Canaccord Genuity on Retail/Footwear & Apparel: 2012 Outlook for Consumer Retail; UA, FL Top Picks
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Rating Summary:
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
14 Buy, 24 Hold, 5 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Canaccord Genuity on Retail/Footwear & Apparel: 2012 Outlook for Consumer Retail; UA, FL Top Picks
Analyst, Camilo Lyon, said, "Heading into 2012, we are not assuming a significant improvement to the consumer spending environment, which will likely continue to be pressured by high unemployment and low wage growth. In addition, price increases from both apparel and footwear manufacturers will begin to flow through to retail across a wider breadth of SKUs as compared to only selective price increases on a narrow set of SKUs that occurred in 2011. With this backdrop in place, we believe the athletic sector is well positioned given the secular trends toward active living. Our top picks for 2012 are UA for its visible growth story and FL for its EBIT margin recovery opportunity."
Under Armour (NYSE: UA)(BUY-rated) - "Our top athletic vendor pick is UA. We believe the company’s multiple top-line drivers coupled with improving gross margin prospects should result in another year of solid EPS growth. Visible outlet sq. ft. growth, new line extensions, and the company’s new entry into the cotton-based market should result in top-line growth in excess of 25%, in our view. We also believe the company’s gross margin issues that arose from supply chain inefficiencies should inflect in H2/12, improving through 2013."
"Foot Locker (NYSE: FL)(BUY-rated): "Our top athletic retailer pick is FL. We believe FL is in a unique position to benefit from the athletic footwear cycle in addition to continuing to execute on its EBIT margin recovery initiatives. While we do not anticipate a deceleration in the athletic footwear cycle that has been driving solid comp growth in running and basketball, we are comforted by FL’s opportunity to improve its margin structure through changes to its apparel business that are less top line dependent."
Analyst, Camilo Lyon, said, "Heading into 2012, we are not assuming a significant improvement to the consumer spending environment, which will likely continue to be pressured by high unemployment and low wage growth. In addition, price increases from both apparel and footwear manufacturers will begin to flow through to retail across a wider breadth of SKUs as compared to only selective price increases on a narrow set of SKUs that occurred in 2011. With this backdrop in place, we believe the athletic sector is well positioned given the secular trends toward active living. Our top picks for 2012 are UA for its visible growth story and FL for its EBIT margin recovery opportunity."
Under Armour (NYSE: UA)(BUY-rated) - "Our top athletic vendor pick is UA. We believe the company’s multiple top-line drivers coupled with improving gross margin prospects should result in another year of solid EPS growth. Visible outlet sq. ft. growth, new line extensions, and the company’s new entry into the cotton-based market should result in top-line growth in excess of 25%, in our view. We also believe the company’s gross margin issues that arose from supply chain inefficiencies should inflect in H2/12, improving through 2013."
"Foot Locker (NYSE: FL)(BUY-rated): "Our top athletic retailer pick is FL. We believe FL is in a unique position to benefit from the athletic footwear cycle in addition to continuing to execute on its EBIT margin recovery initiatives. While we do not anticipate a deceleration in the athletic footwear cycle that has been driving solid comp growth in running and basketball, we are comforted by FL’s opportunity to improve its margin structure through changes to its apparel business that are less top line dependent."
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