J.P. 摩根-美股-零售行业-美国百货商店与低价零售市场分析-2019.1.7-24页.pdf

North America Equity Research07 January 2019Equity Ratings and Price TargetsMkt CapRatingPrice TargetCompanyTicker($mn)Price($)CurPrevCurEnd DatePrevEnd DateKohls Corp.KSS US15,722.5766.41OWn/c78.00Dec-19n/cn/cMacys,Inc.M US9,166.5629.38Nn/c33.00Dec-1936.00Dec-19J.C.Penney Co.,Inc.JCP US335.501.10UWn/cn/cn/cDillards,Inc.DDS US1,749.8963.31NUW62.00Dec-1958.00Dec-19Nordstrom,Inc.JWN US7,956.7246.97Nn/c51.00Dec-1956.00Dec-19Burlington StoresBURL US11,267.63163.37OWn/c184.00Dec-19n/cn/cTJX CompaniesTJX US57,472.7745.40OWn/c51.00Dec-19n/cn/cRoss StoresROST US32,904.6385.34OWn/c93.00Dec-19n/cn/cSource:Company data,Bloomberg,J.P.Morgan estimates.n/c=no change.All prices as of 04 Jan 19.Dept Stores&Off-Price RetailBoss 4Q/Holiday Fieldwork&Mgmt Access Takeaways;Upgrade DDS 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 22 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.With 80%of 4Q now in the books(&ahead of Holiday pre-announcements this week)we thought value add to share takeaways from our recent fieldwork and management access across the Department Stores and Off-Price retailers.(1)Department Stores=Mixed 4Q Bag:(i)OW-rated KSS/Neutral-rated M modeling upside to Street same-store-sales and EPS noting more mixed December trends(relative to November)particularly at M.(ii)DDS raising 4Q EPS materiallyabove Consensus and upgrading to Neutral(from Underweight),(iii)UW-rated JCP lowering top and bottom-line estimates below the Street,(iv)Neutral-rated JWN lowering 4Q EPS below the Street(modeling SSS more/less in-line w/Consensus).(2)Off-Price Retail:modeling upside to 4Q Street same-store-sales and EPS across the sub-sector(OW-rated BURL/TJX/ROST)raising estimates on OW-rated BURL and OW-rated TJX based on favorable quarter-to-date fieldwork.Boss 4Q-To-Date Department Store Fieldwork:M(Neutral/Lower PT to$33):Our+2.0%4Q owned same-store-sales estimateremains unchanged(vs.managements implied 1.3%-2.3%guide)modeling 4Q EPS of$2.82(Street at$2.74).Clarifying the calendar,M realigned its comp base salesweeks to most closely match comparable promotional timing YOY(unchanged methodology vs 1Q-3Q)resulting in an immaterial impact to reported same-store-sales in 4Q per management.Specifically,our fieldwork pointed to above-plan trends in November followed by more mixed performance in December including a deeper mid-month lull as well as softer trends in week 4 leading into Christmas(particularly post the E-comm Holiday shipping deadline on 12/21)with our+2.0%4Q estimate incorporating a tougher January comparison to close the quarter(300bps tougher YOY).On gross margin,we see potential upside to our-30bpscontraction estimate with management confirming its initial 4Q plan(embedded within its Fall season slightly down guide on the 2Q call)remains unchanged with inventory exiting 3Q“clean across all product categories.”Regarding SG&A,management confirmed FY18 guidance as flat as a%of sales YOY with our 4Q model embedding SG&A dollars down-1.1%.For FY18 our model stands at$4.28 EPS(Street$4.15/$4.10-$4.30 guide)based on 2.2%owned comps(vs.+2.0%to+2.3%guide).Incremental to Ms Holiday sales release,we see management outlining a incremental multi-year cost-savings(vs.$850M gross savings announced in 2North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-FY17/FY18)focused on“right-sizing”its existing store fleet with 85%of the 100 store closures announced in August 2016 now shuttered.KSS(Overweight/$78 PT):Our+1.8%4Q shifted same-store-sales estimate or-0.2%reported remains unchanged equating to EPS of$2.19(Street$2.16).On the calendar,we estimate a 200bps headwind in 4Q with our+1.8%underlying shifted comp representing a+8.1%2-year stack(or the companys best performance since 1Q11).Importantly,our latest fieldwork points to both November and December exceeding plan with notable strength in 2H November and 2H December supported by satellite foot traffic acceleration noting January compares ease 500bps to close the quarter.Moving down the P/L we are modeling gross margin roughly flat in 4Q(or+33bps for FY18 25-30bps guide)with potential for upside to our estimate driven by inventory-led merchandise margin expansion(fieldwork=clean position exiting Holiday w promotional activity and clearance levels well controlled YOY)and higher BOPIS and BOSS penetration YOY providing a partial offset to the-20-30bps historical e-comm/delivery headwind.For FY18 our model stands at$5.55 EPS(Street$5.52/higher-end of$5.35-$5.55 guide)representing 9%EPS growth ex tax reform based on 1.9%comps(higher-end of+0.5%to 2.0%guide).JCP(Underweight):We are lowering our 4Q same-store-sales estimate to negative 4.5%(below the Street at-3.4%)and reducing EPS to$0.03(below the Street at$0.16).Two Key Takes From Our Fieldwork:(1)SSS:Our work points to materially higher YOY sales of clearance apparel inventory with the unit velocity tailwind more than offset by AUR compression and below-plan full-price conversion given broken product assortments.(2)GPM:we lower our gross margin estimate to-250bps contraction YOY materially below the Street down 97bps and managements 150-200bps plan(&2Q down 216bps)with inventory likely to exit 4Q down more than managements-6%forecast a potential silver lining.Specifically,our recent work noted a material increase in 50-70%off“Final Take”signage and incremental layered discounting of extra 20%off any purchase(regardless of tender type).On SG&A,we are modeling 4Q dollars down 2.0%(vs guide of relatively flat).For FY18 our model stands at-$1.09 EPS(Street$0.68/$0.66-0.67 guide).Importantly,we see incremental upside opportunity(versus our above-Street 4Q SSS)with our model embedding(in rank order of potential upside opportunity)a+6%comp at Marmaxx(+100bps 3-year stack upside opportunity),+6.0%SSS at Homegoods(+200bps 3-year stack oppty),+3%at Canada and+1%Intl.Specifically,our fieldwork,satellite data,and intra-quarter management access points to traffic-driven above-plan same-store-sales performance in both November and December(led by expansion of better/best apparel assortment at Marmaxx).Moving down the P/L,we are modeling 64bps of gross margin compression based on higher freight expenses,FX hedging headwinds and occupancy deleverage from the loss of the extra week,partially offset by 32bps of SG&A leverage.For FY18 our model stands at$2.46 EPS(managements$2.41-$2.43 guide)based on+5.5%same-store-sales.BURL(Overweight/$184 PT).We are raising our 4Q same-store-sales estimate to+4.0%(above the Streets at+2.9%/+2-3%guide)equating to$2.81 EPS($2.71-$2.75 guide/Street at$2.77).Notably,our+4.0%comp represents a+14.5%3-year stack(+9.9%2-year)representing a+370bps acceleration versus TTM trend and the models best performance in 6 quarters.Specifically,our fieldwork and satellite data suggests 3Q top-line momentum continued through November with 2H December trends acceleration led by a strong gifting assortment,home and athletic apparel.Moving down the P/L,we are modeling+20bps of gross margin expansion and 31bps 4North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-SG&A leverage.For FY18 our model stands at$6.42 EPS(Street$6.41/managements$6.33-$3.37 guide)based on+4.0%same-store-sales.ROST(Overweight/$93 PT).We are modeling 4Q same-store-sales of+3.0%(above the Street at+1.9%/+1-2%guide)translating to 4Q EPS of$1.14(Street at$1.13/high-end of mgmts$1.09-$1.14 guide).Importantly,our+3%estimate represents a 100bps 2-year sequential stacked improvement with potential for incremental upside based on accelerating foot traffic by our December satellite data.On margins we are modeling-84bps of gross margin compression primarily driven by freight pressure and occupancy deleverage from the loss of the extra week and 72bps of SG&A deleverage reflecting 33bps wage investment(i.e.vs.30bps in 3Q).For FY18 our model stands at$4.20 EPS(managements$2.41-$2.43 guide)based on+5.2%same-store-sales.5North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-Kohls Corp.OverweightCompany DataPrice($)66.41Date Of Price 04 Jan 1952-week Range($)83.28-52.53Market Cap($mn)15,722.57Fiscal Year End JanShares O/S(mn)237Price Target($)78.00Price Target End Date 31-Dec-19Kohls Corporation(KSS;KSS US)FYE Jan2017A2018E2019E(Prev)2019E(Curr)2020EEPS(Operating)($)Q1(Apr)0.390.64A-Q2(Jul)1.241.76A-Q3(Oct)0.700.98A-Q4(Jan)1.872.19-FY4.185.555.905.906.27Bloomberg EPS FY($)4.085.50-5.775.67Source:Company data,Bloomberg,J.P.Morgan estimates.Investment Thesis,Valuation and RisksKohls Corp.(Overweight;Price Target:$78.00)Investment Thesis We see KSS as a rare large-cap“value”idea in consumer with its$75-$80K HH income core customer demographic and off-mall store fleet well positioned and operational and traffic initiatives driving a multi-year high-single-digit to low-double-digit EPS profile with the companys balance sheet generating$2B in annual FCO by FY19E supporting a 4%dividend and low-double-digit to mid-teens total return.On the top line,KSS underlying comp has improved sequentially for four straight quarters with operational investments(20%E-comm penetration,BOPUS,Active/wellness,Smart Cart,Your Price)laying the foundation for multi-year low-single-digit same-store sales and three potential catalysts representing incremental upside opportunity in FY18E/FY19E:(1)traffic partnerships(AMZN/grocery/convenience),(2)continued mall rationalization/closures(SHLD,regional dept stores),and(3)demographic profile inflection($70-$80K Middle America HH income).On the bottom line,the combination of multi-year inventory management and flow-through efficiencies on both COGS and SG&A equates to mid-single-digit EBIT dollar growth and a high-single-digit base-case EPS profile with an 11-12%FCF yield and$2B of cash on hand by FY19E providing a capital allocation path to a double-digit compounding annual EPS profile(&mid-teens total return)over time.ValuationOur$78 Dec 19 price target is based on 5.5x our 2020E EBITDA,in-line with the 5-year average.From a valuation perspective,we believe the combination of KSSs mid to high-single-digit EPS profile,double-digit FCF yield,and SG&A expense control provides valuation support.Risks to Rating and Price TargetThe economic climate,particularly the employment picture,can affect consumer spending and the department store industry.A decline in household spending could cause sales trends to decrease below our current assumptions,rendering our estimates too high.Additionally,an increase in the competitive landscape could negatively impact gross margins,which is not in our model.Similarly,a successful transformation of close competitor JCP could take market share from Kohls given its heavy exposure to basic clothing with risk to both sales and margins.Finally,6North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-continued negative traffic and failure of Kohls to capture increased traffic and conversion from its credit card could put our comp estimates at risk.7North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-Macys,Inc.NeutralCompany DataPrice($)29.38Date Of Price 04 Jan 1952-week Range($)41.99-22.47Market Cap($mn)9,166.56Fiscal Year End JanShares O/S(mn)312Price Target($)33.00Price Target End Date 31-Dec-19Macys,Inc.(M;M US)FYE Jan2017A2018E(Prev)2018E(Curr)2019E(Prev)2019E(Curr)2020E(Prev)2020E(Curr)EPS(Operating)($)Q1(Apr)0.240.48A0.48A-Q2(Jul)0.480.70A0.70A-Q3(Oct)0.230.27A0.27A-Q4(Jan)2.822.852.82-FY3.774.304.283.753.703.633.51Bloomberg EPS FY($)3.65-4.14-3.63-3.49Source:Company data,Bloomberg,J.P.Morgan estimates.Investment Thesis,Valuation and RisksMacys,Inc.(Neutral;Price Target:$33.00)Investment Thesis Macys top-line profile remains constrained by center-core/accessories withuncertainty around go-forward top-line assumptions keeping us on the sidelines.Larger picture,discretionary dollars continue to shift toward convenience(AMZN)and Value(off-price),with Macys initiatives leading to improved same-store-sales trends in 2018,but lack of margin accretion pressuring the companys bottom-line EPS growth profile.ValuationWe lower our Dec-19 price target to$33($36 prior)based on 5.0 x our 2020 EBITDA estimate,100bps below the companys 5-year average given the companys lack of margin accretion to drive EPS growth,despite improved SSS.Risks to Rating and Price TargetThe economic climate,particularly the employment picture,can affect consumer spending and the department store industry.A greater-than-expected downturn in household spending could cause sales trends to decelerate below our current assumptions,rendering our estimates too high.Additionally,a change in the competitive landscape as related to promotional activity,particularly from moderate peers JCP and KSS,could negatively impact same-store sales growth.Finally,greater inventory availability in the department store channel,particularly from Kohls and JCPenney,could result in excess clearance markdowns,negatively impacting gross margin more than we are current modeling.Alternatively,if consumer spending were to improve,Ms sales would likely benefit,rendering our estimates too low.8North America Equity Research07 January 2019Matthew R.Boss,CPA(1-212)622-J.C.Penney Co.,Inc.UnderweightCompany DataPrice($)1.10Date Of Price 04 Jan 1952-week Range($)4.75-0.92Market Cap($mn)335.50Fiscal Year End JanShares O/S(mn)305J.C.Penney Company,Inc.(JCP;JCP US)FYE Jan2017A2018E(Prev)2018E(Curr)2019E(Prev)2019E(Curr)EPS(Operating)($)Q1(Apr)0.07(0.22)A(0.22)A-Q2(Jul)(0.09)(0.38)A(0.38)A-Q3(Oct)(0.31)(0.52)A(0.52)A-Q4(Jan)0.650.140.03-FY0.33(0.99)(1.09)(0.85)(0.92)Bloomberg EPS FY($)0.14-0.94-0.74Source:Company data,Bloomberg,J.P.Morgan estimates.Investment Thesis,Valuation and RisksJ.C.Penney Co.,Inc.(Underweight;)Investment Thesis JCPs initiatives have been unsuccessful in driving SSS amid a robust consumer backdrop as competitors have outperformed w/the company admitting it has lost its core consumer behind peers in key categories such as e-commerce and athletics.Furthermore,initiatives to clean up its inventory position will also lead to near-to medium-term margin pressure,on top of continued headwinds from appliances and e-commerce.Longer term,the companys leverage stands over 2x the industry average with limited FCF putting pressure on its ability to pay down debt.ValuationWe withdrew our price target in May 2017.Risks to RatingThe economic climate,particularly the employment picture,can affect consumer spending and the departme