In a recent note, we prepared 30 questions that we believe to be topical to ULTA’s growth trajectory. Based on our travels marketing with VP of IR Laurel Lefebvre in Paris, we provide comprehensive answers to our 30 questions that largely relate to future growth opportunities. We look at the different drivers of growth, market share opportunities, prestige brand rollouts, real estate, competition, and margin-driving opportunities. ULTA has significant growth ahead, and although sales growth may decelerate to the mid-teen range going forward (from 20%+), we expect to see leverage on investments driving 20% EPS growth. We are highly confident that ULTA can attain its 15% operating margin goal by the end of 2019.
Search Coverage List, Models & Reports
Search Results1-10 out of 669
We remain UP due to: 1) acceleration of fixed cost brick-and-mortar channel deleverage as sales shift to e-commerce, 2) required investments, and 3) aggressive rollout of Beyond+, BBBY’s “prime-like” free shipping program. Valuation is no consolation in our opinion, as we believe we are in the very early stages of prolonged margin pressure and market share loss. AMC 9/19/17, BBBY reported 2Q17 comp of -2.6% (below Consensus of -0.7%) and adjusted EPS of $0.78 (GAAP $0.67), including $0.11 of one-time related items (Consensus of $0.95). Brick-and-mortar comp was down MSD with online sales continuing to grow in excess of 20% YoY. Further channel weakness and deceleration spurred a need to lower FY17 guidance to approximately $3.00 per share (vs. Consensus at $4.00) from previous guidance of YoY EPS decline of LSD to 10%. Due to the ongoing challenges at brick-and-mortar concepts and the worsening fixed cost margin deleverage, management enacted several transformational initiatives in order to combat the ongoing margin compression. In reaction to the print, shares traded off ~13% in the after-market session.
AMC 9/19/17, BBBY reported 2Q17 comp of -2.6% (below Cons of -0.7%) and our adjusted EPS of $0.78 vs. the Street at $0.95. Our adjusted EPS of $0.78 excludes unfavorable impacts of ~$0.08 related to cash restructuring charges, ~$0.02 related to Hurricane Harvey and ~$0.01 related to the new share-based accounting standard. Brick-and-mortar comp was down MSD with online sales continuing to grow in excess of 20% YoY. We believe our thematic “Deleverage Curve” is weighing heavily on consolidated margins and will only continue to worsen as sales shift to the e-commerce channel. This is the second consecutive quarter BBBY missed across the board on sales, GM, and SGA. During the quarter, the company repurchased $56 million of its common stock or 1.8 million shares. Management updated FY17 guidance from a decline of LSD/-10% to -25% or $3.00 (Street at $4.00). The company did note current initiatives could generate savings in excess of $150 million over the next few years. In reaction, shares traded down ~15% aftermarket.
GPS continues where we left off last quarter with ON pulling back on promos while Gap/BR promote deeper to drive sales. On 9/6/17, GPS said they will focus on ON and Athleta brands by opening 270 ON/Athleta stores while reworking Gap brand and BR via the closure of 200 underperforming Gap brand/BR stores. The promos reflects this reality with Gap brand/BR deeper and ON/Athleta better.
Our analysis suggests a potential deal could fetch up to $54 per share. On 9/12/2017, CNBC reported that the Nordstrom family is nearing a deal with PE firm Leonard Green in a bid to take JWN private. Sources cited Leonard Green could provide $1B in equity to help fund a buyout with $7B to $8B in a debt raise. The Nordstrom family owns 31.2% of the company. We believe a deal would involve a substantial equity rollover of their current position to bolster the equity infusion. Going private would allow the company to make long-term investments in various initiatives without facing backlash from public market shareholders. In our LBO model (click here), we assume a 70%/30% debt-to-equity raise, ~$7.6B of post-deal debt financing, ~$1B private equity contribution, and ~$2.3B equity rollover from the Nordstrom family. Our analysis embeds a 15% takeout premium to current price (34% premium to the unaffected price before JWN’s announcement).
On Monday, 9/18/2017, we will host ULTA in Paris for an NDRS. We are hosting ULTA’s Laurel Lefebvre (Vice President, Investor Relations) in Paris this Monday for an investor marketing day. This is a critical time for the company as valuations have severely compressed over the past four months presenting what we believe to be a tremendous opportunity to own the stock. In this note, we have prepared 30 questions that we believe to be topical to ULTA’s growth trajectory. We also reiterate our Outperform Rating and highlight our Five Reasons to own shares (which we webcasted on 8/25 –click here to access the webcast).
This Time its Behavioral, Not Macro. Sector Sentiment 1, on a Scale of 1 (worst) to 5 (best). Despite retailers generally beating 2Q17 top- and bottom-line with a modest lift in demand in June/July, investors are not taking the bait. For August, 47% of retailers posted a short position >15% (worse than 43% in July). This reading is worse than the same metric during the recession in 2008, suggesting that investors believe the behavioral shift is unrelenting and not a macro backdrop/”wealth perception” issue. Last year, investors attempted to play the classic “back half” retail trade without success. Retail enjoyed a summer rally as “easy compares” set the sector up to ostensibly “win.” However, the behavioral shift to e-commerce drove negative mall traffic and the 2H recovery resulted in a disastrous holiday season. This year, investors seem emboldened to short the uptick rather than bottom fish a sector at historical valuation lows in search of a quick trade in the space. Our Quantitative, Economics, and Strategy team recently published a thoughtful report examining short interest data. Among their findings, equities with high days to cover (19+ days) are correlated with negative future market returns. However, these stocks are on average more costly to short, which leads to overpricing in hard to borrow stocks as bearish views of investor’s are structurally impractical to execute. Please click here to view: “New Insights in Short Interest – A Global Perspective”.
Massive across-the-board beat and raise propels shares up ~35%. 2Q17 EPS beat and strong FY17 guidance resulting in a major squeeze. Adjusted 2Q17 EPS came in at $0.65 vs. $0.47 Consensus with a comp beat of 7% vs. 5.8% Consensus. Gross margin saw a sizable lift from improved mix from grey card membership sales (+200 bps to core merchandise margin) with further SKU rationalization at the Outlet Channel offsetting gross margin by 210 bps. Despite the traditional 2Q working capital usage of cash, the SKU rationalization program helped RH to drive $191 million in operating cash flow during the quarter. Recall RH repurchased 20.2 million shares or 49.5% of shares outstanding this year.
3QTD Retail Segment Comps -LSD vs Consensus of -2.5%. After market, on 9/6/17 URBN filed its 10-Q.
Stock soars 40% on across-the-board beat, exacerbated by short position >50% of float. 2Q17 EPS beat and strong FY17 guidance resulting in a major squeeze. Adjusted 2Q17 EPS came in at $0.65 vs. $0.47 Consensus with a comp beat of 7% vs. 5.8% Consensus. Gross margin saw a sizable lift from improved mix from grey card membership sales (+200 bps to core merchandise margin) with further SKU rationalization at the Outlet Channel offsetting gross margin by 210 bps. Despite the traditional 2Q working capital usage of cash, the SKU rationalization program helped RH to drive $191 million in operating cash flow during the quarter. Recall RH repurchased 20.2 million shares, or 49.5% of shares outstanding YTD.
- 1 of 67
- next →