DKS

Lululemon “Disappoints”; Under Armour Looks Worse

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Athletic retailer lululemon (click ticker for report: ) raised its fourth quarter guidance yesterday, but not as much as the Street had hoped for, as shares have been tumbling since. The firm announced its revenue is likely to be $475 million to $480 million, the high end of its guidance range, but below the consensus estimate of $489 million. Same-store sales guidance of high-single-digit growth was reiterated (consensus was at 10%), driving earnings per share of $0.74—above the firm’s prior guidance of $0.71-$0.73 and equal with consensus. In our view, the stock’s move to the downside was an overreaction, but understandable. Given the company’s lofty valuation, we think market participants are looking for any weakness to close a long position … Read more

Can Eddie Lampert Turn Around Sears?

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Earlier this week, Sears (click ticker for report: ) CEO Lou D’Ambrosio announced that he’ll resign from his position in February due to an illness in the family. Not so surprisingly, Sears chairman and hedge fund titan Eddie Lampert will be taking the reigns as CEO. Lampert, who merged Sears and Kmart several years ago, will be the chief executive for the first time, and as far as we can tell, he seems confident in his ability to turnaround the failing retailer. In an interview with the Chicago Tribune, Lampert cites Jeff Bezos’ success as a finance guy turned retailer leading Amazon (click ticker for report: ) as evidence that he can turn the dying company around. Although he hasn’t … Read more

Nike Reports Second Quarter Results; Shares Split

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Late last week, athletic footwear and apparel heavyweight Nike (click ticker for report: ) reported strong second-quarter results. Revenue of $6 billion was 7% higher than a year ago, and it was also slightly better than consensus expectations. Earnings were also better than expected, growing 11% year-over-year to $1.14 per share, aided immensely by a large share buyback. We plan to adjust our report and fair value estimate on Nike to account for the stock split soon. We like to focus on Nike’s gross margins, which were down 30 basis points year-over-year to 42.5%. Though we are pleased to see gross margin declines moderate, we are a bit worried that gross margins are going to be permanently lower than the … Read more

Solid Cyber Monday

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According to IBM Digital Analytics, Cyber Monday sales surged 26.6% year-over-year and are expected to total $1.5 billion. These results were consistent with our previous belief that the online channel would continue to become a more important retail destination, though we’re a bit surprised that growth was so strong on one day (since we’ve seen retailers run a variety of sales all week long). Two of the big winners yesterday appear to be Amazon (click ticker for report: ) and eBay (click ticker for report: ), where sales volumes increased 52% and 57%, respectively. Sources cite the percentage of retailers participating in Cyber Monday sales at 97%, or almost every company that sells products on the Internet. It’s not easy to … Read more

Who Wins in the Move to Online Retail?

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Over the weekend, turkey took a backseat to consumer spending with respect to the financial markets. According to ShopperTrak, total Black Friday sales dipped 1.8% year-over-year to $11.2 billion; however, online sales jumped 26% year-over-year to over $1 billion (ComScore). Due to the hyper-competiveness of the retail cohort during the holiday season, Black Friday (and Cyber Monday) has become more of an all-week promotional event. We expect online sales to continue be a driver of revenue expansion going forward, and we’ve identified a few names that we think will particularly benefit. Visa/Mastercard Although we prefer Visa (click ticker for report: ) from a valuation and brand strength perspective, it and Mastercard (click ticker for report: ) will be major beneficiaries of the … Read more