includes auto parts stores *** Nonstore sales include catalogs and TV home shopping in addition to online sales Topline: Holiday 2013 Forecast and Actual* Prior Year vs. Forecast and Actual Holiday 2013 Source: U.S. Department of Commerce, and Kantar Retail analysis But nonstore retailing grew slower than 2012

7. © Copyright 2014 Kantar Retail Holiday Spending Steady … 7 … though fewer shoppers participate in holiday gifting Source: Kantar Retail ShopperScape ®. December 2007–2013 Self-Reported Spending on Holiday Gifts (average among all holiday gift shoppers) Percent of Shoppers Purchasing Holiday Gifts Note: Arrows indicate significant difference vs. prior year (95% confidence level)

8. © Copyright 2014 Kantar Retail Amazon Becomes the Top Holiday Destination Leapfrogs Target in 2011, Walmart in 2013 Source: Kantar Retail ShopperScape ®, December 2011, December 2012 and December 2013 8 Note: Arrows indicate significant difference from Holiday 2012.

9. © Copyright 2014 Kantar Retail Data points indicate that “Limiting” is on the agenda –Fewer retailers shopped for back-to-school –Fewer retailers shopped for holiday gift giving –Lower rate of category purchase incidence across myriad discretionary and non- discretionary categories in Q4 Evidence that Shoppers Drawing Boundaries Mounts 9 Source: Kantar Retail ShopperScape ®, December 2010–2013

10. © Copyright 2014 Kantar Retail Fewer Stores on List, but More Purposeful Conversion rates trended up across most retailers & channels 10 Holiday Gift Shopping: Top Conversion Rates* (among all holiday gift shoppers who shopped retailer) *Conversion calculated as the percent of retailers’ holiday gift shoppers who also report buying a gift there Source: Kantar Retail ShopperScape ®, December 2012 and December 2013

11. © Copyright 2014 Kantar Retail Holiday Shopping Shifts Online Proving ground for building online shopping routines Source: Kantar Retail ShopperScape ®, December 2013 11 Budget shifted in favor of online/Cyber Week, away from Black Friday Holidays set stage for year-round online shopping

12. © Copyright 2014 Kantar Retail Overall, Shoppers Spent More Online Even as penetration of online shopping and purchasing stalls Source: Kantar Retail ShopperScape®, December 2010, 2011, 2012, 2013 12 Average spent online on holiday gifts:

13. © Copyright 2014 Kantar Retail Online Conversion Rates Lag Conversion in Aggregate for Multi-Channel Players Source: Kantar Retail ShopperScape®, December 2013 13 Conversion* *Conversion calculated as percent of shoppers who purchased; arrows indicate significant increase from 2012

14. © Copyright 2014 Kantar Retail Apparel’s Popularity Grows on Amazon Moved into number four gift spot in 2013 holiday 14 Source: Kantar Retail ShopperScape ®, December 2011, December 2012 and December 2013 Top 5 Gift Purchases on Amazon.com (among all holiday gift shoppers who shopped Amazon.com)

15. © Copyright 2014 Kantar Retail Clothing in Middle of Pack re: Online Penetration Consumer electronics/ computers have biggest ramp up Softgoods retailers and categories increasingly affected Consumables categories just a matter of time 15 18% of clothing sales online by 2018 Online Share of Goods Categories* Source: U.S. Department of Commerce and Kantar Retail Clothing Furniture Toys & sporting goods Books, magazines, music & videos Food & Alcohol** Computer products, electronics, appliances & office equipment Drugs & HBC *Goods categories exclude auto, fuel, and tobacco categories **Read as: In 2018, 3% of Food & Alcohol spending will be online (and, conversely, 97% of Food & Alcohol spending will remain in stores)

16. © Copyright 2014 Kantar Retail Goods Category* CAGR ‘08–’13 CAGR ‘13–’18FC 2.7%3.6% 4.6%5.9% 2.6%3.7% 1.8%4.4% 1.8%4.1% 3.2%4.1% 3.0%4.6% Goods Category Totals*2.9%4.3% Five-Year Category Spending Outlook Improves 16 USD Billions Source: U.S. Department of Commerce and Kantar Retail *Excludes Autos, Fuel, and Tobacco **Includes prescriptions, OTC drugs, & health & beauty categories ***Includes miscellaneous other durable & non-durable goods categories $2,568 $2,965 $3,661 Growth lifted by incomes, inflation, spending intentions Clothing & Footwear Furniture & Home Furnishings Media, Sporting Goods & Toys Other Miscellaneous Goods*** Food & Alcohol Electronics, Appliances & Office Equipment Drugs, Health & Beauty Care** Drugs/HBC propped up further by health care reform impact Consumer Spending and Growth Rates by Goods Category

17. © Copyright 2014 Kantar Retail Goods Category* CAGR ‘08–’13 CAGR ‘13–’18FC Online Impact ’13-’18FC 14.5%14.7% 2.3%3.3% -1.0 PPT 2.6%3.2% -0.4 PPT 4.2%5.3% -0.6PPT 1.4%2.1% -1.6 PPT -0.6%0.7% -3.7 PPT 1.2%3.0% -1.1 PPT 1.7%1.5% -2.6 PPT 2.3%4.1% -0.5 PPT Goods Category Totals*2.9%4.3% Online Impact on Store Sales Moderate for Clothing 17 USD Billions Source: U.S. Department of Commerce and Kantar Retail Clothing & Footwear Furniture & Home Furnishings Media, Sporting Goods & Toys Other Miscellaneous Goods*** Food & Alcohol Electronics, Appliances & Office Equipment Drugs, Health & Beauty Care** Categories Online Categories In Store *Excludes Autos, Fuel, and Tobacco **Includes prescriptions, OTC drugs, & health & beauty categories ***Includes miscellaneous other durable & non-durable goods categories $2,568 $2,965 $3,661 Consumer Spending and Growth Rates by Goods Category

18. © Copyright 2014 Kantar Retail Apparel & Footwear Sales Growth: Online vs. Store Growth Forecast vs. Current and Prior Year Apparel & Footwear: Improving Topline Growth Pickup in 2014 will be held back by weaker pricing compared with recent years Gains will remain skewed online, forecast to reach18% of sales in 2018 Online impact will limit category growth in stores to between 1% to 2% annually 18 But strong online gains will keep in-store gains weak Source: U.S. Department of Commerce, and Kantar Retail analysis FORMAT BREAKOUT Online Penetration 200320082013E2018F 2%6%12%18%

19. © Copyright 2014 Kantar Retail Shoppers More Optimistic about Apparel Spending than They’ve Been in Years Source: Kantar Retail ShopperScape ®, December 2012 and December 2013 19 All Female Shoppers Gen Y Gen XBoomers Seniors Down Market Middle Market Up Market Spend More Spend About the Same By Generational CohortBy Income Market Plans for Spending on Wardrobe in Coming Year (among female primary Household shoppers)

20. © Copyright 2014 Kantar Retail Despite Macro-Economic Uncertainty, Spending Intentions Steady Source: Kantar Retail ShopperScape ®. June 2008–December 2013 20 Spend Much/ Somewhat More Spend about the Same Spend Much/ Somewhat Less Retail Spending Intentions in Coming Month Compared with the Same Period Last Year (three-month moving average)

21. © Copyright 2014 Kantar Retail Agenda Holiday Wrap-Up and a Look Ahead A Tour of Apparel Basics Shopping Approaches 21

22. © Copyright 2014 Kantar Retail Basic Styles Are Everyday Go-To for More than 4 in 10 Shoppers Basics even more prevalent everyday wear for men 22 Everyday Style Source: Kantar Retail ShopperScape ®. September 2013

23. © Copyright 2014 Kantar Retail Basics Are Perennially at the Top of the List 23 Plans for Adding to Wardrobe in Coming Year (among female primary household shoppers) Source: Kantar Retail ShopperScape ®. December 2013

24. © Copyright 2014 Kantar Retail 40% of Kohl’s Assortment Features “Classic” Styling Source: Kohl’s Fact Book 24

25. © Copyright 2014 Kantar Retail Apparel Has Been a Relative Bright Spot for WMT Source: Company reports, Kantar Retail analysis 25 Walmart US Performance by Department, Quarterly

26. © Copyright 2014 Kantar Retail UNIQLO: Coming Soon to a Market Near You? Source: Company website and Kantar Retail analysis 26 The offer: “Our clothes are functional, designed with innovative features, and are available in a wide range of colors and styles … “.

27. © Copyright 2014 Kantar Retail Source: Kantar Retail store visits 27 UNIQLO’s “Life Wear”: Clothing to improve everyday life …

28. © Copyright 2014 Kantar Retail 28 … with a layer of capsule and specialty collections Source: Kantar Retail store visits

29. © Copyright 2014 Kantar Retail Strengths: –Sharp price points –Cross-generational/family appeal –Technology and fabrication adds utility Weaknesses: –Shopping experience “Sea of sameness” Engagement –Assortment sameness The UNIQLO Concept: “Made for All” 29 Source: Kantar Retail store visits, Kantar Retail analysis

30. © Copyright 2014 Kantar Retail Keeping Shoppers Interested in Basics Show versatility Source: Company Web sites, Kantar Retail analysis 30 TOPSHOP

31. © Copyright 2014 Kantar Retail Keeping Shoppers Interested in Basics Show versatility “Not-so-Basic”: A Modern Refresh Source: Company Web sites, Kantar Retail analysis 31 FOREVER 21

32. © Copyright 2014 Kantar Retail Keeping Shoppers Interested in Basics Show versatility “Not-so-Basic”: A Modern Refresh Be “Best” Source: Company Web sites, Kantar Retail analysis 32 H & M

33. © Copyright 2014 Kantar Retail Keeping Shoppers Interested in Basics Show versatility “Not-so-Basic”: A Modern Refresh Be “Best” Educate and inform Source: Company Web sites, Kantar Retail analysis 33 Target

34. © Copyright 2014 Kantar Retail Keeping Shoppers Interested in Basics Show versatility “Not-so-Basic”: A Modern Refresh Be “Best” Educate and inform Call to Action Source: Company Web sites, Kantar Retail analysis 34 American Eagle Outfitters

35. © Copyright 2014 Kantar Retail Keeping Shoppers Interested in Basics Show versatility “Not-so-Basic”: A Modern Refresh Be “Best” Educate and inform Call to Action Evolve Source: Company Web sites, Kantar Retail analysis 35 Banana Republic

36. © Copyright 2014 Kantar Retail Keeping Shoppers Interested in Basics Show versatility “Not-so-Basic”: A Modern Refresh Be “Best” Educate and inform Call to Action Evolve Demonstrate End Use Source: Company Web sites, Kantar Retail analysis 36 H&M, Old Navy

37. © Copyright 2014 Kantar Retail Keeping Shoppers Interested in Basics Show versatility “Not-so-Basic”: A Modern Refresh Be “Best” Educate and inform Call to Action Evolve Demonstrate End Use “Mass Out” Source: Company Web sites, Kantar Retail analysis 37 H&M, Old Navy

38. © Copyright 2014 Kantar Retail Agenda Holiday Wrap-Up and a Look Ahead A Tour of Apparel Basics Shopping Approaches 38

39. © Copyright 2014 Kantar Retail Convenience Most Important to Mass Apparel Shoppers Source: Kantar Retail ShopperScape ®,September 2013 39 Among Shopper Who Spent Most on Casual Apparel at … Which Statement Best Describes Attitude toward Apparel Shopping (among female primary household shoppers)

40. © Copyright 2014 Kantar Retail All Shoppers Favor “Bite-Size” Shopping 40 Among Shopper Who Spent Most on Casual Apparel at … Source: Kantar Retail ShopperScape ®,September 2013 Which Statement Best Describes Attitude toward Apparel Shopping (among female primary household shoppers)

41. © Copyright 2014 Kantar Retail Value Department Store Shoppers Most Likely to Make Special Trip 41 Among Shopper Who Spent Most on Casual Apparel at … Source: Kantar Retail ShopperScape ®,September 2013 Which Statement Best Describes Attitude toward Apparel Shopping (among female primary household shoppers)

42. © Copyright 2014 Kantar Retail Mass Shoppers Are Truly “One-Stop” Shoppers … Apparel Specialty Shoppers Have Bigger Store Set 42 Among Shopper Who Spent Most on Casual Apparel at … Source: Kantar Retail ShopperScape ®,September 2013 Which Statement Best Describes Attitude toward Apparel Shopping (among female primary household shoppers)

43. © Copyright 2014 Kantar Retail Department Store Shoppers Are Most Likely to Buy on Impulse 43 Among Shopper Who Spent Most on Casual Apparel at … Source: Kantar Retail ShopperScape ®,September 2013 Which Statement Best Describes Attitude toward Apparel Shopping (among female primary household shoppers)

44. © Copyright 2014 Kantar Retail Shoppers Who Think Shopping Is Fun Most Likely to Be on the Mall 44 Among Shopper Who Spent Most on Casual Apparel at … Source: Kantar Retail ShopperScape ®,September 2013 Which Statement Best Describes Attitude toward Apparel Shopping (among female primary household shoppers)

45. © Copyright 2014 Kantar Retail Specialty Stores Attract Treasure Hunters 45 Among Shopper Who Spent Most on Casual Apparel at … Source: Kantar Retail ShopperScape ®,September 2013 Which Statement Best Describes Attitude toward Apparel Shopping (among female primary household shoppers)

46. © Copyright 2014 Kantar Retail Specialty Store Shoppers Most Likely to Have Done Pre-Trip Research Online 46 Among Shopper Who Spent Most on Casual Apparel at … Source: Kantar Retail ShopperScape ®,September 2013 Which Statement Best Describes Attitude toward Apparel Shopping (among female primary household shoppers)

47. © Copyright 2014 Kantar Retail Specialty Store Shoppers Also Most Likely to Buy Online 47 Among Shopper Who Spent Most on Casual Apparel at … Source: Kantar Retail ShopperScape ®,September 2013 Which Statement Best Describes Attitude toward Apparel Shopping (among female primary household shoppers)

48. © Copyright 2014 Kantar Retail Value Department Stores 48 Among Shopper Who Spent Most on Casual Apparel at … Source: Kantar Retail ShopperScape ®,September 2013 Which Statement Best Describes Attitude toward Apparel Shopping (among female primary household shoppers)

49. © Copyright 2014 Kantar Retail Prevailing Approaches to Apparel Shopping Usually shop at few retailers that are conveniently located Tend to shop for clothing “one item at a time” Shop for clothing on trips specifically for clothing Look forward to shopping for clothes Like a predictable assortment (vs. treasure hunt) … … but like to see what’s in stores vs. researching online in advance In-store vs. online Buy at the end of the season Draws: One or two regular retailers vs. Several different based on needs Buy against plan for the season vs. Buy on impulse 49 Source: Kantar Retail ShopperScape ®,September 2013

50. © Copyright 2014 Kantar Retail Channels Where Shoppers Diverge from Average Mass Value Department Store Apparel Specialty Store Traditional Department Store Will Go Out of Way to Favorites XX “Big” Trips X Shop When Out for Other Things X Broad Store Set XX Impulse Purchasing XX Shopping for Clothes Is Fun XX Want a Treasure Hunt X Pre-trip Online Research X Online Shopping/Buying Saves Time X 50 Source: Kantar Retail ShopperScape ®,September 2013

51. © Copyright 2014 Kantar Retail Digital Shopper Forum | February 25–26, 2014 | Chicago, IL Participate in interactive, thought-provoking discussions. Network with the who's who of your peers and the experts in the industry. Learn from Kantar Retail experts' on the subjects of digital, shopper, omni- channel, and big data. Mention this webinar to save $100 off of your event ticket … *if your company doesn’t already have a block of pre- paid event seats For more info on this event, visit our website http://www.kantarretail.co m/digitalshopper2014/ http://www.kantarretail.co m/digitalshopper2014/ Or, email us events@kantarretail.com events@kantarretail.com

52. © Copyright 2014 Kantar Retail Questions? Holiday Wrap-Up and a Look Ahead Not-so-Basic Look at Basics Shopping Approaches Submit questions on Q&A panel on right side of screen 52

53. © Copyright 2014 Kantar Retail Contact: Mary Brett Whitfield Senior Vice President marybrett.whitfield@kantarretail.com T:+ 1 614 355 4010 www.kantarretailiQ.com