미국 나스닥 상장 업체의 노스페이스 전략 분석

BUSINESS

THIS  PROSPECTUS  CONTAINS  CERTAIN  FORWARD-LOOKING  STATEMENTS  WITHIN THE
MEANING OF THE FEDERAL SECURITIES LAWS. ACTUAL RESULTS AND THE TIMING OF CERTAIN
EVENTS COULD  DIFFER  MATERIALLY FROM  THOSE  PROJECTED IN  THE  FORWARD-LOOKING
STATEMENTS  DUE TO A  NUMBER OF FACTORS,  INCLUDING THOSE SET  FORTH UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

The Company believes  The North  Face-Registered Trademark-  is the  world's
premier  brand of  high-performance outdoor  apparel and  equipment. The Company
designs and distributes technically sophisticated outerwear, skiwear, functional
sportswear,  tents,  sleeping   bags  and   backpacks,  all   under  The   North
Face-Registered Trademark- name.

The  North Face has developed a superior reputation for quality, performance
and  authenticity  by  providing   technically  advanced  products  capable   of
withstanding  the most  extreme conditions. For  nearly 30  years, the Company's
outdoor apparel and equipment  have been the brand  of choice for numerous  high
altitude   and  polar  expeditions.  These  products  are  used  extensively  by
world-class climbers, explorers and  extreme skiers, whose  lives depend on  the
performance of their apparel and equipment. To maintain and further enhance this
unique  legacy,  the  Company continuously  develops  and  introduces innovative
products that  are functional,  technically  superior and  designed to  set  the
industry  standard in each product category.  The Company cultivates its extreme
image through  its  targeted marketing  efforts  and its  teams  of  world-class
climbers, explorers and skiers.

To  protect the integrity of The  North Face-Registered Trademark- brand and
ensure a high level  of customer service and  education, the Company limits  the
distribution  of its  products to  a select  number of  specialty retailers. The
Company sells its products to  over 1,500 wholesale customers representing  more
than  2,000 store  fronts throughout the  United States, Europe  and Canada. The
Company also owns and operates nine retail  and two outlet stores in the  United
States.

INDUSTRY OVERVIEW

Technical   outdoor  apparel  and  equipment  historically  have  been  used
primarily by professional  climbers and serious  outdoor enthusiasts. In  recent
years,  these products have become increasingly popular among a broader group of
consumers. The Company believes that this  growth has been the result  primarily
of (i) an increase in outdoor recreational activities by the general population,


(ii) a growing demand for highly functional products, (iii) a growing acceptance
of  outdoor  apparel  as casual  wear  and  (iv) an  increase  in  the technical
sophistication of products in this field.

The  trend  towards  more  active  outdoor  lifestyles  is  demonstrated  by
increased  participation in  a variety  of outdoor  activities such  as camping,
hiking and  backpacking.  According  to  The  Outdoor  Recreation  Coalition  of
America,  from  1993 to  1994  the number  of  people who  participated  in rock
climbing increased 32%, while participation in mountain biking increased 20% and
backpacking increased  11%. In  addition,  outdoor or  rugged apparel  has  been
increasingly  worn as casual clothing even by individuals who do not participate
in outdoor  activities  or  require  the  functionality  of  a  high-performance
product.   Casual  wear  in  general   also  has  become  increasingly  popular,
particularly in the workplace as evidenced  by the dramatic increase in  "casual
days."

The Company believes that consumers recently have demonstrated an increasing
preference  for  functional, performance-oriented  products.  Purchase decisions
often are  driven as  much by  a desire  to create  a particular  perception  of
themselves  as healthy and  active as by  an actual need  for these products. An
example of this trend is the growing popularity of sport utility vehicles  which
have  become  one of  the fastest  growing segments  of the  automotive industry
despite the  fact that  most owners  of such  vehicles never  venture off  paved
streets.   Finally,  over   the  last   decade,  there   have  been  significant
technological advances in  materials and  features that  have increased  product
functionality  and performance. The number of  products and product segments has
increased dramatically as marketers target specific

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functions and  uses to  particular user  groups. For  example, in  the  footwear
industry,  there has  been a  proliferation of new  products designed  to suit a
greater variety  of activities  and conditions.  See "Risk  Factors --  Changing
Consumer Preferences."

BUSINESS STRATEGY

The  North  Face's goal  is to  design  and market  the most  recognized and
respected brand  of high-performance,  technically-oriented outerwear,  skiwear,
outdoor  equipment and functional  sportswear in the world.  Each element of the
Company's strategy is intended to enhance  and reinforce the global brand  image
of  The North Face-Registered Trademark- among both consumers and retailers. Key
elements of the strategy are to:

OFFER TECHNICALLY  SUPERIOR  PRODUCTS.    The North  Face  is  committed  to
offering technically superior products that are functional, reliable and durable
and  that  set the  industry  standard in  each  product category.  Many  of the
Company's existing product lines feature technically superior,  high-performance
products designed to be used in remote, mountainous or polar environments and to
withstand  the  harshest  conditions.  To  reinforce  The  North Face-Registered
Trademark- image  of quality  and reliability,  the Company's  products carry  a
lifetime  warranty.  The  Company  believes  that  this  standard  of excellence
cultivates, for  the  entire  range  of  The  North  Face-Registered  Trademark-
products, a technical, extreme and authentic image that also appeals to the more
casual outdoor enthusiast seeking functional, high-performance products.

DESIGN  INNOVATIVE PRODUCTS.   The North Face is  committed to maintaining a
premier position in the outdoor apparel and equipment industries by remaining on
the leading edge of  product design and materials  technology. More than 85%  of
the  products currently offered by The North  Face are new products or have been
updated since 1993. In designing and developing new product styles and features,
the Company's  teams  of  world-class climbers,  explorers  and  extreme  skiers
contribute  design ideas and  test new products. The  Company also works closely
with suppliers to  develop high-performance  materials that  result in  lighter,
stronger  and  more  efficient  products,  and  frequently  obtains  from  these
suppliers first and/or exclusive rights to  use the new materials for a  certain
period of time.

PROMOTE  ITS EXTREME BRAND IMAGE.  The Company devotes significant resources
to strengthening  The North  Face-Registered Trademark-  brand by  projecting  a
technical, extreme and authentic image that appeals to professionals and serious
outdoor  athletes as well  as to broader  segments of the  population. The North
Face believes  that the  product choices  of professionals  and serious  outdoor
athletes  create  greater  product  visibility  and  influence  general consumer
preferences. The Company  provides equipment and  outerwear for expeditions  and
other  high profile  outdoor activities and  promotes The  North Face's products
through its teams of world-class climbers, explorers and extreme skiers.

FOCUS ON SELECTIVE  DISTRIBUTION.   To protect  the integrity  of The  North
Face-Registered  Trademark- brand and promote a  high level of customer service,
the Company  limits  the distribution  of  its products  to  a select  group  of
specialty mountaineering, backpacking and ski retailers, large specialty outdoor
retail chain stores and selected general sporting goods retailers. The Company's
wholesale  customers typically sell  high quality, technically-oriented products
that are consistent  with the Company's  standards and have  well trained  sales
personnel capable of providing superior customer service and technical guidance.
Through  selective  distribution, The  North  Face believes  it  increases brand
loyalty and encourages its wholesale customers  to carry a broader array of  its
products.

INTRODUCE  SUMMIT SHOPS.   The North  Face recently  developed Summit Shops,
year-round concept  shops  dedicated  to The  North  Face-Registered  Trademark-
products  and to be primarily located  within certain of the Company's wholesale
customers. Summit  Shops  are  designed  to  increase  the  Company's  sales  in
specialty  retailers by broadening The  North Face-Registered Trademark- product
offerings, improving merchandising and building brand awareness. The North  Face
will  design and install  Summit Shops and provide  its specialty retailers with
merchandising and training support. The Company believes that Summit Shops  will
provide  specialty retailers with an opportunity  to increase sales of The North
Face-Registered Trademark-  products  without  devoting  substantial  additional
resources.  By  establishing  operating  guidelines for  the  Summit  Shops, the
Company will promote high levels of service and a broad product selection, while
minimizing its investment and operational commitment.

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SELECTIVELY OPERATE RETAIL STORES.  To complement its wholesale distribution
strategy and to  increase brand awareness  in selected markets,  The North  Face
currently  operates  nine  retail stores.  These  stores enable  the  Company to
display the full line of  The North Face-Registered Trademark- products,  obtain
feedback from customers, closely monitor the retail sell-through of its products
and obtain consumer information. The North Face does not plan to open additional
retail  stores  due to  the recent  development  of its  Summit Shops,  which it
expects will provide many of  the advantages of Company-operated retail  stores,
with a higher return on investment.

GROWTH STRATEGY

The Company's growth strategy is to continue to build on the strong consumer
awareness  and  technical  reputation of  The  North  Face-Registered Trademark-
brand. While  professionals  and  serious  outdoor  enthusiasts  will  remain  a
critical  part of the Company's  consumer base, The North  Face believes that it
will continue to benefit from  increasingly active consumer lifestyles and  what
it  identifies as a growing  preference for functional, high-performance outdoor
apparel and equipment. Key elements of the Company's growth strategy are to:

INTRODUCE NEW PRODUCTS  AND COMPLEMENTARY PRODUCT  CATEGORIES.  The  Company
intends  to  take  advantage  of  the  strength  of  The  North  Face-Registered
Trademark- brand by continuing to introduce new products within existing product
categories  and  by  adding   complementary  product  categories.  The   Company
introduces  innovative new products within  existing categories and extends core
product lines by creating new "families" of products around existing products, a
strategy which  has  been effective  both  in  launching the  new  products  and
increasing  the sales of the core  products. In addition, although the Company's
products historically have been concentrated primarily in premium price  product
categories,  the  Company  intends to  continue  to introduce  products  in more
moderate price-point  segments,  so  as  to  access  a  broader  consumer  base.
Consistent with The North Face-Registered Trademark- image, however, the Company
ensures  that these products offer the highest performance and function in their
category. Finally,  the  Company intends  to  introduce additional  new  product
categories, such as its recently introduced lines of windwear, day packs, gloves
and underwear.

ROLL  OUT  SUMMIT SHOPS.    The Company  recently  developed the  concept of
"Summit Shops"  to  promote  The  North  Face-Registered  Trademark-  brand  and
increase  sales at specialty retailers. The Company intends to open Summit Shops
in a  controlled  manner,  selecting  specialty  retailers  willing  to  make  a
substantial commitment to the concept by dedicating sufficient selling space and
financial  and operating  resources. The  Company anticipates  initially opening
Summit Shops primarily in large specialty outdoor retail chains and in  selected
larger,  outdoor  specialty  stores,  and  may  consider  other  high-end retail
formats. The Company expects to open its  first Summit Shop in late Summer  1996
and  anticipates that  approximately 25  Summit Shops  will open  throughout the
United States by the end of 1996.

PROMOTE TEKWARE  AS  A  HIGH-PERFORMANCE ALTERNATIVE  TO  SPORTSWEAR.    The
Company  intends to broaden the distribution  and increase its product offerings
of Tekware, an innovative new line of high-performance, functional clothing made
from a new generation of synthetic fabrics. Tekware generally maintains the look
and feel  of  cotton,  while offering  significant  functional  and  performance
advantages over cotton, such as its quick-drying, abrasion- and shrink-resistant
properties.  Management expects Tekware to change  the way consumers think about
casual clothing  for  active outdoor  use  and to  provide  the Company  with  a
competitive  advantage in the  sportswear market. The  Company believes that the
initial response from its wholesale  customers to Tekware, which was  introduced
for Spring 1996, has been positive.

PURSUE  INTERNATIONAL OPPORTUNITIES.  The North Face intends to pursue sales
in international markets  while selectively increasing  its distribution in  the
United States. The Company believes that many of the same lifestyle and consumer
trends  that have benefited  the Company in the  U.S. are increasingly affecting
international markets, particularly  in Europe  and Canada. The  North Face  has
established  regional headquarters in  Europe and Canada,  and recently combined
its domestic and international

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product development, sourcing  and marketing functions  to improve  efficiencies
and  develop an  integrated effort  designed to  increase its  global focus. The
Company  anticipates  that  its  international  sales  will  benefit  both  from
expanding  the distribution of  its products and the  increased awareness of The
North Face-Registered Trademark- brand. The Company anticipates that Europe  and
Canada  will provide the most significant  near-term opportunities but also will
selectively pursue new markets in Asia.

PRODUCTS

The   North    Face   offers    a   broad    range   of    high-performance,
technically-oriented  outerwear, skiwear, outdoor equipment and Tekware designed
for extreme applications,  such as high  altitude mountaineering, ice  climbing,
rock  climbing, backpacking, skiing and  snowboarding. The Company characterizes
its apparel-related products  as "equipment for  the body." As  a result of  the
experience gained through nearly 30 years as the brand of choice for many of the
world's  most  challenging  high  altitude  and  polar  expeditions,  The  North
Face-Registered Trademark-  has achieved  a unique  level of  authenticity.  The
North  Face-Registered  Trademark- products  are  original designs  and  carry a
lifetime warranty  for  the original  owner  against defects  in  materials  and
workmanship.  In 1995, sales of outerwear, equipment, skiwear and other products
represented approximately 50%, 25%, 14% and 11%, respectively, of net sales.

The Company's goal is to offer the most technically advanced products in its
field and  to establish  the industry  standard in  each product  category.  The
Company  designs its  premium products  for extreme  applications, such  as high
altitude mountaineering, ice climbing and  polar expeditions, which it  believes
represents  only  a small  fraction of  its  potential customers.  These premium
products serve to  reinforce The  North Face-Registered  Trademark- brand  image
while appealing to non-extreme users. The Company also strives to offer products
at  more moderate price-points that remain "best of class" by incorporating many
of the features, materials and technology used in its leading edge designs.  The
Company  believes  that  this  product  design  philosophy  enhances  The  North
Face-Registered Trademark- brand while appealing to the broader consumer market.
See "Risk Factors -- Dependence on New Products."

OUTERWEAR

The Company's outerwear is engineered to provide protection in cold, wet and
windy conditions and to  accommodate the range of  motion required for the  most
extreme   activities.  It  is  designed  to  adapt  to  varying  conditions  and
situations, taking into account the unpredictability of the weather and the fact
that some outdoor activities alternate  between periods of extreme exertion  and
total  rest, requiring a proper balance between ventilation and insulation. Each
year, the Company enhances its outerwear lines by adding new products and design
innovations. Overall, the Company  has introduced 65  new outerwear products  in
1996,  including  two  entirely  new collections,  "Search  and  Rescue-TM-" and
"Remote Terrain Gear." Among the  exclusive features being introduced this  year
are  ergonomic swivel  hoods, ten-piece  articulated sleeves  and multi-position
double slider underarm zippers. The Company  now offers four principal lines  of
outerwear and a line of Technical Apparel Accessories.

EXPEDITION  SYSTEM-REGISTERED  TRADEMARK-  is an  advanced,  integrated cold
weather clothing  system in  which several  pieces (including  full body  suits,
pants,  jackets,  vests, anoraks  and accessories)  work  together in  layers to
create warmth, protection and safety. Since 1994, the Company has  significantly
expanded  the Expedition  System-Registered Trademark- product  line by creating
new families of products  around existing products, such  as the Mountain  Light
and  Denali fleece families, adding new  product segments, such as the Himalayan
and Kichatna Series,  significantly upgrading and  restyling existing  products,
such as the Nuptse Series, and adding products specifically designed for women.

WEATHER  SYSTEMS  is  a  collection of  four  distinct  series  of outerwear
designed to provide protection  in wet and  windy conditions, while  maintaining
comfort  throughout variations  of season,  temperature, moisture  and wind, and
over a  wide  range of  activities.  For example,  the  Hydrenaline-TM-  Series,
introduced in 1994, is a technically advanced line of shell outerwear based on a
proprietary  microfiber  fabric,  Hydrenaline-TM-,  that  combines  features  of
breathability and water resistance  and is ideal  for hiking, running,  mountain
biking, cross country skiing and other aerobic outdoor activities.

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SEARCH AND RESCUE-TM- introduced a new concept to the outdoor industry. This
collection  of one  piece suits,  shells and fleece  is designed  to support and
protect mountain search and rescue teams in extreme weather conditions. Although
intended for search and rescue experts, several pieces within the collection are
expected to appeal to  consumers who desire its  protective attributes for  less
extreme outdoor activities.

REMOTE  TERRAIN GEAR  ("RTG") was  created for  backcountry snowboarding and
combines elements of  the Company's Expedition  System with unique  snowboarding
features  to  create  products  such  as  pants  that  are  cut  in  the  seated
snowboarding position. Unlike  most snowboarding  clothing which  caters to  the
fashion  tastes of snowboarders, the highly functional RTG is expected to appeal
to a performance-oriented snowboarding market.

TECHNICAL APPAREL  ACCESSORIES includes  a  wide range  of  high-performance
thermal  underwear,  head  wear,  gloves  and  mittens  which  have  been tested
extensively throughout the world in extreme conditions. This collection has been
expanded significantly in 1996 with the introduction of nine new products.

TEKWARE-TM-

In 1996, The North Face entered  the broader casual apparel market with  its
introduction  of  Tekware-TM-, an  innovative  line of  high-performance outdoor
apparel made  from  a new  generation  of  synthetic fabrics  and  developed  in
collaboration  with E.I. DuPont de Nemours & Co. ("DuPont") and other companies.
Tekware is offered in  three lines, Climbing, Training  and Trekking, each  with
versions  for men  and women.  Each line features  a broad  collection of pants,
shorts, shirts, pullovers, vests, tank tops and tights, each in several  styles.
Tekware  is designed for  serious outdoor pursuits  and is especially functional
for everyday use. Overall, the Company introduced 67 Tekware products for Spring
1996 and an additional 44 Tekware products for Fall 1996.

ADVANTAGES OF TEKWARE-TM- OVER COTTON CLOTHING

FEATURES                                    TEKWARE    COTTON
- -----------------------------------------  ---------  ---------
Quick Drying.............................      X
Abrasion Resistant.......................      X
Shrink Resistant.........................      X
Tear Resistant...........................      X
Fade Resistant...........................      X

Tekware has garnered positive publicity from the press. Explaining why  they
selected  Tekware for their prestigious "Editors'  Choice" award, the editors of
BACKPACKER magazine wrote in the April 1996 issue: "We're not big fans of cotton
clothes for backcountry duty. Once wet, cotton  takes forever to dry and in  the
process  it sucks away precious body warmth.  Hypothermia is a real concern when
you wear jeans or a cotton T-shirt  in the wilderness, and that's why some  wise
woodsperson  coined the phrase,  'cotton kills.' Naturally,  when The North Face
touted its  new Tekware  clothing line  as  '100% Not  Cotton,' it  grabbed  our
attention.  During our  field tests  we found  that when  nasty weather  or hard
hiking soaks you, these non-absorbent, synthetic shirts and pants keep you  warm
while  your body heat quickly dries the fabric. . . . These sensible clothes are
built for the backcountry but won't make you look or feel like a trail bum  when
you hit town."

Tekware  provides  an effective  complement to  the Company's  other product
offerings and will  be prominently  featured in  the Summit  Shops. The  Company
believes Tekware will be very appealing to wholesale customers and will increase
the  amount of  selling space  devoted to  The North  Face-Registered Trademark-
products. The  Company believes  Tekware's broad,  year-round product  line  and
consistent  new  product  introductions  will  help  create  sustained  consumer
interest in The North Face-Registered Trademark- brand. In addition, unlike some
of

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the Company's other product  categories, Tekware has the  potential to become  a
repeat  or  "replenishment" business  as  consumers purchase  new  sportswear to
complement  or  replenish  their  existing  wardrobes.  See  "Risk  Factors   --
Introduction and Acceptance of Tekware-TM-."

EQUIPMENT

Equipment  is  critical to  The North  Face-Registered Trademark-  image and
reputation  and  plays  an  extremely   important  role  in  its  research   and
development,  field testing and  marketing activities. The  Company offers three
comprehensive lines of  technical outdoor  equipment: tents,  sleeping bags  and
backpacks. The Company has increased its equipment sales over the last two years
by  introducing  new  products  and  refining  existing  products.  The  Company
introduced 65 new equipment products in 1996.

TENTS.  The  North Face is  regarded as the  premier supplier of  expedition
tents  built to withstand  extreme weather conditions.  The North Face currently
offers an extensive line of 23 tent  models, designed to suit a wide variety  of
weather conditions and applications. The North Face offers 12 expedition-quality
tents,  including models such as the VE-25,  long renowned as the world's finest
base camp tent, and the Mountain-24, rated  by CLIMBING MAGAZINE in 1995 as  the
best  two-person  expedition  tent. The  Company's  best selling  tents  are its
three-season and recreational tents  that also offer  superior features and  are
used by a wide range of consumers for backpacking and camping.

SLEEPING  BAGS.    The  Company  offers  27  models  of  sleeping  bags  for
mountaineering and backpacking  that differ  in insulations,  shell fabrics  and
linings.  The Company offers 13  models in the goose down  line and 14 models in
its synthetic insulated line of sleeping bags to provide comfort in temperatures
ranging from -40  DEG.F to  30 DEG.F.  During the  last two  years, the  Company
introduced  several innovations in fabrics,  insulation and construction of both
its goose  down  and synthetic  insulated  lines.  For Fall  1996,  the  Company
introduced  synthetic sleeping bags made  from Polarguard 3D, a high-performance
product developed  by Hoechst  Corporation ("Hoechst"),  in close  collaboration
with The North Face.

BACKPACKS.   The North Face offers a comprehensive line of backpacks grouped
into three  categories: (i)  large  volume, internal  frame packs  for  extended
backcountry trips; (ii) "tech packs" for sport specific activities and (iii) day
packs.  The  large  volume,  internal  frame  pack  category  consists  of three
different lines based on differing  load carrying efficiencies. These packs  are
made  in a range of  torso lengths and in  sizes to fit both  men and women. The
"tech pack" line consists of 11 models  of sport specific packs designed by  The
North  Face  teams  of  climbers,  explorers  and  extreme  skiers  for specific
activities, such  as  high  altitude  climbing,  ice  climbing,  rock  climbing,
backcountry  skiing  and snowboarding.  During the  last  year, the  Company has
introduced new  lines of  daypacks, lumbar  packs and  cargo bags  providing  an
opportunity  for a wide audience  of hikers, students and  the general public to
own a The North Face-Registered Trademark- product at a more moderate price.  In
1996,  the Company  introduced 33 new  products in the  categories of backpacks,
"tech packs," day packs, cargo bags and pack accessories.

SKIWEAR

The Company  offers skiwear  designed for  extreme skiing  in remote  areas.
While  the  Company's  skiwear is  designed  for  extreme users,  it  has become
increasingly  popular  among  recreational  skiers.  The  North  Face-Registered
Trademark-  skiwear products  include parkas,  jackets, anoraks,  ski pants, ski
suits, gloves and other  accessories. The Company's  six skiwear collections  --
Heli,  Steep  Tech-Registered  Trademark-,  Men's  Extreme-Registered Trademark-
Gear,  Women's  Extreme-Registered  Trademark-  Gear,  Men's  Extreme-Registered
Trademark-  Light and Women's  Extreme-Registered Trademark- Light  -- have been
designed for specific applications, including helicopter skiing and  backcountry
skiing.  The  Company's skiwear  offers  highly technical  features  for optimal
weather protection,  maximum freedom  of movement  and appropriate  ventilation,
including the use of tough, abrasion-resistant fabrics, such as Kevlar, that are
strategically  overlaid or inset for added protection in areas of excessive wear
and tear, such as  shoulders and elbows. The  Company's skiwear collections  are
reviewed  annually  and  are  redesigned,  as  appropriate,  to  add  innovative
features. In 1996, the Company introduced 56 new skiwear garment products and 15
new skiwear accessory products.

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PRODUCT DESIGN AND DEVELOPMENT

The Company's goal is to offer the most technically advanced products in the
world that establish  the industry  standard in  each of  the Company's  product
categories.  To  remain on  the  leading edge  of  product design  and materials
technology, the Company  continually eval!uates  trends, monitors  the needs  and
desires  of its consumers and works with  its materials suppliers to develop new
materials and  products  and  enhance  product designs.  See  "Risk  Factors  --
Dependence  on Key Suppliers of Materials"  and "-- Dependence on New Products."
The Company regularly reviews its product lines and actively seeks input from  a
variety  of sources.  At the  forefront of the  product development  effort is a
15-member product  development  team, which  includes  experts in  textiles  and
design  engineering. This team,  which is responsible  for overseeing testing of
designs and introducing new outerwear,  outdoor equipment, skiwear and  Tekware,
is organized along major product lines, each with a product manager. The product
development  team  works with  staff designers  and  also with  outside contract
designers. The Company's teams  of climbers, explorers  and extreme skiers  also
are important components of the Company's product design and development effort.

The product development cycle, from initial design to introduction, can take
from  12 to 18 months,  with tents and backpacks  requiring more time than other
products. A  new product  may be  produced in  several prototypes  before  being
submitted  for  testing.  New  designs  are tested  by  the  Company's  teams of
climbers,  explorers  and  extreme  skiers  and  by  in-house  and   independent
laboratories,  as well as by  The North Face personnel.  The Company maintains a
materials testing  laboratory with  equipment  to execute  a variety  of  tests,
including  water  resistance,  air  permeability,  tear  strength  and  abrasion
resistance.

The Company's products  are designed  with materials that  are essential  to
their   technical  performance.  Most  of   these  materials  are  developed  in
collaboration with  major  suppliers, such  as  W.L. Gore  &  Associates,  Inc.,
DuPont,  Hoechst, Burlington Industries,  Inc. and Mitsui  Textiles. The Company
works closely with  these suppliers to  develop high-performance materials  that
result  in lighter,  stronger and  more efficient  products. With  an innovative
material, the Company generally seeks an exclusivity period, usually one to  two
years,  after  which  the  supplier  is  free  to  make  the  material generally
available. These suppliers frequently provide  much of the funding for  research
and  development of the materials they are developing for the Company, and often
contribute to the costs of promoting products incorporating their material.  See
"Risk Factors -- Dependence on Key Suppliers of Materials."

MARKETING AND PROMOTION

The Company's goal is to increase brand awareness by projecting a technical,
extreme  and authentic image  that appeals to  professionals and serious outdoor
enthusiasts as  well as  to  broader segments  of  the population.  The  Company
conveys an extreme and highly technical image by featuring world-class climbers,
explorers,  skiers  and  snowboarders  using  the  Company's  products  on  high
altitude, polar or backcountry expeditions. The North Face's marketing materials
utilize language and images  that, while directed to  the extreme athlete,  also
create an emotional connection with broader segments of the population.

Management  believes that The North Face has  obtained a high level of brand
awareness and  loyalty from  the extreme  users  of its  products. In  order  to
bolster  the loyalty  of these  individuals and  to further  enhance its extreme
image, the Company is increasing its support of selected high altitude and polar
expeditions  and  its  teams  of  climbers,  explorers  and  skiers.  The  North
Face-Registered  Trademark- products have  been the brand choice  of many of the
world's most challenging expeditions  for nearly 30 years.  A small sampling  of
these  expeditions includes the 1969 Arctic  Institute of North America Altitude
Expedition; 1978 American Woman's  Himalayan Expedition; 1987 International  K-2
Expedition;  1989  Trans-Antarctica  Expedition;  1992  American  Gasherbrum  IV
Expedition;   1994   Sagmartha   Environmental   Expedition;   and   the    1995
Ak-Su Kyrgyzstan Expeditions.

Recognizing  that  the product  choices  of professional  athletes influence
consumer preferences, The North Face  employs and/or has entered into  contracts
with  several world-class  professional climbers, including  Conrad Anker, Kitty
Calhoun-Grissom, Greg  Child,  Lynn  Hill,  Alex Lowe  and  Jay  Smith;  extreme

34

skiers  Scot Schmidt and Rob and  Eric DesLauriers; and backcountry snowboarders
Jim and Bonnie Zellers.  These athletes are essential  to the Company's  product
design  and testing. In addition, they  participate in promotional activities on
behalf of the Company, including demonstrations and appearances at  exhibitions,
trade  shows, retailer clinics  and promotional events, and  appear in photos to
promote the Company in catalogs, advertisements, posters and videos. The Company
has entered into relationships with the Professional Ski Instructors of  America
and  with the National Ski Patrol pursuant  to which each of these organizations
endorses the Company's skiwear.

In 1994, The North Face began an ongoing comprehensive consumer  advertising
campaign in outdoor and ski publications. The Company's advertisements appear in
magazines such as OUTSIDE, CLIMBING MAGAZINE, BACKPACKER and POWDER. The Company
also  has  received  editorial coverage  in  a  wide range  of  general interest
publications, including VOGUE,  ELLE, ESQUIRE, GQ  and THE NEW  YORK TIMES.  The
Company  provides a wide assortment of  point of purchase advertising support to
retailers, including catalogs,  descriptive product hang  tags and visual  aids.
Many  of these  point of  purchase marketing tools  will be  integrated into the
Company's newly  developed Summit  Shops.  The Company  also promotes  sales  by
operating  sizable product displays at three  industry trade shows, two of which
are held in  the Spring and  one in  the Fall of  each year. In  the year  ended
December  31,  1995,  the  Company  incurred  expenditures  for  advertising and
promotional activities which were approximately 4% of net sales.

SELECTIVE DISTRIBUTION

To preserve the integrity of The North Face-Registered Trademark- image  and
reputation,  the  Company currently  limits its  distribution to  retailers that
market products that are consistent  with the Company's technical standards  and
that  provide  a high  level of  customer service  and technical  expertise. The
Company  currently  sells  its   products  to  a   select  group  of   specialty
mountaineering,   backpacking  and  skiing  retailers,  premium  sporting  goods
retailers and major outdoor specialty retail  chains. The Company does not  sell
its  products to national  general sporting goods chains  or to discount stores.
The Company  sells  its products  in  the  United States  to  approximately  840
wholesale  customers, representing an  estimated 1,100 store  fronts. In Canada,
the Company  sells  its  products  to  approximately  200  wholesale  customers,
representing  an  estimated  240  store  fronts,  and  in  Europe,  it  sells to
approximately 460  wholesale  customers,  representing an  estimated  700  store
fronts.  Major  customers of  the  Company include  Recreational  Equipment Inc.
("REI") and Eastern Mountain Sports, Inc. ("EMS"). No single customer  accounted
for more than 6% of net sales in 1995.

While  The North Face will continue  to add selected wholesale customers, it
anticipates  focusing  primarily  on  increasing  sales  at  existing  wholesale
customers.  To accomplish this, the Company  recently developed Summit Shops and
established a new  core inventory  replenishment program.  The Company  believes
that  Summit Shops will  increase sales by increasing  selling space devoted to,
and  improving  the  merchandising  of,  The  North  Face-Registered  Trademark-
products.  See "Risk  Factors --  Implementation of  Summit Shop  Strategy." The
Company believes the new core inventory replenishment program, which inventories
certain popular core  products for  quick reorder  delivery, will  enable it  to
provide consistent product flow to both the Summit Shops and its other wholesale
customers.  The North Face expects the  new core inventory replenishment program
to increase the sales of its strongest selling items by increasing the Company's
ability to meet strong reorder demand.

The Company's products are sold in  the United States, Canada and Europe  to
wholesale  customers by independent sales representatives. Sales representatives
conduct in-store clinics to educate  sales personnel on the technical  qualities
and uses of the Company's products, provide customer support, review each retail
account  on a  periodic basis  and assist the  Company in  forecasting levels of
product needs. Sales representatives in the United States, Canada and Europe are
paid on a commission basis. Sales representatives in the United States sell  The
North Face-Registered Trademark- products exclusively.

The  Company maintains a specialty  retailer and customer service department
to handle orders  and consumer inquiries,  as well as  a warranty department  to
handle the repair or replacement of defective or damaged merchandise. All of the
Company's    products   (other   than   those   sold   through   the   Company's

35

outlet stores) are covered by a lifetime warranty. Defective or damaged products
returned to the Company generally are replaced or repaired within 10 to 14  days
of  receipt. Warranty  expenses in  1995 were  approximately 0.8%  of net sales.
Although the  Company  does  not  expect warranty  expenses  to  increase  as  a
percentage  of net sales, there can be  no assurance that such expenses will not
increase significantly in  the future as  a percentage of  net sales. See  "Risk
Factors -- Product Liability Risk; Warranty Exposure."

In  June 1995,  the Company  opened a  new 146,500  square foot distribution
facility in  San  Leandro, California.  This  facility, which  also  houses  the
Company's  executive and administrative headquarters,  handles a majority of the
U.S. distribution  of  the  Company's products,  with  the  Company's  secondary
distribution  center  in Richmond,  California handling  the excess  during peak
periods. The Company's distribution centers  are highly automated. The  majority
of the Company's products are shipped by UPS and common carriers.

SUMMIT SHOPS

The  Company  recently  developed  Summit  Shops,  year-round  concept shops
dedicated to The North Face-Registered  Trademark- products and primarily to  be
located  within certain of its wholesale customers. Summit Shops are intended to
increase sales  at existing  specialty retailers  and to  attract new  specialty
retailers  by  offering an  attractively designed,  professionally merchandised,
dedicated selling space  featuring a  broad array of  The North  Face-Registered
Trademark-  products.  The  objectives  of  the Summit  Shops  are  to  (i) have
dedicated year-round selling  floor space within  selected specialty  retailers'
stores;  (ii) help the Company's  specialty retailers compete against mainstream
apparel retailers;  (iii) create  a  repeat customer  base; (iv)  modernize  the
specialty   retailers'  approach  to  merchandising  The  North  Face-Registered
Trademark-  products;  (v)  provide  the  ability  to  closely  monitor   retail
sell-through  at  specialty retailers;  and (vi)  maintain a  consistent product
assortment  at  the  specialty  retail  level.  The  Company  has  designed  the
appearance  of each Summit  Shop, including its  fixtures, merchandise displays,
descriptive placards and graphic images,  to increase consumer awareness of  The
North  Face-Registered  Trademark- brand  and  image. The  Company  will provide
merchandising support for the  Summit Shops, while  the specialty retailer  will
provide  the customer service and sales personnel. The Company will also provide
sales and product training  for the specialty retailers'  personnel who work  in
the  Summit Shops.  Each Summit Shop  is expected to  follow certain operational
guidelines and maintain minimum inventory levels.

Beginning in March 1996, EMS, a major outdoor retail chain, opened The North
Face-Registered Trademark- concept shops, the precursors to Summit Shops, in  14
of  its  stores.  These  concept  shops  carry  only  The  North Face-Registered
Trademark-  products.   Unlike  Summit   Shops,   however,  the   fixtures   and
merchandising  displays of the concept shops were designed primarily by EMS. EMS
has informed  the Company  that, based  on  the initial  performance of  the  14
concept  shops, it intends to  open four additional shops,  two of which will be
Summit Shops, by the end of 1996.

The Company expects to open  its first Summit Shop  in late Summer 1996  and
anticipates  that  approximately 25  Summit  Shops, averaging  approximately 650
square feet in size,  will open by the  end of 1996. The  North Face intends  to
substantially  increase the number of Summit Shops within its existing specialty
retailers in 1997. See "Risk Factors -- Implementation of Summit Shop Strategy."

RETAIL OPERATIONS

RETAIL STORES.  The Company's  retail operations are an important  component
of  its marketing and  product development strategies  and provide a distinctive
environment  in  which  to   merchandise  and  sell   the  complete  The   North
Face-Registered  Trademark- product  line. Located primarily  in high-end retail
shopping districts  and regional  shopping malls,  these stores  carry the  full
range  of The North Face-Registered Trademark- outerwear, equipment, skiwear and
Tekware as well as complementary products such as footwear and accessories  from
other  manufacturers. As a result of the Company's ability to control the visual
presentation and product assortment in its retail stores, the stores help  build
brand  awareness  and  introduce  consumers  to  the  full  range  of  The North
Face-Registered Trademark- products. These stores  also provide a means for  the
Company to test the appeal

36

of  new products  and merchandising  techniques. By  working closely  with store
personnel, many  of  whom are  outdoor  enthusiasts, the  Company  also  obtains
customer feedback that influences product design and development.

The  following table shows  the approximate retail selling  space at each of
the Company's nine retail stores:

APPROXIMATE
SELLING
LOCATION                                        SQUARE FOOTAGE   YEAR OPENED
- ----------------------------------------------  ---------------  -----------
Denver, CO....................................         8,500           1973
Boulder, CO...................................         3,400           1982
Seattle, WA...................................         4,600           1985
Oakbrook, IL..................................         3,000           1991
San Francisco, CA.............................         8,100           1991
Schaumberg, IL................................         3,400           1991
Costa Mesa, CA................................         5,500           1993(1)
Palo Alto, CA.................................         7,800           1994(2)
Chicago, IL...................................        12,000           1995

---

(1) Replaced a store in a nearby location initially opened in 1986.


(2) Replaced a store in a nearby location initially opened in 1979.

Although the Company considers its retail  stores to be an important  aspect
of  its business strategy, the Company currently has no plans to open additional
retail stores, particularly given  its focus on  the introduction of  additional
Summit  Shops in  1996 and  1997. The  Company believes  that Summit  Shops will
provide many of the same benefits as its Company-operated retail stores and that
the substantially reduced operational and financial commitments associated  with
Summit Shops will result in a higher return on investment.

OUTLET  STORES.   The Company  also operates  two outlet  stores, located in
Berkeley and  San  Francisco, California.  The  outlets serve  primarily  as  an
effective  means to liquidate  discontinued merchandise. The  Company intends to
open one additional outlet store during the next 12 months.

INTERNATIONAL OPERATIONS

Sales to customers outside the United States accounted for approximately 23%
and 30% of the Company's net sales in  1995 and the first three months of  1996,
respectively. The Company recently implemented an integrated world-wide approach
to  product development, sourcing and marketing in order to reduce costs, ensure
consistent worldwide operations and create  a unified global brand. By  offering
the  same  product  lines and  promoting  the  same extreme  image  in catalogs,
advertising and  point of  purchase materials,  the Company  has positioned  The
North  Face-Registered Trademark-  brand in  Europe consistently  with the brand
image in the United States and Canada. Outside the United States, The North Face
products are  sold to  wholesale  customers in  Europe  and Canada  through  the
Company's wholly-owned subsidiaries and by a licensee in Hong Kong and Macao. In
Japan  and Korea,  substantially all  of the  Company's trademarks  are owned by
Kabushiki Kaisha Goldwin ("Goldwin").

EUROPE.  The  North Face believes  that it is  currently well positioned  in
Europe  to take advantage of the same  industry trends that are occurring in the
United States. Although  the Company  has operated in  Europe for  more than  12
years  and believes it  is recognized as  a leader in  the design, marketing and
distribution of highly  technical outdoor apparel  and equipment, only  recently
has  it begun to  devote additional resources  in Europe to  increase sales. The
Company's European operations are headquartered in Port Glasgow, Scotland, where
it maintains a small  factory and distribution  center. The Company  distributes
its  products directly to approximately  460 wholesale customers representing an
estimated 700 store fronts throughout Europe. Its primary markets are the United
Kingdom, Germany, Italy,  France, Spain,  Sweden, Denmark  and The  Netherlands.
Independent   sales  agents  reporting  to  the  Company's  sales  director  are
responsible for sales in each country.

37

CANADA.  The Company's Canadian operations are headquartered in Toronto  and
include  a distribution center and a customer and warranty service center. Since
early 1995, the  Company has  sold its  products in  Canada through  independent
sales  representatives to approximately 200  wholesale customers representing an
estimated 240 store fronts in Canada, primarily in British Columbia, Ontario and
Quebec. Prior to  1995, the  Company's products were  sold in  Canada through  a
licensee.  During 1995,  The North Face  undertook the  following initiatives in
Canada: (i)  established  a  sales,  sales  support,  finance  and  distribution
facility  in  Toronto;  (ii)  hired  a  general  manager  to  head  the Canadian
operations; (iii) significantly expanded  the available product categories;  and


(iv)  integrated  the marketing  and  sourcing efforts  with  those of  the U.S.
operations. The  Company believes  significant additional  growth  opportunities
exist in the Canadian market.

ASIA.  In Japan and Korea, substantially all of the Company's trademarks are
owned  by Goldwin, a leading manufacturer and distributor of high-end sports and
outdoor  apparel   and   equipment.   The   North   Face-Registered   Trademark-
is  the  leading high-performance  outdoor brand  in Japan.  The North  Face and
Goldwin work closely together in the areas of product design, sourcing and brand
imaging. The  Company believes  that Goldwin  shares the  Company's strategy  of
building  a unified global brand. The Company benefits from this relationship by
selling products  made  in the  United  States to  Goldwin  and by  charging  an
administration  fee for orders which Goldwin adds to the Company's production in
China and Southeast  Asia. In Hong  Kong and Macao,  the Company's products  are
sold  through a  licensee, Mitsui  & Co.,  Ltd. ("Mitsui").  Management plans to
capitalize on  the  Company's  growing worldwide  strength  by  exploring  sales
opportunities in other Asian and Pacific Rim countries.

SOURCING AND MANUFACTURING

The  Company sources virtually all of  its products through approximately 50
unaffiliated manufacturers  in  North America  and  Asia, including  Hong  Kong,
China,  Taiwan, Korea,  Indonesia, Thailand  and the  Philippines. The Company's
European subsidiary  operates a  small manufacturing  factory in  Port  Glasgow,
Scotland  which accounts for a minor  portion of the Company's total production.
The Company has implemented  a global sourcing strategy  that will enable it  to
achieve  greater economies of scale, improve  gross margins and maintain uniform
quality standards for  its products. The  Company believes that  it enjoys  good
relationships with its suppliers and manufacturers and has the ability to secure
the  necessary capacity  to meet  increased demand  for its  products. See "Risk
Factors -- Reliance on Contract Manufacturing."

To ensure  that products  manufactured  by others  are consistent  with  its
standards,  the  Company  manages all  key  aspects of  the  production process,
including establishing  product specifications,  selecting the  materials to  be
used  to  produce  its  products  and  the  suppliers  of  such  materials,  and
negotiating the prices  for such  materials. The  Company maintains  a staff  of
quality  control specialists  which conducts on-site  inspections throughout the
production process, including at  the mills before the  fabrics are shipped,  at
the  factories  as  the products  are  made  and, finally,  before  the finished
products are shipped.

The Company  currently  is engaged  primarily  in a  two  season,  wholesale
business,  Spring  (January  to June)  and  Fall (July  to  December). Wholesale
customers place preseason orders from two to five months prior to the  beginning
of  the  season  for  deliveries  throughout  the  season.  Reorders  are  taken
throughout the season and  are based on availability.  With the introduction  of
the Company's new Tekware line and Summit Shops, the Company anticipates that it
increasingly  will be supplying its products  on a year-round basis. The Company
is in the process  of implementing a new  core inventory replenishment  program,
under  which it  intends to maintain  stocks of  key products at  all times. The
Company has established linked production  flow arrangements with its  suppliers
in  which key raw  material vendors and  contract manufacturers will  be able to
respond quickly to the Company's production needs. As the Company implements its
new  core  inventory  replenishment  program,  reorder  sales  are  expected  to
increase.

38

The  Company's  Merchandise  Forecasting  and  Planning  Department analyzes
information which it receives from the Company's various sales arms and develops
forecasts for the Company's products. These forecasts are continually updated to
reflect advance orders and reorders  and are turned into production  quantities.
The Company's Product Acquisition Department, in turn, issues purchase orders to
the  Company's unaffiliated  manufacturers. Unaffiliated  manufacturers purchase
the materials specified by the Company and manufacture and ship the products  to
the  Company. The Company's unaffiliated manufacturers sell finished products to
the Company on an FOB basis and are at risk for the quality and timely  delivery
of  the  products. Approximately  35 to  40% of  the Company's  total production
requirements are financed with letters of credit; the balance is purchased under
open terms ranging from 14 to 60 days.

MANAGEMENT INFORMATION SYSTEMS

The Company believes that  a high level of  computerization is essential  to
maintain   and  improve  its  competitive  position.  The  Company's  management
information and electronic data  processing systems consist of  a full range  of
retail,   financial,  distribution   and  merchandizing   systems.  The  Company
anticipates spending a total of approximately  $1.5 to $2.0 million through  the
end  of 1997 to upgrade its systems,  with particular emphasis in sourcing, core
inventory replacement  and forecasting,  and believes  that once  in place,  the
upgraded systems, along with routine upgrades, will be sufficient to accommodate
the  Company's  anticipated  growth  in  sales  and  planned  expansion  for the
foreseeable future. See "Risk Factors -- Ability to Achieve and Manage Potential
Future Growth."