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 TPR initiated at Outperform, $60 price target.
- Michael Kors Holdings Ltd KORS initiated at Outperform, $75 price target.
- Estee Lauder Companies Inc EL initiated at Outperform, $162 price target.
- Tiffany & Co. TIF initiated at Outperform, $120 price target.
- Canada Goose Holdings Inc GOOS initiated at Outperform, C$52 price target (TSX-listed stock).
- Lululemon Athletica inc. LULU initiated at Outperform, $96 price target.
- Burlington Stores Inc BURL initiated at Outperform, $146 price target.
- Ross Stores, Inc. ROST initiated at Outperform, $88 price target.
- Kohl's Corporation KSS initiated at Outperform, $72 price target.
- Nike Inc NKE initiated at Outperform, $78 price target.
- Foot Locker, Inc. FL initiated at Outperform, $50 price target.
- VF Corp VFC initiated at Outperform, $85 price target.
- Ralph Lauren Corp RL initiated at Outperform, $125 price target.
- Ulta Beauty Inc 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.
- 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'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'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 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' 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 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 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'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 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 JCP initiated at Underperform, $2.50 price target.
- Finish Line Inc FINL initiated at Underperform, $9 price target.
- 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'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.
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