Retail Monitor. October 2015 Retail Monitor

Retail Monitor October 2015 — Retail Monitor 1 Overview Through August 2015, year-over-year retail sales have increased in every month, according ...
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Retail Monitor

October 2015 — Retail Monitor

1

Overview Through August 2015, year-over-year retail sales have increased in every month, according to data from the National Retail Federation (“NRF”). During the back-to-school season, some sectors fared better than others. Consumers remain frugal, and continue to shift toward online purchases. During the back-to-school season, as has been a trend seen over the past few years, some sectors fared better than others. E-commerce continues to outperform total retail sales. Most recently, the NRF reported that e-commerce sales experienced a 7.5% increase year-overyear in August, which dwarfed the 2.6% gain achieved for total retail sales. This illustrates that many consumers shopped online during the back-to-school season, a trend that will most certainly be seen during the upcoming holiday season. E-commerce sales were likely aided by promotions offered by many retailers. The following table illustrates year-over-year total retail sales trends for the 12 months ended August 2015, as reported by the NRF:

Source: NRF In addition to the e-commerce sector, off-price retailers continue to dominate as consumers remain frugal and look to find quality products for less. This trend shows no sign of slowing, and subsequently new competitors have been trying to enter the off-price sector, such as Macy’s and Kohl’s. Department store retailers such as these are looking for ways to drive sales, as the retail sector continues to see a decline in mall traffic. Similarly, the specialty apparel sector, particularly women’s and teen retailers, continues to feel the brunt of the decline. Earlier this year the industry saw a number of bankruptcy filings and extensive store closures, and there are more on the horizon. Quiksilver filed for bankruptcy in September 2015, and will likely continue to close stores. American Apparel also filed for bankruptcy in October 2015. Other retailers also have plans to rationalize their store bases in the coming months. For example, Macy’s announced plans to close up to 40 stores early in 2016, Pier 1 plans to close 100 over the next three years, and Stage Stores plans to close 90 locations.

In addition, Gap will be closing 175 locations in North America, including over 100 this year. This does not include any factory or outlet locations, and will result in a store base that is reduced by approximately one quarter. Aside from the general decline in mall traffic and the increase in ecommerce spending, many retailers have been faced with economic issues outside of their control. For example, the west coast port slowdown early in 2015 had residual effects, with many retailers reporting inventory arrived late to the stores. This had a ripple effect through the middle of the year, as retailers were faced with a glut of inventory that had to be discounted to make room for new product. Furthermore, as the U.S. dollar has been strong overseas, there has been a decline in tourism in the U.S. from other countries, which has impacted retail sales, particularly at some department stores’ flagship locations. There also remains much uncertainty in the economy of other countries, such as China, which has led to volatility in the stock market. Many consumers are also aware of the potential rate hike by the Federal Reserve. All of these factors can spook consumers and result in a pullback in discretionary spending. Despite all of these factors, the NRF expects the positive trends to continue throughout the remainder of the year. Sales trends have benefited from gas prices that have been lower than historical levels in recent months. However, after projecting 4.1% year-over-year growth for the year in February, the NRF has downgraded this forecast to 3.5%, citing the west coast port slowdown, economic issues overseas, and the strength of the U.S. dollar. E-commerce sales forecasts were trended downwards, as well, though they are still expected to grow between 6% and 8% over 2014. Excluding sales of automobiles and gas, e-commerce sales have increased 12% during the first half of 2015, compared to the same timeframe last year. In general, sales are expected to increase during the holiday season. However, consumers will likely seek out bargains, comparing prices online to find the best deals. E-commerce will be a popular method for shopping, with customers looking to take advantage of targeted promotions, temporary sales, and free shipping promotions. In addition, off-price and discount retailers will remain popular shopping destinations, as consumers aim to stretch their dollars as much as possible. Department stores and specialty retailers will work to capitalize on an omni-channel presence, and will aim to drive sales both in stores and online as they continue to face declining mall traffic. Those retailers that fail to attract customers during the key shopping season could face store closures next year.

October 2015 — Retail Monitor

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Department Stores Some department stores have experienced comparable store sales increases during the summer and into back-to-school season driven by strength in key products or online sales growth. Others experienced softer sales, citing lingering effects of the west coast port slowdown, which resulted in product arriving late to stores and subsequently requiring increased discounts to sell through. In addition, mall traffic remains on the decline; department stores have leveraged omni-channel, and have also utilized marketing tactics such as email, social media, and targeted promotions sent to mobile devices to drive sales. 

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NOLVs: NOLVs have ranged from relatively consistent to trending up between 0.5 and 1.0 percentage points, driven by positive sales trends and increasing gross margin. Sales Trends: Most department store retailers reported positive sales during the most recent quarters and the back-to-school season. Some reported that sales were driven by ecommerce. However, there are some outliers, as Sears continues to struggle, and Macy’s’ sales have been weak in recent quarters due to factors such as inventory arriving late as a result of the west coast port slowdown. In addition, some of the luxury department stores have experienced softer sales due to a stronger U.S. dollar and foreign consumers shopping overseas. Gross Margin and Discounting: Gross margin has been relatively consistent, with some companies benefiting from increased average markups. However, gross margin could potentially decline going forward, as discounting for some companies has also increased, as promotions continue to be used to drive customer traffic.



Leverage multiple channels: Department store retailers have been working to determine how best to execute an omni-channel strategy. In order to remain competitive with online-giant Amazon, some retailers offer same-day delivery, ship from their stores as well as warehouses, and offer curbside pickup; however, some have had to improve their supply chain and create efficiencies in logistics to execute these offerings in the most profitable way possible. In some cases, retailers have opted to consolidate warehouses and leverage instore inventory to fulfill orders, while other retailers have added regional warehouses or utilized third-party logistics facilities to get product into the hands of customers as quickly as possible. Expand off-price: Within the luxury sector, off-price counterparts such as Saks Off 5th and Nordstrom Rack continue to perform well. Recognizing the strength of the off-price concept, as well as the fact that off-price giants TJX and Ross pose formidable competition, Macy’s has debuted its Backstage off-price concept, and Kohl’s also opened a store called Off Aisle. Differentiate product mix: Department stores have long used private label and exclusive brands as a means to develop a customer following. Recently, many have expanded into store-within-a-store partnerships to drive traffic. Examples include Nordstrom’s Madewell stores and JC Penney’s Sephora shops.

The table below illustrates comparable store sales trends for major public department stores (Represents the most recent fiscal quarter sales reported):

Neiman Marcus

1.9%

2.2%

5.6%

5.5%

Saks

0.1%

0.6%

2.6%

1.0%

Saks Off 5th

12.7%

10.3%

12.1%

19.2%

Hudson’s Bay/Lord & Taylor

4.9%

4.9%

2.3%

1.7%

Nordstrom

4.8%

4.2%

4.5%

3.4%

Nordstrom Rack

1.7%

(0.2%)

3.2%

1.7%

Macy’s

(2.1%)

(0.7%)

2.0%

(1.4%)

Dillard’s

1.0%

(1.0%)

3.0%

(1.0%)

J.C. Penney

4.1%

3.4%

4.4%

0.0%

Kohl’s

0.1%

1.4%

3.9%

(1.8%)

Sears

(14.0%)

(14.5%)

(7.0%)

(0.7%)

Note(s): The most recent quarter reported for all companies ended August 1, 2015. Some retailers report results including e -commerce sales.

Going forward into the holiday season, department store retailers will aim to be the retailer that gets the right product into the hands of the customer as quickly as possible. Many will likely look to right-size their businesses, by identifying and closing underperforming stores as leases expire, while others may look to expand globally, into Canada and other countries. October 2015 — Retail Monitor

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Specialty Apparel Stores The specialty retail sector continues to face challenges, particularly in the teen and women’s sector. Retailers have been negatively impacted by the decline in mall traffic, in part due to increased e-commerce spending. In addition, fashion trends over the past several years moved away from major brands to fast-fashion retailers. In the absence of an “it” item to drive sales, many retailers have been experimenting with their merchandising mix to entice shoppers. While customers have responded favorably to some brands’ mixes, such as Old Navy and American Eagle, others have stumbled, with Gap, Zumiez, Aeropostale, J. Crew, and Christopher & Banks all citing merchandising missteps in the past six months. Other retailers, including Gap and Abercrombie & Fitch, have noted the need to adjust their merchandising strategy to compete with fast fashion retailers, and are working to bring in newer product more quickly. The major trend within the apparel sector has been consumers becoming more casual in appearance, particularly as the “athleisure” apparel trend has gained traction. Consumers are wearing stylish, comfort apparel that can be worn to work out or run errands.





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NOLVs: NOLVs have varied by the type of retailer and the performance of the company. In general, NOLVS for Teen and Children’s retailers have decreased due to lower margins and decreased sales, while NOLVs have increased for Women’s and Men’s retailers due to gross margin improvements. There are some outliers in all segments. Sales Trends: Most companies have experienced negative comparable store sales trends recently due to declines in customer traffic; however, others with appealing product mixes and strong e-commerce sales have fared better. Gross Margin and Discounting: Gross margin has been adversely impacted by promotional pricing to drive sales. However, margins have improved for some retailers in recent months as companies better manage their inventory levels and improve promotional strategies.







Bankruptcies and store closures: The specialty retail sector has seen a number of bankruptcies and liquidations over the past year, and further closures appear on the horizon. While some have gone out of business entirely, some specialty retailers have closed underperforming stores to rightsize the business. Dots, Delia’s, Wet Seal, Body Central, Deb Shops, Abercrombie & Fitch, and Aeropostale are all retailers that have closed either all or part of their store bases over the past year. More recently, surf-andskate inspired specialty apparel has faced challenges, as Quiksilver filed for bankruptcy in September 2015, and PacSun continues to experience comparable store sales declines. American Apparel filed for bankruptcy in October 2015, and Joe’s Jeans was recently sold to Sequential Brands. Declining mall traffic/e-commerce growth: The general decline in mall traffic continues to impact sales at specialty retailers. Specialty apparel retailers have worked to offset declines in brick-and-mortar locations by offering a wide assortment of products and sizes on their e-commerce websites, as well as incorporating social media tools and enhancing their omni-channel presence. In addition, retailers have worked to leverage store locations, such as by offering site-to-store shipping. Competition/promotional activity: Due to extremely high competition in the marketplace, specialty apparel retailers continue to be hyper-promotional to lure in customers who have been conditioned to expect constant and deep promotions. This has impacted profitability. Payroll issues: Many retailers, including a number of specialty apparel retailers, have been under pressure to increase minimum wage rates, which increases payroll expenses. For example, the Gap recently announced it would raise its minimum wage to $10 in 2015. In addition, there has been mounting pressure to stop the practice of on-call scheduling. While it allows retailers to avoid being over-staffed during slower times, it also results in unpredictable schedules and paychecks for employees. The Gap, Abercrombie & Fitch, Ann Taylor, Victoria’s Secret, and Bath & Body Works have all announced they will cease the practice.

Going forward into the holiday season, retailers will continue to work to offset brick and mortar sales declines by offering a wide assortment of products on their e-commerce websites. Further consolidation within the sector is likely, as retailers will continue to right-size their store bases and close underperforming locations as leases expire. Some specialty retailers may be forced to shutter a more significant number of stores, if steep sales declines persist. Store base reductions can reduce operating expenses and improve companies’ bottom lines. October 2015 — Retail Monitor

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Specialty Apparel Stores The following tables illustrate comparable store sales trends for major public specialty apparel retailers (Represents the most recent fiscal quarter reported):

Family Specialty Apparel J. Crew

(11.0%)

(8.0%)

(3.0%)

4.0%

Banana Republic

(4.0%)

(8.0%)

2.0%

(2.0%)

Gap

(6.0%)

(10.0%)

(6.0%)

(5.0%)

Old Navy

3.0%

3.0%

11.0%

0.0%

Urban Outfitters

4.0%

4.0%

6.0%

(1.0%)

(1.9%)

1.7%

5.4%

(1.4%)

0.9%

(2.3%)

1.2%

(1.6%)

Christopher & Banks

(12.4%)

(11.7%)

N/A

(7.6%)

Ascena Retail Group

(4.0%)

(3.0%)

(2.0%)

(4.0%)

Guess

(2.8%)

(5.9%)

(5.0%)

(4.8%)

New York & Co.

3.8%

1.8%

(0.9%)

(3.4%)

Express

7.0%

7.0%

(2.0%)

(5.0%)

Victoria’s Secret

3.0%

5.0%

4.0%

3.0%

3.1%

6.8%

6.8%

2.2%

(9.4%)

(1.5%)

(6.6%)

(8.1%)

Abercrombie & Fitch

(4.0%)

(9.0%)

(10.0%)

(10.0%)

Aeropostale

(8.0%)

(11.0%)

(9.0%)

(11.0%)

American Eagle

11.0%

7.0%

0.0%

(5.0%)

The Buckle

1.1%

(0.3%)

(0.5%)

(0.9%)

(4.5%)

3.0%

8.3%

3.7%

(3.5%)

0.7%

3.7%

0.2%

2.0%

0.0%

5.0%

1.0%

Women’s Specialty Apparel White House/Black Market Chicos

Men’s Specialty Apparel Men’s Wearhouse Jos A. Bank Teen Specialty Apparel

Zumiez Children’s Specialty Apparel The Children’s Place Gymboree

Note(s): The most recent quarter reported for total Ascena Retail Group ended July 25, 2015; Urban Outfitters ended July 31, 2015; all other companies ended August 1, 2015.

October 2015 — Retail Monitor

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Off-Price/Dollar Stores/Mass Merchants Most discount retailers experienced positive sales during the summer and into the back-to-school season, as consumers remain price-conscious despite an improving economy. Lower fuel prices also continue to benefit sales, as customers had more discretionary dollars to spend. Off-price retailers also continue to perform well, as consumers increasingly favor retailers such as TJX and Ross Stores over mall-based department stores and specialty stores.



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NOLVs: NOLVs have been generally increasing by up to 1.0 percentage point, due to gross margin improvements, higher sales, reduced



expenses, and better inventory management.

 Sales Trends: Most companies within this sector have experienced positive sales results, particularly during the back-to-school season, as consumers looked for bargains.

Competition: Recognizing the success of off-price retailers, there have been several new entrants into the arena. Macy’s has debuted its Backstage off-price concept, and Kohl’s also opened a store called Off Aisle. In addition, Filene’s Basement, which closed all of its stores by late 2011, has returned to the sector with an online-only website offering select product at bargain prices. Similarly, competition amongst mass merchants was extremely high during the back-toschool shopping season, with Wal-Mart and Target offering promotions to compete against each other, as well as Amazon. Growing store bases: Retailers continue to expand their store base. For example, TJX continues to grow its store base in the U.S. and globally, with stores in Canada, Germany, Ireland, Poland, the U.K., and Austria, as well as plans to enter the Netherlands in 2015. It also announced the acquisition of Trade Secret, an off-price chain in Australia this summer. Ross Stores has also announced plans to expand into new and existing markets over the next few years, through its Ross Dress for Less and dd’s Discounts banners. Dollar store activity: Dollar stores continue to perform well, with categories such as tobacco, candy, and snacks particularly driving sales for many. This sector has seen market activity over the past year, as the acquisition of Family Dollar by Dollar Tree was completed in July 2015. The combined company agreed to sell off or close over 300 Family Dollar stores to pass FTC approval. E-commerce: E-commerce has been a point of expansion within the off-price and mass merchant sector. TJX, Nordstrom Rack, Stein Mart, Belk, and Burlington Coat Factory continue to develop and expand their e-commerce websites and offerings. However, Ross Stores has no plans to offer an e-commerce website.

The following table illustrates comparable store sales trends for major discount and dollar store retailers (Represents the most recent fiscal quarter sales reported):

Gross Margin and Discounting:

TJX

6.0%

5.0%

4.0%

2.0%

Gross margin has either remained

Ross Stores

4.0%

5.0%

6.0%

4.0%

consistent, or has increased slightly

Burlington Coat Factory

5.6%

0.8%

6.7%

5.2%

Stein Mart

3.0%

4.8%

5.6%

3.1%

Wal–Mart

1.5%

1.1%

1.6%

0.5%

due to the merchandise mix, or decreased discounting and promotional activity.

Target

2.4%

2.3%

3.8%

1.2%

K-Mart

(7.3%)

(7.0%)

(2.0%)

0.5%

Costco

6.0%

5.0%

8.0%

7.0%

Dollar General

2.8%

3.7%

4.9%

2.8%

Dollar Tree

2.7%

3.4%

5.6%

5.9%

Note(s): The most recent quarter reported for TJX, Ross Stores, Burlington Coat Factory, Stein Mart, Target, K-Mart, and Dollar Tree ended August 1, 2015; Wal-Mart ended July 31, 2015 and excludes fuel; Costco ended August 30, 2015 and excludes fuel; Dollar General ended July 31, 2015.

Off-price retailers are expected to continue to perform well during the holiday season. Mass merchants will likely offer deals and promotions to drive sales. October 2015 — Retail Monitor

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E-Commerce E-commerce continues to change the way consumers shop, and has steadily increased as a percentage of total retail sales over the past few years. It remained a popular shopping channel during the back-to-school season for many consumers. Retailers in most sectors continue to focus on omni-channel capabilities, working to target customers in stores, online, and via mobile apps on smartphones and tablets. While e-commerce growth can drive sales for retailers, it continues to contribute to the general decline in mall traffic that has been seen over the past few years.



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NOLVs: NOLVs have generally continued to increase for multichannel retailers appraised by GA, based on recent experience. In addition, depending on the amount of sales a company generates via ecommerce, GA has been adding an ecommerce sale to its liquidation strategy, which can increase values by up to 4.0 percentage points, depending on the penetration of ecommerce sales, as well as the associated expenses. Sales Trends: Overall, e-commerce sales trends have been increasing, particularly in the direct segment of multi-channel retailers, driven by a continued focus on omni-channel efforts. In some cases, however, this has resulted in a decline in, or relatively flat, brick-and-mortar sales. Gross Margin and Discounting: Many companies continue to experience declines in gross margin, albeit at a much slower rate, as the industry remains highly competitive. Companies continue to test different combinations of discounts and free shipping tools to identify the most effective and profitable tool to drive sales.





Competition: Amazon remains the e-commerce industry leader, with some estimating that it is even set to surpass Macy’s as the top U.S. clothing retailer in the next few years. Many companies are strategizing ways to compete. When Amazon promoted its “Prime Day,” which touted deals akin to Black Friday doorbusters on July 15, 2015, Wal-Mart followed suit, announcing its own specials that day. Other companies strive to compete on an ongoing basis, thinking outside the box for ways to be able to offer same-day delivery or free shipping. New companies are also entering the arena, such as Jet.com, which has been described as the “Costco of the Internet.” Marketplace sales: Rather than trying to compete with Amazon, some companies have realized the better option is to sell their products through Amazon’s marketplace, or participate in Amazon’s Fulfillment by Amazon (“FBA”) program. Marketplace sales allow a company to offer their product for sale on Amazon’s website and fulfill from their own warehouses. The FBA program allows companies to store product within Amazon’s facilities, and once sold, Amazon ships directly to customers. GA attended the Internet Retailer Conference and Expo in Chicago in June 2015, which included seminars regarding Amazon and its marketplace. This is a growing sector that GA has seen used by many companies appraised. Multi-channel: In light of online competition from Amazon and new players like Jet.com, retailers continue to leverage multi-channel business models, offering customers the convenience of ordering online, and then picking up the order at a store location. In addition, many retailers have developed the ability to fulfill online orders from store inventory in addition to distribution centers, and many allow customers to return purchases made online to store locations.

The following table illustrates e-commerce sales as a percentage of total retail sales, as well as the year-over-year change in e-commerce sales dollars, excluding auto and gasoline sales, based on information from the U.S. Commerce Department:

% of Retail Sales

10.5%

10.2%

10.1%

10.0%

Change Year Over Year

14.1%

14.8%

14.0%

15.6%

Source: www.census.gov/retail. Results are revised estimates, calculated using information in the most recent press release for the second quarter of 2015, excluding sales of automobile and gasoline.

Competition will remain fierce in the e-commerce sector throughout the 2015 holiday season, with companies looking to compete with Amazon’s Prime option. Retailers will work to generate customer traffic both in stores and online through strategic promotions and convenience options such as same-day store pickup. Going forward, e-commerce sales will continue to be strong, and will likely follow similar trends as the first half of 2015, which saw e-commerce sales increase 12% over the prior year. October 2015 — Retail Monitor

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Footwear The footwear industry has been predominantly positive throughout the summer and back-to-school season. Sneakers and casual footwear in particular have been driving sales, as consumers have been dressing more casually on a day-to-day basis. Furthermore, sneakers are no longer merely about function, but they are also about style, as fashion sneakers have been driving sales. Other summer footwear styles also performed well this year, including sandals and women’s summer heels. In general, consumers continue to see footwear as a way to showcase their personal style. 

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NOLVs: NOLVs have generally been increasing between 0.5 and 2.0 percentage points due to increases in sales. Sales Trends: Sales trends within the



Casualization: Over the past few years, consumers have increasingly become more casual in appearance, particularly as the “athleisure” apparel trend has gained traction. Consumers are wearing stylish, comfort apparel that can be worn to work out or run errands. This has impacted the footwear industry, as casual footwear to complement these athleisure outfits has sold well. Vulcanized sneakers, such as Converse and Vans, continue to sell well. Consumers are also purchasing athletic sneakers, particularly Jordan’s and low-top basketball sneakers. Vintage styles have also been celebrated. Several major athletic footwear brands are bringing back reinvigorated styles from years ago. E-commerce: Footwear retailers continue to develop an omni-channel presence. The transition toward online shopping has been less prevalent in footwear than in other sectors, as many consumers prefer to try on shoes before purchasing. However, retailers continue to leverage multi-channel capabilities, offering to order a size, color, or style of a shoe unavailable in a store for customers, and have it sent to their home through the e-commerce division. Major players in the industry continue to strengthen mobile platforms and expand e-commerce to compete with online retailers such as Zappos.com and Amazon.com.

industry have generally increased; however, performance has varied by category. In general, casual footwear

The following table illustrates comparable store sales trends for major footwear

retailers (Represents the most recent fiscal quarter sales reported):

has been performing better than dressier options, as consumers are continually dressing more casually

DSW

1.8%

5.1%

7.6%

2.6%

Johnston & Murphy

10.0%

3.0%

2.0%

0.0%

Gross Margin and Discounting:

Foot Locker

9.6%

7.8%

10.2%

6.9%

Many companies have had to

Finish Line

1.5%

5.5%

3.2%

4.5%

increase discounting to drive sales;

Famous Footwear

0.1%

3.1%

4.0%

(0.2%)

however, some have managed to

Journeys

4.0%

5.0%

16.0%

6.0%

offset margin erosion through the

Skechers

12.8%

9.3%

13.9%

11.0%

sale of higher-margin products,

Steve Madden

18.5%

11.6%

(2.3%)

(7.4%)

Deckers

0.0%

4.7%

7.6%

3.3%

on a day-to-day basis.

higher average prices, and an increase in sales through e-commerce

Note(s): The most recent quarter for Finish Line ended August 29, 2015; Sketchers, Steve Madden, and Deckers ended

versus lower-margin channels.

June 30, 2015; all other companies ended August 1, 2015.

Early in the back-to-school season, warmer weather in many areas of the country resulted in boots being slow to sell. However, many retailers are anticipating boots to sell well once temperatures cool, and continue to perform during the holiday season. In particular, fashionable ankle boots for women are anticipated to be a strong trend during the rest of the year, as are boots designed to withstand the winter elements and function well on snowy terrain. October 2015 — Retail Monitor

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Sporting Goods Overall, sporting goods retailers have seen positive results, as most have finally gotten past comparisons to a year of elevated sales of firearms and ammunition that started in 2012 and 2013, but subsequently slowed. Many major retailers have seen sales gains in recent quarters despite comparisons to sales boosted by the World Cup last year, illustrating the strength of the industry. Despite the overall gains, some categories continue to perform better than others. While items such as sporting hard goods and footwear have been trending well, golf participation continues to be on the decline, and therefore, sales of golf equipment and related accessories continue to struggle.



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NOLVs: NOLVs have generally remained consistent.  Sales Trends: Sales trends for most sporting goods retailers have been increasing, with those that rely on firearms are no longer negatively impacted by comparisons to elevated levels, and companies that cater more toward bat and ball sports continue to improve.

Gross Margin and Discounting: Gross margin has varied by



Firearms and ammunition: During 2015, sales of firearms and ammunition, a major category at many sporting goods retailers, have returned to more normalized levels, following significant increases in 2012 and 2013, and a subsequent slowdown. While some retailers have reported weakness in categories such as hunting, overall, demand for firearms has stabilized. Going forward, 2016 is an election year, and election years have historically seen a surge in gun and ammo sales, as consumers become concerned that changes in legislation could make purchasing firearms more difficult. Publicized mass shootings also spark the same fear regarding changes in legislation, and there have been several this year that have not resulted in the subsequent increase in firearms sales. Until recently it seemed that consumers had already stocked up; however, recent events have caused some presidential candidates to tout plans for stricter gun control. This could cause a spike in sales of guns and ammo in the coming year. E-commerce: Within the sporting goods industry, e-commerce continues to grow as a percentage of total sales. Dick’s and other retailers continue to experience strong online sales growth. Retailers have been working to drive traffic both in stores and online, to capture market share. Apparel: Sales of licensed sporting apparel related to the NFL, NBA, and MLB have been trending well, as customers support their favorite teams and players. In addition, one of the biggest trends in 2014 that has shown no signs of slowing in 2015 has been “athleisure,” whereby clothing is designed to transition from workouts to everyday life, as it is both comfortable and fashionable. This trend has been driving sales at retailers, and benefiting big names such as Under Armour, Lululemon, and Athleta.

The following table illustrates comparable store sales trends for major public sporting good retailers (Represents the most recent fiscal quarter sales reported):

company. Some have been able to hold margin consistent, while others

Dick’s

have experienced declines as they increased discounts to drive sales. Others have experienced increased

Big 5 Sportsman’s Warehouse

gross margin due to a shift in the mix

1.2%

1.0%

3.4%

1.1%

Cabela’s

(0.9%)

(1.3%)

(5.5%)

(11.2%)

Hibbett

(1.1%)

(0.9%)

5.4%

0.6%

1.7%

3.9%

(0.5%)

1.0%

0.5%

(0.7%)

(5.3%)

(6.2%)

of sales to higher margin categories,

Note(s): Results for Dick’s include Dick’s Sporting Goods stores, Golf Galaxy, and the e-commerce business; Cabela’s

resulting from a decrease in firearms

represents consolidated comparable store sales including Canada. The most recent quarter for Dick’s, Hibbett, and

sales, which typically achieve a lower

Sportsman’s Warehouse ended August 1, 2015; Cabela’s ended June 27, 2015; Big 5 ended June 28, 2015.

gross margin. Going forward into the winter and holiday season, weather will play a major roll in sporting goods sales. A cold winter with ample snow will benefit equipment and apparel for snow sports and outdoor activities. In addition, the athleisure trend shows no sign of slowing, which will continue to benefit apparel sales. October 2015 — Retail Monitor

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Consumer Electronics Results in the consumer electronics industry continue to vary by category. Smartphones and gadgets remain strong sellers, as consumers increasingly opt to spend discretionary dollars on the latest technology. Other consumer electronics, such as certain television models, have not fared as well, although larger 4K televisions have seen some success. Appliances have been a bright spot, aided by the strong housing and remodeling markets. Many consumer electronics retailers have been expanding into other categories. Some offer wearable health technology, as well as fitness equipment, with others relying on mattresses and other home items to buoy sales. While some have hoped that smart home technology would prove a boon for sales, it has been somewhat slow to take off. Smart home technology is appealing to many consumers; however, consumers seem willing to wait to implement the technology as part of a more extensive home remodel and upgrade.



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NOLVs: NOLVs have generally remained relatively consistent.



Sales Trends: While some consumer electronics retailers are experiencing declining sales due to decreased mall traffic, a competitive environment, and weak results in key categories, others have expanded their product categories to include items like



Cell phones: Cell phones have been a bright spot in the consumer electronics industry, with consumers vying to get the latest and greatest smartphones soon after release, such as Apple’s recently released iPhone 6s. Wireless service providers often are willing to sell the newest, most desirable smartphones at slim margins or even below cost in order to gain customers on their network. For years consumers could often buy a $600 smartphone for closer to $200 or $300, in the event that they signed a two-year contract with the provider. Most recently, a change has emerged. Providers are trending toward having customers pay in installments over the course of a two-year timeframe, which increases the total monthly bill, but allows the customer to avoid paying a large up-front fee for the phone. Sprint also offers a model whereby customers lease smartphones, and are able to trade up to newer models sooner. Wearable technology: Wearable technology, particularly items geared toward health and fitness, continue to gain traction. Activity trackers allow consumers to wear a device that tracks their level of activity. These continue to be popular, with brands such as FitBit becoming extremely well-known. Smartwatches, particularly the Apple Watch, have seen increased demand this year, and will likely be popular gifts this holiday season. External competition: This industry continues to face competition not only from traditional brick-and-mortar consumer electronics players, but also from online giants like Amazon, office supply retailers, and even some drug stores.

furniture, bedding, and appliances, and have reported positive sales trends.

The following table illustrates comparable store sales trends for major public consumer electronics retailers (Represents the most recent fiscal quarter sales reported):

Gross Margin and Discounting: Some retailers have experienced

Best Buy

2.7%

(0.7%)

2.0%

2.4%

declines in gross margin due to

hhgregg

(6.3%)

(10.0%)

(6.3%)

(11.4%)

increased promotional activity needed

Conn’s

2.2%

(5.0%)

1.7%

(0.4%)

to drive sales and sell through aged

Note(s): The most recent quarter for Best Buy ended August 2, 2015 and represents domestic sales, excluding installment billing; hhgregg ended June 30, 2015; Conn’s ended July 31, 2015 and represents product sales only.

goods. Retailers reliant on smartphones have experienced margin declines, as these products typically generate lower margins. Conversely, retailers that have expanded product offerings into higher margin categories like bedding have seen gross margin

Going forward into the holiday season, new smartphones, the Apple Watch, and other gadgets will likely be at the top of many consumers’ wish lists. However, the industry will continue to face challenges such as weaker television sales. Conversely, the video gaming segment is anticipated to see a strong holiday season, as this is the second year that the latest gaming consoles are widely available, and these consoles, as well as games and accessories, will likely sell well.

results improve.

October 2015 — Retail Monitor

9

Books, Music, and Movies After successive years of declines, sales of physical books have bottomed out and are actually trending up slightly. Sales have been driven by improved merchandising efforts coupled with a stable/improving market for physical books. Titles such as Harper Lee’s Go Set a Watchman and E.L. James’ Grey stacked up well against last year’s strong pipeline of young adult books. Within the Music/Movie segment, streaming services continue to take share from physical CDs and DVDs, as well as digital purchases.



  

NOLVs: NOLVs have been relatively consistent for most companies, although some have declined. Sales Trends: Sales of physical books are up slightly. E-book sales have declined due to price hikes. College textbook sales continue to decline on a dollar basis, as rentals grow in popularity, while K-12 sales are mixed due to the cyclical adoption schedule. Physical CD and DVD sales are still declining and digital track and album sales are declining in favor of streaming services. Gross Margin: Gross margin has been relatively flat to slightly up for most companies. Companies have been strategic in their promotions and relying on in-store events and experiences to drive traffic and compete with online sellers.





In-store experience: Brick-and-mortar book stores have been pushing in-store marketing events to drive traffic and offer an experience that online giants can’t replicate, especially those geared toward children. Retailers also continue to expand non-book categories like toys, games, and gifts, which are generating increased comparable store sales. E-book sales slowdown: According to the Association of American Publishers, e-book sales for adult, children’s, and young adult titles decreased 10.4% for the first five months of 2015 compared to the prior year. Moreover, several publishers have been reporting a drop in e-book sales in recent quarters. Experts blame the new distribution deals publishers cut with Amazon.com, which enables publishers to set e-book prices and avoid deep discounts. This has effectively raised the price of e-books to upwards of $15 for certain titles, which has not resonated with consumers. Barnes & Noble spinoff: In August 2015, Barnes & Noble changed its strategy by spinning off its college bookstores business. It had originally planned to spin off its struggling NOOK business. The company believes that the separation will allow each business to optimize its strategic opportunities. Textbook rentals and services: Textbook rentals have solidified their place in the college market as a means to save students money. Companies are becoming increasingly smarter with their rental pricing and inventory management. Some are being more strategic in their purchases, while others are partnering with Amazon.com to reach a wider customer base. Industry leaders are also bolstering the service side of the business to connect with students and build customer loyalty. This includes school-focused services such as POS systems and inventory management, as well as student-focused services like homework help, tutoring, and course management.

The following table illustrates comparable store sales trends for major public book retailers (Represents the most recent fiscal quarter sales reported):

Barnes & Noble1

1.0%

(0.5%)

1.7%

0.5%

Books-A-Million

(0.3%)

(0.9%)

1.8%

0.1%

Note(s): Represents core comparable bookstore sales and excludes sales of NOOK products. The most recent quarter for both companies ended August 1, 2015.

Discounting: Discounting has remained relatively consistent, with thoughtful, targeted promotions.

October 2015 — Retail Monitor

10

Books, Music, and Movies





Increased digital penetration in K-12 market: Overall K-12 sales have been mixed due to cyclical changes in the timing of program adoptions. However, digital products continue to grow exponentially as schools add more options to the curriculum and publishers strengthen their digital portfolios. For example, Houghton Mifflin recently acquired Scholastic Corporation’s Educational Technology & Services division, while McGraw-Hill Education acquired an equity stake in busuu, a global mobile language learning platform. Physical and digital music and movie sales drop while streaming grows: According to Nielsen SoundScan, 2014 was a record low for the industry and 2015 has seen similar trends. Both physical album sales and digital album sales are down as more consumers transition to online streaming services. Only two CDs reached platinum status – Taylor Swift’s 1989 and the Frozen soundtrack. For the first half of 2015, audio streams in units totaled 58.6 billion, up 75% from the prior year. Vinyl is still performing well, though it only represents 6% of total sales. Vinyl has boosted sales within independent music stores. The same is being seen within the video category. In 2014, digital movie sales surpassed sales of physical product for the first time. Spending on subscription services increased 25% to $4.02 billion. It is expected that, like music, physical sales will continue to fall as more consumers switch to digital.

The following tables illustrate music sales in units by type:

(14.9%)

CD Sales

56.6 million

(10.0%)

106.5 million

(9.4%)

Digital Album Sales

53.7 million

(0.1%)

9.2 million

6.1%

Vinyl Sales

5.6 million

38.4%

Total Album Sales1

257.0 million

(11.2%)

Total Album Sales1

116.1 million

(4.0%)

Digital Tracks

1,101.6 million

(12.5%)

Digital Tracks

531.6 million

(10.4%)

Audio Streams

78.6 billion

60.5%

Audio Streams

58.6 billion

74.2%

Video Streams

85.3 billion

49.3%

Video Streams

76.6 billion

109.2%

Total Streams

163.9 billion

54.5%

Total Streams

135.2 billion

92.4%

(2.0%)

Total Music Consumption

259.4 million

14.2%

CD Sales Digital Album Sales Vinyl Sales

Total Music Consumption2

140.8 million

476.5 million

Note(s) (1) Includes physical CDs, vinyl, and digital. (2) Includes streaming (1,500 streams equals one album), digital sales (10 track downloads equals one album), and physical sales.

2

Note(s) (1) Includes physical CDs, vinyl, and digital. (2) Includes streaming (1,500 streams equals one album), digital sales (10 track downloads equals one album), and physical sales.

Retailers will continue to manage book, CD, and DVD inventory levels while also using other categories and in-store events to drive traffic. The recent slowdown in e-book sales could be a sign that physical books will continue to have relevance for the foreseeable future.

October 2015 — Retail Monitor

11

Arts and Crafts The arts and crafts industry remains highly competitive, and therefore continues to see mixed results as retailers vie for consumers’ dollars. The most recent quarters have seen the residual effects of sales comparisons to inflated levels resulting from the Rainbow Loom and similar variations; however, in the coming months comparisons should be more normalized. In general, retailers are not looking for that next big thing to drive sales, but rather are focused on the continued popularity of do-it-yourself (“DIY”) projects and crafts to drive sales, and in having the right mix of product to meet current trends.



  





NOLVs: NOLVs for companies appraised by GA have remained relatively consistent, or in some cases, have increased up to 1.5 percentage points. Increases have been driven by companies finding success through balancing markup and discounting cadences to maintain or increase gross margin, without sacrificing sales. Sales Trends: Many arts and crafts retailers experienced increasing sales over the past 12 months; however, some continue to report weaker results due to comparisons to inflated levels the prior year driven by the Rainbow Loom and similar offerings. Some experienced sales declines due to residual effects from the west coast port slowdown, which resulted in goods getting to stores late, and subsequently requiring discounts. Gross Margin and Discounting: Companies continue to use discounting to drive sales. While discounting adversely impacts gross margin, some retailers have managed to experience margin increases due to more targeted promotions, increased markup, and lower acquisition costs through private labels.



DIY and online influence: DIY projects, particularly those related to home décor, weddings, and parties, remain popular, largely as a result of the continued expansion of social media. Customers see crafts and DIY projects online, on websites such as Pinterest and Etsy, and often want to replicate them at home. Craft retailers have been working to capitalize on this by ensuring that customers know they can get all the essentials for their projects in their stores. Going one step further, many offer online tutorials and in-store classes geared toward making seasonally appropriate or in-vogue projects. Merchandising: While the Rainbow Loom, as well as similar variations, remain popular with children, more recently retailers have seen sales level off compared to elevated sales levels in the past. Retailers have been working to offer a balanced inventory mix that continually drives sales, and have been following trends to have the right mix of popular inventory. In the recent backto-school season, many retailers showcased school supplies and related items. In addition, recently marquee lights in the shape of letters of the alphabet have been popular décor for weddings, and many have worked to stock this trend. Some retailers have worked to continually remerchandise stores to ensure that products are easy to find, and in some cases have offered end caps that feature all the necessary items to make a certain project, often inspired by Pinterest. Competition: The industry remains very competitive, with traditional brickand-mortar arts and crafts stores such as Jo-Ann Fabrics, Michaels, and A.C. Moore facing competition from big box retailers such as Wal-Mart and Target, as well as online players such as etsy.com. Retailers have also been managing cost structures, and closing underperforming locations as leases expire.

The following table illustrates comparable store sales trends for major public craft retailers (Represents the most recent fiscal quarter sales reported by these companies):

Michaels Hancock Fabrics

1.6%

0.3%

1.4%

(0.8%)

(1.3%)

(1.9%)

2.2%

0.3%

Note(s): The most recent quarter for Michaels and Hancock Fabrics ended August 1, 2015.

Going forward, there may be a new competitor entering the market, as Amazon is reportedly launching its own marketplace of handmade crafts, similar to Etsy.com. During the holiday season and beyond, retailers will continue to capitalize on trends seen on websites such as Pinterest. This includes Pinterest’s recently announced “buyable pins,” where customers will be able to buy certain pinned items through Pinterest’s merchant partners. Michaels has also recently added wi-fi to its stores, to allow customers to more easily access their pins while shopping. Throughout the holiday season, retailers will work to be the destination for crafters by offering on trend products at attractive price points. October 2015 — Retail Monitor

12

Office Supplies The office supplies industry continues to face consolidation and store closures, as well as decreasing sales trends, due to challenges from a general decline in purchases of paper and other core products. While many retailers offered promotions in an attempt to drive customer traffic during the back-to-school season, sales declines overall continue to be driven by businesses becoming more digitized and less reliant on paper. Major players also face continued competition from mass merchants, club warehouses, and online retailers, leading many to expand and revamp their product offerings.



 



 

NOLVs: NOLVs have been mixed as ongoing sales declines have been offset by improvements in gross margin, the closure of underperforming store locations, growth of e-commerce, and improved inventory management. Sales Trends: Generally, retailers in the industry have experienced ongoing sales declines due to reduced spending on core products; however, key growth areas include break room and janitorial supplies. In addition, some retailers have most recently experienced comparable store sales gains, due to the closure of underperforming locations, and subsequent shift in customer traffic to go-forward store locations. Gross Margin and Discounting: Gross margin within retail stores has been mixed as companies continue to offer promotions to drive sales; however, promotions and discounts have been more targeted than in the past, to the benefit of gross margin for some retailers.





Competition and acquisition activity: In order to effectively compete with major online competitors such as Amazon, office supply retailers have worked to leverage economies of scale, leading to merger and acquisition activity in the industry over the past couple of years. Office Depot and OfficeMax merged in late 2013. More recently, Staples announced it planned to acquire Office Depot for $6.3 billion, pending FTC approval. While there has been some question as to whether anti-trust issues may prohibit this merger, a ruling is expected in October 2015. Store closures: As a result of the continued decline in customer traffic and a shift away from paper-related items, office supply retailers are rationalizing store bases and transitioning from big-box to small-format store concepts. Staples has closed more than 200 stores since 2014. After exiting its Canadian retail business in mid-2014, Office Depot plans to close at least 400 stores by 2016. More store closures will be seen going forward. GA has been involved in many store closures in this sector. E-commerce: Recognizing the decline in sales and subsequent store closures of many brick-and-mortar locations, many office supplies retailers have been expanding their e-commerce business. Staples in particular has made significant investments in its e-commerce capabilities as approximately half of its sales are now generated online. This push complements the smaller-format initiative, as companies can offer more products online, without having to stock all SKUs in the stores. Product mix: As offices continue to reduce their paper usage in favor of digital technologies, office supply companies are expanding their product offerings in order to become one-stop shopping destinations for all office needs. Although sales of core product categories have declined, growth areas include break room and janitorial supplies. Major players, such as Staples and Office Depot, have also added new specialty products, including those related to healthcare and education, to capture additional sales.

The following table illustrates comparable store sales trends for major public office supply retailers (Represents the most recent fiscal quarter sales reported):

N.A. Stores

(3.0%)

(3.0%)

(4.0%)

(4.0%)

Commercial

2.6%

3.0%

5.0%

3.0%

N.A. Retail

1.0%

(2.0%)

(2.0%)

(3.0%)

(4.0%)

(4.0%)

(1.0%)

(1.0%)

Staples

Office Depot N.A. Business Solutions

Note(s): The most recent quarter for Staples ended August 1, 2015 (N.A. stores exclude e-commerce and represent comparable store sales only); the most recent quarter for Office Depot ended June 27, 2015.

Going forward, retailers within the office supplies sector will continue to evolve business strategies to remain competitive. This includes leveraging economies of scale, streamlining operations, and increasing e-commerce operations. October 2015 — Retail Monitor

13

Grocery Stores The grocery sector as a whole continues to perform well, though there have been some clear winners and losers. Continued consolidation was seen throughout 2015, with more expected in the coming months. Retailers are keeping a close watch on pricing and promotions to drive sales and protect margin in this highly competitive market.



 

 NOLVs: NOLVs have remained relatively consistent for most companies.

Sales Trends: Sales have increased for most of the key industry leaders.

 Gross Margin: Overall gross margin has been relatively consistent. However, non-perishable gross margin has been up, while perishable has been down, generally due to increased offerings of convenience items (fresh cut fruits, etc.), which



Consolidation: Competitive pressures are weighing heavily on smaller, regional players. Rising costs require economies of scale to achieve better purchasing power and leverage distribution platforms. Recent activity includes the merger of Albertsons and Safeway, which led to Haggen acquiring 146 Safeway/Albertsons stores. Haggen’s acquisition has been tumultuous, causing it to ultimately file for bankruptcy and announce plans to close/sell most of its newly-acquired stores. Delhaize Group and Royal Ahold N.V. announced a $29 billion merger deal expected to close in 2016, while A&P filed for Chapter 11 bankruptcy and is closing/selling many of its stores. SpartanNash and Smart and Final have also expressed interest in growing through acquisitions. Alternative formats: Alternative formats continue to increase in popularity, particularly those focused on natural and organic products. Whole Foods unveiled plans to launch a new lower-priced format in 2016 targeting millennials. Low-price European chain Aldi is also expanding. Smaller formats are growing, especially in urban markets and within the discount sector, such as Wal-Mart’s Neighborhood Markets stores and Target’s TargetExpress stores. Hannaford also recently opened its first small-format store. Traditional supermarkets are expected to reduce their selling space by opening smaller stores and by retrofitting existing stores to have larger warehouse areas to stage home deliveries and fulfill click-and-collect orders. Pricing: Recent volatility in protein and produce prices should subside in the coming months, though egg prices will remain high. The USDA is forecasting either deflation or minimal inflation going forward. Customer service: Supermarkets continue to focus on prepared foods, expanding on-site cafes, in-store clinics, and health-related kiosks. Many are adding grocery pickup and home delivery options to compete with Peapod and Amazon Fresh. Amazon is even testing a new drive-thru grocery concept. Adding convenience options is critical to remain competitive, but comes at a price, namely higher labor costs and logistical difficulties.

can increase shrink. The following table illustrates comparable store sales trends for major public grocers (Represents the most recent fiscal quarter sales reported): Discounting: Discounting has been relatively stable with retailers

5.3%

5.7%

6.0%

5.6%

continuing to offer targeted

Supervalu

(0.3%)

1.1%

2.3%

0.4%

promotions to drive traffic.

Ahold USA

1.9%

0.2%

0.3%

1.2%

Delhaize Group

2.5%

2.5%

3.6%

5.3%

Publix

4.1%

5.3%

6.4%

5.0%

Whole Foods

1.3%

3.6%

4.5%

3.1%

(1.0%)

(0.1%)

3.0%

3.3%

4.3%

4.7%

3.5%

2.2%

Kroger

The Fresh Market Weiss Markets

Note(s): All sales exclude fuel. The most recent quarter for Kroger ended August 15, 2015; Supervalu ended June 20, 2015 and reflects Retail Food operations only and excludes Save-a-Lot; Ahold USA ended July 12, 2015; Delhaize Group ended June 30, 2015; Publix and Weiss Markets ended June 27, 2015; Whole Foods ended July 5, 2015; The Fresh Market ended July 26, 2015.

The supermarket industry remains poised for continued transactions as companies attempt to grow through acquisition and achieve economies of scale. October 2015 — Retail Monitor

14

Pharmacy and Drug Stores Drug stores continue to reinvent themselves as one-stop wellness centers and convenient shopping alternatives to supermarkets and mass merchants. Most recently, major chains CVS, Walgreens, and Rite Aid have invested in digital tools such as smartphone apps and telehealth services. The industry continues to be impacted by the conversion of branded drugs to generics, and increased penetration of specialty drugs and industry-wide declines in insurance reimbursement rates.

 

  

NOLVs: Most NOLVs have remained relatively consistent. Sales Trends: Sales trends have been generally increasing, depending on the company, type of product, and sales region.

 Generic drug price increases: Generic drug prices have been on the rise due to several factors, including higher costs of raw materials and reduced competition. Some generic drug prices have increased as part of business strategies to increase profits, which many have labeled price-gouging and sparked outrage from both consumer groups and Congress. For example, after Daraprim, a generic used to treat infections, was acquired by a pharmaceutical startup in September 2015, the company raised the price overnight from $13.50 to $750 per tablet. Additionally, after another pharmaceutical company purchased the tuberculosis drug Cycloserine in August, it raised the price from $500 to $10,800 for 30 pills. However, the increase was rescinded after significant public backlash. While some pharmacies have been able to pass these increases on to customers, others have had to absorb the costs, to the detriment of gross margin.  Tobacco: CVS’ front-end comparable store sales continue to be impacted by its decision to stop selling tobacco in late 2014; however, this will be anniversaried soon, which should result in more normalized sales. In addition, sales are more profitable, as tobacco sales generally achieve lower gross margin. Should other retailers follow CVS’ lead, similar declines in front-end sales could be seen.  In-store services: Drug stores continue to blur the line between retail store and health provider by investing in in-store services, such as medical screenings, nutrition and health education, medication therapy management, and telehealth programs. In addition, several states have passed laws allowing pharmacists to administer more types of vaccines and immunizations.  Specialty drugs: Pharmacy retailers are offering an increased assortment of high -cost specialty drugs used to treat rare and chronic conditions. While a boon to pharmacy retailers’ bottom line, industry advocates have questioned the rapid rise of specialty drug prices and patients’ and insurers’ ability to afford them. The following table illustrates the quarterly comparable store sales trends for CVS, Walgreens, and Rite Aid (Represents the most recent fiscal quarter sales reported):

Gross Margin: While many retailers in the industry have experienced

CVS

improving gross margins due to the

Pharmacy

4.1%

4.2%

5.5%

4.8%

transition to lower-cost generic

Front End

(7.8%)

(6.1%)

(7.2%)

(4.5%)

0.5%

1.2%

1.6%

2.0%

drugs, generic drug prices have been

Total Walgreens

increasing, which has pressured

Pharmacy

7.0%

9.7%

8.1%

7.8%

gross margin. In addition, declining

Front End

1.6%

2.5%

1.5%

1.3%

reimbursement rates continue to

Total

6.3%

6.9%

5.7%

5.4%

Pharmacy

2.8%

3.9%

5.7%

7.2%

Front End

0.3%

0.6%

2.0%

1.6%

Total

2.1%

2.9%

4.5%

5.4%

pressure gross margin. Script Valuation: Script values have remained relatively consistent.

Rite Aid

Note(s): The most recent quarter for CVS ended June 30, 2015; Walgreens ended May 31, 2015; and Rite Aid ended August 29, 2015.

Sales are expected to increase due to continued demand for prescription drugs, clinic visitations, and general merchandise, particularly as the rate of uninsured Americans continues to decline. These gains may be slightly offset by declines in profitability as a result of higher drug costs and reduced reimbursement rates. Retailers may focus on private label sales to increase gross margin. October 2015 — Retail Monitor

15

Furniture and Home Furnishings The furniture and home furnishings industry continues to trend in a positive direction. Strength has been seen particularly through e-commerce channels. In general, the industry continues to benefit from strength in the housing and remodeling markets, as new home buyers have been purchasing new furniture, and existing homeowners have been updating décor. Recent trends include rustic pieces, which incorporate wood and leather, as well as lanterns and statement pieces.



  

NOLVs: NOLVs have generally been increasing by up to 1.0 percentage point within the industry, although there have been some outliers that have not fared as well. Increases have been driven by increasing sales and in some cases, an increase in product sold through the direct channel. Sales Trends: Sales continue to be primarily positive throughout the industry, with many retailers experiencing sales increases due to compelling merchandise mixes, online growth, an improving housing market and remodeling sector, and enhanced focus on customer service. Gross Margin and Discounting: Gross margin performance for the industry has generally been increasing. Retailers have kept inventory levels in line with sales, to avoid having to discount to sell through excess inventory, to the benefit of gross margin. In addition, companies continue to improve sourcing and reduce costs where possible.





E-commerce growth: The furniture and home décor industry continues to see a shift toward online purchasing as customers become more comfortable making bulky or expensive purchases online. Brick-and-mortar locations are increasingly becoming more of a showroom or gallery for many players within the industry. Customers will often try out certain furniture pieces before purchasing, such as sofas, recliners, and chairs in person, but may opt to make the purchase online once the final decision has been made. E-commerce growth has also been significant for home décor and home furnishings. Items such as area rugs, bedding, curtains, lamps, lighting, and patio and outdoor furniture continue to be popular online purchases. Online-only players, such as overstock.com, etsy.com, wayfair.com, and jossandmain.com, which offer home furnishings, furniture, and accent pieces for the home, continue to benefit from this trend. Home décor: Many companies have been focused on home décor items, both in stores and online. Companies tend to offer items such as throw pillows, blankets, curtains, and candles that continually change in style and color, to encourage customers to make small changes to update their décor more frequently, such as seasonally. Bedding: Mattresses remain a strong driver of customer traffic for furniture retailers, as they are often purchased on a replacement basis. Retailers promote these categories, as mattresses and bedding often get customers into the door, thereby allowing customers to see other products that are available. There has also been growth in mattress-only retailers. Many retailers have also been offering complementary products, such as bed linens.

The following table illustrates comparable store sales trends for major public furniture and home furnishings retailers (Represents the most recent fiscal quarter sales reported):

Bed, Bath, & Beyond

0.7%

2.2%

3.7%

1.7%

Pier 1 Imports

2.5%

2.0%

5.7%

2.5%

Williams Sonoma

6.3%

4.6%

5.1%

8.7%

Kirkland’s

6.7%

3.0%

8.2%

6.3%

La-Z-Boy

5.3%

4.6%

6.5%

3.4%

Restoration Hardware

16.0%

15.0%

24.0%

22.0%

Note(s): Trends for Williams Sonoma include the Williams Sonoma stores, as well as Pottery Barn, Pottery Barn Kids, West Elm, PBteen, and e-commerce revenue. The most recent quarter for Bed, Bath, & Beyond and Pier 1 Imports ended August 29, 2015; Williams Sonoma ended August 2, 2015; Kirkland’s and Restoration Hardware ended August 1, 2015; La-Z-Boy ended July 25, 2015.

In 2015, continued e-commerce growth within the furniture industry is expected to be seen. Retailers will work to increase customer traffic both in stores and online by continually updating the merchandise mix. Retailers will also manage inventory levels to avoid having to discount. October 2015 — Retail Monitor

16

Pet Supplies The pet supplies industry has predominantly experienced growth in recent years. Sales of pet supplies have benefited from a general increase in pet ownership. In addition, over the past few decades, pets have increasingly been viewed as part of the family. As such, pet owners are often willing to spare no expense when purchasing food, supplies, or medical care for their pets.



   

NOLVs: NOLVs have generally remained consistent, or in some cases increased by up to 1.5 percentage points within the industry, although there have been some outliers that have not fared as well. Increases have been driven by increasing sales and in some cases, declines in aged inventory. Sales Trends: Sales performance has been primarily positive throughout the industry, with most retailers experiencing sales increases due to strong merchandise mixes, as well as continued growth through online channels. Gross Margin and Discounting: Gross margin performance for the industry has generally been decreasing, but this has largely been driven by the product mix, and increases in sales of lower-margin product. Most companies have not had to be too promotional to drive sales.







E-commerce and online expansion: E-commerce has been a major focus within the retail sector in recent years, and the pet industry has not been immune. Many major pet retail chains offer an extensive product assortment online. In addition, pet supplies retail giants have been supplementing their e-commerce business with key acquisitions in recent years. For example, Pet360 was acquired by PetSmart in 2014. Pet360 operates multiple e-commerce pet websites, such as PetFoodDirect.com, which offers pet food, medication, and other pet supplies. Similarly, Petco acquired Drs. Foster and Smith in late 2014. Drs. Foster and Smith is an online pet supply company that is run by veterinary experts. It specializes in pet prescription medications, and other pet products. Competition: The brick and mortar retail presence of pet supplies is widely penetrated. In addition to local, mom-and-pop pet supplies stores, the industry has been dominated by big box pet supplies retailers PetSmart and Petco, which both operate more than 1,400 stores. Wal-Mart and Target offer pet food, treats, toys, and other supplies at low prices. Amazon.com also offers a variety of pet items. Furthermore, the industry faces competition from the off-price sector, as retailers TJ Maxx, Marshalls, HomeGoods, Tuesday Morning, and several others, offer pet supplies at discounted prices. Services: Given the penetration of competition within the industry, many companies have been working to differentiate themselves through services. Examples include in-store services such as grooming, pet training, pet daycare, and boarding facilities. In addition, several companies have recognized the appeal of door-to-door delivery service within the pet sector. Examples include 1-800-PetMeds, which offers a variety of pet medications that can be purchased online or through the company’s phone center, as well as PetFlow.com, which offers close to 150 brands of pet food, as well as treats and supplies, that typically arrive on a customer’s doorstep within a couple of days. Subscribers to this website can opt to select recurring deliveries of food within certain intervals. Premium offerings: Revenue within the pet industry has been driven by an increase in pet ownership over the past few decades; however, in recent years, sales have also benefited from increased spending in the industry’s primary product category: pet food. In recent years, there has been an emphasis on allnatural and premium pet foods, which are sold at higher price points. Pet foods that tout specialty formulas have also been gaining traction. Examples include food and treats that are grain-free, high-protein, or low-carb. Foods with natural ingredients have gained favor.

Going forward, the pet supplies industry could see some consolidation, as it has been rumored that the two largest specialty retailers of pet supplies, Petco and PetSmart, could merge. The industry will likely continue to experience growth. Sales will be driven by key product categories, particularly pet food, including more natural, and often expensive, options. Services such as grooming and boarding will also likely continue to drive sales.

October 2015 — Retail Monitor

17

3‐Year Relative Sector Stock Market Performance 500%

450%

400%

350%

300%

250%

200%

85%

150%

36% 29% 26% (1%) (6%) (17%)

100%

50%

0% Oct‐12

Jan‐13

Apr‐13

Jul‐13

Oct‐13

Jan‐14

Apr‐14

Jul‐14

Oct‐14

Jan‐15

Apr‐15

Jul‐15

Oct‐15

Three Year

One Year

Six Month

Three Month

Department Stores

(1%)

(10%)

(22%)

(3%)

Specialty Apparel

(17%)

(19%)

(24%)

(18%)

Off‐Price/Dollar Stores/Mass Merchants

29%

(6%)

(11%)

9%

Footwear

85%

(14%)

(5%)

9%

Sporting Goods

(6%)

(13%)

(9%)

11%

Consumer Electronics

26%

9%

(14%)

(7%)

S&P 500

36%

(4%)

(5%)

1%

October 2015 — Retail Monitor

18

1

3‐Year Relative Sector Stock Market Performance (cont’d) 500%

450%

400%

350% 218% 300%

250%

200%

94% 51% 39% 36% 36%

150%

100%

50%

0% Oct‐12

Jan‐13

Apr‐13

Jul‐13

Oct‐13

Jan‐14

Apr‐14

Jul‐14

Oct‐14

Jan‐15

Apr‐15

Jul‐15

Oct‐15

Three Year

One Year

Six Month

Three Month

Books, Music, and Movies

36%

6%

4%

63%

Office Supplies

94%

(23%)

(26%)

16%

Grocery Stores

51%

(11%)

(29%)

(7%)

Pharmacy and Drug Stores

218%

(11%)

(13%)

27%

Furniture and Home Furnishings

39%

(16%)

(15%)

7%

S&P 500

36%

(4%)

(5%)

1%

October 2015 — Retail Monitor

19

2

GA Retail Monitor Public Company Analysis ($ in millions, except per share amounts) Share Price 10/6/2015

% 52‐WK High

Market Cap

Enterprise  Value

Enterprise Value /  2015E Revenue 2016E Revenue

Enterprise Value /  2015E EBITDA 2016E EBITDA

EV/EBITDA % 5‐Yr Median

EBITDA Margin % 5‐Yr Median

Department Stores Hudson’s Bay/Lord & Taylor

$17.96

79.4%

$3,271

$5,195

0.64x

0.47x

8.2x

6.7x

85.0% 

90.1% 

Nordstrom

73.27

88.1%

13,792

16,510

1.15x

1.06x

8.7x

8.3x

110.8% 

92.6%  100.4% 

Macy’s

51.39

69.8%

17,009

23,430

0.84x

0.83x

6.0x

6.1x

105.6% 

Dillard’s

90.53

62.8%

3,510

4,165

0.61x

0.61x

5.2x

5.2x

85.3% 

99.0%  183.5% 

J.C. Penney

9.79

97.0%

2,991

7,327

0.58x

0.56x

11.4x

8.5x

194.4% 

Kohl’s

46.49

58.4%

9,042

13,154

0.68x

0.67x

5.0x

5.0x

84.0% 

95.2%  NA

Sears

25.30

52.4%

2,698

4,193

0.17x

0.18x

NM

NM

NA

$20.14

56.7%

$1,389

$1,323

0.38x

0.38x

4.1x

3.9x

60.8% 

74.0%  NM

Specialty Apparel Abercrombie & Fitch Aerospostale

0.53

12.1%

42

98

0.06x

0.06x

NM

NM

NM

American Eagle

15.45

83.6%

3,019

2,692

0.77x

0.75x

5.7x

5.3x

108.8% 

89.6% 

3.6x

129.7% 

68.9% 

Ascena Retail Group

13.69

77.8%

2,671

2,533

0.42x

0.34x

4.9x

Cato

34.74

77.4%

954

670

0.67x

0.65x

NA

NA

108.0% 

95.1% 

Christopher & Banks

1.38

18.5%

51

17

0.04x

0.04x

3.7x

0.9x

24.4% 

54.3% 

Express Inc.

18.14

87.5%

1,537

1,451

0.62x

0.59x

5.3x

5.0x

97.8% 

265.0% 

GAP

28.44

64.8%

11,568

11,873

0.73x

0.72x

5.0x

4.8x

79.1% 

92.3% 

Guess?

21.48

91.9%

1,842

1,396

0.63x

0.63x

6.9x

6.5x

107.4% 

72.6% 

New York & Co.

2.52

76.9%

162

117

0.12x

0.12x

3.4x

2.9x

101.4% 

91.9% 

The Buckle

37.60

67.0%

1,825

1,683

1.45x

1.41x

5.9x

5.7x

83.2% 

96.2% 

Urban Outfitters

30.58

64.7%

3,790

3,639

1.02x

0.95x

6.8x

6.2x

81.4% 

81.9% 

Victoria's Secret

93.39

97.5%

27,118

31,048

2.59x

2.44x

12.3x

11.4x

141.6% 

105.6% 

Zumiez

16.30

40.1%

435

358

0.44x

0.41x

4.3x

3.9x

35.1% 

91.5% 

$148.41

94.6%

$64,996

$64,950

0.55x

0.52x

13.4x

12.7x

135.3% 

107.6% 

Dollar General

68.72

84.4%

20,249

22,932

1.12x

1.03x

9.9x

9.0x

104.5% 

95.4% 

Dollar Tree

65.19

77.4%

15,301

22,343

1.45x

1.07x

13.1x

9.2x

158.0% 

91.9% 

Off‐Price/Dollar Stores/Mass Merchants Costco

Ross Stores

47.69

84.1%

19,461

19,225

1.62x

1.52x

10.2x

9.5x

117.7% 

105.9% 

Stein Mart

8.97

53.9%

410

568

0.41x

0.38x

6.6x

6.0x

139.4% 

106.3% 

Target

78.10

91.0%

49,080

59,053

0.79x

0.78x

8.0x

7.7x

105.1% 

93.7% 

Source: S1 Capital IQ.

October 2015 — Retail Monitor

20

GA Retail Monitor Public Company Analysis ($ in millions, except per share amounts) Share Price 10/6/2015

% 52‐WK High

Market Cap

Enterprise  Value

Enterprise Value /  2015E Revenue 2016E Revenue

Enterprise Value /  2015E EBITDA 2016E EBITDA

EV/EBITDA % 5‐Yr Median

EBITDA Margin % 5‐Yr Median

TJX

70.77

92.0%

47,725

47,111

1.53x

1.44x

10.9x

10.2x

125.5% 

102.4% 

Wal‐Mart

65.68

72.2%

210,566

257,759

0.53x

0.52x

7.5x

7.3x

93.1% 

94.0% 

$31.05

91.8%

$1,357

1,468

0.56x

0.54x

7.4x

7.0x

106.3% 

120.5% 

Footwear Caleres Crocs

11.46

71.4%

856

$841

0.77x

0.74x

11.9x

9.7x

427.6% 

16.7% 

Deckers Outdoor

59.59

59.7%

1,947

1,855

0.98x

0.89x

6.5x

5.8x

57.8% 

87.1% 

DSW

25.17

63.6%

2,234

1,942

0.73x

0.68x

5.7x

5.2x

63.4% 

100.2% 

Finish Line

19.47

67.0%

874

773

0.41x

0.40x

4.6x

4.3x

90.5% 

83.1%  117.8% 

Foot Locker

70.74

91.6%

9,860

9,022

1.22x

1.16x

8.4x

7.7x

127.9% 

Johnston & Murphy

57.05

68.8%

1,357

1,425

0.47x

0.45x

5.5x

5.0x

73.7% 

94.8%  172.9% 

Skechers U.S.A.

127.64

78.0%

6,505

6,173

1.97x

1.68x

14.3x

11.4x

159.6% 

Steven Madden

36.56

81.7%

2,309

2,210

1.53x

1.43x

11.5x

9.8x

132.6% 

78.5%  96.2% 

Wolverine World Wide

21.83

62.0%

2,251

2,867

1.03x

0.99x

9.3x

8.7x

78.0% 

$10.17

65.7%

$226

$294

0.29x

0.28x

5.7x

5.5x

81.5% 

99.2%  98.3% 

Sporting Goods Big 5 Cabela's

44.98

74.7%

3,163

7,101

1.73x

1.58x

14.6x

12.9x

98.0% 

Dick's

51.23

84.9%

6,074

5,957

0.80x

0.74x

7.4x

6.7x

91.2% 

97.2%  95.6% 

Hibbett

35.73

64.1%

851

769

0.80x

0.75x

5.9x

5.4x

52.5% 

Sportsman's Warehouse

12.08

81.0%

583

810

1.11x

0.98x

11.4x

9.8x

NM

96.7% 

Best Buy

$37.32

88.9%

$12,859

$10,973

0.28x

0.27x

5.0x

4.8x

115.7% 

102.2% 

Conn's

25.24

57.4%

922

1,727

1.04x

0.90x

9.5x

7.5x

107.7% 

78.0% 

hhgregg

5.18

63.0%

144

134

0.07x

0.07x

NM

NM

NM

NM

$37.52

89.8%

$2,052

$2,468

1.95x

1.86x

8.6x

8.1x

93.1% 

118.6%  85.7% 

180.2% 

Consumer Electronics

Books, Music, and Movies Barnes & Noble Books‐A‐Million

3.20

94.4%

49

98

$6.55

67.0%

$3,590

$4,259

NA

NA

NA

NA

99.6% 

0.29x

0.30x

5.5x

4.9x

93.9% 

Office Supplies Office Depot

Source: S2 Capital IQ.

October 2015 — Retail Monitor

21

GA Retail Monitor Public Company Analysis ($ in millions, except per share amounts) Share Price 10/6/2015 Staples

12.37

% 52‐WK High

Market Cap

Enterprise  Value

63.8%

7,961

8,466

Enterprise Value /  2015E Revenue 2016E Revenue 0.40x

0.40x

Enterprise Value /  2015E EBITDA 2016E EBITDA 6.1x

EV/EBITDA % 5‐Yr Median

EBITDA Margin % 5‐Yr Median

6.0x

103.4% 

77.0% 

Grocery Stores Kroger

$37.13

94.2%

$36,144

$47,124

0.43x

0.41x

8.4x

8.0x

148.7% 

110.6% 

Sprouts Farmers Market

22.02

57.3%

3,382

3,573

1.00x

0.87x

12.1x

10.4x

NM

114.7% 

Supervalu

7.33

61.1%

1,942

4,527

0.25x

0.25x

5.5x

5.5x

125.4% 

99.3% 

The Fresh Market

23.87

56.7%

1,160

1,120

0.60x

0.56x

5.7x

5.4x

35.2% 

100.1% 

Weis Markets

41.06

79.1%

1,104

1,001

NA

NA

NA

NA

112.0% 

86.9% 

Whole Foods

33.53

58.2%

11,969

11,341

0.72x

0.64x

7.9x

7.1x

57.0% 

101.0% 

Pharmacy and Drug Stores $99.82

87.9%

$111,599

$123,346

0.82x

0.74x

10.6x

9.5x

140.0% 

97.5% 

Rite Aid

6.09

65.1%

6,181

13,473

0.46x

0.40x

9.9x

8.8x

108.9% 

151.3% 

Walgreens

84.10

86.4%

91,861

103,941

0.92x

0.86x

12.7x

10.7x

172.2% 

100.1% 

CVS

Furniture and Home Furnishings Bed, Bath & Beyond

$59.70

75.0%

$10,125

$10,928

0.90x

0.88x

6.3x

6.4x

78.3% 

90.0% 

Kirkland's

22.32

75.6%

386

337

0.60x

0.54x

6.1x

5.2x

145.6% 

97.3% 

La‐Z‐Boy

26.86

92.6%

1,358

1,269

0.86x

0.79x

9.1x

7.6x

113.7% 

143.4% 

Pier 1 Imports

7.31

41.7%

646

871

0.46x

0.45x

5.8x

5.4x

63.4% 

76.6% 

Williams Sonoma

78.35

87.7%

7,110

7,140

1.42x

1.33x

10.3x

9.3x

143.9% 

98.3% 

Source: S3 Capital IQ.

October 2015 — Retail Monitor

22

Monitor Information GA’s Retail Monitor highlights key industry drivers within the retail sector and how they relate to GA’s valuation process and current trends in recovery values. As the retail industry is impacted by consumer spending patterns and various macro and microeconomic factors, timely and accurate information is essential. GA strives to contextualize important indicators to provide a curated perspective of the market for our clients’ needs. Such indicators include general industry trends, comparable store sales trends, gross margin changes, and discounting activity. Any comparable store sales illustrated in this monitor reflect figures as they have been reported by public retailers. The methodology for calculating comparable store sales may vary by company. GA welcomes the opportunity to make our expertise available to you in every possible way. Should you need any further information or wish to discuss recovery ranges for a particular segment, please feel free to contact your GA Business Development Officer using the contact information shown in this and all Retail Monitor issues. GA’s Retail Monitor provides a brief overview highlighting specific sectors of the retail industry. The information contained herein is based on a composite of GA’s industry expertise, contact with industry personnel, liquidation and appraisal experience, and data compiled from a variety of well-respected sources believed to be reliable. GA does not make any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained in this issue. Neither GA nor any of its representatives shall be liable for use of any of the information in this issue or any errors therein or omissions therefrom.

October 2015 — Retail Monitor

23

Experience GA is one of the largest liquidators of retail inventory and has been involved in a variety of liquidations, ranging from the disposition of excess inventory and the closing of underperforming stores, to full-scale liquidations of national retailers with hundreds of stores. GA has experience with full and partial liquidations of companies throughout a variety of retail sectors, some of which are detailed below: Target Canada

Cache

Office Depot/Max

Circuit City

Macy’s

Fashion Bug

Mervyns

Tower Records

Fortunoff

Frederick’s of Hollywood Eddie Bauer

RadioShack

Linens ‘N Things

Naartjie

Whitehall Jewelers

Borders

Jo-Ann Fabrics

Boot Town

A&P

Movie Gallery

These experiences, in addition to numerous others, provide GA with valuable insight into the market trends and the consumer response that can be expected in a liquidation. They give us an understanding as to recovery values that can be achieved for retailers within these industries. In addition to this liquidation experience, GA has worked with and appraised numerous retailers, including industry leaders within each sector. While our clients remain confidential, GA’s extensive list of appraisal experience includes: 







Numerous retailers of apparel and accessories, including major department store retailers and a variety of specialty retailers that are found in malls throughout the country. Several e-commerce and multi-channel retailers, as well as flash sale websites and auction websites. In particular, GA has appraised 71 of the top 500 ecommerce companies as reported by Internet Retailer. Leading off-price retailers of apparel and accessories, including major national and regional chains. Retailers of consumer electronics, including smaller, more localized chains, as well as regional, national, and international retailers with close to 4,500 store locations.





 



Many jewelry retailers, including one of the largest in the United States, with locations throughout the country and net sales exceeding $1.4 billion annually. Major national and regional discount and dollar stores, including one of the country’s largest chains, with over 10,000 stores. Leading book retailers, including one with over 700 store locations and sales of upwards of $4.5 billion. Sporting goods retailers that specialize in a number of products, including those for outdoor sports, recreational ball sports, hunting, camping, and fishing, and a variety of other equipment for outdoor enthusiasts. Major regional grocery store chains including one with a store base of upwards of 800 and net sales in excess of $10.0 billion, as well as smaller local grocery store retailers and pharmacies.

In addition to our internal personnel, GA maintains contacts within the retail industry that we utilize for insight and perspective on recovery values.

October 2015 — Retail Monitor

24

Appraisal & Valuation Team Mike Marchlik National Sales & Marketing Director [email protected] (818) 746-9306

John Bankert President [email protected] (781) 429-4054

Ryan Mulcunry Executive Vice President - Northeast Region, Canada & Europe [email protected] (617) 692-8310

David Triompo Managing Director, Consumer Products [email protected] (781) 429-4067

David Seiden Executive Vice President, Southeast Region [email protected] (770) 551-8114 Bill Soncini Senior Vice President, Midwest Region [email protected] (312) 777-7945 Jennie Kim Vice President, Western Region [email protected] (818) 746-9370 Daniel J. Williams Managing Director, New York Region [email protected] (917) 464-1521 Drew Jakubek Managing Director, Southwest Region [email protected] (972) 996-5632

Scott Carpenter President, GA Retail Solutions [email protected] (818) 884-3737 Adam Alexander President, GA Global Partners [email protected] (818) 884-3737

Tracy Foohey Associate Director [email protected] (781) 429-4059 Matthew Gins Senior Project Manager [email protected] (818) 746-9386 Nicole Hines Project Manager [email protected] (781) 429-4072 Kipp Visi Project Manager [email protected] (312) 777-7957 Robert Vaughn Project Manager [email protected] (818) 746-7351 Louise Shimazu Associate Project Manager [email protected] (818) 746-9339

About Great American Group Great American Group is a leading provider of asset disposition solutions and valuation and appraisal services to a wide range of retail, wholesale, and industrial clients, as well as lenders, capital providers, private equity investors, and professional services firms. For more information, please visit www.greatamerican.com. Great American Group, LLC is a wholly owned subsidiary of B. Riley Financial, Inc. (NASDAQ: RILY), a diversified provider of collaborative financial and business advisory services through several subsidiaries, including: B. Riley & Co. LLC, a leading investment bank and a FINRA & SIPC member, which provides corporate finance, research, and sales & trading to corporate, institutional and high net worth individual clients; Great American Group, LLC; B. Riley Capital Management, LLC, an SEC registered Investment Advisor, which includes B. Riley Asset Management, a provider of investment products to institutional and high net worth investors, and B. Riley Wealth Management (formally MK Capital Advisors), a multi-family office practice and wealth management firm focused on the needs of ultra-high net worth individuals and families; and Great American Capital Partners, a provider of senior secured loans and second lien secured loan facilities to middle market public and private U.S. companies. B. Riley Financial, Inc. is headquartered in Los Angeles with offices in major financial markets throughout the United States and Europe. For more information on B. Riley Financial, Inc., please visit www.brileyfin.com. For B. Riley’s research access, please contact a B. Riley representative at 310-966-1444.

Headquarters 21860 Burbank Blvd. Suite 300 South Woodland Hills, CA 91367

800-45-GREAT

www.greatamerican.com October 2015 — Retail Monitor

25