Nomura Securities Retail Weekend Reading: Looking at the Best Business Models (COH, LULU, KORS)

July 20, 2012 10:47 AM EDT
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Nomura Securities Retail Weekend Reading:

Analyst, Paul Lejuez, said, "During times of macro uncertainty, market skittishness, and a few earnings disappointments, there is a tendency to focus on who is next (to miss). Though we should not ignore near-term concerns, we believe it is important to take a step back and reflect on the leading business models within the retail landscape. The best business models should hold up better and/or bounce back quicker."

Lejuez believes ROIC, revenue growth and valuation are a way to determine balance.

For Softlines, he like Coach (NYSE: COH), Lululemon (Nasdaq: LULU) and Michael Kors (Nasdaq: KORS), which are standouts in terms of ROIC and revenue growth. As for Chico's FAS (NYSE: CHS) and rue21 (NYSE: RUE), Lejuez feels these two are trading at low valuations. Urban Outfitters (Nasdaq: URBN) seems like its too expensive, considering valuation. ROIC and revenue growth are middle of the road.

For Hardlines, Lejuez, thinks Amazon (Nasdaq: AMZN) is tops with revenue growth, however, ROIC declined and valuation is high. Dollar General (NYSE: DG) and Dollar Tree (Nasdaq: DLTR) look balanced considering high multiple, growth and ROIC. Bed Bath & Beyond (Nasdaq: BBBY) and Advanced Auto (NYSE: AAP) look to fit into more value-oriented portfolios.

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