Published and distributed by Cowen and Company, LLC

EQUITY RESEARCH
March 22, 2023

■ Retailing/Broadlines & Department Stores:

TD COWEN'S NEW RETAIL VISION - NEXT LEVEL PRIMER
Broadlines
■ Retailing/Broadlines & Department Stores:
Department Stores
■ Retailing/Specialty Stores: Specialty Retail
■ Retailing/Specialty Stores: Luxury Brands
■ eCommerce Platforms

Oliver Chen, CFA THE TD COWEN INSIGHT

646 562 1424
oliver.chen@cowen.com
CEO Guide to Understanding the Retail Ecosystem Movement. Winning in retail requires combining "magic" and "logic"
to drive innovation and build new communities, products, and services. Our 45-slide presentation covers our retail
Tom Nass strategies, best practices, tensions, and implications. This primer contains a comprehensive breakdown of channel
646 562 1316 margins and case studies on customer lifetime value.
thomas.nass@cowen.com

Katy Hallberg
646 562 1321
katy.hallberg@cowen.com

Jonna Kim, CFA

646 562 1419
jonna.kim@cowen.com

Max Rakhlenko, CFA

646 562 1423
max.rakhlenko@cowen.com

Bradley Jamison
646 562 1375
bradley.jamison@cowen.com

Please see pages 47 to 57 of this report for important disclosures. TDCOWEN.COM

TD COWEN NEW RETAIL VISION PRIMER
OLIVER CHEN’S SECTOR APPROACH

March 2023

Oliver Chen, CFA

646.562.1424
oliver.chen@cowen.com

Max Rakhlenko, CFA

646.562.1423
max.rakhlenko@cowen.com

Jonna Kim, CFA

646.562.1494
jonna.kim@cowen.com

Katy Hallberg
646.562.1321
Katy.hallberg@cowen.com

Tom Nass
646.562.1316
Thomas.nass@cowen.com

Bradley Jamison
646.562.1375
Bradley.jamison@cowen.com

2 | March 22, 2023

Oliver Chen: Senior Equity Research Wall Street Stock Analyst
Retail, New Platforms, Luxury Sector Stock Coverage
Oliver Chen is a Managing Director and senior equity research analyst covering retail and luxury goods. Mr.
Chen’s deep understanding of the consumer and his ability to forecast the latest trends and technological
changes that will impact the retail space has set him apart from peers. Oliver’s broad coverage and circumspect
view makes him the thought partner of retail and brand leaders. His coverage of the retail sector has led to
numerous industry awards and press coverage from CNBC, Bloomberg, The New York Times, Financial Times,
Barron’s, The Wall Street Journal and others. Mr. Chen was recognized on the 2018 and 2017 Institutional
Investor All-America Research team as a top analyst in the retailing/department stores & specialty softlines
sector. Mr. Chen was also selected as a preeminent retail influencer as he was named to the National Retail
Federation (NRF) Foundation’s “2019 List of People Shaping Retail’s Future.” Considered an “industry expert,”
Mr. Chen frequently appears as a speaker/panelist at key industry events.
Mr. Chen is also an Adjunct Professor in Retail and Marketing at Columbia Business School, teaching a course recognized for leading
innovation: “New Frontiers in Retailing.”

Prior to joining Cowen in 2014, he spent seven years at Citigroup covering a broad spectrum of the U.S. consumer retail landscape, including
specialty stores, apparel, footwear & textiles, luxury retail, department stores and broadlines. Before Citigroup, he worked in the investment
research division at UBS, in the global mergers and acquisitions/strategic planning group at PepsiCo International, and in JPMorgan’s consumer
products/retail mergers and acquisitions group.

Mr. Chen holds a bachelor of science degree in business administration from Georgetown University, a master’s of business administration
from the Wharton School at the University of Pennsylvania and is a CFA charterholder. At the Wharton School, Mr. Chen was a recipient of the
Jay H. Baker Retail Award for impact in retailing and was a co-founding president of the Wharton Retail Club. He also serves as a member of
the PhD Retail Research Review Committee for the Jay H. Baker Retailing Center at the Wharton School. Mr. Chen was recognized in the
Wharton School’s “40 Under 40” brightest stars alumni list in 2017.

Mr. Chen’s passion for the sector began at the age of 12 when he began working with his parents at their retail business in Natchitoches,
Louisiana.
Source: TD Cowen
3 | March 22, 2023
Stock Coverage Footprint Yields a Broader Retail Vision
Wall Street’s Leading Breadth and Depth

New Platforms Luxury Goods Broadlines Specialty Retail

Recent IPOs

Source: TD Cowen; Note: FTCH and PTON are co-covered with John Blackledge; RH, WSM, BOOT, TSCO, LOW, HD, PLNT, OSW covered by Max Rakhlenko; OPLX, VSCO, BBWI, AEO, CURV, LVLU covered by Jonna Kim
4 | March 22, 2023
Innovative Retail Captures “Magic” & “Logic”
New Societal Forces Drive Rapid and Permanent Change

Magic Logic
Innovative and Rich Enablement:
Customer Experience Achieving Magic

“Magic” “Logic” Examples

Societal Forces Enablement
Individuality & Creativity Personalization, Data, Machine Farfetch, Revolve, Livestreaming,
Learning, Interaction Measurement Social Media

Sustainability Circular retail, Closed Loop Rent-the-Runway, RealReal,

Re-commerce, CaaS Clothes-as-a-Service (Caastle)

Decentralization Peer-to-peer, Fintech, Web3, NFT Poshmark, Livestreaming,

Afterpay

Reducing Friction Connected Customer Journey, Retail Amazon, Macy’s, Walmart,

as an Ecosystem Warby Parker, Retail-as-a-
Service (b8ta, leap), Farfetch
Purpose Ingrained culture from the start, Warby Parker, Brilliant Earth,
Founder story Bombas, Gucci

Source: TD Cowen
5 | March 22, 2023
11

Good-to-Great Retail: Connections, Context, Community Key

Powered by Supply Chain & Software “Logic”
CONNECTED RETAIL
 Seamless Customer
Experience
 Connected Supply Chain
 ↑ Frequency

COMMUNITY RETAIL CONTEXT RETAIL

 Customer Based Engagement  Personalized Interaction

 Authenticity and Innovation  Data Measurement

 ↓ Acquisition Costs  ↑ Loyalty and Retention

CONNECTIONS, CONTEXT & COMMUNITY

DRIVE CUSTOMER LIFETIME VALUE
110-PAGE REPORT

Source: TD Cowen
6 | March 22, 2023
11

TDC 3C Imperative: Connected, Contextual, Community Retail

TDC 3C’s Link to “Customer Lifetime Value”

CONNECTED RETAIL
Impact: Convenience
Value: ↑ Frequency &
Engagement

COMMUNITY RETAIL CONTEXT RETAIL

Impact: Crowd-Sourced Impact: Engagement

Demand Value: ↓ Churn
Value: ↓ Customer ↑ Customer Loyalty &
Acquisition Costs Retention

Source: TD Cowen
7 | March 22, 2023
Customer Lifetime Value Imperative: TDC Calculation
Loyalty (Connected), Retention (Context), Acquisition (Community)

TD Cowen’s Definition of Customer Lifetime Value

Gross profit attributable to each new customer less the cost
of acquiring each new customer.
• Paid vs Organic
• Physical + Digital Efficiency
Formula • Community Engagement

Gross Profit Gross Profit Per New

(ex. occupancy) Customer x (1/churn)
x
% New Members Net Promoter Scores
Acquisition Cost Per New • Convenience
# New Members
Customer
= • Connected
Gross Profit Per New = • Curation
Customer • Context
• Culture
Customer Lifetime
Marketing Expense
Value
# New Members
= • Churn
Acquisition Cost Per New • Margin Mix
Customer • Cohort Behavior
• Context

Source: TD Cowen
8 | March 22, 2023
Customer Lifetime Value: Underpinnings
Logic of Customer Interaction Data Is Crucial to Strategy

WRBY customers typically spend their original purchase

amount again within 2 years through purchasing contacts, eye
exams, or sunglasses

Source: TD Cowen; Company Filings

9 | March 22, 2023
Rethinking Lifetime Value & Customer Acquisition Costs
Case Studies

• Higher contribution margins through LTV growth &

efficiency in CAC

• LTV growth via: Access loyalty program, app

conversion, media solutions, categories
expansion, and personalization

• Efficiency in CAC: Building the brand, driving

NGG organic traffic, scaling order costs, and
personalization

• Strong revenue retention from differentiated product

content and marketing events

• 50% of 2022 active customer base was existing

customers who bought from RVLV in any prior year
and generated ~79% of total revenues

Source: TD Cowen; Top right chart (FTCH 2022 Investor Day Deck); Top bottom chat (4Q22 RVLV Investor Deck)
10 | March 22, 2023
Inventory Management: The Need for Superior “Logic”
Match Supply & Demand and Win Retail
Top 3 Inventories of
Each Sector

[ Sales Growth Y/Y ꟷ Inventory Growth Y/Y ]

All you need to know:
“Right Stuff, Right Place,
Specialty
Retail, Global U.S. Luxury
Department Softlines, Luxury & & Overall Overall Top
Right Time” Broadlines Stores Hardlines and Fitness Accessories Accessories Median 3 Median

7.2%

-1.9%

Balance and Optimize:

-6.3%
-8.3%
-11.9%

Newness/Halo vs. Core Inventory -17.6%

-19.9%

Good / Better / Best

Frequency and Category
-35.5%

Management Inventory Turnover = [COGS / LTM Average Inventory ]

Specialty Retail,
Softlines, and U.S. Luxury & Global Luxury &
Broadlines Hardlines Department Stores Fitness Accessories Accessories

Logic 8.2X
Tactics Reality
Test-Read-React Fewer layers
Maximizing Open Fabric platforming 4.0X 3.7X
to Buy Integrate Design +
3.7X
3.0X

Operations
1.2X

Source: TD Cowen, Thomson Reuters

11 | March 22, 2023
Inventory Management: Measurement
Wall Street Insights of Inventory vs. Sales Print

𝑺𝒂𝒍𝒆𝒔 𝑮𝒓𝒐𝒘𝒕𝒉 % − 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑮𝒓𝒐𝒘𝒕𝒉 % = 𝑺𝒑𝒓𝒆𝒂𝒅

Example: Notes:

Inventory growth should be in line with sales

𝟔. 𝟕% − 𝟎. 𝟏% = 𝟔. 𝟔% growth to avoid excess inventory and
markdowns

𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑮𝒓𝒐𝒘𝒕𝒉 %
𝑪𝒐𝒎𝒑𝒂𝒓𝒂𝒃𝒍𝒆 𝑺𝒂𝒍𝒆𝒔 − = 𝑺𝒑𝒓𝒆𝒂𝒅
𝑻𝒐𝒕𝒂𝒍 𝑺𝒒. 𝑭𝒕 𝑮𝒓𝒐𝒘𝒕𝒉 %
Example: Notes:

𝟐𝟔.𝟎% We use this formula to account for store

𝟏𝟒. 𝟒% − = 𝟒. 𝟒% growth as inventory may be elevated ahead
𝟐.𝟔%
of store openings

Source: TD Cowen, Company Filings; Examples based on latest FY report

12 | March 22, 2023
 TD Cowen Retail Macroeconomic Dashboard
Wall Street Debates

Rising Interest Rates Defensive Stocks

Consumer Health Growth Stocks
Inflation vs. Disinflation Growth at a Reasonable Price Stocks

Oliver Chen, CFA Max Rakhlenko, CFA Jonna Kim, CFA

Senior Analyst & Managing Director Director Vice President
Retail, New Platforms, & Luxury Fitness & Hardlines Beauty & Specialty Retail
Columbia Retail Professor T: 646.562.1423 T: 646.562.1419
T: 646.562.1424 max.rakhlenko@cowen.com Jonna.kim@cowen.com
TD Cowen Retail Macro Dashboard oliver.chen@cowen.com

Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Current Status
Unemployment Rate 4.2% 3.9% 4.0% 3.8% 3.6% 3.6% 3.6% 3.6% 3.5% 3.7% 3.5% 3.7% 3.6% 3.5% 3.4% 3.6% Rising
Labor Force Participation 61.9% 62.0% 62.2% 62.2% 62.4% 62.2% 62.3% 62.2% 62.1% 62.3% 62.3% 62.2% 62.2% 62.3% 62.4% 62.5% Rising
Personal Savings Rate 7.1% 7.5% 4.7% 4.5% 3.8% 3.6% 3.4% 2.7% 3.5% 3.2% 3.0% 3.4% 4.0% 4.5% 4.7% Rising
Personal Savings $ (bn) 1308.9 1372.3 845.6 813.3 695.8 651.1 616.0 506.3 644.7 606.4 574.4 645.8 761.0 858.2 918.8 Rising

Real Wage Growth Y/Y -2.9% -3.7% -3.6% -2.9% -1.3% Rising
Nominal Wage Growth Y/Y 4.0% 4.5% 5.1% 5.0% 5.1% Rising
Headline CPI 6.9% 7.2% 7.6% 8.0% 8.5% 8.2% 8.5% 8.9% 8.4% 8.2% 8.2% 7.8% 7.1% 6.4% 6.3% 6.0% Falling
Core CPI 5.0% 5.5% 6.1% 6.4% 6.5% 6.1% 6.0% 5.9% 5.9% 6.3% 6.6% 6.3% 6.0% 5.7% 5.5% 5.5% Falling
Store Traffic 43.9% 56.4% 53.2% 54.4% 20.8% 57.3% 52.1% 30.3% 10.3% 8.3% 10.4% 6.1% 5.2% 14.4% 44.9% 19.6% Falling
Avg. Conv. Retail Gas Price 3.35 3.24 3.26 3.47 4.15 4.04 4.35 4.84 4.50 3.91 3.65 3.72 3.61 3.17 3.34 Rising
Avg. Conv. Retail Gas Price M/M 2.5% -3.1% 0.5% 6.4% 19.6% -2.7% 7.7% 11.3% -7.1% -13.1% -6.7% 2.0% -2.9% -12.3% 5.2% Rising
Avg. Conv. Retail Gas Price Y/Y 60.5% 49.2% 41.1% 40.0% 48.6% 42.2% 47.1% 59.4% 44.2% 24.5% 15.5% 13.9% 7.9% -2.3% 2.3% Rising
Retail Sales Y/Y (ex. gas & auto) 18.1% 15.8% 11.7% 15.5% 6.7% 8.0% 9.4% 7.7% 7.5% 9.2% 8.9% 7.3% 6.3% 6.3% Flat
E-Comm Mix of Retail Sales 14.5% 14.3% 14.5% 14.8% 14.7% Falling
PCE, Goods Y/Y 16.5% 15.2% 12.9% 15.0% 5.5% 6.3% 7.8% 8.9% 9.3% 8.6% 7.8% 6.6% 4.7% 4.5% 3.9% Falling
Consumer Confidence 109.5 115.8 113.8 110.5 107.2 107.3 106.4 98.7 95.7 103.2 108.0 102.5 100.2 108.3 107.1 102.9 Falling
Rev. Consumer Credit Y/Y 6.2% 6.9% 8.0% 8.9% 11.6% 13.1% 13.2% 13.8% 14.3% 15.2% 15.0% 15.2% 15.0% 14.8% Falling
10-Yr Yield 1.56 1.46 1.76 1.93 2.12 2.74 2.90 3.13 2.89 2.90 3.52 3.97 3.88 3.62 3.62 Falling
Average S&P500 P/E 20.1x 19.7x 19.1x 18.3x 17.7x 16.3x 15.7x 15.8x 16.8x 15.3x 14.9x 15.8x 16.2x 16.8x 17.5x Rising
Average XRT Price 100.5 90.2 83.6 78.9 75.0 66.5 63.0 61.6 67.9 61.6 59.6 64.1 62.5 65.2 70.1 Rising

Company Ticker Rank Prior Market Cap Price FY2 PE Company Ticker Rank Prior Market Cap Price FY2 PE

Costco Wholesale Corp COST 1  1 $ 215,188 $ 485 31 x elf Beauty Inc ELF 25  24 $ 3,928 $ 74 47 x

Source:
Top 3 HomeTD Cowen;
Depot Inc
Thomson Reuters,
HD
FRED,
2  BLS,
2
EIA, Prodco
$ 296,277 $ 291 17 x Tractor Supply Company TSCO 0  0 $ 25,155 $ 229 20 x

LVMH Moet Hennessy Louis Vuitton SE MC FP 3  3 $ 414,814 $ 816 23 x Compagnie Financiere Richemont SA CFR.SW 27  26 $ 77,439 $ 148 21 x

Walmart Inc WMT 4  4 $ 375,529 $ 139 21 x Sally Beauty Holdings Inc SBH 28  29 $ 1,705 $ 16 7x 13 | March 22, 2023
Beauty Health Co SKIN 5  7 $ 1,565 $ 12 24 x Victoria's Secret & Co VSCO 29  30 $ 2,806 $ 35 6x

Onespaworld Holdings Ltd OSW 6  0 $ 898 $ 11 19 x American Eagle Outfitters Inc AEO 30  31 $ 2,564 $ 14 11 x
Our 2023 Themes: Return of the Brands & The Value Imperative
TikTokification, Customer Data Platforms, Permanent Inflation

Datafication

Data Is the Oil That Should Fuel Retail – Loyalty Programs

• Earn customer trust and build data infrastructure

• Analysis to inform pricing, creative direction, and drive faster marketing

Decentralization

The New New Thing – Products and Platforms

• Post purchase experience, phygital world, and biosynthetic products

• Accelerate peer-to-peer connectivity at the expense of mega platforms & take rates

TikTokification

Killer Brands Matter

• Expect volatility in performance marketing efficiency & Trends toward privacy

• Focus on experiential retail, transformational brands, and embrace community

Source: TD Cowen
14 | March 22, 2023
 TD Cowen New Retail Vision Primer
Oliver Chen’s Sector Approach Agenda

Revenue Build

Margin Build

Channel Structures

Our Frameworks for the Future

Source: TD Cowen
15 | March 22, 2023
Retail Revenue: Financial Modeling
Methodology

Print Sales

Comparable Non-Comparable Gross Merchandise

Sales Sales Value

Average Print Wholesale

# of New Store New Store F/X
Transaction Licensing/
Transactions Growth Productivity Impact
Value Franchise

Conversion Average Units per

Traffic Active # of
Rate Unit Retail Transaction Customers Orders

Average
Purchase
Order
Frequency
Value

Source: TD Cowen
16 | March 22, 2023
 Retail Revenue: Revenue Drivers and Modeling
Existing and New Store Formula Print

L𝑌 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 × (1 + 𝑪𝒐𝒎𝒑𝒂𝒓𝒂𝒃𝒍𝒆 𝑺𝒂𝒍𝒆𝒔 + 𝑆𝑞 𝐹𝑡 𝐺𝑟𝑜𝑤𝑡ℎ × 𝑵𝒆𝒘 𝑺𝒕𝒐𝒓𝒆 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒗𝒊𝒕𝒚) = 𝑻𝒐𝒕𝒂𝒍 𝑹𝒆𝒗𝒆𝒏𝒖𝒆

Ticket = Traffic =
𝑆𝑎𝑙𝑒𝑠 𝐺𝑟𝑜𝑤𝑡ℎ − 𝐶𝑜𝑚𝑝𝑎𝑟𝑎𝑏𝑙𝑒 𝑆𝑎𝑙𝑒𝑠
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔 𝑆𝑞𝑢𝑎𝑟𝑒 𝐹𝑡. 𝐺𝑟𝑜𝑤𝑡ℎ
Average Unit Retail = Conversion Rate
# 𝑼𝒏𝒊𝒕𝒔 𝑺𝒐𝒍𝒅
× + ×
# 𝑼𝒏𝒊𝒕𝒔 𝑺𝒐𝒍𝒅
Units Per Transaction =
# 𝑻𝒓𝒂𝒏𝒔𝒂𝒄𝒕𝒊𝒐𝒏𝒔 Traffic

Y/Y Increase in Retail Store & Digital Visits

Source: TD Cowen
17 | March 22, 2023
 Retail Revenue: Revenue Drivers and Modeling Print
Examples and Insights

CY22A Department Stores Broadlines

Total Comparable Sales 4.5% 0.3% 6.6% 2.2%

Traffic Undisclosed Undisclosed 1.2% 2.1%
Store Comp Sales (8.5%) 3.7% 5.1% 1.9%
Digital Penetration 47.8% 33.4% 12.7% 19.3%
Square Footage Growth 0.7% (0.3%) 0.0% 0.8%
New Store Productivity Not Meaningful 45.9% Not Meaningful 79.6%

Other Revenue Sources 3.2% of Sales 3.4% of Sales 0.9% of Sales 1.4% of Sales

Total Revenue (mm) $ 15,091 $ 24,442 $ 611,289 $ 109,120

Credit Card, Advertising Revenue, and Membership Fees

Walmart 4Q Trends:
Revenue Drivers Positive traffic and tailwinds from greater trade down from higher incomes
“Choiceful, discerning, thoughtful” consumer led to greater price sensitivity
Traffic & Transactions Positive unit growth trends across food & grocery

Inflation vs. Disinflation

Target 4Q Trends:
Strong than expected traffic drove strong comparable sales performance
Wallet Share Shifts/ Comparisons Softness in discretionary items led to flat Y/Y average transaction amount
Positive unit share gains across all 5 categories

Source: TD Cowen, Company Filings

18 | March 22, 2023
E-Commerce Platform: Revenue Drivers and Modeling
Methodology
Print

# 𝑜𝑓 𝑂𝑟𝑑𝑒𝑟𝑠
𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 =
𝐴𝑐𝑡𝑖𝑣𝑒 𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟𝑠

G𝑟𝑜𝑠𝑠 𝑀𝑒𝑟𝑐ℎ𝑎𝑛𝑑𝑖𝑠𝑒 𝑉𝑎𝑙𝑢𝑒 = # 𝑜𝑓 𝑂𝑟𝑑𝑒𝑟𝑠 𝑥 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑂𝑟𝑑𝑒𝑟 𝑉𝑎𝑙𝑢𝑒

CY22A E-Commerce

Active Customers 3,918 2,340 781

x Purchase Frequency 1.8 3.5 2.3
Number of Orders 7,093 8,304 1,765
x AOV $ 577 $ 304 $ 627
Gross Merchandise Value $ 4,078 $ 2,523 $ 1,379
- Returns $ 938 $ 1,421 $ 552
Net Sales (millions) $ 3,140 $ 1,101 $ 690

Average Order Value

Source: TD Cowen, Company Filings

19 | March 22, 2023
 TD Cowen New Retail Vision Primer:
Oliver Chen’s Sector Approach Agenda

Revenue Build

Margin Build

Channel Structures

Our Frameworks for the Future

Source: TD Cowen
20 | March 22, 2023
Profitability Drivers: Gross Margin Drivers and Modeling
Methodology
Print
Standard COGS Mix

CY22A
• COGS typically remained
Gross Margin Average
Cut & Sew Raw fixed
Labor Materials Broadlines 23.6%
35% 40% • Gross Margin therefore Department Stores 35.5%
driven by initial markup E-commerce 53.3%
and promotion breadth & Global Luxury 67.6%
Transit/
Duties depth
20%
Distribution
5%

Pricing Strategy
𝑆𝑒𝑙𝑙 𝑃𝑟𝑖𝑐𝑒
Initial Markup % = 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑃𝑟𝑖𝑐𝑒 − 1
Example:
Markdown → Clear Slow-Moving Inventory • Purchase Price from Supplier: $75
• Sell Price in Store: $150
Maintain Greater Share of Full Price Sales… • Initial Markup % =
$150
− 1 = 200%
→ Data Driven Merchandising $75

→ Customer Price Sensitivity

→ Urgency in Limited Quantities
Source: TD Cowen, Company Filings
21 | March 22, 2023
Profitability Drivers: What Moves Gross Margin
Methodology Print

Markdowns Occupancy Input Costs

• Fashion risk • Leverage or • Product costs:
deleverage of fixed typically tied to
• Inventory planning
costs, if included in commodity prices
and ability to align
COGS (cotton, oil)
with demand (See: sales
and inventory spread) • Related to store rent • Labor costs: assume
• Promotional expense low-single digit
environment annual increase in
• Generally, retailers
labor expense
• Increased promotions need low-single digit
lowers merchandise comp sales to
margin leverage rent expense

Source: TD Cowen
22 | March 22, 2023
Profitability Drivers: Gross Margin Drivers and Modeling
Retail vs. Cost Method of Accounting

Inventory Accounting Choice

Retail Cost
Method Method
Tracks inventory at
Inventory & COGS
SKU level and assigns
immediately reflect
a weighted average
markdowns as they
cost to each unit at the
are taken
time of sale

Markdowns taken but

After a hard mark, the
not sold during quarter
value of inventory is
hold a carryover
written down & COGS
impact to next
is charged
quarter’s margin

COGS is charged No adjustment to

regardless of whether inventory or COGS at
the item is sold during the time of markdown.
the period in which it is COGS is determined at
marked down time of sale only

Source: TD Cowen
23 | March 22, 2023
Profitability Drivers: Gross Margin Drivers and Modeling
Retail vs. Cost Method of Accounting

Illustrative Example: Assume a retailer purchases 15 handbags from a supplier for $6 each. The initial markup of 2.3x yields a
retail price of $20. Assume 8 items are sold at full price. The remaining 7 items are marked down by 40% but only 4 are sold.

Retail Method Cost Method

Initial Retail Price $ 20.00 Initial Retail Price $ 20.00
Less: 1st Markdown 40% Less: 1st Markdown 40%
Price After 1st Markdown $ 12.00 Price After 1st Markdown $ 12.00
Total # of Items for Sale 15 Total # of Items for Sale 15

# of Items Sold Full Price 8

# of Items Sold Full Price 8
Revenue from Full Price $ 160.00
# of Items Markdown 7 Revenue from Full Price $ 160.00
# of Items Sold Markdown 4 # of Items Markdown 7
Revenue from Markdown $ 48.00 # of Items Sold Markdown 4
Revenue from Markdown $ 48.00
Total Revenue $ 208.00
Total Revenue $ 208.00
Cost of Goods Sold:
Invoice Costs $ 6.00 Cost of Goods Sold:
Cost on Books After Markdown $ 3.60 Invoice Cost x (1 - 40% markdown)
Invoice Costs $ 6.00
# of Items Sold Markdown 4

Total COGS $ 72.00 12 Total Sold x $6 Invoice Price

Cost Complement $ 83.20 Total Revenue x 40% markdown
Charge to COGS $ 16.80 Gross Margin % 65%
7 Items markded down x (40% markdown x $6 Invoice Cost)

Total COGS $ 100.00 Cost Complement + Charge to COGS Beginning Inventory $ 90.00
Gross Margin % 52% Less: COGS $ 72.00
Ending Inventory $ 18.00
Beginning Inventory $ 90.00 15 Total Items for Sale x $6 Invoice Price
Ending Inventory $ 10.80 3 Items unsold x $3.60 to account for cost after 40% markdown

Source: TD Cowen
24 | March 22, 2023
Luxury Brand eCommerce Margin Profile
Farfetch Case Study Print

Cowen's Estimated Luxury Brands' Margin Structure By Channel

Wholesale* Retail Digital** Via Farfetch
Customer price $100 $100 $100 $100
Selling price $45 $100 $100 $100
Product cost $20 $20 $20 $20
Gross Margin 55% 80% 80% 80%
(-) SG&A $14 $30 $35 $20
(-) Occupancy $30
(-) Freight/shipping $5
(-) Digital Depreciation $10
(+/-) Discounts &
$0-$2
allowances
Operating income 20%-25% 20% 30% 60%
(-) Farfetch Take rate 20%-25%
Operating income (after
take rate) 20-25% 20% 30% 35%-40%

*Wholesale operating income likely to vary with productivity, point of distribution, fixed costs, markdowns and
allowances
** Digital operating income likely change with average order value

Source: TD Cowen, FTCH Company Filings

25 | March 22, 2023
 TD Cowen New Retail Vision Primer
Oliver Chen’s Sector Approach Agenda

Revenue Build

Margin Build

Channel Structures

Our Frameworks for the Future

Source: TD Cowen
26 | March 22, 2023
New Retail Ecosystems
Platformication of Retail

Direct to
Ecosystems
Consumer

Customer Lifetime Value Frequency

Data Centricity Reach
Acquisition Costs Scope

Source: TD Cowen
27 | March 22, 2023
Retail Channel Structures
Evolving Spectrum of Ways to Reach the Consumer

Print
Traditional Retail Model

Manufacturers

Direct to Consumer Model

Manufacturer

Retailer

Consumers

Consumers

Product typically has markup DTC model can be physical More product to choose from,
and lacks direct communication retail and digital (mobile app, but some risk related to
with the brand website) working with 3P vendors

Source: TD Cowen
28 | March 22, 2023
Retail Channel Structures
Marketplaces: Reach, Frequency, and Specialization

Horizontal
vs.
Verticalization

Source: TD Cowen
29 | March 22, 2023
Margin Spectrum Considerations
Operating Margin Spectrum Print

Lower EBIT Margin Higher EBIT Margin

Direct to Marketplace
Wholesale
Consumer Take Rate

eCommerce

Dependent on Average Order Value

Contribution Margin = Total Sales – Variable Costs

LEVERAGE Variable Costs in Retail

LEVERAGE
Wages & Raw Materials
Fixed Costs in Retail Shared Costs in Retail
Utilities
Occupancy (Rent) Marketing
Shipping Costs
Corporate Overhead Finance & Accounting
Credit card fees & Sales commissions
Production & Design Human Resources
Advertising costs
Merchandising IT
Wholesale & Retail Planning Legal

Source: TD Cowen
30 | March 22, 2023
 Print
Margin Spectrum Considerations
Relative Operating Margin Examples – Last Completed FY
Retailer Brand Luxury Digital
16.1% 54.7% 26.6% 8.3%

15.3% 19.0% 25.6% 6.6%

7.1% 18.2% 5.7%

17.7%
4.0% 13.6% (21.6%)
10.8%
3.8%

3.6%

3.3%

(0.04%)

(1.1%)
Source: TD Cowen, Company Filings, Represents Non-GAAP Adj. EBIT Margin (where applicable) for Last Completed FY
31 | March 22, 2023
Margin Spectrum Considerations
E-commerce vs. In-Store: Examples and Drivers

E-comm Margin E-comm Margin

Worse vs. Stores Parity Better vs. Stores

Print

Cost Levers & Considerations

Store productivity: traffic and ticket
Rent expense structure: variable or flat rate
Online fulfillment strategy (freight, shipping):
Split shipments, unit costs, handling, pick and pack
Source: TD Cowen, Company Filings
32 | March 22, 2023
Channel Margin Mix
Print

Wholesale Can Be Higher or Lower Margins vs. Direct-to-Consumer Retail

Lower AUR Product Higher AUR Product

Wholesale Operating Costs: Direct to Consumer Operating Costs:

• Shipments to wholesale partners • Pick, pack and ship e-commerce orders

• Managers to facilitate partnerships • Labor & Rent

Wholesale Channel DTC Channel

Low fixed cost High fixed cost

Lower merchandise margin product Higher merchandise margin product

Source: TD Cowen, Company Filings
33 | March 22, 2023
Bricks and Clicks: Online Meets Offline
Academic Research on Interrelationships and Shop-in-Shops

Store

Advantages:
• Lower prices
• Higher service and better
customer touchpoint by
manufacturer
• Lower risk to both
manufacturer and retailer

Source: TD Cowen, Ratchford et al.

34 | March 22, 2023
Rent Expense Primer
Store Productivity & Leverage
Higher Store Productivity = lower rent expense as a % of sales Potential for structurally higher EBIT margin

Rent Expense as % of sales ↓ when sales per square foot ↑

Rent Expense as % of sales ↑ when sales per square foot ↓

Print

Higher store productivity = contingent rent kicks in which changes rent from a fixed to variable expense (diminishing leverage)

Retailers can continue to leverage other components of

occupancy that remain fixed

What Constitutes Occupancy?

Minimum rent expense allowed under lease
Additional contingent rent
Common area maintenance charge
Store depreciation
Real estate tax
Insurance
Utilities and store repairs

Source: TD Cowen, Company Filings

35 | March 22, 2023
 TD Cowen New Retail Vision Primer
Oliver Chen’s Sector Approach Agenda

Revenue Build

Margin Build

Channel Structures

Our Frameworks for the Future

Source: TD Cowen
36 | March 22, 2023
Magic & Logic: “Societal Forces” Meet “Enablement”
Sustainability and the Connected Store

Magic Logic
Innovative and Rich Enablement:
Customer Experience Achieving Magic

Sustainability Connected Store

“Magic” “Logic” Examples

Societal Forces Enablement
Individuality & Creativity Personalization, Data, Machine Farfetch, Revolve, Livestreaming,
Learning, Interaction Measurement Social Media

Sustainability Circular retail, Closed Loop Rent-the-Runway, RealReal,

Re-commerce, CaaS Clothes-as-a-Service (Caastle)

Decentralization Peer-to-peer, Fintech, Web3, NFT Poshmark, Livestreaming,

Afterpay
Reducing Friction Connected Customer Journey, Retail Amazon, Macy’s, Walmart, Warby
as an Ecosystem Parker, Retail-as-a-Service (b8ta,
leap), Farfetch
Purpose Ingrained culture from the start, Warby Parker, Brilliant Earth,
Founder story Bombas, Gucci

Source: TD Cowen
37 | March 22, 2023
The New Store = The “Connected” Store
Walmart Case Study
Autonomous Floor Scrubber Picking and Packing

Autonomous Alpha
Floor Scrubber Bot

Focal FAST
Systems Unloader

Source: TD Cowen
Inventory Accuracy Inventory Unloading
38 | March 22, 2023
Platformication of Retail
Rethinking What Retail Means

#COMMUNITYRETAIL #REALISTICRETAIL #WELLNESSRETAIL

DO IT
YOURSELF Authenticity Value
fication

CONNECTION Platformication Community Health

Robotization Personality Curbside

TIME

Source: TD Cowen
39 | March 22, 2023
“S.T.A.R.” Retail - Key to Relevancy with Millennials + Gen Z
• Why Do Millennials & Gen Z matter? Global transfer of wealth ($30T+) is underway

• Millennials’ share of the country's overall net worth expected to quadruple by 2030

• TD Cowen’s Proprietary Survey indicates ~65% of Millennials & Gen Z spend 4+ hours on smartphones;
implied digital acceleration & competitive moats around the most digitally enabled brands and
marketplaces
Sustainability – Sustainability & social impact are cited when purchasing apparel,
footwear and accessories as being either “very important” or
“somewhat important' by 76% for 18–34-year-olds

62.1% of 18-34 aged consumers view food transparency as

Transparency – 'Important' or 'Very Important' in making a restaurant decision vs.
4.1% above consumers aged 35 +

Product discovery is taking place on social media; “tribe” formation

of brand enthusiasts is translating into brand strength and
Authenticity – marketing efficiency via user-generated content (UGC). +40% of IG
users A18-34 indicated product purchase from a brand they
discovered on IG.

Purchases at leading resale platforms grew +36% y/y in total. Digital

Re-Commerce – & data driven communities of users, product scarcity, and network
effects drive platform growth.
Source: TD Cowen
40 | March 22, 2023
Societal Forces: Sustainability & Purpose
TD Cowen’s ESG Framework: What is L.E.E.S.S
We selected five Sustainability Accounting Standards Board (SASB) categories that we believe are most important and
representative of Environmental, Social, and Governance goals. These categories represent the most frequently addressed
issues within our company survey and strategies, as well as investor interest, and comparability data.

Cowen Classification SASB Category SASB Framework

Lifecycle Product Design & Lifecycle Management Lifecycle impacts of products and services related to packaging,
distribution, resource intensity, and other factors related to the useful
life of a product or service.

Emissions Greenhouse Gas (GHG) Emissions Direct Scope 1 greenhouse gas (GHG) emissions that a company could
produce through its natural operations (mobile and stationary):
factories, power plants, delivery trucks, planes, etc.

Employees Employee Engagement, Diversity, & Hiring, promotion, and company culture practices reflect the
Inclusion respective local talent pool and customer base. This category also
addresses discrimination on the bases of race, gender, ethnicity,
religion, sexual orientation, among other factors.
Sourcing Materials Sourcing & Efficiency Managing environmental and societal risks related to supply chain
operations through product design, manufacturing, and end-of-life
management.

Supply Chain Supply Chain Management Minimizing and addressing issues related to human rights,
environmental responsibility, labor practices, and ethics and
corruption created by suppliers.

Source: TD Cowen, Truvale, SASB

41 | March 22, 2023
TD Cowen’s Actionable Steps to Improve ESG
Our L.E.E.S.S Framework
LIFECYCLE
 Use sustainable ingredients for
EMISSIONS manufacturing and packaging

 Monitor Scope 1 and 2 emissions  Consider product end-of-life

recycling efforts
 Reduce emissions for stationary
and mobile operations
EMPLOYEES
 Hire and promote a diverse and
inclusive workforce

 Prohibit any discrimination

SUPPLY CHAIN
 Environmental and social issues
related to the supply chain
 Screen and engage with
suppliers on key potential issues
SOURCING
 Track impact on availability and
price of key recourses
 Monitor external impacts to climate
change or environment from
suppliers

Source: TD Cowen, Truvale, SASB

42 | March 22, 2023
 Logical Force: Machine Learning Revolution
From Predictive to Prescriptive Retail
Strategic Machine Learning Real-Time

Create
Data Analytics

Prescribe
Business Intelligence
Value

Time
Prediction

Diagnosis

Description

Tactical Ex-Post

What What Plan of

Why? Execute
Happened? Next? Action
Source: TD Cowen
43 | March 22, 2023
Logical Force: Machine Learning Revolution
Merchandise and Design Innovation Example

Customer Interaction Merchandising Data-Driven Product

Cycle
“Millions” “Data Analysis” “Right + Re-Order”

Attributes Pre-informed + trend-infused • Mitigated fashion risk

(i.e. fabric, buttons, print, etc.) buying; “read and react”
• Automated re-orders can
x
Auto-triggered re-order capability improve gross margins
Styles
(i.e. SKU - fit, color, weight) Algorithmically-driven technology • Scalable platform can drive cost
x recommends pricing based on leverage
Customer Interactions demand
(i.e. clicks, add to cart, purchases)

Millions of Insights

Question: Can You Maximize Surprise and Delight

and Customer Satisfaction Through Data?
Source: TD Cowen

44 | March 22, 2023

The Future Is: The E.S.P. Imperative for NFT’s

TD Cowen’s CEO
Innovation Guide Engagement Status Players

Concept NFTs as an Virtualization of Gamification of

Engagement Tool Personas Retail
Reduce Friction, Drive
Business Raise Customer Lifetime Drive Brand Equity and Youthful Relevance,
Value; Reduce Customer First Party Brand Omni-Engagement, and
Implication Acquisition Costs Relationship Entertainment

Trailblazers

Dolce & Gabbana x UNXD 10 KTF Gucci Grail Burberry x Mythical

Collezione Genesi Bankos Block Party

Source: TD Cowen
45 | March 22, 2023
Comparison Table (price as of 3/19/23)
3/19/2023 PTARGET P/E Ratio EV/EBITDA EV/Sales FCF Yield
YTD % PT FY2 EBITDA Div
Company Price Move Cowen Rating PT Multiple FY2 FY2 FY2 Market Cap Net Debt EV Margin yield FY1
Broadlines
Walmart Inc $139.40 -2% Outperform $180 26.7x 20.7x 10.8x 0.6x $375,774 $35,737 $418,809 5% 0% 3.5%
Costco Wholesale Corp $487.06 7% Outperform $600 38.2x 31.0x 18.2x 0.8x $215,998 -$2,864 $208,880 4% 1% 2.6%
Target Corp $159.30 7% Outperform $200 19.0x 15.1x 9.2x 0.8x $73,364 $13,910 $87,274 6% 3% 4.9%
Average 4% 22.3x 12.7x 0.8x 5% 4%
Hardlines
Home Depot Inc $288.33 -9% Outperform $360 21.4x 17.1x 12.7x 2.1x $292,703 $40,436 $333,139 17% 0% 5.9%
Lowe's Companies Inc $197.31 -1% Market Perform $210 14.3x 13.4x 10.7x 1.7x $118,613 $32,228 $150,841 13% 2% 7.5%
Average -5% 15.3x 11.7x 1.9x 15% 7%
Department Stores
Macy's Inc $18.88 -9% Outperform $29 7.6x 4.9x 3.0x 0.3x $5,122 $2,134 $7,256 10% 0% 20.0%
Kohls Corp $23.24 -8% Market Perform $31 9.9x 7.4x 4.7x 0.4x $2,573 $4,724 $7,297 6% 9% 24.1%
Dillard's Inc $317.96 -2% NA NA NA 11.4x 7.2x 0.9x $5,968 -$278 $5,690 19% 0% 7.2%
Nordstrom Inc $16.57 3% Market Perform $20 9.9x 8.2x 4.1x 0.3x $2,652 $2,169 $4,821 7% 5% 21.4%
Average -4% 8.0x 4.8x 0.4x 11% 18%
U.S. Luxury & Accessories
Tapestry Inc $40.91 7% Outperform $55 13.0x 9.7x 7.1x 1.5x $9,655 $741 $10,485 20% 3% 7.7%
Capri Holdings Ltd $42.44 -26% Market Perform $55 8.5x 6.5x 5.7x 1.1x $5,331 $991 $6,590 19% 0% 13.4%
Ralph Lauren Corp $110.95 5% Outperform $151 16.4x 12.0x 6.5x 1.1x $7,318 -$601 $7,100 15% 3% 6.5%
RH $246.42 -8% Outperform $320 18.8x 14.5x 8.4x 1.9x $5,432 $643 $6,453 26% 0% 9.8%
Farfetch Ltd $4.62 -2% Market Perform $7 0.9x NA 16.3x 0.6x $1,629 $374 $2,160 NM 0% -7.7%
Signet Jewelers Ltd $73.29 8% NA NA NA 6.6x 4.0x 0.5x $3,315 -$1,271 $3,788 13% 1% 18.5%
Warby Parker Inc $9.70 -28% Outperform $17 2.4x 52.7x 13.5x 1.2x $1,124 -$209 $915 NM 0% 2.3%
Movado Group Inc $33.18 3% Market Perform $38 8.2x 7.2x 3.8x 0.7x $738 -$277 $556 19% 4% NM
Brilliant Earth Group Inc $3.96 -9% Outperform $5.50 0.8x 10.0x 7.3x 0.7x $376 -$92 $366 6% 0% 19.2%
Average -6% 14.9x 8.1x 1.1x 17% 9%
Specialty Retail/Softlines/Fitness
TJX Companies Inc $74.50 -6% Outperform $88 22.5x 19.1x 12.0x 1.5x $86,062 -$2,118 $83,944 12% 0% 3.5%
Ross Stores Inc $102.06 -12% Market Perform $114 20.5x 18.3x 11.7x 1.6x $35,147 -$2,095 $33,051 13% 1% 3.9%
Ulta Beauty Inc $506.44 8% Outperform $570 21.0x 18.6x 12.5x 2.2x $25,769 -$738 $25,031 18% 0% 4.1%
Estee Lauder Companies $234.43 -5% Outperform $280 38.2x 32.0x NA 4.6x $83,790 $1,455 $86,255 20% 1% 2.2%
Olaplex Holdings Inc $3.88 -26% Market Perform $4.50 4.9x 11.6x 9.1x 4.3x $2,523 $340 $2,863 59% 0% 11.0%
Beauty Health Co $11.29 24% Outperform $15 3.9x 22.3x 13.4x 3.0x $1,497 $166 $1,663 3% 0% 2.2%
Williams-Sonoma Inc $116.89 2% Outperform $140 9.8x 8.2x 5.2x 0.9x $7,739 -$367 $7,372 20% 3% 12.2%
Lululemon Athletica Inc $294.79 -8% Outperform $488 43.0x 25.9x 16.0x 4.1x $37,609 -$1,260 $37,257 25% 0% 1.1%
Bath & Body Works Inc $34.44 -18% Outperform $52 14.3x 9.5x 6.9x 1.5x $7,876 $3,630 $11,507 21% 2% 9.8%
Planet Fitness Inc $74.00 -6% Outperform $92 34.5x 27.7x 16.3x 6.8x $6,619 $1,589 $8,196 40% 0% 2.9%
Grocery Outlet Holding Corp $26.92 -8% Outperform $35 31.4x 24.2x 11.1x 0.7x $2,629 $283 $2,911 5% 0% NM
Gap Inc $9.71 -14% Market Perform $10 11.2x 10.9x 4.1x 0.3x $3,552 $621 $4,173 3% 6% 8.8%
Peloton Interactive Inc $10.07 27% Market Perform $12 NA NA 59.2x 1.5x $3,488 $308 $4,300 NM 0% NM
Boot Barn Holdings Inc $71.94 15% Outperform $90 14.9x 11.9x 7.4x 1.2x $2,145 $25 $2,170 16% 0% 4.9%
American Eagle Outfitters Inc $12.80 -8% Market Perform $15 12.0x 10.3x 4.2x 0.4x $2,503 -$161 $2,342 10% 3% 13.6%
Revolve Group Inc $24.76 11% Outperform $30 1.4x 22.6x 13.1x 1.2x $1,818 -$235 $1,583 8% 0% 3.8%
elf Beauty Inc $72.46 31% Market Perform $70 44.1x 45.6x 29.2x 6.1x $3,862 $54 $3,843 17% 0% 1.6%
Sally Beauty Holdings Inc $14.35 15% Market Perform $19 8.9x 6.7x 5.3x 0.7x $1,540 $1,081 $2,588 12% 0% 12.8%
Thorne Healthtech Inc $4.67 29% Outperform $8 12.6x 7.3x 5.1x 0.8x $247 -$47 $230 4% 0% NM
Torrid Holdings Inc $2.32 -22% Market Perform $4.20 0.6x 4.2x 3.6x 0.4x $238 $327 $562 12% 0% 22.4%
Lulu's Fashion Lounge Holdings Inc $2.32 -8% Market Perform $3 0.3x 8.9x 2.9x 0.2x $91 $18 $110 3% 0% 26.7%
Onespaworld Holdings Ltd $11.14 20% Outperform $13 1.9x 18.7x 13.3x 1.4x $887 $186 $1,068 7% 0% NM
Tractor Supply Company $232.48 3% Market Perform $245 0.1x 20.1x NA 1.6x $25,585 $999 $26,585 13% 2% NM
Victoria's Secret & Co $30.34 -15% Market Perform $45 0.2x 5.6x NA 0.5x $2,358 $1,122 $3,497 11% 0% 18.5%
AKA Brands Holding Corp $0.86 -31% Market Perform $1.70 0.5x 9.4x 4.3x 0.3x $113 $97 $211 4% 0% 42.7%
Average 0% 16.6x 12.1x 1.4x 15% 10%
Global Luxury & Accessories MC FP
MYT Netherlands Parent BV $6.39 -28% Market Perform $7 0.6x 12.9x 6.3x 0.6x $543 -$92 $503 2% 0% 8.0%
Canada Goose Holdings Inc $25.10 4% Outperform $22 14.9x 17.0x 9.2x 2.3x $2,633 $333 $3,066 17% 0% 6.8%
LVMH Moet Hennessy Louis Vuitton SE EUR 787.40 16% Outperform € 900 25.5x 22.3x 13.4x 4.5x € 393,003 € 24,235 € 420,991 34% 2% 4.1%
H & M Hennes & Mauritz AB SEK 122.84 9% NA NA NA 16.9x 6.1x 0.9x 179,180 kr 50,928 kr 230,108 kr 14% 8% 7.9%
Prada SpA HKD 55.25 25% NA NA NA NM 10.8x 3.7x $141,247 $1,572 $18,463 NM 0% 0.5%
Kering SA HKD 547.30 15% NA NA NA 15.0x 9.2x 3.2x $67,879 $7,371 $76,035 36% 0% 6.5%
Compagnie Financiere Richemont SA SEK 133.45 11% Market Perform 152 CHF 21.7x 19.1x 10.6x 3.3x 69,387 CHF -1,503 CHF 69,760 CHF 29% 2% 4.3%
Burberry Group PLC HKD 2,267.00 12% NA NA NA 17.8x 9.1x 2.7x $8,574 $179 $9,076 30% 0% 5.6%
Hugo Boss AG SEK 56.10 4% NA NA NA 13.9x 5.9x 1.2x 3,949 kr 726 kr 4,717 kr 11% 2% 8.3%
Virgin Galactic Holdings Inc USD 4.16 20% Outperform $7 NA NM NM 14.3x $1,166 -$493 $673 NM 0% -44.4%
Tod's SpA EUR 34.92 15% NA Na NA 30.7x 7.5x 1.6x € 1,146 € 504 € 1,714 19% 0% 3.2%
Average 9% 18.4x 8.8x 3.5x 21% 1%
Overall Aveage 1% 16.3x 10.1x 1.9x 15% 8%
Overall Median 2% 14.2x 8.8x 1.2x 13% 7%
LULU, RL, ROST and TJX are covered by John Kernan, FTCH & PTON are co-covered with John Blackledge, HD, LW, OSW, RH, WSM, PLNT, TSCO, and BOOT are covered by Max Rakhlenko, OLPX, BBWI, AEO, VSCO, CURV, LVLU covered by Jonna Kim
Items italicized in PT FY2 Multiple indicate EV/S multiple
Source: TD Cowen, Thomson Reuters
46 | March 22, 2023
TD COWEN
EQUITY RESEARCH March 22, 2023

VALUATION METHODOLOGY AND RISKS

Valuation Methodology

Broadlines:
Our valuation methodology is primarily based on Price-to-Earnings (P/E), supplemented by, in some cases, Enterprise
Value to EBITDA (EV/EBITDA) and Price-to-Free Cash Flow (P/FCF) ratios and DCF analysis. We may also use Enterprise
Value to Revenue (EV/Revs) for companies operating at depressed levels of profitability. In some cases we use
probability-weighed, scenario-based decision trees as a basis for devising our price targets. We incorporate the
company’s and its peers’ historical and current valuation multiples, as well as our analysis of future growth rates,
company-specific risks, return on invested capital, and other inputs from our research when devising our valuation
multiples and the probabilities we assign to different scenarios when developing our price targets.
We make investment recommendations on certain early stage, pre-revenue companies based upon an assessment of
their business model, technology, probability of market success, and the potential market opportunity, balanced by an
assessment of applicable risks. Such companies may not be assigned a price target.

Department Stores:
Our valuation methodology is primarily based on Price-to-Earnings (P/E),supplemented by, in some cases, Enterprise
Value to EBITDA (EV/EBITDA) and Priceto-Free Cash Flow (P/FCF) ratios and DCF analysis. We may also use Enterprise
Value to Revenue (EV/Revs) for companies operating at depressed levels of profitability. In some cases we use
probability-weighed, scenario-based decision trees as a basis for devising our price targets. We incorporate the
company’s and its peers’ historical and current valuation multiples, as well as our analysis of future growth rates,
companyspecific risks, return on invested capital, and other inputs from our research when devising our valuation
multiples and the probabilities we assign to different scenarios when developing our price targets.
We make investment recommendations on certain early stage, pre-revenue companies based upon an assessment of
their business model, technology, probability of market success, and the potential market opportunity, balanced by an
assessment of applicable risks. Such companies may not be assigned a price target.

Luxury Brands:
TD COWEN
EQUITY RESEARCH March 22, 2023

Our valuation methodology is primarily based on Price-to-Earnings (P/E), followed by Enterprise Value to EBITDA (EV/
EBITDA), Price-to-Free Cash Flow (P/FCF) ratios, and DCF analysis. We may also use Enterprise Value to Revenue (EV/
Revs) for companies operating at depressed levels of profitability. In some cases we use probability weighed, scenario-
based decision trees as a basis for devising our price targets. We incorporate the company’s and its peers’ historical and
current valuation multiples, as well as our analysis of future growth rates, company-specific risks, return on invested
capital, and other inputs from our research when devising our valuation multiples and the probabilities we assign to
different scenarios when developing our price targets.
We make investment recommendations on certain early stage, pre-revenue companies based upon an assessment of
their business model, technology, probability of market success, and the potential market opportunity, balanced by an
assessment of applicable risks. Such companies may not be assigned a price target.
Specialty Retail:
Our valuation methodology is primarily based on Price-to-Earnings (P/E), followed by Enterprise Value to EBITDA (EV/
EBITDA), Price-to-Free Cash Flow (P/FCF) ratios, and DCF analysis. We may also use Enterprise Value to Revenue (EV/
Revs) for companies operating at depressed levels of profitability. In some cases we use probability weighed, scenario-
based decision trees as a basis for devising our price targets. We incorporate the company’s and its peers’ historical and
current valuation multiples, as well as our analysis of future growth rates, company-specific risks, return on invested
capital, and other inputs from our research when devising our valuation multiples and the probabilities we assign to
different scenarios when developing our price targets.
We make investment recommendations on certain early stage, pre-revenue companies based upon an assessment of
their business model, technology, probability of market success, and the potential market opportunity, balanced by an
assessment of applicable risks. Such companies may not be assigned a price target.
eCommerce Platforms:
Our valuation methodology is primarily based on DCF analysis, followed by comparable company multiples, such as EV/
Sales, EV/EBITDA, P/E, and P/FCF. In some cases we use probability weighed, scenariobased decision trees as a basis
for devising our price targets. We incorporate the company’s and its peers’ historical and current valuation multiples, as
well as our analysis of future growth rates, company-specific risks, and other inputs from our research when devising
our valuation multiples and the probabilities we assign to different scenarios when developing our price targets.
We make investment recommendations on certain early stage, pre-revenue companies based upon an assessment of
their business model, technology, probability of market success, and the potential market opportunity, balanced by an
assessment of applicable risks. Such companies may not be assigned a price target.

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Investment Risks

Broadlines:
Risks to the companies in our sector include risks and uncertainties associated with the global economic environment
and consumer spending, as well as competition within consumer and fashion products industries and fluctuating
consumer demand trends, which can create variability in sales and margins. Increases in the prices of raw materials,
rent, freight, labor, tariffs, or manufacturers’ inability to produce goods on time or to specifications may negatively
impact results. Execution flaws and the departure of certain key executives may negatively affect performance and
financial results. Legal, regulatory, political, currency, and economic risks, as well as challenges to maintain favorable
brand recognition, loyalty, and reputation for quality, may affect the ability to conduct business in both domestic and
international markets.

Department Stores:
Risks to the companies in our sector include risks and uncertainties associated with the global economic environment
and consumer spending, as well as competition within consumer and fashion products industries and fluctuating
consumer demand trends, which can create variability in sales and margins. Increases in the prices of raw materials,
rent, freight, labor, tariffs, or manufacturers’ inability to produce goods on time or to specifications may negatively
impact results. Execution flaws and the departure of certain key executives may negatively affect performance and
financial results. Legal, regulatory, political, currency, and economic risks, as well as challenges to maintain favorable
brand recognition, loyalty, and reputation for quality, may affect the ability to conduct business in both domestic and
international markets.

Luxury Brands:
Risks to the companies in our sector include risks and uncertainties associated with the global economic environment
and consumer spending, as well as general competition within the consumer and fashion products industries and
fluctuating consumer demand trends, which can create variability in sales and margins. Increases in the prices of
raw materials, rent, freight, labor, tariffs, or manufacturers’ inability to produce goods on time or to specifications
may negatively impact results. Execution flaws and the departure of certain key executives may negatively affect
performance and financial results. Legal, regulatory, political, currency, and economic risks, as well as challenges to

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maintain favorable brand recognition, loyalty, and reputation for quality, may affect the ability to conduct business in
both domestic and international markets.
Specialty Retail:
Risks to the companies in our sector include risks and uncertainties associated with the global economic environment
and consumer spending, as well as general competition within the consumer and fashion products industries and
fluctuating consumer demand trends, which can create variability in sales and margins. Increases in the prices of
raw materials, rent, freight, labor, tariffs, or manufacturers’ inability to produce goods on time or to specifications
may negatively impact results. Execution flaws and the departure of certain key executives may negatively affect
performance and financial results. Legal, regulatory, political, currency, and economic risks, as well as challenges to
maintain favorable brand recognition, loyalty, and reputation for quality, may affect the ability to conduct business in
both domestic and international markets.
eCommerce Platforms:
Risks to the companies in our sector include risks and uncertainties associated with the global economic environment
and consumer spending, as well as general competition within the consumer and fashion products industries and
fluctuating consumer demand trends, which can create variability in sales and margins. Further, all of our companies
are at risk if they are unable to innovate and adapt to technological change. Increases in the prices of raw materials,
rent, freight, labor, tariffs, or manufacturers’ inability to produce goods on time or to specifications may negatively
impact results. Execution flaws and the departure of certain key executives may negatively affect performance and
financial results. Legal, regulatory, political, currency, and economic risks, as well as challenges to maintain favorable
brand recognition, loyalty, and reputation for quality, may affect the ability to conduct business in both domestic and
international markets.

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ADDENDUM
Ticker Rating Price* Price Target Ticker Rating Price* Price Target
AKA■ Market Perform $0.88 $1.70 GOOS.TO Outperform C$24.98 C$30.00
GOOS Outperform $18.19 $22.00 COST Outperform $487.05 $600.00
ELF Market Perform $72.47 $70.00 EL Outperform 234.56 $280.00
GPS Market Perform 9.70 $10.00 KSS Market Perform $23.23 $31.00
M Outperform $18.88 $29.00 JWN Market Perform 16.56 $20.00
SBH Market Perform $14.35 $19.00 TGT Outperform $159.36 $200.00
SKIN Outperform $11.31 $15.00 ULTA Outperform 506.46 $570.00
WMT Outperform $139.40 $180.00 WRBY Outperform $9.69 $17.00
FTCH Market Perform $4.62 $7.00 RVLV Outperform $24.78 $30.00
MC FP■ Outperform €787.30 €900.00

*As of 03/17/2023
■Rating and/or Price Target Change

Analyst Certification
Each author of this research report hereby certifies that (i) the views expressed in the research report accurately reflect his or her personal views about any and all of the subject securities or issuers, and (ii) no part of
his or her compensation was, is, or will be related, directly or indirectly, to the specific recommendations or views expressed in this report.

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current disclosures for all the companies in this report, clients should refer to https://tdcowen.bluematrix.com/sellside/Disclosures.action or contact your Cowen and Company, LLC representative for additional
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The recommendation contained in this report was produced at March 19, 2023, 22:08ET. and disseminated at March 20, 2023, 6:00ET.
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Cowen and Company, LLC. New York 646 562 1010 Boston 617 946 3700 San Francisco 415 646 7200 Chicago 312 577 2240 Cleveland 440 331 3531 Atlanta 866 544 7009 Stamford 646 616 3000 Washington, D.C.
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TD COWEN EQUITY RESEARCH RATING DEFINITIONS

Outperform (1): The stock is expected to achieve a total positive return of at least 15% over the next 12 months

Market Perform (2): The stock is expected to have a total return that falls between the parameters of an Outperform and Underperform over the next 12 months

Underperform (3): Stock is expected to achieve a total negative return of at least 10% over the next 12 months

Assumption: The expected total return calculation includes anticipated dividend yield

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TD Cowen Equity Research Rating Distribution

Distribution of Ratings/Investment Banking Services (IB) as of 12/31/22
Rating Count Ratings Distribution Count IB Services/Past 12 Months
Buy (a) 679 69.78% 125 18.41%
Hold (b) 289 29.70% 17 5.88%
Sell (c) 5 0.51% 0 0.00%
(a) Corresponds to "Outperform" rated stocks as defined in Cowen and Company, LLC's equity research rating definitions. (b) Corresponds to "Market Perform" as defined in Cowen and Company, LLC's equity research
ratings definitions. (c) Corresponds to "Underperform" as defined in Cowen and Company, LLC's equity research ratings definitions. Cowen and Company Equity Research Rating Distribution Table does not include any
company for which the equity research rating is currently suspended or any debt security followed by TD Cowen Cross-Asset Research.

Note: "Buy", "Hold" and "Sell" are not terms that Cowen and Company, LLC uses in its ratings system and should not be construed as investment options. Rather, these ratings terms are used illustratively to comply with
FINRA regulation.

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POINTS OF CONTACT

Analyst Profiles

Oliver Chen, CFA Tom Nass Katy Hallberg

New York New York New York
646 562 1424 646 562 1316 646 562 1321
oliver.chen@cowen.com thomas.nass@cowen.com katy.hallberg@cowen.com

Oliver Chen is an II-ranked analyst covering Tom Nass is an associate on the specialty Katy Hallberg is an associate on the
retailing/specialty, broadlines, department retail & broadlines/department stores team. specialty retail & broadlines/department
stores, & luxury goods. He has an MBA from He joined TD Cowen in 2022. stores team. She joined TD Cowen in 2021.
Wharton.

Jonna Kim, CFA Max Rakhlenko, CFA Bradley Jamison

New York New York New York
646 562 1419 646 562 1423 646 562 1375
jonna.kim@cowen.com max.rakhlenko@cowen.com bradley.jamison@cowen.com

Jonna Kim covers the specialty retail & Max Rakhlenko is a director on the retail & Bradley Jamison is an associate on the
broadlines/department stores team. She luxury team. He joined TD Cowen in 2016. retailing broadlines & hardlines/luxury
joined TD Cowen in 2018 from JPMorgan team. He joined TD Cowen in 2022 from
Chase. Hedgeye.

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57 | March 22, 2023