GPS : NYSE : US$39.68
COMPANY DESCRIPTION: Gap is a global specialty retailer of clothing and accessories for women, men, and children. GPS brands consist of Gap, Old Navy, Banana Republic, Athleta, and Piperlime. The company operates around 3,100 stores
worldwide, and GPS products are sold through 300 franchise locations.
All amounts in US$ unless otherwise noted.
Consumer & Retail — Specialty Retail
SEPTEMBER SSS DECLINE AMID SLUGGISH TRAFFIC TRENDS
GPS reported a SSS decline of 3% on top of +6% in September. We had forecast +3%, and the consensus estimate was +2%. The company noted traffic decelerated throughout the month, particularly as the government shutdown approached. According to ShopperTrak, U.S. retail traffic was down 5% in the last week of September and has declined in 12 of the last 15 weeks.
We are maintaining our HOLD rating as we do not see any near-term catalysts that would propel shares out of their current range, especially given the deteriorating retail traffic environment.
GPS suffered September SSS declines across all core categories. Gap global SSS were -3% on top of +3%, Banana
Republic global -5% on top of +4%, and Old Navy global -2% on top of +10%.
We are lowering our Q3 EPS estimate by $0.03 to $0.65, $0.04 below prior consensus. We now forecast a SSS decline of 0.7% on top of +6%, versus our prior +1.8% estimate. This would be GPS’s first down quarter since Q4:11.
Our long-term projections move higher as we are increasing our share buyback assumptions. We now estimate an
average $1.2B in annual buybacks from FY14-FY17. We had previously not modeled for any repurchases in the out years.
Posted by jackbassteam on October 11, 2013
FRAN : NASDAQ : US$18.08
Francesca’s Holdings Corporation is the holding company for specialty retailer Francesca’s Collections. Through a national chain of around 440 retail boutiques and an e-commerce web site, Francesca’s sells apparel, jewelry, accessories, and gift items with an assortment tailored to its core 18-35 year-old, fashion-conscious female customer.
All amounts in US$
GROWTH THESIS REMAINS INTACT
On September 4, FRAN reported Q2 results that fell below expectations as traffic weakened and greater promotional levels persisted. Since that time, the stock has declined 25%, compared with the S&P 500 index +2%, the RLX index +4%, and the specialty apparel peer group +2%. We consider this an overreaction for a company we forecast will grow sales and EPS at compounded annual rates of 15% and 17%, respectively, over the next five years. Traffic has remained soft, which does cloud the H2 picture, but we think this is priced in following the stock’s recent move. Over the long haul, we believe FRAN will continue to generate one of the highest EBIT margins (in the mid-20% range) and returns (TTM ROIC of 29%) in the specialty retail group. We do not think this is fully reflected with shares trading at 12x our C2014 EPS estimate and 7x C2014E EV/EBITDA.
We expect square footage to increase at a five-year CAGR of 18%. This is the highest rate of growth among all the retailers we cover and is three times the group’s average.
Shares trade at a discount to specialty apparel peers despite top growth prospects. FRAN trades at a sizable discount to the group’s average C2014E P/E of 17x and C2014E EV/EBITDA of 8x, while our sales and EPS growth projections are more than double the mean.
Posted by jackbassteam on October 8, 2013
NASDAQ : US$10.45
Un casque d’esclade black diamond. (Photo credit: Wikipedia)
Black Diamond Inc. is a leading provider of outdoor recreation equipment and lifestyle products. BDE also develops, manufactures and distributes a broad range of products used for climbing, mountaineering, backpacking, skiing, and various other outdoor recreation activities under the Black Diamond and Gregory brands.
BDE reported EPS of -7c vs. our -4c estimate with the shortfall relative to our estimates coming from $2.5M less in sales and 70bps less of gross margin expansion as a cold/wet spring season resulted in spring cancellations. Weather volatility continues to make retailers more cautious with fall orders (a consistent theme across the industry) and thus are pushing the inventory risk onto vendors, BDE included. 2013 sales/margin guidance was lowered due to cancellations and FX pressures. Importantly BDE’s inventory is clean (+7% vs. sales +22%) and sets the stage for re-orders, when/if weather materializes. With apparel launching next month, POC’s new road line in 2014, and the integration of Gregory Japan and PIEPS going smoothly, the long term growth thesis is intact. As such, we reiterate our BUY.
Full-year guidance now calls for sales of $205-$210M from $216-$221M, and gross margin of 38.5%-40% from 40%-41%. Sales growth target of 20% in ’14 was unchanged, and given the many drivers coming into play over the next 18 months, looks conservative.
Gross margin trends remain favorable (+120bps in Q2), in spite of continued FX headwinds as POC, Gregory Japan, and apparel are expected to be gross margin accretive into 2014.
Our $13.50 target is derived by our DCF analysis
Posted by jackbassteam on August 6, 2013
English: Barefoot female in public being shooed away by NYC police (ostensibly for panhandling). (Photo credit: Wikipedia)
SHOO : NASDAQ : US$47.67
Steven Madden, Ltd., together with its subsidiaries, designs, sources, markets and sells fashion-forward footwear for women, men and children. The company was founded in 1990 and is headquartered in Long Island City, New York. SHOO has a portfolio of brands that reaches globally among all economic tiers. SHOO offers products through wholesale partners, an e-commerce platform and its own retail stores.
SHOO’s success is predicated on continual turnover in fashion and its ability to deliver on those new trends. After previewing fall ’13 product and the bustling traffic in its showroom, we believe this season should be no different for Madden. Booties continue to sell at breakneck velocity,
particularly the Troopa in updated prints and materials (e.g., floral and macramé at $129). The bootie’s success has caused it to go on autoreplenishment in 3 colors to meet insatiable demand. The next iteration bootie is an ankle bootie with a stacked heel, continuing the underlying theme and supporting solid category growth in H2/13, we believe.
Gold accents remain a key trend (e.g., gold chain mail, buckles, and zippers) although in a more subtle manner than before. Interestingly, the dress
category is showing signs of life at SHOO retail as the $99.95 Marlenee has become the third fastest shoe to sell 1M pairs. While retailers are not
committing to the trend just yet, the data is positive, and we note that SHOO usually leads these trends by 6-12 months. We reiterate our BUY.
Madden Girl is the standout brand as the repositioning at M doors is driving solid reorders, while at TGT both private label and Mad Love are also performing well. Conversely, the sneaker trend appears to be winding down as distribution is maxed and the category is approaching saturation.
Sandal inventory across the industry remains heavy despite the recent weather-driven uptick in traffic. As such, retailers have broken price on the category and we fear further price reductions are to come should sandals not accelerate by July 4. While SHOO’s sandal inventory is in control, we believe the need to maintain promotional pace with others will subject it to unnecessary markdowns. That said, this is embedded in guidance and thus we do not see any risk to our Q2 numbers
Posted by jackbassteam on June 10, 2013
Gildan Activewear (Photo credit: Wikipedia)
GIL : NYSE : US$36.55
Gildan is one of North America’s premier vertically integrated apparel manufacturers, focusing on frequent replenishment items with relatively low fashion risk. The company sells to the wholesale market, along with directly to retail.
RECORD RESULTS TO BEGIN F2013
We are raising our target price to US$42.00 (from US$41.00) following strong Q1/F13 earnings results.
Gildan reported Q1/F13 earnings results on Wednesday, after the market close. Revenue increased 39% YoY to $421 million, ahead of
previous guidance of $400 million. After excluding restructuring and acquisition related costs, EPS of $0.32 was ahead of consensus of $0.30 and well above Q1/F12 at -$0.38. Gildan reiterated its F2013 EPS guidance of $2.60-2.70, although we believe this has room for upward revisions as the year progresses.
During the quarter Printwear sales grew an impressive 66% YoY to $244 million, driven by higher overall unit volumes, the nonrecurrence
of both inventory destocking and the distributor devaluation discount which occurred last year. Promotional discounting in the channel was also lower than previously anticipated. Meanwhile, Branded Apparel sales improved 13% YoY due to increased sales of Gildan branded products, which offset lower YoY sock sales.
Our 12-month US$42.00 target price represents 15.7x our F2013 EPS estimate of $2.68. We believe there is a strong probability for upward
guidance revisions as the year progresses, should cotton prices remain range-bound, and should Gildan secure additional retail wins and
wholesale market share.
Posted by jackbassteam on February 8, 2013
Francesca (Photo credit: Paolo Neoz)
Francesca’s Holdings Corporation
FRAN : NASDAQ : US$23.95
BUY Target: US$30.00
Francesca’s Holdings Corporation is the holding company for specialty retailer Francesca’s Collections. Through a national chain of over 350 retail boutiques and an ecommerce web site, Francesca’s sells apparel, jewelry, accessories, and gift items with an assortment tailored to its core 18-35 year-old, fashion-conscious female customer .
We believe FRAN’s unique business model positions the company to profitably expand its store base. A low-cost, small-footprint store model has translated to EBIT margins in the mid-20% range and one of the specialty retail group’s highest ROIC at around 30%. We expect FRAN’s boutique feel, driven by a broad and trend-right product assortment, should continue to resonate with customers as the company expands square footage at the highest annual rate among all of the companies in our coverage universe.
We estimate double-digit SSS growth will persist in FY13, and we are modeling for EPS of $1.29.
We forecast annual square footage growth of 18% over the next five years. By comparison, the specialty retail group average is +6%.
FRAN’s growth potential warrants a premium to the specialty apparel peer group. We estimate sales and EPS will grow at annual rates of 29% and 39%, respectively, over the next three years versus the group averages of 8% and 19%.
Posted by jackbassteam on November 19, 2012
Description unavailable (Photo credit: Raleene)
Steven Madden, Ltd.
SHOO : NASDAQ : US$42.83 BUY Target: US$53.00
Steven Madden, Ltd., together with its subsidiaries, designs, sources, markets and sells fashion-forward footwear for women, men and children. The company was founded in 1990 and is headquartered in Long Island City, New York. SHOO has a portfolio of brands that reaches globally among all economic tiers. SHOO offers products through wholesale partners, an e-commerce platform and its own retail stores
We are anticipating a solid earnings report from SHOO when it reports on Thursday, November 1 BMO. We believe our EPS estimate of $0.87 (consensus of $0.90) could prove conservative by ~4c based on stronger wholesale sales and gross margin. We believe above-plan sell-through of booties drove solid footwear sales while handbags propelled accessories growth. Moreover, the studded trend is pushing ASPs higher. Retail comps (7% est.) likely also benefitted from similar trends; however, we believe that like with most retailers, traffic slowed in late September.
While we expect commentary to be relatively reserved on the conference call due to choppy traffic trends and Hurricane Sandy, we remain positive on SHOO’s prospects and thus reiterate our BUY.
Growth may suprise to the upside driven by solid sales of booties, casuals (Superga), and anything with studs. According to our checks, early fall boot reads have been better than plan, particularly short shaft boots (e.g. Troopa). In addition, we expect the strength in handbag sales to continue and drive wholesale accessories growth of 20%+. Gross margin expansion in Q3 as the mix impact of TGT’s private label business lessens and direct sourcing efforts manifest. We are modeling margin expansion of ~80bps.
We arrive at our $53 target by applying a blended average of 15x 2013 P/E, 9x EV/EBITDA, and DCF.
Posted by jackbassteam on October 31, 2012