Abercrombie

Fatima-‐Ezzahra Bouayad-‐Amine, Yegor Bryukhanov, Guilhem Horvath, Seda Karacaoglu, Veronika Safonova

Agenda

2

1. Market and company analysis

2. Buyout rationale and value creation levers 3. Valuation and deal

4. Exit strategy

An industry dominated by clothing and subject to cyclical growth

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Clothing Sportswear Footwear Apparel

1 380

250 50 1 730

-‐4%

-‐3%

-‐2%

-‐1%

0%

1%

2%

3%

4%

5%

6%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Apparel Clothing Sportswear Footwear

Growth in the apparel industry (07-‐17) Breakdown by products ($bn)

•  The apparel industry is largely composed by clothing. It is subject to cyclical growth

•  The main growth driver is the economy’s health Source: Euromonitor 2013

3

Market analysis

The industry is dependent on the emerging markets

Growth in the apparel industry (07-‐17) Breakdown by region ($bn)

Asia-‐PaciZic represents 32% of the apparel worldwide sales and has been growing to levels above 6% lately. Source: Euromonitor 2013

0

200

400

600

800

1000

1200

1400

1600

445

340

325 100

170 1 380

-‐8%

-‐6%

-‐4%

-‐2%

0%

2%

4%

6%

8%

10%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

World Asia paciZic Western europe North america Latin america

4

Market analysis

Industry is highly fragmented but has been consolidating lately

Market shares in the clothing market (2012)

•  The clothing industry is highly fragmented thanks to little barriers to entry

•  During 2004-‐2011 period, fragmentation lessened: in 2011, major brands accounted for 18% of total value sales

•  Industry consolidation is partly due to the rise of vertically-‐integrated retailers such as H&M and Inditex

•  The expansion of their store footprint has enabled these players to capture a larger share of the market 0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0%

2004 2005 2006 2007 2008 2009 2010 2011

Major clothing brands Rest of the market Major clothing as a % of the total market

Source: Euromonitor 2013 5

Comments

Market analysis

A group with core brands and markets, expanding in fast-‐growing businesses Global sales by brand ($m)

•  Hollister and A&F are the major brands of the company

•  Hollister was estimated to grow at a 25% rate for FY 2012

•  A&F and Abercrombie Kids barely achieve pre-‐crisis volumes

•  Gilly Hicks is still very small compared to other brands but is growing very fast

Source: Euromonitor 2013

-‐200

300

800

1300

1800

2300

2006 2007 2008 2009 2010 2011 Abercrombie & Fitch Abercrombie Hollister Gilly Hicks

0

1000

2000

3000

4000

5000

2009 2010 2011

U.S. Stores International Stores Direct to Customers

•  Due to A&F origins, the largest share of sales is realized in the US

•  International sales are now the key growth drivers

•  Direct sales via dedicated website have also been expanding

Sales breakdown by type of store ($m)

8%

2%

0%

44%

CAGR ‘06 – ‘11

17% 85%

7%

CAGR ’09 – ‘11

6

Comments

Company analysis

A&F is less proZitable than peers due to important SG&A costs Gross margin benchmark

Source: Euromonitor 2013

30%

40%

50%

60%

70%

2012 2011 2010 2009 American Eagle ANF GAP

0%

5%

10%

15%

2012 2011 2010 2009 American Eagle ANF GAP

Operating margin benchmark

0%

2%

4%

6%

8%

10%

2012 2011 2010 2009

American Eagle ANF GAP

Net proRit margin benchmark

•  Abercrombie & Fitch is well above listed competitors in terms of gross margin

•  However, operating and net proZit margins lag behind, mainly due to SG&A expenses (over 55% of A&F revenues vs. 5% to 25% of competitors’)

•  Overall, A&F is improving its performance over time while others are either stagnant or declining

7

Company analysis

Comments

A&F has only started to improve its inventory turnover and to reshufZle its real estate portfolio Inventory turnover ($m)

•  Inventory turnover of A&F is way higher than competitors’, although it improved in 2012

Source: Companies Zinancials

•  Capex is a reZlection of new stores openings and closures: A&F is in the process of optimization of its store base

•  GAP increases its capital expenditures while American Eagle is relatively Zlat

Capex

0 20 40 60 80 100 120 140

2012 2011 2010 2009

American Eagle ANF GAP

0% 2% 4% 6% 8% 10% 12% 14%

2012 2011 2010 2009

American Eagle ANF GAP 8

Company analysis

Comments

Comments

A&F is an interesting LBO target as it is currently undervalued and has important growth potential

Source: Google Finance

American Eagle OutRitters

Abercrombie and Fitch

GAP

9

Market performance

Agenda

10



4. Exit strategy

Why is selling to a PE fund the best option?

Remain independent Sell to competition Sell to a diversiRied textile group

Sell to a PE fund

Top-‐line performance

Declining sales in major A&F Group brands, minor brands struggling to break through

Little cross-‐selling and distribution synergies

Distribution and cross-‐selling synergies

Future growth will be maximised

Bottom-‐line performance

Durably decreasing, low and volatile margins

Synergies allow decrease in SG&A costs

Costs rationalisation allows proZitability increase

Incentive to increase substantially proZitability

Management& Employees

Low performance is putting both management and employees at risk

•  Management likely to be replaced by buyer’s protégés

•  Probable headcount decrease to realise synergies

•  Possibly unchanged management thanks to its recognised expertise

•  Probable headcount decrease to realise synergies

•  Unchanged management, incentivised thanks to a management package

•  Possible layoffs to reduce costs

Outcome -‐ -‐ -‐ + ++ 11

Expansion of the product line

Action Impact Rationale

•  Introduction of sportswear line:

•  SurZing •  Swimming •  Fitness

outZits •  Applies to Hollister

and AnF stores

+2% revenues per store annually

•  Fast growth of sportswear segment

•  Alignment with the brand image

•  Expansion of target customer base

•  Enlargement of accessories offering:

•  Jewelry •  Sunglasses •  Watches

•  Applies to Hollister and AnF stores


•  Increase in purchases per customer

•  High margin items •  Complete looks

offering

Implementation

•  Partnership with sportswear manufacturers

•  A&F branding •  Partnerships

with sports events organizers

•  Purchases from external producers

•  A&F branding

12

Revenue growth levers

Rationalization of marketing


•  Increased exposure to external audience rather than in-‐store:

•  Billboards •  Magazines

•  Mostly focused on Hollister brand

•  No increase in marketing spend

•  Reallocate budget from in-‐store experience to external advertising tools

•  Raise awareness using direct exposure

•  Maintain the premium positioning and the spirit of the brands

•  Social media campaigns •  Viral content •  Online games

•  Cover all brands

•  Sponsorship of summer sport events

•  Cover all brands


13


Shift in geographic focus

2,9

8,8

0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 8,0 9,0 10,0

US store International store

Revenue per store in 2011

Average revenue per store – 3,5

0 100 200 300 400 500 600 700 800 900 1000

LA Europe Asia Canada Middle East

US stores

2011 2017

The geographical presence must be changed: we reduce the US stores and expand internationally

Currently US stores are performing poorly compared to international stores

Actual and target breakdown of number of stores per region

14


Store openings: 75 per year

Cost of opening/ closure per store

Five-‐year store locations management plan

Store closures: 50 per year

USD 0,25m

USD 5,5m

Total cost per year

USD 414m

USD 12,5m

•  45 Hollister •  15 A&F •  10 Gilly hicks •  5 Abercrombie

•  Natural closure •  A&F and Abercrombie •  Overlapping stores in

the same mall

Criteria

15


Online strategy


•  Selling product through other online platform (Asos, Zalando..)

•  Improving website experience (more languages, ergonomic..)

•  Improve delivery services

•  No risk of cannibalization

•  Targeting new kind of customers

•  Increasing sales with better margins

Maintain 30% growth

16


3,5

4,0

3,2

3,3

3,4

3,5

3,6

3,7

3,8

3,9

4,0

2011 2017

Evolution of sales per store

+14%

Expansion of product line

Rationalization of marketing

New geographic mix

Revenue improvement drivers

m$

Summary of store revenue growth initiatives

17


Cost reduction levers

Cost item Impact Action

•  Closures of underperforming stores in the US allow for increase in operating margin

•  Decrease of store expensed by 0,4% of revenue per annum

•  Stores expense

•  Cut the in-‐store promotional activities in A&F stores in established markets

•  Marketing expense

•  Introduce strict inventory management system

•  Inventory cost

•  Decrease inventory turnover from ~80 to ~70 days of sales

•  0,5% of revenue in marketing cost saving

18

Cost reduction levers

•  Consolidation of distribution centers: centralized hubs in major regions

•  Distribution expense

•  Saving in distribution expense of 0,1% of revenue

Agenda

19



4. Exit strategy

Valuation Summary

59

64

45

46

65

62

66

Discounted Cash Flow

Transac>on Comparables

Transac>on Comparables, net of premium

Comparable Companies

88

Valuation Summary Using Wall Street Projections

Implied Purchase price of 60$ a share, constituting a 26% over the closing price on the

31st of December 2012

•  Valuation using Wall Street analyst consensus estimates at WACC of 8,6% allowed us to arrive at a fair value of the company

•  Based on the 4 different valuation methodologies a number of valuation ranges were examined

•  A price of 60$ a share was chosen as the one that reZlects the possible price that might be paid by the strategic buyer if a competitive tender was organized

•  The resulting price implies:

•  Entry EBITDA’12 multiple of 7,04x

•  Deal Enterprise Value of 4,5$bn

•  Deal Equity Value of 5,1$bn

20

Comments

•  A range of Zinancing structures was identiZied for the buyout, of comparable risk proZiles

•  Equity contribution of the management and the sponsor vary from 33% to 43% of the total uses

•  A revolving credit facility in the amount of 400$m was established to mitigate any unexpected cash shortfalls

•  All structures assume reZinancing of existing of 65$m. In order to craft the most appealing Zinancing structure

Transaction Structure

1000 2000 1200

700

1000

1648 1598

1043

1994

1765 2015 1516 2265

646 646

0%

20%

40%

60%

80%

100%

Structure 1 Structure 2 Structure 3 Structure 4

Term Loan A Term Loan B Senior Subordinated Notes Total Equity Contribution Cash on Hand

A range of proposed transaction structures

After careful operational and performance analysis under different scenarios, it was decided to retain the

Structure 1, beneRicial for both sponsor and management

21

Comments

Debt Allocation and Capital Optimization

•  The proposed Zinancing structure for the LBO is comprised of:

•  Term Loan B: •  Size: 1200$m •  Pricing: LIBOR + 350bp •  Term: 9 years •  Repayment: 1% per annum, bullet

•  Senior Subordinated Notes: •  Size: 1648$m •  Pricing: 10% coupon per annum •  Term: 10 years

•  Interest expenses comprised of mainly subordinated note coupon payments

•  Due to cash shortfall, revolver is triggered in the Zirst 3 years, repaid fully by 2016

•  Cash is applied, meaning that all the cash generated is directed to make optional loan repayments

•  No commitment charge was negotiated

1200 1188 1176 1001 705 267

1648 1648 1648 1648 1648

1648 1648

Pro Forma 2012

2013 2014 2015 2016 2017 2018

Term Loan B Senior Subordinated Notes

Financing Structure Evolution

45,6 45,4 45,2 38,6 27,3 10,4

164,8 164,8 164,8 164,8 164,8 164,8

1,0 1,2 0,2

2013 2014 2015 2016 2017 2018

Term Loan Subordinated Notes Revolver

Interest Expenses in $m

22

Comments

Key Credit Statistics

•  Due to strong cash generation capabilities A&F quickly reduces debt loading

•  Once term loan A has been repaid, cash position becomes positive, allowing for additional cushion

•  Even though under LBO scenario credit statistics signiZicantly above industry averages, company is able to sustain it in our view

•  EBITDA/cash interest expense are considered strong to sustain debt loading

•  As expansion strategy kicks in and debt is being reimbursed, the company will show signiZicant balance sheet improvements

•  Debt to total capitalization will stand at 40% post exit, due to subordinated notes only, leaving the company in a great condition for potential buyers

7,7

5,8

4,2 3,0

2,0 1,4

7,7

5,8 4,2

3,0 2,0

1,2

2013 2014 2015 2016 2017 2018

Total debt/ EBITDA Net debt/EBITDA

Total Debt/EBITDA & Net Debt/EBITDA

EBITDA and Debt Loading

1,76 2,31

2,99 3,87

5,09

6,50

63,3% 63,0% 60,5% 55,6%

47,3% 39,9%

0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0%

0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00

2013 2014 2015 2016 2017 2018

EBITDA/Cash interest expense % Debt to Total Capitaliation 23

Comments

CAPEX & D&A Statistics Capital Expenditures – LBO case vs. Wall Street estimates

•  Due to aggressive expansion strategy, CAPEX signiZicantly exceeds Wall Street Projections

•  However, we believe that these investments will pay off in terms of top-‐line expansion and margin optimization

•  Even at these levels of CAPEX, the company experiences no difZiculties in servicing debt

•  Depreciation expenses allow for tax shield and provide room for additional EBIT expansion

•  Assumed to be equal to CAPEX in the year after the exit and in after

414 414 414 414 414 414

200 210 220 230 240 245

106,9% 97,0% 88,0% 79,9% 72,4% 69,0%

0,0% 20,0% 40,0% 60,0% 80,0% 100,0% 120,0%

0

100

200

300

400

500

2013 2014 2015 2016 2017 2018

CAPEX -‐ LBO case CAPEX -‐ Wall Street estimates

% Increase over estimated

Depreciation – LBO case vs. Wall Street estimates

254 281 313

347 385 414

221 217 213 212 212 212

2013 2014 2015 2016 2017 2018

D&A -‐ LBO case D&A -‐ Wall Street Estimates 24

Comments

EBITDA & EBIT Improvement

373 488

627 787

977 1139

8,23% 9,73%

11,23% 12,73% 14,23%

15,91%

0,00%

5,00%

10,00%

15,00%

20,00%

0

200

400

600

800

1000

1200

2013 2014 2015 2016 2017 2018

EBITDA EBITDA Marging

EBITDA & EBITDA margin show steady growth

•  EBITDA shows steady growth due to the cost-‐cutting initiatives and partially due to D&A increases

•  EBITDA margin shows increase due to efZiciencies resulting from policies implemented post – LBO

•  In the Zirst years lower than consensus estimates due to aggressive expansion and resulting MG&A and store related expenses

•  EBIT margin and EBIT improve due to the growth in the top-‐line, operating efZiciencies and tax shield provided by increase D&A on new CAPEX

EBIT & EBIT margin growth

119 207

314

441

592 725

2,6% 4,1%

5,6%

7,1%

8,6%

10,1%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

0 100 200 300 400 500 600 700 800

2013 2014 2015 2016 2017 2018

EBIT EBIT margin 25

Comments

Equity Value at Exit

Equity Value Evolution

•  Standard holding period of 5 years was applied to the case of A&F

•  Due to strong operating strategy and cash generation, core debt is being repaid over the holding period, leading to dramatic increase in equity value in 2017 exit year

•  Conservatively assumes same exit multiple as entry multiple of 7,04x

IRR - Assuming Exit in 2017E Exit Multiple

23,1% 6,0x 6,5x 7,0x 7,5x 8,0x 6,0x 17,6% 17,6% 17,6% 17,6% 17,6% 6,0x 17,8% 17,8% 17,8% 17,8% 17,8% 6,5x 20,6% 20,6% 20,6% 20,6% 20,6% 7,0x 23,1% 23,1% 23,1% 23,1% 23,1% 7,5x 25,4% 25,4% 25,4% 25,4% 25,4% 8,0x 27,6% 27,6% 27,6% 27,6% 27,6%

IRR - Assuming 0.7x Entry Multiple Exit Year

2015 2016 2017 2018 2019 0,2% 16,1% 23,1% 24,9% 25,0%

6,0x -13,4% 8,1% 17,8% 21,1% 22,0% 6,5x -6,1% 12,3% 20,6% 23,1% 23,6% 7,0x 0,2% 16,1% 23,1% 24,9% 25,0% 7,5x 5,8% 19,5% 25,4% 26,7% 26,3% 8,0x 10,9% 22,6% 27,6% 28,3% 27,5%

-‐258 603

1767

3189

4965

2882 2832 2649 2353 1915

2013 2014 2015 2016 2017

Equity Value at Exit Net Debt

26

Comments

IRR decomposition in the case of 30% equity and 70% debt

Source: Team estimates

9,3%

0,5% 0,0%

13,2%

23,0%

Revenue effect Margin effect Multiple effect Leverage effect IRR

In the case of 70% debt and 30% equity, return is generated for 40% via sales increase and for 57% via leverage effect. Overall IRR is at 23% in a 5-‐year horizon

Comments

27

An attractive management package

Source: Team estimates

•  Management initial investment: $75m, getting 5% of the company’s total equity

•  Ratchet mechanism: performance target is set at a IRR of 20%. If beaten, the management share doubles

Compensation Ratchet effect on IRR

Mike Jeffries Chairman & CEO

40%

David Cupps General Counsel &

Secretary 20%

Michael Kramer CFO 20%

Leslee Heero Head of Strategy

20%

Participations

28

0%

20%

40%

60%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

30%

32%

34%

36%

38%

40%

Sponsors Management

Source: Abercrombie & Fitch investor relations

Agenda

29



4. Exit strategy

Exit Strategy

Fundamentals

Strategic Rationale

Challenges

Evaluation

IPO Secondary Buyout

•  Mcap: 17,05$bn •  EBITDA: 2,51$bn

•  Mcap: 21,77$bn •  EBITDA: 2,01 $bn

•  Mcap: 10,83$bn •  EBITDA: 1,68$bn

•  IPO guarantees a fair price

•  AUM > 5$bn •  EBITDA > 500$m

•  Requires previous squeeze out

• Depending on economic outlook

•  Listing on NYSE with GDR on LSE

•  Apparel industry may not seem appealing

•  Low price likely

•  If strategic levers do not generated required performance

•  Strategic buyer likely to pay high premium of 20-‐30% •  One of these might be interested in improving their international positions and product ranges by forming a new partnership with A&F

•  Possess large cash and lending capability and will be able to pay the price

•  For GAP and Nordstrom, there might be anti-‐trust regulatory issues •  Cyclicality of the industry might hamper purchase ability of the companies

•  Employees might be against takeover by direct competitors •  Future product ranges, trends and positioning of the brand may not coincide

30

++ + -‐

APPENDICES

31

Pro Forma Income Statement Income Statement

Actual Estimated Projected In USD mln., except per share data 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Revenue Net Store Sales 2 633 3 051 3 586 3 891 3 728 3 981 4 249 4 452 4 621 4 691 Direct-to-consumer sales 290 405 552 599 779 1 012 1 316 1 711 2 224 2 447 Other 5 12 18 20 20 20 20 20 20 20

Total Revenue 2 928 3 468 4 156 4 510 4 527 5 013 5 584 6 182 6 865 7 157 Cost of Sales -1 045 -1 256 -1 639 -1 694 -1 678 -1 833 -2 014 -2 199 -2 407 -2 474

Gross Profit 1 883 2 212 2 517 2 816 2 849 3 180 3 571 3 984 4 458 4 684 Stores & Distribution Expense -1 425 -1 589 -1 888 -1 988 -2 290 -2 511 -2 769 -3 035 -3 335 -3 441 MG&A Expense -353 -400 -437 -474 -453 -477 -503 -526 -550 -537 Other Operating Expense 14 10 -3 19 13 14 16 17 19 20

Operating Profit 119 233 189 374 119 207 314 441 592 725 Revolving Credit Facility -1 -1 0 0 0 0 Term Loan A 0 0 0 0 0 0 Term Loan B -46 -45 -45 -39 -27 -10 Senior Subordinated Notes -165 -165 -165 -165 -165 -165 Cash Interest Expense -211 -211 -210 -203 -192 -175 Amortization of deferred financing fees -8 -8 -8 -8 -8 -8 Total Interest Expense -219 -219 -218 -211 -200 -183 Interest Income 0 0 0 0 0 2 Interest Expense, net 2 -3 -4 -7 -219 -219 -218 -211 -200 -181

Pre-tax Income 121 230 185 366 -100 -12 96 230 393 544 Income Tax -41 -78 -60 -130 35 4 -34 -80 -137 -191

Net Income From Continuing Operations 80 151 126 236 -65 -8 63 149 255 354 Income/Loss from Discontinuing Op -79 0 1 0 0 0 0 0 0 0

Net Income 1 151 127 236 -65 -8 63 149 255 354 Net Income margin 0,05% 4,37% 3,05% 5,24% -1,44% -0,16% 1,12% 2,41% 3,72% 4,94%

EBITDA 358 462 422 626 373 488 627 787 977 1139

32

Pro Forma Balance Sheet Balance Sheet

Estimated Projected 2012 Adjustments Pro Forma 2012 2013 2014 2015 2016 2017 2018

Assets Current Assets + -

Cash & Equivalents 646 -645,7 0 0 0 0 0 0 319 Marketaeble Securities 0 0 1701 1762 2713 2431 2301 2401 Receivables 100 100 100 111 123 137 152 158 Inventories 362 362 357 389 426 463 505 517 Deferred Income Taxes 55 55 73 80 90 99 110 115 Other Current Assets 105 105 106 117 130 144 160 167

Total Current Assets 1267 622 2336 2459 3482 3273 3228 3676

PPE, net 1308 1308 1468 1601 1702 1769 1798 1798 Non-current marketable securities 0 0 0 0 0 0 0 0 Deferred Financing Fees 67,2 67 60 52 44 36 29 21 Other assets 366 366 106 117 130 144 160 167 Goodwill & Intangible Assets 3324,3 3324 3324 3324 3324 3324 3324 3324

Total Assets 2942 5688 7294 7553 8682 8547 8539 8986

Liabilities Current Liabilities

Accounts Payable 143 143 154 171 190 210 233 243 Accrued Expenses 392 392 393 436 485 537 597 622 Deffered Lease Credit 39 39 44 48 51 53 54 54 Income Tax Payable 114 114 114 114 114 114 114 114

Total Current Liabilities 688 688 706 769 841 915 998 1033

Long-term Liabilities Revolving Credit Facility 46 8 0 0 0 0 Term Loan A 0 0 0 0 0 0 0 0 Term Loan B 1200 1200 1188 1176 1000,98 704,771 267 0 Senior Subordinated Notes 1648 1648 1648 1648 1648 1648 1648 1648 Deferred Income Tax 1 0,6 16,1 17,6 18,7 19,4 19,7 19,7 Deferred Lease Credits 168 168,4 189,0 206,1 219,0 227,7 231,4 231,4

Long-term debt (Leaseold Financial Obl) 64 -63,9 0,0 0,0 0,0 0,0 0,0 0,0 0,0 Other Liabilities 245 0,0 1828,2 2064,4 3227,3 3155,5 3243,0 3568,6

Total Liabilities 1166 5621,5 5888,7 6954,9 6670,4 6407,0 6500,8

Shareholder's equity Total Shareholder's Equity 1776 1737,5 -1775,7 1737 1672 1665 1727 1876 2132 2485

Total Shareholder's Equity & Liabilities 2942 7294 7553 8682 8547 8539 8986 33

Pro Forma Cash Flow Statement Cash Flow Statement

Projected 2012 2013 2014 2015 2016 2017 2018

Cash from Operating Activities Net Income 236 -65 -8 63 149 255 354 Depreciation and amortization 253 254 281 313 347 385 414 Non-cash chage for asset impairment 68 169 175 201 198 197 208 Loss on Disposal/Write-off of Assets 22 56 58 66 65 65 69 Deferred Lease Credits Amortization -48 -54 -59 -63 -65 -66 -66 Other 16 16 16 16 16 16 16 Inventories (Inc/Dec) 208 5 -32 -37 -37 -42 -12 Other Assets & Liabilities -21 0 -11 -13 -14 -16 -7 Accounts Receivable (Inc/Dec) -10 0 -11 -13 -13 -15 -6 Deferred Income Taxes (Inc/Dec) 22 -18 -8 -9 -10 -11 -5 Accrued Expenses (Inc/Dec) 17 1 42 50 52 59 25 Accounts Payable (Inc/Dec) -69 12 17 19 20 23 9 Deferred Lease Credits (Inc/Dec) -2 5 4 3 2 1 0 Income Taxes (Inc/Dec) 37 0 0 0 0 0 0 Total Change in Working Capital 182 4 1 0 0 -1 5

Net Cash from Operating Activities 379 464 597 710 852 999 Cash from Investing Activities

Capital Expendiure -414 -414 -414 -414 -414 -414 Other Investing 0 0 0 0 0 0

Net Cash from Investing Activities -414 -414 -414 -414 -414 -414 Cash from Financing Activities

Revolving Credit Facility 46 -38 -8 0 0 0 Term Loan A 0 0 0 0 0 0 Term Loan B -12 -12 -175 -296 -438 -267 Senior Subordinated Notes

Cash flow from Financing Activities 34 -50 -183 -296 -438 -267

Beginning Cash Balance 0 0 0 0 0 0 Change in Cash 0 0 0 0 0 319

Ending Cash Balance 0 0 0 0 0 319 34

Weighted Cost of Capital Calculation WEIGHTED COST OF CAPITAL CALCULATION

WACC Calculation - Netherlands Capital Structure Debt-to-total capitalization 2% Equity-to-total capitalization 98%

Cost of Debt Cost of Debt 5,00% <==== Estimation Tax Rate 35% <==== Normalized US Tax Rate After Tax of debt 3,25%

Cost of Equity Risk Free Rate 1,8% <===== US 10 y treasury bond yield Market Risk Premium 4,0% <===== Duff & Phelps Equity Risk Premium Levered Beta 1,71 <===== Thomson One Banker Cost of Equity 8,6%

WACC 8,6%

Market Cap Calculation Share Price 46,99 <==== As of 3rd of April 2013 Shares Outstanding 85,64 <==== As of 3rd of April 2013 Total Market Capitalization 4024,2 <==== As of 3rd of April 2013

Value of Debt 64 <==== 2012 proxy statements

Total Capitalization 4088 35

DCF – Wall Street Consensus Estimates DISCOUNTED CASH FLOW ANALYSIS

Source: Credit Suisse Research Reports, case of a next best buyer, made according to the Street Estimates

Assumptions

WACC 8,56%

Tax Rate 35%

Perpetual growth rate 1,00%

EBITDA 358 462 422 626 664 713 769 820 1 046 1 104

% margin 12,22% 13,33% 10,15% 13,89% 14,12% 14,45% 14,88% 15,06% 15,24% 15,42%

Less: Depreciation & Amortization 239 229 233 253 221 217 213 212 212 212

EBIAT 78 155 129 244 280 315 358 396 400 420

Plus: Depreciation & Amortization 239 229 233 253 221 217 213 212 212 212

Less: Capital Expenditure 414 414 414 414 200 210 220 230 240 245

Less: Increase in Net Working Capital 0 -1 20 30 35 45

Unlevered Free Cash Flow 301 323 331 348 337 342

Discount Period 0,5 1,5 2,5 3,5 4,5 5,5

Discount Factor 0,96 0,88 0,81 0,75 0,69 0,64

Present Value of Free Cash Flows 289 285 269 261 233 218

Scenario 1

Terminal Year Free Cash Flow 346

WACC 8,56%

Capitalization rate 7,56%

Terminal Value 4574

Present Value Factor 0,64

PV of terminal value 2912,309

PV of Free Cash Flows 1555

Total Enterprise Value 4468

Less: Net Debt -582

Total Equity Value 5049

Total Shares Outstanding 85,64

Current Price per Share 46,99

Share Price as per DCF 58,96

Premium/Discount to Current Price 25,5% 36

Business Plan Scenarios Base Case 2013 2014 2015 2016 2017 2018 2019 2020 2021

Net Store Revenue 3728 3981 4249 4452 4621 4691 4761 4832 4905

Direct to Customers 779 1012 1316 1711 2224 2447 2618 2722 2750

Other 20 20 20 20 20 20 20 20 20

Total Revenue 4527 5013 5584 6182 6865 7157 7399 7575 7675

COGS -1678 -1833 -2014 -2199 -2407 -2474 -2520 -2542 -2537

Stores Expense -2290 -2511 -2769 -3035 -3335 -3441 -3521 -3567 -3575

MG&A -453 -477 -503 -526 -550 -537 -518 -493 -461

Other 13 14 16 17 19 20 21 21 22

Downside 1



Other 19 19 19 19 20 20 20 20 20

Total Revenue 4436 4913 5473 6059 6728 7014 7251 7423 7521

COGS -1711 -1869 -2054 -2243 -2455 -2523 -2570 -2593 -2588

Stores Expense -2336 -2561 -2824 -3095 -3402 -3510 -3591 -3638 -3647

MG&A -462 -486 -513 -536 -561 -548 -529 -503 -470

Other 13 14 16 18 20 21 21 22 22

Downside 2



Other 19 19 19 19 19 19 19 20 20

Total Revenue 4391 4862 5417 5997 6659 6942 7177 7348 7445

COGS -1711 -1869 -2054 -2243 -2455 -2523 -2570 -2593 -2588

Stores Expense -2336 -2561 -2824 -3095 -3402 -3510 -3591 -3638 -3647

MG&A -462 -486 -513 -536 -561 -548 -529 -503 -470

Other 13 14 16 18 20 21 21 22 22 37

Abercrombie

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