J.P. 摩根-美股-零售行业-美国百货商店与专业零售业市场分析-2019.1.7-28页.pdf

North America Equity Research07 January 2019Equity Ratings and Price TargetsMkt CapRatingPrice TargetCompanyTicker($mn)Price($)CurPrevCurEnd DatePrevEnd DateAbercrombie&FitchANF US1,386.4219.97UWn/c19.00Dec-19n/cn/cAmerican Eagle OutfittersAEO US3,455.5819.17Nn/c21.00Dec-19n/cn/cBoot BarnBOOT US520.6118.24OWn/c23.00Dec-1934.00Dec-19Five BelowFIVE US6,020.41107.97OWn/c129.00Dec-19n/cn/cL Brands,IncLB US7,884.7727.71Nn/c29.00Dec-1934.00Dec-19lululemon athletica inc.LULU US17,428.55128.55OWn/c180.00Dec-19n/cn/cOllies Bargain Outlet HoldingsOLLI US4,508.3169.25OWn/c87.00Dec-19n/cn/cThe Gap,Inc.GPS US9,982.2025.40UWn/c24.00Dec-1925.00Dec-19Urban OutfittersURBN US3,543.6232.29NOW38.00Dec-1950.00Dec-19Source:Company data,Bloomberg,J.P.Morgan estimates.n/c=no change.All prices as of 04 Jan 19.Dept Stores/Specialty SoftlinesBoss Fieldwork Findings&ICR Preview;Downgrade URBN To NeutralRetailing/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-Aaron T Grey,CFA,CPA(1-212)622-J.P.Morgan Securities LLCSee page 26 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.Ahead of next weeks ICR Exchange Conference in Orlando we thought value-add to provide takeaways from our latest fieldwork/management access and layout market expectations(i.e.buy-side bars)to assess the setups into the Holiday pre-announcements.(1)Specialty Softlines:(i)Potential SSS/EPS Upside vs.Street:OW-Rated LULU/OW-Rated BOOT.(ii)Modeling More/less In-Line w/Street:Neutral rated AEO/UW-Rated ANF.(iii)Potential SSS/EPS Risk Versus Street:Neutral-rated URBN(downgrading from Overweight),and UW-rated GPS.(2)Discounters:see upside to 4Q Street same-store-sales and EPS at both OW-rated FIVE and OW-rated OLLI.The Buy-Side SSS Bars into ICR Pre-announcements(based on incoming call-volume):(1)Discounters:FIVE:+3.5-3.9%Holiday SSS(lapping+6.7%Holiday SS LY 5.9%4Q print);OLLI:+4.0%-5.0%.(2)Specialty Softlines:LULU:4Q SSS Guide Raised to Low-Double-Digits(vs.High-Singles to Low-Doubles currently)noting 300bps 4Q reported upside vs.ICR raised guide the past 3 years;URBN:5%+Holiday SSS(i.e.at or better than 12/10 update);LB:Dec.SSS VS-2%/BBW+15%;AEO:4Q-to-date SSS+6%;ANF:4Q SSS Guide Reiterated at Low-Single-Digits;and BOOT:F3Q(Dec.-end)SSS+8-9%.Boss 4Q-To-Date Specialty Softlines&Discounters Fieldwork:LULU(Overweight/$180 PT):We anticipate management will raise its 4Q SSS guidance to positive low-double-digits(vs.high-singles to low-doubles on 12/6)noting the reported 4Q print exceeded the ICR pre by+266bps on average the past 3 years(i.e.low-doubles at ICR 18=mid-teens 4Q by historical precedent).Based on recent fieldwork,we are raising our 4Q SSS to+14%(Street+11.4%&guide of positive high-single-digits to low-double-digits)based on+7%store comps and e-com+32%equating to 4Q EPS of$1.73(vs.Street$1.69&guide of$1.64-1.67).For the FY18,we model EPS of$3.73(the Street at$3.69 and guide of$3.65-3.68)based on SSS+15.6%.URBN(Downgrade to Neutral/Lower PT to$38):We are lowering our 4Q SSS estimate to+4.6%modeling EPS of$0.78(below the Street at$0.81).Specifically and based on our recent fieldwork,we are modeling Urban concept comps at+5.5%(below 2North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-6-7%at 12/10 10-Q update),Anthro at+3.5%(below+4%10-Q update),and Free People at+6%(vs.+6-7%as of 12/10).Despite facing easier comparisons at all 3 concepts between the 12/10 10-Q and ICR conference a year ago(12/11 LY:+5%SSS vs.+2%on 1/8)we see total consolidated same-store sales running at or below 12/10s 5%comp into this years conference facing a+800bps tougher compare in January to close the quarter.On margins,our model embeds+45bps of adjusted gross margin expansion(vs.managements 30-50bps guidance),and+5.9%SG&A$growth(matching mgmts+5%adjusted outlook).Importantly,our promotional tracker and store work points to the Urban concept less promotional 4Q-to-date with Anthro promotional activity higher year-over-year particularly in 2H December and January-to-date by our work(noting inventory clean into 4Q).Specifically,our tracker cited(i)12/23:30%-Off Everything(incrementally higher YOY),(ii)1/3:25%-Off Home(incremental YOY),and(iii)1/4:25%-Off Tops&Sweaters(incremental YOY)with our post-Christmas store work pointing to an increase in hard marks on the floor($19.99-$69.99)in our view.Looking forward,2-year stacked total company consolidated same-store-sales compares accelerate+450bps the next 4 quarters(relative to 4Q)with core Urban stacks+280bps tougher in FY19 relative to 4Q(+670bps vs.TTM trend)and Anthro facing a+7.8%2-year stack in FY19(versus 2.1%in 4Q and negative 4.3%TTM)noting an above coverage average correlation between Anthro comps and S&P performance(&highest across our coverage during the financial crisis).Said differently,we are modeling+3.5%comps in FY19 equating to$2.90 EPS(below the Street at$2.95)with the aforementioned comparison math(+450bps)equating to a flattish comp downside scenario neutralizing the risk/reward profile in our view.Downgrade to Neutral lowering our PT to$38 based on 12x our FY20 EPS or a 1.35x PEG to URBNs 8-9%EPS growth profile the next 2 years by our model.BOOT(Overweight/Lower PT to$23):We are modeling+8.3%3Q same-store-sales(Street at+5.7%/5-7%mgmt.guide)equating to$0.62 EPS(Street at$0.61).Importantly,our work and management access points to material upside opportunity versus 5-7%guidance(&our 8.3%SSS)noting trends were running above 2Qs+11.3%comp as of 10/25,which we believe remained stable through our Chicago roadshow on 11/12.Moving down the P/L,we are modeling+79bps gross margin expansion and 38bps SG&A deleverage.For the year,our model stands at$1.27 EPS(Street at$1.25)with 4Qs forecast unchanged since 5/15s initial annual guide despite full year numbers raised 21%since that time.Taking a prudently conservative(if not overly cautious)approach to our model we have moderated our FY20/21 same-store-sales(+4-5%vs.double-digits the past 3 quarters)and margin estimates to account for“potential”moderation in oil/gas regions(40%of stores combined)given the 35%move in crude since the October 18 peak noting business remains at a multi-year peak today.That said,with 3-5%comps and double digit store growth translating to mid-teens multi-year EBITDA growth the stock appears mis-priced at 10.9x our CY20 EPS.Remain Overweight lowering our Dec 19 price target to$23 based on 13.5x our CY20 EPS or a 0.8x PEG(Dec by our work)with laterally softer apparel trends in Europe worth noting at 23%of sales.On margins by our promotional tracker both A&F and Hollister appear to be trending in-line to 3North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-slightly less promotional YoY domestically,which should benefit AUR similar to last quarter modeling 5bps of gross margin expansion(matching flat to up slightly guide).For FY18,we model EPS of$0.96(vs.Street$0.90)based on+2.7%SSS.AEO(Neutral/$21 PT):We model 4Q SSS of+5.9%(vs.Street+5.6%/positive mid-single-digit guide)based on core AE+3%and aerie+25%equating to 4Q EPS of$0.43(vs.Street$0.42&guide$0.40-0.42).Our field work points to storewide promos slightly more promotional YoY for AE brand in December noting the AE brand is lapping heavy markdown units in 4Q last year with our+80bps gross margin expansion estimate more/less in-line with managements guide(slightly below 110bps expansion).On the top-line,mgmt.noted on its 12/11 EPS call that holiday was off to a very good start at the AE brand with aerie brand mgmt.citing strong momentum pleased with early holiday results.For the FY18,we model EPS of$1.48(vs.Street$1.47)based on SSS+8.1%.LB(Neutral/Lower PT to$29):We model December SSS of+4%(vs.Street+2%&November+9%)with VS SSS-2%(vs.+2%in November)and BBW SSS+15%(vs.+18%in November).Importantly,our promo tracker points to merchandise margins down significantly at VS for the 11th straight month on deeper storewide promos at both VS&PINK led by an incremental YoY Super Saturday promo of“40%off everything.”For 4Q,we lower EPS to$2.02(vs.Street$1.99)based on continuing weakness at VS,offset by continued strength at BBW w/4Q gross margin-203bps(vs.guide down-to-down significantly)and SG&A deleverage of 104bps.Forthe FY18,we model EPS of$2.70(vs.guide$2.60-2.80)based on SSS+3.9%.GPS(Underweight/Lower PT to$24):We lower our 4Q EPS to$0.68(Street at 3.4%&and high-end of 3-4%guide)equating to EPS of$1.59.On cadence,managements+3-4%guide on 12/5 came after lapping its strongest monthly compare of the quarter(w/Nov Dec in LYs+6.7%Holiday comp)noting Januarys flattish comp provides an easier compare to close the quarter with our satellite data pointing to continued momentum through December.For the FY18,we model EPS of$2.66(vs.the Street at$2.69 and guide of$2.60-2.64)based on SSS+3.7%.Looking ahead,management feels confident in 20%+net income growth in FY19&FY20)in a 10%tariff scenario with comps in only the 2%level on our math(vs.+3.8%5-year average)a key point we see management emphasizing in its fire-side chat.OLLI(Overweight/$87 PT):We model 4Q SSS of+4.0%above the Street at+2.7%and high-end of mgmts“high end of+2-3%”guide(w/our estimate flat on a 3-year stack to TTM trend)equating to 4Q EPS of$0.66.Importantly,our fieldwork points to potential incremental upside vs.our+4.0%estimate driven by the combination of the companys expanded toy offering($200M buyout at retail prices),ticket/AUR accretive appliance assortment(aided by industry disruption),4North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-and adoption of the companys tiered loyalty program(Army ranks added in August).Specifically,on cadence of the quarter our work points to outsized momentum in November(consistent w/12/4 mgmt commentary)with sustained above-plan trends in December including a solid Army Night on 12/9 by our Satellite data despite unfavorable weather(snow)coinciding with the weekend of the event in VA/NC(11%of stores by our work).For 2018,we model EPS at$1.78(mgmts$1.74-$1.77 guide)on 3.8%SSS.Looking ahead,management confirmed its long-term algorithm as intact in FY19 with +1-2%comps(vs 3%+SSS 5 straight years),flat gross margins,and a 1-1.5%fixed cost hurdle driving high-teens to 20%net income growth.Proprietary EPS Tables and Specialty Promotion Tracker on Page 5 Herein:5North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-Boss Dept Stores&Specialty SoftlinesFigure 1:JPM Estimates vs.Street(4Q18 and 2019)Source:J.P.Morgan estimates,Bloomberg;BOOT 4Q=3QFY19 and 2019=FY20Figure 2:JPM Specialty Promo Tracker(4Q-to-Date)Source:Company Promotional Emails;J.P.Morgan.TickerRatingPTJPM SSS Street SSSJPM EPSStreet EPSJPMStreetOLLIOW$874.0%2.9%$0.66$0.66$2.13$2.10FIVEOW$1294.0%3.8%$1.59$1.59$3.19$3.15AEON$215.9%5.6%$0.43$0.42$1.73$1.61ANFUW$191.8%1.4%$1.13$1.13$1.00$1.10BOOTOW$238.3%5.9%$0.62$0.61$1.43$1.44GPSUW$241.0%0.8%$0.68$0.70$2.39$2.65LULUOW$18014.0%11.4%$1.73$1.69$4.58$4.34LBN$294.8%1.9%$2.02$2.02$2.55$2.71URBNN$384.6%4.7%$0.78$0.81$2.90$2.95Specialty Softlines/Athletic/Apparel&AccessoriesDiscounters 2019 EPS4Q 18Retailer4Q-to-Date4Q-to-Date Call-OutsAmerican EagleStorewide promotional messaging slightly deeper YoYAbercrombieStore wide promos about in-line YoYHollisterStore wide promos about in-line YoY w/Dec Week 1-2 slightly less promotionalUrban OutfittersLess promotional on store events,especially in Dec Week 3-4AnthroSlightly more promotional,especially in Dec Week 3-4VSDeeper on storewide events and clearanceBBWStorewide promo events and coupon look lower YoYGapAdditional discounting on clearance and deeper storewide eventsOld NavyStorewide events about inline with last yearBanana RepublicStorewide events about inline with last year6North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-Abercrombie&FitchUnderweightCompany DataPrice($)19.97Date Of Price 04 Jan 1952-week Range($)29.69-15.28Market Cap($mn)1,386.42Fiscal Year End JanShares O/S(mn)69Price Target($)19.00Price Target End Date 31-Dec-19Abercrombie&Fitch Co.(ANF;ANF US)FYE Jan2017A2018E2019E2020EEPS(Operating)($)Q1(Apr)(0.90)(0.56)A-Q2(Jul)(0.16)0.06A-Q3(Oct)0.300.33A-Q4(Jan)1.381.13-FY0.660.961.001.07Bloomberg EPS FY($)0.390.941.101.23Source:Company data,Bloomberg,J.P.Morgan estimates.Investment Thesis,Valuation and RisksAbercrombie&Fitch(Underweight;Price Target:$19.00)Investment ThesisFacing severe secular challenges,ANF is in the midst of a major brand building initiative to regain customers and return to a growth profile.After cutting$350M in expenses over the last 3-4 years,we believe ANFs earnings power going forward is increasingly dependent on the companys ability to drive positive comps,which appears increasingly too difficult in the worsening retail backdrop.We are not convinced that ANF will see an inflection point in comps on a sustainable basis and see consistent EBITDA declines for the years ahead.ValuationOur Dec 19 price target of$19 is based on 4.0 x our 2020E EBITDA(EBIT+D&A at 3.6%of sales,in line with specialty peer group avg.).The 4x EBITDA is about in line with the companys 5-year average given top-line stabilization and improved trajectory for 2018.Risks to Rating and Price TargetThere is a risk that we have underestimated the upside potential to ANFs SSS and earnings outlook and,in turn,stock price relative to market expectations,and therefore our price target.Some company-specific factors include the companys ability to hit fashion trends as well as exogenous factors such as traffic levels and the industry-wide level of promotions that could drive upside to results.7North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-American Eagle OutfittersNeutralCompany DataPrice($)19.17Date Of Price 04 Jan 1952-week Range($)29.88-16.14Market Cap($mn)3,455.58Fiscal Year End JanShares O/S(mn)180Price Target($)21.00Price Target End Date 31-Dec-19American Eagle Outfitters(AEO;AEO US)FYE Jan2017A2018E(Prev)2018E(Curr)2019E(Prev)2019E(Curr)2020E(Prev)2020E(Curr)EPS(Operating)($)Q1(Apr)0.160.23A0.23A-Q2(Jul)0.190.34A0.34A-Q3(Oct)0.370.48A0.48A-Q4(Jan)0.440.440.43-FY1.161.491.481.741.732.001.99Bloomberg EPS FY($)1.16-1.47-1.60-1.72Source:Company data,Bloomberg,J.P.Morgan estimates.Investment Thesis,Valuation and RisksAmerican Eagle Outfitters(Neutral;Price Target:$21.00)Investment Thesis AEO is regaining traffic and sales momentum with core customers,driven by the strength of its denim business.We rate AEO shares Neutral as we are concerned that the highly competitive teen retail industry will continue to consolidate and experience pricing pressure a