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The detail on retailfor MN Shopping Center Association,5/08Lauri Brunner/Thrivent AssetManagement

Retail Landscapeand Stock Evaluation,Summer 20072

Backdrop: 2004For the nation's 12 largest retailers:% F04SSS 4.7Stores, YOY Chg 4.6Sales p/Avg Store, YOY Chg 7.0List includes: WMT, HD, COST, TGT, LOW, BBY, M, JCP, SPLS, KSS, GPS, BBBY3

130125120SP500 Index4270260250240230220210200115110105Backdrop: 20042004: last yr of rel outperf, SPRetail up 21.6%, SP500 up 9.0%10030-Dec2-Dec15-Jul17-Jun20-May22-Apr25-Mar26-Feb29-Jan4-Nov7-Oct9-Sep12-AugSPRetail SP5001-JanSPRetail Index

Backdrop: 2005For the nation's 12 largest retailers:% F04 F05SSS 4.7 3.2Stores, YOY Chg 4.6 4.9Sales p/Avg Store, YOY Chg 7.0 5.0Relative Performance of S&P Retail Index to SP500 12.6 -4.1List includes: WMT, HD, COST, TGT, LOW, BBY, M, JCP, SPLS, KSS, GPS, BBBY5

Backdrop: 2006For the nation's 12 largest retailers:% F04 F05 F06SSS 4.7 3.2 3.6Stores, YOY Chg 4.6 4.9 6.5Sales p/Avg Store, YOY Chg 7.0 5.0 4.0Relative Performance of S&P Retail Index to SP500 12.6 -4.1 -4.3List includes: WMT, HD, COST, TGT, LOW, BBY, M, JCP, SPLS, KSS, GPS, BBBY6

Backdrop: 2007For the nation's 12 largest retailers:% F04 F05 F06 F07SSS 4.7 3.2 3.6 1.1 (1)Stores, YOY Chg 4.6 4.9 6.5 8.1 (1)Inventory, YOY Chg 10.1 9.2 (1)Sales p/Avg Store, YOY Chg 7.0 5.0 4.0Relative Performance of S&P Retail Index to SP500 12.6 -4.1 -4.3(1) F07 values represent a 2 Qtr Avg (Q4:06 and Q1:07)7

Backdrop: 2007The 20 Largest Retailers:Avg FY2 Rolling P/E Multiple, monthly20x19x18x17x16x15x14x13x12x6058565452504846444240383634323028262422201816141210Months ago...BBY, COH, COST, CVS, GPS, HD, JCP, JWN, KSS, LOW, LTD, M, NKE, SHLD, SHW, SPLS, TGT, TJX, WAG, WMT8

Conclusion: 6/07• SSS are slowing.• Store growth has accelerated.• Inventory growth has outpaced sales growth fortoo long.• Productivity gains are peaking (have peaked?).• The US retail store landscape is mature and isshowing signs of over-crowding.• This will result in weak retail sector performance.Sell retail stocks.9

165160155SP500 Index103203002802602402202001501451402007: How it ended2007: SPRetail down (18.0%), SP500 up 3.5%1351303-Dec16-Jul18-Jun21-May23-Apr26-Mar26-Feb29-Jan5-Nov8-Oct10-Sep13-AugSPRetail SP5001-JanSPRetail Index

Retail Landscapeand Stock Evaluation,Current Situation11

2008: Recession loomsa b c d eYr Sls Growth Recession? Fed Funds Retailers'(YOY % Chg) Rate Cuts EPS Revisions1990 19 starts 7/90 Yes, several down (11%), the trough1991 24 ends 3/91 Yes, several down (6%), less bad1995 18 No 2 in 2H down (7%), the trough1996 12 No 1 in Jan down (5%), less bad2000 11 No No, raised 3x down (15%), the trough2001 6.2 3/01 - 11/01 Yes, 11x down (12%), less bad2007 5.2 No 3 in 2H down (6%)2008 4.8e Yes? 3 YTD still negativeRetailers used:WMT, HD, KR, COST, TGT, CVS, WAG, SHLD, LOW, BBY, M, JCP, SPLS, TJX, KSS,GPS, ODP, CC, LTD, JWN, OMX, BJ, SHW, DDS, BBBY, FDO12

On the rise again.US Retail Store CLOSINGS3,5003,0002,6443,0682,5002,2362,0001,7131,5001,2531,00050002004 2005 2006 2007 2008eNote: I'm starting w/2004 data b/c 2004 represents the most recent yr retail stocks outperformed the S&P…until 2008.13

• Now let’s look at Total US Retail Storeclosures (expressed as square footage)vs. just 1 retailer, Wal-Mart.14

Even as Wal-Mart has slowed square footage additions inthe 2007 to 2008 time frame, total US square footagereductions have accelerated.60Square Footage CLOSED, in Millions, US Retail StoresSquare Footage ADDED, in Millions, WMT SuperCenters504030201002004 2005 2006 2007 2008eNote: Assumes closed stores average 10,000 sq ft.15

CAPACITY COUNTS!A reasonto be equal-weightRetail stocks

For the nation's 12 largest retailers (by sales) (WMT, HD, KR, COST, TGT, CVS, WAG, SHLD, LOW, BBY, M, MCP)I expect Q1 AVERAGE SSS to decline, again.Avg SSS5%4%4.2% 4.2%3.8%4.1%3.9%4.4%3.6%4.4%3%3.2%2.9%2%1.7% 1.7%1.1%1%0%-0.4%-1%-1.4%-2%Q3:04 Q4:04 Q1:05 Q2:05 Q3:05 Q4:05 Q1:06 Q2:06 Q3:06 Q4:06 Q1:07 Q2:07 Q3:07 Q4:07 Q1:08e18

Re: inventoriesThe bad news: inventory growth has outpaced sales growth for 5 qtrs.The good news: Given all I've heard about "cutting orders" I expect progress by2H:08 which is good for stocks.Inventory Growth has exceeded sales growth on AVERAGE by… (in bp)400300275297200100846480210-43-100-161-125-200-235-300Q3:05 Q4:05 Q1:06 Q2:06 Q3:06 Q4:06 Q1:07 Q2:07 Q3:07 Q4:0719

Valuation check: Stocks "look cheap", but fundamentals remain poor. Equal-weight.20xAvg FY2 Rolling P/E MultipleAvg EV/TTM EV/EBITDA Multiple15x19x14x18x13x17x12xP/E Mult16x15x14x11x10x9xEV/EBITDA Mult13x8x12x7x11x6x10x5/03 D03 D04 D05 D06 D07 4/085x20

New Topic:Fashion/ProductCyclesWhat does a cycle look like???21

When is it enough???24

Mar '06 = -1.1%, Mar '07 = -11.4%, Mar '08 = -19.3% ---> 3 Year = -31.8%25

Today’s proven catalystsfor picking retail stocks.28

Retail for 2008• Favor retail sub-sectors sectors undergoingrationalization (aka store closures; aka“capacity out”).• Avoid retail sub-sectors sectors rapidly addingsquare footage in pursuit of market sharegains.33

Wal-Mart for 200834

Wal-Mart: benefits of less crowdingshow up in 2008.60100%5080%New Square Feet in Millions40302060%40%20%0%Price Performance10-20%01995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008-40%Net New Square Feet in MillionsWal-Mart SupercentersWal-Mart Stock Performance vs. the S&P50035

Thank you.36