Consumer Discretionary

Report by JJK Research Associates

After reviewing the Valentine’s Day assortments for VS and Pink, JJK believes management is delivering on its promise to refresh/modernise the brand. They highlight the group’s highly differentiated assortments vs. competitors who have, to date, underplayed the important VD holiday (except for Lululemon where product and colours are very impactful). This should drive ongoing +traffic and +conversion and +AUR, supporting productivity recapture after many years of declines. With the benefit of easing comparisons, JJK expects momentum to build in 1H25. They model FY24 and FY25 EPS of $2.35 and $2.85, respectively, with EBIT margin increasing from 5.6% in FY24 to 6.1% in FY25.

Consumer Discretionary

Report by JJK Research Associates

Consumer stocks are climbing the wall of worry reflecting supply chain challenges, higher distribution expense, rising prices and tough comps. Hence, there is limited visibility on the consumer sector delivering yoy F22 earnings gains. JJK highlight a select few who are well positioned for growth, including the value focused off-price retailers (TJX, Burlington, Ross) and beauty leaders (Bath & Body Works, Estee Lauder, Ulta). Upgraded growth strategies and Europe’s emerging rebound should also drive strong upside at A&F, Capri Holdings, Lululemon, PVH, Ralph Lauren and Victoria’s Secret.