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Nomura - Oct 11, 12 - International Brands - Global Retail Databook

Nomura - Oct 11, 12 - International Brands - Global Retail Databook

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Published by: Debbie Bright on Oct 13, 2012
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07/13/2013

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International brands
 RETAIL
EQUITY RESEARCH
Retail diaries: Global retail databook – Sept
 
After months of weakness,metrics start to improve;Correction in luxury multiples
October 11, 2012
Turnaround of trends in August as retail sales and CCI increase
 After showing weakness for the last few months, retail metrics began toshow some improvement, with Hong Kong, Australia, Japan and Germanyall seeing y-y growth momentum recover in August and the US continuedits strength. On Consumer Confidence Index (CCI) as well, the trend wasmostly rising. We also saw a momentum rebound in Swiss watch exportvalue; however, absolute value term continues to decline. Travel data(PRK & ASK) showed improvement across all regions except Africa. In anutshell, we think it is too early to say a sustained recovery is in the works;however retail health is looking better after the last few weak months.
Which have been the best performers? Which have underperformed?
The retail subsector’s performance was mixed in Sept. Luggage continuedas the best performer, followed by OEM. Luxury corrected and Chinabranded retail was the worst-performing subsector. In terms of individualstocks, Michael Kors and GAP top the YTD list, while Anta and VIP led thepack last month. Inditex saw the most positive EPS upgrades from thestreet.
Organic growth and SSSG trend: Broadly in line with our estimates
Prada's 2Q12 continued to have strong SSSG, but slowed a bit in Italy andNorth America. The outlook was also cautious, in line with other luxurynames. Otherwise, the luxury earnings season was mixed; mid-marketretailers (eg, GAP, H&M, Inditex) mostly beat the market’s expectation,while cosmetics names were in line. Chinese retailers delivered mostly inline results.
Samsonite is our top pick, but keep tabs on luxury
 Although Samsonite (Buy) is up 30% since its recent trough in July, webelieve potential upside still remains, led by its sharp discount to Tumi andstrong fundamentals. Regarding Li&Fung, we don’t expect many near-termcatalysts, thus we maintain our Neutral. Esprit's 2H12 results showed itspoor performance might not only come from transformation spending butalso weaker sales momentum. We maintain our Neutral due to a lack of catalysts. Correction in valuation for luxury likely makes a case for entrypoints, but Prada is still trading rich vs our cautious outlook on sector.
London again takes the crown of Global Fashion Capital in 2012
The combination of Kate Middleton and the Summer Olympics helpedLondon retain its crown as the top Global Fashion Capital in 2012,followed by New York, Barcelona, Paris and Madrid.
Cautious in the short term on China-branded retailers
We are cautious on retailers’ short-term performance and expect weak3Q12 data to be released. We believe China retail sales may improve in4Q12, benefiting from FAI growth acceleration and last year’s low base.
Anchor themes
Retail diaries - The monthlyglobal retail databook. In thisdata-centric retail diariesmonthly, we keep track of global datapoints on retail,consumer health, valuations,price performance, relativecomparisons, news flow,company events.
Research analystsHong Kong RetailTanuj Shori - NIHK
tanuj.shori@nomura.com+852 2252 1407
Sarah Xing - NIHK
sarah.xing@nomura.com+852 2252 1565
Vivien Hu - NIHK
vivien.hu@nomura.com+852 2252 1569
Vishnuvardana Reddy - NSFSPL
vishnuvardana.reddy@nomura.com+91 22 3053 2847
 
ee Appendix A-1 for analystcertification, importantdisclosures and the status of non-US analysts.
 
Nomura |International brands October 11, 2012 
2
Company upcoming events
Fig. 1: Important upcoming events
Source: Bloomberg, Nomura research
Company nameTickerEventDateTimeHigh End Brands/Luxury
LuxotticaLUX IMQ3 2012 Earnings Release10/25/2012Christian DiorCDI FPAnnual General Meeting10/26/201221:30HermesRMS FPDash 2012-Diversified Asset Show10/24/201221:10PPRPP FPQ3 2012 Sales and Revenue Release10/25/2012BurberryBRBY LNQ2 2013 Sales and Revenue Release10/11/2012Hugo BossBOSS GRQ3 2012 Earnings Release10/30/2012CoachCOH USQ1 2013 Earnings Release10/23/201219:00Tiffany & CoTIF USWells Fargo Securities Retail and RestaurantsSummit10/02/2012
Department Stores
Macy'sM USSeptember 2012 Sales and Revenue Release10/04/2012NordstromJWN USSeptember 2012 Sales and Revenue Release10/04/2012SaksSKS USSeptember 2012 Sales and Revenue Release10/04/2012Kohl'sKSS USSeptember 2012 Sales and Revenue Release10/04/2012JC PenneyJCP USLimitedLTD USSeptember 2012 Sales and Revenue Release10/04/2012TargetTGT USSeptember 2012 Sales and Revenue Release10/04/2012NextNXT LNQ3 2013 Sales and Revenue Release10/31/201214:00
Global middle-range/mass market
 Abercrombie & FitchANF USTelsey Advisory Group (TAG) Fall Consumer Conference10/03/2012 American EagleAEO USTelsey Advisory Group (TAG) Fall Consumer Conference10/03/2012GAPGPS USSeptember 2012 Sales and Revenue Release10/04/2012H&MHMB SSSeptember 2012 Sales and Revenue Release10/15/2012
OEM
Yue Yuen551 HKChina Corporate Day10/15/2012
Luggage
VIPVIP INQ2 2013 Earnings Release10/24/2012
Beauty and personal care
 AvonAVP USQ3 2012 Earnings ReleaseNu SkinNUS USTelsey Advisory Group (TAG) Fall Consumer Conference10/03/2012Q3 2012 Earnings Release10/25/2012RevlonREV USQ3 2012 Earnings Release10/26/2012Fancl Corp4921 JPS1 2013 Earnings Release10/26/2012Shiseido4911 JPS1 2013 Earnings Release10/31/2012Kose4922 JPS1 2013 Earnings Release10/26/2012LG Household051900 KSQ3 2012 Earnings Release10/27/2012
China Branded Retailer
I.T999 HKS1 2013 Earnings Release10/24/2012
 
Nomura |International brands October 11, 2012 
3
Fig. 2: HK Coverage Stock List
Note: Currency: HKD. Closing prices as of 10 Oct 2012; Ratings and Price Targets are as of the date of the most recentlypublished report (http://www.Nomura.com) rather than the date of this documentSource: Bloomberg, Nomura research
Sector P/E and performance comparison
Fig. 3: Luxury sector and Prada trading P/E comparison
From August 2011 to September 2012
Note: Closing prices as of September 28, 2012Source: Bloomberg, Nomura research
Fig. 4: Global mass-mid market sector, luggage andSamsonite trading P/E comparison
From August 2011 to September 2012
Note: Closing prices as of September 28, 2012Source: Bloomberg, Nomura research
Fig. 5: Beauty and personal care sector and L’Occitanetrading P/E comparison
From August 2011 to September 2012
Note: Closing prices as of September 28, 2012Source: Bloomberg, Nomura research
Fig. 6: Global mass-mid market sector and Esprit trading P/Ecomparison
From August 2011 to September 2012
Note: Closing prices as of September 28, 2012Source: Bloomberg, Nomura research
CompanyTickerRatingTarget PriceLive Price
Prada1913 HKNeutral57.7059.75Esprit 330 HKNeutral12.5012.92Li & Fung494 HKNeutral13.6011.98Samsonite1910 HKBuy18.0014.86L'Occitane973 HKBuy22.6021Intime Department Store1833 HKBuy11.008.33New World Dept Store China825 HKNeutral4.604.41Parkson Retail Group3368 HKNeutral6.806.39Golden Eagle Retail Group3308 HKBuy17.6015.18
13.015.017.019.021.023.025.027.0
   A  u  g  -   1   1   S  e  p  -   1   1   O  c   t  -   1   1   N  o  v  -   1   1   D  e  c  -   1   1   D  e  c  -   1   1   J  a  n  -   1   2   F  e   b  -   1   2   M  a  r  -   1   2   A  p  r  -   1   2   M  a  y  -   1   2   J  u  n  -   1   2   J  u   l  -   1   2   A  u  g  -   1   2   S  e  p  -   1   2
Luxury Sector Trading PE Luxury Sector Mean Luxury Sector Mean+2std Luxury Sector Mean+1stdLuxury Sector Mean-1std Luxury Sector Mean-2std Prada Trading PE
9.011.013.015.017.019.021.0
   A  u  g -   1   1   S  e  p -   1   1   O  c   t -   1   1   N  o  v -   1   1   D  e  c -   1   1   J  a  n -   1   2   F  e   b -   1   2   M  a  r -   1   2   A  p  r -   1   2   M  a  y -   1   2   J  u  n -   1   2   J  u   l -   1   2   A  u  g -   1   2   S  e  p -   1   2
Global Mass Market Sector Trading PE Global Mass Market Sector Mean Global Mass Market Sector Mean+2stdGlobal Mass Market Sector Mean+1std Global Mass Market Sector Mean-1std Global Mass Market Sector Mean-2stdSamsonite Trading PE Luggage Sector Trading PE
14.015.016.017.018.019.020.021.022.0
   A  u  g  -   1   1   S  e  p  -   1   1   O  c   t  -   1   1   N  o  v  -   1   1   D  e  c  -   1   1   D  e  c  -   1   1   J  a  n  -   1   2   F  e   b  -   1   2   M  a  r  -   1   2   A  p  r  -   1   2   M  a  y  -   1   2   J  u  n  -   1   2   J  u   l  -   1   2   A  u  g  -   1   2   S  e  p  -   1   2
Beauty and Personal Care Sector Trading PEBeauty and Personal Care Sector MeanBeauty and Personal Care Sector Mean+2stdBeauty and Personal Care Sector Mean+1stdBeauty and Personal Care Sector Mean-1stdBeauty and Personal Care Sector Mean-2stdL'Occitane Trading PE
5.010.015.020.025.030.0
   A  u  g -   1   1   S  e  p -   1   1   O  c   t -   1   1   N  o  v -   1   1   D  e  c -   1   1   D  e  c -   1   1   J  a  n -   1   2   F  e   b -   1   2   M  a  r -   1   2   A  p  r -   1   2   M  a  y -   1   2   J  u  n -   1   2   J  u   l -   1   2   A  u  g -   1   2   S  e  p -   1   2
Global Mass Market Sector Trading PE Global Mass Market Sector Mean Global Mass Market Sector Mean+2stdGlobal Mass Market Sector Mean+1std Global Mass Market Sector Mean-1std Global Mass Market Sector Mean-2stdEsprit Trading PE

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