RNB RNB RETAIL AND BRANDS AnnuAl RepoRt 2005/2006

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RNB

RNB RETAIL AND BRANDS AnnuAl RepoRt 2005/2006

StRipeD RevolutioN

tuRNS 30

MoRe luxuRy foR youR MoNey

iN CopeNhageN

logiCal SolutioN

to logiStiCS

MoDel foR SuCCeSS

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Content

RnB RetAIL AnD BRAnDS AB

RnB RetAIL AnD BRAnDS ABRnB RetAIL AnD BRAnDS AB

RNB RETAIL AND BRANDS 8 the year in brief

10 the President’s comments – Mikael Solberg on RnB RetAIL AnD BRAnD’S model for success 14 Business areas and business models

16 Good for consumers, producers and the environment – the company’s social responsibility weighs heavy

PoLARN o. PyRET

20 Polarn o. Pyret – it is in to be out and striped

24 Po.P in new markets 26 Po.P’s red winter DEPARTmENTS & SToRES

30 Departments & Stores takes a step south to Illum, Copenhagen’s most exclusive department store

34 newly opened Hermès store in nK offers Stockholmers the chance to see Kelly live

40 time for gold – this year the watch is hotter than even before, but only if it is made from the most precious metal

JC50 JC is Sweden’s jeans leader – a rocking rebel turned respectable

J-SToRE

54 J-Store – it is all in the band

SoLo56 Solo celebrates its 25th anniversary – with a jeans procession

SISTERS

58 More variety – as long as it’s a dress. Sisters offers style tips

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RNB

RNB RETAIL AND BRANDS AnnuAl RepoRt 2005/2006

StRipe RevolutioN

tuRNS 30

MoRe luxuRy foR youR MoNey

iN CopeNhageN

logiCal SolutioN

to logiStiCS

MoDel foR SuCCeSS

RnB RetAIl AnD BRAnDS Annual Report 2005/200

Responsible publisher: Mikael Solberg project Manager: Johan tamsen Art Director: Martin Källqvist

Writers: Helene Murdoch assisted by Jo- han tamsen and Fredrik Zanderholm photographers: Björn Lofterud, Mats Högberg, ewa-Marie Rundqvist. Martin Källqvist, Sandra Petersson, thomas Klementsson and others.

Fashion: Ami Loupedis

Financial statements: Göran Blomberg president and Ceo of RnB:

Mikael Solberg

Advertising: Peter Sjöström

Concept: Johan tamsen, Helene Mur- doch/Vero Kommunikation and Martin Källqvist/Superlativ production, printing & repro:

tryckeri Knappen in Karlstad paper: Cover: Multi Art Gloss 300g, Contents: Multi Art Gloss 150g

Cover: Anders Lundström Head of security RnB photographer: Mats Högberg Stylist: Ami Loupedis

BRoThERS

64 Brothers makes you a king in a suit

72 Caring for your jackets – and make them last for years

LogISTICS

74 Logical solution to logistics fAShIoN

78 Fashion – some employees select their winter fa vorites in black with a contrast

85 Attitude and knowledge are key words at

RnB University, the company’s own business school BoARD of DIRECToRS AND mANAgEmENT

88 RnB Board of Directors and management 92 the RnB card

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1500 3000 4500 6000 10

20 30 40 50 60 70

02 03 04 05 06

RNB share SIX General Index Number of shares traded, thousands

2

(incl. late entries)

(c) FINDATA DIREKT

357

01-02 02-03 03-04 04-05 05-06 01-02 02-03 03-04 04-05 05-06

01-02 02-03 03-04 04-05 05-06

535 489 497 721

638,026,4 -38,1 36,1 41,6 29,9

863,4 840,1 975,5 1543.2 77 97 85 101 229

15 16 19 25 210

47% 53%

357

01-02 02-03 03-04 04-05 05-06 01-02 02-03 03-04 04-05 05-06

01-02 02-03 03-04 04-05 05-06

535 489 497 721

638,026,4 -38,1 36,1 41,6 29,9

863,4 840,1 975,5 1543.2 77 97 85 101 229

15 16 19 25 210

47% 53%

357

01-02 02-03 03-04 04-05 05-06 01-02 02-03 03-04 04-05 05-06

01-02 02-03 03-04 04-05 05-06

535 489 497 721

638,026,4 -38,1 36,1 41,6 29,9

863,4 840,1 975,5 1543.2 77 97 85 101 229

15 16 19 25 210

47% 53%

ANALySTS

enskilda - elisabeth Johansson Handelsbanken - Rasmus engberg Öhman - Rolf Karp

A-Brokers - Håkan Filipsson fINANCIAL oBJECTIVES

• An operating margin exceeding 10%

over a business cycle.

• Long-term sales growth of 10–15%.

• An equity/assets ratio exceeding 30%.

RnB RetAIL AnD BRAnDS ABRnB RetAIL AnD BRAnDS AB

ThIS IS RNB RETAIL AND BRANDS

RnB RetAILS AnD BRAnDS business concept is to adopt an international perspective in efforts to own, operate and develop store concepts for fashion and quality-conscious customers.

oPERATIoNAL oBJECTIVES to...

• create a unique experience for our customers through our concept, col lection and service.

• be the most attractive employer for people with a burning interest in fashion.

• be the obvious business partner for our suppliers.

ThE yEAR IN BRIEf

• net sales totaled SeK 1,535.2 M (93.). Sales in comparable stores increased by 4.2%.

• operating profit before restruc turing costs amounted to SeK 9.

M (41.).

Profit after financial items totaled SeK 20.9 M (3.3).

• Profit after tax after adjustments for minority shares amounted to SeK 11.3 M (25.), which corresponded to SeK 0.31 (0.2) per share.

• Cash flow from operational

activities was a negative SeK 2.0 M (pos. .9).

on August 31, 200, the total number of stores in RnB RetAIL AnD BRAnDS was 439, of which 210 were operated by franchisees.

RnB RetAIL AnD BRAnDS AB consists of two lines of business – Polarn o. Pyret and Departments &

Stores. Polarn o. Pyret is a brand with a focus on baby and children’s wear. Departments & Stores is a distribution platform for national and international brands through stores in the nK and Steen

& Ström department stores and the JC, J-Store and Brothers & Sisters store concepts.

NUmBER of SToRES SALES AND oPERATINg PRofIT

AVERAgE NUmBER of EmPLoyEES

RnB AVeRAGe AGe 32 WoMen 32

Men 28

SAleS opeRAtInG pRoFIt

pRopRIetARY StoReS FRAnCHISe StoReS

2005/200

in brief

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RnB RetAIL AnD BRAnDS AB 9

Significant

events during the year

foLLoWINg fISCAL yEAR-END

• Following the end of the extended acceptance period, RnB’s holding of shares and warrants in JC amounts to 9.5%. RnB has commenced the process of compulsory redemption of the remaining shares outstan- ding in JC.

• RnB RetAIL AnD BRAnDS expands its distribution platform in the department store business area by establishing approximately 2,000 square meters of retail space in the Illum department store, in Copenhagen, which will offer men’s fashion, cosmetics, jewelry and watches. the men’s fashion department is scheduled to open at the end of spring 200 and other departments will open in August 200.

ESTABLIShmENT of PoLARN o.PyRET oUTSIDE SWEDEN PRoCEEDINg AS PLANNED

During the year, new master franchise agreements were signed for the markets in Finland, Poland, Ireland and Russia. the company an- ticipates that it will have a presence in at least 20 countries by 2010.

RNB RETAIL AND BRANDS ACQUIRES JC

In May 200, RnB made a public offer to acquire JC. A merger of RnB and JC crea- tes a leading distributor of national and international brands in the nordic retail market. the merger gives rise to several benefits in terms of the coordination of operations. the synergies are estimated to amount at least SeK 0 M annually and are expected to come into full effect from the 200/200 fiscal year.

ShARE SPLIT 2:1

As at March 1, 200, the company implemented a share split resulting in a doubling of the number of shares in the company. on August 31, 200, the total number of shares in the company amounted to 55,12,32.

CoNTINUED STREAmLININg of DEPART- mENTS & SToRES AND DEVELoPmENT of PARTNER moDEL

During the period, the Champagne store concept was discontinued in favor of the continued development of the RnB RetAIL AnD BRAnDS offering in the nK stores in Stockholm and Gothenburg and Steen & Ström in oslo.

START of oUTLET IN KoSTA

to further strengthen cooperation with RnB RetAIL AnD BRAnDS’ suppliers, an agreement was signed with new Wave Group concerning the formation of an outlet in Kosta, and a total of 4,000 square meters of retail space was opened in July 200. In addition, RnB RetAIL AnD BRAnDS has an option to open a further 1,500 square meters.

ACQUISITIoN of SKANDINAVISKT hERR- AND DAmmoDE WITh RETAIL oPERATIoNS IN NK IN goThENBURg RnB acquired Skandinaviskt Herrmo- de AB and Skandinaviskt Dammode AB, which have retail operations in the nK department store in Goth- enburg. the acquired store area totals 3,100 square meters, with oc- cupancy as of December 1, 2005.

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10 RnB RetAIL AnD BRAnDS ABRnB RetAIL AnD BRAnDS AB

What do you consider to be the most important events during the year?

MIkAel SolBeRG: that we established ourselves as a leading distributor of national and international brands in the nordic retailing market. through our acquisition of JC and Skandinaviskt Herr- and Dammode with operations at nK in Gothenburg and the successful launch of our concept at Steen & Ström in oslo and Po.P’s continued expansion, we have demonstrated that we can grow. now we’re also going to show that we can make money.

What do you consider to be the largest synergies from the merger with JC?

MIkAel SolBeRG: We have said that we anticipate approximately SeK 0 million in pure synergy profits annually, with full effect by financial year 200/200. those profits are the result of reduced overhead costs. However, we above all expect to be able to realize efficiencies in purchasing and distribution. In the past, for example, Polarn o. Pyret has been too small to demand that a supplier in China reserve manufacturing capacity – but together we are able to carry more clout.

this is also true of our abilities to, among other actions, influence working conditions at our suppliers in our production countries. Yet another important aspect is that we will become an even more attractive venture partner for external brands by being able to offer a combination of prestige and volume – or more simply put, the combination of nK and JC.

Will you continue to grow at the same pace?

MIkAel SolBeRG: We have undergone a period of significant growth – not only in Sweden, but also in the other nordic countries. We have shown the market that our concept – to own, operate and develop retailing and fashion concepts – is, from an international perspective, a successful one. now it is time to consolidate that success. this means that during the coming year we will be focusing on se- curing the benefits of the expansion that we have undergone to date. We will also take steps to further streamline in such areas as distribution and purchasing. We quite simply want to ensure that we are doing the right thing from the outset.

MoDeL FoR SUCCeSS

A strong company culture. Curiosity. Genuine involvement.

those are a few of the factors that RnB RetAIL AnD

BRAnDS President and Ceo Mikael Solberg mentions as the most important for the company’s future. At the same time, he views the preservation and dissemination of company culture as the greatest challenge in the comprehensive expansion that RnB RetAIL AnD BRAnDS is undergoing.

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“- However, this is primarily about attitude. the company’s results depend entirely on the work of the salespeople. I want them to be aware of the importance of their work – and I also want to work to raise the status of this important occupatio- nal group.”

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What do RnB RetAIl AnD BRAnDS’ plans for geographic expansion look like?

MIkAel SolBeRG: At the end of the financial year RnB RetAIL AnD BRAnDS reached an agreement to expand into Illum, Copenhagen’s leading department store within the quality segment. With that step, we have taken our partner model to both norway and Denmark – and demonstrated that it is not tied to either a specific department store or a geographic area. our goal is to eventually apply the partner model even in other markets. We are mainly looking eastwards – towards Fin- land, the Baltic States and Russia. When it comes to Polarn o. Pyret, our goal is to be operating in at least 20 countries by 2010. In this regard, we have made good progress. During the past year, master franchisee agreements were reached for the chain in Finland, Poland, Ireland and Russia – which means that Polarn o. Pyret is now in 11 countries. It should also be noted that all of these openings have been successful.

What do you consider to be the greatest success factors?

MIkAel SolBeRG: our strong company culture. engaged and curious employees. I myself find it very fun to go to work – and I perceive that even other RnB RetAIL AnD BRAnDS employees feel the same way. to date, we have been successful at matching up various personalities and talents, which have created the essential dynamics in the company. We have also succeeded in developing our own brand in a positive manner – which has resulted in many people being proud of saying that they work for RnB RetAIL AnD BRAnDS. that makes me very happy.

the gretest challenges?

MIkAel SolBeRG: Preserving and strengthening the company culture as we expand. In order to succeed, we will need to be able to convey that feeling to all new employees, as well as develop and strengthen it throug- hout the company. We also have to be careful in our new recruiting. I re- gularly travel around to the stores to meet with employees face to face.

But, of course, that is not enough. During the year we have acquired new channels for quickly and effectively reaching out to all employees. this includes our new portal as well as our new Web-based training program, RnB University.

You have been talking about a “unique shopping experience.”

How do you define that?

MIkAel SolBeRG: It’s all about the way in which we treat customers.

My goal is that we become “service pros.” In order to succeed, we are currently working on freeing up salespeople’s time from demanding secondary tasks, such as pricing and security tagging, so that they can instead focus entirely on customers. However, this is primarily about attitude. the company’s results depend entirely on the work of the salespeople. I want them to be aware of the importance of their work – and I also want to work to raise the status of this important occupa- tional group.

What do you foresee for the future of RnB RetAIl AnD BRAnDS?

MIkAel SolBeRG: We have created a very good starting point. In recent years, we have succeeded in increasing the level of attraction for both potential partners as well as investors and, particularly, employees. A key factor for guaranteeing continued success will be our ability to attract

“super experts” within a host of fields, not least on the sales side. My goal is that we will become even more attractive – for everyone.

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RnB RetAIL AnD BRAnDS

BUSIneSS AReAS AnD BUSIneSS MoDeLS

Polarn o. Pyret

Polarn o. Pyret is a wholly owned brand of baby and children’s wear. operations are conducted through a combination of proprietary stores and franchise stores in Sweden and via a master-franchise concept in other markets. the master-franchise concept involves Polarn o. Pyret appointing a master franchisee for each new market who receives the franchise rights for an entire country in exchange for royal- ties. the master franchisees themselves are responsible for the operations in their respective markets and the investments required.

In order to ensure the continued successful internationali- zation of the company, strict demands in terms of industry experience, franchise experience and local market knowledge are imposed on master franchisees. At the same time, master franchisees must be able to operate at least one Polarn o. Pyret store themselves. Within the framework of Polarn o.

Pyret’s store concept, product lines and determined tar- gets, master franchisees must establish new stores under their own control or via franchisees in accordance with an adopted establishment plan.

to date, Po.P is found in Sweden, norway, estonia, Latvia, Lit- huania, the UK, Ireland, Russia, Poland and Iceland. the target is for Po.P to have established a presence in a total of 20 markets by the end of 2010.

DePartments & stores

Departments & Stores is conducted through the JC/J-Store/

Solo, Saks, Brothers & Sisters business areas and the Depart- ment Stores line of business, which includes the operation of department stores at nK Stockholm, nK Gothenburg, Steen

& Strøm in oslo and – from spring 200 – Illum in Copenhagen.

the product lines in JC/J-Store/Solo, Saks and Brothers &

Sisters currently comprise a mix of proprietary and external

brands, while the product lines for Department Stores comprise exclusively external brands.

the product lines in JC/J-Store/Solo, Saks and Brothers &

Sisters are planned, produced and purchased centrally, with distribution to the various stores administered from a central warehouse. this is known as the JC model. In this manner, the combined strength in relation to manufacturers and other suppliers is utilized, at the same time as the product lines and flows of goods can be optimized during a season.

the Department Stores business area is primarily operated in accordance with RnB RetAIL AnD BRAnDS’ partnership model, which has been developed to meet changed consump- tion behavior, whereby a broad range of products and store renewals are central success factors.

In simplified terms, the partnership model involves interac- tion between RnB RetAIL AnD BRAnDS and the brand-owners, where RnB RetAIL AnD BRAnDS specializes in creating exciting store concepts with an attractive mix of brands, maintaining a high level of service and selling clothes, while the brand-owners largely determine the products that are to be found in stores, influence the “depth and breadth” of their collections and control the flows of goods during a season between stores and cities. Under the partnership model, suppliers also receive a higher margin per item of clothing sold in return for increased responsibility for inventories, which enhances their incentive to shorten lead times and raise the degree of renewal in stores.

the partnership model also presents an opportunity to continue the development and expansion of the Depart- ment Stores business area, which to date has been achieved through increased presence at nK Stockholm and nK Goth- enburg and the new establishment of Steen & Strøm in oslo and – from spring 200 – of Illum in Copenhagen.

RnB RetAIL AnD BRAnDS AB comprises two business areas: Polarn o. Pyret and Depart- ments & Stores, which is a distribution platform for national and international brands.

Departments & Stores currently includes the JC/J-Store/Solo, Saks, Brothers & Sisters business areas and the Department Stores business area that encompasses the operation of departments at nK Stockholm and nK Gothenburg and at Steen & Strøm in oslo. the Illum department store in Copenhagen will also be added to this operation in the spring and autumn of 200.

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Departments & Stores is a distribution platform for national and international brands. Departments & Stores includes nk Stockholm, nk Gothenburg, Steen & Strøm (oslo), JC, J-Store, Solo, Brothers, Sisters and Saks, as well as Illum from spring 2007 (Copenhagen).

number of stores:

nk Stockholm / nk Göteborg / Steen & Ström: 65 JC / J-Store / Solo

Sweden: 128 (33 proprietary / 95 franchise) norway: 47 (32 proprietary / 15 franchise) Finland: 17 (17 proprietary / 0 franchise)

Brothers / Sisters / Saks 128 (44 proprietary / 62 franchise) totAl: 363 stores

Sek M 2005/2006 2004/2005

net sales 1 206,1 685,3

AuG 2006 AuG 2005

number of stores 363 64

Departments & Stores polarn o. pyret

polarn o. pyret is the leading brand of baby and children’s wear. polarn o. pyret comprises a mix of proprietary stores and franchise stores in Sweden. polarn o. pyret’s international expansion takes place via master franchisees. to date, master-franchise agreements have been established in norway, estonia, latvia, lithuania, Finland, poland, the uk, Ireland, and Russia. the target is to have master-franchise agreements in a total of 20 countries by the end of 2010.

number of stores:

Sweden: 58 (38 proprietary / 16 franchise), norway: 14, uk: 5, Finland:

2, estonia: 2, latvia: 2, lithuania: 2, Ireland: 1, Iceland: 1, Russia: (opens January 20, 2007) 1.

totAl: 82

Sek M 2005/2006 2004/2005

net sales 331,4 279,5

AuG 2006 AuG 2005

number of proprietary stores 38 37

number of franchise stores 38 25

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the products sold through RNB Retail aND BRaNDS must not only be attractive and of a high quality -but must also be manufactured under good working conditions and with the least possible negative impact on the environment. So says Katarina ekeroth, who is responsible for issues relating to the environment, quality and social responsibility at RNB Retail aND BRaNDS.

GooD FoR ConSUMeRS, PRoDUCeRS – AnD tHe enVIRonMent

RNB Retail aND BRaNDS does not have plants of its own but instead cooperates with manufacturers world- wide, the majority of whom are located in italy, turkey, China and elsewhere in asia. for a company with suppliers who are so widely separated geographically, it is a challenge to know what the real situation is for the suppliers’ employees after an expected inspection has been completed, according to Katarina ekeroth.

“We use several methods to ensure that working conditions are satisfactory,” says Katarina. “these include daily contacts with our suppliers, continual visits by personnel from our local production offices, and the imposition of extensive requirements before a new supplier is placed under contract.

“these requirements relate to both working conditions and the work environment. We conduct our own on-site inspection of the facility before concluding an agreement.

if we have views on factors that are relatively simple to remedy, such as lighting and marking of emergency exit routes, the producer is given a chance to rectify the short- comings. if we have serious criticisms, we refrain from engaging that particular supplier.”

MeMBeRShip iN BSCi

to ensure that any improvements made are not merely of a cosmetic nature, suppliers are also checked on an ongoing basis by certified inspectors from the european retail trade organization BSCi, the Business Social Compli-

ance initiative, of which RNB Retail aND BRaNDS is a member. BSCi is an initiative through which the member companies work together to bring about better working conditions in supplier countries. the organization, which has some 50 members, has formulated a joint code of conduct for checking and following up working conditions.

CoMpReheNSive CoDe of CoNDuCt

BSCi’s code of conduct is based in part on the uN Con- ventions on Children’s Rights and human Rights, and states, among other provisions, that the laws in force in each country must be followed, and that employees must have the right of association and the right to collective bargaining. other provisions include the prohibition of discrimination, child labor and forced labor. it also establishes rules for wages, working hours and environmental and safety issues.

“our aim is that all the companies within RNB Retail aND BRaNDS should not only know where and how products are manufactured but should also be able to take pride in what they know,” says Katarina ekeroth.

in addition to its own brands, RNB Retail aND BRaNDS cooperates with a number of external brands.

Katarina notes that although it is more difficult for the company to oversee and control production under other labels, it nevertheless aims, through information and other means, to persuade these too to strengthen their control over their suppliers.

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“We ask our cooperating brands to complete a questionnaire in order to gain an insight into their production, and we follow up the questionnaire with recommenda- tions,” she says.

foCuS oN quality aND Safety

Katarina ekeroth notes that RNB Retail aND BRaNDS has detailed quality manuals that describe the require- ment levels for all products, relating for example to chemical content, as well as physical requirements such as wearing qualities and washability. the manuals also contain safety instructions – for children’s clothing for example. RNB Retail aND BRaNDS is a member of SiS, the Swedish Standards institute, which enables the company to keep track of the development of rules and ordinances in the safety area.

“it is a fundamental principle for us that every parent should feel safe and secure with the products we sell,”

says Katarina.

aCtive ChoiCe of MoRe eNviRoNMeNtally fRieNDly CheMiCalS

the eu recently decided on new chemicals legislation, known as ReaCh. the decision was received with disap- pointment by many observers, who saw it as watered- down because it did not contain mandatory rules on the subject of replacing hazardous chemicals with more environmentally friendly alternatives. RNB Retail aND BRaNDS nevertheless intends to continue working in ac-

cordance with this latter principle, says Katarina ekeroth.

the company is a member of ifp Research’s chemicals group, which is a cooperative venture between companies in Scandinavia aimed at increasing knowledge about how we can reduce the environmental impact caused by the production of textiles.

“it is a matter of taking an active position with the aim of reducing the use of chemicals in our clothing production – and if that is not possible, at least choosing the most environmentally friendly alternatives,” says Katarina.

SafeR tRaNSpoRtS

RNB Retail aND BRaNDS’ environmental policy also covers transports. the company is currently participat- ing in a two-year joint project for safer and more environmentally friendly transports in cooperation with the National Road administration and a number of Swedish fashion chains.

“the idea is that companies should benefit from each other’s experience and jointly develop requirements for transports that suit the Swedish fashion sector,” says peter Karlsson, head of logistics at RNB Retail aND BRaNDS.

“the cooperative efforts prioritize areas such as reduced emissions, safer speeds, use of seatbelts, drivers free from the influence of alcohol and drugs, and safer vehicles.”

“our target is that everyone in RnB RetAIl AnD BRAnDS will not only know where and how the products are manufactured, but will also be proud of this.”

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HUGO BOSS Scandinavia AB Stockholm Sweden Phone No. +46-8-524-632-00 www.hugoboss.com

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HUGO BOSS Scandinavia AB Stockholm Sweden Phone No. +46-8-524-632-00 www.hugoboss.com

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polarn o. pyret has been creating clothing for children and adults since 1976, promoting quality and function as its philo- sophy. the clothes have consistently been made from comfor- table natural materials that are easy to care for and wash. And the stripes have been there since the beginning.

“We offered a new concept, one that stood for lasting value and quality. It became an alternative to synthetics, superficiality and rapid fashion changes. that was appealing to socially progres- sive individuals – of which there were many during the 1970s.

In those days you could see entire demonstration marches dressed in our clothing,” says tommy Adamsson, grandson to founder nils Adamsson and president of the company for the 14 years through 1995.

“our launch of functional, basic clothing that could be used all year round contrasted sharply with the minimalist fashion styles for children at the time. looking back on that period, it seems like an obvious choice – we were focused on nice quality, good sewing and simple designs. At the time, that was a unique concept and our efforts generated significant attention inclu- ding from the media,” says katarina af klintberg, who oversaw development of the polarn o. pyret concept in her role first as marketing manager in 1974 and later as president of the company from 1976 to 1983.

Perhaps it comes from the

strong, straightforward concept.

Perhaps it is the consistent focus on quality. Perhaps it is the stripes, which for Polarn O.

Pyret has become what checks are to Burberry. At any rate, it is clear that those combined factors have contributed to creating the strong brand Polarn O. Pyret, which celebrated its 30th anniversary in 2006.

It’s in to be out – and striped

polarn o. pyret

Photo: Ewa-Marie Rundqvist

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BoRN fRom – CoNDomS

polarn o. pyret has its roots in an entirely different operation than today’s – namely condoms. A young man by the name of nils Adamsson traveled around Västergötland in the early 1900s selling sewing machines. During his travels he encountered many impoverished families and he noted how many children they had. An idea took root in his head to help these families reduce their birth rates. In 1909, nils Adamsson purchased a tobacco shop in Falköping where he began selling condoms imported from Germany.

“today, it is difficult to understand what incredibly strong feelings that kind of operation generated. to counteract such sales, a new law was passed, the contraception law, which forbid the marketing of contraceptives. Both grandma and grandpa were imprisoned for three months for violating this law,” explains tommy Adamsson.

During those initial years, nils and karin Adamsson also sold healthcare products in addition to their core operation, which was an excellent way to generate credibility for their business.

During the war years from 1939-45, the company began selling baby products under the pyret name.

“the stores had two departments – one for healthcare products and one for baby items. the reason for this was so that mot-

hers would not have to pass through the ‘gentlemen’s department’ to purchase items for their babies – and the men would not have to encounter screaming children on the way to their products,” says tommy Adamsson.

During the 1970s, the last restrictions on condom sales were lifted in Sweden. Condoms started being sold at department stores, gas stations and press stands. this resulted in lower prices and a decline in profitability from sales. As a result, in 1976 the sale of contraceptives came to an end and the company changed its name to polarn & pyret AB.

CoNCEPT DEVELoPED

For many outsiders, polarn o. pyret is symbolized, above all, by its stripes. there are plenty of knock-offs – but striped shirts sold by competitors are still usually associated with polarn o. pyret.

the architects behind the successful venture was the team of katarina af klintberg and designer Gunilla Axén. At the time, products were still being brought in from various suppliers, but they pioneered their own concept, based on their own designs.

these included t-shirts, sweatshirts, corduroy pants and jackets – and of course their big seller, long underpants (long johns).

the colors were red, blue, green and brown – and striped.

Stripes were included in the very first polarn o. pyret collection, which was launched in autumn 1975.

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the key concept behind this initiative was quality. their vision marked a shift away from synthetics and poor fits in favor of natural materials and comfort. other values they embraced were confidence and tradition, which were easy to build on after the many years as suppliers of healthcare products.

“An important aspect was that the clothing should be functional.

In addition to comfort and durability, everything could also be machine-washed. We also included nametags, repair patches and extra buttons. We were continually trying to envision new, intelligent solutions that would make life easier for the parents,”

explains katarina af klintberg.

Success was not long in coming. the politically conscious Swe- den of the 1970s was thirsting for clothing that signaled exactly what polarn o. pyret was offering. the collection was expanded to include women’s and eventually men’s clothing – and entire families could dress themselves in polarn o. pyret from head to toe. unisex became unifamily.

“Daycare workers were often our best salespeople – they wan- ted the children to be dressed in our clothing since they kept dry when they went outside,” says tommy Adamsson.

fRom ThEN To NoW

tommy Adamsson became president in the mid-1980s. the company expanded rapidly, in part through franchisee agreements. A large number of stores opened in Sweden as well as a few overseas – in Switzerland, Iceland and norway.

Success bred success – but then the setbacks started. the market changed radically. the yuppie generation of the 1980s was much more interested in flair and glamour than the down- to-earth assortment that polarn & pyret offered. Minds were of different opinions as to which direction was the right one to take for the future as earnings continued to decline. Symbolically enough, the classic polarn o. pyret stripes disappeared during

this period. the young, socially conscious generation that had comprised the customer base from the outset was still there – but they had become grandparents. And no new customers were in sight.

By 1996, the company was close to financial ruin. It was into this situation that Mikael Solberg, Jan Carlzon and paul leder- hausen took over operations. the company’s repositioning was turbulent. the purchasing department was replaced and a new, younger profile of women’s clothing was launched. the imme- diate result was that old customers didn’t recognize their store, while new customers were not finding their way in. production was turned over to new suppliers who, during the startup phase, did not fulfill the company’s quality requirements. By the beginning of 1998, the company was on shaky ground – but then things started turning around that spring. Sales gradually increased and the customers got younger. At the same time, new capital was brought in to finance the remodeling of a number of stores.

In 2000, the company underwent a merger with portwear, partly for the purpose of sharing infrastructure costs such as It and logistics. the fashion group RnB RetAIl AnD BRAnDS was born and a year later, in 2001, the company was listed on the Stockholm Stock exchange’s o-list.

STRIPES RETAKE PLACE of hoNoR

An important goal for the new polarn o. pyret was to clarify its concept. this meant, among other things, that new designers were recruited. they were given the task of maintaining and further developing that which the company brought from its past. Stripes returned to a place of honor and were used in various contexts to reinforce the brand.

the new focus of the product lines was on infants and children.

A line of maternity clothing was launched, as well as children’s shoes, bouncy swings and diaper bags. Women’s clothing disappeared at the same time.

this new direction proved to be correct. Since 1996, the company has quadrupled its sales to more than Sek 330 M. Another indication of that success is that the average age of customers has dropped significantly and that the number of loyal club members has increased considerably.

“We’ve found the right market position. We are doing what we are best at – functional children’s clothing. And it is clear that many customers would prefer that their children remain warm, dry and happy than for them to look trendy. the stripes can be viewed as a symbol of this,” says Cecilia tufvesson Marlow, departing president of polarn o. pyret, who will be taking on the same position for JC and J Store.

In other words, it’s in to be out again – and striped.

Footnote: To celebrate its 30th anniversary, Polarn O. Pyret designed a collection with a distinct retro feel. The garments, which were launched in autumn 2006, were manufactured in limited quantities and quickly sold out.

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“We’ve found the right market position. We are doing what we are best at – functional children’s clothing. And it is clear that many customers would prefer that their children remain warm, dry and happy than for them to look trendy.”

Cecilia tufvesson Marlow

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Polarn O. Pyret is more sought after as a clothing brand in Sweden than both Dior and Gucci. That is apparent from statistics from the auction site Tradera which, in spring 2006, had approximately 140,000 searches for Polarn O. Py- ret. As a result, it became the site’s most popular brand, in all categories.

Now the striped revolution is spreading beyond Swedish borders. During 2006, Polarn O. Pyret signed master franchisee contracts for Finland, Poland, Ireland and Rus- sia. Similar agreements were already in place for Norway, Estonia, Latvia, Lithuania and Iceland.

Clear logic

According to Cecilia Tufvesson Marlow, there is a clear logic behind the establishments in all of these countries.

“They comprise a portion of our local market, both in terms of climate zone and transportation distances. In addition, Poland and Ireland, for example, are among those countries that have the fastest growing economies in Europe, with significantly increased purchasing power as a result,” she says.

The same logic also applies to entering the Russian market – with a master franchise agreement being reached at the end of 2006.

And there are many new markets that have shown a strong interest in the concept.

“Many countries lack high quality, well-designed, functional children’s clothing in the mid-price segment, which means that there are many people interested in taking on the role of master franchisee,” says Cecilia Tufvesson Marlow.

rapid growth in norway and england

Parallel with Polarn O. Pyret’s capture of new markets, expansion within those markets in which the concept already exists continues. During 2006 this meant, for example, that “shop-in-shop” opened for business in four department stores in the UK, belonging to the British chain House of Fraser. Altogether, the House of Fraser includes 60 department stores, with most of those being recep- tive to the establishment of Polarn O.

Pyret’s so-called “shop-in-shop”

– an area of a store devo- ted entirely to a single brand. In addition, the British master franchisee opened two of its own Po- larn O. Pyret shops during the year.

“Another market that is expanding rapidly at the moment is Norway, which currently has 14 stores with another eight planned. Sales in Norway have exceeded all expectations,”

says Cecilia Tufvesson Marlow.

Dryer, warmer children

One of the biggest challenges in the rapid expansion, according to Ceclia Tufvesson, is to adapt the selection of offerings – that is, to know how many garment items in the upcoming collection should be ordered, since lead times are so long on, for examples, jackets and other outer clothing.

“But that is a nice problem to have – and it is also satis- fying to know that we are acting to ensure that more children here, and in other countries, keep dry, warm and happy,” she says.

polarn o. pyret is already world-renowned – in Sweden. now its functional children’s clothing is on its way to achieving the same status in several other countries. the ambition is to develop polarn o. pyret into an international brand where distribution occurs through the assistance of master franchisees.

polarn o. pyret

Striped revolution

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Foto: Thomas Klementsson.

Photo Thomas Klementsson

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Red Winter

Wind-proof baby hat Sek 175 Stroller mobile Sek 195

Mittens Sek 75 Anti-skid socks Sek 65 photo: Sandra peterson

Backpack Sek 245

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Anti-skid socks Sek 65 pajamas Sek 245 Woolen baby stockings Sek 95, kids Sek 125

Gloves Sek 45 Baby hat Sek 95 Vind fleece overall Sek 495

Backpack Sek 245

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TIGEROFSWEDEN.COM

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TIGEROFSWEDEN.COM

24811tg_TIGR214 RNB-aŵrsred 450x1 1 12/8/06 9:09:36 AM

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DepARtMentS & StoReS:

After successful transformation acts in the nK department stores in Stockholm and Gothenburg and Steen & Strøm, nK’s equivalent in oslo, RnB RetAIL AnD BRAnDS is taking the next step to the south to Illum, Copenhagen’s leading department store in the quality segment.

In late spring 200, RnB RetAIL AnD BRAnDS will open a new men’s fashion department at Illum. In August, new and remodeled departments for cosmetics, jewelry and watches will open their doors. the entire ground floor will be renovated, totaling some 1,500 square meters on Illum’s entrance level that RnB will operate.

“With our previous department store establishments, we have shown that the partner model is a platform and an approach that is not linked to a specific department store or geographic area,” says Roger Kylberg, president of the De- partments & Stores business area.

“Much of it is an intuitive feeling. We have learned from the investment in oslo that we must approach other markets with respect and carefully assess what works in each market,”

he continues.

Close dialogue with brand partners According to Roger Kylberg, one of the reasons for success has been the close partnership with the

Illum is Copenhagen’s most exclusive department store.

It is also one of the Strøget pedestrian street’s most famous landmarks. the time has now come for RnB Re- tAIL AnD BRAnDS to wave its magic wand over this tem- ple of luxury. Denmark will thus be the third country in which RnB establishes its distribution platform in the department store segment.

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brand names included in the departments that RnB RetAIL AnD BRAnDS will take over.

“Because the brands are already in place, their representatives also possess much local knowledge that we can use to advantage. We are therefore engaged in a close dialogue with them and are continuously exchanging ideas. We simply cannot assume that something that works in Stockholm will also work in oslo or Copenhagen. Although, as in this case, it is a question of neighboring countries, consumer patterns and trends are different,” says Roger Kylberg.

Uninhibited shopping since 1891 Another lesson from previous department store establishments and changes is that it is necessary to take the best of what the department store’s brand contains and enhance it.

Illum is a case in point. this is a department store that has been in operation for more than 100 years. on March 3, 191, Copenhagen residents were able to read in their daily newspapers that a specialty store was being opened that day for fabrics and sewing accessories on Østergade 55. the man behind the new store was A.C. Illum, who was credited with such talents as a keen sense of the fashions of the day, business skill and in-depth knowledge of the industry. Mr. Illum had noted

that people were moving into the city from the country as industria- lization progressed and that wealth and affluent families were increasing in Copenhagen, thus increasing the number of refined ladies who had the opportunity and the means to devote themselves to fashion and uninhibited shopping. A.C. Illum’s strategy was to offer them the very best in life – the most cove- ted luxury articles, high quality and service. this was also to be offered in an exclusive venue.

It was soon apparent that A.C. Illum had found exactly the right concept for attracting the affluent ladies of Copenhagen to his store. Inspi- red by success, he purchased the property across the street eight years later in 199. Copenhagen’s first department store was thus born. today, Illum continues to hold its position as the city’s foremost and most exclusive department store.

“one of our challenges is to nurture what already exists in the form of a strong brand and a well established address. We want to add a sense of both innovation and tradition that will attract both new and existing customer groups,” says Roger Kyl- berg.

Exclusive and unique – for many people

the objective is thus more refine- ment than radical change. the new

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concepts for the departments are already being developed. Just as with the other department stores that RnB RetAIL AnD BRAnDS has transformed, this will largely be a question of emphasizing brands and increasing their visibility. exclusivity will also be emphasized.

“We want to sell beauty in a beautiful way. the store should be esthe- tically pleasing and convey a feeling of comfort to the customer. to succeed, a number of different components must work together – everything from color schemes to lighting, which is extremely important,” says Roger Kylberg.

“We also want to create a feeling of exclusivity – although exclusivity if not for everyone, then for many people. You may not be able to af- ford a Chanel garment, but perhaps a Chanel lipstick, which can give you the same feeling of luxurious well-being,” he continues.

there are many ways to let brands become more prominent, according to Roger Kylberg. Some methods that have already been tested successfully at nK and Steen & Strøm.

one is to design modules with a clear profile for each brand, instead of as previously, a generic environment for the entire cosmetics department, for example. Modules may also not be higher than a cer- tain height so that customers are able to see the entire offering in the department and also feel linked to the rest of the department store. the goal is to create a sense of clarity and accessibility that will make the customer want to come back again and again.

mEN ALSo WANT To BE BEAUTIfUL Another trump card is the development of a department for male beauty products, an initiative that was successfully launched at nK in Stockholm with Male Depot. Ac- cording to Roger Kylberg, there is a strong trend towards a more all-encompassing view of male ap- pearance.

“Women have long been aware that all superficial details are important in creating a total impression, but we have only seen the beginning with respect to men. It is only in recent years that some men have understood the importance of skin care, for example. today, it is accepted that just as men use a deodorant, they can also use a moisturizing cream for their face. Given that men account for 50 percent of the population, it is easy to see the potential in this target group,” notes Kylberg.

BRoADER – AND LARgER

RnB RetAIL AnD BRAnDS’ ambition in its department store investments is to offer a broader and larger overall range, according to Roger Kylberg. Instrumental in this ef- fort is acquiring a hub, meaning a department store, in every major nordic city.

“From these hubs, we can then adapt geographically with attractive concepts on a smaller scale that are related to the department store. It is only a question of time until the next establishment is announced,” he concludes.

Women have long been aware that all superficial details are important in creating a total impression, but we have only seen the beginning with respect to men.

It is only in recent years that some men have understood the importance of skin care, for example.

Roger kylberg

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RNB RNB RETAIL AND BRANDS AnnuAl RepoRt 2005/2006

RNB

StRipeD RevolutioN

MoRe luxuRy foR youR MoNey

logiCal SolutioN

MoDel foR SuCCeSS

Santos 100

Santos 100

Content

RNB

2005/200

in brief

MoDeL FoR SUCCeSS

RnB RetAIL AnD BRAnDS

BUSIneSS AReAS AnD BUSIneSS MoDeLS

GooD FoR ConSUMeRS, PRoDUCeRS – AnD tHe enVIRonMent

It’s in to be out – and striped

Striped revolution

in new markets

Red Winter

MoRe LUxURY

FoR YoUR MoneY

In CoPenHAGen

2005/200