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Retail Winners And Losers From Credit Suisse: Nike, Lululemon, JC Penney And More

Retail Winners And Losers From Credit Suisse: Nike, Lululemon, JC Penney And More

Analysts at Credit Suisse, led by Michael Binetti, after Monday's market close initiated coverage on a plethora of apparel and retail names.

Here's a summary of the bull and bear calls from the team of analysts.

The Bull Calls

  • Tapestry Inc (NYSE: TPR) initiated at Outperform, $60 price target.
  • Michael Kors Holdings Ltd (NYSE: KORS) initiated at Outperform, $75 price target.
  • Estee Lauder Companies Inc (NYSE: EL) initiated at Outperform, $162 price target.
  • Tiffany & Co. (NYSE: TIF) initiated at Outperform, $120 price target.
  • Canada Goose Holdings Inc (NYSE: GOOS) initiated at Outperform, C$52 price target (TSX-listed stock).
  • Lululemon Athletica inc. (NASDAQ: LULU) initiated at Outperform, $96 price target.
  • Burlington Stores Inc (NYSE: BURL) initiated at Outperform, $146 price target.
  • Ross Stores, Inc. (NASDAQ: ROST) initiated at Outperform, $88 price target.
  • Kohl's Corporation (NYSE: KSS) initiated at Outperform, $72 price target.
  • Nike Inc (NYSE: NKE) initiated at Outperform, $78 price target.
  • Foot Locker, Inc. (NYSE: FL) initiated at Outperform, $50 price target.
  • VF Corp (NYSE: VFC) initiated at Outperform, $85 price target.
  • Ralph Lauren Corp (NYSE: RL) initiated at Outperform, $125 price target.
  • Ulta Beauty Inc (NASDAQ: ULTA) initiated at Outperform, $245 price target.


  • Tapestry, the parent company of Coach and Kate Spade, accounts for 40 percent of the premium accessories market and continues to take "huge steps" to improve further.

  • EBIT upside will likely come from Kate brand growth and management's revision of cost synergies from $50 million to $100 million.

Michael Kors

  • Consensus estimates are too low and doesn't reflect the improving macro environment and the company's encouraging footage growth.
  • Negative trends like over-discounting and operating underperforming stores have been fixed and should generate multiple quarters of "negative-but-improving" same-store sales.

Estee Lauder

Estee Lauder's "powerful portfolio transformation" leads to confidence in the company's 6 to 8 percent revenue growth trajectory.

Estee Lauder's 16.5 percent margins have upside to match rival L'Oreal Luxe who boasts a 19 to 20 percent adjusted EBIT margin.


  • Tiffany's most recent earnings report showed the company had the "most product newness in years.

  • Consumer response so far to Tiffany's products may signal its new strategy is working and resonating well.

Canada Goose

  • Canada Goose's market share in the $11 billion premium outwear market stands at just 6 percent and implies a "substantial untapped global opportunity" ahead.

  • Canada Goose's large opportunity ahead implies it can grow its EPS "well above" the company's own 20 percent target.


  • The Street's forecast of just 5 percent same-store sales growth remains below the company's current momentum, for example same-store sales in the third quarter rose 7 percent.
  • New stores in Asia are generated a sales per square foot ratio that is 5 to 10 percent above the total fleet average.

Burlington Stores

  • Burlington Stores can narrow its sales per square footage gap versus its peers at $130/foot versus $310+/foot.
  • Tax savings could add 1.5pp to sales/foot in 2018 while a better inventory management should add incremental upside.

Ross Stores

  • Ross Stores' consistent double-digit EPS growth, same-store sales outperformance, margin improvement, and stock buybacks should help the company reach Street estimates for 2018.
  • The company is also "one of the clearest long-term reinvestment opportunities."


  • Kohl's fourth quarter same-store sales growth of 6.3 percent was its first quarter of positive traffic since 2015.
  • The encouraging quarter should give investors better conviction that ongoing initiatives can result in sustainable sales and margin growth.


  • Nike's revenue growth woes likely bottomed and should now grow at a high-single digit rate by fiscal 2019.
  • Nike will see momentum from international strength now accounting for 55 percent of total sales which is growing at 12 percent.

Foot Locker

  • Foot Locker could benefit from a much needed push from market leader Nike to bolster its innovation.
  • Investors are being "paid to wait" with a 3.12 percent dividend yield ahead of a "high-conviction improvement" in the second half of 2018.

VF Corp

  • VF is best positioned to navigate through any softline challenges, including M&A deals and on-trend fashion.
  • The Street's estimates aren't including margin growth and upside to 20 percent EBIT margins.

Ralph Lauren

  • Ralph Lauren's analyst day in June should "pave a path" towards positive revenue trends and the stock will undergo a "catch-up trade."
  • Margins for Ralph Lauren's retail partners should turn positive in the third quarter, which marks a "necessary condition" to restart its wholesale growth.

Ulta Beauty

  • Ulta Beauty is among the few that operates a high-growth retail business and its industry-leading same-store sales could continue coming in at or above its 7 to 9 percent target.
  • The stock is "mispriced due to concerns" about the competitive environment but the company boasts multiple margin levers.

The Bear Calls

  • J C Penney Company Inc (NYSE: JCP) initiated at Underperform, $2.50 price target.
  • Finish Line Inc (NASDAQ: FINL) initiated at Underperform, $9 price target.

JC Penney

  • Recent encouraging comp drivers could slow, including appliances, beauty and Home.
  • The company will see "almost no tax savings" which puts it at a disadvantage versus competitors who have incremental cash to reinvest in their growth initiatives.

Finish Line

  • Finish Line's stock is trading at a 13.1 times NTM Street EPS valuation which already prices in EPS growth from tax savings and margin normalization.
  • Finish Line faces a higher risk of store closures at 29 percent versus 16 percent for Foot Locker.

Related Articles (EL + BURL)

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