巴克莱-美股-零售业-美国专业零售、服装与电子商务：PRISM一种全面的零售方式-2019.11.12-417页 (2).pdf

CORE Barclays Capital Inc.and/or one of its affiliates 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.PLEASE SEE ANALYST CERTIFICATION(S)AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 411.Equity Research 12 November 2019 Restricted-Internal U.S.Specialty Retail,Apparel&E-Commerce Initiating Coverage:Introducing PRISM 360,a Holistic Approach to Retail Initiating on U.S.Specialty Retail,Apparel&E-Commerce at Neutral.Our Neutral rating is based on an improving tariff backdrop,offset by sector-wide inventory build,negative mall traffic,and general oversupply.Within the broader coverage universe,our views on our subgroups are bifurcated.We have a positive view of Off-Price retail and wholesale brands with pricing power that are moving to direct-to-consumer.We have a negative view of mall-based retailers that sell commoditized products.We are initiating on 26 names,nine Overweight,three Underweight,and 14 Equal Weight.The Overweights:NKE(Top Pick),VFC,BURL,EYE,RH,RL,TJX,WSM,ROST.NKE and VFC have highly desirable brands backed by technological and design innovation.RL is proactively rebuilding its global brand with evidence of early success.These wholesalers can significantly grow their margin-accretive direct-to-consumer channels.BURL,ROST,and TJX offer an Off-Price value proposition,with little to no e-commerce cannibalization.EYE is a growth story dominant in the value vision care segment,with unit,product,and service opportunities.RH has solved the omnichannel dilemma,with inventory-less Galleries acting as advertising rather than sources of margin risk.WSM has positive comp momentum,growth opportunities in West Elm,and offers attractive risk/reward.The Underweights:GPS,LB,W.GPS and LB,while both are relatively“cheap”on valuation embedding downside expectations,exemplify our theme of retail deleverage.We see comp and EPS risk in FY20 for both.Although W is the beneficiary of the shift of home furnishings online,we expect the mix of slowing top-line on a larger base of comp sales,combined with critical spending to fuel growth,to perpetuate losses.Noteworthy Equal Weights:PLCE,JWN,UAA.At PLCE,while we believe in the share and margin recovery story,our promo checks do not show evidence of reduced discounting or alleviation of competitive pricing in the cutthroat childrens sector.For JWN,we believe deleverage is firmly in play,but the addition of up to$800 million in sales should help margins stabilize in the near-term.At UAA,an otherwise highly compelling self-help growth story is overshadowed by the DOJ and SEC investigations.Whats in this report.We begin by defining the different business models in the retail distribution network.We then identify the root cause of the retail sectors secular downtrend fixed cost deleverage.We then move to company-specific analysis starting with a five-minute qualitative assessment we call BRICK,and shift to quantitative analysis with our PRISM 360 framework.Finally,we overlay valuation as the ultimate judge of fundamental performance.We dont expect this chapter book to be read in one sitting,but instead to be used as a reference manual to guide investors through the multi-year shifting landscape.We hope you find some useful tools both new and old to add to your investment process.Happy reading!INITIATING COVERAGE U.S.Specialty Retail,Apparel&E-Commerce NEUTRAL from N/A For a full list of our ratings,price targets and earnings in this report,please see table on page 2 U.S.Specialty Retail,Apparel&E-Commerce Adrienne Yih+1 212 526 5257 BCI,US Cory McHattie+1 212 526 7166 BCI,US Barclays|U.S.Specialty Retail,Apparel&E-Commerce 12 November 2019 2 Summary of our Ratings,Price Targets and Earnings Estimates in this Report Company Rating Price Price Target EPS FY1(E)EPS FY2(E)Old New 07-Nov-19 Old New%Chg Old New%Chg Old New%Chg U.S.Specialty Retail,Apparel&E-Commerce NR Neu American Eagle Outfitters,Inc.(AEO)N/A EW 16.60 N/A 17.00-N/A 1.60-N/A 1.54-Burlington Stores,Inc.(BURL)N/A OW 204.56 N/A 239.00-N/A 7.28-N/A 8.26-Capri Holdings Limited(CPRI)N/A EW 35.63 N/A 37.00-N/A 4.95-N/A 5.33-Dicks Sporting Goods,Inc.(DKS)N/A EW 41.39 N/A 45.00-N/A 3.41-N/A 3.58-Foot Locker,Inc.(FL)N/A EW 46.48 N/A 48.00-N/A 4.92-N/A 5.20-G-III Apparel Group,LTD.(GIII)N/A EW 29.64 N/A 27.00-N/A 3.11-N/A 2.85-Hanesbrands Inc.(HBI)N/A EW 15.99 N/A 16.00-N/A 1.75-N/A 1.75-Kontoor Brands,Inc.(KTB)N/A EW 35.01 N/A 35.00-N/A 3.92-N/A 3.68-L Brands,Inc.(LB)N/A UW 18.08 N/A 16.00-N/A 2.39-N/A 2.38-National Vision Holdings,Inc.(EYE)N/A OW 29.71 N/A 34.00-N/A 0.72-N/A 0.82-Nike,Inc.(NKE)N/A OW 90.40 N/A 111.00-N/A 3.04-N/A 3.50-Nordstrom,Inc.(JWN)N/A EW 37.13 N/A 36.00-N/A 3.30-N/A 3.33-PVH Corp.(PVH)N/A EW 97.66 N/A 100.00-N/A 9.41-N/A 10.17-Ralph Lauren Corporation(RL)N/A OW 115.67 N/A 130.00-N/A 7.80-N/A 8.63-RH(RH)N/A OW 175.26 N/A 198.00-N/A 10.82-N/A 12.37-Ross Stores,Inc.(ROST)N/A OW 113.07 N/A 124.00-N/A 4.53-N/A 4.95-Tapestry,Inc.(TPR)N/A EW 27.07 N/A 27.00-N/A 2.55-N/A 2.75-The Childrens Place,Inc.(PLCE)N/A EW 85.94 N/A 85.00-N/A 5.59-N/A 7.49-The Gap,Inc.(GPS)N/A UW 18.06 N/A 14.00-N/A 1.70-N/A 1.59-The TJX Companies,Inc.(TJX)N/A OW 59.30 N/A 66.00-N/A 2.61-N/A 2.86-Ulta Beauty,Inc.(ULTA)N/A EW 243.77 N/A 251.00-N/A 12.01-N/A 13.30-Under Armour,Inc.(UAA)N/A EW 17.59 N/A 19.00-N/A 0.35-N/A 0.50-Urban Outfitters,Inc.(URBN)N/A EW 30.57 N/A 30.00-N/A 2.23-N/A 2.41-V.F.Corporation(VFC)N/A OW 86.41 N/A 103.00-N/A 3.35-N/A 3.93-Wayfair Inc.(W)N/A UW 83.82 N/A 76.00-N/A-7.90-N/A-10.34-Williams-Sonoma,Inc.(WSM)N/A OW 69.23 N/A 77.00-N/A 4.75-N/A 5.01-Source:Barclays Research.Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency.FY1(E):Current fiscal year estimates by Barclays Research.FY2(E):Next fiscal year estimates by Barclays Research.Stock Rating:OW:Overweight;EW:Equal Weight;UW:Underweight;RS:Rating Suspended Industry View:Pos:Positive;Neu:Neutral;Neg:Negative Barclays|U.S.Specialty Retail,Apparel&E-Commerce 12 November 2019 3 TABLE OF CONTENTS INVESTMENT CONCLUSION.6 Initiating on U.S.Specialty Retail,Apparel&E-Commerce at Neutral.6 Industry Stock Momentum The Leaders vs.The Laggards.12 Investor Sentiment The Believers vs.The Convicted Sellers.12 CHAPTER 1:UNDERSTANDING THE DIFFERENT RETAIL MODELS.14 The Traditional Retail Model.14 Department Store/Brand Retail Model.15 Vertical Retail Model.16 Wholesale Model.17 Off-Price Retail Model.18 Direct-to-Consumer E-Commerce Model(Vertical Retail).19 Pureplay E-Commerce Model(No Inventory).20 Which Model Is Best?.21 CHAPTER 2:THE RETAIL SECTOR BACKDROP:DELEVERAGE.23 The Root Cause of Deleverage.23 Retail Deleverage Defined.26 The Retail Deleverage,or Death,Curve(“D-Curve”).28 Succeeding as an Omnichannel Retailer.29 Channel Elasticity:The Rubber-Band Effect.30 CHAPTER 3:OMNICHANNEL IMPACT ON RETAIL MODELS.32 Department Store/Branded Retail Omnichannel Impact.32 Vertical Retail Omnichannel Impact.32 Wholesale Omnichannel Impact.33 Off-Price Retail Omnichannel Impact.34 Pureplay E-Commerce Omnichannel Impact.35 CHAPTER 4:BRICK QUALITATIVE COMPANY ASSESSMENT.36 BRICK Assessment.36 CHAPTER 5:PRISM 360 RETAIL MODEL.38 PRISM 360 Retail Model.38 CHAPTER 6:MODEL#1:THE PRISM CURVE.40 The PRISM Curve.40 Phases of PRISM Curve Fundamental Analysis.40 PRISM Curve Implications for Stock Ratings.43 PRISM Curve Implications for Investors.43 CHAPTER 7:MODEL#2:INVENTORY ANALYSIS:IM SPREAD,GMROI,&OMROI.45 Importance of Inventory Management.45 Inventory Management Spread(“IM Spread”).45 Barclays|U.S.Specialty Retail,Apparel&E-Commerce 12 November 2019 4 Gross Margin Return on Inventory(“GMROI”).46 Operating Margin Return on Inventory(“OMROI”).46 OMROI Calculation Defined.47 Using OMROI to Measure Deleverage Impact.47 Is OMROI Effective in Forecasting Future Earnings Yield?.48 CHAPTER 8:MODEL#3:PROPRIETARY PROMO TRACKER.49 Proprietary Promo Tracker.49 CHAPTER 9:PRACTICAL APPLICATION OF THE D-CURVE THEORY.51 Sensitivity Analysis of the D-Curve.51 An Example of Deleverage in a Retailer.54 CHAPTER 10:CALCULATING DELEVERAGE IN A RETAILER.56 A Six-Step Model to Calculate Deleverage Risk.56 Practical Use:Brick-and-Mortar Deleverage Calculator.57 CHAPTER 11:CALCULATING CHINA TARIFF IMPACT.59 China Tariff Impact.59 Summary Impact.61 Methodology.62 Five Ways Retailers Can Mitigate Tariff Impact.68 CHAPTER 12:FACTORS FOR CONSIDERATION.70 Positive Factors to Consider for the Sector.70 Negative Factors to Consider for the Sector.73 CHAPTER 13:VALUATION.74 Specialty Softlines Subgroup Valuation.74 Off-Price Retail Valuation.76 Specialty Hardlines&Other Valuation.78 Apparel&Footwear Valuation.80 E-Commerce Valuation.82 AMERICAN EAGLE OUTFITTERS,INC.(EW).84 BURLINGTON STORES,INC.(OW).97 CAPRI HOLDINGS LIMITED(EW).108 THE CHILDRENS PLACE,INC.(EW).120 DICKS SPORTING GOODS,INC.(EW).132 FOOT LOCKER,INC.(EW).144 G-III APPAREL GROUP,LTD.(EW).154 Barclays|U.S.Specialty Retail,Apparel&E-Commerce 12 November 2019 5 THE GAP,INC.(UW).163 HANESBRANDS INC.(EW).178 KONTOOR BRANDS,INC.(EW).187 L BRANDS,INC.(UW).196 NATIONAL VISION HOLDINGS,INC.(OW).209 NIKE,INC.(OW)OUR TOP PICK.219 NORDSTROM,INC.(EW).231 PVH CORP.(EW).244 RH(OW).254 RALPH LAUREN CORPORATION(OW).266 ROSS STORES,INC.(OW).278 TAPESTRY,INC.(EW).288 THE TJX COMPANIES,INC.(OW).301 ULTA BEAUTY,INC.(EW).311 UNDER ARMOUR,INC.(EW).323 URBAN OUTFITTERS,INC.(EW).332 V.F.CORPORATION(OW).347 WAYFAIR INC.(UW).357 WILLIAMS-SONOMA,INC.(OW).368 Barclays|U.S.Specialty Retail,Apparel&E-Commerce 12 November 2019 6 INVESTMENT CONCLUSION Initiating on U.S.Specialty Retail,Apparel&E-Commerce at Neutral Volatile global backdrop;consumer spending remains stable with potential risk of deteriorating.We believe that the overall macroeconomic backdrop in the U.S.is choppy,but stable currently.Given global uncertainty in both Europe and Asia,we believe the U.S.consumer discretionary space entering 2020 will be largely status quo with potential risk of deterioration due to macro events.By that,we mean consumers have the means to spend,but they continue to prioritize discretionary spending on travel,experiences,health and wellness,and food and entertainment over apparel,home goods,and commodity-oriented products.Low interest rates,low unemployment,and improving wage growth are generally supportive of a similar spending backdrop to 2019.We are initiating on our broadly-defined U.S.Specialty Retail,Apparel&E-Commerce industry with a Neutral rating over a 12-month horizon.We point out that the stock ratings within the industry are relative to one another within our coverage universe.As we gain confidence that:1)apparel and accessory retailers can meet consensus expectations over the next 12-month horizon,2)sufficient supply of malls and stores has exited the space,and 3)retailers have adapted their business models to become more nimble in inventory and cost reduction,we would look to become increasingly constructive.We do not foresee that inflection occurring in 2020.Specialty Softlines We cover Specialty Retail both Softlines and Hardlines.We believe both of these subgroups have varying degrees of deleverage risk,with Specialty Softlines/Apparel the most at risk.We believe stocks in Specialty Retail reflect a multitude of secular pressures and concerns,with the space generally operating at historically low profitability.Apparel deflation has been a two-decade long trend,and the price transparency of e-commerce means that pricing power will remain fleeting for those selling commodity goods.Despite the fact that retailers are trading toward the lower end of their historical valuations and on trough(ing)earnings,we expect more pressure and below-consensus FY20 EPS outlooks across this subgroup.Despite historically low valuations,we believe GPS(UW)and LB(UW),remain at risk from commodity pricing in their product categories and a loss of connection with their respective target customers.We feel that each of the Gap,Banana Republic,Victorias Secret,and PINK brands will see continued market share erosion until they identify longer-term fixes.JWN(EW)is the only department store that we cover,given our negative view on secular deleverage.Despite the potential$800mn in non-comp sales from their newly-opened Manhattan flagship and Nordstrom local mitigating earnings risk in the near-term,our longer-term view is negative.With brick-and-mortar comps negative,we believe margin erosion is inevitable over the long-haul.While we are supporters of the PLCE(EW)transformation,we believe 3Q19 and 4Q19 are the quarters PLCE needs to show progress in raising average unit retail and gaining healthy market share.Unfortunately,our promotional checks have not shown the pricing inflection we want to see yet as promos remain flat to last years deeply promotional levels.Thus,we await the next catalyst,which is the Gymboree launch in early 2020 and seek evidence of recovery until then.The longer-term positioning is appealing,but the near-term lacks visibility.Barclays|U.S.Specialty Retail,Apparel&E-Commerce 12 November 2019 7 Off-Price Retail The Off-Price retail channel has proven itself to add value to a consumers shopping experience.With the convenience of e-commerce,there are fewer reasons to physically go to a brick-and-mortar store.However,the value,selection,and scarcity offered through the Off-Price experience continue to drive traffic to these conveniently-located off-mall locations.Regarding the threat of Amazon encroaching on Off-Price dominance,we point out that the breadth of offering and freshness of product(weekly)is extremely difficult to replicate online.While Off-Price has been a five-year outperforming subgroup,we expect the trend to continue.We further point out that Off-Price is also defensive as consumers trade down for value in tougher economic times.We are constructive on all three of the Off-Price names,BURL(OW),ROST(OW),and TJX(OW).TJX is the global leader in the space and targets a slightly higher income target market.TJX is the least expensive in the subgroup,but also has exposure to Europe weakness.As a group,the companies benefit from inventory dislocation and have relatively less risk of passing price through from tariffs.Of the three stocks,and despite having the highest valuation,we favor BURL given its unit growth potential and the recent appointment of Michael OSullivan as CEO(most recently COO of ROST).Specialty Hardlines&Other Specialty Hardlines&Other is a hybrid subgroup consisting of home furnishings,sportswear,optical,and beauty retailers,among others.The home furnishings industry is already at 50%e-commerce due to heritage catalogue businesses.As such,while there is clearly risk that shipping costs will continue to escalate,we believe current home furn