Reinhard E. Döpfer Chairman of the European Fashion and Textile Export Council (EFTEC) Lingerie Market Report Russia Spring 2015 (Updated in May 2015) Presentation at 6 th RUSSIAN LINGERIE MARKET FORUM in the Framework of 15 th RUSSIAN FASHION RETAIL FORUM (RFRF) on the Occasion of MOSCOW MODE LINGERIE & SWIM February 24, 2015; 16:00 – 18:00 hrs.

Table of Content: 1.General reflections on the status of the Russian Intimate Apparel Market 2.Development of Intimate Apparel exports from the member states of EU-28 to Russia 2.1.Benchmark of EU-15 exports against EU-Eastern member states’ exports from 2008 until 2014, 2015p 2.2.Benchmark of the 10 main intimate apparel supplier countries, comparison of 2014 against Benchmark of the 6 main product category exports, comparison of 2014 against Share of main product categories of Intimate Apparel against total EU-28 Intimate Apparel Exports to Russia, Comparison of year 2014 to the crisis year Key indicators for the Russian Intimate Apparel Market 3.1.Projection on the shares of retail market value per price segment 2014 & 2015p 3.2. Projection on the share of main retail channels against total retail market value of € million for year 2015p 2 Lingerie Market Report Spring th RLMF, February 24, 2015 _________________________________________________________________________________________________________

1.General reflections on the status of the Russian Intimate Apparel Market Russian consumers of today have a rather need-oriented purchasing behavior for intimate apparel and have developed a very rational price-quality consciousness, which guides their buying decision to the lower-medium to medium-priced underwear. This attitude has accelerated over the past twelve months of 2014, due to the decline of the Ruble, surging inflation and the weakening development of the Russian economy. Fashion context, function and fit are secondary attributes which stand in contrast to the hype around body culture, fitness-training and wellness treatments. The Retail Structure for intimate apparel is split between open markets for mass consumption merchandise, domestic and international mono-brand chains offering “affordable” lingerie, a few, but important, multi-brand chains selling “better-to- premium” intimate apparel and privately owned multi-brand shops and boutiques operating in the medium- to upper-medium price segments. Department stores carrying large brand-exposing sections or concessions of women’s lingerie and men’s outerwear, as found in the West, are lacking in Russia. Instead, catalog distance retail and online retail are playing a consistently growing role in the commercialization of intimate apparel. 3 Lingerie Market Report Spring th RLMF, February 24, 2015 _________________________________________________________________________________________________________

Import Distributors carrying multi-brand portfolios of intimate apparel still play a dominant role in wholesale, serving over independent shops, often through a network of regional wholesalers. This archaic system of distribution, which costs multiple re-sell margins, is not really breaking up in any way because foreign brands still depend on these distributorships. Direct Purchasing of intimate apparel from foreign brands is complicated and cost- excessive for independents due to numerous problems: prepayments to the supplier, shipping and logistics plus customs clearing at own risk, mandatory EAC certifications including hygiene certification for underwear. Deficits at P.O.S. include weak ERP knowledge, HRP and CRM skills, visual merchandizing, brand-building awareness as well as training of sales personnel and event marketing. Outlook 2015: As experienced during the financial crisis year 2009, when demand for intimate apparel declined at more than 30 percent against the peak year 2008, purchases of lingerie and all related products are expected to slump at a similar rate in As affluent Russian consumers are not or much less affected by the crisis, there is a likelihood that premium- and luxury lingerie will gain territory at a few percentage points against the declining total of the retail market value. More so, because this category of consumers travels less abroad to buy lingerie sets and take these back as gifts. 4 Lingerie Market Report Spring th RLMF, February 24, 2015 _________________________________________________________________________________________________________

5 2. Development of European Intimate Apparel* Exports to Russia p 2.1.Comparison of EU-15 versus EU Eastern Member States *Intimate Apparel includes: day- and night underwear for women, men, children; bras, shapewear, corsetry; home- and loungewear; underskirts, pantyhose (tights) and swimwear for both genders Million Euro Lingerie Market Report Spring th RLMF, February 24, 2015 _________________________________________________________________________________________________________

6 2.2.EU-28 Intimate Apparel Exports to Russia by 10 Main Supplier Countries, Comparison of 2014 against 2010 Million Euro Source: EFTEC Lingerie Market Report Spring th RLMF, February 24, 2015 _________________________________________________________________________________________________________

Product Categories Brassieres, Shapewear, Corsetry Pantyhose (Tights) Circular knitted singlets & undervests for women & girls (tops) Circular knitted slips & underpants for women & girls (bottoms) Swimwear for women & girls Slips, briefs, underpants including boxer shorts for men & boys Million € EU-28 Intimate Apparel Exports to Russia by 6 Main Product Categories, Comparison of 2014 against 2010, in million € + 40,2% - 64,0% + 41,0% + 60,4% + 25,8% + 68,7% Source: EFTEC Lingerie Market Report Spring th RLMF, February 24, 2015 _________________________________________________________________________________________________________

€ 343,5 Million € 352,4 Million (+ 2,6%) Source/ Copyright: EFTEC, average nominal annual growth over five years, since 2009 = 0,52% 2.4. Shares of main product categories of Intimate Apparel against total EU-28 Intimate Apparel Exports to Russia, comparison of year 2014 to crisis year Lingerie Market Report Spring th RLMF, February 24, 2015 _________________________________________________________________________________________________________

2014: RUB 400 Source: EFTEC 9 3. Key Indicators for the Russian Intimate Apparel Market 3.1.Projection on the shares of retail market value per price segment 2014 and 2015p Luxury Premium Lower Medium Low priced Mass Market Segment (Share in Value!!!) (Share in Volume is over 60%) RUB 500 RUB RUB RUB RUB China, Vietnam, Turkey Ukraine, China, Turkey, Serbia, Romania, Russian Production Retail Market Value per Segment / Market Share in % / Tendency / Average Retail Price Points / Main Supplier Countries - 20% Italy, France Italy, Germany, France Italy, Germany, France, Austria, Spain, UK Baltic Republics, Belarus, Hungary, Russian Production, Poland, Turkey, Hong Kong € mn. (50%)  € 809 mn. (25%) ↘ € 421 mn. (13%)  € 388 mn. (12%)  RUB RUB Lingerie Market Report Spring th RLMF, February 24, 2015 _________________________________________________________________________________________________________ Upper Medium Medium = € mn 2015p:- 20% = € mn

10 3. Key Indicators for the Russian Intimate Apparel Market 3.2.Projection on the shares of main retail channels against the total retail market value of € million for year 2015p Source: EFTEC Lingerie Market Report Spring th RLMF, February 24, 2015 _________________________________________________________________________________________________________ *DIM closing stores in Moscow and St. Petersburg; Stockmann closing three stores in Moscow