Taking stock with teens piper jaffray spring2010

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  • 1. Taking Stock With Teens Results Presentation Spring S i 2010
  • 2. 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. 8 Piper Jaffray received non-investment banking securities-related compensation from the following companies during the past 12 months: (Gikas) SNDA; non investment securities related (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, 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 BGS, DLM, GA, GME, HAS, LF, LTM, MAT, TPX, DLB OWW, Regan] BKC, CMG, DRI, EAT, MRT; (Walkley) CTV, MOT, NOK 2
  • 3. Speaking Order Jeff Klinefelter •• Survey Detail •• Spending Highlights •• Apparel Brands & Teen Retailers Foot ear Retailers, Footwear Neely Tamminga •• Parent Survey Detail •• Beauty/Personal Care y Tony Gikas •• Video Games Mike Olson (Andrew Murphy & Nick Gallus) •• Digital Media, Music •• Internet/e-commerce Nicole Miller Regan •• Restaurants Mike Walkley • Wireless Technologies 3
  • 4. Consumer Sector Investment Risks Risks include, but are not limited to: •• Reliance on k top management l key •• 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 Source: Piper Jaffray & Co. 4
  • 5. 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 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 Source: Piper Jaffray & Co. 5
  • 6. Survey Detail NATIONAL SCHOOL SURVEY Spring 2010 Fall 2009 Spring 2009 Fall 2008 Spring 2008 Fall 2007 Spring 2007 Fall 2006 Spring 2006 Students Surveyed - Legacy 900 1,200 600 850 670 980 600 1,000 700 Gender 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 16.6 Percentage 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 16.5 Average 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 2006 Students Surveyed - DECA 5,100 10,000 7,500 6,800 4,500 3,300 1,200 3,000 1,200 Gender 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 16.9 Percentage Of Students Part-Time Employed 43% 39% 45% 51% 50% 51% 51% 52% 56% Average Total Hours Worked Per Week 19.6 19 6 19.5 19 5 19.8 19 8 21.1 21 1 21.0 21 0 21.8 21 8 21.8 21 8 22.1 22 1 19.8 19 8 Average 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 2006 Response 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 $100,000 66% 56% 57% 47% 51% 55% 60% 50% 69% Source: Piper Jaffray & Co. 6
  • 7. Spending Highlights Key Takeaways Our 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 cycle pp 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) Source: Piper Jaffray & Co. 7
  • 8. 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 Chg Apparel $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 - Fem ale $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 Source: Piper Jaffray & Co. 8
  • 9. Channel Preference –– National School Survey SHOPPING CHANNEL PREFERENCE 40% Spring-10 Fall-09 Spring-09 Fall-08 35% 30% 25% 20% 15% 10% 5% 0% partment Discount Specialty Majo Chain Outlet Internet Ma order ail or D Dep S Source: Piper Jaffray & Co. 9
  • 10. Spending By Category –– National School Survey SPENDING BY PRODUCT CATEGORY Spring-10 Fall-09 Spring-09 25% Fashion Categories = 39% 20% 15% 10% 5% 0% Source: Piper Jaffray & Co. 10
  • 11. Apparel Brands & Teen Retailers Brand Preferences –– National School Survey •• Action Sports Brands at #1, 13% mindshare (v. 12% Spring ’’09, 14% Fall 09) 09, 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’’09 g 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 Nike, Eagle, •• 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 Source: Piper Jaffray & Co. 11
  • 12. 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 % Total 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 % Total 1 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% 5 Aeropostale 5% Urban Outfitters 6% Nordstrom 5% TOP CLOTHING BRAND PREFERENCES - NATIONAL SCHOOL SURVEY - MALE Rank Spring 2010 % Total Fall 2009 % Total Spring 2009 % Total 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 Co. 12
  • 13. 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 Source: Piper Jaffray & Co. 13
  • 14. 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 % Total 1 American Eagle 11% Action Sports Brands 10% American Eagle 10% 2 Nike Nik 8% American Eagle A i E l 10% Action S t B d A ti 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 % Total 1 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% TOP CLOTHING BRAND PREFERENCES - NATIONAL ONLINE SURVEY - MALE Rank Spring 2010 % Total Fall 2009 % Total Spring 2009 % Total 1 Nike 16% Nike 15% Nike 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% Source: Piper Jaffray & Co. Source: Piper Jaffray & Co. 14
  • 15. 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, U , UGG Australia, V , Converse, and Steve Madden , Vans, , •• Foot Locker and ALDO cited as favorite retailers; Journeys falls out of top ten Online Survey •• Nike tops total vote with 43% share vs 423% Fall’’09 and 40% Spring’’09; No. 1 male & female vs. No •• 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 Source: Piper Jaffray & Co. 15
  • 16. Footwear Brands & Retailers –– National School Survey TOP FOOTWEAR BRAND PREFERENCES - NATIONAL SCHOOL SURVEY - ALL STUDENTS Spring 2010 Fall 2009 Spring 2009 Fall 2008 Rank Brand % Total Rank Brand % Total Rank Brand % Total Rank Brand % Total 1 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 Australia A t li 5% 3 St Steve Madden M dd 5% 3 VVans 7% 3 St Steve M dd 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% 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
  • 17. Footwear Brands & Retailers –– National Online Survey TOP FOOTWEAR BRAND PREFERENCES - NATIONAL ONLINE SURVEY - ALL STUDENTS Spring 2010 Fall 2009 Spring 2009 Fall 2008 Rank Brand % Total Rank Brand % Total Rank Brand % Total Rank Brand % Total 1 Nike 43% 1 Nike 43% 1 Nike 40% 1 Nike 42% 2 Vans V 5% 2 Converse C 6% 2 Vans V 5% 2 Vans V 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% Source: Piper Jaffray & Co. 17
  • 18. 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‘‘09 Parents 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. Source: Piper Jaffray & Co. 18
  • 19. Parent Survey PARENT SPENDING ON APPAREL FOR SELF $1,800 $1,571 $1,526 $1,592 $1,600 $1,484 $1,455 $1,398 $1,400 $1,306 $1,249 $1,224 $1,203 $1,157 $ , $1,194 $1,200 $1 200 $1,115 $974 $968 $952 $1,000 $896 $826 $800 $600 $400 $ $200 $0 Fall Spring Fall Spring Fall Spring Fall Spring Fall Spring Fall Spring Fall Spring Fall Spring Fall Spring 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Source: Piper Jaf f ray & Co. p y 19
  • 20. Parent Survey PARENT SPENDING ON TEEN APPAREL $1,600 $1,487 $1,413 $ $1,391 $1,400 $1,379 $1,230 $1,201 $1,200 $1,141 $1,142 $1,089 $1,085 $1,075 $1,048 $1,015 $1 015 $995 $1,000 $935 $915 $883 $800 $643 $600 $400 $200 $0 Fall Spring Fall Spring Fall Spring Fall Spring Fall Spring Fall Spring Fall Spring Fall Spring Fall Spring 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Source: Piper Jaff ray & Co. 20
  • 21. 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 pts Victoria’’s (in line •• 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. •• 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 over drug stores for No. 2 position as channel for skin care o er dr g No Source: Piper Jaffray & Co. 21
  • 22. Beauty & Personal Care Favorite Cosmetics Brand For Teen Girls –– National School Survey Spring 2010 Fall 2009 Rank Favorite Cosm etics Brand % Total Rank Favorite Cosm etics 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 Sep o a Sephora 4% % 6 Sep o a Sephora 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% Spring 2009 Fall 2008 Rank R k Favorite Cosm etics Brand F it C ti B d %T t l R k F Total Rank Favorite Cosm etics Brand it C ti B d %T t l Total 1 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% Source: Piper Jaffray & Co. 22
  • 23. Beauty & Personal Care Favorite Cosmetics Brand For Teen Girls ––Online Survey Spring 2010 Fall 2009 Rank Favorite Cosm etics Brand % Total Rank Favorite Cosm etics Brand % Total 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 L'Oreal 4% 8 L'Oreal 3% 8 Sephora 3% 9 Sephora 3% 9 Revlon 3% 10 Revlon 2% 10 Avon 3% Spring 2009 Fall 2008 Rank Favorite Cosm etics Brand % Total Rank Favorite Cosm etics Brand % Total 1 Cover Girl 23% 1 Cover Girl 23% 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% Source: Piper Jaffray & Co. 23
  • 24. Beauty & Personal Care Favorite Cosmetics Brand For Parents Spring 2010 Fall 2009 Rank Favorite Cosm etics Brand % Total Rank Favorite Cosm etics 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% 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% Spring 2009 Fall 2008 Rank Favorite Cosm etics Brand % Total Rank Favorite Cosm etics Brand % Total 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% Source: Piper Jaffray & Co. 24
  • 25. 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 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 experiences p 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 games 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 Source: Piper Jaffray & Co. 25
  • 26. 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%) Source: Piper Jaffray & Co. 26
  • 27. 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. Source: Piper Jaffray & Co. 27
  • 28. Restaurants Key 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 •• Taste T t continues t rank hi h t and nutrition ranks lowest ti to k highest d t iti k l t •• 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) 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 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 28
  • 29. 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. •• Increased Emphasis On Pricing •• Survey respondents now rate ‘‘price’’ as the #2 most important factor in their p purchase decision versus #3 in 2009. • 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). Source: Piper Jaffray & Co. 29
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