Spring 2015 Company Update

Dear Valued Gerson/Sterling Customer:

We hope with the nicer weather here (finally!) your spring and early summer sales are in full swing. As we approach the year’s midpoint, we would like to provide a brief update on the progress of continuing to improve your experience in working with our company. The commitment we made to our customers late this past year was to communicate more frequently.

By now, you should have received confirmation of your Fall/Holiday orders, including items that have been cancelled by the factories. The number of items cancelled this year is consistent from year’s past, and the good news is the dollars of cancelled items is lower. For the most part, our cancellations are a result of not buying enough of a particular item from our factory. We are absolutely committed to continue offering the very best seasonal line in the marketplace, and our goal is to deliver 100%, and in a timely manner. One area we have identified in helping our delivery percentage and timeliness of shipments is to reduce the number of duplications and very similar product in our catalogs.

The additional systems and personnel we have put in place are helping us greatly in tracking the Fall, Halloween, and Holiday orders now in production with our factories. Our offices in Hong Kong and Shanghai are speaking with and visiting our factories on a daily basis, and then forwarding weekly updated progress reports.

The deliveries from our factories for Spring/Summer ’15 were well ahead of last year, although we struggled with the West Coast Port slowdown and shutdown. This letter is neither the time nor place for discourse on politics on the confrontation, but the entire dispute was unnecessary, and ended up hurting consumers, retailers and suppliers. We did our best to compensate for the delayed arrivals by investing in a second shift, both in order processing and our distribution center. Our planning definitely helped, but it could not compensate for some containers of product sitting on the West Coast for an additional 4 weeks. For those of our customers affected by the West Coast port shut down, we truly apologize.

I have seen previews of our Spring 2016 product assortments, and you will be excited as I am! It is the best assortment our designers and product merchants have created. I am especially pleased with progress on our newest addition, Garden Meadow. Solar products continue to grow in sales, and we are introducing a completely re-energized line. We are investing heavily in bringing existing Garden Meadow factories up to Gerson’s standards, as well as onboarding new suppliers we feel will improve delivery time and quality to meet our customers’ expectations. Of all of our various brands, Garden Meadow was most adversely affected this spring by the West Coast Port slowdown/shutdown, so the plan we have in place is to ship spring much earlier from the factories this next season.

We greatly appreciate the opportunity of supporting your stores, and we thank you very much for the loyalty to our company.

Best regards,

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

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