Consumers Vibrant
Analyst Rick Patel noted that the U.S. consumers are alive and kicking, with the jobless rate holding steady at a five-year low of 4.9 percent and consumer confidence ticking up for the past five years. Notwithstanding, the analyst noted that savings rate, despite rising modestly in the year-to-date period, is still flat. Gas prices have also pulled back notably, the analyst noted.
Shopping Trends Not Reflecting Vibrancy
CLSA noted that mall traffic has been down year-over-year for several years despite the sound consumer fundamentals. The firm attributed the weakness to increasing shift towards e-commerce amid the mobile commerce revolution. Even after the e-commerce channel is included, the firm noted that most retailers in its coverage universe are experiencing comp declines.
Off-Price Gained, Specialty Apparel Pained
While suggesting that the companies are seeing sequential weakness, CLSA noted that off-price stores are outperforming. On the other hand, specialty apparel retailers, especially those targeting teens, are going through the most pain.
Sub-Sectors Dissected
- Accessories & handbag retailers have seen their growth slowing from single-digits to flattish trend, as increasing promotion and shift toward smaller, less costly bags weigh. Increased focus on quality of sales, according to CLSA, can help improve average ticket.
- CLSA stated that luxury retailers are facing the heat of a firmer dollar through lower tourism and forex translations.
- Jewelry, though remaining resilient in the past, has slowed to flattish growth in 2015. CLSA expects growth to decline in 2016, with commodity weakness blamed for it.
- Apparel retailers have been the long sufferers as pricing deflation and struggling comps stifle them.
Ratings, Target Prices
- Coach Inc COH: Buy/$45.
- Ralph Lauren Corp RL: Buy/$125.
- G-III Apparel Group, Ltd. GIII: Outperform/$34.
- Kate Spade & Co KATE: Outperform/$21.
- Oxford Industries Inc OXM: Outperform/$78.
- Signet Jewelers Ltd. SIG: Outperform/$87.
- Tiffany & Co. ( TIF: Outperform/$80.
- Carter's, Inc. ( CRI: Underperform/$95.
- Michael Kors Holdings Ltd( KORS: Sell/$45.
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