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Four analysts and top management from two sector firms examine the broadline retailers & discounters sector in this special 31-page Broadline Retailers & Discounters issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info515.htm

TWST: How would you characterize the performance of the apparel and footwear stocks over the past 12 months?

Ms. Murray: During 2001, performance was very mixed. We started the year “up” in terms of relative performance. As the economy began to slow in the June/July period, the stocks pulled back. During the market turbulence in September, the stocks, being very economically sensitive, pulled back dramatically. In September 2001, my coverage names fell 25%. The market offered significant value opportunities in September, and the group actually ended the year on a stronger note. So depending upon which quarter you were looking at, the story was very different. In the fourth quarter we saw a recovery that mended September’s decline. Overall, 10 of the 14 research stocks that I cover at Salomon Smith Barney beat the market in 2001. The group rose a median 0.6% versus the decline of 13% in the S&P 500.

TWST: Was there any notable change in consumer spending on apparel and footwear in the wake of September 11?

Ms. Murray: Yes. Spending levels pulled back in the fourth quarter of 2001. For the year apparel spending fell almost 6%, a significant easing from the 2% increase generated in 2000. Spending was up in the first half of 2001, and pulled back in the second half. Industry data suggest that apparel spending was down almost 14% in the fourth quarter. A portion of the decline was lower prices, as retail was very promotional, but unit sales were also down in most categories.

TWST: Despite the fact that many believe that the recovery is imminent, and according to today’s paper the recession has been declared over, there are still concerns about job losses. How would you assess the mood of consumers today?

Ms. Murray: The consumer has proven to be more resilient than expected, even in this cycle, which has been unique with respect to the rapidity with which things unfolded. The consumer has been helped by several factors, including lower interest rates, lower taxes, and lower energy prices. Additionally, while the unemployment rate has been rising, it is still below levels reached during other recessions. All these items have benefited the consumer and helped cushion the blow. Overall, we expect the consumer to continue to spend selectively, having ended 2001 and entered 2002 in better shape than most had expected.

TWST: Are there any other stocks that you’ve given the same ranking to as Coach?

Ms. Murray: I have two Buy-rated stocks. Coach is our top pick for 2002, and Jones Apparel (NYSE:JNY), which is more an opportunity to play the economic recovery in women’s footwear and apparel, as Jones is the industry leader in both categories. Jones did have a tough year in 2001, particularly in footwear, but management has taken steps to address these issues, including the hiring of Rhonda Brown, a strong footwear executive, to run the 9 West business, which Jones acquired in 1999. I think Jones will emerge a market share winner in 2002.

This special issue includes:

1) Broadline Retailers & Discounters - In an in-depth (9,300 words) Analyst Roundtable, Shari Schwartzman Eberts, Vice President at J.P. Morgan Securities, Wayne Hood, Managing Director at Prudential Securities, Inc. and Jeffrey Stinson, Research Analyst at Midwest Research, examine the outlook for the sector including outlook for the economy, earings expectations and share specific stock recommendations.

2) Apparel & Footwear Stocks - In an in-depth (3,200 words) Expert Interview, Carol Pope Murray, Director at Salomon Smith Barney, examines the outlook for the sector and shares specific stock recommendations.

3) CEO interviews (average 2,500 words). Top management of two sector firms examine the outlook for their firm and the sector.