RESEARCH SUMMARY. Yano Research Institute April 16, Research Outline. Key Findings Honcho, Nakano-ku, Tokyo , Japan

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1 RESEARCH SUMMARY Yano Research Institute April 16, 2010 Sporting Goods Market in Japan: Key Research Findings 2010 Research Outline Key Findings Honcho, Nakano-ku, Tokyo , Japan Yano Research Institute has conducted a study on the sporting goods market in Japan based on the following research outline. 1. Research period: From December 2009 to February Research targets: Sporting goods manufacturers, wholesalers, import firms, retailers (approx. 450 firms in total) 3. Research methodologies: Face-to-face interviews by our specialized researchers and questionnaire survey by post <What is the sporting goods market in this survey?> The sporting goods market in this survey consists of equipment and goods of the following 16 major categories in addition to some other sports goods; Golf, Ski, Fishing, Athletic wear, Outdoor, Sports shoes, Tennis, Swimming, Baseball & Softball, Marine sports, Snowboard, Cycle sports, Badminton, Martial art, Table tennis and Fitness Domestic sporting goods market in 2009 is expected to register a negative growth of 98.0% Scale of the sporting goods market (manufacturers' shipment basis) in Japan in 2009 is projected to be 1,279.7 billion yen, 98.0% "Cycle sports" and "Outdoor sports" made over 1% growth in market size. "Cycle sports" and "Outdoor sports" are the two categories of the sporting goods market that have made over 1% of positive year-on-year growth in The cycle sports market is projected to be 30.3 billion yen, 107.8% of the previous year, supported by "sports bike boom" that is associated with such key words as "health", "environment" and "economy". The outdoor sports goods market is expected to grow to billion yen, 103.4% year-on-year thanks to the continuous increase of new participants to mountain activities and outdoor activities, and consequently, steady growth of both the cycle sports market and the outdoor goods market has continued. Products offered at discounted prices or special prices due to divergence between demand and supply are a part of the negative factors to the market growth. Ratio of the bargain products to the total sales has been increasing. This is a typical phenomenon in the markets of "golf goods", "tennis goods" and "sports shoes" in particular, which is taken as a negative factor to the growth of the total sporting goods market. Above all, the golf goods market, accounting for about 20% of the total sporting goods market, largely shrunk (to 91.8% of the previous year) due to slow replacement demand for "wood clubs (number one wood)" and decreased demand in response to special procurement boom occurred around the time of implementation of the restriction on the high restitution performance clubs in addition to increased composition ratio of bargain products to the total golf goods sales, which has an impact on the scale back of the entire sporting goods market. Consumers have had much sterner eyes on prices than before as the low-price orientation has become popular in the recession continued from the second half of In addition the consumers have become more discerning and selective, and higher product value for the price has been more and more widely required. Furthermore, it has become clearer that "health" is the keyword to encourage consumption. And such factors as "ecology" and "economy" have already been something we cannot ignore as they are closely related to the "Outdoor sports" where people could be healed in nature and to "Cycle sports" that are popular as an economical and environment-friendly transportation tool.

2 Report format: Published report: Sporting Goods Industry 2010 Issued in: March 2010 Language: Japanese Format: 645 pages in A4 format Price: 139,500 yen (6,975 yen of consumption tax will be additionally charged for sales in Japan.) Contacts: Public Relations Yano Research Institute Ltd. (URL: Phone: Research Summary 1. Market overview The scale of the sporting goods market (domestic shipment basis) in Japan in 2009 is projected to be 1,279.7 billion yen, 98.0% The market had achieved positive growth for four consecutive years from 2005, but it is projected to fall into negative in 2009 as a consequence of economic recession. Overview of Major Categories 1-1. Golf The domestic shipment value of the golf goods in 2009 is expected to be billion yen, 91.8% of the previous year. The sales will be decreased in all subcategories of the golf goods, other than some exceptions, including "golf clothes" that had enjoyed continuous high growth until The biggest factor that made the performance dropped that much should be the drastic decrease in sales of "number one wood", one of the major products. The reasons for the decrease include "slow replacement demand (or prolonged replacement cycle)" due to the "restriction on the high restitution performance clubs" and "decreased demand in response to special procurement boom occurred around the time of implementation of the restriction on the high restitution performance clubs" in addition to "increased composition ratio of bargain products to the total golf goods sales caused by the divergence between demand and supply, which forced unprecedented level of negative growth Athletic wear Market size for the athletic wear (domestic shipment basis) in 2009 is expected to reach billion yen, 100.7% The market consists of exercise clothes, life-style wear, succor & futsal wear, track & field/ running wear, basketball wear and volleyball wear. Firstly, the exercise clothes, accounting for 52.6% of the total athletic wear market, are expected to make a positive growth in Secondly, the life style wear with 22.1% of the composition ratio, is projected to fall into negative on the other hand. Following the life-style wear (sports wear used as street clothes), the succor & futsal wear that accounts for 15.9% is expected to slightly decrease. The field & track/ running wear, while its composition ratio is below 5%, has been continuously achieving sharp growth owing to running boom, and will record double-digit growth. Basketball wear is going to stay flat, and volleyball wear is expected to show year-on-year losses. The exercise clothes are widely used in many different scenes in everyday life that does not involve participation to serious competitions. One of the biggest factors that made the market grow should be appropriate responses to the needs of, for instance, clothes for "walking", "(indoor or outdoor) exercise", "commuting" by bicycles and "running". In this category of sporting goods, the product that is attracting a great deal of attention from sporting goods manufacturers nowadays is the high-performance supportive compression underwear. As a subcategory of the athletic wear market, the foregoing product is expected to achieve double-digit growth. As discussed above, while the favorable performance of the exercise clothes and field & track/running

3 clothes have lead the growth of the total athletic wear market, it is offset by the decreased demand for the lifestyle wear, which made the total athletic wear market stay almost flat Sports shoes The domestic shipment value of the sports shoes is expected at billion yen in 2009, 100.4% Deterioration of economy had a great impact on the sports shoes market as well, and there are quite a few numbers of retail stores suffering from slow sales. The domestic shipment, having achieved a small rise apparently, the market is in fact far from healthy and such that supply is chronically excessive and serious slump in end user sales has caused deflationary spiral. In the sports shoes market in latest years, there are some categories that have healthily grown based on real demands against the backdrop of the trend of health and beauty-consciousness on one hand. On the other hand, it is undeniable that the market might have neglected to address the challenge of excessive supply. Consequently, the sports shoes market both in shipment and retail basis bears a burden of flood of bargain prices as a result of competition for market share through lowering prices. The commercial practices unique to sports shoes that the supply by manufacturers is always larger than actual demand have not been improved yet particularly in the category of multipurpose shoes (casual sneakers). Moreover, uncertainty of the Japanese domestic market due to the low birth rate in addition to deterioration of economy has cast a shadow over the entire sports shoes market Outdoor The domestic shipment of the outdoor goods is expected at billion yen in 2009, 103.4% of the previous year. The outdoor goods market is categorized in clothes, shoes, and sacks and hard goods (outdoor gears & equipment). The composition ratios in 2009 are expected to be 41.2% for clothes, 17.3% for shoes, 11.7% for sacks, 21.1% for hard goods and 8.8% for others respectively. The categories that have lead the positive growth of the outdoor goods market are clothes, shoes and sacks, total of which accounts for almost 70% of the outdoor goods market, and they are all projected to achieve positive growth. The hard goods, primarily the camping gears & equipment, as a whole shall remain almost flat. The outdoor goods in general have been achieving relatively steady growth though the magnitude of the growth vary by item, while many products are having a hard time due to eroded consumer confidence resulted from prolonged economic downturn. In 2009, there are some positive trends to the outdoor goods market including increase of new young female hill-climbers and family day campers Cycles sports The domestic shipment of the cycle sports goods in 2009 is projected to be 30.3 billion yen, 107.8% The highest growth rate among all categories covered in this study is anticipated for the cycle sports market even though it is not as high a rate as that of 2008 (124.3% year-on-year). It has been long said that "sports bike boom", against backdrop of some key words including "health", "ecology" and "economy", became apparent, and that is expected to continue also in Future outlook The scale of the sporting goods market (domestic shipment basis) in Japan in 2010 is forecasted to be 1, yen Some categories with continuous growth potential may include the outdoor goods and cycle sports goods. Demand for the outdoor goods should be continuously expanded and the market is expected to keep growing also into the future because the consumer segment that had not been involved in outdoor activities before have started to participate in such activities through some events including open-air music festivals and trail running races in addition that participants to mountain-hiking, trekking and eco-tour have increased. As for the cycle sports goods, the market is predicted to continue to expand as the new participants, especially the middle-aged and elderly people, have increased thanks to the rise in health consciousness and demand for replacement and additional purchase by the users who have first participated in around 2007, when "sports bike boom" has started to occur.

4 Table 1: Market Size of the Sporting Goods in Japan Category (Shipment value basis) Units: Mil. Yen, % (Upper row : Market share, Lower row : Year-on-year ratio) (Projection) 2010 (Forecast) % % % % % % Golf 264, , , , , , Ski 35, , , , , , Fishing 124, , , , , , Athletic wear 197, , , , , , Outdoor 113, , , , , , Sports shoes 180, , , , , , Tennis 68, , , , , , Swimming 25, , , , , , Baseball/Softball 70, , , , , , Marine sports 10, , , , , , Snowboarding 36, , , , , , Cycle sports 19, , , , , , Badminton 12, , , , , , Martial art 14, , , , , , Table tennis 10, , , , , , Fitness 15, , , , , , Others 13, , , , , , Total 1,213, ,242, ,281, ,305, ,279, ,285, Estimated by Yano Research Institute Ltd. 1) The above numbers (including those for 2008 or before) are based on the research and the calculation newly conducted during the research period of this report (Dec Feb. 2010) 2) The market size is based on manufacturers' shipment value.

5 Figure 1: Market Size of the Sporting Goods in Japan Category (Shipment value basis) (Unit: Mil. Yen) 1,300,000 1,200,000 1,100,000 1,000,000 13,300 15,049 10,983 14,220 12,570 19,430 36,870 10,873 70,964 25,200 13,350 16,865 10,520 13,850 12,870 20,250 34,615 10,610 74,470 25,300 63,700 13,590 19,050 10,320 13,690 13,195 22,600 31,000 10,620 77,050 25,520 61,150 13,880 19,420 10,310 13,450 13,595 28,100 30,380 10,930 77,100 26,520 60,620 13,860 13,870 19,390 19,640 10,270 10,240 12,630 12,710 13,320 13,390 30,300 32,400 29,370 28,700 9,820 9,600 77,220 78,170 24,800 25,250 58,890 58,490 Others Fitness Table tennis Martial art Badminton Cycle sports Snowboarding Marine sports Baseball/Soft ball Swimming Tennis 68, , , , , , , , ,050 Sports shoes 700, , , , , , ,820 Outdoor 600, , , , , , , ,350 Athletic wear 400, , , , , , ,240 Fishing 300,000 35,250 32,840 29,570 28,290 25,400 24,780 Ski 200, , , , , , , ,480 Golf (Projection) 2010 (Forecast) Category 3) The market size is based on manufacturers' shipment value. Estimated by Yano Research Institute Ltd