1. Presented by: Laura Kennedy, Principal Analyst Amy Koo, Senior Analyst Prepared by: Robin Sherk, Director February 27, 2014 US Channel Mass Webinar Walmart and Target – The Year Ahead 2014

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 Key Trends Impacting 2014 Mass Expectations Walmart & Target Shoppers’ Holiday Behaviors & Spending Plans Working with Walmart and Target Today 3

4. © Copyright 2014 Kantar Retail Key Trends Impacting 2014 Mass Expectations Employment Rebounding value of investment assets Inflation effects Government programs Source: Kantar Retail research and analysis 4

5. © Copyright 2014 Kantar Retail Source: U.S. Bureau of Labor Statistics, and Kantar Retail Employment Will Keep Improving Slowly Have Nots most improved in 2013, but still far behind Haves Source: U.S. Bureau of Labor Statistics, and Kantar Retail 5 Unemployment Rate by Haves & Have Nots 1 ( Seasonally Adjusted, Monthly through November) Have Nots (some college or high school degree or less) Haves (4-year college degree or higher) Overall Unemployment Rate 7.0% 8.7% 3.4% 1 Education is used in place of income as a proxy for Have/Have Not status because it is a good predictor of low versus high income households -0.8% -0.5% -0.7% YoY change

6. © Copyright 2014 Kantar Retail * Recovered states have gained back nearly all or more than all jobs lost during recession; unrecovered states have gained back less than half of jobs lost Recovered Partly Recovered Unrecovered Employment Varies by Geography 6 Job recovery highly dependent on region. States by Jobs Recovery* Source: U.S. Bureau of Labor Statistics, and Kantar Retail D.C AlaskaHawaii Higher Target concentration Higher Walmart concentration

7. © Copyright 2014 Kantar Retail Employment Gains Led by Metropolitan Areas 7 30 largest cities and immediate suburbs have led recovery Source: U.S. Department of Labor and Kantar Retail Austin Baltimore Boston Charlotte Chicago Columbus Dallas Denver Detroit El Paso Arizona California Colorado Florida Illinois Indiana Maryland Massachusetts Michigan Nevada New York North Carolina Ohio Oklahoma Oregon Pennsylvania Tennessee Texas Washington Washington D.C. Wisconsin Jobs Lost (Jan 2008-Feb 2010)Jobs Recovered (Feb. 2010 to Oct. 2013) U.S. Jobs Lost and Recovered (in Thousands) Fort Worth Houston Indianapolis Jacksonville Las Vegas Los Angeles Memphis Milwaukee Nashville New York City Oklahoma City Philadelphia Phoenix Portland San Antonio San Diego San Francisco San Jose Seattle Washington D.C Urban AreasNon-Urban Areas

8. © Copyright 2014 Kantar Retail Rebounding Assets: Net Worth Bounces Back Overall, households’ wealth has recovered since the recession Source: Federal Reserve Board and Kantar Retail, 1995-2013 Q3 8 Net Worth (in USD billions) recession periods +11% YoY

9. © Copyright 2014 Kantar Retail Rebounding Assets: Housing Values Recovery through much of the country…but not all Source: U.S. Bureau of Labor Statistics, Federal Housing Finance Agency, and Kantar Retail 9 11% 27% 10%12%14% At or above pre-recession peak Still below peak, but growing fast **Measures current home prices (through Q32013) relative to recession low point (% is increase from low) 7%57% D.C 31% Alaska 8% 23%20% Hawaii 21%19% 16% 15% 10% 21% 23% 41% 32%37% States by Recovery in Home Prices Recovered Partly Recovered Unrecovered Higher Target concentration Higher Walmart concentration

10. © Copyright 2014 Kantar Retail Rebounding Assets: Feeling the Improvements All see improvement, though more so for Target shoppers Source: Kantar Retail ShopperScape®, October-December 2012 and October-December 2013 10 Note: Arrows indicate a statistically significant year-to-year difference (90% confidence). Worth of Investments Value of Home

11. © Copyright 2014 Kantar Retail Consumer Prices* Year-to-Year Inflation Rates 2010-201120122013E2014F2014-2018F-- 2010-201120122013E2014F2014-2018F-- Inflation Expected to be Moderate in 2014 Source: : U.S. Bureau of Economic Analysis, and Kantar Retail 11 0 But anticipate an uptick in the long term * Consumer prices are based on the price index for household consumption (PCE) as reported by the Bureau of Economic Analysis

12. © Copyright 2014 Kantar Retail Source: U.S. Bureau of Labor Statistics and Kantar Retail Measures of Consumer Price Inflation (Monthly, Percent Change Year-to-Year) Goods (excluding food & fuel) -0.1% in Oct Food & Fuel* -4.3% in Oct Inflation in 2014 Mainly Limited to Services 12 Retail goods inflation will remain flat, food & fuel to stay down Services 2.4% in Oct *Includes Food at Home (i.e., excluding food service) and motor fuels

13. © Copyright 2014 Kantar Retail Inflation Long Term Trend Will Be Hard for Have Nots Have Nots income growth won’t keep pace with necessities Source: U.S. Department of Commerce, and Kantar Retail analysis 13 Inflation Impact on U.S. Household Income * Nominal Compound Annual Growth Rate High School/Some College* All Households 4-Year College Degree** Income Growth By: Food & Fuel Prices * Yellow bars are average inflation rate Underlying bars are average income growth for households * High school education or only some college is indicator of “Have Not” households **4-year degree or more is indicator of “Have” households

14. © Copyright 2014 Kantar Retail Government Programs: Food Assistance Reduced SNAP benefits for struggling Have Nots Source: Kantar Retail research and analysis, USDA 14 SNAP benefits were cut Nov. 1 st, 2013, and were made permanent in the 2014 farm bill 83% of SNAP households are at or below the poverty line ($19,530 family of 3 in 2013).These HH receive about 91% of all benefits Walmart, supermarkets, and dollar stores are most likely to continue to take the brunt of cutbacks, whereas Target will be minimally impacted SNAP recipients are expected to cut back and trade down on their spending Changes to Maximum Allowed Monthly Payout, as of Nov. 1, 2013

15. © Copyright 2014 Kantar Retail Government Programs: Affordable Care Act Disproportionately increases coverage for Have Nots, Gen Y/X, and minorities Source: Kantar Retail ShopperScape ®, August 2013 15 Where Does U.S. Population Get Health Insurance? 20132014 AFTER REFORM

16. © Copyright 2014 Kantar Retail Government Programs: Shoppers Affected Small subset, but significant difference in retailer bases Source: Kantar Retail ShopperScape®, November 2013 16 Note: Arrows indicate a statistically significant difference between monthly shoppers and all shopppers (95% confidence).

17. © Copyright 2014 Kantar Retail 2014 Key Trends Closing Considerations While both Target and Walmart will be affected by all of these trends, their core shopper bases of Haves and Have Nots, respectively, will weigh the impacts differently. Improvements in economic conditions for all, but particularly for Have Nots, spending will still be cautious Rebounding asset values will boost shoppers’ comfort in their financial situation, loosening purses – particularly for Haves Inflation will have a modest effect on fuel, food, and goods, but shoppers may trade out of services, to the benefit of lower-cost home-based alternatives Changes in government programs will pressure low income household on their food budgets, while encouraging more long- term focus on their health – although at a cost Source: Kantar Retail research and analysis 17

18. © Copyright 2014 Kantar Retail Agenda Key Trends Impacting 2014 Mass Expectations Walmart & Target Shoppers’ Holiday Behaviors & Spending Plans Working with Walmart and Target Today 18

19. © Copyright 2014 Kantar Retail Shoppers Have Felt Positive About Their Position Source: Kantar Retail ShopperScape®, October-December 2013 19 Note: bolding/highlighting indicates a statistically significant year-to-year difference (90% confidence level) Evaluations of Household Financial Health in Q4 2013 Compared with Same Time a Year Ago All Shoppers Monthly Target/ SuperTarget Shoppers Monthly Walmart/WMSC Shoppers Job security Better off19%23%19% No change64%61%64% Worse off17%16%17% HH income level Better off28%34%28% No change49%45%48% Worse off23%21%24% Credit card debt level Better off23%26%24% No change59%55%57% Worse off18%19% Monthly mortgage and car payments Better off21%24%21% No change67%64%67% Worse off12% Worth of investments Better off27%33%24% No change58%56%59% Worse off15%11%16% Value of home Better off28%34%26% No change60%57%61% Worse off13%10%13% Though not everyone is upbeat

20. © Copyright 2014 Kantar Retail Holiday Participation Reflects This Nuance Source: Kantar Retail ShopperScape®, December 2012, December 2013 20 Yellow arrow indicates significant difference vs. previous year (95% confidence level) Note: Among monthly shoppers of the given retailers

21. © Copyright 2014 Kantar Retail Mass Shoppers More Mindful of Their Store Sets The Top Five Retailers/Channels Shopped for Holiday Gifts Source: Kantar Retail ShopperScape®, December 2012 and December 2013 21 Read as: 64% of Target shoppers who purchased holiday gifts reported shopping Amazon for holiday gifts. Note: Arrows indicate significant change from previous year (90% confidence level)

22. © Copyright 2014 Kantar Retail Deal Orientation was Rising over the Holidays Aided by the array of options… Source: Kantar Retail ShopperScape®, December 2013 22 Arrows indicates significantly greater percentage vs. all holiday shoppers (90% confidence level) Note: among monthly shoppers of the given retailer who shopped for holiday gifts

23. © Copyright 2014 Kantar Retail Switching to 2014 Outlook: Mixed Expectations Target shoppers slightly more optimistic than Walmart’s Source: Kantar Retail ShopperScape®, January 2014 23

24. © Copyright 2014 Kantar Retail Spending Intentions Reflect This View Source: Kantar Retail ShopperScape®, January 2011 – January 2014 24 Spending Intentions* Percent of Shoppers Planning to Spend About Same or More * Represents sum of percentage of primary household shoppers planning to spend about the same or more in the coming month

25. © Copyright 2014 Kantar Retail Considering Specific Headwinds: SNAP reductions causing those shoppers to cut back Source: ShopperScape® 25 Note: among monthly Walmart shoppers who receive SNAP benefits Arrows indicates significantly greater percentage vs. all shoppers (90% confidence level)

26. © Copyright 2014 Kantar Retail And the Uncertainty Around the Health Care Act Causing some to pull-back on discretionary spending… Source: ShopperScape® 26 Arrows indicates significantly greater/less percentage between Walmart and Target shoppers (90% confidence level) Note: among monthly shoppers of the given retailer who anticipate spending more on health care this year

27. © Copyright 2014 Kantar Retail Shoppers Continue to Focus on Deals While Walmart’s audience displays more limiting behaviors Source: ShopperScape® 27 All Shoppers Target/ SuperTarget Shoppers Walmart/ WMSC Shoppers Taking advantage of good sales/deals47%56%50% Buying only things I truly need45%46%47% Using more coupons41%52%45% Shopping less often31% 34% Doing more price comparison shopping before making a purchase29%37%32% Buying less expensive versions of products20%18%23% Buying more store brands instead of national or high-end brands18%19%20% Shopping online more often15%18%16% Which of the following describe how you will approach shopping in 2014? Yellow shading indicates significantly greater percentage vs. all shoppers (90% confidence level) Note: among monthly shoppers of the given retailer

28. © Copyright 2014 Kantar Retail Spending Priorities in 2014 All Shoppers Target/ SuperTarget Shoppers Walmart/ WMSC Shoppers Products that help you stay healthy62%65%61% Products that help you better organize or manage your life52%55%54% Products that help you save time doing household chores48%45%50% Products that are personalized to meet your specific needs or tastes39%37%40% Products to help you better enjoy your favorite hobbies or activities39% 38% Products that help you stay fit37%36% Products that will allow you to stay in your current home longer36%33%36% Little indulgences or small luxuries that make you feel special34%36%33% New digital/mobile, computer or electronics products24%25%24% Products that make you look more attractive21%23%20% Products that you can customize to your exact specifications20%19%21% Health remains a top concern Source: Kantar Retail ShopperScape®, October-December 2013 28 Note: among monthly shoppers of the given retailer Bolding/highlighting indicates a statistically significant difference between Target and Walmart shoppers (90% confidence level)

29. © Copyright 2014 Kantar Retail Closing Considerations Mixed sentiment, though Target’s shoppers are feeling slightly better than Walmart’s Both audiences are value conscious/deal seeking, while Walmart’s shoppers are also more inclined to be cutting back and trading down –Walmart’s dollar store defense will also be key Health and efficiency are top concerns –Indulgences are less of a focus Mass shopper outlook Source: Kantar Retail analysis 29

30. © Copyright 2014 Kantar Retail Agenda Key Trends Impacting 2014 Mass Expectations Walmart & Target Shoppers’ Holiday Behaviors & Spending Plans Working with Walmart and Target Today 30

31. © Copyright 2014 Kantar Retail Serving the Budget-Strapped Have Nots Source: Kantar Retail store visits, analysis 31 Helping shoppers spend less through lower-tier solutions, smaller pack sizes, and rounded price points, while reinforcing the deal:

32. © Copyright 2014 Kantar Retail While Helping the Haves Seeking Value Source: Kantar Retail analysis 32

33. © Copyright 2014 Kantar Retail Supporting Purposeful Spending Quantifying savings, explaining the value for money Source: Kantar Retail store visits, analysis 33

34. © Copyright 2014 Kantar Retail Supporting Walmart’s Role as a Health Resource Source: ECRM, Kantar Retail store visits, analysis 34

35. © Copyright 2014 Kantar Retail Three Key Takeaways for Walmart Attracting value-seeking Haves to build basket growth Practical messages, easing budget pressure Split outlook Dollar store defense Coupons, deals build on EDLP Spending sensitivity Capture newly insurance (Pharmacy, solutions) Drive wellness support, solutions Health priority Source: Kantar Retail analysis 35 Support stock-up and cross-box solutions Maintain functional, supportive tone Support stock-up and cross-box solutions Maintain functional, supportive tone Emphasize smaller pack sizes for Have Nots Assert savings via brand quality Boost EDLP Emphasize smaller pack sizes for Have Nots Assert savings via brand quality Boost EDLP Link to Walmart’s health services Support cross-box offer Align with Walmart’s wellness programs Link to Walmart’s health services Support cross-box offer Align with Walmart’s wellness programs InsightRetailer implication Supplier implication

36. © Copyright 2014 Kantar Retail Bifurcated Focus on Affluent & Modest Guests Best guests still provide bulk of profitability, requiring suppliers to still cater to their tastes Target needs to regain less affluent guests, who had turned away because of “Expect More” offerings and prices Source: Kantar Retail research and analysis 36

37. © Copyright 2014 Kantar Retail Framing Value for All Guests Even affluent guests are trading down or out of discretionary service activities, opening opportunities to provide home consumption instead As guests cut back on discretionary, cross-box solutions become even more critical Source: Kantar Retail research and analysis 37

38. © Copyright 2014 Kantar Retail Health & Wellness as a Strategic Focus Target’s guests are willing to invest in long-term wellness, so suppliers should orient their messaging accordingly Products that are traditionally indulgences can be reframed as improving quality of life Source: Kantar Retail research and analysis 38

39. © Copyright 2014 Kantar Retail Cluster by Regional & Urban Economic Trends Work with Target to better cluster marketing appeals to resonate with sentiments on the ground – not every region is recovering Guests in urban metropolitan regions may be more willing to spend on discretionary items, as well as skew better and best Source: Kantar Retail research and analysis 39

40. © Copyright 2014 Kantar Retail Four Key Takeaways for Target Increase overall penetration as best guest spending plateaus Tailor different messaging for Best guests and all others Bifurcated Have/Have Not Focus Frame discretionary spending as a trade down from luxury Solutions enable cross-box purchases of discretionary Framing Value for All Guests Emphasize H&W lifestyle solutions Use stress reduction as driver for small indulgences Health & Wellness as Strategic Focus Tailor assortments and messaging for local audience Higher discretionary spending in urban clusters Cluster by Region/Urban Economic Trends Source: Kantar Retail analysis 40 Balance EMPL for both upscale and entry priced items Smaller pack sizes and whole dollar price points Balance EMPL for both upscale and entry priced items Smaller pack sizes and whole dollar price points InsightRetailer implication Supplier implication Align with dining/beauty/ service solution alternatives Enable discretionary cross-box solution purchase Align with dining/beauty/ service solution alternatives Enable discretionary cross-box solution purchase Align with Target Pharmacy Emphasize long-term H&W benefits to guests Align with Target Pharmacy Emphasize long-term H&W benefits to guests Develop assortments by regional spending clout Pilot urban initiatives with Target Develop assortments by regional spending clout Pilot urban initiatives with Target

41. © Copyright 2014 Kantar Retail Walmart & Sam’s Club Workshop: April 15-16, 2014 Bentonville, AR Target Workshop: April 29, 2014 Minneapolis, MN Upcoming Workshops: For more details email events@kantarretail.com

42. © Copyright 2014 Kantar Retail Contact: Laura Kennedy Principal Analyst Laura.Kennedy@KantarRetail.com 617.912.2851 www.kantarretailiQ.com Robin Sherk Director Robin.Sherk@KantarRetail.com 212.896.8191 www.kantarretailiQ.com Amy Koo Senior Analyst Amy.Koo@KantarRetail.com 617.912.2872 www.kantarretailiQ.com