national retailer risk tracking by madison marquette

8/14/2019 National Retailer Risk Tracking by Madison Marquette

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Retail Retail Madison Recent

Retailer / Parent Company Ticker Brands Category Risk Rating Industry Commentary

Abercrombie ANFAbercrombie

HollisterRuehl

Apparel Medium

Despite accelerated promos & clearance activity, May 2009 Comps were below expectations- ANF reported -28%

compared to -24.6% estimate. By division - A&F -25%, Hollister -32%, Abercrombie -28%, and Ruehl -33%. Direct

sales declined -10% to $15.6 million. Good news - cost and inventory cuts & international expansion opportunity.

ANF Board has approved closure of 29 Ruehl stores in 2009 - Ruehl losses resulted in 1Q09 $50.7 mil non-cash pre-

tax impairment charge. Citi views closure of all Ruehl stores favorably.

Aeropostale ARO Aeropostale Apparel Low

Reported above consensus 1Q09 EPS of $.049 and 2Q and 3Q expectations raised. Strong inventory management

with Q1 inventory turns of +21.8%, driving comps to +11%. ARO closed the Jimmy'Z concept given annualized

operating losses of ~$8mil pre-tax and is opening a new concept - P.S. from Aeropostale - targeted at kids 7 to 12.

Ten new stores are scheduled for open in 2009, but it will take 3-5 years before this new concept can become a

meaningful growth driver.

Aldo Shoes ALDO Aldo Shoes Apparel Medium Private Company.

AMC Entertainment AMCAMC

Lowes CineplexCinema Medium

Private company with public debt and 2nd largest competitor in sector. AMC announced a loss of $81.2 million in

fiscal year 2009 compared to $43.4 million profit the prior year. In May 2009 AMC received $600 million for a private

offering of senior notes due in 2019 and will use the money to pay off $250 million in debt coming due in 2012.

American Eagle AEO American Eagle Apparel Medium

Over the past year and a half, operating margins have been cut in half from over 19% to 9% expected this year, with

juniors' business (62% of the mix) in its third year of negative comps. AT $456/sq ft (vs. 5-yr avg of $490), AEO'ssales productivity could have more downside if recent initiatives in juniors don't result in positive comps. Good news -

less negative comps, potential positive influence from return of Roger Markfield as CMO, 2H09 product cost/transport

savings, possible EPS benefit from Martin + Osa improvement or closure, & AEO's robust balance sheet ($374mm net

cash) & attractive FCF yield (~10%).

AnnTaylor ANNAnn Taylor

Ann Taylor LoftApparel Medium

ANNs balance sheet is solid with $112mm in cash at the end of 2008 and $125mm draw down on its $250mm

revolver and with no known liquidity issues. Strong inventory control (1Q09 at -16% psf), driving improving gross

margin, ongoing cost savings/restructuring program, reduced capex, and improved product

execution. 1Q09 comps = -30.7% (ATS -42.7% and Loft -24.2%), GM +230 bps (tight inventory control), & SG&A

dollars -11.3%

Apple AAPL Apple Electronics Low

iPhone is emerging as the clear leader in the battle over the mobile internet. C309 - expect price cut to current

generation iPhone to drive 50-100% incremental unit demand, and 15%+ of current iPhone users upgrade to a new

version. Mac-iPod near term weakness are offset by strength in iPhone franchise. Apple computer sales declined 3%

in most recent quarter. Apple is remodeling 100 stores this year and opening 25 new stores.

Barnes & Noble BKSBarnes & Noble

B. DaltonBooks Medium

Bookstore consolidation continues to be inevitable ov er the next 5-10 years as online and non-traditional competition

increases, and digital reading is more accepted. BKS not expected to be primary source of store attrition given their

best-in-class operating model. 1Q SG&A $ down 3% w/ home-office headcount reductions, renegotiated service

contracts, and reduced operating expenses. 80-100 leases due annually the next 3 years, BKS may negotiate lower

rents for years to come.

bebe BEBE Bebe Apparel Low3Q FY09 (year ends 7/2/09) Net Sales -15.6%, Traffic -17%, Comps -23.5%, Conversion -8%. Inventory declined by

double-digit percentage (-16%) for the 2nd consecutive quarter. Low inventory combined with a stronger merchandise

plan getting ready to launch, Bebe is in a position to c hase up-trending categories and mitigate margin pressure.

Bed Bath & Beyond BBBY

Bed Bath & Beyond

Christmas Tree Shops

buybuy BABY

Harmon Face Values

Furnishings Low

4Q09 (FY end Feb) comps were down 4.3%, at the better end of expectations. EPS of $0.55 were well ahead of

estimates of $0.44. Linens' liquidation occurred during BBBY's 4Q, so even more positive results may come in

following quarters. Company plans to add 50 to 54 new stores across concepts this year, lower than the original 65

estimated.

NATIONAL RETAILER RISK TRACKING

MADISON MARQUETTE

AS OF JUNE 2009


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MADISON MARQUETTE

AS OF JUNE 2009

Belk BLKIB BelkDepartment

StoreMedium

For fiscal first quarter ending 5/2/09, Belk announced net sales of $760.9 compared to $817.3 last year, and comp

sales were down 7.7%. Net income was $0.5 million compared to $5.1 million last year. Belk opened three new stores

in the first quarter and expanded another, with two more expansions planned in 2009.

Bennigan's MRGBennigan's

Steak & AleRestaurant High

Chapter 7 in July 2008. 300 units to close. Bennigan's franchises (138 units) to stay open, Company owned to close

(150 units).

Best Buy BBYBest Buy

Magnolia Audio VideoElectronics Low

Best Buy has gained customers following the liquidation of Circuit City. U.S. market share grew by two percentage

points year over year. Still, for the period ended May 30, BBY posted income of $153 million, or 36 cents per share,

down from $179 million, or 43 cents per share, a year earlier. Same-store sales fell 6.2%. BBY is expanding its online

offerings, and selling more outdoor furniture and equipment to make up for declines in s ales or traditional products.

Blockbuster Video BBI Blockbuster Video Video Medium

BBY ended 1Q09 with 64 less stores and 74 less franchise stores than 4Q08. Posted a 12.3% decline in same-store

sales for domestic rentals after four consecutive quarters of increases. Only segment to enjoy y/y revenue gain was

domestic video game sales, up 10%. BBY rolling out 3,000 kiosks in 2009 to compete with Redbox, but BBY faces stiff

competition here and still has a negligible portion of dvd-by-mail.

Borders Group BGP

Borders

Borders ExpressBorders OutletWaldenbooks

Books Medium

Management over the last year has significantly reduced costs, reduced debt load, closed underperforming stores,

and conserved capital, putting BGP on the right track to survive and turnaround the company. 1Q09 comps were -

13.5%, an improvement over -15.3% in 4Q08. SG&A declined 23% as a percent of sales from payroll and other store

expenses, reduced corp overhead, and supply chain costs. BGP closed 11 Waldenbooks in 1Q (100 in the past year).

Brookstone BKST Brookstone Furnishings Medium

BKST sales down 31.6% YTD as of April 4th 2009, while comp store sales were down 25.1%. Cutting costs by

reducing corporate headcount 15%, freezing capital spending, and dropping inventory levels 25%. During 1Q

remodeled two and closed four stores and plan to open and remodel a limited number during 2009. Reviewing each

store to determine underperforming locations to renegotiate leases or close stores.

Buckle BKE Buckle Apparel LowBKE continues to post some of the best top-line growth in retail, with 22 consecutive months of double-digit comps

while most retail is struggling. BKE's mix is shifting to women's (60% of sales today) from more important men's

historically (50% of sales last year). 2nd half comps are estimated to be 10%-12%.

Burlington Coat Factory BURL Burlington Coats Apparel Low4Q (end May 30, 2009) Net Sales were $811.5 million compared with $780.9 million last year, a 3.9% increase. Comp

store sales were down 3.1%. During 12 month period ending 5/30/09, Burlington opened 36 net new stores, giving

them 433 stores in 44 states and Puerto Rico.

Cache CACHCache

Cache LuxeApparel Medium

1Q09 net sales of $53 million with comp store sales down 20.7%. Continue to lower inventory levels and cut operating

expenses and now expect to save $18 million in OE this year. Cache's losses for year 2009 are projected to decrease

roughly 70%. Remain selective with new store openings. During 1Q opened 2 new stores while closing 4 locations,

and plan to close 6-8 more stores in 2009.

California Pizza Kitchen CPKICalifornia Pizza

KitchenRestaurant Low

1Q09 - posted EPS of $0.11 vs. estimates of $0.10 with comps of -5.9% and revenues of $161 million. COGS were

lower than expectations driven by favorable spot cheese prices, produce costs, and strong store level cost controls.

45% of stores are located in CA and FL, so exposure to worsening markets.

Carmike Theaters CKEC Carmike Theaters Cinema Low

Considered a leader in digital/3-D segment with 500 screens added in recent years, providing CKEC an advantage

with more wide-release 3-D movies scheduled for release in 2009 and beyond. Plus people have to see 3-D movies in

the theater, not on dvd, and ticket prices are higher. CKEC expected to increase 10% at the box office compared to 7-

9% for the industry in 2Q.


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MADISON MARQUETTE

AS OF JUNE 2009

Chico's CHSChico's

WH-BMSoma

Apparel High1Q09 EPS of $0.11 vs. estimate of $0.09. Comp sales declined -3.2% in 1Q, with Chico's down ~-6% (vs. -18.6% in

2008) and WH-BM ~+4%. New management at Chico's in 1Q able to make changes to help improve comp sales. CHS

has now targeted another 45 stores to close over the next 3 years, or 30-35 stores per year.

Christopher & Banks CBKChristopher & Banks

CJ BanksApparel Medium

4Q09 (FY end Feb) loss amounted to $0.82 per share and c omps declined 20%, making the fourth year of negative

same store sales. Management used frequent and aggressive promotions to drive customer traffic and reduce

inventory levels, and transactions declined only 5% so this may have had some success. SG&A dollars were flat y-o-y

and operating margin was down -27%. CBK continues to seek out other opportunities for savings, including actively

pursuing more favorable lease terms upon expiration, a renewed focus on smaller markets where there is less

competition and customers are relatively more loyal, and continued expansion of product offering/sizes on the e-

commerce site.

Cinemark CNKCinemark

Century TheatersCinema Low

3rd largest competitor in sector with a strong presence in Latin American. 1Q09 EPS of $0.17, which is above

estimates and up from $0.08 a year ago. CNK helping prove that cinema might be recession proof. Revenue was also

up 6% from last year, including 10.6% domestically where CNK gained market share with box office up 11.2%

compared to only 9.5% for the industry.

Circuit City CCTYQ Circuit City Electronics High Chapter 11. All stores closed. Potential move to resurrect on-line business.

Coach COH Coach Apparel Low

Factory stores have sales per sq ft ov er $2,500 & contribute ~30% of COH's operating income. Starting FQ1:10 -

COH will reposition handbag assortment in full price stores (to include more $200-300 bags and fewer $300+ ones) to

increase conversion and handbag penetration and offset the planned 10-15% average ticket decline as a result of the

strategy. Biggest growth opportunity is China, where COH plans to open 50 more stores over the next 5 years.

Coldwater Creek CWTR Coldwater Creek Apparel Medium1Q09 comps were down 18.6%, although they supposedly improved to high singles digit losses in April and May.

While there has been some progress in recent weeks in sales and conversions (up 50 bp), traffic remains challenging

(down 19.1% in Q1). CWTR does have $74.9 million in cash with no debt.

Cost Plus World Market CPWM Cost Plus Furnishings High

Cost Plus intends to close 26 stores and exit 18 markets where it has too few stores to support its marketing spend.

Also planning to reduce workforce by 18%. The closures are essential for the company to maintain liquidity. With

cash balances of just $3.7 million at the end of 2008 and continued negative free cash flow, debt servicing remains a

challenge. Consensus estimates peg losses for fiscal year 2009 at $1.98 per share.

Crate & Barrel CRATECrate & Barrel

CB2

Land of Nod

Furnishings Medium Private company. Sector leader, but susceptible to drops in consumer discretionary spending.

CVS CVS CVS Drug LowCVS retail pharmacy has been performing very well in the economic downturn. CVS continues to out-execute

Walgreens in comps and earnings growth. Same stores sales growth up 3.5-5.5% as of 5/15/09 with 4-6% projected

for the quarter.

Dick's Sporting Goods DKS Dick's Sporting Goods Sports Low

DKS is best positioned in the industry and the clear long-term winner in sporting goods. DKS is opening up to

possibility of second-use sites now with the dislocation from competitors and c losing by other large-format retailers.

This could help induce further sq ft growth. West Coast especially opening up for DKS where regional and local

competitors are going out of business, and in smaller markets, are often only one or two locations that can support a

big-box store.

Dillard's DDS Dillard'sDepartment

StoreHigh

EPS in Q109 above estimates driven by solid GMs (+28bp), as inventories fell sharply and SG&A margins improved

on savings from store closures, payroll, & advertising. Comps continue to struggle, while liquidity remains strong.

Closed 21 stores in FY08 and this year they have committed to closing 5 stores and it is highly likely they would close

more than that, though not to the extent they closed doors in FY08.


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MADISON MARQUETTE

AS OF JUNE 2009

Dress Barn DBRN Dress Barn Apparel Low3Q EPS of $0.39 exceeded management guidance, $0.30-$0.32, due to s tronger sales & gross margins and tight cost

control. Cash totaled $5.11/share and inventory psf declined 4%. Comp sales trends are up +3% in 3Q.

Eddie Bauer EBHI Eddie Bauer Apparel High

Eddie Bauer Holdings Inc. sought Chapter 11 bankruptcy protection on 6/18/09 with plans to sell its assets to anaffiliate of private-equity firm CCMP Capital Advisors LLC or a higher bidder at auction. The loss for the first quarter

ended April 4 widened to $44.5 million from a $19.3 million loss in the year-ago period. Sales fell 15.7 percent to

$179.8 million from $213.2 million. Same-store sales were down 11.3 percent. The retailer operated 251 full-price units

and 119 outlets as of April 4, the end of the first quarter.

Express EXPR Express Apparel Medium Private company (Golden Gate Capital 2007).

Foot Locker FL

Foot LockerFoot Action

ChampsLady Foot LockerKids Foot Locker

Apparel Medium

A cyclical shift toward technical athletic footwear has benefited FL over the past several quarters, mitigating

sales pressure from reduced consumer traffic in the malls. Disciplined inv entory management has limited markdown

activity; this, coupled with the shift to higher-Average Selling Price (ASP) marquee styles, has supported gross

margins, which should continue through the remainder of 09. Foot Locker closed 225 underperforming doors in fiscal

2008 (on top of 274 doors the prior year), and is planning on opening 2550 new doors and relocating or remodeling

150 doors in fiscal 2009. Management foresees the potential for another 100 store closings in the future, depending on

how leases negotiations transpire.

Fossil FOSL Fossil Apparel MediumFOSL is performing well domestically with -4% comps in 1Q09, which is outperforming the industry. Internationally,

currency headwinds continue to hamper sales. Stock price is up over 80% from March lows, with estimates for further

growth this year. Balance sheet is clean with over $3 in cash/share and virtually no debt.

Gamestop GMEGamestop

EB GamesElectronics Medium

1H09 difficult due to digital downloading, increasing competition, and lack of any big new titles released. 2H09 looks to

be better with a very strong title lineup, a price cut on the PS3, and install base 1.5x higher than it was a year ago.

Gap GPSGap

Old NavyBanana Republic

Apparel Medium

1Q09 EPS of $0.31, above estimates of $0.30. SG&A declined by -7.6% and inventory continues to be tight,

decreasing -12% in 1Q09. GPS has outstanding liquidity ($1.7bn cash and no debt). Old Nav y comps were flat in

March and +1% in April, first positive comp in five years - due to improved avg unit costing and markdowns and

revamped marketing program.

Golds Gym GOLDS Golds Gym Exercise High Private company operates mostly through franchises.

Gymboree GYMBGymboree

Janie & JackCrazy 8

Apparel Low

Good top line and expense reductions this year should improve the companies position. Gross margins will likely see

continued pressure in 2009 due to higher product and promotional costs. Losses from Crazy 8 cut by half -- outlook

for continued improvement as company continues expansion and manages payroll more effectively. Aggressive

expansion of Crazy 8 not yet proven in market. Earnings and sales likely flat for 2009.

H&M HM'B-SK H&M Apparel Low

Company continues to be impacted by currency exchange issues. Wall Street estimates that gross margins could fall

350bps in 2009. This combined with increasing operating costs that are growing faster than sales has created

pressure to keep income stable. To offset these factors, H&M may have to push sales prices, which is counter to their

business model of very affordable disposable fashion (Jimmy Choo recently announced as anew shoe designer for

H&M). Stock price looks high. If stock value declines added pressure on company would be felt.

Harris Teeter RDK Harris Teeter Grocery Low

Same store sales flat at up 0.1%. Wall Street sees the company as well positioned, despite economic slowdown. One

positive metric is that shoppers have increased 2%, even though the average ticket declined -- suggesting its core

shopper is shopping more frequently, but buying les per trip. For HT, gross sales rose 6% with GLA rising 7%.

Company continues expansion plans.


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MADISON MARQUETTE

AS OF JUNE 2009

Hibbett Sporting Goods HIBB Hibbett Sports Sports Low

Expansion plan to grow in smaller markets that have been overlooked by its larger competitors appears successful.

Discretionary consumer headwind, however, weighing on sales. Current strategy is to expand into distressed real

estate at favorable rents. Good vendor relationships with Nike and added North Face recently. Better inventory

management systems being advanced now could improve operating margins by 200-300 bps.

Home Depot HD Home DepotHome

ImprovementMedium

More stable than a year ago. Growth to remain modest with 8 new stores in 2010. Analysts see a mature format with

store base approaching saturation. HD to continue to lag Lowes. 2009 estimated to see further decline sin sales,

gross profit, and operating income. HD sees a uplift of perhaps 150 bps in gross margins from merchandising

initiatives and supply chain improvement. The downturn in housing and pullback in consumer high ticket items still

weighing on company.

Hot Topic HOTTHot Topic

TorridApparel Low

1Q09 earning beat Wall Street estimates slightly. Comps stores up 9.6% at Hot Topic and down 1.7% at Torrid.

Inventories slightly elevated which may create some modest markdown pressure after 2Q. Lower store occupancy

costs (rent, CAM) main reason fro gross margin improvement. May sales have slowed.

J Crew JCG J Crew Apparel Medium

Strong cash position at the end of 1Q09 -- $155M in cash and $100M in a term note. Company continues to build

online capability, which is expected to add to bottom line from some pent up demand. After significant markdowns in

beginning of 2009, inventory flat, which implies lower markdowns for last half of year. Apparel sector still under

pressure. Store closing likely modest going forward.

JCPenney JCP JCPenney DepartmentStore

Low

Economy remains challenging in terms of weak shopper traffic and reluctance to spend on higher ticket items.

Consumer patterns, however, appear to be stabilizing. Some sales recovery noted by region and product - market

share recovering in the SW, off-mall stores doing well, and women's apparel making gains. Operations are the key toperformance - inventory remains low and well managed, merchandising has been good with buyers better anticipating

store needs, resulting in lower pressure for markdowns. Lower cap-ex program with 16 stores forecast through 2011.

American Living and Sephora being well received by customers. Rewards program gaining traction with customers.

Joann Stores JAS Joann Stores Furnishings Low

EPS positive and beat Wall Street estimates. Wall Street sees company guidance as overly conservative. Comps up

overall -- with small stores posting 3.% gains versus (0/6%) for large stores. Management continues to advance

initiatives to expand gross margins, maximize e-commerce business, leverage new systems, and rev italize its

portfolio. JAS benefiting from Walmarts exit of fabrics line.

Jos A Banks JOSB Jos A Banks Apparel Low

EPS positive at $0.62, which beat Wall Street estimates. Comps rose 4.3%. Suits performed well, growing 40% over

the period. Gross margins declined 180 bps (lower than estimated) due to more promotional activity. JOSB strategy

is to generate GM dollars and not manage the rate as they attempt to increase market share from competitors.

Overall operating margin flat from 2008. Plans for 10-15 new stores annually in 2009 and 2010.

Kohl's KSS Kohl'sDepartment

StoreLow

Strategy is to pick up market share from competitors that have gone out of business and that are less competitive as a

result of a cut back in operations, cap-ex, etc. Comp store sales estimated to be 150-200 bps stronger as a result of

Mervyn's and Gottschalk's liquidations. Women's business still negative, but less so. One risk is higher pre-openingexpenses associated with new stores due to Mervyn's expansions.


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MADISON MARQUETTE

AS OF JUNE 2009

Kroger KR

Kroger

QFCRalph's

Smith's

King'sFry's

Owen'sCity Market

Baker'sHighlander

Scott'sPay Less

J C Food Stores

Food 4 LessFoods Co.

Fred MeyerTurkey Hill

Tom ThumbQuick Stop

Fred Meyer Jewelers

Littman JewelersFox's Jewelers

Barclay Jewelers

Grocery Low

KR continues as a price leader and well positioned to attract the price sensitive consumer. Wall Street shows that KR

has a 15% price edge over its competitors, leading to market share gains and higher store productivity. Solid

customer experience through strong merchandising keeps customers coming back. One strength is KR's customer

loyalty program (gasoline) which has driven traffic. KR is moving toward a cell phone loyalty program that rewards

customers with 20 free minutes for every $100 spent (KR owns a 50% stake in i-wireless).

Limited Brands LTD

LimitedVictoria's Secret

Bath & Body WorksC.O. Bigelo

White Barn CandlesHenri Bendel

La Senza

Apparel Medium

Sales down on a per SF basis and on a store basis (average store s ize up 4%). Bath & Body Works sales down 2%,

Pink and intimates up slightly. Wall Street sees Victoria's Secret as a benefit even in the recession (La Senza has not

performed as strongly as had been estimated). Could see an upside in franchising fees from VS abroad. Apparel

sector strained overall, resulting in a likely deterioration in comp store performance in 2009. Effort underway to issue

$500M to re-purchase debt ($1.05B due in 2021).

Linens n Things LIN Linens n Things Furnishings High Chapter 11. All stores closed.

Lowes LOW Lowes Cinema Medium

Stronger competitor in sector. Low debt repayments in 2009 and 2010. After a poor 4Q08, 2009 has started more

positive given the headwind to the sector. As consumers pulled back from paid home improvement projects and

moved back to DIY, Lowes has benefited. GMs were up 77 bps in 1Q, a v ast improvement from being down sine late

2007. Comps less negative - down 2.6% overall and 4.2% per ticket. Sales per SF expected to hit $270 in late 2009 --

off from the peak of $337, but reasonable as a s teady benchmark.

Macy's M-N Macy'sDepartment

StoreLow

Macy's still struggling with market position. The company anticipates its My Macy's concept to renew its customer

base, although the effects of this initiatives have not yet been realized. Sales down 9.5% to $5.2B. Comp stores

down 9.0%. GMs down 500nps to 38.1%. Comp stores expected to continue decline for 2009 as S&P downgraded

Macy's to junk status.

Michael's MICHMichael's

Aaron BrothersFurnishings Low

Bain Capital Partners & The Blackstone Group present owners (2006). In June the company reported net income of

$4M for 1Q, up $24M from 1Q08. Comp stores were down 2%, even though traffic was up 3.6% the average ticket

was down 5.2%. Gross margins were down 150 bps.

Modell's Sports MODEL Modell's Sports Sports Medium Private Company

Muvico MUV Muvico Cinema Medium Private company. FL regional chain that has been expanding to challenge sector leaders.

National Amusements NAMUSEShowcase Cinemas

Cinema De LuxBridge Cinema

Cinema Medium

Private company. Deep relationships with movie producers. 6th largest competitor in segment. Pressure on high

debt for owner with CBS and Viacom. Company reached agreement with enders in February to restructure debt

($1.6B)Theater sale advanced. As of May 2009, buyer was identified for 68 US theaters and 21 UK theaters that

would be sufficient to pay down near term debt.


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MADISON MARQUETTE

AS OF JUNE 2009

Nordstrom JWNNordstrom

Nordstrom RackDepartment

StoreLow

Status quo - not much change from last year, but business trends appear to be less volatile. Comp stores down

double digits. and shopper traffic still down as consumers pullback on discretionary purchases. Company more

proactively managing inventory. Rack represents a growth opportunity (60 today) -- 13 new Racks to open n 2009,

with 10 per year after that. Full line stores count to slow, with only 2-4 new Nordstrom stores per year going forward.

Wall Street believes that the decision to migrate prices points 10% down may have a lasting impact on comp stores

sales.

Office Deport ODP Office Deport Office Supply MediumSufficient liquidity to run the company through 2010. EPS continues negative in 2009, but less so that 2008. Vendors

continue to support company. As the economy begins to turn positive, the office supply stores, in general, should

show improvement. Cost cutting at company has impacted sales on individual stores and the closing of 100+ units.

Office Max OMX Office Max Office Supply Medium

1Q net income fell 79% to $13M versus $62M last year. Decline attributable to consumer and business buying

cutbacks. Mass merchandisers have cut prices on business products, putting pressure on the office supply sector.

Office Depot shuttering stores positions OMX to gain market share. Rolling out smaller format (Ink, Paper, Scissors)

to penetrate high traffic areas more effectively at a lower cost.

Pacific Sunwear PSUN Pacific Sunwear Apparel Medium

Still challenged - gross margins declined, however, merchandise margins and distribution costs both improved. SG&A

expenses also have declined by 12.6%. Denim has shown no pricing pressure, unlike footwear and accessories.

PSUN has no borrowing against credit facility ($150M) and has $32M in cash -- which puts the company is a strong

cash position through 2009. While comp are down and will continue down in 2009, inventories are managed down by

30% from last year which should position the company to meet street estimates.

Panera Bread PNRA Panera Bread Restaurant LowStill hitting the mark with consumers as evidenced by positive EPS ($0.57), total revenue up 5.7%, and comps positive

at 0.7%. Caf sales strong. Biggest issue is that Wall Street is more optimistic at performance outlook and that will be

difficult for Panera to match -- even though they met their performance goals. Company remains in growth mode.

Payless ShoeSource PSSPayless ShoeSource

Stride RiteApparel Low

EPS positive at $0.59, beating Wall Street estimates slightly. Comp stores down 5.2% at Payless and down 0.5% at

Stride Rite. Payless gaining market share due to promotions of children's shoes. Risk going forward is the company's

plan to move to higher priced fashion items. This could impact sales, result in lower inventory turns, and the create a

need to take mark downs if they miss on the buying front.

Petco PETCO Petco Pets LowPrivate. Owned by Leonard Green and Texas Pacific Group (2006). Continues to be solid competitor in segment and

has edge over PetsMart in organic foods.

PetsMart PETM PetsMart Pets Low

Leading chain in sector wit 1,008 stores. Aggressive expense control has resulted in better than expected earning of

$0.37. Total sales up 9.5% with comps up 3.9%. Gross profit down 100 bps due mostly to lower merchandise

margins. Store traffic up slightly. Management wants to amass $300M by year end -- making a stock buy back

program likely.

Regal Entertainment Group REGAL

Regal TheatersEdwards Theaters

United ArtistsConsolidated

Cinema Low Private company. Largest competitor in sector.

Rite Aid RADRite Aid

Eckerd Drug

BrooksDrug Medium

Rite aid still challenged. Fitch recently upgraded its issuer default rating to B- and its rating outlook to stable form

negative due to its progress in improving liquidity and 2010 debt maturities. May store comps up 0.6% and pharmacy

comps up 1.6%. Operating metrics still lag competitors.

Ritz Camera / Boaters World RITZ

Ritz Camera

Wolf CameraKits Cameras

Inkley'sThe Camera Shops

Boaters World

Camera /Sports

High Filed Chapter 11 on February 23, 2008. Now in liquidation.


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MADISON MARQUETTE

AS OF JUNE 2009

Ross Stores ROST Ross Stores Apparel LowOne of the few retailers delivering strong earning growth - 1Q09 EPS up 21%. Better buying, fresher merchandise,

faster inventory turns, and the loss of Mervyn's have res ulted in good comp gains. Q1 ended with $460M in cash and

$150M in debt.

Royal Ahold AH-AEGiant LandoverGiant Carlisle

Stop & ShopPeapod

Grocery LowCorporate metrics still well balanced. PA and NJ are now tougher markets, but management continues to find the rightmatch in product and market share. Sales at Stop & Shop estimated to be up 2.4% in 2009 and Giant Carlisle up

3.8%.

Safeway SWY

Safeway

Von'sGenuardi's

Dominick'sPac n Save

Randall's

Grocery Low

Wall Street believes the worst is behind Safeway and it is poised for improvement. Most of the issues are not

company related but due to the overall economy. The company's reinvestment in stores since 2003 has put pressure

on them to a degree -- upgraded stores fell more expensive to the consumer, so these consumers have cut back --

even though there are no pricing differences.

Saks SKSSaks

Off Fifth

Department

StoreMedium

Aggressive cost cutting has led to better than expected SG&A savings and lower cap-ex. Gross profit margins still

under pressure from poor comps store sales and continued discounting to drive traffic. Revenues expected to be

down 12% in 2009, resulting in continued negative operating income for 2009 and into 2010. Management still

focused on more expense reductions in 2009 - up to $60M from a prior $20M-$30M. Inventories still high - although

down 11% comp stores down 25%.

Sears SHLDSearsKmart

Department

StoreMedium

While gross margins are down due to lower sales on big ticket items, tools, appliances, and apparel, management

aggressively cut operating costs which offset the drop. Overall, sales decline 9.2% year on year. Same store sales

declined 7.4%. In June Sears announced the extension for their credit facility to 2010 (set to expire in 2010) and

increased their borrowing capability to $4.1B from $3.8B.

Signet Jewelry SIGKay's

Jared's

Sterling JewelersJewelry Medium

EPS slightly ahead of Wall Street estimates at $0.31. This improvement was driven by lower SG&A costs. Comps

down 2.9% versus a decline in total sales of 7.3%. Management continues to push operating cost reductions ($100M

in inventories for 2009 in the US) and 50% lower cap-ex. The goal is to be at $175-$225M in cash by year end to buy

down debt. One upside is that the company appears to be a survivor and will benefit from the closures of competitors.

One risk is that gold continues to escalate, driving the cost of good s sold higher.

Staples SPLS Staples Office Supply Low

Although sector sales remain soft, company has managed the downturn well in terms of proactively cutting SG&A and

moving its distribution improvements. Customer traffic improved, with some signs that the small business segment

may be beginning an improvement. Free cash increased 71% from a year ago and debt to equity was reduced to 56%

from 75%. Free cash will likely be used to reduce debt by $1B in 2009. Comps down 8%, better than competitors.Plan is to continue to open stores in dense MSAs.

Starbucks SBUX Starbucks Restaurant Medium

Howard Schultz back at the helm. Schultz noted in a May conference in NYC that McDonald's introduction of coffee

has not impacted SBUX sales at all. Company has made strides in cost cutting. Margins in US and International likely

to improve as SBUX leverages vendor relationships better. US comps down 8%. Management sees margins getting

back to their peak of 16% (2003) from the current 10.8%. This may take some time. Company recently introduced a

healthy food menu that it is gradually rolling out. Company is also working with partners to offer bounce-back coupons

to drive sales (Kraft, Pepsi, Dreyers Ice Cream).

Steve Madden Shoes SHOO Steve Madden Shoes Apparel LowSHOO continues to be a successful player in the segment due to good product execution. Net sales expected to be

up 1.1% for 2009. Gross margins remain in balance with trends and SG&A costs are lower, suggesting proactive cost

management. C ompany may acquire an un-named women's athletic brand 2009.

Super Valu SVUSuper ValuAlbertson's

Shop 'N SaveGrocery Medium

CEO to be replaced with CEO of Walmart's America's brand. Company has cut cost drastically to remain competitive

and this is now impacting store operations. Wall Street estimates that it is under-spending it competition by 25%. New

management talent my shake things up, but it will take time for the company to get back on the right path.


9/10




MADISON MARQUETTE

AS OF JUNE 2009

Talbots TLB

Talbots

Talbots Kid'sTalbots Men's

J. Jill

Apparel High

Buyer identified for weak J. Jill unit. Price of $75M is a significant discount from original purchase price of $515M.

TLB has working capital lines of $365M - and continues to be fully drawn. Balance sheet over leveraged and comp

sales continue to decline. $245M due in late 2009 or early 2010 - necessitating renewals or refinancings. Froze

pensions in May. Has $550M in total outstanding debt as of 1Q09.

Target TGT TargetDepartment

StoreLow

While consumers have been trading down to Target, comps sales are still off by 6.1% -- and below Wall Street's

expectation. Mandatory consumer driven markdowns are part of what is driving this sales pattern. Inventory

management controls are in place and credit card issues are being managed should improve the company's position.

The Childrens Place PLCEChildren's PlaceDisney Stores

Apparel Low$186M in free cash now available to repay $15M term loan in 2010. Has been able to realize lower SG&A expenses

due to lower store costs. Comp sales down 9% - lower than expected by Wall Street. Analysts see PLCE as well

positioned and could realize an upside in back to school sales.

The Limited THELTD The Limited Apparel Medium Private company - Sun Capital 2007. Sun recently invested $50M in funding and has provided a $75M line of credit to

TJ Maxx TJX

TJ MaxxMarshalls

HomeGoods

AJ Wright

Apparel LowStrong margin performance. Overall comps across all brands was up 3-4% in May. Better than expected

performance has increased management's store openings - 2009 up to 85 from 65 (some of this growth is

international). Total sales seen as flat for 2009, although net income will be up just slightly.

Tween Brands TWBJustice

Limited TooApparel Medium

Lower inventories driving improved margins - but comp stores (down 23%) still a drain. 1Q09 ended with $84M in

cash and $165M in debt. Justice's higher price point an issue in this economy. Aggressively managing store leases

and successfully converting many to percentage rent (30% lower rents in these stores).

Urban Outfitters URBN

Urban OutfittersAnthropologie

Free PeopleTerrain

Furnishings Low

Top line is still difficult but management is aggressively working to maximize performance. Merchandise and supply

chain improvement showing margin rewards. Anthrop improving and Urban is stable but down, although performance

may decline further. Sales/So at Urban are $520, down from it 5-year average of $550/SF. 2009 revenues forecast to

be up 2%, a far cry from the 20% increase from past years. Still plans to add stores in 2009 and 2010 (38 per year).

Walgreen WAG Walgreen Drug LowSame store sales up 1.0% - which was lower than expected. Comp store prescription rose 2.8%. WAG has been

working to improve the shopping experience through renovations and better merchandising. This has improved traffic.

Walmart WMTWalmart

Sam's Club

Department

StoreLow

New CEO whose mandate is to continue to enhance the brand. Store count likely to grow as company begins to

deploy smaller formats and brands to meet demand. Company moving away from the 195K SF model and experiment

with smaller super centers - even as small ay 77K SF. Net sales expected to be up 7% in 2009. Economicalconsumer seeking value has benefited Walmart - comps sales up over 3%.

Whole Foods WFMI Whole Foods Grocery Medium

2Q09 comps continue to decline, but at a slower pace (down 4.8%). Consumers reportedly still view Whole Foods as

expensive, an issue in this economy that has impacted discretionary spending. While the company sees flat comps

for the remainder, some on Wall Street see continued risk and that comps could continue to pace negative at 4-5%.

Management has had solid past gains in productivity with little attention paid to managing expenses - Wall Street

believes cost cutting needs to take place to improve operating margins. Store expansions cut back from 15% to 7%.

Company is also renegotiating leases and cutting labor costs at this time. Liquidity has improved with infusion of

capital from Leonard Green ($425M) and Yucaipa (7% s take).

Williams Sonoma / Pottery Barn WSM

Williams Sonoma

Pottery BarnPottery Barn Kids

West Elm

Furnishings Medium

Comp stores down 21% and total sales down 22%. PB Kids declined 25%. Gross margins declined 550bps to 30.1%.

Managing rent expense is seen as a big plus for the company - with 20% or stores coming up for renewal in the next 4

years and 25% of stores having a co-tenancy issue. Wall Street estimates that this could pressure rent negotiations to

be down 20% from 2008 and some stores being down 30%. PB Teens comps down 17% and West Elm was down but

bucked the macro trend.


10/10




MADISON MARQUETTE

AS OF JUNE 2009

Zales ZLC Zales Jewelry MediumEPS are down $0.73 - below Wall Street's estimate. Lower sales drove the decline - comp stores down 20%, although

more closely managed SG&A took some of the decline away. Longer-term, likely a turnaround, but still seeing

headwinds in the recession.

NOTE: Tickers noted inREDare Madison Marquette designations for tracking purposes and do not reflect actual public company ticker symbols.

Source: Thomson ONE; Wall Street Analyst Reports; Madison Marquette Market Research.

national retailer risk tracking by madison marquette

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