J.P. 摩根-美股-零售行业-2019年Q1美国百货商店与专业软线零售EPS预览-2019.5.10-48页 (2).pdf

North America Equity Research10 May 2019Equity Ratings and Price TargetsMkt CapRatingPrice TargetCompanyTicker($mn)Price($)CurPrevCurEnd DatePrevEnd DateAbercrombie&FitchANF US1,975.8428.46Nn/c32.00Dec-1927.00n/cAmerican Eagle OutfittersAEO US4,046.8422.45Nn/c24.00Dec-1922.00n/cBoot BarnBOOT US829.4329.06OWn/c33.00Dec-1928.00n/cBurlington StoresBURL US11,484.19166.51OWn/c174.00Dec-19n/cn/cDillards,Inc.DDS US1,857.6867.21UWn/c57.00Dec-19n/cn/cFoot LockerFL US7,478.4056.87Nn/c65.00Dec-1970.00n/cJ.C.Penney Co.,Inc.JCP US390.401.28UWn/cn/cn/cKohls Corp.KSS US16,186.6068.37OWn/c84.00Dec-19n/cn/cL Brands,IncLB US6,900.2424.25Nn/c24.00Dec-19n/cn/clululemon athletica inc.LULU US23,551.25173.71OWn/c197.00Dec-19n/cn/cMacys,Inc.M US7,082.4022.70Nn/c26.00Dec-19n/cn/cNordstrom,Inc.JWN US6,742.1239.80UWn/c40.00Dec-1942.00n/cRoss StoresROST US37,404.2497.01OWn/c97.00Dec-19n/cn/cThe Gap,Inc.GPS US9,817.1424.98UWn/c24.00Dec-1928.00n/cTJX CompaniesTJX US68,157.1353.84OWn/c58.00Dec-19n/cn/cUrban OutfittersURBN US3,100.2628.25Nn/c29.00Dec-19n/cn/cUnder Armour,Inc.UAA US9,862.2722.12Nn/c23.00Dec-1922.00n/cSource:Company data,Bloomberg,J.P.Morgan estimates.n/c=no change.All prices as of 09 May 19.Dept Stores/Specialty SoftlinesBoss 1Q EPS Preview:Fieldwork,Bodies Buried&Buy-Side BarsRetailing Department Stores&Specialty SoftlinesMatthew R.Boss,CPA AC(1-212)622-Bloomberg JPMA BOSS Steven Zaccone,CFA(1-212)622-Grace Smalley(1-212)622-Elliott Simon,CFA(1-212)622-J.P.Morgan Securities LLCSee page 46 for analyst certification and important disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Into 1Q earnings kicking off next week across our Department Stores&Specialty Softlines space we thought value-add to lay-out(1)notable upside and downside top-line outliers(vs.Street Consensus)by our latest fieldwork,(2)margin implications incorporating findings from our proprietary promotion tracker,(3)buy-side bars by sub-sector,and(4)latest sentiment(bodies buried)based on regional marketing and incoming call volume.Circling back to our mid-April Retail Round-Up-we expect management conference call rhetoric on the consumer to broadly reflect“Underlying Firm Footing(ex weather)”albeit acknowledging tax reform tailwinds in FY18 and closely monitoring a potential back-half bifurcation between the low/middle income(positive)and aspirational/high-end customer(negative).How We Would Position By Sub-Sector:(1)Overweight Defensive Growth(&Disruption Beneficiaries):Off-Price,Dollar Stores&Discounters,(2)Overweight Global Brands:Apparel/Footwear&Athletic,(3)Underweight Mall-Based Department Stores&Specialty Retail.Where Are the Bodies Buried in Dept Stores&Specialty Softlines?Based on incoming investor call volume:Highest Current Controversy:FL,KSS,CPRI,GPS,UAAMost Positive Sentiment:TJX,LULU,RL,NKE,AEOMost Negative Sentiment:JWN,M,URBN,PVH,TIFWhere We Stand on 1Q Comps Versus Street Consensus:Potential Upside:TJX,LULU,FL,BOOT,AEOPotential Downside:GPS,JWN,JCP,DDS,KSS2North America Equity Research10 May 2019Matthew R.Boss,CPA(1-212)622-The Boss 1Q Preview&Fieldwork:Department Stores:Buy-Side SSS Bars into the 1Q Prints:M:-0.5%,KSS:-1%,JCP:-4%,JWN:Flat(w/Rack+4%),and DDS:+1%.M(Neutral/$26 PT):Modeling 1Q EPS of$0.35(vs.Street at$0.33)based on flat same-store-sales(below Street at+0.3%)representing a-230bps sequential 2-year stacked deceleration(&-480bps on 3-year basis)and low-end of 0-1%annual guide.Importantly-our fieldwork points to a softer February to start the quarter(weather/refunds)with a slightly above-plan March offset by below-plan 2H April trends particularly in womens apparel(post RRU mgmt breakfast)to close the quarter.Moving down the P/L we model gross margin contraction of 75bps(1H pressure 2H pressure)and 56bps of SG&A deleverage(w/improvement as the year progresses).A key point reiterated by management at our 4/11 Retail Round-Up was elevated 1Q gross margin pressure given clearance of Spring transition receipts(modeling down 75bps YOY)with inventory planned to exit 1Q in a“better”position(relative to 4Q)noting continued gross margin drag in 2Q albeit moderating in magnitude with 2H GPM expected to be down slightly YOY(modeling down 15bps YOY in 2H).On the larger picture backdrop(&theme we expect to hear broadly),CEO Gennette commented that the consumer remains on“solid footing”,but 2019 is not expected to be at the pace of 2018 with tax reform tailwinds in the rear view(see 4/15-Boss Retail Round Up:Key Management Takeaways).On the call,we expect an update on managements 5 key FY19 initiatives(destination categories,vendor direct,Growth150,backstage,and mobile)targeted at narrowing narrow the delta versus industry growth,which stood at 200bps in FY18(industry+4%M+2%)down from 450bps in FY17(industry+2.5%M down-2%)with additional“Fund the Future”multi-year cost savings to be outlined by year-end.Looking ahead,we are modeling 2Q EPS of$0.54 based on+0.5%same-store-sales and FY19 EPS of$3.13(vs.$3.05-$3.25 guide).KSS(Overweight/$84 PT):Modeling 1Q same-store-sales of-1.0%equating to 1Q EPS of$0.60(below the Street at$0.68).On cadence,the combination of“below-plan”February comps and unfavorably cold weather particularly in the Midwest(and Northeast)including 2 weekends of snow in the second half of April weighed on the magnitude of March-April improvement(relative to February)by our work.On margins we are modeling 10bps gross margin contraction with recent store work pointing to inventory well managed exiting 1Q(vs.-2%per store exiting 4Q)with markdown/clearance levels controlled modeling with our+1.75%SG&A dollar build reflecting 1H weighted investments(ex 2H AMZN partnership launch).Looking ahead,our model stands at$6.10 based on+1.0%same-store-sales with management outlining 5+2H19 top-line catalysts on our recent European roadshow consisting of active expansion to 160 doors,Nine West launch(footwear/accessories+apparel exclusive),EVRI plus-size private label launch,Property Brothers exclusive home line launch,and Elizabeth&James brand launch with nationwide launch of the AMZN partnership slated for July(see 4/22-Boss Retail Round Up and Europe Roadshow:Key Management Takeawaysand 4/23-AMZN Partnership Mgmt Takes).JCP(Underweight):Lowering our 1Q same-store-sales estimate to-5.5%(below the Street at-3.9%)equating to a 1Q EPS loss of$0.38(Street at-$0.37).Importantly,our work points to below-plan top-line trends consistently 3North America Equity Research10 May 2019Matthew R.Boss,CPA(1-212)622-throughout 1Q with aggregate March/April same-store-sales improving versus Februarys trough(albeit below internal recapture plan)noting appliance clearance activity served as a slight benefit in the quarter.Moving down the P/L-we are modeling gross margin down 40bps despite lapping a 239bps shortfall a year ago with continued clearance activity capping opportunity for upside this quarter by our work.Looking ahead,we are lowering our 2Q comp to-6%reflecting a 200bps headwind from the exit of appliance sales equating to EPS of-$0.34(vs.Street at-$0.27).We lower our FY19 EPS to-$0.95(vs.Street at-$0.75)based on-4.3%comps and+100bps gross margin expansion with CEO Soltaus assortment influence not material until Back-to-School.DDS(Underweight/$57 PT):Lowering our 1Q same-store-sales estimate to+1%equating to 1Q EPS of$2.74 based on 60bps of gross margin contraction and+1.9%SG&A dollar growth.Importantly,our recent work points to a continued build of apparel inventory(particularly on the womens side)with inventory per square foot exiting FY18 up 4.9%(=460bps above adjusted sales growth)pointing to elevated 2Q19 gross margin risk with the Service Charge&Other line item worth watching(vs.-$3.2M decline the past 4 quarters on average).Looking ahead,we are modeling a 68 cent loss in 2Q(vs.Street at 53 cent loss)with comparisons accelerating next three 770bps sequentially from-2.0%in 1Q to+5.7%by 4Q and elevated gross margin risk(i.e.timing of markdowns)with incremental potential downside risk to our model on the Service Charge&Other line estimating a 2.4%decline in FY19(vs.-7.8%in FY18/55%of DDS Operating Income).JWN(Underweight/Lower PT to$40):We lower our 1Q same-store-sales to-0.5%(below the Street at+0.5%)equating to EPS of$0.41(below the Street at$0.46).Specifically,we are modeling Full-line comps down-3.0%(w/B&M traffic the sequential shortfall by our work)and+4.0%at the Rack with elevated inventory exiting 1Q across both channels by our recent work(noting our recent field checks point to building womens apparel inventory at Rack).Laterally,recent commentary at the higher-end(TIF at our Retail Roundup conference,Kering,LOreal,and Neiman Marcus)points to choppy trends with the combination of 34%SALT state exposure,softer tourist trends on the coasts,and SPX volatility representing potential 2H19 headwinds.Moving down the P/L,our model reflects a 22%EBIT dollar decline in 1Q with 50bps of gross margin contraction and 66bps of SG&A deleverage.Looking ahead we are modeling 2Q EPS of$0.95(guide 3-4%)with our fieldwork pointing to trends exceeding plan consistently throughout the quarter(noting“solid start”commentary on 2/27)and+5%HomeGoods same-store-sales.4North America Equity Research10 May 2019Matthew R.Boss,CPA(1-212)622-Looking ahead we are modeling 2Q EPS of$0.65(Street at$0.62)based on+3.6%comps raising our FY19 EPS to$2.63(vs.$2.55-2.60 guide).ROST(Overweight/$97 PT):Modeling 1Q same-store-sales of+2%(vs.Street at+2%)equating to$1.11 EPS(vs.$1.05-$1.11 guide).Specifically,mgmt.s Flat to+2%guide on 3/5 incorporated ladies apparel underperformance given higher 1Q category penetration(relative to 4Q)with our fieldwork pointing to March/April improvement relative to February despite unfavorable weather.On the margin front,we are model gross margin down-85bps YOY inclusive of flat merchandise margin,freight-30bps,and-45bps from higher distribution costs as ROST anniversaries a+45bps benefit from packaway in 1Q18 modeling SG&A deleverage of 50bps including 32bps of pressure from wage investment.Looking ahead,we lower our 2Q EPS to$1.12(below the Street at$1.14)based on+3%same-store-sales with management citing continued wage investment pressure through 1H19(modeling 30bps impact to 2Q SG&A).BURL(Overweight/$174 PT):Modeling 1Q same-store-sales of+0.5%or at the high end of mgmt.s 4/23 updated guide of Flat to+0.5%with our math pointing to down mid-single-digits in February improving to Mar/Apr up low-single-digits.We model EPS of$1.25 or at the high-end of mgmt.s 4/23 updated guide for$1.21-1.25 w/gross margin down 10bps(merchandise margin+15bps offset by freight-25bps)and SG&A deleverage of 57bps.Looking ahead,we see mgmt.guiding 2Q SSS(&2H19)back to+2-3%with inventory expected to exit 2Q down mid-single-digits equating to$1.16 EPS(vs.Street at$1.15).Please see our detailed recap of BURLs CEO announcement and 1Q pre-announcement-Bench Bolstered For the Next Leg;1Q In Rear-View w/2Q-4Q On Track.Sizing Up Specialty Softlines-Based on incoming call volume-The Buy-Side SSS Bars into the 1Q Prints:GPS:-2%Consolidated(ON:-1-2%,Core Gap:-4-5%);URBN:-1%;ANF:+2-3%;LB-1%;AEO:+3-4%,and BOOT+7%.GPS(Underweight/Lower PT to$24):Lowering 1Q same-store-sales to negative 3.0%(Street-1.1%)w/Old Navy-2%,core Gap-5%,and BR-2%lowering our 1Q EPS to$0.25(Street$0.35)based on+4%SSS(or+80bps sequential acceleration in the two-year stack),+20bps gross margin expansion,and 10bps SG&A leverage noting mgmt.cited on 3/6 that 2Q will mark the start of operating margin improvement primarily driven by SG&A leverage”.Raising our Dec 19 price target to$24.URBN(Neutral/$29 PT):Modeling 1Q EPS of$0.26(matching the Street)based on-1%same-store-sales(Street-0.8%)comprised of Core UO-1%,Anthro-2%,and FP+4%.Importantly,our fieldwork pointed to challenging trends in Feb/Early March driven by unfavorable weather and Spring transitional floorsets with notable underlying improvement in 2H March and April(excluding the Easter shift impact)by our work.Our 1Q model embeds gross margin-145bps YoY(vs.guide-150bps YoY)with merchandise margins down-115bps(noting our promotion tracker showed an incremental Anthro promo of 20%off dresses/skirts in April week 1)modeling SG&A$growth of+3%YoY(in-line w/mgmt.guide of+3%).Looking forward,we model 2Q EPS of$0.76(Street$0.09)with same-store-sales+2.6%noting the multi-year comparison is unchanged sequentially.Circling back to our 3/6 upgrade to Neutral(Execution In A Tough Tape;4Q Beat w/FY19#s Moving Higher;Upgrade to Neutral),we believe ANF is demonstrating Hollisters ability to“comp the comp”through product,marketing,loyalty,and remodels with momentum continuing QTD,new store experiences are driving a 40-100bps SSS over lift the next 3 years,and real estate flexibility and operating expense leverage noting managements 5.8%EBIT margin by FY20 equates to$2.25 EPS(or 50%current Street FY20 EPS of$1.50).Raise Dec 19 Price Target to$32(was$27)based on 5.0 x EV/FY20E EBITDA.LB(Neutral/$24 PT):Modeling a 1Q EPS loss of$0.01(vs.Street Flat)more/less in-line with guidance of breakeven noting a higher tax rate is 5c dilutive.Our 1Q SSS of-1.3%(vs.guide of down low-single-digits&Street-1.2%)reflects VS-5%(vs.Street-4.6%)or Flat in two-year stacks and BBW+4.5%(vs.Street 2.5%)or 6North America Equity Research10 May 2019Matthew R.Boss,CPA(1-212)622-600bps deceleration in two-year stacks.Our 1Q model embeds gross margin down 93bps YoY on-75bps of merchandise margin decline w/1Q SG&A deleverage of69bps YoY on Flat SG&A dollars(in-line w/guide).Importantly,our fieldwork and promo tracker points to elevated promotional messaging continuing at VS throughout the quarter pointing to a WIP assortment noting mentary on the 2/28 call that once the“merchandise is more right than wrong”VS will be able to“reduce promotions.”Despite the addition of licensed swim product this spring,we note the more material change in the VS assortment is not expected until the 2H19 once new VS lingerie president John Mehas(formerly Tory Burch)has an impact on the product.We expect this 2H-dyanmic could lead to 2Q guidance set below the Streets$0.23 estimate(JPM at$0.20).For the full year,we model FY19 EPS of$2.26 Street$0.27&$0.25-0.27 guide)and 4Q SSS to+7.8%(Street 5.7%&guide of 5-7%).Our fieldwork points to above-plan trends consistently across the quarter including strong regional macro data(oil/gas)and more favorable regional and category centric weather(cooler/wet in California&Texas)noting mgmt.s guidance on 2/5 reflected QTD same-store-sales running in-line w/3Qs+9.2%comp(w/B&M+10%).Looking ahead and circling back to our 1x1 ICR meeting and recent mgmt.access,BOOTs tax rate increases to 25%in FY20 from FY19s rate of 7%due to one