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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: Moving on to the stocks, you’ve written that the best months to own apparel and footwear stocks have historically been February and March. Has this been true for 2002, and what does this mean in terms of how investors should be looking at the stocks in April, May and June?

Ms. Murray: Similar to retail stocks, there is a seasonal pattern in stock performance for apparel and footwear companies. Looking back at a period of almost 15 years, there is a positive bias for January, February and March. In 2002, the stocks have outperformed the market in January and February, and we would expect that also to hold true for March of this year. For the rest of the year, we do not necessarily expect a reversal in performance, but the outlook is less compelling. The data indicate outperformance of roughly 55%-60% on a monthly basis, versus 80%-90% in February and March. The seasonality of stock moves does have some correlation with earnings. The calendar second quarter is the smallest period for industry sales and profits, and the stocks typically don’t rally during this period. Part of the first quarter preference is that holiday reports are released, which are the lion’s share of industry sales and profits. So the confirmation that companies did enjoy a good holiday season is reported during the calendar first quarter, as are early bookings for the following fall. In 2002, given our expectations that the economy will enjoy a recovery, and that company earnings will improve, the apparel and footwear stocks should have the ability to continue to outperform. We did increase our rating for the group at the beginning of this year to market-weight from underweight, based on our view that as earnings recover and profits go up, the stocks will show relative strength.

TWST: Are there any other companies you’d like to highlight, companies that might not be stocks that investors should rush out and buy today, but where investment interest could develop as we move through the year and look out to 2003?

Ms. Murray: Yes. In apparel, I have high regard for the management team at Liz Claiborne (NYSE:LIZ). In footwear I would say the same for Genesco (NYSE:GCO). Genesco is a leading footwear retailer, including a large chain of stores called Journeys, which is a very competitive and well-managed destination retail concept for teen consumers. It is the Gap, Abercrombie or American Eagle equivalent of teen footwear. Competition in the mall for Journeys is not developed, which provides Genesco with a dominant market position. Comp-store sales at Journeys have outpaced the industry, including the challenging period of fall and holiday 2001. Genesco also owns Johnston & Murphy, a leading brand in men’s footwear. In 2001, J&M’s performance did suffer, prompted by the slowing economy and some issues regarding product and merchandising. As J&M starts to recover, perhaps benefiting from a return to business attire, we would revisit Genesco. Both Liz Claiborne and Genesco are rated outperform at Salomon Smith Barney, so we are expecting the stocks to appreciate, but not to the same degree as our Buy-rated stocks.

TWST: One last question, Carol — are there any stocks in the group that investors should stay away from in 2002?

Ms. Murray: We have neutral ratings on half of our coverage list. These are companies that we believe may have some portfolio issues, in terms of brand positioning, and thus possess more earnings risk. Another important issue is the company’s ability to manage discretionary spending and inventory levels, which will impact the level of potential earnings upside in 2002 as business conditions improve. Conversely, if the pace of the recovery is slower than expected, companies that are increasing spending or have high inventory levels could experience more earnings declines.

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.