Lee Cooper in Russia

Roseleen Bakshi25th June 2009

Steve Manners, VP Brand DevelopmentLouise French, AVP Marketing & Business DevelopmentSerena Sibbald AV P

Today we will cover….

Hard metrics versus soft dataSelecting channels for Lee Cooper for the middle

market.Which geographies to target? Which players to target for Lee Cooper? Which retailers to target?Timeline

Hard data is bad…

…but it’s not all bad …

Oil revenues make up around a quarter of Russia’s GDP.Current Oil prices levels are lowRussia’s economic recovery will return as oil prices recover.

2007 2008 2009E 2010EGDP (UBS)

8.10% 7.20% 3.50% 4.50%

GDP (Verdict)

8.10% 5.60% -4.50% -2%

Consumer Expenditure (UBS) 12.80% 13.10% 6% 5%

Unemployment Rate (UBS)

11.90% 13.30% 14%

2007 2008 2009E 2010EInterest Rate

(Verdict)10% 12% 13%

Inflation Rate (UBS)

9% 14% 10.90% 8%

…but from the soft data:there is hope

11%13%

18% 19%22% 22% 23% 24% 24%

29% 32%

56%

0%

10%

20%

30%

40%

50%

60%

France

UK

Brazil

US

Canada

Germ

any

53 Country

Average

Italy

Spain

Russia

China

India

Do you think your country will be out of an economic recessionin the next 12 months?Percent saying yes.

Very Strong Growth: >= +5%Growth: between +1 and plus 4%Neutral: between -1 and +1%Negative: between -1% and -4%Very Negative: <= -4%

1

3

5

4

2

Top actions Consumers are taking to save

KPI

Reasons for the Crisis in Russia: Oversupplies of imported Garments during the Boom Phase from 2002 till 2007

Management Defaults hidden by the Boom Phase:

Only 40 % of independent clothing retailers monitor and evaluate through-selling results during and after the end of retail seasons

budget- and portfolio planning still based on emotional rather than rational indicators (vertical against horizontal portfolio planning)

Calculation of retail prices, based on“commonly practiced” mark-ups of in between 2,8 and 3,8 and not by full cost assessments according to western business administration standards

display of merchandise characterised by “more is better” rather than by “less is more”

no awareness for professional visual merchandising and window decoration

shop managers not capable to teach sales personnel in service orientation towards consumer clients

Clothing forecasts have been adjusted downwards

8,730,3 31,9

35,137,9 40,0

12,3 (+41%)17,8 (+45 %)

22,7 (+28%)

30,0 (+33%)

37,9* (+26%)

45,5 (+20%)52,3 (+15%)

57,6 (+10%)60,5 (+5%)

0

10

20

30

40

50

60

70

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

* Source: ITMM GmbH, Stuttgart

1/3

in bn US $ -

…but on a relative basis still look good…

20112007

Per capita consumption of clothing $USCountry

424460Germany

426267Russia

Cost of lease for retail space at Shopping Malls and Trade Centres down by 30-50 % against Spring 2008.

Cost of building materials, shop construction and furnishings depreciating by similar rates.

Salaries and wages put on freeze for 2009 or under negotiation at cuts of 25 %.

Availability of skilled human resources surging at lower salaries.

Lee Cooper can benefit in present crisis

Today we will cover….

Hard metrics versus soft dataSelecting channels for Lee Cooper for the middle

marketWhich geographies to target? Which players to target for Lee Cooper?Which retailers to target?Timeline

Projection on Market Shares of main Clothing Retail Categories in Russia, 2008

YES

YES

NO

NO

Which channels do the middle classes prefer?

Russia’s middle class consumers often frequent modern shopping centers and boutiques:more value focused consumers usually prefer hypermarkets

out-of-town and expanding fast fashion players like Gap, H&M and Inditex. A multitude of street stalls and markets also survive as they are often the cheapest in the clothing sector. 3,000 such markets are active in Russia today, but their number and share of total clothing sales is diminishing.

Source: Verdict Research

Today we will cover….

Hard metrics versus soft dataSelecting channels for Lee Cooper for the middle

marketWhich geographies to target?Which players to target for Lee Cooper?Which retailers to target?Timeline

Seven large Russian Federal Districts to be critically observed

Source:

SiberiaUral

Northwestern Region

CentralRegion

NorthernCaucasus

Volga

Far EastMoscow

SiberiaUral

Northwestern Region

CentralRegion

NorthernCaucasus

Volga

Far EastMoscow

Scoring Regions in regard to the Viability of Fashion Retail Market

Source: UBS

3.38

4.03.29

4.04.0

3.8

4.14

Footnote: 1= very good viability, 6 = very bad viability

3.25

SiberiaUral

Northwestern Region

CentralRegion

NorthernCaucasus

Volga

Far EastMoscow

Regional Retail Market Analysis

Central Region & the Uralsare two Federal Districtswith income per capitathan Russia’s average of$580.

Far East FederalDistrict has thelowest share ofretail sales (4%)in Russia.

The most dynamic developmentof retail sales in 2008 wasdemonstrated by the South, Urals& Volga Districts 34%, 33% and 32%y-o-y , respectively

YES

YES

NO

Today we will cover…

Hard metrics versus soft dataSelecting channels for Lee Cooper for the

middle marketWhich geographies to target? Which players to target for Lee Cooper? Which retailers to target?Timeline

Criteria of Players choice

VF CORPORATION www.vfc.com

VF Corporation makes branded apparel including Jeans wear, intimate apparel, sportswear, outdoor products and workwear.

PORTFOLIOLee, Wrangler, Riders, Rustler, Vanity Fair, Vassarette, Bestform, Lily of

France, Nautica, John Varvatos, JanSport, Eastpak, The North Face, Vans,

Napapijri, Kipling, Lee Sport and Red Kap.

YESWhy?Key supplier of related denim brands in Russia

FIBA HOLDING www.fibaholding.com

Founded in 1987 Fiba Group controls an investment portfolio of high-value brand names in both financial and non-financial lines of business.It has 63 companies in 15 countries with $20 billion total assert & $4 billion total equity.Group's international financial investments have increased by 35% in 2008.

PORTFOLIOFranchising rights of Marks & Spencer Russia in 2005 with 14 stores and 512 employees in Russia.Gap Russia it operates with 3 stores in 2 different locations.Banana Republic stores are expected to open for the 2009 holiday season in Russia.

YESWhy?Key supplier in our target department stores & our target independent stores

Jamil Co. Group

Holding company with international management and international business standards. JamilCo. has been active on the Russian retail market for luxury and casual clothing and accessories of major international brands since 1993.

PORTFOLIOJamilCo Group has represented the Levi’s® brand since 1988, opening the first Levi’s®store Moscow in 1993.Represent Coach brand in Russia.

YESWhy?Key supplier (long established) denim supplier in our target regions

PPE Group – Mail order

Founded in 1999, the PPE Group is today Russia’s leading mail order company, operating across the entire country.

The Otto Group owns 70 percent of the cooperative venture and the PPE Group 30 percent.

PORTFOLIO Mail order

OTTO is aimed at women between the ages of 24 and 45 and families.Bonprix is for the particularly price-conscious customer. Witt International is aimed at an older and established target group, who are looking primarily for quality in their purchases and prefer a classic dress style.

E-commerce & LogisticsThe second company, “Business Service”, is building the required warehouse and logistics center in the town of Tver, along with a call centre for order taking and customer service.

YESWhy?Market leader in mail order / internet in Russia

Today we will cover….

Hard metrics versus soft dataSelecting channels for LeeCooper for the middle

marketWhich geographies to target?Which players to target for Lee Cooper?Which retailers to target?Timeline

Choosing Retailers For Lee Cooper….

Which cities?

Expansion of Trade Centres and Shopping Malls as Key Driving Factors for Allocation of newClothing Retail Stores in the Russian Region over the Period 2002-2008

Source: Russian Federal Service of State Statistics of the Gross Regional Product (GRP, end of 2006),and population (1 January 2007).

>$10'000 >$5'000 >$3'000 >$2'000 >$638.82

Source: USB

Map of Russian subdivisions by GDP (GRP) per capita.

City Population Estimatedin 1.000 Number of Competitors(2006) Retail Stores

of Clothing locatedat commercial centres LEVIS

(2008) STORES

Moscow 10406 10000 26Volgograd 991 620 4

Ekaterinburg 1,308 1,400 3Ufa 1,030 760 3

St. Petersburg 4,581 4,560 2Omsk 1,139 480 2

Samara 1,143 760 2Kazan 1,113 640 1

Chelyabinsk 1,093 700 1Perm 993 600

Novosibirsk 1,387 760Rostov-on-Don 1,055 520Krasnojarsk 921 440

Nishnij-Novogorod 1,284 970Sub Total 15,763 11,620 44

Tumen 542 400Kirov 469 360

Saratov 850 320Kaliningrad 424 360Krasnodar 710 300

Pensa 510 300Magnitogorsk 413 240

Tula 509 200Togliatti 705 200

Subtotal 5,132 2,680

Total 20,895 14,300

…and which retailers?

Expansion of Trade Centres and Shopping Malls as Key Driving Factors for Allocation of newClothing Retail Stores in the Russian Region over the Period 2002-2008

Source:

CITY STOCKMANN TOPSHOP

Moscow 6 5St. Petersburg 1 3

Krasnodar 2Nishnij-Novogorod

EkaterinburgUfa

Total 7 0

Priority 2 1

Number of Denim Brands 10 9

Likely Size of Opportunity for Lee

Cooper HIGH HIGHFinancial Stability STABLE

Established in Russia since 1,989 2,006

SALES 250 M EURO

CITY 5KARMANOV JEAN SMPHONY

Moscow 16 1St. Petersburg 2 1Ekaterinburg 2 1Samara 1Ufa 2 1Nishnij-Novogorod 4Kazan 1

Chelyabinsk 1 1Volgograd

Perm 1 1

Novosibirsk1

Rostov-on-Don 2 1

Omsk 1

Krasnojarsk 1OTHER 10TOTAL 43 9

Priority 1 2Number of Denim Brands 10 25

Likely Size of Opportunity for Lee Cooper HIGH HIGH

Financial Stability NA NA

Established in Russia since NA NASALES NA N A

QUELLE RUSSIA

Number of Denim Brands 12Likely Size of Opportunity

for Lee Cooper HIGH

Financial Stability STABLE

Established in Russia since 2,005SALES (2007) 115BNCUSTOMERS 30M

GROWTH 40% IN 2008SKUs. offering 100,000

PAGES600-page catalogue

INTERNET/CATALOGUE INDEPENDENT MULTI/MONO BRANDS DEPARTMENT STORES

…and which retailers?

Expansion of Trade Centres and Shopping Malls as Key Driving Factors for Allocation of newClothing Retail Stores in the Russian Region over the Period 2002-2008

Source:

CITY STOCKMANN TOPSHOP

Moscow 6 5St. Petersburg 1 3

Krasnodar 2Nishnij-Novogorod

EkaterinburgUfa

Total 7 0

Priority 2 1

Number of Denim Brands 10 9

Likely Size of Opportunity for Lee

Cooper HIGH HIGHFinancial Stability STABLE

Established in Russia since 1,989 2,006

SALES 250 M EURO

CITY 5KARMANOV JEAN SMPHONY

Moscow 16 1St. Petersburg 2 1Ekaterinburg 2 1Samara 1Ufa 2 1Nishnij-Novogorod 4Kazan 1

Chelyabinsk 1 1Volgograd

Perm 1 1

Novosibirsk1

Rostov-on-Don 2 1

Omsk 1

Krasnojarsk 1OTHER 10TOTAL 43 9

Priority 1 2Number of Denim Brands 10 25

Likely Size of Opportunity for Lee Cooper HIGH HIGH

Financial Stability NA NA

Established in Russia since NA NASALES NA N A

QUELLE RUSSIA

Number of Denim Brands 12Likely Size of Opportunity

for Lee Cooper HIGH

Financial Stability STABLE

Established in Russia since 2,005SALES (2007) 115BNCUSTOMERS 30M

GROWTH 40% IN 2008SKUs. offering 100,000

PAGES600-page catalogue

INTERNET/CATALOGUE INDEPENDENT MULTI/MONO BRANDS DEPARTMENT STORES

YES YES YESMay beYES

In Independent Multi-brand 5KARMANOV, JS casual, Fashion Mart is good channel…..

Today we will cover….

Hard metrics versus soft dataSelecting channels for LeeCooper for the middle

marketWhich players to target for Lee Cooper?Which geographies to target? Which retailers to target?Timeline

Retail in Russia Timeline: past, present and future 2000-2012

Source: Verdict Research

Lee Cooper Timeline in Russia A/W 2010

Weekly & Seasonsales analysis

Weekly & Seasonsales analysis

Feedback Loop Feedback Loop

Review marketing & sales strategy AW2010Review marketing & sales strategy AW2010

Support w/ marketing programmes

Support w/ marketing programmes

Brand Knowledge & Training sessionsBrand Knowledge & Training sessions

LaunchLaunch

Present Product A/W 2010Present Product A/W 2010

Initial Meeting w/ PotentialLicenseesInitial Meeting w/ PotentialLicensees

Deal negotiations & sign offDeal negotiations & sign off

Dec ‘09Dec ‘09

Finalization of Licensee Finalization of Licensee

Business plan approval

Business plan approval

Initial meetings onBUSINESS PLAN

Initial meetings onBUSINESS PLAN

Aug ‘10Aug ‘10Feb ‘10Feb ‘10

Lee Cooper Timeline in Russia