This document provides the results of Piper Jaffray's semi-annual "Taking Stock With Teens" survey. Key findings from the survey include:
- Teen spending on fashion is expected to increase rather than decrease, with fashion accounting for 39% of budgets. Apparel spending is trending ahead of footwear.
- Teens are spending less on electronics, music, and movies due to technology convergence. Budgets remain tight despite increasing parental contributions offsetting lower employment.
- Specialty retail remains the most preferred shopping channel but is losing share to discounters and online retailers. Fast fashion brands are most popular among females while West Coast brands are favored by males.
- Action sports brands have
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.
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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.
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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.
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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
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•• 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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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21. Beauty & Personal Care
Gen Y (Teen Girls) Snapshot:
•• Beauty spending a mixed bag: affluent teens down 9% while more middle-income teens
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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.
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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.
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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%
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•• 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
30. Analyst Certification—Jeff Klinefelter, Neely Tamminga, Mike Walkley, Mike Olson, Gene Munster, Nicole Miller Regan, Tony Gikas
The views expressed in this report accurately reflect my personal views about the subject company and the subject security. In addition, no part of my
compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report.
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