Taking stock with teens piper jaffray spring2010

Taking Stock With TeensResults Presentation

S i 2010Spring 2010

Analyst Disclosures Klinefelter, Tamminga, Gikas, Munster, Olson, Miller Regan, Walkley

1. I or a household member have a financial interest in the securities of the following companies: none

2. I or a household member is an officer, director, or advisory board member of the following companies: none

3. I have received compensation within the past 12 months from the following companies : none

4. Piper Jaffray or its affiliates beneficially own 1% or more of any class of common equities of the following: none

5. The following companies have been investment banking clients of Piper Jaffray during the past 12 months: (Klinefelter) GIII, RUE; (Gikas) SCSS, SENEA; (Munster) ACOM, LOGM; (Olson) ROVI; (Walkley) DRWI

6. Piper Jaffray expects to have the following companies as investment banking clients within the next 3 months: (Klinefelter) GIII, RUE; (Gikas) SCSS; (Olson) ROVI; (Walkley) DRWI

7. Other material conflicts of interest for Klinefelter, Tamminga, Gikas, Kaiser, Miller-Regan or Piper Jaffray regarding companies in my universe for which I am (we are) aware include: (Klinefelter) GIII, RUE: underwriting; (Gikas) SCSS, SENEA: underwriting; (Munster); ACOM, LOGM: underwriting; (Olson) ROVI; (Walkley) DRWI: underwriting

8 Piper Jaffray received non investment banking securities related compensation from the following companies during the past 12 months: (Gikas) SNDA;8. Piper Jaffray received non-investment banking securities-related compensation from the following companies during the past 12 months: (Gikas) SNDA; (Munster) DRIV, VCLK; (Walkley) COGO, QCOM

9. Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: (Klinefelter) CROX, CTRN, DECK GIII, HOTT, ICON, PSUN, ROST, VLCM, WTSLA, ZUMZ, (Tamminga) ANN, BBBY, CACH, CWTR, FACE, FOSL, IPAR, KIRK, ULTA, URBN, (Munster) AAPL, ACOM, AMZN, BIDU, DRIV, EBAY, FMCN, GOOG, GSIC, IACI, KONG, LOGM, MCHX, PRTS, SINA, SOHU, VCLK, WWWW, YHOO;(Gikas) ATVID, CLUB, CYOU, ERTS, GMCR, HAIN, JAKK, NTES, PEET, PWRD, SCSS, SENEA, SNDA, THQI, ( )TTWO; (Miller Regan) BAGL, BJRI, BWLD, CAKE, CPKI, MSSR, PFCB, PNRA, RRGB, RUTH, SBUX, SONC; (Olson) AAPL, ADBE, ADSK, AKAM, AVID, CSTR, CTRP, DTSI, EXPE, LLNW, NFLX, PCLN, PMTC, RNWK, ROVI, SFLY; (Walkley) ALVR, ANEN, CELL, COGO, DRWI, ERIC, GRRF, NVTL, PALM, PWAV, QCOM, RIMM, SMSI, SPRD, SWIR

10. Piper Jaffray usually provides bids and offers for the securities of the following companies and will, from time to time, buy and sell the securities of these companies on a principal basis: Klinefelter) ANF, ARO, AEO, GCO, GES, GPS, JCG, JCP, KSS, PVH, RL, RUE, TGT, UA, VFC, WRC, ZQK [Tamminga] ANN CBK CHS COH EL JWN LTD NWY TLB WSM; [Gikas] BGS DLM GA GME HAS LF LTM MAT TPX ZZ; [Olson] DLB OWW STV; [Miller

2

ANN, CBK, CHS, COH, EL, JWN, LTD, NWY, TLB, WSM; [Gikas] BGS, DLM, GA, GME, HAS, LF, LTM, MAT, TPX, ZZ; [Olson] DLB, OWW, STV; [Miller Regan] BKC, CMG, DRI, EAT, MRT; (Walkley) CTV, MOT, NOK

Speaking Order

Jeff Klinefelter�• Survey Detail�• Spending Highlights

Apparel Brands & Teen Retailers Foot ear�• Apparel Brands & Teen Retailers, Footwear

Neely Tamminga�• Parent Survey Detail�• Beauty/Personal Carey

Tony Gikas�• Video Games

Mike Olson (Andrew Murphy & Nick Gallus)Mike Olson (Andrew Murphy & Nick Gallus)�• Digital Media, Music�• Internet/e-commerce

Nicole Miller Regan�• Restaurants

Mike Walkley• Wireless Technologies

3

Consumer Sector Investment Risks

Risks include, but are not limited to:

l k �• Reliance on key top management

�• Changing consumer preferences

�• Changes in input costs and raw materials

�• Markdown risks

�• Product flow and inventory disruptions

�• Competition

�• Lack of pricing power

�• Deleveraging of fixed expenses

�• Potential Auction Rate Securities exposure

�• Foreign exchange rate risk

�• General macroeconomic uncertainty

4Source: Piper Jaffray & Co.

Survey Detail

Surveyed teens and parents nationally to measure:

Brand Preferences Spending Trends Shopping Characteristics

THREE UNIQUE SURVEYS:

1) National School Survey

�• Classroom visit & electronic surveys of 900 teens; average age 16.6 years

�• Average HH Income $79K represents top 30% of U.S. household units

2) National Online Survey2) National Online Survey

�• On-line feedback from nearly 5,100 students; average age 16.7 years

�• Average HH Income $49K aligns more closely with U.S. median ($42K)

3) Parent Survey

�• Mail-in feedback; parent response rate of 8%; average age 46 years

�• Approx. 66% of respondents with average HH Income >$100k


Survey Detail

NATIONAL SCHOOL SURVEY Spring 2010 Fall 2009 Spring 2009 Fall 2008 Spring 2008 Fall 2007 Spring 2007 Fall 2006 Spring 2006Students Surveyed - Legacy 900 1,200 600 850 670 980 600 1,000 700Gender Breakdow n - Female to Male 48%-52% 44%-56% 46% - 54% 47% - 53% 51% - 49% 49% - 51% 58% - 42% 51% - 49% 55% - 45%Average Age 16.6 16.3 16.3 16.2 16.4 16.6 16.6 16.4 16.6Percentage Of Students Part-Time Employed 39% 38% 35% 44% 45% 45% 43% 50% 46%Average Total Hours Worked Per Week 18.3 18.5 19.0 18.4 18.9 20.6 19.0 20.0 16.5Average Household Income $79,000 $75,000 $73,000 $76,000 $77,200 $71,000 $73,000 $74,000 $72,000

NATIONAL ONLINE SURVEY Spring 2010 Fall 2009 Spring 2009 Fall 2008 Spring 2008 Fall 2007 Spring 2007 Fall 2006 Spring 2006Students Surveyed - DECA 5,100 10,000 7,500 6,800 4,500 3,300 1,200 3,000 1,200Gender Breakdow n - Female to Male 53%-47% 52%-48% 52%-48% 51% - 49% 52% - 48% 54% - 46% 49% - 51% 54% - 46% 53% - 47%Average Age 16.7 16.2 16.7 16.4 17.1 16.6 16.8 16.3 16.9Percentage Of Students Part-Time Employed 43% 39% 45% 51% 50% 51% 51% 52% 56%Average Total Hours Worked Per Week 19 6 19 5 19 8 21 1 21 0 21 8 21 8 22 1 19 8Average Total Hours Worked Per Week 19.6 19.5 19.8 21.1 21.0 21.8 21.8 22.1 19.8Average Household Income $49,200 $51,900 $51,600 $50,400 $56,700 $46,000 $51,000 $42,000 $44,000

PARENT SURVEY Spring 2010 Fall 2009 Spring 2009 Fall 2008 Spring 2008 Fall 2007 Spring 2007 Fall 2006 Spring 2006Response Rate 8% 17% 9% 14% 11% 22% 10% 10% 33%Average Age 46 years 47 years 47 years 46 years 47 years 46 years 46 years 46 years 46 years% HH Income > $100 000 66% 56% 57% 47% 51% 55% 60% 50% 69%% HH Income > $100,000 66% 56% 57% 47% 51% 55% 60% 50% 69%

Source: Piper Jaffray & Co.

6

Spending Highlights

Key Takeaways

Our Spring 2010 Taking Stock with Teens survey results continue to reflect the early stages of aOur Spring 2010 Taking Stock with Teens survey results continue to reflect the early stages of a

discretionary recovery and fashion replenishment cycle, although �“value�” remains a key theme in

budgeting and store and brand selection for young consumers at all levels of household income.

�• Teens spend $29B/year on fashion; National School Survey $7B-$8B, Online Survey $12B-$13B

�• Spending expectations on apparel point to �“more�” vs. �“less�”; fashion at 39% of budget

�• Apparel trending ahead of footwear; indicative of a new fashion cyclepp g y

�• Teens spending less on electronics, music & movies; convergence of technologies at play

�• Budgets still tight; parent contribution increasing to partially offset employment declines

�• Specialty channel still preferred at 29% but ceding share; Internet & discount growing

�• Fast Fashion preferred for females (33% share); West Coast Brands for males (21% share)


Fashion Spending �– National School Survey

Fashion Spending Spring-10 Seq Chg Y/Y Chg Fall-09 Seq Chg Y/Y Chg Spring-09 Y/Y Chg Fall-08 Y/Y Chg Spring-08 Y/Y ChgApparel $608 -19% -2% $749 21% 4% $620 -22% $721 1% $795 -21%Shoes $209 -5% -21% $221 -16% 2% $263 4% $217 2% $254 -6%Accessories $116 3% -14% $113 -16% -9% $135 0% $125 0% $134 -24%Total - All $932 -14% -8% $1,083 6% 2% $1,018 -14% $1,062 1% $1,183 -19%, , , ,

Apparel $895 -22% -2% $1,154 27% 7% $911 -19% $1,074 7% $1,129 -13%Shoes $243 -4% -27% $254 -24% -1% $333 9% $256 1% $305 -3%Accessories $181 5% -19% $173 -22% -10% $223 8% $193 3% $206 -12%Total - Female $1,319 -17% -10% $1,581 8% 4% $1,467 -11% $1,524 6% $1,640 -11%

$ $ $ $ $Apparel $327 -17% -12% $392 6% 1% $370 -8% $389 -8% $404 -18%Shoes $176 -8% -13% $192 -5% 7% $202 4% $180 6% $195 2%Accessories $52 -14% -12% $60 2% 0% $59 17% $60 0% $50 -34%

Total - Male $555 -14% -12% $644 2% 2% $631 -3% $629 -3% $651 $762


Channel Preference �– National School Survey

SHOPPING CHANNEL PREFERENCE

30%

35%

40%Spring-10 Fall-09 Spring-09 Fall-08

SHOPPING CHANNEL PREFERENCE

10%

15%

20%

25%

0%

5%

Spec

ialty

or C

hain

part

men

t

Dis

coun

t

Out

let

ail o

rder

Inte

rnet

S

Maj

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Dep D M

a9


Spending By Category �– National School Survey

20%

25%

SPENDING BY PRODUCT CATEGORY

Spring-10 Fall-09 Spring-09

Fashion Categories = 39%

5%

10%

15%

0%


10

Apparel Brands & Teen Retailers

Brand Preferences �– National School Survey

�• Action Sports Brands at #1, 13% mindshare (v. 12% Spring �’09, 14% Fall�’09)Action Sports Brands at #1, 13% mindshare (v. 12% Spring 09, 14% Fall 09)�• Forever 21- #2 up from #4 Spring �‘09 (+430bps), flat to Fall�’09�• Hollister drops from #3 to #5; (100bps seq) and (500bps) Y/Y�• Nike gains sequentially to No. 3 (9%) vs. No. 4 (8%) in Fall�’09 and No. 3 (6%) in Spring�’09g q y ( ) ( ) ( ) p g�• AEO steady at #4 with 7% share; Aero gains to #6 from #8 in Fall �’09 and No. 7 in Spring�’09�• Abercrombie falls to #7 with 3% share; down from #6 in Fall �‘09

�• Females prefer Forever 21 by wide margin w/ 20% share, 13ppts ahead of Hollister #2�• Charlotte Russe, Aeropostale gain among females, Hollister cedes add�’l share

Males prefer Action Sports Brands Nike American Eagle Hollister�• Males prefer Action Sports Brands Nike, American Eagle, Hollister�• Pacific Sunwear tops West Coast Brands list with 34% share; strong fashion perception rank�• Volcom top boardsport brand with 22% category share; Quiksilver #2, Vans #3�• Nike at 47% & Under Armour at 25% continue to dominate athletic brand category

11

�• Nike at 47% & Under Armour at 25% continue to dominate athletic brand category


Apparel Brands & Teen Retailers �– National School Survey

TOP CLOTHING BRAND PREFERENCES - NATIONAL SCHOOL SURVEY - ALL STUDENTS

Rank Spring 2010 % Total Fall 2009 % Total Spring 2009 % Total1 Action Sports Brands 13% Action Sports Brands 14% Action Sports Brands 12%1 Action Sports Brands 13% Action Sports Brands 14% Action Sports Brands 12%2 Forever 21 10% Forever 21 10% Hollister 12%3 Nike 9% Hollister 8% Nike 6%4 American Eagle 7% Nike 8% Forever 21 5%5 Hollister 7% American Eagle 8% American Eagle 5%

TOP CLOTHING BRAND PREFERENCES - NATIONAL SCHOOL SURVEY - FEMALE

Rank Spring 2010 % Total Fall 2009 % Total Spring 2009 % Total1 Forever 21 20% Forever 21 19% Hollister 14%2 Hollister 7% Hollister 8% Forever 21 10%3 American Eagle 6% American Eagle 7% Action Sports Brands 7%4 Charlotte Russe 5% Action Sports Brands 7% American Eagle 5%4 Charlotte Russe 5% Action Sports Brands 7% American Eagle 5%5 Aeropostale 5% Urban Outf itters 6% Nordstrom 5%

TOP CLOTHING BRAND PREFERENCES - NATIONAL SCHOOL SURVEY - MALE

Rank Spring 2010 % Total Fall 2009 % Total Spring 2009 % Total1 Action Sports Brands 21% Action Sports Brands 21% Action Sports Brands 18%1 Action Sports Brands 21% Action Sports Brands 21% Action Sports Brands 18%2 Nike 17% Nike 15% Nike 11%3 American Eagle 10% American Eagle 8% Hollister 9%4 Hollister 7% Hollister 8% American Eagle 5%5 Ralph Lauren Polo 3% Ralph Lauren Polo 4% Abercrombie & Fitch 4%

Source: Piper Jaffray & Co

12


Apparel Brands & Teen Retailers �– National Online Survey

Brand Preferences �– National Online Survey

�• American Eagle returns to #1 with 10% share; Nike #2; Action Sports Brands #3

�• Forever 21 stays at #5, however, share declines 200bps

�• Aeropostale remains at #6 with 5% share; cedes 1ppt from Fall �’09

�• Forever 21 #1 with juniors up 400bps from last spring and 500bps from last fall

�• American Eagle still solid w/ #2 ranking for girls, gains100bps of share to 11%

�• Hollister maintains #3 rank with juniors; Aeropostale moves one rank higher to #4

�• Nike top ranked for males at 16% share; Action Sports Brands #2 (13%)

�• American Eagle Ranked #3 for males; Hollister slips to No. 5 from No. 4

�• Within Action Sports Brands males pick PacSun (27%), Hurley (9%), and LRG (7%)

�• Nike remains #1 preferred athletic brand with 47% share; UA solid #2 with 19% share


Apparel Brands & Teen Retailers �– National Online Survey

TOP CLOTHING BRAND PREFERENCES - NATIONAL ONLINE SURVEY - ALL STUDENTS

Rank Spring 2010 % Total Fall 2009 % Total Spring 2009 % Total1 American Eagle 11% Action Sports Brands 10% American Eagle 10%2 Nik 8% A i E l 10% A ti S t B d 10%2 Nike 8% American Eagle 10% Action Sports Brands 10%3 Action Sports Brands 8% Nike 8% Hollister 7%4 Hollister 7% Hollister 8% Nike 7%5 Forever 21 6% Forever 21 7% Forever 21 5%

TOP CLOTHING BRAND PREFERENCES - NATIONAL ONLINE SURVEY - FEMALE

Rank Spring 2010 % Total Fall 2009 % Total Spring 2009 % Total1 Forever 21 12% Forever 21 13% American Eagle 11%2 American Eagle 11% American Eagle 10% Forever 21 9%3 Hollister 8% Hollister 8% Hollister 9%4 Aeropostale 5% Action Sports Brands 7% Action Sports Brands 7%5 Buckle 5% Aeropostale 7% Aeropostale 6%5 Buckle 5% Aeropostale 7% Aeropostale 6%

TOP CLOTHING BRAND PREFERENCES - NATIONAL ONLINE SURVEY - MALE

Rank Spring 2010 % Total Fall 2009 % Total Spring 2009 % Total1 Nike 16% Nike 15% Nike 14%2 Action Sports Brands 13% Action Sports Brands 14% Action Sports Brands 14%2 Action Sports Brands 13% Action Sports Brands 14% Action Sports Brands 14%3 American Eagle 10% American Eagle 10% American Eagle 10%4 Ralph Lauren Polo 7% Hollister 7% Hollister 6%5 Hollister 6% Ralph Lauren Polo 5% Ralph Lauren Polo 5%



Footwear Brands & Retailers

School Survey�• Nike tops charts for nineteenth survey; 42% share�• Vans at #2, gains 3ppts share to 10%�• Steve madden falls from No. 3 to No. 5, UGG Australia and Converse move higher�• Low-profile sneakers remain popular; Puma, Adidas, and DC among top ten�• Males favor Nike, Vans, Adidas, Puma, and DC; Nike captures more than 50% share�• Females favor Nike, UGG Australia, Vans, Converse, and Steve Madden, U , V , ,�• Foot Locker and ALDO cited as favorite retailers; Journeys falls out of top ten

Online SurveyNike tops total vote with 43% share vs 423% Fall�’09 and 40% Spring�’09; No 1 male & female�• Nike tops total vote with 43% share vs. 423% Fall�’09 and 40% Spring�’09; No. 1 male & female

�• Vans, Converse, Puma, and UGG Australia round out top five; Vans & UGG move higher�• Journeys ranks No. 7 as most preferred retailer; Foot Locker next in line�• Girls favor Nike, Converse, UGG Australia, Vans, and Journeys; Payless, DSW, & Foot Locker in top 10�• Males pick Nike (63%), Vans, Adidas, DC, and Converse; collectively account for 79% mind share�• Journeys and Foot Locker preferred specialty retailers across genders


Footwear Brands & Retailers �– National School Survey

TOP FOOTWEAR BRAND PREFERENCES - NATIONAL SCHOOL SURVEY - ALL STUDENTS

Rank Brand % Total Rank Brand % Total Rank Brand % Total Rank Brand % Total1 Nike 42% 1 Nike 35% 1 Nike 33% 1 Nike 28%2 Vans 10% 2 Vans 7% 2 UGG Australia 7% 2 Vans 6%3 UGG A t li 5% 3 St M dd 5% 3 V 7% 3 St M dd 6%

Fall 2009Spring 2010 Fall 2008Spring 2009

3 UGG Australia 5% 3 Steve Madden 5% 3 Vans 7% 3 Steve Madden 6%4 Converse 5% 4 UGG Australia 5% 4 Puma 5% 4 Converse 5%5 Steve Madden 3% 5 Converse 4% 5 Steve Madden 4% 5 Adidas 4%6 Puma 3% 6 Puma 3% 6 Foot Locker 4% 6 Puma 4%7 Adidas 2% 7 Adidas 3% 7 Converse 4% 7 Rainbow 3%8 Foot Locker 2% 8 Payless 2% 8 Adidas 3% 8 UGG Australia 3%8 Foot Locker 2% 8 Payless 2% 8 Adidas 3% 8 UGG Australia 3%

DC 2% 9 DC 2% Journeys 3% 9 Journeys 2%10 ALDO 1% Journeys 2% 10 Payless Shoes 2% 10 Payless Shoes 2%

Source: Piper Jaffray & Co.p y

16

Footwear Brands & Retailers �– National Online Survey

TOP FOOTWEAR BRAND PREFERENCES - NATIONAL ONLINE SURVEY - ALL STUDENTS

Rank Brand % Total Rank Brand % Total Rank Brand % Total Rank Brand % Total1 Nike 43% 1 Nike 43% 1 Nike 40% 1 Nike 42%2 V 5% 2 C 6% 2 V 5% 2 V 5%

Fall 2009Spring 2010 Spring 2009 Fall 2008

2 Vans 5% 2 Converse 6% 2 Vans 5% 2 Vans 5%3 Converse 5% 3 Vans 5% 3 Converse 4% 3 Adidas 4%4 Puma 3% 4 Adidas 3% 4 Adidas 3% 4 Converse 3%

UGG Australia 3% 5 Puma 3% 5 DC 2% 5 Puma 3%6 Adidas 2% 6 Journeys 2% 6 UGG Australia 2% 6 Journeys 2%7 Journeys 2% 7 DC 2% 7 Puma 2% 7 Foot Locker 2%8 DC 2% 8 Payless 2% 8 Journeys 2% 8 DC 2%9 Foot Locker 2% 9 Sperry Top Sider 2% Payless 2% 9 Payless 2%10 Sperry Top Sider 2% 10 Foot Locker 1% 10 Sperry Top Sider 2% 10 Old Navy 2%


17

Parent Survey

Key Takeaways

Polled approximately 100 parents; 66% reporting HH Income > $100K

Parents spending for teen up 31% from Spring�’09 and up 5% from Fall�‘09Parents spending for self up 62% from Spring�’09 and flat from Fall�’09

Parents indicate preference for department stores followed by discount and specialty.�• Department stores increased from 26% in Fall �‘09 to 32% in Spring �‘10

Shopping frequency increases on a monthly and remains flat on a weekly basis.�• Believe retailers have opportunity to convert on increased interest in time spent in

malls given improving traffic trends.

Parents prefer Nordstrom (22%) when shopping for themselves, followed by Macy�’s (13%).

Parents select Action Sports Brands (14%), followed by Nordstrom (11%), and Wal-mart (7%)when shopping for their teen.


Parent Survey

PARENT SPENDING ON APPAREL FOR SELF

$1,800

$1,224 $1,203

$1,398

$1,592

$1,306$1,249

$1,484$1,455

$1,157

$1,571

$1,194

$1,526

$1 200

$1,400

$1,600

$974 $968 $952

$1,115

$896

$826

$ ,

$800

$1,000

$1,200

$200

$400

$600

$0

$

Fall2001

Spring2002

Fall2002

Spring2003

Fall2003

Spring2004

Fall2004

Spring2005

Fall2005

Spring2006

Fall2006

Spring2007

Fall2007

Spring2008

Fall2008

Spring2009

Fall2009

Spring2010

Source: Piper Jaf f ray & Co.

19

p y

Parent Survey

PARENT SPENDING ON TEEN APPAREL

$

$1,487

$1,600

$1,413 $1,391

$1,230

$995

$1,085

$1,141

$1,201

$1 015

$1,089$1,142

$1,379

$1,075 $1,048

$1,200

$1,400

$995

$883$915

$1,015

$935

$643

$800

$1,000

$200

$400

$600

$0

$200

Fall2001

Spring2002

Fall2002

Spring2003

Fall2003

Spring2004

Fall2004

Spring2005

Fall2005

Spring2006

Fall2006

Spring2007

Fall2007

Spring2008

Fall2008

Spring2009

Fall2009

Spring2010

20

Source: Piper Jaf f ray & Co.

Beauty & Personal Care

Gen Y (Teen Girls) Snapshot:�• Beauty spending a mixed bag: affluent teens down 9% while more middle-income teens y g g

spending up 4% y/y�—complete reversal from six months ago�• Cover Girl No. 1 favorite brand among both National School Survey and National Online

Survey respondents; MAC, No. 2 among the more affluent teens�• Preferred fragrance brand: Victoria�’s Secret (in-line with past three surveys); gained 5 ptsPreferred fragrance brand: Victoria s Secret (in line with past three surveys); gained 5 pts�• She prefers to purchase skin care and cosmetics in discount stores and drug stores�• Foundation makeup remains the most loyal cosmetics category

Baby Boomers (Female Parents) Snapshot:�• Affluent parents spending is up 48% y/y in beauty�• Skin care remains top of mind and top priority in her �“beauty wallet�”; spending +73%�• L'Oreal No 1 among our Parent Survey respondents; gained 5pts�• L Oreal, No. 1 among our Parent Survey respondents; gained 5pts�• Preferred fragrance brand: Chanel followed by Bath & Body Works & Victoria�’s Secret with

20% share�• Discount channel is preferred in skin care; department stores, cosmetics. Department stores

gaining share o er dr g stores for No 2 position as channel for skin care

21

gaining share over drug stores for No. 2 position as channel for skin care



Favorite Cosmetics Brand For Teen Girls �– National School Survey

Fall 2009Spring 2010Rank Favorite Cosmetics Brand % Total Rank Favorite Cosmetics Brand % Total

1 Cover Girl 20% 1 MAC 23%2 MAC 19% 2 Cover Girl 14%3 Maybelline 13% 3 Bare Escentuals 9%4 Bare Escentuals 8% Maybelline 9%5 Clinique 6% 5 Clinique 6%6 Sephora 4% 6 Sephora 5%6 Sep o a % 6 Sep o a 5%7 Chanel 3% 7 Revlon 4%

Lancome 3% 8 Mary-Kay 3%9 Mary-Kay 3% 9 Chanel 2%

Neutrogena 3% L'Oreal 2%Neutrogena 2%

R k F it C ti B d % T t l R k F it C ti B d % T t lFall 2008Spring 2009

Rank Favorite Cosmetics Brand % Total Rank Favorite Cosmetics Brand % Total1 MAC 19% 1 MAC 23%2 Cover Girl 18% 2 Cover Girl 15%3 Maybelline 13% 3 Maybelline 11%

4 Clinique 8% 4 Clinique 8%5 Bare Escentuals 7% 5 Bare Escentuals 7%6 L'Oreal 4% 6 L'Oreal 4%

Sephora 4% 7 Sephora 3%8 Mary-Kay 3% 8 Neutrogena 3%

Urban Decay 3% 9 Urban Decay 3%10 Lancome 2% 10 Bobbi Brow n 2%

Neutrogena 2%



Favorite Cosmetics Brand For Teen Girls �–Online Survey

Rank Favorite Cosmetics Brand % Total Rank Favorite Cosmetics Brand % TotalSpring 2010 Fall 2009

1 Cover Girl 24% 1 Cover Girl 24%2 Maybelline 13% 2 MAC 14%3 MAC 13% 3 Maybelline 13%4 Bare Escentuals 7% 4 Mary-Kay 6%5 Clinique 6% 5 Bare Escentuals 6%6 Mary-Kay 6% 6 Clinique 5%7 Avon 4% 7 L'Oreal 4%7 Avon 4% 7 L Oreal 4%8 L'Oreal 3% 8 Sephora 3%9 Sephora 3% 9 Revlon 3%

10 Revlon 2% 10 Avon 3%

Rank Favorite Cosmetics Brand % Total Rank Favorite Cosmetics Brand % Total1 Cover Girl 23% 1 Cover Girl 23%2 MAC 15% 2 MAC 14%

Spring 2009 Fall 2008

2 MAC 15% 2 MAC 14%3 Maybelline 13% 3 Maybelline 12%4 Bare Escentuals 7% 4 Clinique 7%5 Mary-Kay 7% 5 Bare Escentuals 6%6 Clinique 6% 6 Mary-Kay 5%7 Avon 4% 7 L'Oreal 3%8 L'Oreal 3% 8 Avon 3%9 Revlon 2% 9 Revlon 3%10 Sephora 2% 10 Sephora 2%



Favorite Cosmetics Brand For Parents

Fall 2009Spring 2010Rank Favorite Cosmetics Brand % Total Rank Favorite Cosmetics Brand % Total

1 L'Oreal 15% 1 L'Oreal 10%2 Lancome 12% 2 Clinique 9%3 Clinique 8% Lancome 9%

Estee Lauder 8% MAC 9%5 Bare Escentuals 7% 5 Mary Kay 7%

Cover Girl 7% 6 Bare Escentuals 7%

Fall 2009Spring 2010

Cover Girl 7% 6 Bare Escentuals 7%7 Chanel 5% 7 Cover Girl 5%

MAC 5% 8 Neutrogena 5%Maybelline 5% 9 Maybelline 4%

10 3 brands tied for 10th 3% Revlon 4%

Rank Favorite Cosmetics Brand % Total Rank Favorite Cosmetics Brand % TotalFall 2008Spring 2009

1 Bare Escentuals 20% 1 Maybelline 15%2 L'Oreal 15% 2 Clinique 12%3 Clinique 10% 3 Cover Girl 11%4 Bobbi Brow n 7% 4 Mary Kay 7%

Lancome 7% 5 Estee Lauder 7%Maybelline 7% L'Oreal 7%

7 Chanel 5% 7 MAC 6%

Mary-Kay 5% 8 Bare Escentuals 5%Trish McEvoy 5% Lancome 5%

10 8 brands tied for 8th 2% 10 Almay 4%


Video Games

Key Takeaways:

The current cycle is clearly maturing; non-traditional gaming experiences showing promise

We estimate teens represent approximately 35% of video game playersWe estimate teens represent approximately 35% of video game players

Video game spending represents 8% of teen budgets

77% own a next-generation console; only 3% intend to buy a console in the future

Despite declining interest in the current cycle, teens remain receptive to new game experiencesp g y , p g p

New Findings:

�• 53% of teens are willing to pay for downloadable content on their console

�• 28% would download full games if possible; 46% of games would be downloaded

�• 24% are willing to pay for streaming games; 61% would pay $20/month

�• 25% of teens play games through social websites such as Facebook;

�• 38% would pay for cell phone games 35% will buy fewer PSP/DS games38% would pay for cell phone games, 35% will buy fewer PSP/DS games

We do not expect a new generation of consoles during next 3-5 years:�• Digital opportunities are growing quickly but will take time to scale; will not offset console declines NT

25


Digital Media

Key Takeaway

iTunes market share among teens remains high at 93% (flat y/y).

�• iPhone�’s popularity is rising

�• 31% of teens plan on buying an iPhone in the next 6 months (vs. 16% one year ago)

�• In the last year, market share among teens has risen from 8% to 14%y , g

�• Apple saturating portable media player market

�• iPod has 92% market share (up slightly y/y)

�• 31% of teens intend to buy an MP3 player in the next 12 months (up y/y)

�• 34% listen to music on a cell phone (mobile music is a key opportunity)

�• iTunes share remains high (92%)

�• RealNetworks maintaining share (35%)

26


Online Movie Rentals

Key Takeaway

Netflix (NFLX) and Coinstar�’s (CSTR) Redbox kiosks are benefiting from the closing of movie rental retail stores (Blockbuster).( )

�• Netflix: DVD by Mail and Digital streaming �• DVD-By-Mail: 28% of teens currently use DVD-by-Mail (up from 25% y/y)

�– 36% expect to use DVD-by-Mail in 2 years.

�• Downloads: 33% currently download movie rentals (up from 17% y/y)

�– 50% expect to download movie rentals in 2 years.

�• Redbox: Kiosks are taking share from retail stores (Blockbuster) closing�• Kiosks: 14% currently use kiosks (up from 11% y/y).

�• Retail Stores: 72% of teens currently rent movies at retail stores, but just 57% expect to rent at retail stores in 2 years.

27


RestaurantsKey Takeaways

�• Spending: Value-Centric Brands With Premium Attributes Most Preferred

�• Teen survey revealed that restaurant teen spend decreased down ~9% from beginning of recession began (Fall 2007)

indicating negative mix shift due to discounting

�• Conversely, online survey indicates that teen spend was slightly better than the last survey (Fall 2009), but lower than the

majority of prior surveys, illustrating the consumers�’ continued value-centric mindset when selecting a dining option

�• Sources of Influence:

�• Value continues to rank higher in recent surveys as consumers adjust to the current macroeconomic conditions

T t ti t k hi h t d t iti k l t�• Taste continues to rank highest and nutrition ranks lowest

�• Parents: Slightly Improved Outlook

�• Parents weekly spend at restaurants decreased significantly from prior survey, reflecting the extreme discounting prevalent

throughout the industry over the last few months

�• First time in the last three surveys, majority of parents perceived that they spent the same on dining out (instead of less) First time in the last three surveys, majority of parents perceived that they spent the same on dining out (instead of less)

reflecting a slightly better consumer outlook

�• Market Share:

�• Recommend QSR and premium-convenience segments over casual dining space which is supported by the survey results as

the majority of preferred brands fall within the QSR and premium convenience segments

Stocks That Benefit From Survey Results

�• Starbucks- #1 preferred brand on school and online surveys; transitioning to a portfolio company versus a single-branded growth

story prior

�• Chipotle- #2 preferred brand on school survey; brand equity continues to build lists as its geographic footprint expands

�• Darden- Olive Garden #2 preferred brand on both school and online surveys: continues to offer a compelling value proposition

28

�• Darden Olive Garden #2 preferred brand on both school and online surveys: continues to offer a compelling value proposition

leading to increased market share in casual-dining segment

Wireless Technology

Key Takeaways

Increasing Mix Of Smartphones , Aggressive Handset Pricing, Motorola Gaining Share

�• Increasing Mix Of Smartphones

�• 70% of survey respondents indicating their next purchase would be a smartphone.�• Positive for Qualcomm �– compelling investment in competitive handset market.Positive for Qualcomm compelling investment in competitive handset market.

�• Increased Emphasis On Pricing

�• Survey respondents now rate �‘price�’ as the #2 most important factor in their purchase decision versus #3 in 2009.p

• Consistent with aggressive smartphone pricing trends by carriers over last12 months with compelling smartphones selling at sub $100 price points.

�• Motorola Gaining Share

• Apple, Blackberry & LG remain top 3 brands and this is consistent with �‘09 results. • However, Motorola gained share versus 2009 and ranked #4 in 2010 versus #5 in

2009 �– Driven by popularity of Droid at Verizon (#1 seller since launch in Dec �‘09).

29


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Taking stock with teens piper jaffray spring2010

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