1. Holiday Wrap-Up: Season Was a Success, Driven by a Last-Minute Surge of Shoppers 2. Consumers Were Willing to Wait for the Best Deals, Which Resulted in a Last-Minute Rush in Sales 3. Favorable Holiday Calendar; Day Before Christmas Was a Saturday 4. Cold Weather Caused an Uptick in Outerwear Sales 5. Holiday Online Sales Growth Outpaced In-Store Sales Growth 6. Retailers Managed Online/Offline Balance Better than in Years Past 7. Amazon Won with Its “Best Ever” Holiday Season 8. In-Store Traffic Increased When Online Delivery Window Closed 9. Not Everybody Won—Department Store Sales Growth Was Less Robust and Apparel Struggled amid Discounting 10. This Season’s Best-Sellers: Tech-Related Products 11. Traffic Momentum Continued After Christmas 12. National Returns Day, January 5, Expected to Draw 1.3 Million Package Returns 13. Brick-and-Mortar Stores See Returns as an Opportunity to Drive Sales 14. Favorable Macro Backdrop

1. US 2016 HOLIDAY Wrap-Up:
Successful Season Driven by a
Late-December Surge
Shoshana Pollack
Senior Research Associate
FUNG GLOBAL RETAIL & TECHNOLOGY
January 5, 2017
1

2. Agenda
8. In-Store Traffic Increased When Online
Delivery Window Closed
9. Not Everybody Won—Department Store
Sales Growth Was Less Robust and
Apparel Struggled amid Discounting
10. This Season’s Best-Sellers: Tech-Related
Products
11. Traffic Momentum Continued After
Christmas
12. National Returns Day, January 5,
Expected to Draw 1.3 Million Package
Returns
13. Brick-and-Mortar Stores See Returns as
an Opportunity to Drive Sales
14. Favorable Macro Backdrop
1. Holiday Wrap-Up: Season Was a
Success, Driven by a Last-Minute Surge
of Shoppers
2. Consumers Were Willing to Wait for the
Best Deals, Which Resulted in a Last-
Minute Rush in Sales
3. Favorable Holiday Calendar; Day Before
Christmas Was a Saturday
4. Cold Weather Caused an Uptick in
Outerwear Sales
5. Holiday Online Sales Growth Outpaced
In-Store Sales Growth
6. Retailers Managed Online/Offline
Balance Better than in Years Past
7. Amazon Won with Its “Best Ever”
Holiday Season
2

3. 1. Holiday Wrap-Up: Season Was a Success, Driven by a Last-Minute
Surge of Shoppers
We continue to see more evidence that the holiday season was a
success.
• We estimate that sales growth for the holiday season hit the high
end of our original 3%–4% forecast.
– Our favorable view on the season is based on three things:
last-minute shoppers seeking deep discounts, a favorable
calendar and favorable weather.
• MasterCard Advisors’ SpendingPulse survey found that total retail
sales rose by 4% for the Nov. 1–Dec. 24 holiday season.
• The National Retail Federation (NRF) is confident that sales growth
for the season will reach or exceed the rate it predicted in October.
• According to the International Council of Shopping Centers (ICSC),
consumers spent 16% more this year than last year, and 4% more
than they originally planned.
3

4. $529
$554
$569
$585
$608
$626
$645–$651
5.2%%
4.6%
2.7% 2.7%
4.1%
3.2%
3%–4%
0%
2%
4%
6%
8%
10%
$400
$450
$500
$550
$600
$650
$700
2010 2011 2012 2013 2014 2015 2016E
GrowthRate
HolidayRetailSales(USDBil.)
Holiday Retail Sales Growth Rate
Source: NRF/Fung Global Retail & Technology
1. Holiday Wrap-Up: Season Was a Success, Driven by a Last-Minute Surge
of Shoppers
4

5. 2. Consumers Were Willing to Wait for the Best Deals, Which
Resulted in a Last-Minute Rush in Sales
• Consumers have been trained to wait for the best deals, given the highly promotional environment
over the holidays in the last few years.
• Deep discounts were prevalent at the malls again this year.
• Driven by consumers’ last-minute shopping and deal seeking, the days leading up to Christmas were
very strong.
• MasterCard Advisors’ SpendingPulse survey indicated that the day before Christmas was the biggest
shopping day of the season. Retailers benefited from a favorable calendar, as that day was a Saturday
this year.
5

6. 3. Favorable Holiday Calendar; Day Before Christmas Was a Saturday
• There were two extra days between Thanksgiving and Christmas this year: 31 days compared with 29
last year.
• Christmas Eve and the first day of Chanukah fell on the same day this year, so holiday gift purchases
got an extra boost ahead of December 25.
• Christmas Eve fell on a Saturday this year.
6
Election Day
Singles’ Day
Thanksgiving
Black Friday
Cyber Monday
Giving Tuesday
Green Monday
Chanukah
(Sundown–Sundown,
Dec 24–Jan 1)
Super Saturday
Christmas

7. 4. Cold Weather Caused an Uptick in Outerwear Sales
• The decline in temperatures in December, following a warmer November, benefited cold weather
categories such as outerwear and accessories such as scarves and gloves.
• Given that the weather was unseasonably warm last year, we believe retailers could benefit from
pent-up demand for outerwear.
• According to Planalytics, colder temperatures in the Eastern US bolstered sales of outerwear by $309
million versus last December.
7

8. 5. Holiday Online Sales Growth Outpaced In-Store Sales Growth
• According to MasterCard, e-commerce sales were up 18.9% for the season, handily outperforming
total sales growth of 4%.
• Adobe estimates that the holiday season generated online sales of $91.6 billion, an increase of more
than 10% year over year, and that growth accelerated in the run-up to Christmas Day.
• E-commerce volume also skyrocketed on Christmas, Sunday, December 25, according to Verizon,
increasing by a record-breaking 78%.
8
Source: US Census Bureau/NRF
16.6%
14.7%
15.8%
13.5%
12.9%
14.1%
13.5%
12.9%
13.3%
14.8%
15.2%
13.9%
14.6%
14.2%
15.1%
15.5%
16.0% 15.7%
1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16
29% 30%
34%
31%
33%
36%
39% 40%
44%
46%
57%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
US Retail E-Commerce Sales Growth, YoY % Change
(1Q11-3Q16), Adjusted
Percentage of US Holiday Shopping Done Online, 2006-
2016
15.1%

9. 6. Retailers Managed Online/Offline Balance Better than in
Years Past
• Retailers appeared to manage the online surge
better than in prior years. At least 20% of
retailers moved their shipping deadlines up in
order to have more time to deliver packages by
December 25.
• Many retailers refined their messaging in the
week leading up to Christmas to drive their buy-
online, pick-up-in-store service, allowing them
to capture last-minute sales without the risk of
weather or an overloaded carrier network
leading to late deliveries.
• More consumers took advantage of buy online,
pick up in store and expedited shipping this
holiday season.
9

10. 7. Amazon Won Again with Its “Best Ever” Holiday Season
• Amazon emerged as a clear winner, calling
the holiday season its “best ever.”
• Devices including the Amazon Echo, Echo
Dot, Fire TV Stick and Fire tablet topped
the best-sellers list. Device sales were nine
times higher than last year.
• In the fashion category, Levi’s Men’s 501
Original Fit Jeans, Fossil’s Emma large zip
wallet and Kate Spade’s Cedar Street cross-
body bag were the most popular sellers.
• December 19 was the peak shipping day
for Amazon, while December 23 was the
biggest day for Prime Now deliveries.
2.5%
2.7%
2.9%
3.9%
36.9%
Macy's
Walmart
Target
Best Buy
Amazon
Online Holiday Market Share, Nov 10–Dec 16
Source: Slice Intelligence
10

11. 8. In-Store Traffic Increased When Online Delivery Window Closed
• According to RetailNext, brick-and-mortar sales
in the week ending December 24 rose by 6.5%
year over year, after having fallen during the
earlier part of the month.
• Conversion was high, as consumers came to buy
in the final days leading into Christmas.
• Some 91% of holiday shoppers did at least some
of their shopping in a brick-and-mortar store,
according to the ICSC.
11

12. 9. Not Everybody Won—Department Store Sales Growth Was
Less Robust and Apparel Struggled amid Discounting
• Despite the late-December surge, not every retailer benefited. Mid-tier department stores still heavily
discounted items as the women’s apparel category remained somewhat weak.
• Apparel discounts reached their highest point in December, averaging 31.3%, according to Conlumino.
• Within the apparel category, women’s apparel struggled, with sales falling by 2.9%, but the decline
was offset by gains in men’s apparel, which was up 7.4%, according to MasterCard Advisors’
SpendingPulse.
Holiday Sales Growth by Category, Nov 1–Dec 24
(2.4)%
(2.2)%
0.2%
0.4%
5.2%
Electronics and Appliances
Jewelry
Apparel
Furniture
Home Furnishings
Source: MasterCard Advisors SpendingPulse
12

13. 10. This Season’s Best-Sellers: Tech-Related Products
• Tech items were popular even at stores that
typically do not have a broad electronics
offering. Apple and Michael Kors tech
watches sold particularly well at department
stores.
• Macy’s commented that the “tech tidings”
trend was one of the biggest statements for
the holiday season. Virtual reality viewers,
3D pens and the Apple Watch were all
strong sellers.
13

14. 11. Traffic Momentum Continued After Christmas
14
• Strong traffic at malls continued after Christmas as Monday, December 26, was a
federal holiday.

15. • A double-digit increase in online sales this
holiday season is expected to result in an
increased number of returns.
• UPS is forecasting that 1.3 million
packages will be returned on its “National
Returns Day” on January 5. Last year, the
carrier saw 1 million packages returned.
UPS said it expects to handle more than
5.8 million returns the first week of
January.
About 10% of holiday purchases are returned, according to the NRF, although the rate can be triple
that for online orders.
Source: AlixPartners
5.2%
9.3%
9.6%
10.5%
12.3%
21.0%
30.0%
Beauty
Sporting Goods
Footwear
Apparel
Housewares
Auto Parts
All Online Purchases
Retail Return Rates
15
12. National Returns Day, January 5, Expected to Draw 1.3
Million Package Returns

16. • The vast majority of gifts that are returned are returned in physical stores, regardless of where
they were purchased.
- According to JCPenney, more than 90% of online returns are brought to a physical store.
• As shoppers flock to stores this week to return unwanted holiday gifts, department stores and
traditional retailers have an opportunity that pure e-commerce players do not have: the
opportunity to make another sale.
• According to the NRF, 48% of consumers will be going to the stores the first week in January to
make returns, redeem gift cards and browse after-Christmas sales.
16
13. Brick-and-Mortar Stores See Returns as an Opportunity to
Drive Sales

17. 14. Favorable Macro Backdrop
Source: US Energy Information Administration/International Monetary Fund/Rhodium Group
A solid job market, relatively low gas prices and improving wages suggest that the economy sustained
its strong momentum in the fourth quarter—which proved positive for the holiday shopping season.
The US unemployment rate was 4.6%
in November, 40 basis points lower
than in November 2015
Home prices continued to rise
moderately in November, supported
by low mortgage rates and a
shortage of supply
Private sector wages rose
by 2.5% year over year in
November
Consumer confidence hit
98.2 in December, up 6.0%
year over year
17

18. Indicator Period 2016 2015
YoY %
Change
Impact on
Consumption
Gas Price (USD per Gallon) Jan $2.31 $1.93 19.7% –
University of Michigan Index of
Consumer Sentiment
Dec 98.2 92.6 6.0% +
Unemployment Rate Nov 4.6% 5.0% (40) bps +
Average Hourly Wages Nov $25.89 $25.16 2.5% +
S&P CoreLogic Case-Shiller 20-City
Composite Home Price NSA Index
Oct 191.79 182.49 4.9% +
US Housing Starts Nov 109,000 117,100 (6.9)%
–
Source: US Bureau of Labor Statistics/US Energy Information Administration/US Bureau of Economic Analysis/S&P Dow Jones/University of Michigan
14. Favorable Macro Backdrop
18

19. Gasoline prices averaged $2.31 per gallon in
the last week of December, up from $1.93, or
38 cents per gallon, from the year-ago period.
Looking ahead: gas prices are expected to rise.
• OPEC’s deal to decrease production will result
in higher gas prices
Source: US Energy Information Administration
US Retail Gasoline Prices (USD per Gal.)
$2.31
$1.50
$1.70
$1.90
$2.10
$2.30
$2.50
$2.70
$2.90
Dec 14 Jun 15 Dec 15 Jun 16 Dec 16
19
14. Favorable Macro Backdrop: Gasoline Prices Rising, But Still Low

20. The University of Michigan Index of
Consumer Sentiment hit 98.2 in December,
up 4.7% over November and up 6.0% year
over year:
• The reading was above the market’s
expectation of 98.
Confidence edged upward due to attitudes
about:
1. Personal finances
2. Inflation
3. Unemployment
4. Government policies
5. Interest rates
Source: University of Michigan
University of Michigan Index of
Consumer Sentiment
98.2
50
60
70
80
90
100
110
06 07 08 09 10 11 12 13 14 15 16
20
14. Favorable Macro Backdrop: Consumer Confidence Rises
to Its Highest Level in 13 Years

21. The US unemployment rate was 4.6% in
November, down from 4.9% in October
and 5.0% in the year-ago period:
• The decline in unemployment was partly
driven by growth in new jobs, which was
partially offset by a 0.1% decline in the
labor force participation rate, to 62.7%.
Sector growth:
• Construction, professional/business
services and healthcare grew.
• Retail sector jobs declined for the second
straight month, reflecting a shift toward
online shopping.
Payrolls grew by 178,000.
Through November 30, 2016
Source: US Bureau of Labor Statistics
US Unemployment Rate
4.6%
3%
4%
5%
6%
7%
8%
9%
10%
11%
Nov 10 Nov 11 Nov 12 Nov 13 Nov 14 Nov 15 Nov 16
21
14. Favorable Macro Backdrop: Labor Market Stands Firm,
Jobless Rate Falls to Nine-Year Low and Payrolls Rise

22. Average hourly earnings fell by 0.1% over
November, but were up 2.5% year over year:
• Wages increased by 2.8% year over year in
October.
• This was the largest increase since June 2009.
Looking ahead: further tightening of the labor
market is expected.
• This will support stronger wage growth in the
months ahead.
Through November 30, 2016
Source: US Bureau of Labor Statistics
Average Hourly Earnings (YoY % Change)
2.5%
1.5%
2.0%
2.5%
3.0%
Nov 10 Nov 11 Nov 12 Nov 13 Nov 14 Nov 15 Nov 16
22
14. Favorable Macro Backdrop: Wages Continue to Advance
Following Large Gains

23. 14. Favorable Macro Backdrop: US Housing Starts Fall in November
• Housing starts surged to a high not seen in more than nine years in October as builders
slowed construction of both single-family and multifamily homes.
• US housing starts in November reached 109,000 (annualized), down 7.4% from the month
prior.
Source: US Census Bureau/National Association of Realtors
US: Housing Starts and Building Permits (Seasonally Adjusted Annual Rate, Thous.)
23
1090.0
0.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
1600.0
Jul 13 Jul 14 Jul 15 Jul 16

24. 14. Favorable Macro Backdrop: Home Sales Appear Solid, Decline Slightly
amid Higher Prices
• Home sales appear solid, but are constrained by supply and affordability.
• Existing home sales increased by 2.0% month over month in October, to 5.6 million.
– This indicates some release of pent-up demand due to tight supply over the summer.
• New home sales decreased by 1.9% month over month in October.
– The reading came in weaker than the expected drop of 0.5% due to lower affordability.
5,600
4,000
4,400
4,800
5,200
5,600
6,000
Oct 11 Oct 12 Oct 13 Oct 14 Oct 15 Oct 16
x0.001
Existing Home Sales
563
0
150
300
450
600
750
Oct 11 Oct 12 Oct 13 Oct 14 Oct 15 Oct 16
New Home Sales
US: Existing Home Sales and New Home Sales (Seasonally Adjusted Annual Rate, Thous.)
Source: US Census Bureau/National Association of Realtors
24

25. • In November, US retail sales excluding autos were up 0.2% from October, versus
expectations of a 0.4% increase. Year over year, sales were up 3.9%.
– Sales at nonstore retailers (such as Amazon, Google and eBay) rose by 11.9% year over year
in November.
– Department stores, continuing their recent trend of underperformance, saw the biggest
decline in November, with sales down 6.4% year over year.
Monthly Retail Sales ex Autos
Jan 2003–Nov 2016 (YoY % Change)
Monthly Retail Sales ex Autos
Dec 2015–Nov 2016 (YoY % Change)
3.9%
3.9%
(10)
(5)
0
5
10
15
03 04 05 06 07 08 09 10 11 12 13 14 15 16
0
1
2
3
4
Source: US Census Bureau
25
14. Favorable Macro Backdrop: US Retail Sales Inched Up in November

26. Thank you!
26
Shoshana Pollack
Senior Research Associate
FUNG GLOBAL RETAIL & TECHNOLOGY