Sector Sentiment 1 (worst) out of 5. Proprietary checks show clean inventory, but weak start to 1Q17. NRF data showed that holiday was actually better than expected for non-apparel sectors, as apparel was an exception with weak results. The same recurring issues continue to drag the sector with anemic mall traffic, the shift to online from brick-and-mortar, jockeying for consumers’ share of wallet via promos, and a paucity of demand drivers. We expect these issues to continue to be a drag on brick-and-mortar comps with the Off-Price channel favored over Specialty Retailers.
Search Coverage List, Models & Reports
Search Results1-10 out of 472
In 2016, President’s Day was 2/15/16, while this year it is shifted one week later and will occur on 2/20/17. “Flattish” promos are necessary to offset negative mall traffic. Sector-wide promos QTD have been relatively “Flattish” potentially helped by tight inventory control. February is the least important month of the quarter.
Confirms reviewing of strategic alternatives. KATE announced today that the Board of Directors, together with management, is looking for strategic alternatives for the company. The company also beat 4Q16 handily with gross margin decline significantly better than Consensus and guidance, driven by improved sourcing as well as inventory and cost control. Given management’s focus on reviewing strategic alternatives, management did not give forward guidance. Shares of KATE were up ~11% in the early session trading.
4Q16 Consumer Sentiment Poll scores 1.8 out of 5, more negative than 3Q16 score of 2.3. Each quarter, we send out a brief survey to gauge investor sentiment prior to earnings, where 1 is “Bad” and 5 is “Good.” This quarter we received 68 total responses. Thanks for replying, if you did. Survey results are completely anonymous, and the greater the response rate, the more conclusive the results, so please consider participating.
The Wolfe Retail Monthly Short Report is published using the end-of-month reported short interest positions each month. Our Retail Monthly Short Report helps to gauge sentiment on individual stocks. In this report, we show two metrics 1) short interest shares as a percent of float and 2) short interest share change month-over-month for the last twelve month period. Given the increasing volatility in the sector, particularly ahead of earnings reports, we believe that tracking short interest in concert with recent stock price moves relative to valuation is another useful tool to gauge near-term investor sentiment.
“Flattish” promos necessary to offset still-negative mall traffic. With only one week of the new quarter thus far, we have seen a sector-wide move towards “Flattish” promos from “Deeper” during 4Q16. We note there is a lot of sales activity to come in the quarter and February is the least important month of the quarter. We also note LY had excess inventory after a warm holiday season, so we would not read the sequential “improvement” as indicative of a positive change.
4Q16 Promo Rating: “Deeper;” 3Q16 Rating: “Flat” The sector rating for 4Q16 was “Deeper” on promotional activity YoY, worsening from 3Q16. Although beginning-of-quarter inventory was “clean,” demand remains fleeting.
The Bad News. 1) January comp deceleration to -MSD. URBN’s 4Q16 comp was flat, implying January comp of negative MSD, decelerating from holiday of +1.5%. 4Q16 comp sales by brand: UO was +2%; Free People +1.2%; Anthropologie -2.9%. 2) Anthropologie apparel remains weak. Clearance was deeper ending the quarter with no clear turn on the apparel category. 3) EPS reduction. 4Q16 Consensus EPS of $0.58 likely to be reduced to mid-$0.50 range and sub-$2.00 EPS for FY2017. Stock was down ~3% in the after-hours trading session.
KORS “Brand Footprint” still too large. Management recognizes the need for shrinking its brand footprint, pulling back on inventory and an ongoing haircut to wholesale in particular. Therefore, we maintain our thesis that KORS’ brand footprint will have to significantly shrink from current size. In reaction to a reduction of 4Q17 EPS outlook, the stock traded off ~12% during the trading day.
KORS reported a low-quality FY3Q17 EPS of $1. 64 vs. Cons of $1.63. 4Q17 EPS guidance came in well below Consensus. 3Q17 comp came in light at (6.9%) vs. Cons at (5.1%). Despite the comp miss, KORS came in just above the Street, but we note this to be a low-quality print as comp and gross margin misses were offset by lower SGA, a lower tax rate YoY, and incremental YoY share buybacks contributing ~$0.03 to EPS. 4Q17 EPS guidance came in roughly 24% below the Street ($0.68 to $0.72; Cons $0.92) on a negative low-teen comp and ~14% operating margin. In reaction, the stock traded off ~7% in pre-market trading ahead of the earnings call (8:00am ET; 1-888-778-8895).
- 1 of 48
- next →