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Peter gallagher djib consumer highlights

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Key inputs in blue can be varied by the reader

Total amount of buyback (m) $1,204Average premium paid on current price 10%Net cash on hand; used in buyback (m) $404Interest rate on new debt 5%Free cash flow, FY2011 (m)* $200Debt issued in buyback (m) $800Average price paid per share 20.90$ Shares bought (m) 57.6

Fiscal 2010 estimated

Fiscal 2011 estimated

Fiscal 2011 estimated, with

buybackRevenues (m)* 5,013$ 5,135$ 5,135$ COGS (m) (3,504)$ (3,574)$ (3,574)$ Gross margins* 30.1% ` 30.4% 30.4%Operating income (m) 255$ 295$ 295$ Interest expense, net (m) -7.1 -6.6 -40Pretax income (m) 248$ 289$ 255$ Taxes (m) (86)$ (103)$ (91)$ Net income (m) 162$ 186$ 164$ Diluted shares 156.2 156.2 98.6EPS 1.03$ 1.17$ 1.67$

EPS accretiveness of buyback: 42%

Cash (m) 541$ 741$ 174$ Debt (m) 137$ 137$ 800$ Net debt (m) (404)$ (604)$ 626$

Effective interest rate 5% 5% 5%Tax rate 35% 36% 36%

Gross selling space (m) 12.8 12.6 12.6Sales/square foot 391$ 406$ 406$

Debt/free cash flow 1.0x 0.7x 5.0xNet debt/free cash flow N/A N/A 3.9x

* Consensus - FactSetSources: FactSet, Dow Jones reporting

Created on November 26, 2010

As the shoe retailer rebounds, the company finds itself underleveraged. Shareholders would benefit from a leveraged recap.

Dow Jones Investment Banker spreadsheets are provided on an “as-is” basis and are for information purposes only. Dow Jones specifically disclaims any representations or warranties, express or implied, includin g merchantability or fitness for a particular purpose. We do not give tax or investment advice or advocate the purchase or sale of any security or investment. You should always seek the assistance of a professional for tax and investment advice.

Foot Locker Hits Its Stride

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Inputs in blue can be adjusted by the reader

All figures in $ millionsFiscal 2010

sales

Fiscal 2010 operating

profit

Operating profit

margin

Depreciation & amortization

(DJIB estimate)

Fiscal 2010 Ebitda (DJIB

estimate)

Ebitda margin

Assumed Ebitda growth

('10 -'11)

Fiscal 2011 Ebitda

Mean peer forward multiple

Segment enterprise

value

North American Retail $2,818 $338 12% $95 $433 15% 5.0% $455 8.0x $3,637

North American Foodservice

$1,873 $149 8% $70 $219 12% 5.0% $230 7.0x $1,610

International Beverage $3,221 $586 18% $105 $691 21% 6.0% $732 9.0x $6,592

International Bakery $785 $45 6% $30 $75 10% 0.0% $75 6.0x $450

Total $8,697 $1,118 $300 $1,418 16.3% 5.2% $1,492 8.2x $12,289Cash

adjustment $3,514Adjusted SOP

value $15,802Current EV $13,107Difference $2,695Discount 17%

Equity value $19.9615% Tax Leak $16.96

Updated: December 22, 2010 Stock price $17.50Source: Company filings, DJIB Estimates Premium 3%

At Sara Lee's current stock price, its individual business lines are worth only slightly more separately than the company's current market value. That is not enough to offset modest tax leakage that could be expected if the units were sold. Therefore, a tax-free spinoff of the beverage unit along with an accelerated stock repurchase would be more shareholder friendly than a breakup.

Dow Jones Investment Banker spreadsheets are provided on an “as-is” basis and are for information purposes only. Dow Jones specifically disclaims any representations or warranties, express or implied, including merchantability or fitness for a particular purpose. We do not give tax or investment advice or advocate the purchase or sale of any security or investment. You should always seek the assistance of a professional for tax and investment advice.

Sara Lee: Fully Valued Assuming Modest Tax Leakage

Sara Lee received $1.7 billion in proceeds December 6 and has additional business divestures of $1.1 billion not yet closed. These flows are taxed at a 15% capital gains rate (0% tax basis).

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YTD ∆% Mkt Cap RemainingThe TJX Cos., Inc. Apparel 19.2% $20.6B Apr '11: $361M $1,200MPolo Ralph Lauren Corp. Apparel 16.7% $12.4B Dec 10: $0M $719MVF Corp. Apparel 13.2% $10.7B Mar '11: $3M 6.5M sharesThe Buckle, Inc. Apparel 5.3% $1.9B Jan '11: $0M 0.6M sharesPhillips-Van Heusen Corp. Apparel 3.0% $4.4B Jan '11: $0M $0MGap, Inc. Apparel -15.4% $10.9B Apr '11: $548M $1,500MGuess?, Inc. Apparel -17.3% $3.6B Jan '11: $0M $250MMacy's, Inc. Department 11.8% $12.0B Jan '11: $0M $852MJ.C. Penny Co., Inc. Department 11.8% $7.8B Apr '11: $900M $0MNordstrom, Inc. Department 7.4% $10.0B Apr '11: $176M $985MRoss Stores, Inc. Discount 25.8% $9.4B Apr '11: $112M $788MFamily Dollar Stores, Inc. Discount 9.3% $6.6B Feb '11: $150M $350MKohl's Corp. Discount 0.3% $15.8B Apr '11: $445M $3,055MTarget Corp. Discount -18.1% $33.9B Apr '11: $819M $1,400MFoot Locker, Inc. Footwear 26.7% $3.8B Apr '11: $30M $170MThe Finish Line, Inc. Footwear 26.5% $1.2B Feb '11: $6M 2M sharesWolverine World Wide, Inc. Footwear 18.9% $1.9B Mar '11: $5M $149MNike, Inc. Footwear -1.3% $40.0B Feb '11: $468M $3,300MCoach, Inc. Leather 8.4% $17.6B Mar '11: $192M $1,300MThe Men's Wearhouse, Inc. Men's 31.8% $1.7B Jan '11: $46M $104MAbercrombie & Fitch Co, Teen 29.7% $6.5B Apr '11: $26M 9.3M sharesAmerican Eagle Outfitters, Inc. Teen -6.6% $2.7B Jan '11: $24M 14.5M sharesLimited Brands, Inc. Underwear 27.1% $12.5B Apr '11: $500M $500MChico's FAS, Inc. Women's 18.6% $2.5B Apr '11: $36M $145M

$4,847M $16,767M

Source: Company Filings and Press Releases

StockMost Recent Quarter Reported

Buybacks

Nearly $5 billion in recent share buybacks and $17 billion available under existing authorizations should open the door to more IPOs in the retail sector

Dow Jones Investment Banker spreadsheets are provided on an “as-is” basis and are for information purposes only. Dow Jones specifically disclaims any representations or warranties, express or implied, includin g merchantability or fitness for a particular purpose. We do not give tax or investment advice or advocate the purchase or sale of any security or investment. You should always seek the assistance of a professional for tax and investment advice.

Retail Buybacks are In

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Nestle SA deal for Ralston Purina Co.

2001

($M LTM) EV/sales EV/EbitdaSales $2,766 $2,080Ebitda $758 $604Ebitda margin 27% 29%Price/sales 4.2x 4.2x EV/Ebitda 15.3x 15.3x EV $11,631 8,747 9,265

Created June. 27, 2011

Sources: FactSet, company filings, DJIB reporting and estimates

Pet Nutrition Segment

DJIB estimate

Colgate Palmolive Co

Colgate Palmolive's pet nutrition unit has litte in common with the parent's dominant business--selling oral, personal and home care products--and management seems to pay little attention to the pet business. Other pet food businesses have sold at rich multiples. Using the closest comp, Colgate's business would be worth around $9 billion. Blue figures are inputs that the user can vary.

Dow Jones Investment Banker spreadsheets are provided on an “as-is” basis and are for information purposes only. Dow Jones specifically disclaims any representations or warranties, express or implied, includin g merchantability or fitness for a particular purpose. We do not give tax or investment advice or advocate the purchase or sale of any security or investment. You should always seek the assistance of a professional for tax and investment advice.

Colgate: How Much Would You Pay For Pet Food?

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$ figures in millions

($M LTM) FY 2010 FY 2011 E EV/sales EV/Ebitda EV/sales EV/Ebitda EV/sales EV/EbitdaSales $323 $370 $1,841 $2,008 $2,750Ebitda $36 $45 $194 $233 $350Ebitda margin 11% 12% 11% 12% 13%EV/sales 1.6x 1.4x 1.5x 1.4x 1.0x EV/Ebitda 14x 11x 14x 11x 8x EV $517 $517 $2,803 $2,655Current EV $1,624

63%

Implied market cap $2,048Current market cap $1,018Potential premium 101%Implied share price $10.04

Created July 11, 2011

Sources: FactSet, company filings, DJIB reporting and estimates

PPR SA deal for Volcom, Inc.May 2, 2011

$M LTM 2012 Consensus 2015 Goal

Quiksilver, Inc.surfing, skateboarding and snowboarding

apparel, footwear, accessories DJIB estimate

PPR's purchase of sports wear maker Volcom sent a message about the attractiveness of U.S. action sports brands. The next target could be Quiksilver. Blue figures are inputs that the user can vary.

Dow Jones Investment Banker spreadsheets are provided on an “as-is” basis and are for information purposes only. Dow Jones specifically disclaims any representations or warranties, express or implied, includin g merchantability or fitness for a particular purpose. We do not give tax or investment advice or advocate the purchase or sale of any security or investment. You should always seek the assistance of a professional for tax and investment advice.

Quiksilver: Skating Its Way To A Sale

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($ figures in millions, except share prices)

FY 2006 LTM 7/31/07 FY 2010 LTM 3/31/11 EV/sales EV/Ebitda EV/sales EV/Ebitda EV/sales EV/Ebitda EV/EbitdaSales $151 $152 $1,242 $1,258 $968 $995 $1,100 Financial StrategicEbitda $10 -$2 $110 $110 $35 $88 $99 $99Ebitda margin 6% -1% 9% 9% 4% 9% 9% 9%EV/sales 0.9x 0.9x 1.0x 1.0x 0.6x 0.6x 1.0x EV/Ebitda 14x NM 11x 11x 17x 7x 9x 11x EV $133 $133 $1,225 $1,225 $1,100 $842 $1,089

Current EV $603 $60340% 81%

Implied market cap $867 $1,114Current market cap $628 $628Potential premium 38% 77%Implied share price $9.11 $11.71

Created July 21, 2011

October 31, 2007 May 19, 2011 putters (11%), golf balls (18%), accessories (25%)

FY 2010 2012 Consensus 2013 Potential

SRI Sports deal for Fila Korea deal for Callaway Golf Co.Roger Cleveland Golf Co. Acushnet Co. Drivers & fairway woods (23% of sales), irons (23%),

Signs of a spring recovery could result in a revaluation of Callaway Golf Co. Blue figures are inputs that the user can vary.

Callaway: Valued Below Par

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