JOSB

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Surveying Recent M&A Action

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The environment for merger and acquisition (M&A) activity has arguably never been better thanks to healthy balance sheets, historically low interest rates, and equity prices that speak of optimistic times. Just in the past few weeks, we’ve witnessed a number of deals come to the fore. Let’s take a look at a few of these deals and offer our quick take on the transaction. Healthcare Actavis (ACT) – Forest Labs (FRX) DUBLIN, Ireland and NEW YORK, Feb. 18, 2014 /PRNewswire/ — Actavis plc (NYSE: ACT) and Forest Laboratories, Inc. (NYSE: FRX)…announced that they have entered into a definitive agreement under which Actavis will acquire Forest for a combination of cash and equity valued at approximately $25 billion or $89.48 per … Read more

Mixed Second Quarter Results Across Retail

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Tuesday morning, a variety of retailers reported calendar second quarter results that were decidedly mixed. Let’s take a deeper look. TJX Companies TJX Companies (click ticker for report: ) posted second quarter results marked by top and bottom line expansion. Revenue increased 8% year-over-year to $6.4 billion with same-store sales growth of 4% while earnings per share improved 18% year-over-year to $0.66 per share. Both metrics exceeded consensus expectations. Year-to-date, the firm has generated free cash flow of $314 million, equal to 2% of total revenue. Though the company has 3,119 locations worldwide, the company continues to experience stable comparable same-store sales (“comp”) growth. TJX’s 2-year stacked comp has consistently hovered around 10-11% during the past four quarters. Source: Valuentum, … Read more

Jos A. Bank Warns on Earnings; We’re Not Touching This Stock

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Troubled suit seller Jos A. Bank (click ticker for report: ) warned earlier this morning that its first-quarter earnings per share were going to fall in the $0.27-$0.30 range, which is well below the consensus estimate of $0.46 per share. This range is also well below the company’s first quarter earnings of $0.53 per share in fiscal year 2012. Management readily blamed lower average selling prices and higher input costs as weighing on margins, but we also think the company is having a hard time competing in the suit retail business. In our view, customers simply do not want the firm’s suits unless the value element is incredibly compelling. We also think the company missed a huge opportunity as the … Read more

Jos. A. Bank’s Friday Night Update Reveals Huge Profit Shortfall

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Late Friday night, suit retailer Jos. A. Bank (click ticker for report: ) used a common tactic to report bad news, revealing in an 8-K that net income for 2012 will be approximately 20% lower than it was in 2011. Some simple mathematical calculations reveal that the figure will lead to lower EPS in not only 2011, but also below what the firm reported in 2010. Although we’re sure SG&A has increased as a percentage of sales, we think the terrible results are the product of compressing gross margins. The firm is famous for its “Buy 1, Get 2 Free” marketing, though it sometimes extends to buying one suit for a free shirt, tie, socks, and other accessories. While Jos. … Read more

JoS A. Bank Struggles to Maintain Margins

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Wednesday morning, men’s suit retailer JoS A. Bank (click ticker for report: ) reported weaker than expected earnings for its third quarter. Sales increased 11% year-over-year to $233 million, roughly in-line with consensus expectations. Earnings per share fell 13% year-over-year to $0.47, which was worse than expected. In a highly promotional low-end suit environment, the firm had to run several special sales to compete with the likes of Macy’s (click ticker for report: ), which was also quite promotional (and has the advantage of a stable of brand names). Same-store sales increased 4.8%, with online/direct marketing sales up 26% year-over-year, though the company acknowledged November sales trended downward (thanks in part to Sandy). Gross margins tumbled from 62.6% to 57%, … Read more

Men’s Wearhouse Changes Its Style

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After the market closed Wednesday afternoon, Men’s Wearhouse (click ticker for report: ) reported relatively uneventful fourth quarter results that were overshadowed by the company’s strategy change. After announcing the appointment of John Kimmins to chief financial officer last week, the company unveiled that it hired Jefferies to evaluate strategic alternatives for its K&G unit (potentially a sale), which has struggled immensely. The company will focus on Men’s Wearhouse and Moore’s. The firm also added $155 million to its share repurchase authorization, giving the company the ability to repurchase $200 million shares. On top of share repurchases, it announced an amendment to its current credit facility. Kimmins must have been busy. As for K&G, we believe market participants think the company is signaling it will … Read more

Valuentum’s Comprehensive Report on Retail Brands

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Key Takeaways ·        Valuentum sees four major brand segments o   Ultra-Luxury §  Richemont, Burberry, LVMH, Gucci (Kering), Chanel, Hermes §  Rich heritage brands, economically resilient consumer o   Luxury §  Marc Jacobs, Tory Burch, Ralph Lauren, Tiffany §  Valuable brands, semi-strong barriers to entry o   Aspirational §  Michael Kors, Marc by Marc Jacobs, Coach, North Face §  Popular with younger consumers, strong brand loyalty o   Established §  Nike, Adidas, Under Armour, lululemon, PVH, Express §  Price competitive, exposed to fashion ·        Our favorite dividend idea: Coach ·        Fallen Stars: Guess, Bebe ·        Valuentum’s Take: Brand value is only part of the investment equation Branding has been a powerful force in both marketing and investing for the past century. Companies work hard … Read more