Textiles, Apparel, & Luxury Goods
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NKE $91
25 Sep 2023 |
Jefferies downgrades Nike, sees student loan repayments impacting sales
We question the poll claiming 87% of student loan debt holders within their payback window will have trouble making those payments when they resume in October, but we do believe some discretionary companies will bear the brunt of the program’s resumption. Jefferies believes one of the most obvious targets will be footwear and athletic accessory maker Nike (NKE $91). Then again, it’s not like the company hasn’t already been hammered. Floating around the $90-mark, Nike shares trade today where they traded in October 2019. In other words, your four-year investment would have had a negative real (inflation adjusted) return. Bulls may point to the fact that $90 puts the shares at a 50% discount to their November 2021 highs, but this is hardly a value play. Shares trade at a 28 multiple, and the forward P/E still clocks in at 25. Jefferies downgraded Nike from Buy to Hold and lowered its price target from $140 to $100 per share. If they turn out to be right, a 10% gain would hardly be worth the risk. The bullish calls on Nike over the past few years have revolved around the company’s growth in emerging markets, primarily China. With China and the US at interminable odds, we would cross through that bullet point. The strong US dollar poses a headwind, as it makes US goods more expensive for overseas buyers. Finally, the competitive landscape in the space is fierce, with Adidas, Under Armour, and a slew of newer entrants clawing away at market share. We agree with the Jefferies call and the analyst’s price target. |
FL $29
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Foot Locker gaps down by a third as management gives sobering guidance, outlines Nike problems
(28 Feb 2022) Shares of retailer Foot Locker (FL $29) plunged over 30% last Friday after management said it expects weaker sales and earnings this year due to supply chain issues and economic factors such as raging inflation. Furthermore, the company admitted that Nike's (NKE $137) decision to focus on direct-to-consumer sales at the expense of its third-party sellers (such as Foot Locker) will have a deleterious effect on the company, at least in the short term. To put that statement in perspective, nearly 70% of Foot Locker sales in 2021 were of Nike products. How much of a hit does management expect to take in 2022? The company is projecting a sales decline of between 8% and 10% this year. As for the quarterly earnings, the numbers were a mixed bag: Sales grew from $2.19 billion in the same quarter of the previous year to $2.34 billion this past quarter; however, thanks to higher supply-chain costs, net income for the quarter fell 16% from the previous year, to $103 million. Foot locker has nearly 3,000 retail stores around the world, with management expecting to trim that figure by roughly 3% this year. We could easily make a convincing argument for a $50 fair value on FL shares, which would equate to a 67% gain in the share price. The company's financial health is strong, it has a tiny P/E ratio of 3.4, and a price-to-sales ratio of 0.36. A $3 billion small cap in the specialty retail space is not for the faint of heart at this moment in time, but it has a nice risk/reward profile for more "aggressive money." We would recommend a stop loss around $27.60 on any purchase of the shares. |
BIRD $16
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Allbirds was overpriced from the start, which is one reason its shares have been slashed in half
(08 Dec 2021) We are constantly scanning the IPO calendar, looking for under-the-radar names that won't be devoured by investors at the initial open, driving prices to outrageous levels. Allbirds (BIRD $16) seemed like it had potential; after all, who would get too excited about an athletic footwear maker going public? After pricing 20 million shares at $15 apiece the night before the big debut, we decided to buy in if they fell to the $10-$12 range after trading began. Instead, retail investors gobbled BIRD shares up right out of the gate, driving the price up to an intraday high of $32.44 on the third of November. So much for that trade. One month later, on the 3rd of December, shares had dropped to $13.91 intraday—a 57% course correction. So, are we entertaining the trade once again? Not really. Allbirds shoes are pretty cool, and sales continue to be strong despite the fact they don't believe in discounting the price. The company's self-proclaimed raison d'être is to bring the world eco-friendly and environmentally-sourced shoes. It is hard to go a paragraph deep into any of their ads or press releases without reading the word "sustainability." While management's efforts in this area may be commendable, their words might carry more weight if such a large percentage of Allbirds products weren't made in China—not exactly the ESG capital of the world. In the company's first earnings report since going public, sales came in at $63 million for the quarter funneling down to a net loss of $14 million. For comparison's sake, in its latest quarter $1.1 billion footwear retailer Designer Brands (DBI $16) notched sales of $817 million and had a positive net income of $43 million. Despite its current "discount" from highs, Allbirds seems ripe for another turn downward in the next general market correction. IPO days for companies we are interested in can be stressful. Trading volatility is high, and the stock price can literally double on the first tick out of the gate. Patience is paramount; if you are priced out (based on your mental buy price) immediately, be patient, as you will have another chance to buy in at a lower price. Even with companies such as Facebook and Tesla, this has always been the case. Use the emotions of others to create wealth in the markets rather than letting your own cloud your judgment. |
PVH $109
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PVH is selling its legacy clothing lines to Authentic Brands
(28 Jun 2021) Apparel manufacturing firm PVH (PVH $109) is selling four of its legacy brands, or what they call their Heritage Brands, to Authentic for $220 million. Why would the company want to part ways with prominent names Izod, Van Heusen, Arrow, and Geoffrey Beene? Management says it is doing so to "drive the next chapter of sustainable, profitable, growth," which will be built on a foundation of the Calvin Kline and Tommy Hilfiger brands. The company also said it plans on "supercharging" its e-commerce channel. That actually makes sense in this new world of hybrid workers buying fewer suits and more work-casual clothing. It is also interesting to note that this is the first major move by new CEO (Feb, 2021) Stefan Larsson—though longtime CEO and well-respected industry insider Manny Chirico did take on the role of Chairman of the Board. Not counting Chirico, the average tenure of PVH's management team is just 1.5 years. As for the buyer of these brands, privately-held Authentic is collecting quite the portfolio. In addition to these four names, the company owns Forever 21, Lucky Brand, Nine West, and part of Brooks Brothers—which it helped buy out of bankruptcy last year. Before the pandemic, PVH had an annual revenue of approximately $10 billion and a net income which was perennially in the black. Last year, the firm notched $7 billion in sales and lost $1.16 billion. We actually like the move by $7.7 billion PVH to sell off these legacy brands, but is the stock a buy? We don't think so. It is estimated that the company will generate $6.73 in earnings per share in FY2022, which is about what it generated in FY2017. The share price ranged from $84 to $139 that year, and we wouldn't touch it above $75 per share. Perhaps the fledgling management team will impress, but this single move is really all we have to go on thus far. |
UA $19
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Trading Desk: Cowen: Under Armour is "best idea"
(24 Jun 2021) Shares of sports apparel manufacturer Under Armour (UA $19, UAA $21) shot up around 4% following an upgrade by investment research firm Cowen, which put it on its "best idea" list. Analysts at the firm believe that UA is well poised to take advantage of the return of team sports and a back to school season which will be largely free from mask requirements. Cowen has an overweight rating on the company with a price target of $31 per share. We are not as bullish, as Under Armour is heavily dependent on sales in the Asia Pacific region, and tensions remain high (rightfully so) between China and the US. We also don't like the multi-share-class gimmick. An investor can buy Class A shares under the ticker UA and have one vote per share. The same investor could buy Class C shares under the ticker UAA and have no voting rights. Of course, the anointed company insiders like Kevin Plank own Class B shares, which the common hoi polloi cannot touch—and which carry around ten votes per share. Gimmickry. For the record, six years ago UAA was trading above $51 per share. |
LB $39
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Bath & Body Works, Victoria's Secret parent jumps 16% on unexpected earnings beat
(19 Nov 2020) We have traded L Brands (LB $39) on and off for decades, but steered clear after the longest-serving CEO of any company in the S&P 500, Les Wexner, began to show signs that things weren't clicking upstairs like they once were. The fact that he was also ensnared in the Jeffrey Epstein brouhaha didn't help, either. When Wexner indicated this past January that he may be willing to let go of the company he founded in 1962, we almost bit once again on LB shares. We should have—they were trading for $23. In a logic-defying earnings report, the company's Bath & Body Works unit posted a 55% jump in quarterly sales, with L Brands turning a profit of $330 million versus a loss of $252 million in the same quarter last year. When we think of L Brands' flagship names, with think bricks-and-mortar stores; the fact that the company was able to perform so strongly during the heart of the pandemic is remarkable. It also portends good things to come for the company under new leadership: longtime retail specialist Andrew Meslow took the reins from Wexner this past May. The founder made a lot of boneheaded moves in his waning months, like ditching swimsuits, stopping catalog mailings, and shunning digital sales to focus on his physical stores (he told the WSJ that he had 5,000 years of history on his side). The company still has a lot of debt, and the price seems rich at $38 after their 16% spike on the earnings release, but it feels like they won't need to be going the Chapter 11 route anytime soon. While we don't own LB, we did pick up shares of Macy's (M) and Nordstrom (JWN) in the Intrepid during the darkest days of the downturn. Those positions have paid off nicely. |
LEVI
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It is hard to find any rationale for investing in Levi Strauss & Co
(09 Jul 2020) Precisely one year ago, on 10 Jul 2019, we wrote that "Even writing about this company (Levi Strauss) bores the hell out of us." At the time, shares were sitting at $21, or roughly where they traded on IPO day. Today, LEVI shares are at $12.90, and we still see no reason to invest—despite the 50% discount. The company just reported quarterly results, and they were not good. Sales were off 62%, coming in at $498 million, and the company reported a net loss of $364 million. As could be expected, the earnings commentary revolved around the pandemic, but it is difficult to see what drives this company higher when the smoke clears. In a bid to save $100 million per year, the "woke" Levi announced that it would be firing 700 workers, or 15% of its workforce. What is a fair value for LEVI shares? Probably right around where they sit right now. Look for a deep value play elsewhere. |
NKE
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Nike plunges on horrendous quarter...that every analyst got wrong
(26 Jun 2020) 100% of analysts covering the stock. That is how many got it dead-wrong with respect to Nike's (NKE $94) Q4—which ended in May. Against an aggregate prediction for an estimated gain of $0.07 per share, the outspoken, highly-political shoe company actually lost $0.51 per share. The range of analyst estimates went from a loss of $0.38 to a gain of $0.46 per share, with all overshooting the mark. The company got slammed with a whopping 38% decline in sales for the quarter, most notably from its North American business, which was cut almost in half. Shocked investors responded by dragging the stock down nearly 8% on the day. With its 38 P/E ratio and propensity to get mixed up in politics, we would stick with names like Adidas (ADDYY) or even beaten-down Under Armour (UA) before touching Nike. That being said, the company's new CEO, former PayPal chief John Donahoe, is bound to do a much better job at the helm than buffoonish Mark Parker. Sadly, Parker is now the executive chairman at the firm. |
HBI
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Hanesbrands quickly retrofitting its factories to switch from underwear to protective mask production. (24 Mar 2020) Hanesbrands Inc (HBI $8-$9-$19), the company whose name is synonymous with underwear, has announced that it has received a US government contract to produce N95 masks for health care workers "as quickly as possible." The North Carolina-based firm, which was founded in 1901, is retrofitting large sections of its manufacturing plants with the goal of producing 1.5 million masks each week. Hanes is part of a consortium which, in aggregate, is hoping to churn out six million of the Hanes'-designed masks each week. Hanesbrands is one of literally tens-of-thousands of American companies donating their time, money, and facilities in an effort to halt the spread of this virus. Not since World War II has there been a mobilization effort of this scale.
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LB
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Victoria's Secret's parent company pops 12% after Les Wexner finally shows signs of letting go. (29 Jan 2020) He is the longest-serving CEO of any company in the S&P 500. At 82, Leslie Wexner founded what was once called Limited Brands (LTD) back in 1962, and has been at the helm ever since the company went public in 1969. We have followed the company, now called L Brands (LB $16-$23-$29), for a long time, and have traded the parent company of Victoria's Secret and Bath & Body Works with good success through the years. A year ago, however, when shares were sitting at a seemingly-undervalued $28, we wrote that until Wexner is prepared to move on from the company's day-to-day operations, we wouldn't consider buying back in. Now, after a 12% pop, LB is sitting at $23 per share. The catalyst? Wexner is reportedly in talks to sell the $6 billion retail chain. For the record, the company had a market cap of $27 billion precisely four years ago, and a share price of $96. Wexner's age is irrelevant; what is relevant are some of the poor decisions he has made in recent years. For example, instead of embracing the omni-channel marketing approach and creating a vibrant online presence, he stood firmly behind his mall-based approach, telling The Wall Street Journal that he had "5,000 years of history on my side." Um, Les, the ancient Sumerians didn't have high-speed Internet and Amazon accounts. Another terrible decision was ditching swimsuits. Three years after that decision was made, they were brought back. It is no-doubt very difficult to walk away from a company you founded two generations ago, but Wexner is finally making a really good decision. To be frank, we would have been long LB had we known that the founder was close to "looking for strategic options." Now that the word is out, it might still be a worthy buy, albeit a higher-risk proposition, and we could easily see the shares climbing to $30.
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TIF
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Done deal: LVMH will buy American luxury jeweler Tiffany in all-cash deal. (25 Nov 2019) France's LVMH (Louis Vuitton Moet Hennessy) will acquire American jeweler Tiffany (TIF $73-$133-$130) for $16.2 million in cash, or $135 per share. LVMH, under the control of French billionaire Bernard Arnault, controls over 75 brands and is one of Europe's largest companies, worth an estimated $225 billion. The Tiffany deal is part of a larger strategy by the company to move more heavily into China, a marketplace in which the American company has been effectively able to infiltrate. Sadly, despite its success in China, Tiffany has been floundering under various leadership regimes for years, while LVMH has focused on providing exceptional customer service to its high-end shoppers. Tiffany will continue to operate with its name intact while under the LVMH umbrella, it just won't be an American interest—or publicly-traded company. Tiffany's life in the doldrums was of its own making. Instead of providing excellent customer service to its high-end clients, it floundered without a sound strategic plan. The final straw was bringing in Alessandro Bogliolo—someone who had absolutely no vested interest in keeping the company independent—to run the company back in 2017. With a better choice, this acquisition could have been averted, and Tiffany could have been returned to its glory days.
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UA
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Is Under Armour a screaming buy after the shares plummet on news of accounting investigation? (05 Nov 2019) It is amazing how rapidly conditions can change in the investment world, both at a macro- and micro-level. Take athletic apparel maker Under Armour (UA $15-$16-$25). Almost immediately out of the gate, the company was touted as the biggest up-and-coming challenger to industry leader Nike (NKE). By July of 2019, shares had already climbed 50% year-to-date and the firm carried a P/E ratio of 1,200. Since that date, the shares have fallen 36%—nearly 20% of that loss coming on Monday after the firm announced it was at the center of a DoJ and SEC investigation for potential accounting fraud. So, with a more reasonable (yet still high) P/E of 82, is it time to pick up some shares on the cheap? Probably not. What concerns us more than the investigations are the downward-trending earnings per share figures. UA saw quarterly YoY double-digit growth back as far as the eyes could see—at least until recently. While still positive, the last four quarters saw EPS growth of: 1.4%, 1.6%, 1.5%, and 2.4%. That slow growth is hardly deserving of the rich multiples. And, sadly, the accounting investigation and the slower growth rates are related. It seems as though the company (allegedly) may have used some creative accounting to pump the numbers up as they fell into the single digits. Seriously, what are financial executives thinking when they (allegedly) pull such a stunt? While all of this is going on, skilled CEO Kevin Plank announced he would be stepping down from that role effective 01 Jan 2020, though he will take on the role of executive chairman. We still believe in Under Armour, and the double-digit growth will eventually return. In the interim, there are too many questions swirling around the firm to pick up shares, even near their 52-week low.
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TIF
LVMUY |
High-end jeweler Tiffany rockets after Louis Vuitton makes an unsolicited bid to buy the company for $14.5 billion. (28 Oct 2019) Tiffany (TIF $73-$130-$118) is a 180-year-old iconic American jeweler, and one of our favorite trading stocks (along with Signet, SIG) in the luxury goods industry. Going into the week, the company had a market cap of roughly $10 billion. LVMH Moet Hennessy Louis Vuitton SE (LVMUY) is a $214 billion French luxury goods maker and the parent company of Louis Vuitton and Givenchy. LVMH wants to expand its footprint in the world's most lucrative consumer market—the US—and has made an unsolicited bid to buy the jewelry store for $14.5 billion. When news of the offer came to light on Monday morning, shares of Tiffany blew past their 52-week high of $117.92, opening the day around $130 per share. The all-cash bid values TIF at about $120 per share, but that offer will be rebuffed by management as undervalued. It is important to note that Tiffany is now being run by Alessandro Bogliolo, who was at Italian luxury brand Bulgari for sixteen years. The board brought him in two years ago to revamp the brand after private equity firm Jana Partners pushed for change. In other words, he has no real vested, long-term interest in the company he now runs. A deal will get done, but not at the current offer price. Jana Partners and Bogliolo are interested in the bottom line, not preserving a company with a rich American heritage. We expect the deal to be forged when the offer hits the $150-$160 per share mark, or around one-third higher than the current offer. Tiffany will still be around, it just won't be an American company any longer. It will become the Budweiser of the luxury goods industry—American-sounding name, foreign ownership.
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PVH
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Slashed in half in just one year, is PVH now a screaming buy? (26 Aug 2019) What do Calvin Klein, Tommy Hilfiger, IZOD, Van Heusen, ARROW, Speedo, and Geoffrey Beene all have in common? They are all portfolio lines owned by $5 billion fashion company PVH (PVH $67-$69-$157). Despite having a tiny P/E ratio of 8, steadily rising revenue and net income, and extremely solid management in the form of CEO Manny Chirico, the trade war and the global slowdown have combined to hammer PVH's stock price down by 55% in one year, and 25% year-to-date. At $69.01, the shares are selling at a deep discount to fair value. Granted, two lines—Calvin Klein and Tommy Hilfiger—account for over 80% of the firm's revenue, and over half of all revenue emanates from outside the US, but we believe investors have unfairly punished this global fashion powerhouse. Very conservative estimates put the fair value of PVH at $100 per share. While we are currently underweighting the consumer discretionary sector, this company looks mighty attractive. Retail has certainly been under pressure on all fronts, especially the big brick-and-mortar players like Macy's, JC Penney, and Dillard's. While PVH sells its wares to these companies, there is no shortage of its products for sale on Amazon.com, making it less sensitive to transformational changes in the retail industry.
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UA
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Are Under Armour shares a bargain after suffering a double-digit decline on weak earnings? (30 Jul 2019) Shares of athletic apparel maker Under Armour (UA $15-$22-$25) plunged about 20% following the company's Q2 earnings release and revised full-year guidance. Sales weren't bad—up about 1.5%, to $1.19 billion, over last year's second quarter—but the Baltimore-based firm suffered a net loss of $17.3 million in the quarter. While that is a lot better than last year's Q2 loss of $95 million, analysts are beginning to question whether or not the $10 billion company can keep pace in North America with the likes of much larger rivals Nike (NKE) and Adidas (ADDYY). While maintaining the global forecast for the year, management now sees a decline in North American sales for FY2019; Under Armour sold just $816 million worth of goods in the region during the quarter. After watching product sales slide in third-party stores such as Dick's Sporting Goods (DKS) and Foot Locker (FL), the company is making a strategic push into direct-to-consumer sales, both via its online presence and through its roughly 300 North American stores. Management has also undertaken a major restructuring effort to reduce spending and create a more efficient supply chain. For investors, it's a waiting game to see whether or not CEO Kevin Plank has a little more magic up his sleeve. We want to see Under Armour take some market share from Nike, but prospects of that happening appear to be a coin toss at best right now. Furthermore, we have railed against dual-class shares that give the anointed few an inordinate amount of voting control—UA has three share classes, with Plank's class B shares controlling the game.
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LEVI
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Levi Strauss reports; stock drops; who cares? (10 Jul 2019) This past March, we wrote a scathing commentary on Levi Strauss (LEVI $19-$21-$25) just before the company's most-recent IPO. Shares ultimately began trading at $22.22; right now, after today's 10% drop, they sit at $21.32. Still overpriced. Ironically, the 10% hammering came on the heels of a decent earnings report. The jeans maker had $1.31 billion in sales for the quarter, up 5% y/y, with international markets generating 58% of that revenue. The bottom line, however, is probably what spooked investors: the company only made $28.2 million on that $1.31 billion, down from $75 million in the same quarter last year. In the earnings release, CEO Chip Bergh said "(insert boilerplate rosy CEO-speak here)." Even writing about this company bores the hell out of us. They will flop and flounder until, once again, they are taken private. Buy right before that announcement is made, and there may be some short-term profit in the trade. If you are an investor who gets excited about LEVI, you will love Abercrombie & Fitch (ANF). They are cut from the same cloth.
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TIF
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Beaten-down Tiffany & Co is suddenly on a roll. (25 Mar 2019) On Christmas Eve of 2018, high-end jewelry store Tiffany & Co (TIF $73-$103-$142) was sitting down 22.65% year-to-date. Not the kind of performance one would expect for the luxury retailer in the midst of its busiest season. What a difference the turn of a year makes. Suddenly, on the back of upbeat growth expectations as voiced by CEO Alessandro Bogliolo, Tiffany is up 28.2% thus far in 2019. As for Q4, sales dropped 1% from the previous year, to $1.32 billion, while net earnings rose from $62 million in Q4 of 2017 to $204.5 million last quarter. Tiffany's biggest challenge going forward will continue to be the slowdown in global growth, especially in China. The CEO, in fact, cited Chinese and European shoppers spending less on jewelry as a reason for the Q4 sales miss. While the stock is still well below its 52-week high, we wouldn't bite until the global economic environment firms up. While the higher-end retailer tends to be more insulated from economic slowdowns, 75% of Tiffany shops are in department stores, which continue to face headwinds from online competition. We wouldn't be in a hurry to pick up shares at this price. We did, however, pick up Signet Jewelers (SIG: Zales, Kay, Jared) in the Intrepid Trading Platform when it hit a 52-week low.
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LEVI
2019.03.19 |
Levi Strauss to investors: give us your money and keep your opinions to yourself. This Thursday, denim-maker Levi Strauss will go public—again. There are a lot of things we don't like about this IPO, and many of those things can be distilled down to this component: the company will "offer" dual shares, with the dupe investors gaining control of 1% of the firm (yet paying for the lion's share of market cap), while the anointed family owners will control the other 99%. In other words, Levi's IPO sales pitch is: give us your money and keep your mouth shut. So, when the outspoken "social action" firm puts out there next politically-infused commercial, save your grumblings. At least you can always sell your stock. Just be sure and do so before the company goes private again. Sadly, political activism by publicly-traded companies is on the rise. Some management teams (almost always spearheaded by the founder/CEO) are finding it easier to wade into the political arena through their ads and their company-backed commentary. It's no longer enough for the individuals to speak out (as individuals), they want to put the weight of their company behind their opinions. And opinions are all they are. Just because a founder is worth $X billion doesn't mean they are any more intelligent, compassionate, or thoughtful than anyone else. But don't try to tell them that. The best course of action is to simply shun the shares of companies which have made the (erroneous) strategic decision to go down this path.
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LEVI
2019.03.12 |
Dear Levi Strauss, when you go public (again), please stick to blue jeans, not politics. Levi Strauss, the company founded in 1853 to provide a sturdier set of britches to California gold miners, is about to go public—again. The San Francisco-based apparel maker announced its intentions on Monday, and expects to raise around $600 million in the IPO. That amount would value the company at roughly $6 billion—in the sweet spot of the mid-cap range. LEVI (the expected ticker) plans to offer 36.7 million shares priced somewhere between $14 and $16 per share, but should investors bite? Global demand for denim products is strong, and Levi is certainly an iconic brand, but consider how other specialty apparel retailers appealing to the same demographic group—like Gap (GAP), Abercrombie (ANF), American Eagle (AEO), and Urban Outfitters (URBN)—have been struggling. That being said, Levi plans to increase its offerings to attract a younger demographic group, offering such services as a tailor shop, and customer-centric designs which can be placed on blue jeans and T-shirts. In management's own words, Levi wants to become, "a full-fledged global lifestyle leader for both men and women." Certainly, Levi has something other small retailers don't: a massive network of wholesalers who also sell their goods. Additionally, the firm is increasing its offerings on Amazon, and undertaking a new marketing and advertising campaign for direct sales. Here's our biggest concern, however: the company is going to feel the urge to push politics in their ads (remember United Colors of Benetton and their embarrassingly-political ads?). If that happens, Levi will telegraph who they don't want buying their clothing, whittling down their customer base in a very competitive environment. It shouldn't take long for investors to figure out which path management has chosen for the brand. As mentioned, this is not Levi's first IPO. It went public in 1971, but pulled out of the market in 1985 to avoid the "short-term pressures of Wall Street." We could see a short-term pop in share value, but expect it won't be long before LEVI begins to languish, yet again. They do make a great pair of blue jeans, however.
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LB
2019.03.05 |
Should L Brands follow Gap's lead and spinoff Bath & Body Works from Victoria's Secret? Two years ago, we blasted Victoria's Secret's decision to shutdown its swimwear line. Now, parent company L Brands (LB $24-$28-$46) has done an about face and is reintroducing the line. Yet another warning sign that Les Wexner's management team—to include himself—is floundering. Wexner founded L Brands, then known as Limited Brands, back in 1963, and has remained at the helm ever since. While he did recently replace the head of Victoria's Secret, we don't see a clear strategy for the $7.5 billion retailer going forward. Activist investor Barington Capital has an idea: spinoff the company's strong Bath & Body Works chain into its own publicly-trade company, ala Gap and its Old Navy brand. Barington only owns around 1% of the firm (Drexler owns 17%), so we doubt management will take their advice. But is it a good idea? As with the Gap/Old Navy decision, we don't see a split doing much to uncover hidden value within any of the company's individual entities, which also include PINK, LaSenza, and C.O. Bigelow (it shuttered its Henri Bendel stores last year). Victoria's Secret still has great potential, it just needs some new vision to take back the market share it has lost recently to the likes of online player ThirdLove and Amazon's Iris & Lilly. A spinoff won't generate that creative magic. We have traded L Brands long before it changed its moniker from Limited and its ticker from LTD. It looks so tempting at $28 per share, with its 7.5% dividend yield and its 12 P/E ratio. But we just can't pull the trigger. The story would be different if there were any signs that Wexner was prepared to step down, making room for a dynamic new management team.
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SIG
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Jewelry powerhouse Signet plummets on weak holiday numbers, lowered guidance. (17 Jan 2019) Last March, we purchased Signet Jewelers (SIG $28-$26-$71) within the Penn Intrepid Trading Platform for $40 per share. Three months later, in June, we closed out the position at $51.04 for a 28% short-term gain. Today, after the parent company of Kay, Zales, and Jared announced weaker same-store sales over the holiday season and reduced its guidance for 2019, investors hammered the stock down by 25%—with shares punching through a 52-week low. When all of the numbers are in (the company reports on 14 Mar), expect a 1.5% decline in same-store sales during the 2018 holiday shopping season from the previous year. Considering the 5.1% increase in consumer spending this past Christmas, those numbers spell potential trouble ahead. Before Signet purchased the company, we use Zales (former symbol ZLC) as one of our favorite trading stocks. When they got gobbled up, we turned to Signet with great success. Right now, we see the fair value of SIG in the low $40s range, which would imply a 54% upside from where it currently sits. Members, keep an eye on the Trading Desk, as we may well add it to the Intrepid once again.
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KORS
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Michael Kors set to buy Versace, but what kind of headaches might come with the deal? (24 Sep 2018) When Gianni Versace was gunned down in Miami Beach twenty-one years ago, his eponymous company was thrown into turmoil. His sister, Donatella, became creative director at the firm after the fashion designer died, but the family-controlled business hasn't been the same since. Now, in an effort to gain a foothold in higher-end European fashion, Michael Kors (KORS $46-$67-$76) has announced plans to buy the firm for around $2 billion. On its face, the deal makes sense for the growing Kors (the company bought high-end shoemaker Jimmy Choo last year for $1.2 billion), but several serious questions remain. Versace is closely-held by members of the family, many of whom may come along with the deal. Additionally, the company generated only around $920 million in revenue last year, with a paltry $20 million or so flowing down as net profit. Other fashion companies like Tiffany & Co (reportedly) balked at the price tag. What did investors think of the news? Kors fell 8% after the announcement.
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NKE
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Nike steps in it by signing Colin Kaepernick. (04 Sep 2018) What a stupid move. It amazes us how many management teams have made the tactical decision lately to insert their publicly-traded companies into the political arena, knowing (if they are smart enough to realize it) that they will turn off a large percentage of their customer base in the process. Athletic apparel maker Nike (NKE $50-$80-84) is the latest, with their decision to hire washed-up former NFL quarterback Colin Kaepernick. The delusional Kaepernick, who still believes he was not given a new contract due to his political beliefs and not his horrendous play, will be featured in Nike's 30th anniversary "Just Do It" campaign. This is humorous for so many reasons. Perhaps, for example, if the QB had focused more on his professional athletic career and less on his hatred for the National Anthem and what it stands for, he might still be a viable spokesman for an athletic shoe company. As it stands, Nike has given a has-been another platform from which to spew his disdain for this country. We will remember that the next time we are shopping for athletic apparel. NKE was down 3% at the open.
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TPR
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Tapestry jumps double-digits after stronger-than-expected Kate Spade sales. (14 Aug 2018) The company formerly known as Coach, Tapestry (TPR $39-$54-$56), was trading up nearly 14% on Tuesday following reports of a strong showing in its fiscal 4th quarter, which ended 30 June. The luxury goods retailer, which owns the Coach, Kate Spade, and Stuart Weitzman brands, reported a 31% spike in net sales over the same quarter in 2017, and a 36% jump in GAAP earnings per share. The company's Kate Spade line was, in good measure, responsible for these impressive numbers, as revenue from the division spiked 31% following the death of the founder. Interestingly, Tapestry has been tapering off its discount promotions which management considers detrimental to the brand's luxury status. At the very least, reducing these flash sales did not negatively impact overall sales at the firm. Tapestry's 50 p/e isn't out of line for the industry, but we would look at players with better valuations, such as Michael Kors (KORS) or Lululemon (LULU), for placing new money in this space.
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VFC
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VF Corp to spin off its jeans business to focus on activewear, outerwear. (13 Aug 2018) You might not be familiar with apparel manufacturer VF Corp (VFC, $61-$92-$97), but you would certainly recognize their brands. The company, founded in 1899 and based out of Greensboro, North Carolina, owns such iconic names as: North Face, JanSport, Timberland, Vans, Wrangler, Lee, and Dickies. Now, in a strategic decision to focus more on the company's fast-growing outerwear and activewear lines, VF will spin off its 50-year-old denim business. The new company will manage the Wrangler, Lee, and Rustler brands, in addition to the 75 or so VF Outlet stores around the United States. VF also announced it would be moving its headquarters from Greensboro to the Denver metro area within the next year. With these new strategic moves, should you make a move into VF Corp? We don't think so; we place a fair value on the company at around $75-$80 per share.
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PANDY
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With its 50% drop in value and 10% dividend yield, is Pandora a good buy? (08 Aug 2018) First, let's be clear: we are talking about Pandora (PANDY $13-$13-$29) the Danish jewelry company, not the American music streaming service. It has been a really rough year for the luxury retailer, with shares of PANDY falling from $29.16 in April to $13.25 as of today. The latest blow came when management at the $6 billion firm (formerly $12B) drastically cut the company's full year outlook and slashed its critical operating profit margin metric. So, with a 10% dividend yield, a p/e ratio of 9, and annual profits back as far as the eye can see, is the company a screaming buy? Few analysts are willing to go out on the limb after being burned several times over the past year, but based on future cash flow projections, a brave investor with money they are willing to lose might just want to take the gamble.
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LB
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L Brands drops like a rock on soft Victoria's Secret sales. 81-year-old Les Wexner has been the CEO of L Brands (LB $31-$32-$63) since 1963, the year he founded the firm. That also makes him the current CEO of Victoria's Secret, The Limited, Bath & Body Works, PINK, and a number of other lines. We don't believe age—either young or older—should have any impact on someone's ability to lead a company, as there are brilliant minds and dunderheads of all ages in the C-Suite. Having said that, it may be time for Les to step down. Around a year ago, we reported that LB dropped double-digits on declining sales, which management blamed on lower mall traffic. After this past Christmas season, LB dropped from $63/share to $50/share on, you guessed it, "declining mall traffic." On Thursday, the company had another double-digit loss after the company reported disappointing sales during the all-important Victoria's Secret Semi-Annual Sale. That is not good news. We lambasted the company last year for exiting the swim and apparel categories (that could have helped June's numbers), and we believe management continues to make a number of missteps. With Amazon (AMZN) now in this category, brick and mortar specialty shops cannot afford too many errant decisions. Yes, the company is now trading at just an 11 multiple, and investors could get nearly a 7% dividend yield if they jumped in now, but we are not willing to take the risk with the lack of a sound strategic turnaround plan. We are rooting for them, however; it would be a dark day if those Victoria's Secret shops were no longer festooning the local malls.
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NKE
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Nike pounds earnings, spikes 7% after release. Nike (NKE $50-$76-$76), our favorite athletic footwear and apparel maker, just announced its FY 2018 fourth-quarter earnings, and it was blockbuster. Beating analyst expectations for both revenue and profit, the company increased its top-line sales by 13% from the same quarter last year, to $9.8 billion. An unexpected pick-up in North American sales had a lot to do with Nike's success in the quarter. Sales for the full year hit $36.4 billion, and the company set an aggressive $50 billion revenue target for FY 2020. In addition to eight new launches over the course of the quarter, recall that the company shifted course last year and began "officially" selling their products on Amazon, which seems to have had a strong positive impact on sales. NKE was trading up 7% in after-market trading following the earnings release. If they can hit their $50 billion target, shares certainly have room to run.
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SIG
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Trading Desk: We sold Signet Jewelers in the Intrepid for a 28% short-term gain. (06 Jun 2018) After trading the company for years, we know Signet Jewelers (SIG) inside and out. The luxury retailer, which owns such brands as Kay Jewelers, Zales, and Jared, reported a blowout Q2 on Wednesday morning, driving the stock up over 16% within minutes. We purchased SIG in the Intrepid Trading Platform in March at $40 per share, and sold Wednesday at $51.04 for a 28% short-term gain. Clients/members, see the Trading Desk.
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TIF
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Tiffany gaps up 16% after very nice quarterly beat
(23 May 2018) Shares of luxury retailer Tiffany & Company (TIF $84-$119-$120) spiked 16%—close to a new 52-week high—after the famed jeweler reported on a blowout first quarter. Net sales came in at $1.03 billion, an 11% jump from Q1 of 2017, and earnings per share came in at $1.14 versus $0.74 a year ago. Expectations for the full year were also rosy: management expects to see growth in the "high single digits" on strong global sales. The board of directors also approved a $1 billion share buyback program, further buoying investor confidence in the stock. So much for that $60s-range we were looking for. |
SKX
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Skechers loses nearly one-third of its value in a matter of hours
(20 Apr 2018) I will always remember reading famed Fidelity fund manager Peter Lynch's classic book, One Up on Wall Street, back in the 1980s. One particular concept stuck in my mind: forget the analysts' reports for a moment, and listen to what your gut is telling you; try to actually visit a location operated by the company and get a sense for what is really going on. I thought of that book as I was visiting—for the first time ever—a Skechers (SKX $23-$30-$43) retail store last weekend. I was drawn to the company by their slick advertising, specifically the commercials showing popular sports figures wearing the shoemaker's semi-casual sneakers. What a disappointment the store turned out to be. The place looked like a dump (despite the huge overhead they had to be paying for the property), I received no offer of assistance, and of the shoes I liked they had no stock in my (very common) size. In one of those "why didn't I short the stock" moments, I noticed SKX plummeting by nearly 30% on Friday after the company issued dour expectations for the second quarter. Here's how the CFO, John Vandemore, responded: "We continue to invest in our global capabilities and remain poised to capitalize on consumer trends." Uh, John, good buddy, since when is the consumer trend the desire to walk in a store that looks like a Sears outlet from the 1970s? |
UA
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Under Armour pops 16% after it announces a "not bad" quarter
(13 Feb 2018) Performance apparel maker Under Armour (UA $10-$15-$22) was up 16% in early trading after "not disappointing" investors with their Q4 earnings report. It has been a really tough six month spell for the former retail darling, with the company's stock falling 50% between last summer and early November. Analysts weren't expecting much from Q4, so a 2% jump in apparel revenue and a 9% jump in footwear sales was enough for the double-digit price pop. For this fiscal year, the company expects net revenue to be up by "low single-digits." If they can underpromise and over-deliver, they might just continue their climb back into the good graces of the investment community. What do we think is a fair value for the company? About $19 per share, which would represent a 22% spike from the current price. |
VRA
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Vera Bradley rockets nearly one-third higher in one trading session
(06 Dec 2017) This is one of the many reasons we love the stock market. With all of the turmoil in the specialty retail space, who would have had the guts to put some money to work in small-cap (just $400 million market cap) handbag designer Vera Bradley (VRA $7-$11-$15) going into the holiday season? After all, the company has razor-thin margins and the shares have fallen 52% in one year. Nonetheless, VRA soared over 30% on Wednesday after reporting mixed results. Revenue was actually down 10% from the same quarter last year, and below analyst expectations. Same store sales fell 6.9% from last year. Investors apparently liked the fact that the company was able to squeeze out some increased earnings, despite the revenue drop, and drove the shares higher. Then again, when your shares are trading in the $8.50 range, it doesn't take much to move the needle. Would we buy it today? Considering the P/E ratio just went from 30 to 40, no way. With that valuation, we'd rather own Ulta Beauty (ULTA). |
SIG
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Signet Jewelers falls on news of potential investigation by CFPB
(05 Dec 2017) Signet Jewelers (SIG $46-$50-$99) was off nearly 4% pre-market as the company reported to the SEC that it may be under investigation by the Consumer Financial Protection Bureau. The CFPB is considering regulatory action against the company due to its in-store credit practices, including offering credit to customers with low FICO scores, and (reportedly) pressuring customers to buy jewelry they cannot afford. A number of complaints claim that the company opened credit accounts for people without their knowledge or permission. This summer we made a double-digit, short-term gain in SIG (in the Intrepid Trading Platform) after it gapped down to $55. Although the price is below that today, we are going to hold off and see what the investigation brings to fruition. Signet, with a market cap of $3 billion, owns such brands as Jared, Kay, and Zales, among others. |
KORS
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Michael Kors is proof that success has more to do with corporate leadership than industry tribulations
(06 Nov 2017) Not every corner of retail is in dire straits. High-end apparel-maker Michael Kors (KORS $32-$54-$55) was getting close to a new 52-week high in early Monday trading—up more than 13%—as the company beat on revenue expectations for the quarter and raised full-year guidance. The Jimmy Choo acquisition has been a boon to the company, and a good part of the reason they are raising their 2017 revenue outlook from $4.28 billion to $4.6 billion. In that vein, KORS has committed itself to focusing more on their digital sales channel. |
UA
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Under Armour getting pounded after slashing guidance
(31 Oct 2017) Athletic gear maker Under Armour (UA $14-$12-$30) saw its shares plummet 17% in the pre-market after a lousy Q3 earnings report and a downward revision to full-year guidance. Revenues for the quarter came in at $1.4 billion (versus $1.5B expected) and net profit dropped to $54 million (down from $128 million in Q3 of 2016). The company is reportedly looking at exiting its tennis and outdoor segments such as fishing, focusing more on its core businesses of basketball and golf. That doesn't sound like a recipe for growth. The stock is down 50% from its one-year high, but does that mean it's a value play? The stock's P/E ratio is 49. Still sounds expensive to us. |
ADDYY
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Adidas falls after NCAA bribery scandal surfaces
(26 Sep 2017) The FBI arrested 10 people, including four NCAA basketball coaches and an Adidas (ADDYY $71-$111-$119) manager, following a bribery/recruiting scandal. The associate coaches arrested, who were all accused of taking bribes to exert influence over student athletes, hail from USC, the University of Arizona, Oklahoma State, and Auburn. The Adidas executive, James Gatto, has been accused of funneling $100k to a high school basketball player who agreed to play for a school with an Adidas apparel contract. Adidas was off about 3% on the news. |
UA
NKE |
Kevin Durant’s trashing of Under Armour hurts stock, we call BS
(30 Aug 2017) Performance apparel maker Under Armour (UA $15-$15-$37) gapped down about 4% on Tuesday—to a new one-year low—following the disparaging comments of NBA star Kevin Durant. We call a big BS on his comments. During a popular podcast, Durant (who has a fat contract with Nike, by the way) was asked why the University of Maryland was unable to recruit top players any longer. Durant said that the school’s deal with Under Armour was a factor. Really? Are we really supposed to believe that talented young athletes aren’t coming to a university because of that school’s deal with Under Armour. What bull. For the record, we own Nike (NKE $49-$53-$61) in the Penn Global Leaders Club, but we have to call it like we see it. |
TIF
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Tiffany briefly spikes on sales and earnings beat, then falls back
(24 Aug 2017) Luxury jeweler Tiffany & Company (TIF $66-$90-$97), home of the iconic blue box, saw its shares spike after an increase in both sales and profit for the quarter, but then fall back to about where they closed on Wednesday. Sales rose 3%—to $960 million—from last year, and net profit rose 9%—to $115 million. Perhaps the dose of reality for investors was the 2% drop in same-store sales (those opened for more than a year), which was offset by strong sales in Japan and lower input costs. We like the company, but wouldn't buy until/unless the shares are back in the $60s. |
COH
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Coach hammered despite profit gain as sales miss forecast
(15 Aug 2017) In the second quarter of 2016, luxury retailer Coach (COH $34-$42-$48) raked in $81.5 million of net income. Based on the just-released Q2 figures for 2017, the company increased that figure by a massive 86%, to $151.7 million. Great new, right? Then why did the stock plummet 13% on Tuesday’s open? Apparently, investors weren’t thrilled with the 2% drop in sales—from $1.155 billion to $1.13 billion. The P/E ratio—at 22—is in line with other luxury retailers, so what’s up? Investors are simply mispricing this strong company as they are bombarded with negative retail headlines. A full 45% of Coach handbags sell for $400 or more. The consumers buying these handbags are not trolling Amazon for a better deal. At $41.50 per share, if you need a consumer discretionary holding in the luxury space, Coach is a screaming buy. |
SIG
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(08 Aug 2017) We took our profit off the table by selling Signet Jewelers
Two months ago we added Signet Jewelers (SIG $46-$61-$101), parent of Jared, Kay, Zales, and others, to the Penn Intrepid Trading Platform following a gap down. Having tracked this stock for years, it looked too good to pass up at that price and P/E. We wanted a double-digit gain, and we got it. We sold SIG today in the Intrepid at $61.42 for a 12% gain. Members, see the Trading Desk. Recall that the Intrepid is used for short-term, double-digit gains, with the stocks generally holding stop losses. |
KORS
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(08 Aug 2017) Michael Kors up 14% after earnings beat.
London-based women's apparel and accessories maker Michael Kors (KORS $32-$37-$53) has been a poster child for the besieged retail fashion industry. Down 27% in one year and 13% ytd, the company couldn't shake itself out of the doldrums. Before today, that is. Investors pumped new life into the company, pushing it up 14% at the open, following an earnings beat. The luxury retailer had $952 million in sales and earnings of $125 million for the quarter. Get this: both of those figures are worse than the same quarter last year, but analysts were predicting far bleaker numbers. It's all relative, we suppose. With the company's small P/E of 11, this could be a good stock to play a retail rebound, as we pointed out in May (see below). |
UA
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(01 Aug 2017) Floundering Under Armour may look cheap, but...
Athletic wear-maker Under Armour (UA $16-$17-$43) was the darling of Wall Street last year. Much like Chipotle, investors were willing to place an untenable price-to-earnings ratio on the stock based on wild growth projections. A lot can change in a year with any publicly-traded company. Suddenly, UA is down 34% year-to-date, and investors are beginning to notice the net losses. While revenues rose 9% from last year, the company reported a Q2 net loss of $12 million. It also reported a major restructuring effort is now underway. Shares plunged 8% on Tuesday's open. If you want to jump in at a 52-week low, now is your chance. Although the P/E ratio dropped from the high 60s to about 43, that is still a bit too rich for us. It could pop up to our fair value of $20 in no time, but we aren't willing to take the risk...yet. Competition is just too keen. |
KORS
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(25 Jul 2017) Michael Kors to buy upscale shoemaker Jimmy Choo for $1.2 billion
Upscale women's retailer Michael Kors (KORS $32-$35-$53) has agreed to buy designer shoe brand Jimmy Choo for slightly under $1.2 billion as it searches for new avenues of growth. Kors has been under severe pressure lately, committed to maintaining its high standards (and non-discounted prices) in a world of chronically-discounted retail. At $35, the share price looks mighty tempting, but we believe it could fall further before staging a real comeback. We do like the pick-up a lot, however. |
NKE
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(20 Jul 2017) Penn member Nike jumps after upgrade
Nike (NKE) shares were up about 2% following a Morgan Stanley upgrade to overweight and a target price boost from $56 to $68. Analyst Jay Sole sees hot new shoe line offerings as a catalyst to the stock to climb higher in the near- to mid-term, and he believes that North American sales for the firm have troughed. Before Thursday's price jump shares have already gained 11% since we added the stock to the Penn Global Leaders Club several weeks ago. |
COH
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(11 Jul 2017) Penn member Coach gets a positive review from MKM Partners.
Penn Intrepid Trading Platform member Coach (COH), maker of luxury handbags and accessories, received a glowing endorsement from MKM Partners on Tuesday. Analyst Roxanne Meyer initiated coverage on the company with a "BUY" rating and a $59 target price. With COH trading at $47 per share, this would represent a 25% bounce for investors. Meyer also initiated coverage on rival Michael Kors Holdings (KORS) today, giving it a "SELL" rating and a $26 price target (26% below where it opened on Tuesday). |
KORS
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(31 May 2017) Michael Kors gaps down 9% on tough outlook. It wasn't that the earnings report for luxury retailer Michael Kors (KORS $32-$33-$53) was that bad; rather, it was the company's lowered guidance that made the stock drop to a 52-week low. Underlining the company's outlook was the announcement that it would close between 100 and 125 of its full-price locations over the next two years—nearly 20%. With the exception of this past quarter, the company has been profitable, and CEO John Idol has a plan to generate more excitement around the brand, but he warned shareholders it will take time. To bring an aura of "luxury" back to the brand, the company will slash by 40% the number of days its goods are on sale. For that to work, the right design team must be in place, and the right message must be conveyed to their target audience. With an 8 P/E, if investors believe in management's turnaround story now just might be the time to pick up some shares of this undervalued former golden child.
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SIG
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(25 May 2017) Signet Jewelers is screaming "BUY!," but should you? A few months ago, you may recall that we picked up jewelry conglomerate Signet Jewelers (SIG $53-$53-$109) after a 13% unwarranted drop, selling it one week later for a double-digit gain. Well, the owner of Kay, Jared, and Zales is at it again, dropping 10% in the past two trading days, hitting a new 52-week prior low. Sure, the 11.2% drop in same-store sales is of great concern, but the P/E is a crazy-low 8 (beaten down Tiffany still has a P/E of 24), and we believe the fair value of the company is around $75 per share. What did we do for clients? Members can see by visiting the Trading Desk.
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TIF
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(24 May 2017) Tiffany's US sales take a tumble. Nearly half of luxury retailer Tiffany's (TIF $57-$85-$97) sales come from the Americas, and 90% of that amount comes from the United States. That's what makes the company's Q1 earnings report so troubling. While global sales were up 1% year-over-year, sales in the America's were off 3%, and same-store sales fell 4%. And it will be hard for the company to blame "market weakness," considering that the rest of the industry had a pretty decent quarter. One big problem? Tiffany seems to be struggling in its key engagement and wedding jewelry business. Expect a challenging environment for the company throughout the remainder of 2017 as it struggles to find solid footing. It is trying to expand into other areas, such as accessories and home decor, but that could backfire if it loses focus on its core line. Shares of TIF were down 9% on Wednesday.
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FL
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(19 May 2017) ...and then there is Foot Locker, with the lamest excuse of the year. While Gap was busy beating expectations, Foot Locker (FL $51-$60-$79) was plunging after reporting disappointing revenues and profits for the quarter. We've heard some sorry excuses in our time (everything from "unseasonal weather" to "election weariness"), but this one may take the cake. The company blamed delayed income tax returns for poor sales in Q1 "that could not be overcome by much stronger sales in March and April," according to CEO Richard Johnson. With a 15% drop on the open, if you believe in the company now might be the time to jump in. We don't. (Photo: Whatever. Are these guys upset because their tax refunds didn't come yet?)
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GOOS
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(16 Mar 2017) Canada Goose chalks up very successful debut on exchange. Canada Goose (GOOS $16.08), maker of high-end parkas and outerwear, soared on its NYSE debut Thursday, finishing the day up 26%. The Toronto-based company simultaneously debuted on that city's exchange, with equal success. PETA protestors outside the NYSE did not seem to have an impact on the company's IPO.
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SIG
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(10 Mar 2017) We took our one-week, double-digit profit on Signet yesterday. Last week, members may have noticed that we picked up Signet Jewelers (SIG $62-$71-$125) after it fell 13% on flimsy sexual harassment charges. We argued that the response by the market was an overreaction. We bought the company within the Intrepid Trading Platform, looking for a short-term gain. Yesterday, a week after purchase, we sold the position for a 10.97% gain. Not bad for a week's work.
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PLCE
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(08 Mar 2017) Children's Place surges on dividend increase, stock buyback. Apparently not all mall retailers are in dire straits. Small-cap kids' clothing retailer Children's Place (PLCE $67-$109-$111) surged 15% on Wednesday's open after announcing it would double its dividend and undertake a new $250 million stock buyback program. Get this: the company's same-store sales grew 6.9% from the same period a year ago. CEO Jane Elfers seems to be executing strategic initiatives quite skillfully.
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SIG
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(01 Mar 2017) Signet may be attractive on the back of sexual harassment charges. Signet Jewelers (SIG $71-$64-$125), which operates such iconic brands as Jared, Kay, and Zale, fell 13% on Tuesday following the revelation of sexual harassment allegations. A number of former Sterling Jewelers' (a SIG brand) employees claim that there was a culture of sexual harassment and discrimination at that firm. The charges were first filed back in 2008 by a dozen or so women who painted a picture of gender discrimination with a broad brush. The company gave a forceful response to the report, and it appears that the investor response may have been overblown.
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LB
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(23 Feb 2017) Victoria's Secret parent, L Brands, plummets 16%. L Brands (LB $56-$49-$89, formerly known as Limited) plunged through its previous 52-week low on Thursday, settling down 16% from the open—its largest one-day decline since 2008. The culprit? The company is blaming a lousy quarterly report on declining mall traffic, but that is starting to sound like the old standby "we had a warm winter" defense.
In addition to Victoria's Secret, the company owns Bath & Body Works, PINK, and a 75% stake in Express, among others. All of those names are, to be sure, heavily reliant on foot traffic through the malls, but is that the reason for the company's double-digit same-store sales decline? Partly. But why was traffic at Victoria's Secret off 3%, while Bath & Body Works' same-store sales up 5%? We believe it has more to do with the former's decision to exit the swim and apparel categories. Another challenge facing the company is Amazon's entry into the intimate apparel space with its competitively-priced Iris & Lilly brand the company recently rolled out in Europe. It has been selling bras and bralettes at a 20% discount to Victoria's Secret. All that being said, we find LB to be at least 25% undervalued, and we have added to the Penn Intrepid Trading Platform for a short-term gain. |
KORS
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(07 Feb 2017) Michael Kors tumbling on revenue declines. The retail bloodbath continues. Luxury apparel maker Michael Kors (KORS $40-$41-%59) is dropping rapidly this morning, to new 52-week low, after reporting weak sales in North America and Europe for the third-quarter (ended 31 Dec). Year-over-year, revenue fell 3.5% (to $1.35B) and profit dropped 8% (to $271 million) for the company's fiscal Q3. The London-based retailer also lowered its 2017 outlook.
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