A Letter to Our Customers & Change Initiatives

Dear Valued Gerson/Sterling Customer:

As we quickly approach the end of the year, we would like to thank you very much for allowing The Gerson Companies and our family of products to serve you in 2014. Upon reflection, we are very proud that in our most recent fiscal year ended April 30, 2014, we enjoyed the best results in our 73 year history. However, this past seasonwe have not met our own high expectations in supporting our very faithful customers on several levels. The purpose of this letter is to apologize to you and most importantly to detail specific changes in our business practices that will create significant improvements to our customers going forward into 2015. Please be assured it is our highest priority that we provide top quality product, with on time delivery, and superior customer service and communication.

Our growth over the last five years can be attributed to a great product line offering. Our product lines have created an excitement with the potential of serving our customers in 2015 and beyond. In the past 18 months we have integrated two acquisitions into our business, experienced tremendous organic growth, and consolidated three different computer systems into one new computer operating system. All of these actions have created challenges and stress on our Company this past year. We have not executed in several areas of our business as our customers have grown to expect. Additionally this year, many of our factories in China experienced labor shortages causing production and shipping delays. The delayed shipments were further exacerbated by the recent and ongoing slowdowns in processing shipping containers at the west coast ports. Shipments from China to our Olathe, KS Distribution Center that normally take four weeks have been pushed to six and even seven weeks.

We want to assure you that we are keenly aware of the issues, mostly related to shipping and customer communication, and are completely focused on fixing the problem areas. Our management team has been focused over the last few months on reviewing all areas of our company operations to improve the customer experience. The two primary goals of this critically important review process are to improve the timeliness that our customers receive product from Gerson and to provide more timely and detailed communications. We are very pleased to report that our Change Initiatives have already begun. We have identified additional significant improvements that will be in place no later than January 1, 2015. These specific Change Initiatives are identified on the attached pages, and a complete outline will be available on our website by the end of the year.

We truly believe that Gerson offers its customers the most extensive, beautiful, and competitively priced product offering in our industry. We are deeply committed to improving our performance in every area of our Company, especially in how we interact with you. The growth and success of The Gerson Companies is directly related to our extensive list of loyal retail customers so we thank you very much for your business.

For your information, if you placed a Spring 2015 order with Gerson International, we are happy to report that a very large percentage of our inventory is in transit or will be by early December. This means we will be ready to ship Spring 2015 orders in a big way by the end of December to early January.

Thank you very much for allowing our Company and associates to serve your stores, and we appreciate your feedback and the opportunity to continually improve.

Best regards,

John C. Hjalmarson – Chairman and CEO
James S. Gerson – President



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