瑞信全球奢侈品寻找下一个品牌转变20170908CREDITSUISSEGlobalLuxuryGo

DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.8September2017GlobalEquityResearchLuxuryGoodsGlobalLuxuryGoodsCONNECTIONSSERIESTheCreditSuisseConnectionsSeriesleveragesourexceptionalbreadthofmacroandmicroresearchtodeliverincisivecross-sectorandcross-borderthematicinsightsforourclients.ResearchAnalystsGuillaumeGauvillé,[e-mail]@[e-mail]@credit-suisse.comLookingforthenextbrandturnaround■AssessingturnaroundpotentialatsixUS/Europeanluxurygoodscompanies:WiththesuccessofCoach,GucciandCalvinKlein,investorsarelookingforthenextturnaroundstoryinthesoft-luxuryuniverse.Webelievecompaniesthathaveseendecliningsales,marginpressureandfallingCFROI®largelyasaresultofbrandfatigueandlackofcostdisciplinecouldqualify.Inthisreport,weidentifyBurberryandRalphLaurenasourtoppremium/luxuryturnaroundpicks,whileweremainpositiveonTod'sGroupandcautiousonFerragamo,HugoBoss,andMichaelKors.■Welookatsevenfactors:(1)thehealthoftheunderlyingmarket,(2)brandvalue/equitycurrentlydiscountedinthestockprice,(3)theexistingprice/valueproposition,(4)changestomanagementandcreativeteams,(5)theprogressmadesofarregardingcleaningupdistribution,(6)costcuttingpotential,and(7)potentialmarginupside.■WeupgradeBurberrytoOutperform(newTP2,000pfrom1,650p):WenoteBurberryhasundergonethebiggestmanagementreshufflesinceits2002IPOandwebelievethebrandiswellplacedtocapitaliseontheneedfornewnessinluxurythankstoitsapparelexposure.Marginsareclosetohistoricallowsandthecostcuttingplaninplaceshouldalleviateconcernsaboutfurtherearningsdowngrades.Withsell-sidepositioningthemostnegativeithasbeensince2009,wethinkthiscreatesabuyingopportunity.■WeupgradeRalphLaurentoOutperform(newTP$111from$91):WebelievethecompanyisontracktoreturntomeaningfulgrowthandmarginexpansionfromFY19.Thisfollowssignificantchangestomanagement,visibleeffortstoreinvigoratethebrand/products,cleaningupdistributionandrightsizingofthecoststructure.■WeremainNeutralonHugoBoss,FerragamoandMichaelKors:WebelieveHugoBoss(newTP€65)stillfacesachallengingsuitmarketandwethinkitscurrentprice/valuepropositionmaynotyetbeadequate.WelikeFerragamointhelongtermbutthetransitionphaseislikelytohurtmarginsandtriggerfurtherearningsdowngrades.WeremainconcernedaboutMichaelKors’underlyingbrandhealthwhichisnecessitatingstoreandwholesaledistributionrationalisationandare-focusonpricingdiscipline.Moreover,wefindcostsavingstargetsrelativelyunderwhelming.Figure1:BrandturnaroundscorecardforthesixselectedcompaniesBurberryTod'sGroupFerragamoHugoBossRalphLaurenMichaelKorsUnderlyingmarket++++-+++Brandequity+++++=++++Positioningorprice/valueproposition+++++=+++Management/creativedirectorchanges++++++++++-Progressondistributionclean-up+===+-Costcuttingpotential++++=+++-Marginupsidepotential++++-=++-Averagescore++++=++=Source:CreditSuisseresearch.Notes:+++highlysupportive,++supportive,+mildlysupportive,=neutraland-notsupportive8September2017GlobalLuxuryGoods2KeychartsFigure2:BrandfatigueandlittlecostdisciplinehaveweighedonEPSforecastsforallsixbrandsFigure3:ThishasresultedinsharepriceslaggingtheirpeergroupsConsensusEPSforecasts(June2015=100)SharepricerelativetoEuropeanluxuryorUSsoftlines(2015=100)405060708090100110120Jul-15Sep-15Nov-15Jan-16Mar-16May-16Jul-16Sep-16Nov-16Jan-17Mar-17May-17Jul-17Sep-17Tod's(FY17e)HugoBoss(FY17e)Burberry(FY18e)Ferragamo(FY17e)RalphLauren(FY18e)MichaelKors(FY18e)405060708090100110120130140Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17Jul-17Tod'sHugoBossBurberryFerragamoRalphLaurenMichaelKorsSource:ThomsonReuters,CreditSuisseresearchSource:Companydata,CreditSuisseresearchFigure4:BurberryiswellplacedtocapitaliseontheneedfornewnessinluxuryFigure5:WeexpectBurberry'sunderlyingmarginsinFY18tobeclosetohistoricallowsEstimatedrevenuebreakdownforBurberry(%oftotal,inFY17)Retail/wholesaleoperatingmarginsforBurberryTrenchcoats15%Scarvesandponchos10%Womenswear20%Menswear16%Handbags19%Footwearandotheraccessories9%Beauty7%Children4%9.6%12.0%14.2%14.8%14.5%14.6%14.9%9.8%11.6%15.6%16.4%17.8%17.5%16.3%15.4%15.9%15.4%16.9%17.7%4%6%8%10%12%14%16%18%20%FY02FY03FY04FY05FY06FY07FY08FY09FY10FY11FY12FY13FY14FY15FY16FY17FY18eFY19eFY20eFXtailwindsinceFY17AverageSource:Companydata,CreditSuisseestimatesSource:Companydata,CreditSuisseestimatesFigure6:RalphLaurencontinuestoimproveitsdistributionwithlessrelianceonwholesaleFigure7:WeexpectsalesgrowthtopickupandmargintoreboundfromFY19forRalphLaurenEstimatedrevenuebreakdownbychannel(%oftotal,inFY22e)Long-termsalesgrowthandoperatingmarginsforRalphLaurenWholesa