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Around Retail: Aspirational Brands Battle Consumer Perception

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Summary · After positive data reads in the months of October and November, things may finally be looking up for retail spending, but the impact of discounting looms large for many in the space. There are pockets of weakness and strength. · Aspirational and luxury goods manufacturers and retailers are not only subject to the pressures of the promotional retail environment, but also are subject to additional outside forces such as tourism and brand perception. While not dead, mall traffic has been challenging. · Whether it is next-generation wearable technology, a refined online presence, a reduction in markdown allowances, or an enhanced shopping experience, luxury goods companies continue to invest for sustainable growth. Fossil and Richemont have been caught by … Read more

Chipotle Fourth Quarter Comps Suffer Greatly; Could Qdoba Be the One to Eat Chipotle’s Lunch?

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Chipotle’s (CMG) operating performance has come under tremendous pressure in recent months due to a number of reports linking illness in customers to its restaurants. At first, we thought the situation would be relatively contained to just a few dozen instances of sickened customers, but more concerns have come to light since we last commented on the topic. The media is having a field day. Can a company that prides itself on “Food with Integrity” endure, and why so many different causes of illness, from E. coli to salmonella to the norovirus? Could these events mark the beginning of the end of the burrito-making giant’s growth prospects, or is the bad press just a hiccup of indigestion, soon to be … Read more

Wow…Nike. Wow. Innovation Brews Growth.

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Home to some of the strongest brands on the planet, Nike (NKE) is simply a fantastic company. Brand value is quantifiable through the company’s ability to monetize it in the form of future free cash flows, but while the company’s future free cash flows don’t justify scooping up shares at present levels of ~$90 per share, fundamentals at the company have never been stronger. Nike’s fiscal 2015 first quarter results, released September 25, were nothing short of impressive. Revenue jumped 15%, while diluted earnings per share leapt 27% during the period. A shift in mix to higher-margin products, higher average selling prices and continued growth in its higher-margin direct-to-consumer business drove the firm’s gross margin higher. A lower tax rate … Read more

Tiffany Dazzles in Second Quarter; Coach Now Yielding ~4%

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Be sure to catch Valuentum’s Brian Nelson discussing Tiffany’s reports on CNBC Asia at 9:30 PM CST today. The video clip will be posted to the website as soon as it is made available. Luxury jewelry maker Tiffany (TIF) reported fantastic second-quarter results Wednesday and raised its bottom-line guidance for the second time this year and in as many quarters. Tiffany has been benefiting from a modernization of its classical jewelry line-up thanks to the ongoing success of its newest ATLAS collection (shown right) and TIFFANY T jewelry collection (shown below). The ATLAS collection is named for the mythic Greek god and showcases Roman numerals in designs symbolic of strength and freedom on pieces ranging from pendants and earrings to … Read more

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

Under Armour’s Speed-Skating Suit Debacle Not Material

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In case you haven’t been watching the winter Olympics in Sochi this year, the Games have found a way to impact the fundamentals of athletic-equipment firm Under Armour (UA). The company’s CEO Kevin Plank recently defended allegations that its high-tech suits were responsible for the US speed-skating team’s poor performance on ice. Many have pointed to the air vent in the back of the suit that allegedly acted more like a drag-racing parachute (slowing the athletes down) than second-saving aerodynamic technology. Still, even after suit modifications that patched the vent, the US speed skating team failed to win a single medal at the Games. We don’t think the poor publicity will impact Under Armour’s long-term international growth potential, but we … Read more

Lululemon’s Growth Slows in the Second Quarter

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Thursday morning, athletic apparel maker Lululemon (click ticker for report: ) posted strong second quarter results, though the pace of both revenue and earnings growth have slowed. Revenue jumped 22% year-over-year to $345 million, slightly above consensus estimates. Earnings-per-share wasn’t quite as strong, flat year-over-year at $0.39, but it still came in line with consensus expectations. Year-to-date, free cash flow stands at $26.9 million, equal to 4% of total revenue. Image Source: Company Filings, Valuentum The market is displeased with Lululemon’s slowing comp sales growth of 8%, which is the firm’s second consecutive quarter below a double-digit growth rate. Still, the 2-year stacked comp remains strong at 23%. Nearly any other company would be pleased with such a strong two-year … 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

Lululemon’s CEO Departure: Sell-off Justified?

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Luxury athletic apparel maker Lululemon (click ticker for report: ) announced strong first-quarter results Monday that were obscured by the announcement of CEO Christine Day’s departure. We doubt anyone on the Street saw this announcement coming (as evidenced by the large sell-off), and we are a bit surprised at the timing. Although the company has had some quality control issues during the past few months, and we’ve seen the firm chase demand (not have enough inventory), we don’t think Day was at all forced out. She’s presided over a boom in the company’s revenue and profitability over the past five and a half years. Still, Day’s “personal reasons” for leaving come at a strange intersection. Many growth investors believe Day … Read more