Consumer Discretionary

Report by The Retail Tracker

Lululemon shares are trading at both 52-week and five-year lows after a difficult period marked by product challenges and pressure on the brand’s core offering. The source notes that the company had strayed too far from its brand DNA, with limited colour in parts of the range and the departure of its senior merchant. However, early signs of improvement are emerging, including a tighter product offering, more colour and the appointment of a former Nike executive as CEO. While a full turnaround is likely to take time, The Retail Tracker sees potential for the stock to reach $175 over the next 12 months.

Consumer Discretionary

Report by Paragon Intel

Paragon’s executive diligence memo was originally published when Heidi O’Neill was being discussed as a potential CEO successor at Nike and they viewed her as a poor fit for that role. At LULU, she is somewhat better matched to the brief, but their core reservations remain. She has tended to look stronger as an operator and internal brand steward than as a true strategic architect. That matters at LULU, where the challenge requires a sharper product vision, stronger innovation instincts and a willingness to make harder calls on strategy and talent. So, while the fit is better than it would have been at NKE, Paragon still views her as more of a stabiliser than an obvious answer to LULU’s deeper issues.

Consumer Discretionary

Report by Paragon Intel

Paragon Intel adds BBWI’s new CEO Daniel Heaf to their research pipeline. He earned his reputation as a digital builder, but his tenure at Nike was marked by inventory issues, cost cuts and a leadership shake-up that ultimately eliminated his role, while the stock underperformed the S&P 500 by ~40 percentage points. He now steps into a retailer that has cycled through 3 CEOs in 3 years and watched FY24 revenue slide 7% to $7.3bn, even as it courts a broader demographic appeal and eyes faster international growth. Paragon’s work will examine whether Heaf’s omnichannel playbook can reignite top-line momentum, widen margins and restore investor confidence, while also weighing governance stability and the risk that NKE-style missteps resurface as BBWI charts its next phase.

Consumer Discretionary

Report by Quo Vadis Capital

John Zolidis removes DKS from his LONG list, following the group's proposed takeover of Foot Locker. He argues that the deal undermines the rationale for assigning DKS a premium multiple, which had been supported by its consistent performance and structurally superior margins. John is deeply sceptical that management can succeed where respected executive Mary Dillon failed. The acquisition threatens to create even more banner conflict, overlapping real estate, greater reliance on Nike and adds significant operational complexity. Crucially, FL lacks unit growth - the one element DKS was missing. While some cost synergies and FCF may eventually be realised, it will take a long time to recoup the $2.5bn price tag.

Consumer Discretionary

Report by The Retail Tracker

Is 2025 the year NKE’s stock finally breaks back out? Analysts at The Retail Tracker think so. Although for the company to win it needs basketball to be trending again. While timing remains unclear, fashion shifts are turning in its favour. Certain styles are selling well and certain colours are selling out. The Dunk had some very good sellers, the Cortez has been highlighted as a fashion choice for 2025 by a few creators, the group has had some sell-out collaborations and the changes in management have been well received. The Jordan brands turns 40 this year and NKE plans for several drops including the OG Cement. Excitement will start brewing. Investors buying the stock at current levels will be well rewarded.

Consumer Discretionary

Report by The Retail Tracker

NKE’s earnings release was a step forward despite management significantly cutting its forecasts. This should allow NKE to clear product and begin achieving estimates to restore confidence the company is at the bottom. The Retail Tracker has seen more colour added to assortments and some of the more recent drops have been very successful. In addition, trends are changing which should help basketball sales improve. They believe the shares are oversold despite visibility being uncertain, while their longer-term thesis remains intact.

Consumer Discretionary

Report by The Retail Tracker

As Nike finally takes steps forward it seems as though its neighbours are falling apart. Adidas has had a hit shoe (Samba) for a few years, yet it has not changed the momentum for the brand. Allbirds, should never have gone public, is retrenching. Kevin Plank is back at Under Armour and the CEO of Brooks is stepping down. Retail Tracker’s thesis: 1) New competition from ON / Hoka has hit several brands hard, while Alo, Gymshark and Vuori have appealed to younger men (and women) as an alternative to UA and ADS apparel. 2) Fashion has changed and with this change comes a change in footwear - for women this means a shift to loafers and ballet flats vs. sneakers. 3) We have not had a new trend in active / sport with white shoes trending for too many years. Bring back some colour and fashion!

Report by The Retail Tracker

Target (TGT) - product improvements continue; stronger value message positions TGT for a better year ahead.
Gap (GPS) - key brands Gap & Old Navy building momentum; while the new CEO is expected to have a positive impact.
Nike (NKE) - lower expectations off Nov Qtr impacted the stock, but adding back retailers allows for EPS acceleration throughout 2024.
Williams-Sonoma (WSM) - the stock is at an all-time high; sees a mismatch between expectations and earnings performance.
Kohl's (KSS) - continues to struggle with its business, yet the stock has traded up with peers, look for share weakness on 4Q results.
VF Corp (VFC) - not convinced the company can turn it around after a tough 2023 as it looks to trim its portfolio of brands.

Consumer Discretionary

Report by Hedgeye

Brian McGough sees more cross currents around NKE today and critical questions that need to be answered than at any time in the three decades that he has covered the stock (and worked at the company). His analysis focuses on NKE’s historical “super cycles”, where it comes off an investing period and accelerates market share, which he thinks is happening now. These cycles tend to last 3-5 years. Brian believes NKE will overdeliver on revenue, margins and EPS this year by a wide margin, and that it is a "must own" stock. TP $180 (65% upside).

Consumer Discretionary

Report by The Retail Tracker

Brands with good momentum include Lululemon, Abercrombie, Chico’s, Steve Madden, LVMH, Prada, Ralph Lauren and Macy’s. According to The Retail Tracker, these retailers are entering the back half of the year with the consumer on their side and good assortments. In the improvement lane, they highlight Gap, Target, American Eagle, Bath & Body Works and Nike. They also like the risk:reward in two currently out of favour names - Williams-Sonoma (a high-quality company, with exceptional brands / leadership) and Victoria's Secret (left for dead / trades at a steep discount).

Consumer Discretionary

Report by Hedgeye

Brian McGough thinks the brand is growing too quickly and outright recklessly. ONON’s model reminds him of when Kors blew up in 2015 - it sold indiscriminately into wholesale, resulting in discounting, and a slowdown in high margin DTC sales. Brian also thinks the situation is reminiscent of early cycle Under Armour which was billed as “the next Nike”. At least UAA was a real brand, he is not convinced ONON is. To date, the company has managed to keep discounting to a minimum, however, this will change in 2023 as 190% inventory growth flows through the channel. Brian sees 50% downside and would pair a short position here against longs in Deckers and NKE.

Consumer Discretionary

Report by The Retail Tracker

IPO'd last year, this Swiss shoe company is on a winning path as it enters the US market - boasting a beautiful design and appealing logo, ON is targeting the fashion x function customer which has proved so successful for the likes of Nike, Lululemon and Moncler. This approach allows for a range of distribution points helping to broaden brand awareness. Retailers like Bandier and Dover Street Market will also help to bring the brand to the younger fashion crowd. This is important, while this shopper can be fickle, this space, unlike denim or beauty, is not seeing new brand launches every year.

Consumer Discretionary

Report by Quo Vadis Capital

The market misunderstands Nike's relationship with FL and is failing to grasp the impact that changes in the entire athletic footwear ecosystem will have on FL’s sales and margins. John Zolidis forecasts >$8 in EPS & FCF/ Share by FY23. Multiple expansion to ONLY 10x P/E - shares could rise to >$80 (+50% upside). Should Nike consider buying FL in order to accelerate its Consumer Direct offence?

Consumer Discretionary

Report by Customer Growth Partners

Following a stellar spring quarter, LULU has eased ever-so-slightly 2QTD and needs to hit the accelerator again. The company faces growing competition from Athleta and Sweaty Betty, performancewear king Nike and an on-fire Target whose new value-priced All-in Motion brand is capturing share of wallet almost across the board. Craig Johnson also flags LULU’s relative soft spot in bringing more men to the party and how pricing is a problem that needs to be addressed.

Consumer Discretionary

Report by Hedgeye

After 20 years, the company finally has a strategy that is accretive to the global duopoly (with Nike). While ADS has repeatedly tried to play NKE’s game (and most of the time ended up losing), Hedgeye’s Brian McGough explains why this is all about to change. His estimates for EBITDA and EPS are above consensus for both this year as well as the firm’s stated ‘ambitions’ for 2025. Targets 40% upside in 12 months, 75% in 2-years and a three-bagger by year-5 of his model.