Industry Surveys

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Industry Surveys

Marie Driscoll, CFA

Esther Kwon

Apparel & Footwear

Analysts

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Industry Surveys

Apparel & Footwear

(includes Specialty Apparel Retailing)

THIS ISSUE REPLACES THE ONE DATED MAY 24, 2007.

THE NEXT UPDATE OF THIS SURVEY IS SCHEDULED FOR MAY 2008.

November 29, 2007

CURRENT ENVIRONMENT..................................................................1

Challenges, headwinds culminate in significant industry restructuring

Finally in 2007, a national broadline department store: Macy’s

Changes at the retail create challenges, opportunities for apparel companies

The convergence of entertainment and fashion

Comfort over style: casual seasonal footwear has legs

Specialty retailers follow shoppers to lifestyle centers

Sales rising as consumers dress up

Economic growth spurs consumer spending

INDUSTRY PROFILE...............................................................................9

The industry that suits everyone

Apparel

Footwear

INDUSTRY TRENDS ...............................................................................10

The evolution of a lifestyle brand

Stores move into overseas markets

Demographic trends

Sporting apparel goes high-tech

Luxury and value goods both do well

Offshore sourcing

HOW THE INDUSTRY OPERATES .............................................................16

Diverse product lines and ways of operating

Intense competition

Brand management and the specialty retail strategy

Enhancing customer loyalty

Cutting labor costs with offshore sourcing

Vital role of technology

Sales channels proliferate

KEY INDUSTRY RATIOS AND STATISTICS ...................................................23

HOW TO ANALYZE AN APPAREL COMPANY .............................................24

Qualitative factors

Quantitative factors

Corporate governance

GLOSSARY .............................................................................................31

INDUSTRY REFERENCES.....................................................................33

COMPARATIVE COMPANY ANALYSIS ..............................................36


Standard & Poor’s Industry Surveys

Executive Editor: Eileen M. Bossong-Martines

Associate Editor: Diane Cappadona

Statistician: Sally Kathryn Nuttall

Production: GraphMedia

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Copyright © 2007 by Standard & Poor’s

All rights reserved.

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VOLUME 175, NO. 48, SECTION 2

THIS ISSUE OF INDUSTRY SURVEYS INCLUDES 3 SECTIONS.


CURRENT ENVIRONMENT

Challenges, headwinds culminate in

significant industry restructuring

Retail consolidation, private-label penetration,

and consumer migration propelled apparel

wholesalers to radically change or flail in

2007. We have witnessed monumental strategic

modifications by most industry leaders.

For example, VF Corp. sold off its namesake

Vanity Fair business to focus on lifestyle

brands; a rending of Liz Claiborne Inc.’s corporate

profile into Direct Brands and Partnered

Brands to better navigate department

store consolidation; and Jones Apparel

Group Inc. put itself on and off the block,

and ultimately sold its luxury retail business,

Barneys New York Inc.

In recent years, this Industry Survey has

increasingly incorporated specialty apparel

retailers into our discussion of the apparel

industry. With this issue, we are formally integrating

specialty apparel retailers into our

analysis. When the apparel business migrated

from manufacturing to design sourcing and

marketing, it lost manufacturing advantages

without gaining the distributor’s pluses. Apparel

brands became more and more beholden

to the mercy of a consolidating retail

base. Exacerbating this trend are the department

stores’ growing demands for exclusivity

and proprietary product in an effort to differentiate

themselves from their retail peers

in the mall. This has further stymied apparel

brands seeking growth and expansion; it also

has reduced the opportunities to leverage infrastructure

and achieve economies of scale

in design and production, which ultimately

has led to higher cost structures.

The business model of a vertically integrated

specialty apparel retailer, such as The

Gap Inc. or Chico’s FAS Inc., incorporates

that of the traditional wholesaler (design,

sourcing, and marketing) with that of the retailer

(merchandise buying and allocation, as

well as store operations including real estate

site selection and labor scheduling). Whereas

a national apparel wholesale brand typically

supports the brand with advertising and

marketing spending — in the range of 3% to

5% of sales — vertical apparel brands have

virtually all the brand exposure they need in

their store windows, which change as often

as new merchandise arrives (often weekly).

Finally in 2007, a national broadline

department store: Macy’s

The purchase in 2005 of The May Company

by Federated Department stores was

the culmination of decades of consolidation

and contraction of the traditional broadline

department store channel. Department

stores watched lower-priced, off-the-mall

alternatives — such as Target Corp. and

Kohl’s Corp., as well as niche players, the

specialty retailers — capture market share

for years. As share eroded and talented

merchants and retail operators were siphoned

off to retail channels with superior

growth prospects, broadline retailers lost

their merchandise edge and began to compete

on price. This reduced the service component

of the shopping experience and

accelerated the demise of the broadline retailers,

along with the traditional wholesalers

that supplied the broadline channel.

As industry observers, Standard & Poor’s

sees it as a truism that consumer markets bifurcate,

and the players left in the middle

will see their competitive advantage and market

share erode. This partially explains department

store consolidation. Constant

brand-building to elevate brand positioning

is necessary in the long run to maintain

middle-market status. Simple apparel is a

commodity in a deflationary pricing spiral.

Branding not only differentiates and creates

desire, but it also supports pricing.

Federated renamed the former May Company’s

store fleet of approximately 330

stores to Macy’s in 2006 as part of its effort

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APPAREL COMPANY MERGERS & ACQUISITIONS — 2004-07

CLOSING

DATE ACQUIROR TARGET APPROXIMATE VALUE

Apr. 07 Berkshire Hathaway VF Corp.'s intimates business $350 million

Mar. 07 VF Corp. Majestic Athletic terms undisclosed

Jan. 07 Phillips Van-Heusen Superba $180 million

Dec. 06 Liz Claiborne Kate Spade $124 million

Oct. 06 Kellwood Co. CRL Group terms undisclosed

Sep. 06 Stride Rite Corp. Robeez Footwear $27.5 million

Aug. 06 Berkshire Hathaway Russell Corp. $600 million

May 06 Talbots J. Jill $517 million

May 06 Apax Tommy Hilfiger $1.6 billion

Feb. 06 Polo Ralph Lauren Jones Apparel jeans unit $355 million

Jan. 06 Adidas-Salomon AG Reebok $3.8 billion

Jan. 06 Liz Claiborne Westcoast Contempo $23.6 million

Sep. 05 Stride Rite Corp. Saucony $170 million

Jul. 05 Iconix Brand Group Inc. Joe Boxer $40 million

Jul. 05 Carter's Inc. Oshkosh B'Gosh $312 million

Apr. 05 VF Corp. Reef Holdings terms undisclosed

NA Quiksilver Rossignol terms undisclosed

Jan. 05 Liz Claiborne C&C California $29.5 million initial payment, with

contingent payments expected

Dec. 04 Russell Corp. Brooks Sports $115 million

Dec. 04 Jones Apparel Group Inc. Barneys New York Inc. $286.3 million

Aug. 04 Nike Official Starter $47.2 million

Jul. 04 Russell Corp. Huffy Sports $30 million

Jul. 04 Jones Apparel Group Inc. Maxwell Shoe Co. Inc. $345.8 million

Jul. 04 Polo Ralph Lauren Certain assets of RL Childrenswear $240 million

Company LLC

Jun. 04 VF Corp. Vans Inc. $396 million

Jun. 04 Oxford Industries Ben Sherman Ltd. $146 million

Jun. 04 Dick’s Sporting Goods Gaylan Trading $362 million

Jun. 04 Jones Apparel Group Inc. Maxwell Shoe Co. Inc. $346 million

Jun. 04 Reebok The Hockey Company $204 million, plus the assumption of

$149 million in debt

Jun. 04 VF Corp. Kipling Brand $185 million

May 04 Quiksilver DC Shoes $144.2 million

Feb. 04 Kellwood Co. Phat Fashions $140 million, plus contingent payments

NA-Not available.

Source: Company reports.

to bring increased luxury and distinctive assortments

to its newly acquired locations.

Additionally, expanded geographic coverage

under one nameplate allowed for economies

of scale in advertising. The conclusion of the

May/Federated combination was earlier in

2007, when Federated renamed itself as

Macy’s Inc., with a new ticker (M) on the

New York Stock Exchange.

The Federated–May merger has hurt clothing

companies that sold goods to both companies.

The merger has reduced the retail

floor-space footprint, as Macy’s closes duplicative

outlets and pursues a private-label strategy

for differentiation. Macy’s is promoting several

of its private label brands (Alfani, I.N.C. greendog,

and Charter Club), while dropping mature

brands that have underperformed, such as

Kellwood’s Sag Harbor line for women, which

it discontinued earlier in 2007.

Changes at the retail create challenges,

opportunities for apparel companies

Department store retailers are changing

their merchandise mix in ways that help them

stand out from their competitors and convince

shoppers they have products not available elsewhere.

They are phasing out wardrobe basics

that sell for less than brand-name goods and


inging in more fashionable private-label

goods. For example, Federated is promoting its

Alfani, greendog, and Charter Club private label

brands. Mid-priced department store J.C.

Penney Co. Inc. has recently introduced other

private-label brands, including a.n.a. for

women and Ambrielle lingerie.

Department and discount retailers are also

seeking differentiation through exclusive deals

with vendors. For example, Macy’s began exclusively

selling Oscar de la Renta’s O Oscar

line of clothing in 2007, and has just signed an

agreement with Tommy Hilfiger to be its exclusive

distributor. At Target, Champion (from

Hanesbrands Inc.) offers an exclusive line of

C9-branded sporting apparel. Juicy Couture

launched an exclusive fragrance at Bloomingdale’s

(division of Macy’s).

Department store chains are also dropping

brand names that have underperformed,

putting further pressure on clothing companies.

Federated, for example, recently dropped

Kellwood’s Sag Harbor line for women.

Apparel brands lose bargaining power

Apparel and footwear companies face challenges,

thanks to retail consolidation and a

slowing US economy. Companies are working

to cope. At Liz Claiborne, CEO Bill McComb,

who took over in October 2006, is reviewing

strategic alternatives for 16 mature and/or

moderate apparel brands; the options include

divestiture, discontinuation, or licensing. The

brands are projected to generate a combined

$800 million (wholesale) in 2007 and generate

a low-single-digit operating loss. The list of

brands includes such department store mainstays

as Dana Buchman, Ellen Tracy, and

Sigrid Olsen — each of them a better or bridge

brand that targets women aged 35 or older.

The intent is to narrow the portfolio and center

all future corporate activity on one key principle:

building powerful brands. Liz Claiborne

has been divided into two divisions, Direct

Brands and Partnered Brands, in the hope of

developing a best-in-class specialty retail capability.

Direct Brands is the home of Juicy

Couture, Lucky Brands, and Mexx.

Our outlook for Liz Claiborne’s Partnered

Brands division remains one of declining

sales volume. For the Liz Claiborne brand

specifically, we expect continued contraction

at Macy’s, which accounts for an estimated

12% of brand volume in 2007 and is projected

to decline to less than 10% in 2008.

Polo Ralph Lauren Corp. is developing its

specialty apparel retail brand, Rugby, which

is aimed at college youth, and a wholesale

diffusion label, Chaps, which is offered exclusively

at Kohl’s. In an effort to diversify

further, the company is leveraging its designand

brand-building expertise in its newly

formed Global Brand Concepts division,

which will develop lifestyle brands for specialty

and department stores. This group’s

initial product launch will be in 2008 at

J.C. Penney, where the various softline products

in the apparel and home categories will be

grouped under the American Living banner.

VF Corp., the largest US apparel company,

sold its intimates brand, Vanity Fair, in

early 2007 to focus on its lifestyle and sports

apparel brands. In July 2007, the company

added 7 For All Mankind and Lucy Activewear

to its portfolio.

Maturing bridge and specialty retail concepts

target the 35+ woman

Several apparel manufacturers and specialty

retailers have focused on women aged

35 and older as an extremely attractive demographic;

however, it has proven to be a

difficult market in which to both gain a

foothold and maintain momentum, while

these specialty retail concepts and bridge

brands are maturing. Retailers targeting the

baby boom market have struggled recently,

even though the women in this demographic

are likely to have significant discretionary income

and are less affected by high gas prices

and declining home values. (Baby boomers

are the approximately 77 million Americans

born between 1946 and 1964.)

Ann Taylor Stores Corp., Chico’s, Coldwater

Creek Inc., and The Talbots Inc. continue

to struggle to find exciting, “must have”

items for boomers. Same-store sales have been

down, in the mid- to high single digits for

most of 2007. Several new specialty retail concepts

that had opened as growth concepts for

saturated chains have closed or are retooling,

such as Gap’s Forth & Towne (closing after

less than two years) and American Eagle

Outfitters Inc.’s Martin + Osa (open about one

year). These closings illustrate the difficulty of

finding success in this market.

In department stores, bridge brands are

floundering amidst competition from contemporary

and lifestyle brands, as well as

private label and new or limited-edition

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offerings in moderate-priced channels.

Brands such as Dana Buchman, Ellen Tracy,

and Anne Klein are on the decline, while

contemporary and lifestyle brands, such as

Juicy Couture and The North Face, are garnering

more floor space. At Liz Claiborne,

sales of its Partner Brand labels, which include

Dana Buchman and Ellen Tracy, were

down 13% in the second quarter of 2007.

At VF Corp., sales of its outdoor brands,

which include The North Face, were up

20%. Not surprisingly, Dana Buchman and

Ellen Tracy are among the 16 brands that

Liz Claiborne has under strategic review

(to sell, discontinue, or license) in order to

focus on its faster-growing brands, which

include Juicy Couture, Kate Spade, Lucky

Brands, and Mexx.

Contemporary and lifestyle brands gain traction

The boomer and bridge (between moderate

and high-end designer) markets are challenged

by lower-end merchandisers offering

special limited-edition items by guest designers

who typically command premium prices.

Target has been at the forefront of this trend,

with fashions by Proenza Schouler, Behnaz

Sarafpour, and Luella Bartley; fast fashion

chain H&M has worked with Karl Lagerfeld,

Roberto Cavalli, and Stella McCartney.

Department stores are using designers to

head their own proprietary label initiatives

on a more permanent basis, while continuing

to expand private-label efforts to drive traffic

and profits. In the fall of 2007, Kohl’s has

been rolling out apparel, footwear, and accessories

by Vera Wang; American Living

will be in J.C. Penney in 2008. Macy’s has

been experimenting with its O Oscar label by

Oscar de la Renta.

Increasing penetration of exclusive or

private-label merchandise is highly attractive

to department stores that want to differentiate

themselves from the competition and justify

higher mark-ups and fewer markdowns

in the highly competitive apparel segment.

This was one of the key rationales driving

Federated’s acquisition of the May Company

in 2005 and, ultimately, the rebranding of

the new combined chain as Macy’s in 2007.

Across the department store floor, the

“contemporary” category (more modern design

that appeals to younger women) is still

on a hot streak. Estimated at a $16 billion

retail market, it has enjoyed steady growth in

the past five years by offering newness and a

mix of styles at varying price points. New

designers are entering the contemporary market,

and prices have not been an issue; in

fact, in distinct opposition to apparel generally,

contemporary brands have not exhibited

deflationary pricing.

The convergence of entertainment

and fashion

With the launch of InStyle, Time Inc.’s

monthly magazine that celebrates the lifestyles

of entertainers and other public faces, the

convergence of fashion and entertainment accelerated.

Unlike previous celebrity-focused

titles, InStyle was one of the first publications

to use full-length photos showing an

entire outfit. Asking “Who are you wearing?”

has become de rigueur on red carpets

with the proliferation of celebrity TV news

coverage. At MAGIC, the fashion and apparel

trade show of the Men’s Apparel Guild in

California, vendors typically display press

mentions of stars wearing their apparel to

appeal to buyers. Tom Ford — formerly at

Gucci Group NV and more recently featured

on Project Runway, Bravo’s reality show focusing

on fashion design — have made designers

themselves a point of interest.

Both old and new technologies are driving

demand and around-the-clock availability.

Cable channels such as QVC, Home Shopping

Network, and ShopNBC are dedicated to selling

around the clock, extending the reach of

brands to new audiences. High-speed Internet

connections have made shopping online a less

risky proposition by enabling greater detail

and multiple views of an item, along with

24/7 availability. Celebrity news Web sites,

such as TMZ.com, post images and videos of

celebrities who are out and about, sometimes

shopping at their favorite retailers, while

starbrand.tv enables viewers to purchase clothing

and accessories worn by their favorite TV

characters at any time.

Comfort over style: casual seasonal

footwear has legs

Flip-flops and Crocs are staying out of the

closet and on people’s feet much longer.

People are wearing seasonal footwear in

transitional months as well as during warm

weather. Replacing sneakers, the working


woman’s transit shoe of choice, flip-flops

continue to reign. Believed to have been developed

from traditional Japanese sandals,

flip-flops can be made with a variety of materials,

ranging from cheap rubber to leather,

and may include various embellishments to

dress them up. Flip-flops even made a publicized

(albeit somewhat criticized) appearance

at the White House in 2005, when some

members of Northwestern University’s

women’s lacrosse team wore them during

their meeting with President Bush.

Originally intended as a boating/outdoor

shoe due to its slip-resistant, nonmarking sole,

Crocs (produced by Crocs Inc.) became

known by word of mouth for their comfort

and lightweight design. The company, which

holds four patents covering various aspects of

its footwear, intends to transform itself into a

lifestyle company based on two proprietary

products: Croslite, a closed-cell, odor- and

bacteria-resistant resin that molds to foot

shape, for footwear, and Croslite rt, a lightweight,

durable, and heat-resistant material,

for apparel. Styles have been recommended for

gardeners, nurses, and food service workers

for comfort and have been popping up on the

feet of men, women, and children. Sales in the

first half of 2007 more than tripled over the

same period in 2006, with 30% of sales from

international markets. Sales for full-year 2007

are expected to approach $1 billion. Whether

Crocs turns out to be another footwear fad

remains to be seen.

Sports apparel goes upscale

It is well understood that most athletic apparel

and footwear is typically worn for

nonathletic occasions, but the fashion industry

is now partnering more frequently with

traditional sports apparel companies. Perhaps

one of the most visible moves in this

area was the acquisition of a controlling interest

in Puma AG Rudolf Dassler Sport in

April 2007 by PPR SA (formerly Pinault-

Printemps-Redoute). Designers Alexander

McQueen and Philippe Starck are each

working with Puma on different projects.

Stella McCartney is working with Adidas AG

for the fifth time, and Nike Inc. has partnered

with John Varvatos.

Sometimes the fashion industry incorporates

textile and other innovations used in

athletic apparel. In this realm, we are seeing

fashionable clothing that has details like en-

closed zippers and is made of material that

wicks away sweat and fights bacteria. Fabrics

with these elements have been available

in sport clothing for some time.

Specialty retailers follow shoppers to

lifestyle centers

Since 2000, mall growth has been stagnant,

with only a handful of new openings to

compensate for closings, so it is no wonder

that retailers looking for growth are flocking

to lifestyle centers. About half of the more

than 150 lifestyle centers in the United States

have opened since 2002, according to data

from the International Council of Shopping

Centers, a trade group.

Lifestyle centers are upscale, outdoor

shopping areas designed to look like an urban

street and are typically located near affluent

suburbs. Developers are finding it

difficult to find large parcels of land for

malls, and retailers find rental maintenance

costs lower for lifestyle centers than at traditional

malls. According to Poag & McEwan,

the developers who first coined the term

lifestyle centers, sales tend to be about $400

to $500 per square foot in lifestyle centers,

compared with $330 per square foot at traditional

malls.

The boom in luxury goods also may

have played a role. Affluent shoppers seem

to prefer a boutique-like atmosphere, which

is very different from enclosed, 100,000square-foot

malls anchored by a few department

or discount stores. Often, tenants

at lifestyle centers include stores from companies

such as Banana Republic (owned by

Gap), Coach Inc., Chico’s, and Pottery Barn

(owned by Williams-Sonoma Inc.), as well

as higher-end restaurants.

Brands use “shop-in-shop” to grow

In conjunction with opening their own

stores, apparel and accessory brands have used

shop-in-shop concepts to take more control of

merchandising. In a shop-in-shop arrangement,

floor space is dedicated to the display of products

from one brand and typically includes special

signage and fixtures. The proposition is

attractive to both the manufacturer and the retailer

in that the concepts help differentiate

from competition; this allows the brand and

the retailer to bring in higher-end merchandise

and a broader selection, and cycle out slow

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movers, resulting in less markdown risk. These

concepts often see a sales acceleration and productivity

gain.

Coach, Free People (owned by Urban

Outfitters Inc.), and Polo Ralph Lauren have

used this format successfully in select department

stores, while Wolverine World Wide

Inc. has used it for its Merrell line in specialty

sporting goods stores. Dick’s Sporting

Goods Inc. has several shop-in-shop initiatives,

including products from Nike, Under

Armour Inc., and The North Face. By the beginning

of the first quarter of 2008, Dick’s

plans to have more than 300 Nike men’s and

women’s shops each, and 200 Under Armour

shops (100 men’s and 100 women’s) as well.

Plans for The North Face include the installation

of the shop-in-shop concept at 45 to

50 Dick’s stores at full buildout.

Sales rising as consumers dress up

Sales of both apparel and footwear in

the United States are rising, lifted by a move

toward dressier, more colorful looks for

both men and women. Suit sales are rising

for men, and dresses are growing more popular

for women. Sales of accessories, such as

handbags, remain strong. Retail sales of apparel

rose 5% in 2006, compared with a 4%

increase in each of the previous three years,

according to estimates from research group

NPD Fashionworld.

The growth is not occurring evenly, however.

Consumers are increasingly splitting their

purchases between luxury goods and valuepriced

merchandise. The high-end consumer is

more insulated from higher energy prices and

other economic swings. At the same time, inexpensive

goods — sold through chains such

as discounter Target and apparel retailer

H&M — have become more fashionable,

wooing consumers to shop in places that they

otherwise would not have considered.

Clothing companies streamline their business

To deal with the consolidation and merchandising

shifts in department stores, apparel

makers are streamlining and making

other changes. One strategy is to focus on

the best-performing brands.

In February 2007, Liz Claiborne said that

it would close the Mexx line of stores in the

United States, after the brand failed to catch

on following its US introduction in 2003.

The company considers Mexx to be one of

its power brands and is positioning Mexx to

grow internationally, so Mexx stores will remain

open in overseas markets.

Liz Claiborne is also shutting down its line

of Elisabeth apparel, which caters to plus-sized

women, as well as its Laundry by Shelli Segal

stores. The company is focusing instead on

brands including Lucky, Juicy Couture, and

Sigrid Olson. Liz Claiborne may drop more

underperforming brands, CEO William Mc-

Comb said in February 2007.

Apparel makers open stores

With department store space dwindling,

many apparel makers are turning into specialty

retailers, opening their own stores

where they can control how their merchandise

is displayed and ensure that it will not

fight for floor space with competitors or

APPAREL MANUFACTURERS’

RETAIL OPERATIONS — 2007

# OF

RETAIL

AS % OF

COMPANY STORES NET SALES*

Carter's Inc. 376 42

Coach, Inc.† 352 76

Branded stores 259 …

Factory stores 93 …

Jones Apparel Group 1,132 31

Barney's 20 …

Branded stores 411 …

Outlets 701 …

Liz Claiborne 735 31

Branded stores 399 …

Outlets 336 …

Nike 418 NA

Oxford Industries 42 NA

Phillips-Van Heusen 700 NA

Polo Ralph Lauren 282 42

Branded stores 137 …

Outlets 145 …

Quiksilver 487 NA

Branded stores 276 …

Licensed stores 211 …

Timberland 81 13

Branded stores 20 …

Factory stores 61 …

Wolverine 82 NA

V.F. Corp. 538 14

Branded stores 460 …

Outlets 78 …

NA-Not available. *Includes Internet and catalog sales. †Fiscal

year ended June 2007.

Source: Company reports.


with retailers’ private-label goods. Liz Claiborne

operated 399 stores as of the end of

2006. The company has said it hopes to

eventually generate as much as 40% of sales

from its own stores, up from 28% in 2006.

In the four years from 2002 to 2006, VF

Corp. opened 400 single-branded stores featuring

lines such as The North Face and

Vans. Polo Ralph Lauren says that it sends

fresh products to stores continuously; it also

sells exclusive goods that can be found only

at its own branded stores, as a way of driving

shoppers to its outlets. (See the table

“Apparel manufacturers’ retail operations”

for more detail on apparel makers’ retail outlets.)

Shoemaker Deckers Outdoor Corp. is

opening up stores to sell its Uggs brand of

sheepskin boots, normally found in department

stores and shoe stores.

Going abroad

Apparel makers are looking outside their

home markets in search of faster growth,

with clothing sales rising at low- to mid-single

digit rates and as retail consolidation continues.

For manufacturers, many of the new

overseas markets are attractive, due to growing

middle-class populations and a lack of

branded clothing available for sale.

International sales accounted for 28% of

Liz Claiborne’s revenue in 2006, up from just

4% in 2000. The company has said that it

hopes to eventually reach 35% in international

sales. In 2006, VF Corp. formed a

venture with India-based licensing partner

Arvind Mills Ltd. VF expects its apparel

sales in India to grow at more than 25% a

year, up from $40 million presently, because

of the joint venture. Indian consumers have

taken to VF brands, according to the company.

The world’s largest store selling Wrangler

jeans, a brand long associated with American

cowboys, is in Bangalore, India.

In China, as many as 300 million residents

are already in the middle class, and

that number will increase as the country’s

economic boom continues. China’s consumer

spending makes up a smaller percentage of

gross domestic product (GDP) than in other

countries, a statistic likely to change in tandem

with a growing middle class.

Wealthier Chinese are particularly keen on

acquiring brand-name goods. China now accounts

for about 12% of luxury sales worldwide,

according to consulting firm Ernst &

Young. Spending on apparel there will rise to

about $170 billion by 2025 from $45 billion

in 2005, according to McKinsey & Company,

another consulting firm.

India is another promising market. Young

Indians are traveling abroad more frequently

and acquiring a taste for Western

fashion and brand-name goods. As a result,

sales are growing about 35% a year for

women’s branded apparel and 22% for

men’s apparel, according to A.T. Kearney.

Indians are now being introduced to the

concept of chain stores in their own country.

Domestic companies, including Pantaloon

Retail India Ltd. and Reliance Industries

Ltd., are pouring billions into retail to open

networks of stores around the country.

Apparel and accessories retailer Guess?

Inc. is opening stores in both China and India.

Other Asian markets are appealing as

well. Gap will franchise 15 stores that will

open in Indonesia over the next four years.

The company already has plans with partner

FJ Benjamin Holdings Ltd. to open 30

Gap and Banana Republic stores in Singapore

and Malaysia.

Economic growth spurs consumer

spending

US economic growth continues, helping

many apparel companies and clothing retailers

post higher sales growth in the first half

of 2007. However, growth is slowing as

2007 progresses, according to monthly retail

sales reports.

The US economy, as measured by real

GDP, grew at an annual rate of 2.9% in

2006, according to the Bureau of Economic

Analysis (BEA), an agency of the US Department

of Commerce. As of mid-November

2007, Standard & Poor’s was projecting real

GDP growth to slow to 2.1% in 2007 and

1.9% in 2008. Our projection for personal

consumption expenditures (PCE) is a rise of

2.9% in 2007, and tapering off to a 1.9%

gain in 2008, after a 3.1% increase in 2006.

Linked to a growing domestic economy

is the employment environment, which remains

strong. The unemployment rate

stood at 4.7% in October 2007, versus

4.4% in October 2006. Payrolls rose by

166,000 in October 2007; this speaks to the

economy’s ability to generate new jobs,

thereby increasing consumer spending. Wages

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APPAREL & FOOTWEAR’S SHARE OF TOTAL

PERSONAL CONSUMPTION EXPENDITURES

(In percent)

7.0

6.5

6.0

5.5

5.0

4.5

4.0

3.5

3.0

1977 79 81 83 85 87 89 91 93 95 97 99 01 03 05 2007

Source: US Department of Commerce.

are going up as well. As of mid-November

2007, Standard & Poor’s was forecasting

an average unemployment rate of 4.6% in

2007 and 5.0% in 2008, compared with

4.6% in 2006.

Consumer confidence is one of the foundations

of consumer spending and is of

greatest importance to the footwear and apparel

industry. The University of Michigan’s

consumer sentiment survey slipped in October

2007 to 80.9 from 83.4 in September

(1966=100). Rising prices, especially for

gasoline, deteriorating home values and the

waning strength of the labor market led to

the decline.

The Conference Board, a private research

organization, also reported a dip in

sentiment in October 2007. The index fell

to 95.6 (1985=100) in October, down from

99.5 in September.

US apparel sales rose 5.1% to $190.1 billion

in 2006, according to the NPD Group, a

market research firm. Sales of women’s apparel

rose 5.3% to $102 billion (representing

54% of all apparel sales), while men’s apparel

sales rose 2.9% to $54.8 billion (29%).

Sales of children’s apparel (clothing for boys,

girls, infants, and toddlers) rose 8.4% to

$33.3 billion and accounted for 17% of apparel

sales in 2006. ■


INDUSTRY PROFILE

The industry that suits everyone

Through the second quarter of 2007, US

consumers spent an annualized $368.4 billion

on clothing and footwear, up 3.8% from

$354.9 billion spent in the year-earlier period,

according to the US Department of Commerce.

Given an estimated US population of

299.4 million as of July 2007, per capita expenditures

on clothing and footwear equaled

roughly $1,230.

US employment levels in apparel and

footwear manufacturing have fallen drastically.

According to the US Department of Labor,

domestic apparel employment has fallen

by 79% from the mid-1990s — to 181,300

in February 2007, from 853,800 in December

1994. Increased quotas, reduced tariffs,

and a string of free-trade and preferentialtrade

agreements have contributed to the

steady flow of manufacturing jobs out of

the United States and into low-cost countries

in Asia, Latin America, Africa, and the

Caribbean. According to Department of Labor

data, domestic apparel employment

peaked in 1973 at 1.45 million; since then,

the sector has shed more than a million jobs.

Apparel

With respect to both manufacturing and

retailing, the US apparel industry is large,

mature, and highly fragmented. Apparel sold

US APPAREL INDUSTRY EMPLOYMENT

(Production workers, in millions)

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

1959 63 67 71 75 79 83 87 91 95 99 03 2007

Source: Bureau of Labor Statistics.

in the United States is made both domestically

and internationally. (Some of the largest

US-based apparel wholesalers are listed in

the “Major apparel companies” table.)

Domestic apparel manufacturers’ shipments

totaled $29.13 billion in the 12

months through February 2007, according

to the US Census Bureau, down 1.9% from

$29.7 billion in the year-earlier period.

Apparel worth $71.629 billion was imported

into the United States in 2006, up

4.2% from the $68.713 billion imported in

2005. Exports of US-made clothing continued

to fall; the figure for 2006 was $4.32

billion, down 3.4% from the $4.47 billion

posted in the year-earlier period.

US retail sales at clothing and accessories

stores rose 6.7% to $216.8 billion in the 12

months through February 2007, from $203.2

billion in year-earlier period, according to the

Department of Commerce. Sales in 2006 rose

6.7% to $214.6 billion.

The US apparel market can be divided

into two tiers: national brands and other apparel.

National brands, produced by about

MAJOR APPAREL COMPANIES

FISCAL

YEAR SALES

COMPANY ENDING (MIL. $)

Nike May '07 16,325

V.F. Corp. Dec.'06 6,216

Jones Apparel Group Dec.'06 4,743

Liz Claiborne Dec.'06 4,994

Hanesbrands† Dec.'06 2,250

Polo Ralph Lauren Mar. '07 4,295

Kellwood Feb.'07 1,962

Phillips-Van Heusen Jan.'07 2,091

Quiksilver Oct.'06 2,362

Timberland Dec.'06 1,568

New Balance* Dec.'06 1,555

Warnaco Dec.'06 1,830

Carter's Inc. Dec.'06 1,343

Oxford Industries May '07 1,129

Wolverine Dec.'06 1,142

*Privately held. †Data is for 6-month fiscal transition period

ending December 30, 2006.

Source: Company reports.

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10 sizable companies, currently account for

some 15% of all US wholesale apparel sales.

The other apparel category, accounting for

about 85% of all apparel distributed, comprises

small brands and private-label (or

store brand) goods.

Footwear

Like the apparel business, the US footwear

industry is mature and fragmented, and its

manufacturing base is declining. According

to NPD Group, a consumer market research

firm, total footwear sales in the first quarter

of 2007 rose 16% to $11 billion. Casual

shoes made up 26% of sales, followed by

dress casual (18%), other leisure shoes

(15%), running shoes (11%), and basketball

shoes (7%). Other shoe categories include

hiking, evening, and tennis.

According to data from the American Apparel

& Footwear Association, a trade association,

US footwear imports totaled 2.37 billion

pairs of shoes in 2006, up 5.3% from 2.25 billion

pairs in 2005. Domestic shoe production

has fallen to represent less than 5% of shoe

purchases in the US in recent years.

While the United States imports most of

its soft-sole footwear, it is particularly strong

in the manufacture of protective or safety

footwear (most of which feature steel safety

toes). Interestingly, domestic footwear producers

often import shoes to offer a diversified

catalog.

Today, the footwear industry is truly

global in nature, with large manufacturers

sourcing products from and selling products

in different countries over several continents.

A multinational strategy allows manufacturers

facing a slow economy in one

country to keep expanding revenues by focusing

on selling in the faster-growing economy

of another country.

US-based companies, such as Nike Inc.,

for instance, have countered slow domestic

results by growing sales through increased

penetration in the well-developed markets of

Western Europe (including the United Kingdom,

Germany, and France) and by entering

new Eastern European markets (including

countries such as Poland and the Czech Republic).

In the fiscal year ended May 2007,

Nike generated 53% of its sales overseas.

Footwear companies, particularly manufacturers

of athletic footwear, have diversi-

fied into related apparel and sporting goods

categories as a way to extend the reach of

their brands and grow revenues. In addition

to sneakers, Nike offers golf clubs, watches,

and yoga mats.

INDUSTRY TRENDS

Most trends affecting apparel and

footwear manufacturers today are driven by

consumer demand and relate to the size of

the various demographic groups and their

particular wants, shopping patterns, and

spending power. Changing styles in workplace

and leisure attire also are influencing

retail and manufacturing operations. Private

equity firms are buying up apparel companies;

at the same time, there is consolidation

among manufacturers entering new markets

and product lines.

The evolution of a lifestyle brand

The best lifestyle brands give us a picture of

our aspirations and tell an idealized story of a

way of life, of which we want to be a part. It is

a way to emotionally connect with the consumer

and communicate much more than mere

product or fashion, while supporting the positioning

and ultimately the sale of both. A

brand personality and image that are emotional

and unique can be broad enough to support

brand extensions. Ralph Lauren invented

lifestyle branding by crystallizing an idealized,

“upper crust” version of American life. Those

seeking upward mobility eagerly bit the hook.

Case study: Juicy Couture

Juicy Couture Inc. designs, manufactures,

and markets apparel, accessories, and personal

care for men, women, and children.

The company offers T-shirts, skirts, dresses,

sweaters, shorts, drawstring pants, denim

jackets, and track suits, as well as handbags,

shoes, fashion jewelry, sunglasses and, fragrances.

Products are carried by the better

department and specialty stores, including

Saks Fifth Avenue, Scoop, Barney’s, Bergdorf

Goodman, Henri Bendel, and Fred Segal.

Juicy Couture is one of the power brands of

parent Liz Claiborne Inc., which has opened

38 specialty retail locations for Juicy; plans

include continued specialty store expansion

in both domestic and international locations.


Juicy Couture evolved into the premium

lifestyle brand it is today due to strong product

positioning for “girly girls” who want to

be hip, chic, and cool. It is casual luxury

with a mix of Los Angeles celebrity and an

irreverent, fun attitude that attracts shoppers

aged 10 to 44, and even some grandmothers.

These factors are the base of Juicy Couture’s

success. The company is projected to generate

sales of $450 million in 2007, with a corporate

goal of $600 million to $700 million

by 2010; it is estimated to grow at a compound

annual growth rate of 10% to 15%

through 2010, supported by specialty retail

growth of 30% to 40%.

Initially a line of maternity jeans under

Travis Jeans, Juicy Couture was founded in

1994 by the partnership of Gela Nash and

Pamela Skaist-Levy, when they noticed a

dearth of casual sexy apparel for working

out, running errands, stopping at a café, or

picking up the groceries. The brand was

made out of their home in California and

was a huge success on the West Coast.

At the start of Juicy Couture, the focus of

the fashion line was on sportswear and

women’s sweat suits. One of the company’s

primary goals in brand positioning was to

combine sexy style with extreme comfort —

the success of which is evident with the company’s

tracksuit, which today generates 20%

of total sales volume. In 2002, Juicy Couture

added clothing lines for men and children.

Liz Claiborne acquired Juicy Couture in

2003, when sales were less than $50 million

and the business was entirely wholesale. Both

founders have stayed on as copresidents. With

a huge corporation to support its growth,

Juicy Couture could expand distribution,

strategically extend the brand to adjacent categories

(including handbags, shoes, and fashion

jewelry), improve sourcing and the supply

chain, and create a marketing program beyond

word-of-mouth or grassroots.

Juicy Couture continues to expand its

product lines and marketing strategies. In

2005, the company licensed its name to

T-Mobile USA, a subsidiary of Deutsche

Telekom AG, for a designer version of its

Sidekick mobile phone, and to Movado

Group Inc. for watches. In 2006, a line of infant

apparel was added and an eponymous

fragrance, which won three FiFi (fragrance

industry) awards, was introduced. Fragrance

sales for 2007 are projected at $60 million,

which would place Juicy Couture fragrance

among the top 10 US fragrances. The company

further extended the brand to the entire

family with the introduction in 2007 of Juicy

Crittoure fragrance and ancillary items for

dogs and their owners. A man’s fragrance,

Dirty English, is projected to launch in

March 2008.

The first free-standing Juicy Couture

stores opened in the United States in October

2004 in Las Vegas. In October 2007, the

company opened its 34th store, a flagship on

Rodeo Drive. Executing a non–cookie cutter

approach in real estate and store ambience,

Juicy Couture expects to have 39 stores operating

by the end of 2007 and 60 in 2008.

Further afield, the company looks to open 47

shops in China over the next three years, as

well as five in Russia.

While we believe that some categories are a

bit of a stretch (e.g., Christmas tree ornaments

in 2006 and, now, the Juicy Crittoure personal

care line for dogs), by and large the brand is to

the current decade what Liz Claiborne was in

the 1980s and 1990s. Juicy Couture’s casual

apparel and accessories have a following that

spans men, women, and youth, aged 14 to 44.

A testament to the brand — and the ultimate

compliment that can be paid to a company —

is that the brand has morphed into a descriptive:

“How Juicy!”

Stores move into overseas markets

Seeking growth away from saturated US

markets, many retailers are looking to overseas

markets — especially Asia — for new

store locations.

For luxury goods makers, Asia is an alluring

market. Japan has long been a strong

market for luxury goods, thanks to its consumers’

taste for high-end goods. Jewelry retailer

Tiffany & Co. has 52 retail locations

in Japan, where it generated 19% of its revenues

in 2006 of $2.6 billion. Luxury handbag

retailer Coach Inc. received 18% of its

$2.61 billion sales from Japan for the year

ended July 2007. According to Coach, which

is based in New York, Japanese women

spend four times more per capita on luxury

accessories than American women do.

Upscale retailers are now looking to China

and its burgeoning middle and upper

classes. Tiffany opened a store in Beijing in

May 2006 and added a location in Shanghai

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US RESIDENT POPULATION PROJECTIONS

(In thousands)

% CHANGE

AGE GROUP 2007 2015 2025 2007–15 2007–25

Under 5 yrs. 20,817 22,358 23,518 7.4 13.0

% of total 6.9 6.9 6.7

5 to 14 yrs. 40,113 42,607 46,051 6.2 14.8

% of total 13.3 13.2 13.2

15 to 19 yrs. 21,655 20,243 22,457 (6.5) 3.7

% of total 7.2 6.3 6.4

20 to 24 yrs. 20,961 21,810 22,052 4.0 5.2

% of total 7.0 6.8 6.3

25 to 34 yrs. 40,104 44,053 44,345 9.8 10.6

% of total 13.3 13.7 12.7

35 to 44 yrs. 42,882 40,793 45,351 (4.9) 5.8

% of total 14.3 12.7 13.0

45 to 64 yrs. 76,533 83,711 82,141 9.4 7.3

% of total 25.4 26.0 23.5

65 yrs. & over 37,850 46,791 63,524 23.6 67.8

% of total 12.6 14.5 18.2

Total population 300,913 322,366 349,439 7.1 16.1

Racial composition (%):

White 79.8 78.4 76.8

Black 13.0 13.3 13.7

Asian 4.4 5.0 5.7

Other 2.8 3.3 3.8

Hispanic (any race) 14.7 16.6 18.9

Totals may not add due to rounding.

Source: US Department of Commerce, Population Series P-25.

in December. The stores complement the

existing Tiffany boutiques in each city. By

2015, about 27% of Chinese households will

be upper–middle class or better, according to

consulting firm McKinsey & Co., up from

10% of the population in 2005.

Coach also has opened stores in Beijing

and Shanghai, which the company considers

its two “beachheads” in the Chinese market,

according to chief executive officer Lew

Frankfort. The company plans to operate 10

freestanding stores in China within the next

three years. Coach currently operates about

110 locations in Japan.

Foreign retailers enter the US

At the same time that US retailers are

looking abroad, international competitors

are moving into the United States — and often

bringing with them unique ways of operating.

Two examples are Sweden’s H&M

Hennes & Mauritz AB (H&M) and Spain’s

Industria de Diseño Textil SA (Inditex),

which owns the Zara clothing chain and others.

The two companies offer fashionable

clothing for inexpensive prices, and they turn

over their inventory more rapidly than competitors

— thus encouraging shoppers to visit

often and buy items that they like on the

spot. Both companies have grown their

brands by offering what some call “disposable

chic” or “fast fashion” — exceptional

fashion quality at affordable prices.

Both retailers enjoy healthy margins and

growing sales. H&M’s gross margin reached

a record 59.5% in fiscal 2007 (ended November

2006), with sales rising 12%, while

Inditex’s sales jumped 22%. By comparison,

The Gap Inc. had a gross margin of 35.4%

for its fiscal year ended February 2007.

H&M operated 114 US stores as of November

2006; Inditex operates about 20 Zara

stores in the United States.

More European competition might be traveling

across the Atlantic. The United Kingdom’s

Topshop, another low-cost, high-fashion

retailer, is reported to be opening three US

stores in the spring of 2008. There are signs of

interest in Topshop across the Atlantic. The retailer,

a unit of Arcadia Group, reportedly sold

out a line of clothes inspired by supermodel

Kate Moss at Barneys New York Inc. department

store within hours.

Demographic trends

Because specialty retailers usually target a

narrow market, they must pay close attention

to the age distribution, ethnic background,

and priorities of potential customers

in their markets.

Teens entering adulthood

Teenagers aged 15 to 19, who represent

about 7.2% of the US population, have been a

powerful force in retail over the past decade.

Gap, Abercrombie & Fitch Co., American Eagle

Outfitters Inc., and Urban Outfitters Inc.

have been among the leading beneficiaries.

Today, a large share of the 71 million

Americans born between 1977 and 1994 — a

group dubbed “Generation Y” by market researchers

— have entered adulthood. This is

an attractive group for retailers. Shoppers aged

25 and older, for instance, often have more to

spend on apparel and may need to expand

their wardrobes to include professional clothes

for the office. Consumers aged 20 to 34 accounted

for about 26% of spending on apparel

in 2006, according to estimated consumer

data from research group NPD Fashionworld.

Retailers that appeal to teens are trying to

hold onto those consumers as they enter

their twenties. Some examples of new stores

for this demographic are Ruehl (from Aber-


crombie & Fitch), aimed at men and women

aged 22 to 35, and Martin + Osa (American

Eagle Outfitters), a chain that debuted in the

fall of 2006 for shoppers aged 25 to 40. As

Abercrombie and other teen-targeting retailers

seek to hold onto these shoppers, rivals

such as Ann Taylor Loft, Gap’s Banana

Republic, and Express LLC are trying to pull

them away.

Children’s clothing sales rise

As members of Generation Y get older,

they are starting to have children — to the

benefit of specialty retailers that target infants

and young children. Annual sales have

risen the past several years for The Children’s

Place Retail Stores Inc. and The Gymboree

Corp., both of which sell apparel, generally

in mall-based or shopping-center–based

stores. Sales of children’s clothes rose 8% in

2006, besting the gains seen in both men’s

and women’s apparel, according to NPD.

Discount retailers Target Corp. and Wal-

Mart Stores Inc. are big players in the children’s

clothing market. Hoping to grab a

piece of that market, Gymboree is adding a

third retail chain, Crazy 8, which will debut

later in 2007. The new stores will offer

clothes for lower prices than Gymboree’s

namesake and Janie & Jack stores, in hopes

of pulling business from the discount giants.

Retailers struggle to draw older women

Female shoppers, particularly those over

the age of 35, spend the lion’s share of retail

dollars, making them the most desirable target

for retailers. Much of this group belongs

to the baby boom generation, those nearly

76 million Americans born between 1946

and 1964. This segment has more disposable

income than any other population group and

tends to spend it freely. Specialty retailers are

striving to reach shoppers in this segment

who may be looking for fashionable clothes

that are not too provocative or youthful.

Still, apparel retailers have had mixed results

catering to women over 35, who previously

have been neglected by the sector.

Unlike her mother, this consumer has turned

to specialty retailers to build her wardrobe,

rather than relying exclusively on department

stores. She has more money to spend on

clothes and likes to update her wardrobe to

add new clothes and to reflect shifting tastes.

Women aged 35 and older made up 41% of

all apparel spending by women in the fourth

quarter of 2006, according to NPD.

Specialty retailers have launched a number

of chains targeting this group, but several have

failed to catch on with shoppers. Gap, the

largest US apparel retailer, shut its Forth &

Towne chain of 19 stores aimed at women

over 35 in June 2007 after its brief 18-month

foray. In early 2007, Gymboree closed

Janeville, a chain of stores for women over 30.

American Eagle is reported to be retooling

Martin + Osa after disappointing sales.

Chico’s FAS Inc., which owns a chain of stores

targeting women over 35, closed Fitigues, an

upscale casual clothing chain, in 2007; the

company had acquired Fitigues in 2006.

The specialty retailers are losing shoppers

to department store chains that have overhauled

selection to bring shoppers back.

Chains such as J.C. Penney Co. Inc. and

Kohl’s Corp. are offering more exclusive

private-label goods that are fashionable. In

the case of Gap, company executives decided

to focus instead on the company’s existing

Gap and Old Navy chains, which are

struggling.

Young men dressing up

The casual look began its ascendance in

the early 1990s, when corporate America

started emulating the less-rigid dress policies

of high-tech industries. Often, the philosophy

behind the switch from suit-and-tie to casual

attire was that, if employees were working

long hours, they should be allowed to do so

comfortably. Gap rode the success of khakis

for a decade but ultimately became a victim

of its own success: by 2000, khakis were

ubiquitous, and the wearer no longer needed

Gap’s stamp of approval (i.e., the Gap

brand) to feel appropriately dressed when

wearing khakis. The casual look is one factor

that drove deflationary apparel pricing in the

last decade.

In the aftermath of the Internet bust, the

American workplace has been reverting to

more formal attire. Retail trends reveal that

suits are again selling. For women, the business

suit has been tweaked to convey femininity;

for men, its construction has become

more form-fitting. Sales of slacks rose 7.2%

in 2006, compared with growth of 5.4% for

jeans. Men aged 25 to 34 increased purchases

of suits by 13%, and suit sales rose 12%

for men aged 18 to 24. Mass-merchant re-

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tailers offering suits at lower prices have

made them more popular, according to NPD.

Sporting apparel goes high-tech

Athletic apparel has come a long way

from the era of pairing a dowdy gray cotton

sweat suit with tennis shoes. Now, athletic

togs promise to hug the body with

materials that insulate the wearer from cold

weather, while wicking away sweat to boost

performance. Running shoes are being

synced with computers to measure performance.

Consumers have responded to the

high-tech offerings, with sportswear apparel

sales rising 67% in the last 10 years to

$28.8 billion in 2006, according to the

Sporting Goods Manufacturers Association,

an industry trade group.

Other advances in sports apparel include

tagless and stitchless T-shirts and fabrics

that manage odors. Technological advancements

allow manufacturers to maintain or

increase prices and keep consumers loyal to

their brands.

One of the pioneers in advanced athletic

apparel is Under Armour Inc. The company,

founded in 1996, offers compression apparel

that regulates body temperature by wicking

away perspiration to keep an exerciser comfortable.

Users wear the company’s HeatGear

line when it is warm, ColdGear when it is

cold, or AllSeasonGear for moderate temperatures.

The company’s revenue has doubled

in the past two years, to $431 million in

2006, as it expanded into apparel for women

and footwear.

Adidas AG introduced the Adidas_1

running shoe in 2005. The shoe’s technology,

which is available in basketball and running

shoes, uses sensors, a microprocessor, and a

small motor to adjust the level of cushioning

provided by the shoe.

Nike teamed with computer and consumer

electronics company Apple Inc. to develop

the Nike+iPod Sport Kit, which allows

Nike footwear to “communicate” with Apple’s

iPod Nano portable music player. A

user places a sensor into a Nike sneaker,

which relays information on speed, distance,

and calories burned to the music player,

which can then be broadcast through the

user’s headphones. Runners using the Nike+

system have logged more than 10 million

miles since the product went on sale in July

2006, according to a March 2007 statement

from Nike.

Luxury and value goods both do well

The strongest demand for apparel and accessories

is bifurcated between luxury goods

on the high end and inexpensive goods on

the low end. Upper middle class and wealthy

consumers are more insulated from recent

trends, such as higher heating and gas prices,

that have reduced spending for middle class

and lower-income consumers.

Companies that sell to these markets are

thriving. Phillips-Van Heusen Corp., which

acquired the upscale Calvin Klein brand in

2003, posted a 39% increase in net income

in its fiscal year ended February 2007, lifted

by demand for its Calvin Klein brand of

men’s better sportswear and the licensing of

the Calvin Klein name to new fragrances.

Upscale department stores are experiencing

strong sales growth. Same-store sales, or

sales at stores open at least a year, for February

2007 rose 11% at luxury stores from the

year earlier, and then rose an additional 13%

in March, according to trade group the International

Council of Shopping Centers.

Polo Ralph Lauren Corp.’s profits have

risen on demand for its upscale apparel

and accessories. In March 2007, the company

formed a joint venture with luxury

goods maker Compagnie Financière

Richemont SA to design and sell precious

jewelry and watches.

Shoppers are flocking to value goods —

many of which are improving in quality and

fashion — thanks to an infusion of top designers

turning out moderately priced collections.

Two European specialty retailers have

been particularly successful at offering lowerpriced

goods, and both are undergoing aggressive

expansions into the United States.

Sweden’s H&M and Spain’s Inditex have

used unconventional means to expand their

businesses. Inditex, for example, does virtually

no advertising, relying instead on sleekly

designed stores in centrally located neighborhoods

in major cities. Though H&M sells inexpensive

goods, it knows its shoppers are

fashion-conscious. The chain, in the past few

years, has featured lines from designers Karl

Lagerfeld and Stella McCartney. In March

2007, H&M rolled out M by Madonna, a

line of clothing designed by the pop singer.


Both H&M and Inditex are enjoying success.

For the year ended November 30, 2006,

H&M’s sales rose 12% to 68.4 billion

Swedish krona (US$9.17 billion). Sales at

Inditex, which operates under eight banners,

including Zara, Oysho, Pull and Bear, rose

22% to €8.2 billion (US$10.4 billion) the

year ended January 31, 2007. (Note: All currency

conversions in this Survey are at average

exchange rates for the period in question,

except where noted.)

US-based apparel retailers and manufacturers

are wooing designers to produce merchandise

at the low end. Discounter Target

has featured lines by designers Isaac Mizrahi,

Liz Lange, and Mossimo Giannulli. In April

2007, Gap introduced Gap Design Editions,

selecting three up-and-coming design labels

to produce their versions of a woman’s iconic

white shirt.

Steve & Barry’s LLC, a clothing chain

known for selling T-shirts, sweatshirts, jeans,

and other basics — often for less than $10

an item — signed actress Sarah Jessica

Parker to help design a line of fashionable

women’s clothing. Called Bitten, every piece

in the collection will sell for $19.98 or less,

according to press reports. Parker, known for

her sense of style, said that she picked the

chain because she grew up in a family of

eight children that faced financial difficulties.

The chain is hoping to build upon the success

it has enjoyed with its $14.98 Starbury

basketball sneakers, endorsed by New York

Knicks basketball player Stephon Marbury,

who wears them during games. Steve &

Barry’s has since expanded its product line

from 50 items to 200, including apparel and

women’s athletic shoes.

Offshore sourcing

In the ongoing push to cut expenses, US

apparel and footwear manufacturers increasingly

have moved their production facilities

to lower-cost regions outside the United

States — notably Mexico, the Caribbean,

Central America, Asia, and sub-Saharan

Africa. Many manufacturers, though, have

retained some facilities in the United States

to manufacture products that require a fast

turnaround time.

Following the 1995 implementation of the

North American Free Trade Agreement

(NAFTA) and the subsequent lowering of

tariffs, apparel manufacturing in Mexico and

the Caribbean grew significantly. The proximity

of these countries to the United States

means that their facilities can offer significantly

shorter shipping times compared with

Asian manufacturers, while also providing

low-cost production — factors that are especially

important for basic goods.

Legislation in the last several years has sustained

the long-term shift to offshore sourcing.

The Trade Act of 2002 was approved by

the US Congress in July 2002 and signed into

law by President George W. Bush. This legislation

contains the Trade Promotion Authority,

which grants the president the right to negotiate

trade agreements and gives Congress the

final authority to approve or disapprove those

agreements. It also contains the Andean

Trade Preference Act, which provides dutyfree

access to most apparel, and virtually all

footwear, from the Andean region of South

America (Bolivia, Colombia, Ecuador, and

Peru). The new legislation made certain

retroactive modifications to the May 2000

Caribbean Basin Trade Partnership Act and

the African Growth and Opportunity Act

(AGOA), both of which carry numerous

breaks for footwear and apparel from countries

in those regions.

Standard & Poor’s believes that, while

tariff and quota preferences for apparel and

footwear produced in the Caribbean basin,

the Andean region, and, to a lesser extent,

sub-Saharan Africa have temporarily increased

sourcing from these regions, the

trend is not likely to last. Over time, we expect

China’s share of apparel and global

manufacturing to increase dramatically, facilitated

by its entry into the World Trade Or-

US IMPORTS AND EXPORTS OF APPAREL

(In billions of dollars)

80

70

60

50

40

30

20

10

Exports

Imports

0

1990 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 2006

Source: US Department of Commerce.

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NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

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ganization (WTO) on December 11, 2001,

and the elimination of quotas among all 149

WTO-member countries in 2005.

China accounted for 25.9% of all apparel

imported into the United States in 2006,

according to the American Apparel &

Footwear Association, a trade group. That is

nearly double the share in 2004 and comes

after textile quotas against the country were

lifted. In the footwear market, where quotas

were eliminated several years ago, China accounted

for 86.2% of all US imports in the

12 months ended December 2006.

Having plants in Mexico and the

Caribbean provides a quick turnaround time

that will prove less significant than China’s

lower costs. Indeed, because the Internet

speeds communications between an apparel

company and its far-flung plants — thereby

accelerating the cycles — geographic proximity

may become less of a concern.

China has other advantages as well. Its factories

employ highly skilled laborers capable

of producing complex garments. In contrast,

AGOA-eligible countries are unable to produce

fashionable, high-quality garments due

to the generally low levels of technical expertise

and literacy, underdeveloped infrastructure,

and a dearth of capital. In addition,

companies that set up and run plants in China

are taxed by the Chinese government at a lower

rate than if those plants were operating in

the United States. Moreover, by keeping their

sweetened profits in China, US-based apparel

makers can fund future growth.

HOW THE INDUSTRY OPERATES

Although apparel and accessories can be

considered as two separate industries, they

often overlap, with many companies selling

goods in both categories. In addition, their

consumer demand profiles are similar: apparel

and accessories such as footwear are

necessities, yet they are partly discretionary

as well.

At their most basic level, these industries

supply people with utilitarian attire that is

affordable and unlikely to change drastically

in style from year to year. For more fashionconscious

consumers, the industries strive to

update their assortments to reflect changing

trends or to offer innovative styles or features

that command premium prices.

While individual companies’ sales depend

on the specific products they offer, overall industry

demand is driven by general economic

trends, including changes in disposable personal

income, consumer confidence, and

consumer spending. During periods of prosperity,

for example, consumers are more inclined

to update their wardrobes, buy the

newest fashions on a whim, or splurge on

luxury items. During recessions, consumers

tend to shy away from luxury goods, postpone

apparel and footwear purchases that

are not absolutely necessary, or replenish

their wardrobes with inexpensive items.

Population growth and demographic

trends also influence demand. Obviously,

when the number of people rises, so does

overall demand for apparel and accessories.

However, with the US population growing by

only 1% per year, companies in this industry

are looking overseas for growth opportunities.

Economic growth will be particularly

dramatic in Asia. According to the World

Bank, more than 600 million people in East

Asia will earn enough to be considered middle

class by 2030, up from just more than

100 million in 2000.

Demographic trends within the United

States also can affect the quantity and type

of apparel and accessories consumers demand.

For example, as the leading edge of

the baby boomer generation (those born between

1946 and 1964) enters retirement,

these consumers have shifted their spending

priorities to needs other than clothing, such

as healthcare. They are also more likely to

buy comfortable clothes and shoes rather

than the latest fashions.

Changes in consumer attitudes and preferences

also have an effect on apparel demand.

Apparel designers and merchants must adapt

to lifestyle and fashion trends by altering

their product lines. To accommodate consumers’

increasing emphasis on fitness and

exercise, for example, many apparel manufacturers

have added athletic styles to their

mix. Preteen and teen markets tend to be

particularly fashion-driven, and apparel and

footwear brands must closely monitor and

anticipate the ever-changing styles and items

that these consumers want.

Although these industries are mature and

slow growing, they exist in a dynamic and

competitive environment. In order to improve

profitability, many companies are


adopting new technologies and restructuring

to create leaner organizations. Consolidation

has been prevalent in these industries in recent

years, as larger companies strive to lower

their costs by gaining leverage in buying

from suppliers and selling to customers, and

by achieving economies of scale in manufacturing

and marketing. Moreover, the line between

traditional manufacturers and retailers

is blurring: the Internet offers brands direct

access to their customers, while traditional

department stores develop proprietary store

labels for differentiation purposes.

Diverse product lines and ways of

operating

The apparel and accessories industries are

diverse, with hundreds of product lines designed

for men, women, and children in a

wide range of styles and price points. Each

line is designed specifically for a targeted

consumer group, based on its observed and

expected trends and needs.

In the apparel industry, companies can

operate as manufacturers (wholesalers), as retailers,

or as both. For instance, Gap Inc., a

vertical retailer, outsources the production of

its apparel and accessories, which it then sells

in its own stores. Some manufacturers, like

Kellwood Co., sell almost exclusively to retail

channels. Yet others, like Quiksilver Inc.,

Jones Apparel Group Inc., and Liz Claiborne

Inc., distribute their products through multiple

channels, combining traditional retail

channels with their own retail stores.

An apparel manufacturer may sell its

products under its own brand name, a brand

name that it has licensed from another company,

or a retail customer’s private label. For

a manufacturer, private-label manufacturing

not only provides an additional source of

revenue, but also allows its plants to be run

at greater capacity, thus reducing the per-unit

production costs of its own branded goods.

Moreover, since the manufacturer does not

have to support the marketing of privatelabel

goods, such items can be almost as

profitable as branded products. The increasing

diversification of operations means that

the roles of apparel manufacturer, retailer,

brand manager, and licensee continue to

overlap and blur.

Broad apparel categories include sportswear,

career apparel (comprising both tradi-

tional and casual styles), dress, and athletic

apparel. Price points in the apparel industry

are (in ascending order) popular, moderate,

better, bridge, and designer.

Fabrics play an important role in function

and quality. In general, woolens and knits

are high-quality fabrics that can command

higher selling prices. Woven fabrics tend to

be lower in both quality and price.

The women’s segment traditionally has

accounted for more than half of all apparel

sales at retail. This segment’s share was

54% in 2006, down from 56% in 2005, according

to NPD Fashionworld, a market research

and consulting firm. Men’s apparel

represented 29% of retail apparel sales in

2006, the same as in 2005, while children’s

(including infants’ and toddlers’) apparel

accounted for 17% (versus 15%). Overall

apparel spending in 2006 rose 5.1% to

$190.1 billion, according to NPD.

Many traditional apparel vendors, aiming

to diversify their assortments, offer

complementary accessories like costume

jewelry, handbags, hats, belts, watches,

sunglasses, scarves, gloves, and footwear. A

smaller number of firms are niche players

in the accessories market, targeting different

price points. For example, Coach Inc.

aims for the premium-priced segment,

while Fossil Inc. and Claire’s Stores Inc. focus

on the moderate- and popular-priced

markets, respectively.

The unique skill set of vertical apparel retailers

The desire to better control their destiny

has propelled apparel companies like Liz

Claiborne to develop a specialty retail strategy.

In this approach, the store location is a

branding tool; merchandise presentation and

customer service are integral to the total

brand experience. Companies that market

wholesale apparel brands, in contrast, depend

on the retailer for prime store real estate,

as well as for knowledgeable and

engaged store associates.

In addition to the marketing and product

skills (design and sourcing) that are common

to both wholesalers and retail apparel

brands, specialty apparel retailers need real

estate expertise, the ability to flow merchandise

in a timely manner from sourcing base

to individual stores (often by way of a distribution

center), and in-store presentation and

store labor scheduling skills. At the same

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time, they need to maintain brand positioning

and not over-distribute the brand.

Intense competition

Despite years of consolidation activity, the

apparel and accessories industries remain extremely

competitive and highly fragmented.

This is most likely due to the low barriers to

entry: these industries are characterized by

simple technologies, low fixed assets per employee,

and ease of expansion through the

use of contractors. One needs only good

clothing designs that attract department store

and/or specialty store buyers. If a designer

gets orders, he or she can contract the production

of the item to a low-cost, independent

manufacturer, usually outside the

United States.

Although getting into the business may be

relatively easy, staying in is much more difficult.

Typically, small start-up companies are

undercapitalized and lack broad-based global

sourcing; they may also lack marketing muscle

to give their products the exposure needed

to build brand loyalty among consumers.

In addition, many do not have the technology

and systems infrastructure that major retailers

now demand. These small firms often

seek to be acquired by larger companies as a

way to expand the sales of their designs.

The power of big retailers is a major challenge

to many apparel vendors and manufacturers.

As retailers shrink their inventories

and order closer to the time that merchandise

is needed, manufacturers are forced to

assume more inventory risk. In addition,

their sheer size puts big retailers in a strong

position to negotiate favorable terms with

manufacturers, with regard to pricing, shipping,

co-advertising (in which retailers and

manufacturers share the cost of advertising),

and product labeling.

Consumers also wield considerable power

over apparel and accessories brands, as they

can switch readily from one product or

brand to another. To dissuade them from doing

so, manufacturers attempt to raise brand

awareness and build brand loyalty among

consumers. A strong brand image typically

gives a manufacturer more pricing flexibility

by creating a “must-have” perception to the

consumer. Of course, some segments, such as

the popular-price segment, compete strictly

on price: consumers purchase whichever

product is the cheapest. Manufacturers in

this segment must focus on obtaining lowcost

manufacturing.

Brand management and the specialty

retail strategy

Both traditional apparel brands (those

available in department stores) and vertically

integrated specialty apparel retail brands

need to execute brand management strategies

that create value for the consumer and brand

equity for the apparel company. When apparel

becomes a commodity, the apparel

company’s pricing power is nil and deflationary

pressures (along with price wars) rule the

day. On the other hand, when companies

create apparel brands that provide some

emotional meaning to the consumer, pricing

is not the sole driver of purchases. Successful

brands provide opportunities for brand extensions

and potentially generate superior

gross margins.

Over time, consumers have become “brand

polygamists” according to Design Forum, a

retail consulting firm, a position with which

we heartily concur. To compensate for lower

levels of brand loyalty, companies now must

incorporate tangible product features, such as

quality and appearance, with intangibles, such

as a personal level of communication and innovation,

an emotional connection, or aspirational

value. For example, Nike Inc.’s NikeiD

program enables shoppers to design their own

footwear, apparel, and bags. By bringing individual

customization to the activewear giant,

this program differentiates the brand from its

competition and more thoroughly involves the

consumer in the overall brand experience.

Lifestyle branding began with Ralph Lauren’s

successful foray into domestics 25 years

ago. In 2007, the launch of the Martha Stewart

Collection is the largest brand debut in

Macy’s history and spans bed, bath, entertaining

and cooking in an exclusive branding

statement with an authoritative editorial

voice. With product launches exclusive to

other retailers (including Costco for food and

Michael’s Stores for crafts), along with her

presence in Kmart, Martha Stewart is on the

verge of overkill, in our view; the brand’s

growing ubiquity threatens to destroy it.

Brand management requires a balance between

preserving and growing brand value

(also known as brand equity) and capitaliz-


ing on opportunities to expand or stretch the

brand. Done well, a brand extension can

strengthen the “brand proposition” — the

perception of value associated with the

brand. However, extending a brand too far

beyond its core associations or expanding its

markets to less prestigious channels can

weaken a brand. In our opinion, both Tommy

Hilfiger and Polo Ralph Lauren pursued

business strategies in the 1990s that reduced

brand value. To address this, Ralph Lauren

rationalized store distribution by exiting tertiary

locations, while aggressively improving

customer service in the department store.

Now the brand is again elevated to the premier

rung brand of men’s haberdashery in

leading US department stores.

Superior brand strategy often translates

into a sustainable competitive advantage and

creates barriers for competitors to dislodge

loyal customers. Other brand benefits include

premium pricing and leverage in the

distribution channel. For an apparel or accessories

brand, such leverage means superior

product placement or preferred square

footage in retail outlets. Specialty apparel retailers

with leading brands have distribution

leverage: they can demand (and get) the best

mall locations.

Enhancing customer loyalty

Apparel companies go to great lengths to

attract new customers and retain existing

ones. In a market that bombards consumers

with advertising campaigns, and lifestyle and

fashion messages, a brand name is a powerful

weapon in these efforts.

Brands have become increasingly significant

to apparel and footwear sales. Many

consumers have less time to shop than previously,

and they are spending their disposable

income more carefully. Established brand

names, conveying an image of quality, make

shopping easier and faster for many consumers.

For manufacturers, brands build

consumer loyalty, which translates into repeat

business.

Many established brand manufacturers,

such as Tommy Hilfiger, Polo Ralph Lauren

Corp., Jones Apparel Group, and Liz Claiborne,

are leveraging their existing brand

names by adding accessory lines, such as sunglasses,

watches, fragrances, wallets, and

footwear. Some apparel makers, such as Polo

Ralph Lauren, even have ventured into home

furnishings, adding branded linens and dinnerware.

Footwear manufacturers, too, have capitalized

on the strength of their brand names,

with companies such as Nike and Reebok International

Ltd. adding apparel, accessories,

and sports gear to their product portfolios.

License to grow

Licensing is a common means for companies

to extend their product lines; manufacturers

paid $5.9 billion in licensing royalties

in the US in 2005 (latest available) up 1.8%

from 2004, according to the International Licensing

Industry Merchandisers’ Association.

Entertainment/character licensing continued

to garner the largest share of the market, accounting

for $2.62 billion, or 44% of the total,

while trademarks/brands was second

with $1.08 billion.

Licensing is a key element of an integrated

brand marketing program, enabling a company

to extend its brand into new categories.

For instance, in March 2003, Liz Claiborne

licensed certain women’s dresses and suits

under its Liz Claiborne, Liz Claiborne

Woman, and Liz Claiborne Petites labels to

apparel manufacturer Kellwood Co. More

recently, bootmaker Timberland Co. in

February 2006 licensed its brand name to

Phillips Van-Heusen to make Timberland apparel

in North America.

Merchandising is key

Manufacturers must support their brands

through advertising campaigns and by delivering

the right product in an appropriate retail

setting. They also must establish and

maintain good relationships with retailers

and help them to effectively present and sell

their goods. Some manufacturers supply retailers

with an in-store shop — from concept

to display, including fixtures — which allow

the retailer to create an environment consistent

with the brand’s image. It also increases

consumer product recognition and loyalty as

customers become familiar with a product’s

in-store presentation and location.

A manufacturer’s merchandising team usually

utilizes consumer focus groups to provide

customer feedback on the company’s products

or to generate new product ideas. This information

is shared with designers and the production

staff. The merchandising team also

will educate the retailer on the company’s new

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products and servicing of customers. Increasingly,

manufacturers will open a few retail

stores as a way to test their products and gain

direct feedback from their end customers. An

example is VF Corp., which has opened The

North Face stores in several cities, partly to

gauge customer reaction to new products for

this outdoor apparel and gear brand.

Cutting labor costs with offshore

sourcing

US labor costs tend to be relatively high,

leading many manufacturers to turn to overseas

sourcing for a majority of their products.

Companies can establish overseas

production in three ways. They can buy or

build a plant, establish agents that have ties

with factories in the foreign country, or

contract directly with the owners of foreign

factories. Typically, major US apparel companies

establish overseas production in all of

these ways. They also use domestic sources

other than their own plants.

Using overseas manufacturers and/or outside

domestic contractors has several benefits

for apparel companies. Overseas sourcing allows

them to compete with less expensive

imports. Domestic sourcing allows companies

to respond quickly to fashion changes

and to retailers’ needs for automatic inventory

replenishment.

Generally, US companies go to Southeast

Asia for production of more complicated apparel

items. Many of the region’s countries

have large pools of skilled laborers who can

create high-quality items. Although overseas

labor rates have risen in recent years, they

are still significantly below those in the United

States.

Reduced trade regulation

The shift of clothing jobs away from the

United States has accelerated with the expansion

of free-trade agreements. In 1995, the

United States lowered tariffs on clothing imported

from the Caribbean and agreed to

phase out the Multi-Fiber Agreement, which

imposed quotas on imported clothing. When

the North American Free Trade Agreement

(NAFTA) went into effect on January 1, 1994,

it allowed US companies to ship fabric produced

in the United States to Mexico for assembly

and to ship the clothing back to the

United States without incurring import duties.

Apparel products that are simpler to make

are outsourced to less developed countries,

where labor rates are lower than in Southeast

Asia. With the passage of the Caribbean

Basin Trade Partnership Act (CBTPA) in

May 2000, a growing percentage of production

is being sourced in that region, which

offers the advantage of much shorter lead

times because of its proximity to the United

States. The African Growth and Opportunity

Act (AGOA), also passed in May 2000, further

promises to spur the level of apparel and

footwear imports from sub-Saharan Africa.

In October 2000, the Trade Development

Act (TDA) of 2000 took effect. The TDA

gives duty and quota preferences to many

countries in the Caribbean and sub-Saharan

Africa that export apparel to the United

States. Such goods meet must certain content

conditions; typically, apparel produced in

these regions must include fabric made in the

United States. As a result of the TDA, apparel

imports from these regions are expected to

grow faster than they would have without

the special legislation.

In July 2002, Congress granted final approval

for the Trade Promotion Authority

(TPA) that revives presidential “fast-track”

authority to negotiate trade deals that Congress

can accept or reject but not alter. Such

deals may include provisions to eliminate apparel

duties for Andean countries (Bolivia,

Colombia, Ecuador, and Peru), the Caribbean

Basin, and sub-Saharan Africa. On June 30,

2007, Congress allowed TPA to expire, and

prospects for renewal are uncertain.

The bilateral Free Trade Agreement (FTA)

between the United States and Chile became

effective on January 1, 2004. It eliminated tariffs

on 87% of bilateral trade immediately, and

it will establish duty-free trade in all products

within 12 years. An agreement with Australia

that was completed in May 2004 could serve

as a model for the Asia-Pacific region.

In May 2004, the US Central American

Free Trade Agreement (CAFTA) was signed

with Costa Rica, El Salvador, Guatemala,

Honduras, and Nicaragua. It eliminates

tariffs and trade barriers between the United

States and those countries for many

products, including apparel. The Senate Finance

Committee endorsed CAFTA on June

29, 2005, and the measure narrowly passed

the House of Representatives in July. CAF-

TA has been implemented on a rolling


asis in 2006–07 and was expanded to include

the Dominican Republic along with

Central America.

Other talks are progressing under the auspices

of the World Trade Organization. China

joined the World Trade Organization

(WTO) in December 2001. Exports of clothing

and shoes from China jumped after the

elimination of quotas among all WTO-member

countries in 2005. China’s share of US apparel

imports nearly doubled to 25.9% in

2006, according to the American Apparel &

Footwear Association, a trade group. China

is even more dominant in footwear, accounting

for 86.2% of all US imports in 2006.

Vital role of technology

In both the apparel and footwear industries,

technological innovations have facilitated

global expansion and closer coordination

between retailers and manufacturers, while

also cutting costs. For example, improvements

in manufacturing processes — such as

efficiencies in cut-and-sew operations in the

apparel industry — are helping to reduce

manual labor costs.

Rapid improvements in computer technology

have helped to shorten the new product

development phase from years to practically

months, especially in the fashion/style/highperformance

areas. In the athletic footwear

industry, for example, computer-aided design

(CAD) systems enable a manufacturer to reduce

the design-to-production cycle to only a

few months, so footwear companies can provide

the marketplace with a steady flow of

new products.

Apparel makers that link with retailers

through quick-response programs and other

electronic technologies go a long way toward

making themselves indispensable to their customers.

The goal of quick response is to

maintain lean inventories and avoid overstocking,

while ensuring that retailers have

the merchandise customers want to buy,

when they want to buy it. By assuming responsibility

for stocking the stores, apparel

companies help to carry inventory costs, historically

one of retailers’ highest costs. They

also alleviate many of the retailers’ reordering

headaches and help them buy as close to

the selling season as possible. For manufacturers

today, quick response has become key

to survival.

One such system to link retailers and manufacturers

is called electronic data interchange

(EDI). An EDI system employs interconnected

computer terminals throughout the entire

manufacturing and sales systems. At the retailer’s

checkout counter, electronic point-of-sale

scanners read the bar code attached to each

item and record the product sold, its price,

and even such details as its color and size. This

up-to-the-minute report on a given store’s sales

is then relayed to the manufacturer.

With direct access to detailed sales information,

the manufacturer can tailor its production

to consumer demand. The data recorded

by bar code scanners in the EDI system also

are used for automatic (or just-in-time) reordering,

enabling a manufacturer to restock a

retailer’s shelves quickly, using no more than a

computer for communication. In addition to

providing for automatic replenishment, EDI

makes distribution and shipping information

processing more efficient.

Quick response and EDI technologies

have proven successful with basic goods,

which are relatively simple to produce, require

shorter lead times, and increasingly are

being manufactured in highly automated factories

in the United States. These systems are

more difficult to implement for seasonal and

fashion apparel, however, as such goods require

more labor input and tend to be made

in the Caribbean or Southeast Asia.

Technology also is playing a crucial role

in apparel procurement (or reverse auctions)

through the rising popularity of business-tobusiness

(B2B) exchanges — online marketplaces

that allow trading partners to conduct

real-time business communications with each

other. This is changing the way retailers and

vendors conduct business with each other,

whether they are issuing requests for quotes,

bidding for orders, sharing product forecasts,

or collaborating on product development.

These exchanges may be public, such as the

WorldWide Retail Exchange (WWRE), or

private, such as Wal-Mart Stores Inc.’s Retail

Link and other portals that individual retailers,

brands, and trading companies have established

for B2B communications with their

own networks of customers and suppliers.

Sales channels proliferate

Today, most companies distribute their

products through a variety of channels:

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wholesale, catalog, and Internet sales, as

well as through their own retail stores.

Within the wholesale channel, manufacturers

often try to sell to various types of retailers,

including department stores,

specialty stores, discount stores, and national

chains.

In the past decade, many manufacturers

have opened their own retail stores, reducing

their dependence on the wholesale

channel while potentially increasing sales.

This strategy has benefits — it permits

manufacturers to showcase an entire line of

products, enhance brand awareness, test

new products, and directly collect customer

feedback — but it also carries the risk of

alienating retailers who carry the same

merchandise. Some manufacturers have

also established outlet stores to move older

inventory. For instance, Liz Claiborne operated

399 specialty retail stores and 336

outlet stores as of December 30, 2006.

Specialty retailers the most important channel

Consumers buy apparel and accessories

from a variety of retail outlets. Based on

data from the NPD Group, a market research

firm, specialty stores accounted for

30.8% of apparel dollar purchases by consumers

in 2006, followed by mass merchants

(19.9%), department stores (16.2%), national

chains (14.6%), off-price retailers (7.5%),

direct mail/e-tail pure plays (5.1%), factory

outlets (1.7%), and all other retailers (4.2%).

(“All other retailers” is a category consisting

of warehouse stores, dollar stores, company

stores, and miscellaneous retail outlets.)

APPAREL STORE VS. DEPARTMENT STORE SALES

(In billions of dollars)

180

160

140

120

100

80

60

40

20

0

Apparel stores

Discount

department stores

1995 96 97 98 99 00 01 02 03 04 05 06 E2007

E-Estimated.

Source: US Department of Commerce.

Conventional and national

chain department stores

Differences exist in the distribution mix for

men’s, women’s, and children’s items. For

example, more women’s apparel than men’s

is purchased in specialty and department

stores. Men’s apparel is more prevalent in

discount stores and general merchandise

chains. In the children’s segment, a considerably

higher portion of apparel is purchased

in discount stores. Because children

quickly outgrow their clothing, parents are

less inclined to spend a lot of money on a

single item and, therefore, more inclined to

shop at discount stores.

Fashion is increasingly responsive to the

styles sought by the preteen and teen markets,

whose influence is rising. When promoting

a product, however, manufacturers

and retailers must not only take the user into

account, but the shopper as well. For example,

many men’s apparel items actually are

purchased by women.

Direct to consumer: Internet and catalog

Although the Internet accounted for

about 6.5% of total apparel, footwear, and

accessories sales in 2006, according to research

firm Forrester Research, we believe

that it has strong potential for growth as a

distribution channel. The Internet permits

consumers to shop from anywhere at any

time they wish and to make easy price comparisons,

conveniences that shoppers seem

to appreciate.

Manufacturers use Internet sites for marketing

and informational purposes, as well

as to make sales. The Internet enables apparel

and footwear brands to customize

merchandise to shoppers’ specific needs,

which enables firms to achieve better pricing

along with developing a more emotional

bond with the consumer. Both Nike Inc.

and Polo Ralph Lauren are at the forefront

of this strategy.

Selling by catalog is another important

method of distribution. Before the advent

of the Internet, it was the primary way to

shop at home. Today, however, most retail

apparel brands combine catalog sales with

e-commerce sales under the moniker “direct

to consumer.” This is part of an overall

branding strategy to meet consumers’ needs

24/7 and, thereby, strengthen the emotional

bond that is part of the branding experience.

Catalogs are a form of advertising or direct

marketing, bringing the product to the


consumer. Many retailers report that receipt

of the catalog spurs shoppers to the Internet or

the store for the purchase occasion.

KEY INDUSTRY RATIOS

AND STATISTICS

� Gross domestic product (GDP). Reported

quarterly by the US Department of

Commerce, GDP tracks the market value of

all goods and services produced by labor and

capital in the United States; it is, thus, the

broadest measure of aggregate economic activity.

As the economy expands and contracts

with the business cycle, economic growth is

measured by changes in inflation-adjusted

(or real) GDP. Two consecutive quarters of

decline in real GDP generally signal that the

economy is in a recession.

Real GDP rose 3.6% in 2004, 3.1%

in 2005, and 2.9% in 2006. As of October

2007, Standard & Poor’s was projecting increases

in real GDP of 2.0% for 2007 and

2.1% in 2008.

� Real disposable personal income. This

measure of consumers’ after-tax personal income,

adjusted for inflation, is reported

each month by the US Department of Commerce.

Disposable income influences the level

of expected consumer spending. When

incomes are rising, consumers are willing to

spend more than previously, which bodes

well for apparel and footwear sales. Conversely,

when incomes are declining, consumers

are more likely to defer spending

and save their money.

In 2006, nominal disposable personal income

rose 5.9%, following increases of 4.1%

in 2005 and 6.4% in 2004. As of October

2007, Standard & Poor’s was projecting that

disposable income would increase 6.0% in

2007 and 4.9% in 2008.

� Consumer confidence. The Conference

Board, a private research organization, conducts

a monthly poll of 5,000 representative

US households to gauge consumer sentiment,

and it compiles an index of consumer confidence

based on the results. The index represents

a relative measure of how Americans

feel about the strength of the economy, business

trends, their job security or employment

prospects, and their future earning prospects.

CONSUMER CONFIDENCE INDEX

(1985 = 100)

160

140

120

100

80

60

40

1995 96 97 98 99 00 01 02 03 04 05 06 2007

Source: The Conference Board.

High consumer confidence usually is accompanied

by increased spending and borrowing.

Conversely, when consumer confidence is low

(usually due to uncertainty about the future),

personal expenditures are likely to be cut

back or postponed. Because consumer spending

accounts for about two-thirds of the nation’s

economic activity, this measure is

widely watched.

In 2003, the Conference Board’s index of

consumer confidence fell to 61.4 in March —

its lowest level since October 1993 (when it

was 60.5) — largely reflecting consumer

concern over the US war with Iraq. The

most recent reading was 95.6 (1985=100)

in October 2007, its lowest level in nearly

two years (98.3 in November 2005) on

perception of weaker business conditions

and a less favorable job market.

� Consumer price index (CPI). Released

monthly by the Bureau of Labor Statistics

(BLS), this index measures changes in the

prices of commodities, fuel oil, electricity,

utilities, telephone services, food, and energy.

The “core” CPI smoothes out the index

by removing the volatile food and energy

categories. The BLS also releases specific

price indices for both the apparel and

footwear industries.

These inflation rates reflect and influence

pricing decisions of apparel and footwear

companies and their suppliers. Most companies

try to pass on cost increases to the

consumer. When these increases are large,

however, consumers, stunned by high prices,

may hold back on spending — a condition

known as “sticker shock.”

While prices for many products and services

tend to rise over time, that trend does

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APPAREL PRICE INDEXES

(1982–84=100)

220

200

180

160

140

Men’s and boy’s apparel

CPI-Consumer price index.

Source: Bureau of Labor Statistics.

CPI-Total

Footwear

120

Women’s and girl’s apparel

100

1997 98 99 00 01 02 03 04 05 06 2007

not hold for apparel, for which prices have

fallen annually from 1998 through 2005. In

2006, apparel prices, as measured by the

CPI-Apparel index, were unchanged at

119.5. The September 2007, index reading

remained 119.5, a 1.8% year over year decline

from the level in September 2006.

As of October 2007, Standard & Poor’s

was projecting overall inflation, as measured

by the CPI, at 2.7% for full-year 2007 and

1.8% for 2008. CPI increased 3.2% in 2006.

� Interest rates. The level of interest rates

influences management decisions regarding

business acquisitions, new product introductions,

capital expenditures, dividends, and

stock repurchases. High or rising interest

rates increase the cost of borrowing, making

companies less likely to expand facilities or

to make other capital expenditures. During

such times, apparel and footwear manufacturers

may postpone or cancel plans to upgrade

or expand manufacturing capacity. The

level of interest rates also affects consumers’

purchasing decisions. Higher interest rates

can curb consumer spending, as people begin

to pay down their credit cards and rein in

their expenses.

The Federal Reserve Board (the Fed) sets

monetary policy and can take actions that directly

affect short-term interest rates in the

US banking system. After slashing short-term

interest rates 11 times during 2001 to prop

up a recessionary economy, the Fed did not

change rates until November 6, 2002, when

it lowered both the discount and the fed

funds rates by 50 basis points to 0.75% and

1.25%, respectively, in response to the sluggish

economic recovery. The federal funds

rate was last lowered in June 2003, to

1.00% from 1.25%.

By mid-2004, with output expanding and

payrolls growing, the question was when the

Fed would raise rates. A cycle of rate hikes

began in late June 2004, with a 25-basispoint

increase to 1.25%. By October 2006,

the Fed had raised the federal funds rate a

total of 17 times, to 5.25%. Despite these increases,

interest rates remained low on a historical

basis, and particularly so compared

with rates in the late 1970s and 1980s. In

September 2007, on concerns of tighter credit

conditions intensifying the housing downturn

and restraining economic growth, the

Fed cut both the federal funds rate and the

discount rate by half a point, to 4.75%.

As of October 2007, Standard & Poor’s

was projecting the interest rate on Treasury

bills (a proxy for short-term interest rates) to

average 4.4% in 2007 and 4.0% in 2008.

The rate was 4.7% in 2006. We project that

the yield on 10-year notes (a proxy for longterm

interest rates), which was 4.8% in

2006, will drop to 4.7% in 2007 and then

rise to 5.1% in 2008. Our projection for the

federal funds rate is 5.1% in 2007.

HOW TO ANALYZE AN APPAREL

COMPANY

While there are substantial differences in

operating a branded apparel/accessories company

and a specialty apparel retailer, there

are many similarities. Let’s start there.

A good starting point 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 the macroeconomic level, the economy,

employment, and retail sales need to be assessed.

Is the economy expanding or contracting,

or is it headed for a recession? Are new

jobs being created? If so, at what pace?

What is the trend in the unemployment rate?

Changes in trend — incremental growth or decline

— can be more meaningful than the absolute

numbers. Are consumer spending and


overall retail sales growing or contracting? Are

consumer incomes rising, and are consumer

debt levels too high relative to income?

On a more micro level, it’s useful to determine

whether consumers are spending more

or less on apparel and accessories relative to

other goods. Are apparel and accessories

prices rising or falling relative to other discretionary

goods? What are the dominant

fashion trends in these product categories

and how rapidly is the fashion silhouette

changing? How are the nation’s changing demographics

influencing demand for apparel,

accessories, and footwear?

Once the industry’s outlook has been

evaluated, the analyst then can evaluate the

prospects of a specific company, be it an

apparel brand or an apparel retailer. Analysts

evaluating apparel brands and retailers

have the added 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 (or broken) collections appear.

Also important are overall traffic trends

and the average age of the typical shopper.

One also 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 analyst can get a general

understanding of a retailer’s store concept

and how effectively it is being implemented.

Qualitative factors

The following discussion explains several

qualitative factors used to analyze apparel or

accessories branded companies and specialty

apparel retailers.

Evaluating a company’s competitive stance

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 the apparel and accessories

industries, a strong and recognizable

brand name is the key to success and drives

store (internet site) traffic. Through marketing

efforts, companies try to create a wellknown

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.

For example, through meticulous positioning

and aggressive promotional support

over the years, Quiksilver Inc. has transformed

itself from a niche brand of board

shorts into a leader in the youth-oriented,

casual-lifestyle apparel and accessories segment.

This specialty retailer promotes brand

awareness through its store windows, which

are refreshed as often as weekly with new

displays of its fashion products.

◆ Product differentiation. A company

also can 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. For example, while Juicy

Couture’s terry warm-up suits are similar to

other makes, this Liz Claiborne Inc. unit has

used marketing to help differentiate its

brand, creating strong demand for its goods.

◆ Customer demographics and target

market. The growth potential of an apparel

brand or specialty retailer 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

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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.

Because a small group of consumers typically

provides a large share of a specialty retailer’s

revenues, a successful company must

know its core customers and understand

their purchasing habits. At Chico’s FAS Inc.,

for example, the target market is 35- to 55year-old

females with an annual household

income of $75,000 or more — a market size

of approximately 14.8 million women.

Chico’s loyalty program, Passport Club, has

3.2 million active members (1.7 million permanent

and 1.5 million preliminary); this

group accounted for 97% of sales in the 12

months ended August 2007.

For category-dominant companies in an established

segment, sales growth is typically

driven by gains in market share rather than by

overall market growth. Retailers operating in

emerging or fast-growing segments often benefit

from growth in total sector sales. Coach

Inc., for example, has benefited from both

market share and overall market growth since

its initial public offering (IPO) in 2000.

◆ Distribution. What distribution channels

does the company use — its own retail

outlets, mail-order catalogs, department

stores, specialty chains, off-price outlets, the

Internet, or other methods? 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?

Expanding the channels of distribution

can reduce an apparel or footwear manufacturer’s

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.

◆ New product development. For apparel

and accessory companies, sales drivers are

new fashion trends, new silhouettes, and new

fabrications (fabrics that have been processed

with chemicals and provide new functionality),

which may meet consumers’ needs better

than existing designs.

For footwear companies, new products

are crucial to drive growth in the short term.

In the athletic footwear segment, new product

development centers mainly on technology,

with manufacturers aiming their extensive

research and development efforts at improving

the performance and endurance of athletic

sneakers. Similarly, sports apparel brands

develop fabrics with improved functionality

in an effort to expand their market.

◆ Assessing management. In the apparel

and accessories branded and 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, we ask several

questions. 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 in light of the

current environment and the company’s particular

situation? Are management’s interests

aligned with those of its shareholders?

◆ Manufacturing costs. Despite technological

advances, apparel remains a laborintensive

industry. Thus, most domestic

apparel and footwear companies manufacture

products in low-labor-cost regions, including

the Far East, the Caribbean basin,

and Latin America. China is a particularly

large exporter: approximately $23.2 billion

of Chinese-made apparel was shipped to the

US in 2006, according to the US Department

of Commerce.

Moreover, most of the larger domestic industry

participants do no manufacturing at all,

but rather source their merchandise in the

aforementioned locales by developing strategic

relationships with garment and footwear factories

there. A growing number of apparel

firms perform only the entrepreneurial functions

involved in apparel manufacturing —


uying raw materials, creating designs, preparing

samples, arranging for production and distribution,

and marketing the finished product.

Notable exceptions include Carter’s and VF

Corp., both of which manufacture a portion

of their branded merchandise.

What’s unique to retailing?

In addition to the aforementioned factors,

specific areas of analysis for a specialty apparel

retailer with regards to its business

strategy include real estate, inventory, samestore

sales, and technology.

◆ Real estate. “Location, location, location,”

a maxim of the real estate business

holds true for retailers. Factors that affect the

potential profitability of a store include the

area’s demographic profile (age and income)

and population growth. Growing populations

and wealth accumulation can bolster

a company’s long-term viability in a region.

Ideally, a store should be located in an area

with a demographic profile that closely matches

the store’s target demographic.

There are many specialty retail concepts

and formats, with locations ranging from

mall stores to strip center outlets to lifestyle

centers. Analysts should evaluate the availability

of transportation and other factors

governing a location’s accessibility to its target

customer.

Pay attention to specialty chains with concentrated

geographic exposure, for it will

then be necessary to evaluate the economic

environment or other characteristics (such as

weather patterns) of those regions, along

with their influence on apparel and accessories

demand. Geographic concentration

can increase a retailer’s risk profile in cases

such as regional power outages, earthquakes,

and hurricanes, or civil unrest.

Most specialty apparel retailers lease their

stores, a practice that provides financial flexibility

that companies in other industries may

not have. Leases eventually expire, which

gives retailers the flexibility to relocate or

close units. Sometimes, however, due to competition

in the industry and the pressure to

increase earnings, retailers close unprofitable

units with unexpired leases. Doing so creates

a contingent liability that they have to account

for: they may take a reserve for store

closings, pay off the entire lease, and then

write off that amount.

INVENTORY/SALES RATIO — RETAIL APPAREL

2.8

2.7

2.6

2.5

2.4

2.3

2.2

1997 98 99 00 01 02 03 04 05 06 2007

Source: US Department of Commerce.

◆ Inventory: a retailer’s crucial asset. For

retailers, having the right merchandise in the

right place at the right time is crucial. Merchandise

held in inventory is a retailer’s most

important asset. Although buildings, property,

and equipment usually exceed its value in

dollar terms, inventory is what generates

sales, making it the key determinant of success

or failure, profit or loss. While other

variables such as price, location, and service

may influence consumers’ decisions to buy,

the actual merchandise in the store must

meet customers’ expectations and reward

their loyalty over time.

The importance of the planning, buying,

and controlling of merchandise inventory

cannot be overstated. An analyst should consider

inventory growth and inventory turns

to determine how well the company is managing

its inventory. (Issues related to industry

operations are discussed in this Survey’s

“How the Industry Operates” section.)

◆ Same-store or comparable store sales.

This is the most closely watched quantitative

indicator for retailers. Defined as the change

in sales from the preceding year at stores

open for a certain period (usually at least

12 months, but sometimes as long as 24

months, depending on the company), this

measure is a barometer of basic demand.

Many companies release these numbers on

the first or second Thursday of each month

for the preceding month.

Because the same-store sales number excludes

growth from newly opened stores, we

see it as a better indicator of organic growth.

Looking only at total sales gains can be misleading,

as a company that aggressively

opens new units can generate strong sales

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gains even if its stores are generally unprofitable.

Same-store sales trends also give a

better indication of the state of business than

a single month’s numbers do.

◆ Technology. Well-designed information

systems can give a retailer a competitive edge

over its peers by providing valuable data on

the preferences and buying patterns of its

customers. Organizations must be adept at

gathering, understanding, and using information

collected at the store level and analyzing

the learnings to improve merchandise assortments,

store allocation, distribution, expand

customer service, and increase their market

share. IT can shorten the supply chain between

supplier and vendor networks as well

as integrate internal systems and thereby

streamline work flow and reduce expenses.

Quantitative factors

After getting a grasp on the company’s

competitive position, the next step is to analyze

its financial statements — the income

statement, the balance sheet, the statement of

cash flows, and various components of each.

Although these are three separate financial

statements, they are very much interrelated

and need to be analyzed together. The analyst

should also scrutinize the company’s

earnings quality.

Income statement

The income statement records the financial

operations of a firm over a given time period.

Among the major items on an apparel or

footwear company’s income statement that the

analyst should examine are trends in revenues,

gross profit margin, and operating margin.

◆ Revenues or sales. As in most other industries,

an income statement analysis for an

apparel brand or retailer begins with the top

line: sales. 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, or for the

retailer, same store sales gains? 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? All things being equal, a more conservative

revenue recognition policy is desir-

able. With apparel and accessories brands,

any trends in discounts and allowances given

to retailers also should be considered.

◆ Gross profit margin. A company’s gross

margin is calculated as net sales minus the

cost of goods sold, expressed as a percentage

of gross sales. It generally reflects a company’s

sales volumes, product mix, pricing,

sourcing, and operational (including manufacturing)

efficiency. The cost-of-goods-sold

line may comprise a number of items other

than merchandise, including costs of purchasing,

warehousing, distribution, freight,

occupancy, and insurance.

Gross margin should be evaluated on both

an absolute basis and a relative basis. If a

company’s gross margin is high compared

with its peers, the company may possess a

competitive advantage.

An analyst also should look for trends in

gross margin. Are any industrywide factors,

such as overcapacity, cutting into gross margins?

Excessive merchandise inventories and

competitive pressures tend to induce a higher

level of promotional selling and markdowns,

which, in turn, will reduce gross margins.

Conversely, does a particular company have

a product in high demand, allowing it to

charge a premium price as demand exceeds

supply? If possible, determine what is causing

fluctuations in gross margin and whether

those trends will persist.

Comparable-store sales can explain gross

margin trends for retail operations. Other

relevant indicators for apparel and accessories

brands and retailers include average

selling prices (ASPs), initial markups (IMUs),

units per transaction (UPT), average ticket

(AT), and inventory turns (discussed later).

◆ Operating profit margin. This figure is

derived by dividing the operating profit

(gross profit minus selling, general, and administrative

expenses) by sales revenues. The

operating margin indicates the efficiency and

profitability of the entire enterprise — not

just the manufacturing operations, but also

the corporate, selling, and distribution operations.

Nonrecurring items should be excluded

from margin calculations to give the

analyst a baseline for comparing results going

forward.

Because the operating margin reflects

costs that can be managed to some degree


(salaries, commissions, advertising, and so

forth), it usually is easier to control than the

gross margin. The company may derive a

certain degree of expense leverage from increased

sales levels, thereby improving operating

margins. Consequently, an increase in

the operating margin typically indicates that

management is using its resources more efficiently,

allowing fixed costs to be spread

across greater volumes. On the other hand, a

trend of narrowing operating margins may

be a warning sign that management is not

operating at its most efficient level.

Balance sheet

The balance sheet reports major categories

and the stated values of assets, liabilities, and

stockholder’s equity at a specific point in time.

◆ Cash and equivalents. A company’s

cash position needs to be analyzed concurrently

with its ability to generate cash. If a

company continually operates with net cash

outflows because of working capital needs

and capital spending, one should look at the

level of cash and marketable securities on the

balance sheet to determine how long the

company can fund operations before it will

need to tap the capital markets.

◆ Inventory. Inventory management is

crucial to retailers and manufacturers alike.

They must have the right products on hand

in the right amounts; failure to do so could

lead to fashion misses or being caught short

during an important selling season. Having

too much inventory raises costs and ties up

capital. It also may signal impending gross

margin declines, in cases where the products

must be discounted in order to sell them before

they go out of style.

Inventory levels are generally available

from a company’s balance sheet. The effectiveness

of inventory management can be

measured by the inventory turnover ratio.

This ratio, calculated by dividing the cost of

goods sold by its average inventory, should

be reviewed for trends and compared with

peer averages.

Inventory turnover ratios for apparel and

footwear companies, while generally comparable,

could vary widely from company to

company. A high turnover rate indicates that

goods are selling well relative to the average

amount of inventory kept in stock. Converse-

ly, a low turnover rate indicates that goods

are not moving rapidly. Inventory buildup is

less of a concern for basic merchandise,

which can be sold throughout the year, than

it is for fashion-oriented products.

Statement of cash flows

It is necessary to estimate cash inflows (or

sources) and outflows (uses) to determine the

net cash flow generated (or used) by a company’s

operations. How does the company

plan to raise and utilize its cash? The cash

flow statement has three sections: operating,

investing, and financing.

The operating section reflects cash generated

from, or used in, operations, after adjusting

for noncash items (such as depreciation and

amortization), and including changes in

working capital components. For example,

if a manufacturer anticipates higher sales

from seasonal activity, it may need cash to

build inventory levels.

The investing and financing sections capture

other sources and uses of cash outside the

company’s operations. Possible sources include

the issuance of debt, or equity capital and dividends

received from affiliated companies. Potential

uses include repurchasing shares of

common stock, paying dividends, reducing

debt, or reinvesting in the business via either

capital expenditures or acquisitions.

Other factors

In addition to the income statement and

balance sheet items outlined earlier, several

other factors are important to consider when

analyzing an apparel or footwear company.

A company’s order backlog indicates what

its sales will be like over the next few months.

Although this information is not included in

the financial statements, some apparel and

footwear companies report it separately.

Certain companies in the athletic footwear

and apparel segment report worldwide “futures

orders.” This measure covers products

scheduled for delivery between certain dates,

usually over the next three to six months,

and is another way to project revenues. In

the apparel industry, deliveries scheduled for

future seasons are reported as “bookings.”

Corporate governance

Before the scandals at Enron Corp.,

WorldCom Inc., and Parmalat Finanziaria

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SpA, corporate governance (CG) was viewed

simply as the system by which companies are

directed and controlled. In the aftermath of a

series of corporate collapses, however, the

global consensus on CG has broadened. In

the largest sense, CG addresses the guiding

principles that form the basis for managing a

company, incorporating values of transparency,

accountability, integrity, and responsibility

towards maximizing shareholder value.

Governance assessments are extending even

further to the field of corporate responsibility

in a proactive and preventative strategy.

The Organisation for Economic Cooperation

and Development (OECD) defines

corporate governance as the system by which

business corporations are directed and controlled,

the distribution of rights and responsibilities

among different participants in the

corporation (such as the board, managers,

shareholders and other stakeholders), and

spells out the rules and procedures for making

decisions about corporate affairs.

We take it to mean, at the very least, that

boardroom compensation is linked to performance,

directors are of high caliber, and auditors

are independent. CG typically addresses

risk management and internal controls, corporate

culture, stewardship and accountability,

board operations and composition, and the

monitoring and evaluation of activities.

Additionally, the growing importance of

intangible assets (such as brand value or corporate

reputation) and their effect on market

capitalization suggests that potential legal

penalties pale in comparison to the risk of a

plummeting share price. For consumer product

companies in particular, the relationship

between good CG and corporate social responsibility

(CSR) are intertwined: accusations

of sweatshops and child labor have

resulted in consumer boycotts and loss of

brand equity, along with a decline in share

price. Therefore, we see the best CG efforts

including supply chain alignment with CSR

in order to avoid guilt by association.

Many large institutional investors are incorporating

the assessment of CG into their

investment decisions in the belief that compliance

with CG initiatives will reduce a

company’s cost of capital and lower its risk

profile, as well as deliver sustainable shareholder

value. ■


GLOSSARY

Allowance from vendors — Price adjustment to a buyer

for damaged merchandise or for the return of unsatisfactory

merchandise.

Assortment plan — The range of merchandise in a category

that managers intend to keep in a store at a

certain inventory level.

Basic item — Apparel with a style and demand that are

generally constant, and which must remain in stock

to satisfy customers.

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

Business-to-business (B2B) exchanges — Online marketplaces

that enable trading partners to conduct

real-time business transactions.

Buyer — The person responsible for the merchandising

operations of a retail outlet or a specific department.

Carryover merchandise — Goods left over from a preceding

season that are offered for sale in the following

season.

Cash discount — A price reduction given by a supplier

to customers paying their invoices before the end of

a stated discount period.

Centralized buying — A practice among retail chains in

which merchandise is purchased by staff from corporate

headquarters.

Co-op money — A vendor’s contribution to a retailer for

the promotion of merchandise.

Diffusion brand — A lower-priced designer line

launched to reach a different channel (usually mass

market) but still convey a message of exclusivity or

prestige.

Direct buying — Buying straight from the manufacturer

without going through an intermediary.

Electronic data interchange (EDI) — A computer network

linking retailers, manufacturers, and the entire

retail distribution pipeline.

Factoring — The practice of selling manufacturers’

and wholesalers’ account receivables to financial

institutions.

Fashion cycle — The life span of a clothing style, from

its rise in popularity to its decline.

Fashion/specialty center — A strip center with mainly

upscale apparel shops, boutiques, and craft shops

carrying high-end fashion or unique merchandise. It

is usually found in high-income trade areas.

Fashion trend — A style that has moved from limited to

wide acceptance.

Fast fashion — Term used to describe stores like H&M

that turn over styles quickly, encouraging the customer

to buy now because the product will be gone

tomorrow.

Gross margin — The difference between net sales and

the total cost of goods sold, expressed as a percentage

of net sales.

Gross profit — Net sales minus the cost of goods sold.

Jobber — A middleman who buys from a manufacturer

and sells to a wholesaler.

Knockoff — An item that is an exact or similar reproduction

of goods made by another manufacturer.

Lifestyle center — Often located near affluent residential

neighborhoods, a strip center that typically includes

at least 50,000 square feet of space occupied

by upscale, national-chain specialty stores. It also

features restaurants, entertainment, and, frequently,

one or more conventional or fashion specialty department

stores as anchors.

Markdown — A reduction in the retail price of an item,

expressed as a percentage of the original price of

the merchandise.

Markon — The difference between the cost as billed (before

deductions for cash discount) and the retail price.

Markup — An increase in an item’s price.

Merchandise vendor allowances or vendor allowances

— Wholesalers and manufacturers provide retailers

with multiple forms of support to enable the swift

movement of goods through the channel. The forms

of support include cooperative advertising, payroll

reimbursements, and markdown reimbursement programs,

all of which have an adverse impact on

wholesalers’ and manufacturers’ profit margins, although

they may in fact increase retailers’ profits.

Net — A vendor’s billing term signifying that no cash or

trade discount is allowed.

Open to buy — The amount of money that a retailer is

willing to invest in inventory for future sales; it is affected

by current sales trends.

Out of stock — The absence of merchandise in certain

styles, sizes, and/or colors in a store’s inventory.

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Outlet center — A strip center, mall, or cluster of

stores, usually located in a rural or tourist location,

that consists mainly of manufacturers’ outlet stores

selling their own brands at a discount. There are no

anchor stores.

Point-of-sale (POS) terminal — Electronic devices at

store checkout counters that read the universal

product code (UPC) on product labels in order to tally

each customer’s sale. POS terminals collect other

data that enable stores to track sales trends and to

assess the effectiveness of promotions.

Price point — The price range at which a line of merchandise

is offered for sale.

Private label — Merchandise designed by a retailer

that carries the store’s own brand name.

Quick response — A partnership between a vendor and

retailer through which orders are automatically replenished

via computer links.

Ready-to-wear — Any article of apparel manufactured

for sale in a retail store (that is, not custom made).

Same-store sales — The measure of year-on-year

sales growth or decline for a store or chain of

stores. The figure excludes new and closed stores,

which can skew results. Also referred to as

comparable-store sales.

Scanning — The electronic reading of a bar code

that yields such product information as price, color,

and size.

Shrinkage — Loss of inventory due to accounting errors,

misdirected shipments, mistakes in ringing up

charges or pricing goods, bookkeeping errors,

spoilage, breakage, and thefts by employees, vendors,

or customers.

Stockkeeping unit (SKU) — A single item of merchandise,

as measured for inventory management purposes.

Stock turnover — The number of times during the

year that inventory is sold out. The figure is derived

by dividing total cost of goods sold by average

inventory value.


INDUSTRY REFERENCES

PERIODICALS

AAppppaarreell

Edgell Communications

4 Middlebury Blvd., Randolph, NJ 07869

(973) 252-0100

Web site: http://www.apparelmag.com

Monthly; aimed at apparel industry executives, with a focus

on technology, new products, and business strategy.

AAppppaarreell NNeewwss

CaliforniaMart

110 E. 9th St., Ste. A-777, Los Angeles, CA 90079

(213) 627-3737

Web site: http://www.apparelnews.net

Weekly; online apparel newsmagazine and fashion

trade portal for manufacturers and retailers.

TThhee AAppppaarreell SSttrraatteeggiisstt

P.O. Box 406, Fleetwood, PA 19522

(610) 944-8291

Web site: http://www.apparelstrategist.com

Monthly and annual; contains apparel industry statistics,

news, and trends.

DDNNRR

Fairchild Publications Inc.

750 Third Ave., 10 th Fl., New York, NY 10017

(212) 630-3600

Web site: http://www.dnrnews.com

Weekly; focuses on the men’s apparel industry.

FFoooottwweeaarr NNeewwss

Fairchild Publications Inc.

750 Third Ave., 10 th Fl., New York, NY 10017

(212) 630-4880

Web site: http://www.footwearnews.com

Weekly; covers current trends and issues in the

footwear industry.

WWWWDD ((WWoommeenn’’ss WWeeaarr DDaaiillyy))

Fairchild Publications Inc.

750 Third Ave., 6 th Fl., New York, NY 10017

(212) 630-4600

Web site: http://www.wwd.com

Daily; focuses on the women’s apparel industry.

TRADE ASSOCIATIONS

American Apparel & Footwear Association (AAFA)

1601 N. Kent St., 12 th Fl., Arlington, VA 22209

(703) 797-9056

Web site: http://www.apparelandfootwear.org

Provides apparel and footwear manufacturers with industry

statistics and other demographic information.

Cotton Incorporated

6399 Weston Pkwy., Cary, NC 27513

(919) 678-2220

Web site: http://www.cottoninc.com

A worldwide organization funded by cotton growers

and importers that provides research and promotional

support to increase demand for and the profitability of

cotton; publishes Lifestyle Monitor, a newsletter about

consumer attitudes and behavior.

LIMA (International Licensing Industry Merchandisers’

Association)

350 Fifth Ave., Ste. 1408, New York, NY 10118

(212) 244-1944

Web site: http://www.licensing.org

A worldwide organization that works with licensors and

licensees for the advancement of professionalism in licensing

through research, national and international

seminars, trade events, and publications.

National Sporting Goods Association (NSGA)

1601 Feehanville Dr., Ste 300, Mt. Prospect, IL 60056

(847) 296-6742

Web site: http://www.nsga.org

Represents more than 22,000 sporting goods

retailer/dealer outlets and 3,000 product manufacturers,

suppliers, and sales agents.

SGMA International

1150 17th St. NW, Ste. 850, Washington, DC 20036

(202) 775-1762

Web site: http://www.sgma.com

Provides manufacturers, producers, and distributors

with information and statistics related to the global

sports apparel, athletic footwear, and sporting goods

equipment industries; formerly called the Sporting

Goods Manufacturers Association.

US Association of Importers of Textiles & Apparel

13 E. 16th St., 6 th Fl., New York, NY 10003

(212) 463-0089

Web site: http://www.usaita.com

Nonprofit industry association representing textile- and

apparel-importing firms before the US government, the

business community, and the public.

MARKET RESEARCH FIRMS

The Conference Board

845 Third Ave., New York, NY 10022

(212) 759-0900

Web site: http://www.conference-board.org

A not-for-profit, nonadvocacy business membership

and research organization that calculates and disseminates

leading economic indicators and an index of consumer

confidence.

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NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

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The NPD Group Inc.

900 W. Shore Rd., Port Washington, NY 11050

(516) 625-0700

Web site: http://www.npd.com

A market research and consulting organization providing

global sales and marketing perspectives; combines

consumer information with point-of-sale data collected

from retailers and other distribution channels.

Planalytics Inc.

1325 Morris Dr., Ste. 201, Wayne, PA 19087

(800) 882-5881

Web site: http://www.planalytics.com

A consulting firm that helps companies make more effective

and profitable decisions by forecasting weatherdriven

changes in supply, demand, and prices for products

and services.

Teenage Research Unlimited

707 Skokie Blvd., 7th Fl., Northbrook, IL 60062

(847) 564-3440

Web site: http://www.teenresearch.com

A market research firm specializing in the teen demographic;

provides qualitative and quantitative research.

GOVERNMENT AGENCIES

Bureau of Labor Statistics (BLS)

Postal Square Building

2 Massachusetts Ave. NE, Washington, DC 20212

(202) 691-5200

Web site: http://stats.bls.gov

This division of the US Department of Labor is the principal

fact-finding agency of the federal government in

the broad fields of labor, economics, and statistics. Its

major programs include the consumer price index, the

producer price index, the employment cost index, and

the national compensation survey.

US Department of Commerce

1401 Constitution Ave. NW, Washington, DC 20230

(202) 482-4883

Web site: http://www.doc.gov

This cabinet-level department is responsible for various

government agencies that monitor and regulate US commerce.

Among its many divisions is the Census Bureau,

which publishes population statistics and projections.

CORPORATE INFORMATION

Many corporate filings with the federal Securities and

Exchange Commission, including 10-Ks and 10-Qs, are

available through its Edgar Web site:

http://www.sec.gov/edgar/searchedgar/webusers.htm

In addition, most apparel and footwear manufacturers

operate their own Web sites.


DEFINITIONS FOR COMPARATIVE COMPANY ANALYSIS TABLES

Operating revenues

Net sales and other operating revenues. Excludes

interest income if such income is “nonoperating.”

Includes franchised/leased department income for

retailers and royalties for publishers and oil and mining

companies. Excludes excise taxes for tobacco, liquor,

and oil companies.

Net income

Profits derived from all sources, after deductions of

expenses, taxes, and fixed charges, but before any

discontinued operations, extraordinary items, and

dividend payments (preferred and common).

Return on revenues

Net income divided by operating revenues.

Return on assets

Net income divided by average total assets. Used in

industry analysis and as a measure of asset-use

efficiency.

Return on equity

Net income, less preferred dividend requirements,

divided by average common shareholder‘s equity.

Generally used to measure performance and to make

industry comparisons.

Current ratio

Current assets divided by current liabilities. It is a

measure of liquidity. Current assets are those assets

expected to be realized in cash or used up in the

production of revenue within one year. Current liabilities

generally include all debts/obligations falling due within

one year.

Debt/capital ratio

Long-term debt (excluding current portion) divided by

total invested capital. It indicates how highly “leveraged”

a company might be. Long-term debt includes those

debts/obligations due after one year, including bonds,

notes payable, mortgages, lease obligations, and

industrial revenue bonds. Other long-term debt, when

reported as a separate account, is excluded; this account

generally includes pension and retirement benefits. Total

invested capital is the sum of stockholders’ equity, longterm

debt, capital lease obligations, deferred income

taxes, investment credits, and minority interest.

Debt as a percent of net working capital

Long-term debt (excluding current portion) divided by the

difference between current assets and current liabilities.

It is an indicator of a company’s liquidity.

Price/earnings ratio

The ratio of market price to earnings, obtained by

dividing the stock’s high and low market price for the

year by earnings per share (before extraordinary items).

It essentially indicates the value investors place on a

company’s earnings.

Dividend payout ratio

This is the percentage of earnings paid out in dividends.

It is calculated by dividing the annual dividend by the

earnings. Dividends are generally total cash payments

per share over a 12-month period. Although payments are

usually calculated from the ex-dividend dates, they may

also be reported on a declared basis where this has been

established to be a company’s payout policy.

Dividend yield

The total cash dividend payments divided by the year’s

high and low market prices for the stock.

Earnings per share

The amount a company reports as having been earned

for the year (based on generally accepted accounting

standards), divided by the number of shares outstanding.

Amounts reported in Industry Surveys exclude

extraordinary items.

Tangible book value per share

This measure indicates the theoretical dollar amount

per common share one might expect to receive should

liquidation take place. Generally, book value is

determined by adding the stated (or par) value of the

common stock, paid-in capital, and retained earnings,

then subtracting intangible assets, preferred stock at

liquidating value, and unamortized debt discount. This

amount is divided by the number of outstanding shares

to get book value per common share.

Share price

This shows the calendar-year high and low of a stock’s

market price.

In addition to the footnotes that appear at the bottom of

each page, you will notice some or all of the following:

NA—Not available.

NM—Not meaningful.

NR—Not reported.

AF—Annual figure. Data are presented on an annual

basis.

CF—Combined figure. In this case, data are not available

because one or more components are combined with

other items.

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NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

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COMPARATIVE COMPANY ANALYSIS — APPAREL & FOOTWEAR

Operating Revenues

Million $ Compound Growth Rate (%) Index Basis (1996 = 100)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2001 1996 10-Yr. 5-Yr. 1-Yr. 2006 2005 2004 2003 2002

AAPPPAREL, ACCESSOORIES && LUXXURY GGOODSS‡‡

ASHW § ASHWORTH INC OCT 209.6 204.8 173.1 A 149.4 127.5 124.7 75.4 10.8 10.9 2.3 278 272 230 198 169

COH * COACH INC JUN 2,111.5 1,710.4 C 1,321.1 953.2 719.4 616.1 NA NA 27.9 23.4 ** ** ** ** NA

FOSL § FOSSIL INC DEC 1,214.4 1,041.0 960.3 781.7 663.9 546.3 205.9 A 19.4 17.3 16.7 590 506 466 380 322

HBI † HANESBRANDS INC JUN 4,472.8 A 4,683.7 A 4,632.7 NA NA NA NA NA NA (4.5) ** ** ** ** NA

JNY * JONES APPAREL GROUP INC DEC 4,742.8 5,074.2 4,649.7 A 4,375.3 A 4,340.9 A 4,097.2 A 1,034.1 16.5 3.0 (6.5) 459 491 450 423 420

KWD § KELLWOOD CO # JAN 1,961.8 D 2,064.6 D 2,555.7 A 2,346.5 A,C 2,204.7 A 2,281.8 1,521.0 2.6 (3.0) (5.0) 129 136 168 154 145

LIZ * LIZ CLAIBORNE INC DEC 4,994.3 4,847.8 4,632.8 4,241.1 3,717.5 3,448.5 A 2,217.5 8.5 7.7 3.0 225 219 209 191 168

MFB § MAIDENFORM BRANDS INC DEC 416.8 382.2 337.0 292.9 NA NA NA NA NA 9.1 ** ** ** ** NA

MOV § MOVADO GROUP INC # JAN 532.9 470.9 419.0 A 330.2 300.1 299.7 215.1 9.5 12.2 13.1 248 219 195 154 140

OXM § OXFORD INDUSTRIES INC # MAY 1,143.4 D,F 1,121.8 D,F 1,325.7 A,F 1,121.7 A,F 764.6 677.3 703.2 5.0 11.0 1.9 163 160 189 160 109

PVH † PHILLIPS-VAN HEUSEN CORP # JAN 2,090.6 1,908.8 1,641.4 1,582.0 A 1,405.0 1,431.9 1,359.6 4.4 7.9 9.5 154 140 121 116 103

RL * POLO RALPH LAUREN CP -CL A # MAR 4,287.4 3,746.3 A 3,305.4 A 2,649.7 C 2,439.3 2,363.7 1,180.4 13.8 12.6 14.4 363 317 280 224 207

ZQK § QUIKSILVER INC OCT 2,362.3 1,780.9 A 1,266.9 A 975.0 705.5 A 620.6 A 194.6 28.4 30.6 32.6 1,214 915 651 501 363

UNF § UNIFIRST CORP AUG 821.0 763.8 719.4 A 596.9 578.9 556.4 391.8 7.7 8.1 7.5 210 195 184 152 148

VFC * VF CORP DEC 6,215.8 D 6,502.4 A 6,054.5 A,F 5,207.5 A,F 5,083.5 D,F 5,518.8 F 5,137.2 A 1.9 2.4 (4.4) 121 127 118 101 99

VLCM § VOLCOM INC DEC 205.3 160.0 113.2 76.3 NA NA NA NA NA 28.3 ** ** ** ** NA

WRNC † WARNACO GROUP INC DEC 1,827.5 A,C 1,501.1 1,424.2 1,374.4 1,493.0 1,671.3 1,063.8 5.6 1.8 21.7 172 141 134 129 140

APPAARRELL RETAIL‡

ANF * ABERCROMBIE & FITCH -CL A # JAN 3,318.2 2,784.7 2,021.3 1,707.8 1,595.8 1,364.9 335.4 25.8 19.4 19.2 989 830 603 509 476

ARO † AEROPOSTALE INC # JAN 1,413.2 1,204.3 964.2 734.9 550.9 304.8 NA NA 35.9 17.3 ** ** ** ** NA

AEO † AMERN EAGLE OUTFITTERS INC # JAN 2,794.4 C 2,309.4 1,881.2 D 1,520.0 1,463.1 1,371.9 326.4 24.0 15.3 21.0 856 708 576 466 448

ANN † ANNTAYLOR STORES CORP # JAN 2,342.9 2,073.1 1,853.6 1,587.7 1,382.8 1,308.9 807.1 C 11.2 12.3 13.0 290 257 230 197 171

BWS § BROWN SHOE CO INC # JAN 2,470.9 2,292.1 A 1,941.8 1,832.1 1,841.4 1,755.8 1,527.8 4.9 7.1 7.8 162 150 127 120 121

CTR § CATO CORP -CL A # JAN 875.9 F 836.4 F 789.6 F 747.3 F 748.3 F 705.7 F 491.5 F 5.9 4.4 4.7 178 170 161 152 152

CHIC § CHARLOTTE RUSSE HOLDING INC SEP 681.5 D 603.8 539.4 456.6 409.4 324.8 NA NA 16.0 12.9 ** ** ** ** NA

CHRS † CHARMING SHOPPES INC # JAN 3,067.5 2,755.7 A 2,332.3 2,285.7 2,412.4 C 1,993.8 A 1,016.3 11.7 9.0 11.3 302 271 229 225 237

CHS † CHICOS FAS INC # JAN 1,646.5 1,404.6 1,066.9 768.5 A 531.1 378.1 64.1 38.4 34.2 17.2 2,570 2,192 1,665 1,199 829

PLCE § CHILDRENS PLACE RETAIL STRS # JAN NA 1,668.7 1,157.5 A 797.9 671.4 657.0 143.8 NA NA NA NA 1,160 805 555 467

CBK § CHRISTOPHER & BANKS CORP # FEB 547.3 490.5 438.9 390.7 338.8 275.9 95.9 19.0 14.7 11.6 570 511 457 407 353

CWTR † COLDWATER CREEK INC # JAN 1,054.6 779.7 590.3 518.8 473.2 H 464.0 143.1 22.1 17.8 35.3 737 545 413 363 331

DBRN § DRESS BARN INC JUL 1,300.3 1,000.3 A 754.9 707.1 717.1 695.0 515.5 9.7 13.3 30.0 252 194 146 137 139

FINL § FINISH LINE INC -CL A # FEB 1,338.2 1,306.0 1,166.8 985.9 757.2 701.4 332.0 15.0 13.8 2.5 403 393 351 297 228

FL † FOOT LOCKER INC # JAN 5,750.0 5,653.0 5,355.0 4,779.0 4,509.0 4,379.0 8,092.0 A (3.4) 5.6 1.7 71 70 66 59 56

GPS * GAP INC # JAN 15,943.0 16,023.0 16,267.0 15,854.0 14,454.7 13,847.9 5,284.4 11.7 2.9 (0.5) 302 303 308 300 274

GCO § GENESCO INC # JAN 1,460.5 1,283.9 D 1,112.7 A 837.4 828.3 746.8 461.3 12.2 14.4 13.8 317 278 241 182 180

GYMB § GYMBOREE CORP # JAN 791.6 D 678.5 594.5 D 578.0 546.8 505.4 F 303.1 F 10.1 9.4 16.7 261 224 196 191 180

HOTT § HOT TOPIC INC # JAN 751.6 725.1 656.5 572.0 443.3 336.1 43.6 32.9 17.5 3.6 1,723 1,662 1,505 1,311 1,016

JOSB § JOS A BANK CLOTHIERS INC # JAN 546.4 464.6 372.5 299.7 243.4 211.0 155.1 13.4 21.0 17.6 352 300 240 193 157

LTD * LIMITED BRANDS INC # JAN 10,671.0 A 9,669.0 9,408.0 8,934.0 8,445.0 A,C 9,363.0 8,644.8 2.1 2.6 10.4 123 112 109 103 98

MW § MENS WEARHOUSE INC # JAN 1,882.1 1,724.9 1,546.7 1,392.7 1,295.0 1,273.2 483.5 14.6 8.1 9.1 389 357 320 288 268

PSUN † PACIFIC SUNWEAR CALIF INC # JAN 1,447.2 1,391.5 1,229.8 1,040.3 846.4 684.8 155.3 25.0 16.1 4.0 932 896 792 670 545

PSS † COLLECTIVE BRANDS INC # JAN 2,796.7 D 2,667.3 2,656.5 D 2,783.3 2,878.0 2,913.7 2,333.7 1.8 (0.8) 4.9 120 114 114 119 123

ROST † ROSS STORES INC # JAN 5,570.2 4,944.2 4,240.0 3,920.6 3,531.3 2,986.6 1,689.8 12.7 13.3 12.7 330 293 251 232 209

SSI § STAGE STORES INC # JAN 1,550.2 A 1,344.1 1,243.9 972.2 A 875.6 855.6 776.5 7.2 12.6 15.3 200 173 160 125 113

SMRT § STEIN MART INC # JAN 1,501.3 F 1,481.6 1,459.6 D 1,355.5 D 1,408.6 1,320.2 616.2 9.3 2.6 1.3 244 240 237 220 229

TJX * TJX COMPANIES INC # JAN 17,404.6 D 16,057.9 14,913.5 13,327.9 11,981.2 10,709.0 6,689.4 D 10.0 10.2 8.4 260 240 223 199 179

TWB § TWEEN BRANDS INC # JAN 883.7 757.9 675.8 598.7 D 647.5 602.7 NA NA 8.0 16.6 ** ** ** ** NA

URBN † URBAN OUTFITTERS INC # JAN 1,224.7 1,092.1 827.8 548.4 422.8 349.0 156.4 22.9 28.5 12.1 783 698 529 351 270


Operating Revenues (continued)

Million $ Compound Growth Rate (%) Index Basis (1996 = 100)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2001 1996 10-Yr. 5-Yr. 1-Yr. 2006 2005 2004 2003 2002

FFOOOTWEEAR‡

CROX § CROCS INC DEC 354.7 A 108.6 13.5 A 1.2 NA NA NA NA NA 226.7 ** ** ** ** NA

DECK § DECKERS OUTDOOR CORP DEC 304.4 264.8 214.8 121.1 99.1 A 91.5 101.8 11.6 27.2 15.0 299 260 211 119 97

ICON § ICONIX BRAND GROUP INC DEC 80.7 A 30.2 A 69.0 H 131.4 156.5 C 101.4 45.0 6.0 (4.5) 167.6 179 67 153 292 348

KSWS § K-SWISS INC -CL A DEC 501.1 508.6 484.1 429.2 D 290.4 C 236.1 106.8 16.7 16.2 (1.5) 469 476 453 402 272

NKE * NIKE INC -CL B # MAY 16,325.9 14,954.9 13,739.7 12,253.1 10,697.0 9,893.0 C 9,186.5 5.9 10.5 9.2 178 163 150 133 116

SKX § SKECHERS U S A INC DEC 1,205.4 1,006.5 920.3 835.0 943.6 960.4 NA NA 4.6 19.8 ** ** ** ** NA

TBL † TIMBERLAND CO -CL A DEC 1,567.6 1,565.7 1,500.6 1,342.1 1,190.9 1,183.6 690.0 8.6 5.8 0.1 227 227 217 195 173

WWW § WOLVERINE WORLD WIDE DEC 1,141.9 1,061.0 991.9 888.9 A 827.1 720.1 511.0 A 8.4 9.7 7.6 223 208 194 174 162

OTHHER COMPANNIES WITH SIIGNIFIICCANT APPPAREL OPERATIIOONNS

BEBE BEBE STORES INC JUN 579.1 509.5 372.3 323.5 316.4 290.8 NA NA 14.8 13.6 ** ** ** ** NA

COLM COLUMBIA SPORTSWEAR CO DEC 1,293.2 1,160.2 A 1,099.3 953.6 A,C 816.3 779.6 299.0 15.8 10.7 11.5 433 388 368 319 273

HMX HARTMARX CORP NOV 597.9 F 598.2 A,F 586.4 A,F 561.8 F 570.3 F 601.6 A,F 610.2 A,F (0.2) (0.1) (0.0) 98 98 96 92 93

JCG J CREW GROUP INC # JAN 1,152.1 953.2 804.2 688.3 766.4 777.9 808.8 3.6 8.2 20.9 142 118 99 85 95

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. ** Not calculated; data for base year or end year not available.

A - This year's data reflect an acquisition or merger. B - This year's data reflect a major merger resulting in the formation of a new company. C - This year's data reflect an accounting change. D - Data exclude discontinued operations. E - Includes excise taxes. F - Includes

other (nonoperating) income. G - Includes sale of leased depts. H - Some or all data are not available, due to a fiscal year change.

Net Income

Million $ Compound Growth Rate (%) Index Basis (1996 = 100)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2001 1996 10-Yr. 5-Yr. 1-Yr. 2006 2005 2004 2003 2002

APPAARREL, ACCESSOORIES & LUXXUURY GOOODS‡

ASHW § ASHWORTH INC OCT 1.0 (0.7) 8.2 7.3 2.5 2.8 1.4 (3.8) (19.6) NM 68 (52) 585 522 179

COH * COACH INC JUN 494.3 388.7 261.7 146.6 85.8 64.0 NA NA 50.5 27.2 ** ** ** ** NA

FOSL § FOSSIL INC DEC 77.6 78.1 90.6 68.3 58.9 43.7 13.6 19.0 12.2 (0.6) 571 574 666 503 433

HBI † HANESBRANDS INC JUN 322.5 218.5 449.6 NA NA NA NA NA NA 47.6 ** ** ** ** NA

JNY * JONES APPAREL GROUP INC DEC (146.0) 274.3 301.8 328.6 332.3 236.2 80.9 NM NM NM (181) 339 373 406 411

KWD § KELLWOOD CO # JAN 21.1 23.1 66.3 68.9 42.0 37.7 37.6 (5.6) (11.0) (8.7) 56 61 176 183 112

LIZ * LIZ CLAIBORNE INC DEC 254.7 317.4 313.6 279.7 231.2 192.1 155.7 5.0 5.8 (19.8) 164 204 201 180 149

MFB § MAIDENFORM BRANDS INC DEC 27.8 8.9 (7.6) 27.0 NA NA NA NA NA 210.5 ** ** ** ** NA

MOV § MOVADO GROUP INC # JAN 50.1 26.6 26.3 22.9 20.1 17.1 11.7 15.7 24.0 88.4 429 228 225 195 172

OXM § OXFORD INDUSTRIES INC # MAY 52.3 51.2 49.8 39.7 20.3 10.6 19.6 10.3 37.7 2.2 266 261 254 202 103

PVH † PHILLIPS-VAN HEUSEN CORP # JAN 155.2 111.7 58.6 14.7 30.4 10.7 18.5 23.7 70.8 39.0 838 603 316 79 164

RL * POLO RALPH LAUREN CP -CL A # MAR 400.9 308.0 190.4 171.0 174.2 172.5 117.3 13.1 18.4 30.2 342 263 162 146 149

ZQK § QUIKSILVER INC OCT 93.0 107.1 81.4 58.5 37.6 28.0 11.7 23.1 27.1 (13.2) 798 919 698 502 322

UNF § UNIFIRST CORP AUG 39.2 43.3 33.6 29.3 26.9 23.2 24.7 4.7 11.0 (9.6) 159 176 136 119 109

VFC * VF CORP DEC 535.1 518.5 474.7 397.9 364.4 137.8 299.5 6.0 31.2 3.2 179 173 158 133 122

VLCM § VOLCOM INC DEC 28.8 29.3 24.6 14.3 NA NA NA NA NA (2.0) ** ** ** ** NA

WRNC † WARNACO GROUP INC DEC 73.6 49.7 46.9 2,379.3 (163.2) (861.2) (8.2) NM NM 48.2 NM NM NM NM NM

APPAARREL RETAIILL‡

ANF * ABERCROMBIE & FITCH -CL A # JAN 422.2 334.0 216.4 204.8 194.9 168.7 24.7 32.8 20.1 26.4 1,711 1,354 877 830 790

ARO † AEROPOSTALE INC # JAN 106.6 84.0 84.1 54.3 31.3 10.9 NA NA 57.8 27.0 ** ** ** ** NA

AEO † AMERN EAGLE OUTFITTERS INC # JAN 387.4 293.7 224.2 60.0 88.7 105.5 5.9 51.9 29.7 31.9 NM 4,957 3,785 1,013 1,498

ANN † ANNTAYLOR STORES CORP # JAN 143.0 81.9 63.3 100.9 80.2 29.1 8.7 32.4 37.5 74.6 1,650 945 730 1,165 925

BWS § BROWN SHOE CO INC # JAN 65.7 41.0 43.3 46.9 45.2 0.9 20.3 12.5 133.4 60.3 323 202 213 231 222

CTR § CATO CORP -CL A # JAN 51.5 44.8 34.8 31.4 45.8 43.1 7.0 22.0 3.6 14.8 732 638 496 447 652

CHIC § CHARLOTTE RUSSE HOLDING INC SEP 37.2 10.8 15.1 11.0 22.4 21.5 NA NA 11.6 244.1 ** ** ** ** NA

CHRS † CHARMING SHOPPES INC # JAN 108.9 99.4 64.5 40.6 46.3 (4.4) (7.2) NM NM 9.6 NM NM NM NM NM

CHS † CHICOS FAS INC # JAN 166.6 194.0 141.2 100.2 66.8 42.2 1.9 NM 31.6 (14.1) NM NM NM NM 3,457

PLCE § CHILDRENS PLACE RETAIL STRS # JAN NA 63.9 43.0 23.0 8.9 46.6 30.4 NA NA NA ** 210 141 75 29

NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

37


NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

38

Net Income (continued)

Million $ Compound Growth Rate (%) Index Basis (1996 = 100)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2001 1996 10-Yr. 5-Yr. 1-Yr. 2006 2005 2004 2003 2002

CBK § CHRISTOPHER & BANKS CORP # FEB 33.7 30.4 27.0 39.3 38.5 32.9 (0.6) NM 0.5 10.8 NM NM NM NM NM

CWTR † COLDWATER CREEK INC # JAN 55.4 41.6 29.1 12.5 9.4 1.8 10.8 17.7 98.4 33.2 512 384 269 115 87

DBRN § DRESS BARN INC JUL 79.0 52.6 30.9 8.0 37.9 35.3 18.9 15.4 17.5 50.2 418 278 164 43 201

FINL § FINISH LINE INC -CL A # FEB 32.4 60.5 61.3 47.3 25.0 18.4 18.8 5.6 11.9 (46.5) 172 322 326 251 133

FL † FOOT LOCKER INC # JAN 247.0 263.0 255.0 209.0 162.0 111.0 169.0 3.9 17.3 (6.1) 146 156 151 124 96

GPS * GAP INC # JAN 778.0 1,113.0 1,150.0 1,030.0 477.5 (7.8) 452.9 5.6 NM (30.1) 172 246 254 227 105

GCO § GENESCO INC # JAN 68.2 62.6 48.5 29.6 36.4 38.3 10.6 20.5 12.2 9.0 647 593 459 281 345

GYMB § GYMBOREE CORP # JAN 71.2 32.9 17.1 25.7 21.8 4.6 31.8 8.4 73.1 116.3 224 103 54 81 69

HOTT § HOT TOPIC INC # JAN 13.6 22.4 39.7 48.0 34.6 28.6 2.6 18.2 (13.8) (39.2) 530 872 1,544 1,869 1,347

JOSB § JOS A BANK CLOTHIERS INC # JAN 43.2 35.3 24.5 16.6 10.9 6.5 0.3 NM 46.0 22.6 NM NM NM NM 4,361

LTD * LIMITED BRANDS INC # JAN 675.0 666.0 705.0 717.0 496.0 519.0 434.2 4.5 5.4 1.4 155 153 162 165 114

MW § MENS WEARHOUSE INC # JAN 148.6 103.9 71.4 50.0 42.4 43.3 21.1 21.5 28.0 43.0 703 491 337 237 201

PSUN † PACIFIC SUNWEAR CALIF INC # JAN 39.6 126.2 106.9 80.2 49.7 27.6 7.4 18.2 7.5 (68.6) 535 1,703 1,442 1,082 670

PSS † COLLECTIVE BRANDS INC # JAN 125.4 74.2 35.1 (0.1) 105.8 45.4 107.7 1.5 22.5 69.0 116 69 33 (0) 98

ROST † ROSS STORES INC # JAN 241.6 199.6 169.9 228.1 201.2 155.0 80.9 11.6 9.3 21.0 299 247 210 282 249

SSI § STAGE STORES INC # JAN 55.3 55.9 51.4 53.4 54.4 (11.6) 14.0 14.7 NM (1.0) 394 399 366 381 388

SMRT § STEIN MART INC # JAN 37.2 50.9 38.1 3.9 20.7 15.4 26.0 3.7 19.3 (26.9) 143 196 147 15 80

TJX * TJX COMPANIES INC # JAN 776.8 690.4 664.1 658.4 578.4 540.4 213.8 13.8 7.5 12.5 363 323 311 308 270

TWB § TWEEN BRANDS INC # JAN 64.8 54.5 41.6 28.5 47.3 39.6 NA NA 10.4 19.0 ** ** ** ** NA

URBN † URBAN OUTFITTERS INC # JAN 116.2 130.8 90.5 48.4 27.4 15.0 13.3 24.2 50.6 (11.2) 876 986 682 365 207

FOOOTWWEAAR‡

CROX § CROCS INC DEC 64.4 17.0 (1.5) (1.2) NA NA NA NA NA 279.5 ** ** ** ** NA

DECK § DECKERS OUTDOOR CORP DEC 30.6 31.8 25.5 9.2 1.6 1.6 3.7 23.7 79.9 (3.9) 837 871 699 250 44

ICON § ICONIX BRAND GROUP INC DEC 32.5 15.9 0.2 (11.3) (3.9) (2.3) 1.1 39.7 NM 103.9 2,839 1,392 21 (990) (345)

KSWS § K-SWISS INC -CL A DEC 76.9 75.2 71.3 53.8 28.7 23.3 0.7 NM 27.0 2.1 NM NM NM NM 3,926

NKE * NIKE INC -CL B # MAY 1,491.5 1,392.0 1,211.6 945.6 740.1 668.3 795.8 6.5 17.4 7.1 187 175 152 119 93

SKX § SKECHERS U S A INC DEC 71.0 44.7 23.6 (11.9) 47.0 47.3 NA NA 8.5 58.8 ** ** ** ** NA

TBL † TIMBERLAND CO -CL A DEC 101.2 164.6 152.7 117.9 90.2 106.7 20.4 17.4 (1.1) (38.5) 496 806 748 577 442

WWW § WOLVERINE WORLD WIDE DEC 83.6 74.5 65.9 51.7 47.9 45.2 32.9 9.8 13.1 12.3 255 227 201 157 146

OTHHER COMMPPANNIIESS WWIITHH SIIGGNIIFFIICANNT APPPPAREL OPERAATIIOONS

BEBE BEBE STORES INC JUN 73.8 66.3 33.8 19.3 26.5 27.8 NA NA 21.6 11.3 ** ** ** ** NA

COLM COLUMBIA SPORTSWEAR CO DEC 123.0 130.7 138.6 120.1 102.5 88.8 21.0 19.3 6.7 (5.9) 586 622 660 572 488

HMX HARTMARX CORP NOV 7.3 23.6 15.9 8.7 3.4 (13.9) 23.8 (11.2) NM (69.1) 31 99 67 37 14

JCG J CREW GROUP INC # JAN 77.8 3.8 (100.3) (50.2) (40.6) (11.0) 12.5 20.0 NM 1,950.1 620 30 (799) (400) (323)

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. ** Not calculated; data for base year or end year not available.

Return on Revenues (%) Return on Assets (%) Return on Equity (%)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

APPARELL, AACCCCESSORIIES & LLUXURRY GOOODDSS‡‡

ASHW § ASHWORTH INC OCT 0.5 NM 4.7 4.9 2.0 0.6 NM 6.2 7.0 2.6 0.9 NM 8.6 8.8 3.3

COH * COACH INC JUN 23.4 22.7 19.8 15.4 11.9 33.2 32.7 31.8 27.7 24.5 44.5 42.8 43.3 42.7 42.0

FOSL § FOSSIL INC DEC 6.4 7.5 9.4 8.7 8.9 9.7 10.2 13.2 12.8 13.6 13.8 14.9 19.1 17.9 19.5

HBI † HANESBRANDS INC JUN 7.2 4.7 9.7 NA NA 7.1 5.1 NA NA NA 11.1 8.1 NA NA NA

JNY * JONES APPAREL GROUP INC DEC NM 5.4 6.5 7.5 7.7 NM 6.0 6.9 8.2 9.2 NM 10.3 11.6 13.6 15.8

KWD § KELLWOOD CO # JAN 1.1 1.1 2.6 2.9 1.9 1.4 1.5 4.6 5.4 3.7 3.4 3.5 9.8 11.5 8.3

LIZ * LIZ CLAIBORNE INC DEC 5.1 6.5 6.8 6.6 6.2 7.7 10.3 11.1 11.4 10.9 12.3 16.6 18.5 19.5 19.7

MFB § MAIDENFORM BRANDS INC DEC 6.7 2.3 NM 9.2 NA 11.3 NM NM NA NA 43.5 NM NM NA NA

MOV § MOVADO GROUP INC # JAN 9.4 5.7 6.3 6.9 6.7 8.9 5.2 6.1 6.2 6.3 14.3 8.3 8.9 8.9 9.8

OXM § OXFORD INDUSTRIES INC # MAY 4.6 4.6 3.8 3.5 2.7 5.8 5.7 6.2 6.7 5.5 12.3 14.6 18.4 18.5 11.2


Return on Revenues (%) (cont’d) Return on Assets (%) (cont’d) Return on Equity (%) (cont’d)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

PVH † PHILLIPS-VAN HEUSEN CORP # JAN 7.4 5.9 3.6 0.9 2.2 8.1 5.9 2.5 NM 4.1 19.6 19.8 11.4 NM 11.3

RL * POLO RALPH LAUREN CP -CL A # MAR 9.4 8.2 5.8 6.5 7.1 11.7 10.6 7.6 7.9 9.2 18.3 16.5 12.3 13.0 15.8

ZQK § QUIKSILVER INC OCT 3.9 6.0 6.4 6.0 5.3 4.0 6.8 9.6 10.1 8.6 11.5 16.2 15.7 16.3 15.4

UNF § UNIFIRST CORP AUG 4.8 5.7 4.7 4.9 4.6 5.0 6.0 5.5 5.8 5.4 9.1 11.1 9.6 9.1 9.0

VFC * VF CORP DEC 8.6 8.0 7.8 7.6 7.2 10.0 10.2 10.2 10.2 9.4 17.6 19.4 21.2 21.9 18.9

VLCM § VOLCOM INC DEC 14.0 18.3 21.7 18.7 NA 22.0 39.8 84.1 NA NA 24.3 44.4 103.4 NA NA

WRNC † WARNACO GROUP INC DEC 4.0 3.3 3.3 173.1 NM 5.1 4.2 4.2 233.8 NM 11.2 8.2 8.5 NA NA

APPAAREL RETAIL‡

ANF * ABERCROMBIE & FITCH -CL A # JAN 12.7 12.0 10.7 12.0 12.2 20.9 21.3 15.8 17.2 22.1 35.2 40.1 28.3 25.5 29.0

ARO † AEROPOSTALE INC # JAN 7.5 7.0 8.7 7.4 5.7 19.7 18.5 23.6 20.5 18.0 35.7 32.1 39.7 34.6 40.1

AEO † AMERN EAGLE OUTFITTERS INC # JAN 13.9 12.7 11.9 3.9 6.1 21.6 20.3 20.8 7.5 12.6 30.1 27.7 27.9 9.8 16.4

ANN † ANNTAYLOR STORES CORP # JAN 6.1 3.9 3.4 6.4 5.8 9.3 5.8 5.1 9.3 8.5 13.7 8.3 7.2 13.1 12.1

BWS § BROWN SHOE CO INC # JAN 2.7 1.8 2.2 2.6 2.5 6.2 4.4 5.5 6.6 6.4 13.7 9.9 11.6 14.4 16.3

CTR § CATO CORP -CL A # JAN 5.9 5.4 4.4 4.2 6.1 12.3 11.2 9.3 8.5 12.8 19.9 19.9 17.2 13.5 18.2

CHIC § CHARLOTTE RUSSE HOLDING INC SEP 5.5 1.8 2.8 2.4 5.5 10.8 3.4 6.0 5.8 13.7 19.9 6.7 10.2 8.2 19.4

CHRS † CHARMING SHOPPES INC # JAN 3.6 3.6 2.8 1.8 1.9 6.6 6.9 5.2 3.5 4.1 12.4 13.2 9.9 7.0 8.3

CHS † CHICOS FAS INC # JAN 10.1 13.8 13.2 13.0 12.6 16.2 22.6 23.8 26.0 27.4 20.7 28.4 30.2 32.6 34.8

PLCE § CHILDRENS PLACE RETAIL STRS # JAN NA 3.8 3.7 2.9 1.3 NA 9.2 8.7 6.9 3.0 NA 18.1 15.1 9.4 4.0

CBK § CHRISTOPHER & BANKS CORP # FEB 6.2 6.2 6.2 10.1 11.4 11.8 12.3 12.4 21.1 26.1 16.1 17.1 15.8 24.5 30.1

CWTR † COLDWATER CREEK INC # JAN 5.3 5.3 4.9 2.4 2.0 10.7 10.6 10.9 6.3 5.2 19.6 18.6 18.3 11.1 9.3

DBRN § DRESS BARN INC JUL 6.1 5.3 4.1 1.1 5.3 10.1 8.7 6.8 1.8 8.8 21.9 18.6 12.9 2.9 12.0

FINL § FINISH LINE INC -CL A # FEB 2.4 4.6 5.3 4.8 3.3 5.0 10.1 12.2 12.2 7.4 7.4 14.9 17.3 16.2 9.9

FL † FOOT LOCKER INC # JAN 4.3 4.7 4.8 4.4 3.6 7.5 8.0 8.6 8.1 6.8 11.4 13.6 15.9 16.8 15.4

GPS * GAP INC # JAN 4.9 6.9 7.1 6.5 3.3 9.0 11.8 11.3 10.2 5.4 14.7 21.5 23.7 24.4 14.3

GCO § GENESCO INC # JAN 4.7 4.9 4.4 3.5 4.4 9.6 9.4 9.0 6.9 9.2 18.4 20.6 20.4 15.3 22.0

GYMB § GYMBOREE CORP # JAN 9.0 4.8 2.9 4.4 4.0 16.2 8.5 5.3 9.3 9.2 25.8 13.4 8.1 13.8 14.0

HOTT § HOT TOPIC INC # JAN 1.8 3.1 6.0 8.4 7.8 4.4 7.8 14.2 19.8 18.8 6.4 11.5 19.3 25.0 23.4

JOSB § JOS A BANK CLOTHIERS INC # JAN 7.9 7.6 6.6 5.5 4.5 12.8 13.1 11.7 10.4 9.0 23.9 26.3 24.3 21.7 18.6

LTD * LIMITED BRANDS INC # JAN 6.3 6.9 7.5 8.0 5.9 10.0 10.7 10.1 9.5 8.3 24.9 27.7 18.6 14.2 13.0

MW § MENS WEARHOUSE INC # JAN 7.9 6.0 4.6 3.6 3.3 13.4 9.8 7.7 6.1 5.7 21.5 17.4 13.4 9.8 8.1

PSUN † PACIFIC SUNWEAR CALIF INC # JAN 2.7 9.1 8.7 7.7 5.9 5.0 17.0 17.1 16.5 13.2 7.5 25.1 24.1 21.9 18.1

PSS † COLLECTIVE BRANDS INC # JAN 4.5 2.8 1.3 NM 3.7 9.1 5.8 2.9 NM 9.5 18.5 11.9 5.8 NM 19.9

ROST † ROSS STORES INC # JAN 4.3 4.0 4.0 5.8 5.7 11.2 10.9 10.0 15.1 16.5 27.7 24.9 22.3 32.6 33.9

SSI § STAGE STORES INC # JAN 3.6 4.2 4.1 5.5 6.2 7.1 7.9 7.6 8.9 11.0 10.3 11.4 10.8 12.1 14.5

SMRT § STEIN MART INC # JAN 2.5 3.4 2.6 0.3 1.5 7.4 10.2 8.8 1.0 5.0 12.2 17.0 15.1 1.7 9.7

TJX * TJX COMPANIES INC # JAN 4.5 4.3 4.5 4.9 4.8 13.4 13.1 14.0 15.8 15.3 37.1 38.9 41.4 44.5 42.1

TWB § TWEEN BRANDS INC # JAN 7.3 7.2 6.2 4.8 7.3 11.9 10.7 9.4 7.7 15.4 18.0 16.2 13.8 10.7 24.8

URBN † URBAN OUTFITTERS INC # JAN 9.5 12.0 10.9 8.8 6.5 13.9 19.7 19.8 15.2 11.6 18.8 27.2 26.1 18.8 14.8

FFOOOTWWEAR‡‡

CROX § CROCS INC DEC 18.2 15.6 NM NM NA 34.1 36.0 NM NA NA 56.7 221.5 NA NA NA

DECK § DECKERS OUTDOOR CORP DEC 10.1 12.0 11.9 7.6 1.6 13.3 16.5 17.2 7.5 1.6 15.8 20.0 24.1 14.1 2.6

ICON § ICONIX BRAND GROUP INC DEC 40.3 52.9 0.3 NM NM 7.1 11.5 0.4 NM NM 11.5 25.5 1.1 NM NM

KSWS § K-SWISS INC -CL A DEC 15.3 14.8 14.7 12.5 9.9 20.8 23.8 26.9 25.7 16.7 24.7 30.0 35.1 33.7 21.7

NKE * NIKE INC -CL B # MAY 9.1 9.3 8.8 7.7 6.9 14.5 14.9 14.5 12.9 11.2 22.4 23.3 23.2 21.6 18.9

SKX § SKECHERS U S A INC DEC 5.9 4.4 2.6 NM 5.0 10.8 8.1 4.8 NM 10.6 17.9 14.0 8.6 NM 20.5

TBL † TIMBERLAND CO -CL A DEC 6.5 10.5 10.2 8.8 7.6 12.3 21.3 21.8 20.0 17.3 18.6 31.7 32.5 29.4 24.6

WWW § WOLVERINE WORLD WIDE DEC 7.3 7.0 6.6 5.8 5.8 12.9 11.8 10.8 9.3 8.9 17.3 16.2 14.8 12.9 12.9

OOTHHER CCOMPAANIIESS WIITH SIIGGNIFIICCAANT APPPPAAREL OOPERATIIOONNS

BEBE BEBE STORES INC JUN 12.7 13.0 9.1 6.0 8.4 16.2 18.8 12.5 8.5 13.7 19.9 23.0 15.2 10.1 16.2

COLM COLUMBIA SPORTSWEAR CO DEC 9.5 11.3 12.6 12.6 12.6 12.3 13.6 16.0 17.5 19.2 15.6 17.2 19.5 21.6 24.8

HMX HARTMARX CORP NOV 1.2 3.9 2.7 1.5 0.6 1.5 5.0 3.6 1.9 0.7 2.9 10.1 7.7 4.7 1.9

JCG J CREW GROUP INC # JAN 6.8 0.4 NM NM NM 20.3 NM NM NM NM NA NA NA NA NA

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.

NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

39


NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

40

Current Ratio Debt / Capital Ratio (%) Debt as a % of Net Working Capital

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

APPAAREEL, AACCESSOORIES && LUXURY GOODS‡

ASHW § ASHWORTH INC OCT 2.6 2.4 3.5 6.5 4.0 12.4 14.2 20.9 2.9 3.6 25.5 29.2 37.9 3.5 4.6

COH * COACH INC JUN 2.9 2.7 3.9 2.8 1.8 0.3 0.3 0.4 0.8 1.3 0.5 0.7 0.7 1.2 2.8

FOSL § FOSSIL INC DEC 2.6 2.7 2.7 3.5 3.1 0.3 0.2 0.3 0.0 0.0 0.5 0.4 0.4 0.0 0.0

HBI † HANESBRANDS INC JUN 2.3 2.0 2.0 NA NA 0.1 0.2 0.3 NA NA 0.1 0.4 0.4 NA NA

JNY * JONES APPAREL GROUP INC DEC 2.1 1.5 1.9 2.3 3.1 25.9 21.7 26.7 23.8 28.9 118.9 176.4 166.0 101.0 109.8

KWD § KELLWOOD CO # JAN 2.9 3.0 3.3 2.9 2.7 43.4 44.7 38.7 29.1 32.4 75.7 71.8 65.6 47.0 47.3

LIZ * LIZ CLAIBORNE INC DEC 2.2 2.4 2.4 2.6 2.0 20.7 16.9 20.5 21.3 22.2 71.6 49.2 55.6 53.6 61.7

MFB § MAIDENFORM BRANDS INC DEC 3.4 3.1 2.2 1.2 NA 54.7 68.4 71.6 19.6 NA 134.5 172.5 247.7 143.2 NA

MOV § MOVADO GROUP INC # JAN 5.3 5.0 4.6 4.1 4.6 16.6 24.6 12.4 8.3 12.9 19.6 28.4 14.8 10.3 16.0

OXM § OXFORD INDUSTRIES INC # MAY 2.3 2.0 1.9 1.8 2.5 27.5 29.6 43.2 40.6 51.2 103.9 112.8 159.8 121.7 132.9

PVH † PHILLIPS-VAN HEUSEN CORP # JAN 2.8 3.0 2.4 2.7 3.5 25.0 28.4 32.9 35.1 47.8 79.6 91.0 141.1 130.4 76.9

RL * POLO RALPH LAUREN CP -CL A # MAR 2.6 1.6 2.3 2.5 2.3 16.0 1.1 14.8 16.3 17.1 42.6 4.5 36.8 36.0 37.3

ZQK § QUIKSILVER INC OCT 1.7 1.7 2.5 3.0 2.2 43.6 43.7 21.3 20.4 13.7 121.3 139.6 47.6 40.0 27.0

UNF § UNIFIRST CORP AUG 1.8 1.6 1.5 1.8 1.9 29.9 27.9 30.3 15.7 19.9 206.5 229.3 312.3 97.7 127.4

VFC * VF CORP DEC 2.5 2.1 1.7 2.5 2.4 16.2 18.5 17.9 32.6 26.2 40.6 53.4 55.3 71.5 50.2

VLCM § VOLCOM INC DEC 8.8 12.7 5.4 4.8 NA 0.1 0.2 0.9 0.9 NA 0.1 0.2 0.9 1.0 NA

WRNC † WARNACO GROUP INC DEC 1.9 3.0 2.8 2.6 3.0 29.2 23.0 24.6 26.6 -0.1 73.2 42.4 48.5 53.7 0.3

APPAREL RRETAIIL‡

ANF * ABERCROMBIE & FITCH -CL A # JAN 2.1 1.9 1.6 2.4 2.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

ARO † AEROPOSTALE INC # JAN 2.4 2.7 2.9 3.0 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

AEO † AMERN EAGLE OUTFITTERS INC # JAN 2.6 3.0 3.3 2.8 3.0 0.0 0.0 0.0 2.1 2.8 0.0 0.0 0.0 4.1 5.7

ANN † ANNTAYLOR STORES CORP # JAN 2.3 2.6 2.4 3.6 3.0 0.0 0.0 0.0 13.1 14.6 0.0 0.0 0.0 30.1 40.0

BWS § BROWN SHOE CO INC # JAN 1.9 1.7 1.8 2.2 1.9 21.6 24.8 11.3 21.9 25.8 49.4 56.1 17.8 34.0 42.4

CTR § CATO CORP -CL A # JAN 2.4 2.0 2.0 2.0 2.7 0.0 0.0 6.7 9.5 0.0 0.0 0.0 12.0 19.0 0.0

CHIC § CHARLOTTE RUSSE HOLDING INC SEP 2.8 1.9 1.8 1.6 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

CHRS † CHARMING SHOPPES INC # JAN 2.1 1.8 2.4 1.9 1.6 15.3 18.3 23.1 25.1 26.5 40.9 56.7 50.4 74.6 103.2

CHS † CHICOS FAS INC # JAN 3.3 4.4 3.8 2.8 2.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NM 0.0

PLCE § CHILDRENS PLACE RETAIL STRS # JAN NA 2.0 1.8 2.3 2.2 NA 0.0 0.0 0.0 0.0 NA 0.0 0.0 0.0 0.0

CBK § CHRISTOPHER & BANKS CORP # FEB 3.8 3.9 3.6 6.2 5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

CWTR † COLDWATER CREEK INC # JAN 2.1 2.0 2.4 1.8 1.5 0.3 0.0 0.0 0.0 0.0 0.6 0.0 0.0 0.0 0.0

DBRN § DRESS BARN INC JUL 1.5 1.1 1.9 1.7 2.9 25.7 32.7 11.2 12.7 0.0 118.8 569.1 20.9 30.6 0.0

FINL § FINISH LINE INC -CL A # FEB 2.7 2.7 2.7 3.2 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

FL † FOOT LOCKER INC # JAN 3.9 2.8 2.7 2.8 2.2 8.7 11.8 15.8 19.4 24.0 14.5 21.2 30.2 34.4 50.0

GPS * GAP INC # JAN 2.2 2.7 2.8 2.7 2.1 3.5 8.6 27.6 34.2 44.2 6.8 15.6 46.4 59.3 96.1

GCO § GENESCO INC # JAN 2.5 2.2 2.4 3.1 3.1 21.1 23.4 37.2 28.6 36.1 54.5 57.4 91.5 45.1 57.0

GYMB § GYMBOREE CORP # JAN 2.2 2.7 2.1 2.6 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

HOTT § HOT TOPIC INC # JAN 2.6 2.2 2.6 3.8 3.2 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.1

JOSB § JOS A BANK CLOTHIERS INC # JAN 2.2 1.9 1.9 2.1 1.8 0.2 3.0 4.9 24.6 12.4 0.3 5.0 8.7 39.6 22.5

LTD * LIMITED BRANDS INC # JAN 1.6 1.8 1.8 3.2 2.9 34.2 38.6 39.3 10.7 9.9 156.8 138.0 133.5 21.3 23.3

MW § MENS WEARHOUSE INC # JAN 3.0 3.1 2.6 2.7 2.9 9.1 24.2 18.1 20.2 6.5 16.8 42.3 33.9 36.7 11.9

PSUN † PACIFIC SUNWEAR CALIF INC # JAN 2.4 3.5 3.7 3.2 2.5 0.0 0.0 0.1 0.3 1.1 0.0 0.0 0.2 0.6 3.1

PSS † COLLECTIVE BRANDS INC # JAN 2.4 2.5 2.2 2.3 1.9 22.1 23.5 25.3 24.5 18.6 38.3 39.6 52.2 54.9 48.2

ROST † ROSS STORES INC # JAN 1.4 1.4 1.6 1.6 1.5 13.1 0.0 5.5 5.6 3.7 34.7 0.0 12.2 12.2 8.5

SSI § STAGE STORES INC # JAN 2.6 2.4 2.6 2.7 3.6 2.8 0.6 0.6 2.6 0.2 6.5 1.3 1.4 5.5 0.2

SMRT § STEIN MART INC # JAN 2.0 2.4 2.2 2.6 1.9 0.0 0.0 0.0 9.5 0.0 0.0 0.0 0.0 13.4 0.0

TJX * TJX COMPANIES INC # JAN 1.6 1.4 1.3 1.5 1.4 25.9 29.9 24.9 29.2 32.3 59.2 90.9 85.4 90.9 102.9

TWB § TWEEN BRANDS INC # JAN 2.6 2.9 2.8 2.3 2.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

URBN † URBAN OUTFITTERS INC # JAN 2.7 2.9 2.9 3.0 3.4 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.1 0.3

FFOOOTWEARR‡‡

CROX § CROCS INC DEC 2.7 1.2 0.8 1.3 NA 0.1 10.3 20.4 0.0 NA 0.1 32.0 NM 0.0 NA

DECK § DECKERS OUTDOOR CORP DEC 4.7 4.9 3.1 2.0 2.0 0.0 0.0 0.0 27.2 35.0 0.0 0.0 0.0 116.2 156.2

ICON § ICONIX BRAND GROUP INC DEC 2.8 0.8 0.6 0.8 1.1 21.1 44.8 44.4 57.0 49.6 219.4 NM NM NM 483.5

KSWS § K-SWISS INC -CL A DEC 7.6 6.7 5.1 5.9 5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

NKE * NIKE INC -CL B # MAY 3.1 2.8 3.2 2.7 2.3 5.5 6.1 10.9 12.5 12.1 7.5 8.7 15.8 19.5 20.7


Current Ratio (cont’d) Debt / Capital Ratio (%) (cont’d) Debt as a % of Net Working Capital (cont’d)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

SKX § SKECHERS U S A INC DEC 3.5 3.8 3.8 3.9 3.7 19.2 23.8 27.7 31.2 31.1 23.7 29.7 36.0 41.8 40.9

TBL † TIMBERLAND CO -CL A DEC 2.3 2.5 2.9 2.7 2.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

WWW § WOLVERINE WORLD WIDE DEC 4.0 4.0 3.9 4.5 4.5 2.1 4.3 6.4 9.0 13.5 2.9 6.8 10.0 14.6 20.4

OTHHER COMMPAANIES WITH SIGNIFICANT APPPAREL OPERATIONNS

BEBE BEBE STORES INC JUN 6.6 7.3 6.5 6.5 6.9 0.1 0.1 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.0

COLM COLUMBIA SPORTSWEAR CO DEC 4.0 3.6 5.1 5.2 4.7 0.0 1.0 1.6 2.5 4.2 0.0 1.3 2.1 3.3 5.7

HMX HARTMARX CORP NOV 3.1 3.2 2.8 3.3 2.5 25.3 27.8 25.6 31.6 36.5 44.6 43.8 42.1 48.3 63.6

JCG J CREW GROUP INC # JAN 1.7 1.5 1.1 1.5 1.3 97.3 461.8 655.4 365.4 177.6 170.8 869.7 NM NM 768.1

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.

Price / Earnings Ratio (High-Low) Dividend Payout Ratio (%) Dividend Yield (High-Low, %)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

AAPPAREL, ACCESSOORIES & LUXXURRY GOOODS‡

ASHW § ASHWORTH INC OCT NM-88 NM-NM 18-12 16-9 52-24 0 NM 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0

COH * COACH INC JUN 35-19 36-24 41-24 50-18 37-18 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

FOSL § FOSSIL INC DEC 21-14 26-14 25-14 21-11 19-10 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

HBI † HANESBRANDS INC JUN 7-5 NA-NA NA-NA NA-NA NA-NA NA NA NA NA NA NA-NA NA-NA NA-NA NA-NA NA-NA

JNY * JONES APPAREL GROUP INC DEC NM-NM 16-11 16-14 15-10 16-10 NM 19 15 6 0 1.8-1.4 1.7-1.2 1.1-0.9 0.6-0.4 0.0-0.0

KWD § KELLWOOD CO # JAN 42-28 40-25 19-13 16-9 19-12 78 74 27 25 37 2.8-1.8 2.9-1.8 2.0-1.4 2.8-1.5 3.2-2.0

LIZ * LIZ CLAIBORNE INC DEC 18-13 15-11 15-11 15-10 15-11 9 8 8 9 10 0.7-0.5 0.7-0.5 0.7-0.5 0.9-0.6 1.0-0.7

MFB § MAIDENFORM BRANDS INC DEC 19-7 NM-NM NA-NA NA-NA NA-NA 0 NM NA NA NA 0.0-0.0 0.0-0.0 NA-NA NA-NA NA-NA

MOV § MOVADO GROUP INC # JAN 15-9 19-15 18-12 16-9 15-9 12 19 15 11 7 1.3-0.8 1.3-1.0 1.3-0.8 1.2-0.7 0.8-0.5

OXM § OXFORD INDUSTRIES INC # MAY 19-12 20-11 16-11 15-4 11-7 22 19 17 18 31 1.9-1.2 1.7-1.0 1.5-1.1 4.1-1.3 4.3-2.8

PVH † PHILLIPS-VAN HEUSEN CORP # JAN 20-12 16-11 25-14 NM-NM 15-9 6 7 13 NM 14 0.5-0.3 0.6-0.4 0.9-0.5 1.3-0.8 1.4-0.9

RL * POLO RALPH LAUREN CP -CL A # MAR 22-12 19-12 23-15 18-11 17-9 5 7 11 12 0 0.4-0.2 0.6-0.4 0.7-0.5 1.0-0.6 0.0-0.0

ZQK § QUIKSILVER INC OCT 21-15 20-12 22-12 18-11 18-11 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

UNF § UNIFIRST CORP AUG 20-14 20-12 17-14 18-9 21-13 7 7 9 10 11 0.5-0.4 0.5-0.3 0.6-0.5 1.1-0.5 0.8-0.5

VFC * VF CORP DEC 17-11 13-11 13-10 12-9 14-10 40 24 24 28 30 3.6-2.3 2.2-1.8 2.5-1.9 3.1-2.3 3.1-2.1

VLCM § VOLCOM INC DEC 35-15 28-18 NA-NA NA-NA NA-NA 0 0 NA NA NA 0.0-0.0 0.0-0.0 NA-NA NA-NA NA-NA

WRNC † WARNACO GROUP INC DEC 18-10 25-18 22-15 0-0 NM-NM 0 0 0 0 NM 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0

AAPPAREL RETAIILL‡‡

ANF * ABERCROMBIE & FITCH -CL A # JAN 17-10 19-12 20-10 16-10 17-8 15 16 21 0 0 1.4-0.9 1.4-0.8 2.2-1.1 0.0-0.0 0.0-0.0

ARO † AEROPOSTALE INC # JAN 17-11 23-12 23-11 23-6 33-6 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

AEO † AMERN EAGLE OUTFITTERS INC # JAN 19-9 18-10 15-5 28-16 25-8 16 14 4 0 0 1.9-0.8 1.4-0.8 0.8-0.3 0.0-0.0 0.0-0.0

ANN † ANNTAYLOR STORES CORP # JAN 22-16 31-18 35-22 18-8 18-11 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

BWS § BROWN SHOE CO INC # JAN 22-12 20-12 17-10 14-9 11-5 14 18 17 15 15 1.2-0.6 1.4-0.9 1.7-1.0 1.7-1.0 2.9-1.4

CTR § CATO CORP -CL A # JAN 16-12 17-12 17-11 19-12 15-8 35 35 41 46 32 3.0-2.2 3.0-2.1 3.6-2.3 3.9-2.5 4.1-2.1

CHIC § CHARLOTTE RUSSE HOLDING INC SEP 20-9 43-19 32-13 30-13 28-7 0 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0

CHRS † CHARMING SHOPPES INC # JAN 17-11 17-8 17-9 19-7 22-9 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

CHS † CHICOS FAS INC # JAN 53-18 43-20 30-21 34-14 30-16 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

PLCE § CHILDRENS PLACE RETAIL STRS # JAN NA-NA 24-14 24-10 37-9 NM-20 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

CBK § CHRISTOPHER & BANKS CORP # FEB 35-20 24-15 31-20 30-9 30-13 22 19 22 8 0 1.1-0.6 1.3-0.8 1.1-0.7 0.9-0.3 0.0-0.0

CWTR † COLDWATER CREEK INC # JAN 52-31 51-24 42-10 29-11 29-14 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

DBRN § DRESS BARN INC JUL 22-13 22-9 19-14 61-47 17-11 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

FINL § FINISH LINE INC -CL A # FEB 28-14 19-11 16-10 16-5 20-7 15 8 6 0 0 1.0-0.5 0.8-0.4 0.6-0.4 0.0-0.0 0.0-0.0

FL † FOOT LOCKER INC # JAN 18-14 18-11 16-12 16-6 16-7 25 19 15 10 3 1.8-1.4 1.7-1.1 1.3-0.9 1.6-0.6 0.4-0.2

GPS * GAP INC # JAN 23-17 18-13 20-14 20-10 31-15 34 16 7 8 16 2.0-1.5 1.3-0.9 0.5-0.3 0.7-0.4 1.1-0.5

GCO § GENESCO INC # JAN 15-9 16-9 14-7 15-9 17-6 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

GYMB § GYMBOREE CORP # JAN 22-9 23-11 33-19 21-14 29-15 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

HOTT § HOT TOPIC INC # JAN 50-30 47-27 38-16 31-13 26-14 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

JOSB § JOS A BANK CLOTHIERS INC # JAN 20-9 20-10 18-10 21-7 15-4 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

NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

41


NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

42

Price / Earnings Ratio (High-Low) (cont’d) Dividend Payout Ratio (%) (cont’d) Dividend Yield (High-Low, %) (cont’d)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

LTD * LIMITED BRANDS INC # JAN 19-13 15-11 19-12 13-8 23-13 35 36 114 29 31 2.8-1.8 3.2-2.4 9.9-6.1 3.7-2.2 2.4-1.3

MW § MENS WEARHOUSE INC # JAN 15-10 19-10 17-11 24-9 28-9 7 0 0 0 0 0.7-0.5 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0

PSUN † PACIFIC SUNWEAR CALIF INC # JAN 45-23 17-12 18-12 23-10 20-11 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

PSS † COLLECTIVE BRANDS INC # JAN 18-11 24-10 34-18 NM-NM 14-9 0 0 0 NM 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0

ROST † ROSS STORES INC # JAN 18-13 23-16 29-18 19-11 18-12 14 15 15 8 7 1.1-0.8 0.9-0.7 0.8-0.5 0.7-0.4 0.6-0.4

SSI § STAGE STORES INC # JAN 18-13 16-11 15-10 11-6 13-6 9 2 0 0 0 0.7-0.5 0.2-0.2 0.0-0.0 0.0-0.0 0.0-0.0

SMRT § STEIN MART INC # JAN 21-13 22-14 21-8 NM-47 25-11 203 16 0 0 0 15.5-9.5 1.1-0.7 0.0-0.0 0.0-0.0 0.0-0.0

TJX * TJX COMPANIES INC # JAN 17-13 18-13 20-15 18-12 21-14 16 15 13 10 10 1.2-0.9 1.1-0.9 0.8-0.6 0.9-0.6 0.7-0.5

TWB § TWEEN BRANDS INC # JAN 22-13 20-12 22-11 29-16 24-14 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

URBN † URBAN OUTFITTERS INC # JAN 42-19 42-24 43-16 34-7 26-12 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

FFOOOOTWWEAAR‡

CROX § CROCS INC DEC 29-12 NA-NA NA-NA NA-NA NA-NA 0 NA NA NA NA 0.0-0.0 NA-NA NA-NA NA-NA NA-NA

DECK § DECKERS OUTDOOR CORP DEC 25-11 18-7 21-7 24-4 37-15 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

ICON § ICONIX BRAND GROUP INC DEC 25-12 21-8 NM-NM NM-NM NM-NM 0 0 0 NM NM 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0

KSWS § K-SWISS INC -CL A DEC 17-10 17-13 15-8 17-7 18-10 9 8 5 3 2 0.9-0.5 0.6-0.5 0.6-0.3 0.4-0.2 0.2-0.1

NKE * NIKE INC -CL B # MAY 17-13 17-14 20-14 19-12 23-14 23 21 20 19 19 1.8-1.3 1.5-1.2 1.4-1.0 1.6-1.0 1.3-0.8

SKX § SKECHERS U S A INC DEC 19-9 16-10 25-12 NM-NM 19-5 0 0 0 NM 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0

TBL † TIMBERLAND CO -CL A DEC 23-15 17-11 15-11 18-9 19-11 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

WWW § WOLVERINE WORLD WIDE DEC 20-13 19-14 19-12 16-11 16-11 20 20 17 17 15 1.5-1.0 1.4-1.0 1.5-0.9 1.5-1.0 1.4-0.9

OTHER COMMPAANIIES WWIITH SIGNNIFIICCANT APPPAREL OPERATIONNS

BEBE BEBE STORES INC JUN 33-16 42-18 48-19 43-15 25-9 21 14 0 0 0 1.3-0.6 0.8-0.3 0.0-0.0 0.0-0.0 0.0-0.0

COLM COLUMBIA SPORTSWEAR CO DEC 18-13 18-12 18-14 20-10 18-11 4 0 0 0 0 0.3-0.2 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0

HMX HARTMARX CORP NOV 50-27 16-9 20-9 18-7 30-12 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

JCG J CREW GROUP INC # JAN 25-14 NA-NA NA-NA NA-NA NA-NA 0 NM NA NA NA 0.0-0.0 NA-NA NA-NA NA-NA NA-NA

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.

Earnings per Share ($) Tangible Book Value per Share ($) Share Price (High-Low, $)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

APPPAREL,, AACCESSOORIIES & LLUUXURY GGOODSS‡‡

ASHW § ASHWORTH INC OCT 0.07 (0.05) 0.61 0.56 0.19 5.73 5.55 5.66 6.63 5.99 J 10.45-6.17 12.38-5.95 11.20-7.55 8.70-5.00 9.91-4.54

COH * COACH INC JUN 1.30 1.03 0.70 0.41 0.24 2.57 2.07 2.00 1.11 0.67 44.99-25.18 36.84-24.51 28.85-16.88 20.42-7.26 8.93-4.30

FOSL § FOSSIL INC DEC 1.15 1.10 1.28 0.98 0.85 7.72 6.60 6.31 6.05 J 4.89 J 23.84-15.89 28.95-14.96 32.37-17.68 20.13-10.63 16.41-8.78

HBI † HANESBRANDS INC JUN 3.39 2.30 4.73 NA NA NA NA NA NA NA 24.77-17.75 NA-NA NA-NA NA-NA NA-NA

JNY * JONES APPAREL GROUP INC DEC (1.32) 2.33 2.44 2.58 2.59 1.30 (2.23) (1.96) 0.98 0.66 36.10-27.30 37.48-26.47 40.00-33.00 37.44-25.61 41.68-26.18

KWD § KELLWOOD CO # JAN 0.82 0.86 2.41 2.60 1.71 7.89 9.57 10.75 13.34 15.58 34.84-23.20 34.65-21.83 45.10-31.32 41.53-22.65 32.50-19.70

LIZ * LIZ CLAIBORNE INC DEC 2.50 2.98 2.90 2.60 2.19 6.86 7.74 7.13 6.73 5.43 44.50-33.40 43.82-33.70 42.47-32.09 38.90-26.23 33.25-23.55

MFB § MAIDENFORM BRANDS INC DEC 1.21 (0.39) (0.53) 1.15 NA (1.42) (2.39) (7.08) 4.97 NA 22.84-8.49 20.74-10.65 NA-NA NA-NA NA-NA

MOV § MOVADO GROUP INC # JAN 1.95 1.05 1.06 0.95 0.85 14.48 12.50 12.69 J 11.24 J 9.89 J 29.68-17.91 20.38-15.24 19.40-12.78 15.38-8.65 12.60-7.30

OXM § OXFORD INDUSTRIES INC # MAY 2.96 2.93 2.97 2.47 1.35 (0.31) (1.98) (7.10) (1.47) 12.06 55.20-34.34 57.58-33.34 47.50-34.00 35.83-11.01 15.13-9.75

PVH † PHILLIPS-VAN HEUSEN CORP # JAN 2.71 2.15 1.20 (0.18) 1.10 (1.28) (6.68) (15.78) (16.10) 5.73 52.90-31.24 35.38-24.11 29.95-16.45 18.20-11.16 16.46-10.35

RL * POLO RALPH LAUREN CP -CL A # MAR 3.84 2.96 1.88 1.73 1.77 11.99 10.35 10.38 10.56 8.93 83.15-45.65 56.84-34.19 42.83-27.28 31.52-19.30 30.82-16.49

ZQK § QUIKSILVER INC OCT 0.76 0.90 0.71 0.54 0.40 0.95 0.30 2.53 2.54 2.03 16.08-11.60 18.12-10.63 15.57-8.19 9.77-6.05 7.13-4.22

UNF § UNIFIRST CORP AUG 2.04 2.26 1.75 1.53 1.40 9.20 8.74 6.73 14.02 12.91 41.63-28.65 45.75-28.00 29.99-23.83 28.27-14.00 28.78-18.68

VFC * VF CORP DEC 4.83 4.65 4.30 3.67 3.26 13.18 8.40 7.14 8.61 10.91 83.10-53.25 61.61-50.44 55.61-42.06 44.08-32.62 45.64-31.50

VLCM § VOLCOM INC DEC 1.19 1.36 1.28 0.75 NA 5.49 4.22 1.54 0.95 NA 41.40-18.24 37.82-24.40 NA-NA NA-NA NA-NA

WRNC † WARNACO GROUP INC DEC 1.61 1.08 1.03 52.80 (3.08) 2.44 6.45 4.99 4.50 (36.67) 28.22-15.75 27.53-19.70 22.76-15.43 18.23-0.00 0.14-0.00

APPPAAREL RETAAIILL‡‡

ANF * ABERCROMBIE & FITCH -CL A # JAN 4.79 3.83 2.33 2.12 1.99 15.92 11.34 7.78 9.07 7.71 79.42-49.98 74.10-44.17 47.45-23.07 33.65-20.65 33.85-14.97

ARO † AEROPOSTALE INC # JAN 1.33 1.02 1.01 0.66 0.40 4.01 3.48 2.84 2.22 1.61 22.01-14.05 23.64-12.03 22.92-11.47 15.42-4.29 13.11-2.33

AEO † AMERN EAGLE OUTFITTERS INC # JAN 1.74 1.29 1.03 0.28 0.41 6.36 5.16 4.25 2.97 2.60 33.01-14.83 22.69-12.97 15.92-5.28 7.79-4.40 10.15-3.25

ANN † ANNTAYLOR STORES CORP # JAN 2.01 1.14 0.91 1.51 1.21 11.00 10.32 9.06 7.99 6.36 45.15-32.00 34.77-20.41 31.43-19.98 27.19-11.37 22.13-12.83

BWS § BROWN SHOE CO INC # JAN 1.56 1.00 1.08 1.18 1.16 7.10 5.66 9.01 8.23 6.99 34.00-18.52 19.67-12.28 18.68-10.75 17.00-10.55 12.49-6.13


Earnings per Share ($) (cont’d) Tangible Book Value per Share ($) (cont’d) Share Price (High-Low, $) (cont’d)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

CTR § CATO CORP -CL A # JAN 1.64 1.44 1.13 0.91 1.20 8.77 7.69 6.77 6.29 7.05 26.70-19.35 24.37-16.83 19.67-12.57 17.00-10.77 18.50-9.45

CHIC § CHARLOTTE RUSSE HOLDING INC SEP 1.65 0.49 0.70 0.52 1.06 7.14 6.28 5.78 5.24 4.70 32.19-15.28 20.83-9.13 22.24-8.84 15.45-6.73 29.26-7.58

CHRS † CHARMING SHOPPES INC # JAN 0.89 0.83 0.56 0.36 0.41 4.41 3.37 3.82 3.25 2.85 15.57-9.69 14.07-7.00 9.64-5.26 6.85-2.70 9.14-3.80

CHS † CHICOS FAS INC # JAN 0.94 1.07 0.79 0.58 0.40 4.02 3.91 2.60 1.60 1.41 49.40-17.26 46.32-21.78 23.80-16.91 19.72-8.38 11.86-6.21

PLCE § CHILDRENS PLACE RETAIL STRS # JAN NA 2.31 1.60 0.86 0.34 NA 14.05 11.45 9.61 8.62 71.81-41.81 54.64-33.22 37.61-16.77 31.67-7.87 37.31-6.90

CBK § CHRISTOPHER & BANKS CORP # FEB 0.90 0.85 0.74 1.05 1.00 6.07 5.20 4.45 4.74 3.82 31.25-17.57 20.30-12.36 22.82-14.65 31.15-9.00 29.87-12.53

CWTR † COLDWATER CREEK INC # JAN 0.60 0.45 0.33 0.15 0.12 3.41 2.65 2.18 1.47 1.31 31.26-18.69 22.97-10.75 14.09-3.26 4.48-1.69 3.37-1.57

DBRN § DRESS BARN INC JUL 1.29 0.88 0.52 0.13 0.52 2.70 1.15 4.27 3.89 4.58 28.09-16.91 19.56-8.26 9.73-7.25 7.89-6.10 8.75-5.53

FINL § FINISH LINE INC -CL A # FEB 0.68 1.25 1.27 1.00 0.52 9.23 8.64 7.69 6.73 5.63 18.81-9.55 23.39-13.29 19.69-12.52 16.22-5.18 10.44-3.63

FL † FOOT LOCKER INC # JAN 1.59 1.70 1.69 1.47 1.15 12.37 10.59 9.12 7.94 6.34 28.00-21.50 29.95-18.74 27.59-19.97 23.70-9.28 17.95-8.20

GPS * GAP INC # JAN 0.94 1.26 1.29 1.15 0.55 6.30 6.26 5.62 5.22 4.00 21.39-15.91 22.70-15.90 25.72-18.12 23.47-12.01 17.14-8.35

GCO § GENESCO INC # JAN 3.00 2.73 2.19 1.35 1.66 10.41 8.33 5.04 9.58 8.06 43.72-25.50 42.89-25.16 31.39-14.98 20.24-11.82 28.30-10.65

GYMB § GYMBOREE CORP # JAN 2.25 1.04 0.56 0.87 0.75 8.68 J 8.39 J 7.00 J 6.75 J 5.80 J 49.11-20.78 23.80-11.21 18.33-10.87 18.38-11.79 21.50-10.90

HOTT § HOT TOPIC INC # JAN 0.31 0.50 0.86 1.01 0.73 5.01 4.57 4.21 4.65 3.44 15.64-9.43 23.49-13.28 32.30-13.85 31.39-13.60 18.80-9.90

JOSB § JOS A BANK CLOTHIERS INC # JAN 2.40 2.07 1.46 1.08 0.76 11.54 8.90 6.79 5.31 4.52 48.12-22.14 40.62-21.10 26.74-14.84 23.20-7.87 11.67-2.86

LTD * LIMITED BRANDS INC # JAN 1.71 1.66 1.50 1.38 0.97 1.60 1.69 1.31 6.78 5.93 32.60-21.62 25.50-18.81 27.89-17.35 18.46-10.88 22.34-12.53

MW § MENS WEARHOUSE INC # JAN 2.80 1.93 1.32 0.86 0.69 12.83 10.64 9.32 8.18 8.20 41.75-28.76 37.44-20.10 23.01-14.27 20.83-7.84 19.15-6.41

PSUN † PACIFIC SUNWEAR CALIF INC # JAN 0.56 1.69 1.41 1.05 0.67 7.15 7.33 6.03 5.39 3.99 25.26-13.12 29.05-20.33 25.78-17.25 24.56-10.74 13.16-7.20

PSS † COLLECTIVE BRANDS INC # JAN 1.90 1.09 0.52 0.00 1.56 10.48 9.33 8.44 8.42 8.21 33.64-20.36 25.74-11.35 17.72-9.20 17.59-11.89 21.57-13.73

ROST † ROSS STORES INC # JAN 1.73 1.38 1.15 1.50 1.29 6.54 J 5.81 J 5.23 J 5.00 J 4.15 J 31.80-22.12 31.37-22.34 32.86-20.95 28.08-16.29 23.62-15.85

SSI § STAGE STORES INC # JAN 1.33 1.38 1.25 1.25 1.24 10.57 10.22 9.39 8.71 9.71 23.53-16.67 21.59-15.79 18.89-12.30 14.20-7.56 16.06-7.47

SMRT § STEIN MART INC # JAN 0.86 1.18 0.90 0.09 0.50 6.59 7.44 6.45 5.42 5.37 18.34-11.27 26.47-16.81 19.18-7.60 9.65-4.22 12.32-5.37

TJX * TJX COMPANIES INC # JAN 1.71 1.48 1.36 1.30 1.09 4.64 3.70 3.06 2.74 2.36 29.84-22.16 25.96-19.95 26.82-20.64 23.70-15.54 22.45-15.30

TWB § TWEEN BRANDS INC # JAN 1.99 1.62 1.21 0.83 1.42 11.57 10.53 9.29 8.20 7.45 44.53-25.75 32.65-18.85 26.75-13.28 23.69-13.45 34.50-19.45

URBN † URBAN OUTFITTERS INC # JAN 0.71 0.80 0.56 0.31 0.18 4.09 3.40 2.47 1.82 1.45 29.89-13.65 33.77-18.93 24.24-9.16 10.32-2.09 4.65-2.21

FFOOOTWEEAAR‡

CROX § CROCS INC DEC 0.87 0.26 (0.05) (0.04) NA 2.41 0.38 NA NA NA 25.13-10.16 NA-NA NA-NA NA-NA NA-NA

DECK § DECKERS OUTDOOR CORP DEC 2.45 2.58 2.32 0.91 0.17 12.39 8.65 5.80 (0.00) (1.17) 60.56-27.97 47.25-16.92 49.12-16.90 21.99-3.31 6.30-2.56

ICON § ICONIX BRAND GROUP INC DEC 0.81 0.51 0.01 (0.45) (0.17) (1.71) (2.02) (0.63) (0.88) (0.57) 20.39-9.51 10.64-4.16 6.34-2.00 2.69-0.55 5.28-0.80

KSWS § K-SWISS INC -CL A DEC 2.23 2.20 2.04 1.52 0.78 9.86 7.91 6.42 4.86 3.64 37.81-22.54 36.89-27.52 30.01-17.06 25.18-10.61 13.88-7.84

NKE * NIKE INC -CL B # MAY 2.96 2.68 2.31 1.79 1.40 12.93 11.23 9.77 8.13 7.22 50.60-37.76 45.77-37.55 46.22-32.90 34.27-21.19 32.14-19.26

SKX § SKECHERS U S A INC DEC 1.73 1.13 0.61 (0.31) 1.26 10.71 8.56 7.47 6.67 6.85 33.58-14.80 18.19-11.18 15.25-7.51 10.24-5.16 24.40-6.52

TBL † TIMBERLAND CO -CL A DEC 1.62 2.48 2.19 1.66 1.21 7.65 6.93 7.20 5.86 4.89 37.61-24.80 41.01-27.28 33.99-24.35 29.67-15.10 22.98-12.90

WWW § WOLVERINE WORLD WIDE DEC 1.52 1.33 1.15 0.88 0.79 8.19 7.40 7.14 6.54 5.59 30.20-20.26 25.70-18.90 21.66-13.40 14.39-9.53 12.83-8.37

OOTHER COMMPPANIIESS WWIITHH SIIGGNIIFFIICCANT AAPPPPAREL OOPPERRATIIONSS

BEBE BEBE STORES INC JUN 0.81 0.74 0.39 0.22 0.31 4.45 3.66 2.77 2.32 2.09 26.86-13.05 30.97-13.45 18.74-7.31 9.48-3.25 7.76-2.84

COLM COLUMBIA SPORTSWEAR CO DEC 3.39 3.39 3.44 3.01 2.60 21.26 19.18 18.57 15.04 11.72 62.55-42.85 59.76-41.00 62.18-49.22 59.39-31.55 47.80-27.46

HMX HARTMARX CORP NOV 0.20 0.65 0.45 0.26 0.10 6.36 3.61 3.46 3.07 4.57 9.97-5.50 10.48-6.09 8.82-4.05 4.62-1.82 3.02-1.18

JCG J CREW GROUP INC # JAN 1.74 (0.18) NA NA NA 0.09 (42.91) (44.05) (35.97) (30.43) 43.56-24.00 NA-NA NA-NA NA-NA NA-NA

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. J-This amount includes intangibles that cannot be identified.

The analysis and opinion set forth in this publication are provided by Standard & Poor’s Equity Research Services and are prepared separately from any other analytic activity of Standard & Poor’s. In this regard, Standard & Poor’s Equity Research Services

has no access to nonpublic information received by other units of Standard & Poor’s. The accuracy and completeness of information obtained from third-party sources, and the opinions based on such information, are not guaranteed.

NOVEMBER 29, 2007 / APPAREL & FOOTWEAR INDUSTRY SURVEY

43


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