Putting Distribution Money in Their JeansStephen Horak, Lucky BrandKrish Nathan, SDI Industries Jim DeVeau, Taylored Services

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Lucky Brand Company Overview & Strategic Vision

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Lucky Brand Timeline

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1990

1999

2008

2010

2014

• Lucky brand

founded in

Los Angeles

by Gene

Montesano &

Barry

Perlman

• Brand acquired by Liz

Claiborne

• Brand sold primarily through

“mom & pop” specialty stores

and The Buckle

• 12 free standing stores

• Sales peaked at $477

million

• 193 Specialty doors

• 39 Outlet doors

• Sales of $387 million

• New team joined Lucky brand

• Gene M. and Barry P. exit

• Adjusted EBITDA of ($8)

million

• Lucky Brand

acquired by LGP

and Carlos Alberini

in February 2014

• Revenues of $566

million

• Adjusted EBITDA of

$41 million

Lucky Brand Business Overview

LGP and Carlos Alberini acquired Lucky Brand on

February 3, 2014 for $225 million

Apparel lifestyle brand founded in 1990:

Complete apparel offering, rooted in denim

(43% of sales)

Multi-channel distribution network:

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Full Price Specialty 172 Stores

Outlet 82 Stores

Wholesale 1,050+ Doors

Specialty Accounts 375+ Doors

LuckyBrand.com

2015F Net Sales

Specialty 33%

Outlet 20%

E-commerce 9%

Wholesale 36%

Licensing and Int'l

2%

2015F Operating Margins

Distribution Channel Operating Margin

Specialty 9%

Outlet 19%

Wholesale 21%

International 30%

Licensing 97%

E-commerce 23%

Strong Brand Awareness in Excess of Current Scale

Lucky’s brand awareness compares to that of multi-billion dollar brands and is significantly stronger than other premium denim brands, demonstrating our unique lifestyle brand positioning beyond denim

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37% 37% 19% 11% 12% 5% 8% 3% 3% 2% 0% 1% 0%

67% 33% 10% 25% 3% 10% 0% 7% 5%

*$5.9B $3.9B $2.7B $2.2B $2.1B $2.4B $0.5B

*Fiscal 2012/2013 gross annual sales

UNAIDED

UNAIDED

SALES

*$6.9B

Lucky Brand PositioningWe believe we exploit the white space in the market for “accessible premium” denim

How Do We Win

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What We Inherited Where We’re Headed

Aligned Aesthetic Vision and Brand

Voice

Premium lifestyle brand offering a full-

range of products

Showrooms that appropriately display the expanded product

line

Marketing that engages the customer in all touch points of

his / her life

Expanded footprint to capture international

demand

+ $1 B Plan

Four brand pillars that resonate with

core customers

Product Rooted in Denim and

Weekend Wear

Distributed via specialty, outlet, wholesale and e-

commerce

Traditional marketing platform

Domestic focused business

Core

Key Strategies Key Strategy #0 - Define the aesthetic vision of Lucky Brand

Key Strategy #1 - Develop product roadmap, identify licensing opportunities, and develop execution plan to own key categories / price points

Key Strategy #2 - Develop optimum Real Estate, Wholesale, E-Commerce distribution network; design “Store of the Future”

Key Strategy #3 - Develop comprehensive marketing/advocacy strategy and define the ultimate customer experience and engagement program

Key Strategy #4 - Develop a people and culture plan

Key Strategy #5 - Develop plan to become an example of Conscious Capitalism

Key Strategy #6 - Develop international growth strategy

Key Strategy #7 - Develop a business model to achieve superior profitability

Key Strategy #8 - Become a highly efficient organization

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Company Overview

Founded in 1992

Award Winning Retail Experts

2015 Awards - Inbound Logistics TOP 100 3PL & USC Marshall 3PL Excellence

Award

Expertise in Apparel, Footwear and Accessory distribution

Extensive experience with all major retailers

Strategically located warehouses

1,500,000 sf near the gateway ports of Los Angeles / Long Beach, CA and Newark,

NJ

Omni-Channel Distribution

Cross Dock, Transload, Case and Unit Fulfillment, Value Added Services and E-

Commerce

Transportation management services

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Storage Concepts – Reduction in Footprint

Very Narrow Aisle (VNA) configured for carton storage versus pallet storage -Reducing Linear Flow of warehouse and more efficient use of storage space.

Reduces the honeycomb effect found in pallet storage concepts.

Eliminates touches in picking, sorting and consolidation versus pallet storage model.

Carton Level Controls - All inbound cartons receive a license plate (LPN) which allows for carton level tracking throughout the facility.

This reduces labor upon receipt by reducing the level of sortation required on receipt by approximately 18%.

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Solution Design

Case Storage Racking w/ Carton Level Control

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Very Narrow Aisle w/ Case Level Storage

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• As units per sku are allocated, efficiency of reserve storage declines.

• Utilization of reserve storage space for unit replenishment business averages below 75% in a pallet level configuration.

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Standard Pallet Level Storage

Dedicated Operation

Lucky gets the benefit of a dedicated operation, while still utilizing the benefits of a 3PL in a shared services, multi-client environment.

Better Labor Management over multiple shifts allows for LEVELING OF DEMAND.

MHE is utilized over multiple shifts for dual purposes.

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Solution Design

Design Configuration to allow Taylored to run Wholesale and Retail waves concurrently

OR, based upon volume can divert excess volume to other sorter to increase capacity.

EQUALS = Better utilization of equipment and staffing by reducing downtime, level loading pack out functions and providing for steady outbound flow.

Greatly reduces need for OT to work peak volumes.

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Dual Sorter Solution

Duel Sorter Design

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Krish Nathan – CEO of SDI

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Intelligent Design Solutions

“We design distribution centers. We are engineers that utilize our creativity, analytical skills and industry knowledge to develop world class, cost effective and efficient solutions for the distribution of products “

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SDI – 90 Seconds

1. High quantity of SKUs2. Existing storage technique inefficient3. Poor utilization of outbound cartons

to stores4. Technology incompatible with

requirements5. Limited window for shipping to stores

Review Existing Parameters

Website: SDI.SYSTEMS

• Visit existing operations• Collect data• Document and understand• Draw comparison with similar other

operations• Used industry bench marks to create

ROI• Utilize industry knowledge and

experience to “Short Circuit” design process and reach a solution

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Case Study – Business Considerations

Website: SDI.SYSTEMS

Retail & wholesale distribution channels

Unit level distribution business

Reduce per-unit cost

Necessity to exit existing structure and become

stand alone

Tight deadline

No existing infrastructure

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Solution Implemented

Website: SDI.SYSTEMS

• Simple MHE process

• Automated unit sortation with flexibility to ramp

wholesale & retail

• Automated feed of sortation solution & shipping

combined for cost effectiveness

• Automated Print & apply machines

• Warehouse Controls Solution for one seamless interface with WMS

• Real-time decision process driven by SDI controls & SW solution

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Case Study – Video

Website: SDI.SYSTEMS 24

The Results and Long-Term Outlook

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One year post-mortem:

Challenges:

Timing of implementation led to challenges at go-live

Going live at peak timeframe did not leave time for ramp up and learning within a

new facility…100 mph out of the gate

Port Strike in LA/LGB at time we relocated all operations to West Coast led to

inbound delays and pressure on outbound processing time

Benefits realized:

Dedicated facility

Proximity to port

Proximity to corporate

First Year Results:

Shipped 10% more units in our first year than in 2014

Supported the addition of 8% more stores to our fleet

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Results

Future Outlook

Introduce Distribution Initiatives that support Lucky’s Key Strategies:

Key Strategy #0 - Define the aesthetic vision of Lucky Brand

Key Strategy #1 - Develop product roadmap, identify licensing opportunities, and develop execution plan to own key categories / price

points

Key Strategy #2 - Develop optimum Real Estate, Wholesale, E-Commerce distribution network; design “Store of the Future”

Key Strategy #3 - Develop comprehensive marketing/advocacy strategy and define the ultimate customer experience and engagement

program

Key Strategy #4 - Develop a people and culture plan

Key Strategy #5 - Develop plan to become an example of Conscious Capitalism

Key Strategy #6 - Develop international growth strategy

Key Strategy #7 - Develop a business model to achieve superior profitability

Key Strategy #8 - Become a highly efficient organization

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Social Q&A