Consumer Discretionary

Report by AIR Capital

AIR expects a wave of upward revisions from European corporations in the coming months as tariff clouds thin, China stabilises, infrastructure spend ramps up and European rates remain low. The missing piece is consumer confidence, which should rebound quickly if geopolitical tensions ease. Consumer names like Inditex, Stellantis, LVMH, Diageo, Kering, Adidas, Nestle and Unilever look compelling after steep share price declines, with valuations back to decade-lows. Many of these firms are pursuing clear turnaround strategies focused on FCF generation, deep efficiency gains (utilising AI) and renewed focus on core businesses - supported by a trend toward insider CEO appointments, after a decade of appointing outsiders.

Report by AIR Capital

Following a strong H1, AIR remains focused on companies that can continue gaining market share through exceptional management, innovation and cost discipline - all driving rising operating margins and FCF, even in challenging environments. The following names pass all 45 of AIR’s proprietary filters (3 layers of 15 valuation and quality criteria) and are expected to significantly outperform over the next 12 months: 1) Adidas - ranked No.1 in AIR’s quantitative system, with accelerating EBIT, margin gains and surging FCF. 2) Aena - best-in-class margins, strong traffic growth and a robust balance sheet. 3) Prysmian - a key player in energy transition and digital infrastructure with a record €40.3bn order book. AIR rates all three stocks as Strong Buys, with 50-100% upside potential.

Consumer Discretionary

Report by The Retail Tracker

The Retail Tracker has been negative on adidas with the price down 46% YTD, and 19% in the last month. Mark and Marni argue that this reflects ongoing issues in China due to COVID and backlash against the brand for sourcing cotton from the Xinjiang province, where there are humanitarian issues. Meanwhile fashion has also moved against them with consumers moving away from active and casual segments as the world opens up. On top of this the CEO has announced plans to step-down in 2023, and, the company continues to fight with Kanye West.