Credit Suisse Research analysts Christian Buss and Bilun Boyner published a report titled “US Apparel / Footwear / Specialty Softlines: What Worked This Holiday Season?” on January 05, 2012. The report isn’t available online but we will discuss its findings. The analysts have gathered recent commentaries on key demand trends this Holiday season from various retailers, and have published the resulting analysis. According to the analysts, women’s accessories and handbags witnessed the strongest demand pattern. The demand for footwear stayed on the higher side, while warm winters hit the cold weather merchandise demand.
Coach Inc. (COH) has been given an Outperform rating by the Credit Suisse (CS), with a target price of $69 per share. Given its relative strength across the accessories and handbag business, the December trend is expected to bode well for the company. Last year handbags accounted for 63% of the company’s topline; 27% was contributed by accessories and the rest was contributed by footwear, jewelry and sun-wear. Moreover, as per the analysts’ channel checks, Coach kept less than 15% of its inventory at departmental stores on discounted prices. In addition, due to a 30% off promotion, Coach witnessed a strong traffic at certain stores, resulting in long queues on the day after Christmas.
Deckers Outdoor Corp. (DECK) has also been given an Outperform rating by Credit Suisse with a target price of $127 per share. According to detailed surveys, in-store checks, and discussions with retailers carried out by the analyst team, the company has witnessed a strong holiday season. Moreover, its brand image as casual comfort-wear makes it less exposed to the winter seasonality; hence, warm winters this time will not significantly impact sales.
Wolverine World Wide Inc. (WWW) has been given an Outperform rating with a target price of $44 per share by Credit Suisse. The company is expected to benefit from the strength of its footwear during the holiday period. Unlike its competitor UGG, the December’s shoe-purchasing trend did not seem to be limited to gift-related sales. Moreover, Wolverine’s incremental distribution and versatile style are also likely to benefit the Merrell brand’s new barefoot product line.
Columbia Sportswear Co. (COLM) has been given a Neutral rating with a target price of $57 per share. Winter seasonality negatively impacted the sales of the company at wholesale levels through a slow-down in reorder activity along with an increasing demand for discounts. The departmental and sporting goods stores are believed to have offered discounts on Columbia’s merchandise in order to spur sales. In addition, the company’s outlets offered discounts on some products as high as 70% by the end of December. Its Sorel brand (cold-weather footwear label) seems to be benefitting from its incremental distribution and updated fashion ranges. However, Sorel contributes only 5% towards company’s revenues; hence, it may not generate significant overall results.
VF Corp (VFC) has been given an Outperform rating by Credit Suisse with a target price of $154 per share. VF Corp’s has a wide range of brands that provide the company with a hedge against weak cold weather sales. Nonetheless, outerwear contributes significantly towards the company’s financials. The analysts estimate that15% of the total VFC sales are exposed to weather dependent outerwear. Hence, they have kept revenue estimates lower than consensus for the fourth quarter. Ken Heebner initiated a position in VF Corp during the third quarter.
The Bon-Ton Stores, Inc. (BONT) has been assigned an Underperform rating by Credit Suisse with a target price of $4.00 per share. The company’s December sales and margins in all markets were negatively impacted due to warm weather. This holiday, Bon-Ton performed poorly on its handbags and shoes sales. Moreover, commentary suggests that warm winter hit the company‘s cold-weather highly profitable category the most. Cold weather merchandise sales constitute 25% of company’s business, but this time they were down to mid-teens on a percentage basis.
JC Penney (JCP) has been given a Neutral rating by Credit Suisse with a target price of $32.00 per share. This holiday JC Penny did well on its women’s accessories, which stood out as the best performing segments in December. Sales were also boosted by cold weather accessories. Furthermore, children’s outerwear also added well to the share of total sales. Bill Ackman has a large position in JC Penney.
Kohl’s Corporation (KSS) has also been rated Neutral by Credit Suisse with a target price of $60 per share. Kohl’s Corp. witnessed below average men’s and women’s footwear sales. An increase in women’s and children’s shoes was offset by declines in athletic and men’s shoes. Moreover, warm winters also kept the cold-weather categories sales sluggish. On the other hand, accessories, handbags and fashion jewelry sales witnessed single digit growths.
Nordstrom (JWN) has also been rated Neutral by Credit Suisse with a target price of $45 per share. Nordstrom did quite well on its designer, handbags and cosmetics sales and its overall merchandise sale witnessed the strongest performance. Steven Cohen is among Nordstrom investors.
Saks Incorporated (SKS) has also been assigned with a Neutral rating with a target price of $10.5 per share by Credit Suisse. The Saks Fifth Avenue stores executed the women’s and men’s contemporary apparel and handbags sales very well. Women’s shoes, jewelry, men’s accessories and fragrances are categories that also performed well on these stores.