Retail investors have faced a tough 2015 as few companies sufficiently impressed investors to justify a multiple expansion. Citi's retailing analyst Kate McShane initiated coverage of Target, Costco and Wal-Mart earlier this month, and through her own admission in a note on Tuesday, the stocks are "highly controversial."
Here is a summary of Citi's customers top concerns and the analyst's answers.
Target: Margins, Capex Pressure, Valuation
Concern: Why is Target better shielded from wage issues compared to Wal-Mart?
Concern: Why doesn't Target have to invest heavily in e-commerce?
Concern: What will Target's growth margins look like in 2016?
Costco: Credit Card Concern
Concern: Could the credit card switch cause a disruption?
McShane also noted that Citi is expected to purchase American Express' portfolio of U.S. Costco accounts, which will allow the bank to issue new Visa cards and facilitate the transition with little to no disruption expected
Wal-Mart: Why Can't They Just Win Based On Scale
Concern: Doesn't Wal-Mart's sheer size and scale make it the winner by default?
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