Branded Retailers Demonstrate a New Model for Success Says New Hambrecht & Quist Industry Report.

SAN FRANCISCO--(BUSINESS WIRE)--Nov. 11, 1998--

Avoiding the Margin Squeeze Facing Traditional Retailers

and Traditional Product Companies

By taking advantage of the convergence of distribution trends (traditional retail) and branding trends (traditional product companies), a new class of companies has emerged. These companies have combined two historically distinct business models to become their more traditional peers, said Harry A. Ikenson in a report from Hambrecht & Quist on Investment Opportunities in Branded Retailing.

In this world of myriad stores, highly competitive new retail formats, and more demanding and ever-changing consumers, margins and sustainable growth will clearly be harder to come by. A tweaking of old models will not be enough. Similarly, while execution excellence now ranks as a necessity, it alone is not sufficient for success. In this difficult retail environment, companies need unique advantages more than ever before.

The report highlights three important trends changing the landscape of the retailing business:

-- Changing demographics -- such as the increase in single-parent households and those in which both parents work -- which create new branding opportunities, particularly those that focus on convenience;

-- A distribution revolution (both the advent of new channels and the decreasing importance of the independent wholesaler) that eliminates many barriers to growth;

and

-- The lower cost of technology, which allows small companies that utilize database marketing and other effective information-driven strategies to gain an edge on larger, more tradition-bound organizations.

As a result of these trends, new brands are emerging across a wide variety of sectors. Successful companies are focusing on both consumer needs and a radically different distribution environment:

-- Creating a superior, differentiated, or unique product;

-- Branding the product, thereby commanding a premium price; and

-- Identifying a unique distribution channel, owned or controlled by the brand builder.

In this report, Hambrecht & Quist initiated coverage of the following branded retailers: Paul Harris Stores, Inc. (PAUH) and Zale Corporation (ZLC), with Strong Buy recommendations; Florsheim Group, Inc. (FLSC), Intimate Brands, Inc. (IBI), The Limited, Inc. (LTD), with Buy recommendations; and The Talbots, Inc. (TLB) as a hold. H&Q also reiterates its Buy recommendation on Tiffany & Co. (TIF)

Hambrecht & Quist, founded in 1968, is a full-service investment bank focused on growth companies whose businesses are characterized by innovation and structural change and who operate in four areas of the economy: technology, healthcare, services and branded consumer. The Company is headquartered in San Francisco, with principal offices in New York and Boston, as well as offices in Europe, Asia and southern California and has a strategic partnership in Israel. Hambrecht & Quist's common stock trades on the New York Stock Exchange under the ticker symbol HQ.