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。North America Equity Research
23 January 2019
Matthew R. Boss, CPA
(1-212) 622-2630
matthew.boss@jpmorgan
Signet (SIG, Neutral).We update our model following SIG’s Holiday print.We
now model 4Q19 EPS of $3.87 equating to FY19 EPS of $3.78. For FY20 we model
EPS of $3.39. We lower our pricetarget to $27($38 prior) based on 4x
EV/EBITDA.
Tiffany & Co. (TIF, Neutral).We update our modelfollowing TIF’s Holiday print.
We now model 4Q18 EPS of $1.63 equating to FY18 EPS of $4.70. For FY19 we
model EPS of $4.89. We lower our price target to $92($94prior) based on 17x EPS.
Urban Outfitters (URBN, Neutral).We update our model following URBN’s
holiday sales report. We now model 4Q EPS of $0.79equating to FY18 EPS of
$2.71, FY19 EPS of $2.85, and FY20 EPS of $3.10. We lower our price target to
$36 based on 5.0x EV/FY20EEBITDA.North America Equity Research
23 January 2019
Matthew R. Boss, CPA
(1-212) 622-2630
matthew.boss@jpmorgan
Abercrombie & Fitch
Underweight
Company Data
Price ($)20.07
Date Of Price 22 Jan 19
52-week Range ($)29.69-15.28
Market Cap ($ mn)1,393.36
Fiscal Year End Jan
Shares O/S (mn)69
Price Target ($)19.00
Price Target End Date 31-Dec-19
Abercrombie & Fitch Co. (ANF;ANF US)
FYE Jan2017A2018E
(Prev)
2018E
(Curr)
2019E
(Prev)
2019E
(Curr)
2020E
(Prev)
2020E
(Curr)
EPS (Operating) ($)
Q1 (Apr)(0.90)(0.56)A(0.56)A----
Q2 (Jul)(0.16)0.06A0.06A----
Q3 (Oct)0.300.33A0.33A----
Q4 (Jan)1.381.131.12----
FY0.660.960.941.001.011.071.03
Bloomberg EPS FY ($)0.39-0.96-1.12-1.26
Source: Company data, Bloomberg, J.P. Morgan estimates.
Investment Thesis, Valuation and Risks
Abercrombie & Fitch(Underweight; Price Target: $19.00)
Investment Thesis
Facing severe secular challenges, ANF is in the midst of a major brand building
initiative to regain customers and return to a growth profile.After cutting ~$350M in
expenses over the last 3-4 years, we believe ANF’s earnings power going forward is
increasingly dependent on the company’s ability to drive positive comps, which
appears increasingly too difficult in the worsening retail backdrop. We are not
convinced that ANF will see an inflection point in comps on a sustainable basis and
see consistent EBITDA declines for the years ahead.
Valuation
Our Dec ’19 price target of $19 is based on ~4.0x our 2020EEBITDA (EBIT +
D&A at 3.6% of sales,inline withspecialty peer group avg.). The ~4x EBITDA is
about in line with the company’s 5-year average given top-line stabilization and
improved trajectory for 2018.
Risks to Rating and Price Target
There is a risk that we have underestimated the upside potential to ANF’s SSS and
earnings outlook and, in turn, stock price relative to market expectations, and
therefore our price target. Some company-specific factors include the company’s
ability to hit fashion trends as well as exogenous factors such as traffic levels and the
industry-wide level of promotionsthat could drive upside to results.North America Equity Research
23 January 2019
Matthew R. Boss, CPA
(1-212) 622-2630
matthew.boss@jpmorgan
American Eagle Outfitters
Neutral
Company Data
Price ($)20.33
Date Of Price 22 Jan 19
52-week Range ($)29.88-16.14
Market Cap ($ mn)3,664.69
Fiscal Year End Jan
Shares O/S (mn)180
Price Target ($)21.00
Price Target End Date 31-Dec-19
American Eagle Outfitters (AEO;AEO US)
FYE Jan2017A2018E
(Prev)
2018E
(Curr)
2019E
(Prev)
2019E
(Curr)
2020E
(Prev)
2020E
(Curr)
EPS (Operating) ($)
Q1 (Apr)0.160.23A0.23A----
Q2 (Jul)0.190.34A0.34A----
Q3 (Oct)0.370.48A0.48A----
Q4 (Jan)0.440.430.42----
FY1.161.481.461.731.731.992.04
Bloomberg EPS FY ($)1.16-1.47-1.62-1.74
Source: Company data, Bloomberg, J.P. Morgan estimates.
Investment Thesis, Valuation and Risks
American Eagle Outfitters(Neutral; Price Target: $21.00)
Investment Thesis
AEO is regaining traffic and sales momentum with core customers, driven by the
strength of its denim business. We rate AEO shares Neutral as we are concerned that
the highly competitive teen retail industry will continue to consolidate and
experience pricing pressure as fast fashion competitors continue to lower the initial
ticket bar, limiting AEO’s ability to sustainsales productivity levels and margins.
Valuation
Our Dec 2019 price target of $21 is based on 4.5x our FY20EEBITDA, which
represents a 100bps discount to AEO’s historical five-year average based on
concerns of the highly competitive teen retail industry.
Risks to Rating and Price Target
There is risk that we have over/underestimated the downside/upsidepotential to
AEO’s earnings outlook and, in turn, stock pricerelative to market expectations, and
therefore our price target. Some company-specific factors include AEO’s ability to
hit fashion trends as well as exogenous factors such as traffic levels and competitive
environment in the teen space.。。。