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MINNEAPOLIS - April 10, 2003 - Over the past six months, the economic downturn has continued, but since last fall teens have increased their spending on apparel, shoes and accessories. While the teens are spending more, their parents continue to spend money on their teens, but are slightly curbing spending on themselves. In addition, teens continue to list the same three top brands as last fall in Abercrombie & Fitch (ANF, Strong Buy, $31.04, #>), Limited's Express Unit (LTD, Outperform, $13.44, #=) and Pacific Sunwear (PSUN, Strong Buy, $21.21, #>). This data -- and much more -- was released today by U.S. Bancorp Piper Jaffray Retail Analyst Jeff Klinefelter, who recently completed his fifth proprietary research survey on teen spending habits and retail brand perception. Klinefelter conducted mall research tours with nearly 600 teens from 12 high schools in 11 states across the country and one province of Canada.

Brand Preferences
Klinefelter surveyed teens on their favorite places to shop as well as their spending habits. Based on their responses, Abercrombie & Fitch was found to be the most frequent overall destination for the fourth survey in a row grabbing 12 percent of the total votes. In second was Limited's Express Unit, followed by Pacific Sunwear. The same survey last fall found that Abercrombie & Fitch was the most frequent overall destination, followed by Pacific Sunwear and then Limited's Express unit (LTD, Outperform, $14.52, #). In spring 2002, the students chose Abercrombie & Fitch as their most frequent destination, followed by Limited's Express unit and American Eagle Outfitters (AEOS, Outperform, $15.01, #>=).
"Abercrombie & Fitch continues to be the top brand in our survey," said Klinefelter. "More importantly, in our view, is that Abercrombie's Hollister concept showed up in the top five brands having been only listed in the 24th spot six months ago. This is especially interesting, we believe, considering Hollister had stores in only two-thirds of the markets we surveyed. Also, we believe Express' move back to the number two spot this spring was due largely to male teens voting for Express Men's/Structure, which made fifth place this survey up from 12th spot in fall 2002."
Several other brands shifted rankings in the past six months according to the students. American Eagle Outfitters remained in the same place as last fall finishing fourth. In fifth was Abercrombie's Hollister concept as mentioned above. Aeropostale (ARO, Strong Buy, $15.25, #@>+) moved up slightly to 14th, from the 15th spot last fall. Aeropostale also had a presence in just two-thirds of the markets that were polled. The Gap (GPS, Outperform, $15.30, #>=) dropped from fifth to ninth, while Old Navy also fell from seventh to 10th in the past six months.
"Owing to what we believe is a combination of more choices of retailers from which to shop for current fashion trends as well as Gap Inc., focusing on more democratic appeal in its concepts, Gap and Old Navy both fell in the ranking and mind share," said Klinefelter.

Gen Y - Teen Spending Increases
Yearly spending among teens was $1,400, up from $1,156 in fall 2002. In spring 2002, yearly spending was $1,542. In spring 2003, girls spent $1,572 compared with $1,342 in fall 2002 and $1,458 in spring 2002. Guys spent $925 in spring 2003 compared with $890 in fall 2002 and $1,661 in spring 2002.
"Total spending on fashion products (apparel, shoes and accessories) increased by 21 percent on a sequential basis," said Klinefelter. "On a year-over-year basis this spending estimate is down 9.2 percent but on a two-year basis, it is up 6.1 percent. Bottom line, we believe this modest sequential improvement is an indication that fashion spending hit an inflection point during the past fall season and should continue to improve with a strong product offering."

Parents' Contribution to Teen Spending Remains Flat
In addition to surveying the students on spending patterns this spring, Klinefelter also surveyed approximately 150 parents, eliciting a 27 percent overall response rate. According to the data, parents are contributing $927 annually to their teens spending, compared with $935 in fall 2002 or down one percent sequentially. In spring 2002, parents spent $1,115 on their teens. Despite the drop, parents continue to pare their spending with greater magnitude, versus expenditures for their teens. Parent apparel spending slipped six percent sequentially and 23 percent from the prior year to $911. Also, shopping frequency is down overall and the major chains and discount stores were the only channels to gain shopping share.
Brand preferences for the parents reflect the channel shift to favor chain stores with Kohl's (KSS, Market Perform, $55.71, #@) and J.C. Penney (JCP, Not Rated, $18.89) among the top three favorite clothing stores when they shop for themselves. Department stores continue to be an important channel for the parents as it represented 32.5 percent of shopping time. According to the parents, the favorite store to purchase products for their teens is American Eagle Outfitters, followed by Express, and Abercrombie & Fitch and Gap (tied for third place). Kohl's also tied for third place, versus fall 2002 when it did not make the top five list. However, in the markets where Kohl's has a presence, it was the second choice behind American Eagle. This is in contrast to six months ago when it ranked fifth.

Total Spending
A key component of the survey asked the students to identify what percentage of their disposable income they spend on video games/systems, music/movies (DVDs, CDs), electronic gadgets, clothing, accessories/personal care, shoes, food, concerts/movies, car, books/magazines and other. This spring, clothing and accessories remain two of the most frequently shopped and purchased categories, second only to food. On average, teens shop for fashion-related products four times per year, with female consumers shopping five times per year and male consumers shopping slightly less than four times. The video games and hardware category also continues to increase in shopping frequency reaching slightly more than two times per year on average for all students. DVDs and CDs are also a frequently shopped and purchased category.

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