Retail Winners And Losers From Credit Suisse: Nike, Lululemon, JC Penney And More

Analysts at Credit Suisse, led by Michael Binetti, after Monday's market close initiated coverage on a plethora of apparel and retail names.

Here's a summary of the bull and bear calls from the team of analysts.

The Bull Calls

• Tapestry Inc TPR initiated at Outperform, $60 price target.
• Michael Kors Holdings Ltd KORS initiated at Outperform, $75 price target.
• Estee Lauder Companies Inc EL initiated at Outperform, $162 price target.
• Tiffany & Co. TIF initiated at Outperform, $120 price target.
• Canada Goose Holdings Inc GOOS initiated at Outperform, C$52 price target (TSX-listed stock).
• Lululemon Athletica inc. LULU initiated at Outperform, $96 price target.
• Burlington Stores Inc BURL initiated at Outperform, $146 price target.
• Ross Stores, Inc. ROST initiated at Outperform, $88 price target.
• Kohl's Corporation KSS initiated at Outperform, $72 price target.
• Nike Inc NKE initiated at Outperform, $78 price target.
• Foot Locker, Inc. FL initiated at Outperform, $50 price target.
• VF Corp VFC initiated at Outperform, $85 price target.
• Ralph Lauren Corp RL initiated at Outperform, $125 price target.
• Ulta Beauty Inc ULTA initiated at Outperform, $245 price target.

Tapestry

• Tapestry, the parent company of Coach and Kate Spade, accounts for 40 percent of the premium accessories market and continues to take "huge steps" to improve further.

• EBIT upside will likely come from Kate brand growth and management's revision of cost synergies from $50 million to $100 million.

Michael Kors

• Consensus estimates are too low and doesn't reflect the improving macro environment and the company's encouraging footage growth.
• Negative trends like over-discounting and operating underperforming stores have been fixed and should generate multiple quarters of "negative-but-improving" same-store sales.

Estee Lauder

Estee Lauder's "powerful portfolio transformation" leads to confidence in the company's 6 to 8 percent revenue growth trajectory.

Estee Lauder's 16.5 percent margins have upside to match rival L'Oreal Luxe who boasts a 19 to 20 percent adjusted EBIT margin.

Tiffany

• Tiffany's most recent earnings report showed the company had the "most product newness in years.

• Consumer response so far to Tiffany's products may signal its new strategy is working and resonating well.

Canada Goose

• Canada Goose's market share in the $11 billion premium outwear market stands at just 6 percent and implies a "substantial untapped global opportunity" ahead.

• Canada Goose's large opportunity ahead implies it can grow its EPS "well above" the company's own 20 percent target.

Lululemon

• The Street's forecast of just 5 percent same-store sales growth remains below the company's current momentum, for example same-store sales in the third quarter rose 7 percent.
• New stores in Asia are generated a sales per square foot ratio that is 5 to 10 percent above the total fleet average.

Burlington Stores

• Burlington Stores can narrow its sales per square footage gap versus its peers at $130/foot versus $310+/foot.
• Tax savings could add 1.5pp to sales/foot in 2018 while a better inventory management should add incremental upside.

Ross Stores

• Ross Stores' consistent double-digit EPS growth, same-store sales outperformance, margin improvement, and stock buybacks should help the company reach Street estimates for 2018.
• The company is also "one of the clearest long-term reinvestment opportunities."

Kohl's

• Kohl's fourth quarter same-store sales growth of 6.3 percent was its first quarter of positive traffic since 2015.
• The encouraging quarter should give investors better conviction that ongoing initiatives can result in sustainable sales and margin growth.

Nike

• Nike's revenue growth woes likely bottomed and should now grow at a high-single digit rate by fiscal 2019.
• Nike will see momentum from international strength now accounting for 55 percent of total sales which is growing at 12 percent.

Foot Locker

• Foot Locker could benefit from a much needed push from market leader Nike to bolster its innovation.
• Investors are being "paid to wait" with a 3.12 percent dividend yield ahead of a "high-conviction improvement" in the second half of 2018.

VF Corp

• VF is best positioned to navigate through any softline challenges, including M&A deals and on-trend fashion.
• The Street's estimates aren't including margin growth and upside to 20 percent EBIT margins.

Ralph Lauren

• Ralph Lauren's analyst day in June should "pave a path" towards positive revenue trends and the stock will undergo a "catch-up trade."
• Margins for Ralph Lauren's retail partners should turn positive in the third quarter, which marks a "necessary condition" to restart its wholesale growth.

Ulta Beauty

• Ulta Beauty is among the few that operates a high-growth retail business and its industry-leading same-store sales could continue coming in at or above its 7 to 9 percent target.
• The stock is "mispriced due to concerns" about the competitive environment but the company boasts multiple margin levers.

The Bear Calls

• J C Penney Company Inc JCP initiated at Underperform, $2.50 price target.
• Finish Line Inc FINL initiated at Underperform, $9 price target.

JC Penney

• Recent encouraging comp drivers could slow, including appliances, beauty and Home.
• The company will see "almost no tax savings" which puts it at a disadvantage versus competitors who have incremental cash to reinvest in their growth initiatives.

Finish Line

• Finish Line's stock is trading at a 13.1 times NTM Street EPS valuation which already prices in EPS growth from tax savings and margin normalization.
• Finish Line faces a higher risk of store closures at 29 percent versus 16 percent for Foot Locker.