SIA Retailer Advisory Committee Meeting September 23 rd , 2009 Denver , CO

1. SIA Retailer Advisory Committee Meeting September 23rd, 2009 Denver , CO

2. SIA Retail Advisory Committee A committee of retailers to advise, guide and direct SIA with initiatives for growing the snow sports industry through specialty retail.

4. AGENDA

5. State of the MarketplaceSeptember 2009 Consumer’s Perspective (Slumping Economy and Higher Prices) Average 401K became a 201K in 2008/09 Unemployment in double digits and no job is safe (snow sports demographic rate from 2.1% in March 2008 to 4.7% in August 2009) Wage growth flat 2000 to 2007 Lack of vacation time and discretionary income Fear Retailer’s Perspective (Uncertainty and Risk) Poor economic conditions made bargain shoppers out of everyone 2008/09 season margins thin resulting in less profit and diminished cash flow Growing online sales siphon customers from shop floors Continued difficulty securing credit Potential consolidation of retail market Fear Supplier’s Perspective Pre-season equipment orders for equipment down 20% (early estimate) Burden of risk falling on suppliers Credit market still tight Suppliers covered over $30 million in retailers’ debt Marketing costs increasing Retailers cash flow issues translating into late receivables Consolidation – conglomerates buy struggling smaller brands Fear Resort’s Perspective 57 million Skier/Rider visits for 2008/09 season Economic conditions improving for next season Baby boomers leaving the slopes at 150,000 per year with smaller Gen X behind them 2009/10 snowfall unpredictable Fear

6. Total Snow Sports Market Executive Summary Total Snow Sports Market Executive Summary2008/09 Season • Overall Market (Includes Carryover Sales) • $760 million in equipment (-6%) • $1.1 Billion in apparel (-5.5%) • $952 million in accessories ( -2%) • Specialty shop sales (60.5%) • - 7% in units • - 8% in $ to $1.7 billion • Internet sales (19.4%) • +23% in units • + 12% in $ to $547 million • Chain stores (20.1%) • -3% in units • -7% in $ to $567 million • All Specialty Inventories UP.3% units, 11% in $ • Equipment up 12% in units and 19% in $ • Apparel up 2% in units and 6% in $ • Accessories down 2% in units and up 6% in $ • 30% of all alpine skis and 24% of all snowboards were sold at or below cost in 2008/09 • Skier/Rider visits to 57 million for the 2008/09 season down from a record 60.5 million in 2007/08*** • Cash flow in retail suffered as margins thinned due to heavy discounting • Consolidation expected for many suppliers and retailers • Pre-season orders for equipment down 20%-30% according to early reports • 15 million snow sports participants in the U.S. and almost 9 million that identify themselves with a snow sport but did not participate in 2007/08** *SIA Retail Audit top lines. **Sports Participation Coalition 2008. ***May 2009 NSAA Statement by M. Berry.

7. STATE OF THE INDUSTRY│State of the Snowsports Market Lost wealth and job losses at every level kept consumers cautious in their discretionary spending particularly for big tickets items for themselves. However, they did keep going to the slopes. • 57.4 million skiers rider visits • Overall, the snow sports market was down just 4% in $ and 2% in units but margins hit a ten year low • 20% of equipment went out the retailers’ doors at or below cost • CHANGE!!

8. SIA Participation Panel 1 in 14 Americans consider themselves snow sports participants SIA collaborated with several other sports oriented organization including the U.S. Golf Association, the Outdoor Industry Association, U.S. Tennis Association, and the Sporting Goods Manufacturing Association to measure broader aspects of snow sports participation than those covered in the National Sporting Goods Association participation data used throughout this report to indicate top line participation trends. More than 41,500 individual surveys were conducted for this study. 3.9 million consider themselves skiers or riders but did not participate in 2008. There are 14,828,000 (cross country, downhill, freestyle, telemark, snowboard) participants in snow sports. Total U.S. Market: 19 million persons. 8

9. Alpine Ski down 1% 41,500 responses Snowboarding up 5% Cross Country Up 9% Source: SIA Particpation Panel Study 2005/06 to 2007/08

10. Micro Trends 2008.09 Season • High performance alpine boots up 13% in $ • Skis are getting fatter, fat skis sales grew this season • Reverse camber snowboards changed the snowboard market • Sales of goggles, helmets, gloves, winter boots, and wax increased this season • 95,000 apparel suits sold this season, most were for kids which is 20% growth in units and 9% growth in dollars

11. Snow Sports Market Average Prices 2007/08 Season 2008/09 Season • Alpine Equipment $254.79 $253.20 • Snowboard Equipment $183.96 $179.61 • Nordic Equipment $80.11 $82.72 • Telemark Equipment $287.86 $287.89 • Apparel $130.55 $122.12 • Accessories $30.28 $30.63 SIA Retail Audit, Aug – March 2008/09 Average Prices [Adult only] in All Snow Sports Sales Channels, Adult only, Carryover not included.

12. Best Sellers All Ages, All Channels 2008/09 Alpine Skis K2 Indy Ski, Jr K2 Luv Bug, Girls K2 T-Nine Sweet Luv ROXY Sweetheart Ski System, Girls VOLKL Mantra Snowboards BURTON – Bullet Series BURTON – Chopper Series BURTON – Clash Series BURTON – Custom Series BURTON – Feather Series, Wms LIB TECH – Skate Banana • Nordic Skis • ALPINA SPORTS – Control Ski • FISCHER – Jupiter Control • FISCHER – Vision Desire, Wms • KARHU – KBoom, Junior • SALOMON – Snowscape 7 Source: SIA Retail Audit, all retail sales channels, all ages, all genders units sold Aug – March 2008/09

13. Retailers, Resorts and Other Wholesale Buyers • Changes last year: • 103 Managements and 173 Storefronts out of business • 65 Managements and 185 Storefronts opened

14. The Weather 2009/10 “El Niño is present across the equatorial Pacific Ocean and is expected to strengthen and last through Northern Hemisphere winter 2009/10. By early winter, the determination will be made as to whether it can be classified as an official El Niño” NOAA Seasonal Outlook Sep 2009 • In the Northwest El Niño produces warmer than normal temperatures however, El Niño seasons typically do have adequate snowfall, especially at higher elevations. Whistler B.C. is high enough (7,160ft) that its snow usually survives an El Niño • The Sierra Nevada mountain range has mixed results for snowfall during an El Niño events. April 1 snow pack for the Sierra-Nevada Mountains during the eight strong El Niño seasons had four well above average years, and four below-average years, with one water year especially low, 1987-88. If it’s above average, it tends to be “well-above” average in an El Niño year. • For Winter Park and nearby Colorado resorts, the meteorologists typically say with an El Niño there tends to be abundant early snow followed by a dry period and then lots of spring snow. The cascades show few El Niño anomalies. • El Niño snow years average above normal for the nine largest Northeastern cities. The data ranges from New York City having 0.3 inches more to Concord having 6.2 additional inches. Glens Falls generally has 4.2 inches more during El Niño years while Albany has 3.4 inches more and Burlington has 1.8 inches.

15. U. S. Seasonal OutlookSnowfall Outlook for Winter 2009.10 Temperature Precipitation The seasonal outlooks combine the effects of long-term trends, soil moisture, and, when appropriate, the ENSO cycle.

18. Model for Success This study aims to determine what it will take to increase sales of downhill conveyances and, if so, to identify the means of doing so. 18

19. Findings • The study shows that the potential marketis far larger than the actual market. Approximately 10% in any given year enter the season with the goal of replacing their gear. However, an additional 20% would “definitely” upgrade if doing so guaranteed them improved performance. • The most likely candidates to buy are the “solid” and “expert” participants—nearly 30% would upgrade • with the promise of a performance gain. Solid skiers are those “uncomfortable on steep slopes and bumps,” while experts “ski all trails.” These two groups are the most attuned to advances in gear and most appreciative of what new gear can do for them. These groups respond strongly to the notions of improved or easier performance. Source: * From Stage III Model For Success – October, 2005 19

20. Findings (Participants) Alpine skiers tend to be older, more skilled, longtime participants, with higher incomes than other snow sports enthusiasts. • Skiers enjoy a sense of mastery and controlled gliding. • They are looking for improved or easier performance. • Skiers especially respond to a presentation of features, technology, and benefits. • At the store, they are most interested in personal service and fitting. • They are impressed by lightweight equipment, new shapes and designs. Snowboarders are younger and more visual. • They are more enthusiastic about speed, air and tricks. One ad response example: “Photos were inspiring, especially the one where it was very steep and only the tail is touching the snow. This gets to your emotional response even if I can't handle the extreme stuff, you want to see someone doing it.” • They are influenced more by graphics and styling than by technical explanations. • They look to their magazines and to the industry for product information, not just the Internet. • They are interested in a snowboard's width, and like skiers, pay attention to shapes and design. • The younger snowboard audience responded well to the idea of “mountain graffiti”—leaving their signature on the mountain. 20

21. Findings (Participants) • Cross Country (XC) skiers are looking for an escape into a scenic, tranquil environment. • “I liked the mountains and the sayings—they made you feel as if anything is possible,” one respondent said about one test ad. • XC skiers also respond to ease-of-use features, such as no wax skis and one-pull lacing. • They want a good workout, but “it's not cheating to have a ski that makes kicking easier,” another respondent noted. • Cross-country fans picked up on the idea that “a great work out doesn't have to be hard.” • They value boot-binding integration and new materials. • Telemark skiers are the most passionate of all. • Similar to cross country skiers, they appreciate scenic and tranquil mountain experiences. • Since telemark technique is demanding and must work in all types of snow conditions, tele fans want the latest technology. “All mountain” gear gets their attention. • They are very interested in materials along with shape and design. • Snowshoers incorporate elements of the above,as they are often drawn from the same ranks. Otherwise, weight is a key factor. 21

22. Findings (continued) 22

23. In Summary… • Millions of former participants are looking for a reason to come back to the mountain • Recession impacted the snow sports market particularly in retail margins but participants continued to ski and ride • Tight credit and low risk tolerance may significantly impact 2009/10 sales • New technology can still drive the market e.g. reverse camber • Understanding and communicating with consumers in their own language, providing them with better equipment for a better day on the mountain, and providing clear descriptions of how the product will make consumers’ snow sports experiences better will help increase sales

24. OTHER RESEARCH Market Intelligence Report Consumer Research

25. SIA Alpine Ski Suppliers Meeting June 23rd, 2009 Denver, CO Attendees: Atomic, Icelantic, Fischer, Amer, Rossignol, Dalbello-Elan, Sterling Skis, Salomon, Volkl, VIST, 4FRNT

26. PURPOSE OF THE MEETING • Get accurate picture of Alpine ski market • Figure out how to sell more skis • Develop action plan to increase sales of Alpine Skis through specialty shops • Where are you going to be in 10 yrs??

27. MARKET CONDITIONS│David Ingemie • Industry Numbers • Retail sales down 7% in $ and 6% in Units • Wholesale down 10% in units and dollars • Inventory levels up 7% in units and 17% in $ • Margins and sell through declining • Rental increasing • Participation • Participation flat to down • Skier/Rider visits ok at 57.1 million • # of resorts declining (small local resorts) • Weather • Snowfall was average overall in 2008/09 • Snowfall outlook – possible El Nino in 2009/10

28. MARKET CONDITIONS│David Ingemie Shrinking the MarketSome Retailers and Producers Will Not Survive! • Total snow sports market sales declined 4.4% • 29% of all skis sold at or below cost in 2008/09 and current year model sales down 14.4% • Significant amount of receivables at 90 + days past • Alpine equipment inventory up 17.4% despite carryover sell off • Margins and cash flow strangled • Pre-season orders for hard goods down as much as 30% • Credit tight for producers, retailers, and customers Source: SIA Retail Audit for current season model only 2008/09, carryover not included

29. MARKET CONDITIONS│David Ingemie Keeping Up With Customers90% of snow sports consumers use the Internet on a daily basis as a primary information source • Media defused – Bad News; Media defused – Good News • Print media marketing losing effectiveness • Many retailers will not embrace Internet commerce • Snow sports product information on the Internet is scattered, vague, and unreliable • Producers and retailers are not taking full advantage of customer emails/mobile numbers/social networking to market snow sports

30. MARKET CONDITIONS│David Ingemie How Do Consumers Get Information? • 90% of snow sports consumers use the Internet as a primary information source • Consumers use the Internet as a tactical research tool, but online marketing drives offline sales • When the product in question requires a large commitment by a buyer, the internet’s influence on the choice is greater. Sources: ComScore – How Data Changes Media Markets, April 2009,. Pew Research Center, Internet and The American Life Study 2008

31. BACKGROUND OF THE ALPINE SALES SITUATION│Kelly Davis Brands and SKUs in Alpine Category 32 Brands 1,556 Models

32. BACKGROUND OF THE ALPINE SALES SITUATION│Kelly Davis Retailers, Resorts and Other Wholesale Buyers

33. To grow the snow sports industry we must shift from an exclusively transaction focus to a life time value focus.

34. The Core Strategy It’s very simple: Keep your eye on lifetime value. Target lapsed, light and moderate users. Move from random transactions to regular relationship based communications .

35. Some Tactics • Capture critical customer information – name, address, proficiency, frequency, etc. • Partner with retailers – share info, reinforce 3-4 key messages. • Time marketing to purchase decision cycle – aging equipment, new technology, new competence . • Invest in growing proficiency – make every marketing dollar work harder. • Reward loyalty and heavy users . • Focus on kids’ lifetime value – families.

36. The Bottom Line . . . There is considerable latent market growth out there, but we cannot continue to operate as usual for another 10 years.

37. STATE OF THE INDUSTRY│The Economy Overall • Unemployment doubled over the year but stabilizing in snow sports demographic at 4.7% and Mass layoff events cut in half June (1,235) to July (621) 2009 • All retail sectors’ sales down 9.4% annually (August to August) • Snow Sports Down 4.4% • Clothing Retailers down 7.6% • Department Stores down 11.5% • Sporting Goods down 6.4% • Consumer confidence rising, expectation of good economic times are higher than any since December 2007 • Productivity up 6.6% in Q2 2009 • In July, new orders and shipments of manufactured goods rose about 2% and industrial production increased for the first time since Dec 2007 Sources: Bureau of Labor Statistics Unemployment Situation, employment by educational attainment, July 2009. U.S. Census Bureau – Retail Trade and Food Services Sales Assessment Seasonally Adjusted, June 2008 to June 2009, Conference Board Consumer Confidence survey August 2009, BLS Labor, Productivity and Costs September 2009, Manufacturing Orders, Shipments, and Inventories August 2009.

44. Keeping Up With Customers • Print media marketing losing effectiveness • Many retailers will not embrace Internet commerce • Snow sports product information on the Internet is scattered, vague, and unreliable • Producers and retailers are not taking full advantage of customer emails/mobile numbers/social networking to market snow sports

48. OPEN DISCUSSION • Ideas to Address the Problem • Project Connection • Demo Initiative

49. RESULTS OF THE ALPINE MEETING Situation • Alpine equipment sales are down over the past 5-10 years. • This pressure on Alpine sales greatly acerbated by the current recession, sales number down double digit overall – over 8% for specialty shops but 22% for chains. • Reported evidence from manufacturers & retailers that profit margins are also under long term pressure. • SIA Board Member Mike Noonan summed up the situation quite eloquently: “Alpine sales suck.”

50. RESULTS OF THE ALPINE MEETING Causes • While the impact on the industry of the current recession is unambiguous, there are numerous and complex reasons for the longer term decline in sales. • The dramatic sales decline this year may be at least partly a postponement of purchases as in past recessions. • Increased competition and new discount sales channels such as the internet have added to the pressure on pricing. • The flat levels of snow sports participation have helped flatten alpine equipment sales as well. • But the single most significant cause of flattening or declining sales is likely to be the glut in alpine equipment brands (32) and models (over 1,500). This proliferation of consumer choices has surely led to: • Consumer confusion at time of purchase; • Erosion of brand differentiation, eliminating a major source of consumer guidance and price support; • Blurring the customer benefits from new ski technology; • Complicating the job and reducing the sales effectiveness of retailers; and, of course, • Putting ever greater pressure on prices. • Making the ability to communicate benefits & features very difficult