RetailRetailMadisonRecentRetailer / Parent CompanyTickerBrandsCategoryRisk RatingIndustry Commentary

Abercrombie

ANF

AbercrombieHollisterRuehl

ApparelMedium

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%. Directsales 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

ApparelLow

Reported above consensus 1Q09 EPS of $.049 and 2Q and 3Q expectations raised. Strong inventory managementwith Q1 inventory turns of +21.8%, driving comps to +11%. ARO closed the Jimmy'Z concept given annualizedoperating 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 ameaningful growth driver.

Aldo ShoesALDO

Aldo Shoes

ApparelMedium

Private Company.

AMC EntertainmentAMC

AMCLowes Cineplex

CinemaMedium

Private company with public debt and 2nd largest competitor in sector. AMC announced a loss of $81.2 million infiscal year 2009 compared to $43.4 million profit the prior year. In May 2009 AMC received $600 million for a privateoffering 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

ApparelMedium

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/transportsavings, possible EPS benefit from Martin + Osa improvement or closure, & AEO's robust balance sheet ($374mm netcash) & attractive FCF yield (~10%).

AnnTaylor

ANN

Ann TaylorAnn Taylor Loft

ApparelMedium

ANN’s 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 grossmargin, ongoing cost savings/restructuring program, reduced capex, and improved productexecution. 1Q09 comps = -30.7% (ATS -42.7% and Loft -24.2%), GM +230 bps (tight inventory control), & SG&Adollars -11.3%

Apple

AAPL

Apple

ElectronicsLow

iPhone is emerging as the clear leader in the battle over the mobile internet. C309 - expect price cut to currentgeneration iPhone to drive 50-100% incremental unit demand, and 15%+ of current iPhone users upgrade to a newversion. 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

BKS

Barnes & NobleB. Dalton

BooksMedium

Bookstore consolidation continues to be inevitable over the next 5-10 years as online and non-traditional competitionincreases, and digital reading is more accepted. BKS not expected to be primary source of store attrition given theirbest-in-class operating model. 1Q SG&A $ down 3% w/ home-office headcount reductions, renegotiated servicecontracts, and reduced operating expenses. 80-100 leases due annually the next 3 years, BKS may negotiate lowerrents for years to come.

bebe

BEBE

Bebe

ApparelLow

3Q FY09 (year ends 7/2/09) Net Sales -15.6%, Traffic -17%, Comps -23.5%, Conversion -8%. Inventory declined bydouble-digit percentage (-16%) for the 2nd consecutive quarter. Low inventory combined with a stronger merchandiseplan getting ready to launch, Bebe is in a position to chase up-trending categories and mitigate margin pressure.

Bed Bath & Beyond

BBBY

Bed Bath & Beyond

Christmas Tree Shops

buybuy BABYHarmon Face Values

FurnishingsLow

4Q09 (FY end Feb) comps were down 4.3%, at the better end of expectations. EPS of $0.55 were well ahead ofestimates of $0.44. Linens' liquidation occurred during BBBY's 4Q, so even more positive results may come infollowing quarters. Company plans to add 50 to 54 new stores across concepts this year, lower than the original 65estimated.

NATIONAL RETAILER RISK TRACKINGMADISON MARQUETTEAS OF JUNE 2009

RetailRetailMadisonRecentRetailer / Parent CompanyTickerBrandsCategoryRisk RatingIndustry Commentary

NATIONAL RETAILER RISK TRACKINGMADISON MARQUETTEAS OF JUNE 2009

Belk

BLKIB

Belk

DepartmentStoreMedium

For fiscal first quarter ending 5/2/09, Belk announced net sales of $760.9 compared to $817.3 last year, and compsales were down 7.7%. Net income was $0.5 million compared to $5.1 million last year. Belk opened three new storesin the first quarter and expanded another, with two more expansions planned in 2009.

Bennigan's

MRG

Bennigan'sSteak & Ale

RestaurantHigh

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

BBY

Best BuyMagnolia Audio Video

ElectronicsLow

Best Buy has gained customers following the liquidation of Circuit City. U.S. market share grew by two percentagepoints 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 onlineofferings, and selling more outdoor furniture and equipment to make up for declines in sales or traditional products.

Blockbuster Video

BBI

Blockbuster Video

VideoMedium

BBY ended 1Q09 with 64 less stores and 74 less franchise stores than 4Q08. Posted a 12.3% decline in same-storesales for domestic rentals after four consecutive quarters of increases. Only segment to enjoy y/y revenue gain wasdomestic video game sales, up 10%. BBY rolling out 3,000 kiosks in 2009 to compete with Redbox, but BBY faces stiffcompetition here and still has a negligible portion of dvd-by-mail.

Borders Group

BGP

BordersBorders ExpressBorders OutletWaldenbooks

BooksMedium

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

Brookstone

BKST

Brookstone

FurnishingsMedium

BKST sales down 31.6% YTD as of April 4th 2009, while comp store sales were down 25.1%. Cutting costs byreducing corporate headcount 15%, freezing capital spending, and dropping inventory levels 25%. During 1Qremodeled two and closed four stores and plan to open and remodel a limited number during 2009. Reviewing eachstore to determine underperforming locations to renegotiate leases or close stores.

Buckle

BKE

Buckle

ApparelLow

BKE continues to post some of the best top-line growth in retail, with 22 consecutive months of double-digit compswhile most retail is struggling. BKE's mix is shifting to women's (60% of sales today) from more important men'shistorically (50% of sales last year). 2nd half comps are estimated to be 10%-12%.

Burlington Coat FactoryBURL

Burlington Coats

ApparelLow

4Q (end May 30, 2009) Net Sales were $811.5 million compared with $780.9 million last year, a 3.9% increase. Compstore sales were down 3.1%. During 12 month period ending 5/30/09, Burlington opened 36 net new stores, givingthem 433 stores in 44 states and Puerto Rico.

Cache

CACH

CacheCache Luxe

ApparelMedium

1Q09 net sales of $53 million with comp store sales down 20.7%. Continue to lower inventory levels and cut operatingexpenses and now expect to save $18 million in OE this year. Cache's losses for year 2009 are projected to decreaseroughly 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

CPKI

California PizzaKitchen

RestaurantLow

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

CinemaLow

Considered a leader in digital/3-D segment with 500 screens added in recent years, providing CKEC an advantagewith more wide-release 3-D movies scheduled for release in 2009 and beyond. Plus people have to see 3-D movies inthe 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.

RetailRetailMadisonRecentRetailer / Parent CompanyTickerBrandsCategoryRisk RatingIndustry Commentary

NATIONAL RETAILER RISK TRACKINGMADISON MARQUETTEAS OF JUNE 2009

Chico's

CHS

Chico'sWH-BMSoma

ApparelHigh

1Q09 EPS of $0.11 vs. estimate of $0.09. Comp sales declined -3.2% in 1Q, with Chico's down ~-6% (vs. -18.6% in2008) and WH-BM ~+4%. New management at Chico's in 1Q able to make changes to help improve comp sales. CHShas now targeted another 45 stores to close over the next 3 years, or 30-35 stores per year.

Christopher & Banks

CBK

Christopher & BanksCJ Banks

ApparelMedium

4Q09 (FY end Feb) loss amounted to $0.82 per share and comps declined 20%, making the fourth year of negativesame store sales. Management used frequent and aggressive promotions to drive customer traffic and reduceinventory levels, and transactions declined only 5% so this may have had some success. SG&A dollars were flat y-o-yand operating margin was down -27%. CBK continues to seek out other opportunities for savings, including activelypursuing more favorable lease terms upon expiration, a renewed focus on smaller markets where there is lesscompetition and customers are relatively more loyal, and continued expansion of product offering/sizes on the e-commerce site.

Cinemark

CNK

CinemarkCentury Theaters

CinemaLow

3rd largest competitor in sector with a strong presence in Latin American. 1Q09 EPS of $0.17, which is aboveestimates and up from $0.08 a year ago. CNK helping prove that cinema might be recession proof. Revenue was alsoup 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

ElectronicsHigh

Chapter 11. All stores closed. Potential move to resurrect on-line business.

Coach

COH

Coach

ApparelLow

Factory stores have sales per sq ft over $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) toincrease conversion and handbag penetration and offset the planned 10-15% average ticket decline as a result of thestrategy. Biggest growth opportunity is China, where COH plans to open 50 more stores over the next 5 years.

Coldwater Creek

CWTR

Coldwater Creek

ApparelMedium

1Q09 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

FurnishingsHigh

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. Withcash balances of just $3.7 million at the end of 2008 and continued negative free cash flow, debt servicing remains achallenge. Consensus estimates peg losses for fiscal year 2009 at $1.98 per share.

Crate & BarrelCRATE

Crate & BarrelCB2Land of Nod

FurnishingsMedium

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

CVS

DrugLow

CVS retail pharmacy has been performing very well in the economic downturn. CVS continues to out-executeWalgreens in comps and earnings growth. Same stores sales growth up 3.5-5.5% as of 5/15/09 with 4-6% projectedfor the quarter.

Dick's Sporting Goods

DKS

Dick's Sporting Goods

SportsLow

DKS is best positioned in the industry and the clear long-term winner in sporting goods. DKS is opening up topossibility of second-use sites now with the dislocation from competitors and closing by other large-format retailers.This could help induce further sq ft growth. West Coast especially opening up for DKS where regional and localcompetitors are going out of business, and in smaller markets, are often only one or two locations that can support abig-box store.

Dillard's

DDS

Dillard's

DepartmentStoreHigh

EPS in Q109 above estimates driven by solid GMs (+28bp), as inventories fell sharply and SG&A margins improvedon 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 closemore than that, though not to the extent they closed doors in FY08.