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Investment Recommendations in the Consumer Discretionary Sector: Abercrombie and Kohl's Analysis

This presentation provides a comprehensive analysis and investment recommendations in the Consumer Discretionary sector, focusing on Abercrombie & Fitch and Kohl's. With an overweight sector outlook due to improving consumer spending and low interest rates, we recommend selling Abercrombie due to declining same-store sales and potential self-cannibalization risks. In contrast, we advocate buying Kohl's, which has shown significant sales growth and profitability despite recent setbacks. Other holdings include Lowe's, McDonald's, and Panera.

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Investment Recommendations in the Consumer Discretionary Sector: Abercrombie and Kohl's Analysis

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Presentation Transcript

  1. Consumer Discretionary – Company Presentation Claudia Castro Lalit Chopra Marc Davis Dan Feldmann Irini Girgis Paul Howlett

  2. Outline • Recommendation • Abercrombie Overview • Kohl’s Overview • Other Holdings

  3. Recommendation • Sector: • Overweight Consumer Discretionary • Key Drivers • Consumer spending improving, interest rates very low. • Financial Analysis • Decent revenue growth, earnings & margins weak. Margin improvement likely in both margins and spending. • Valuation • Ratios and relative charts indicate sector properly valued. • Companies: • Sell Abercrombie • Replace with Kohl’s • Maintain Lowes, McDonalds, Panera

  4. Abercrombie & Fitch

  5. Business Analysis • Businesses: • Retail Clothing • Manufacturing • Distribution • Main Products • Abercrombie & Fitch • abercrombie • Hollister

  6. Abercrombie Cash Flow Analysis

  7. Abercrombie DuPont

  8. Abercrombie Valuation Analysis

  9. Abercrombie Valuation Analysis

  10. Recommendation • Sell all of our position in A&F • Falling same-store sales (-6%) • Despite double digit sales growth at Hollister • Possible self-cannibalization from Hollister • Lowered its Q2 estimated earnings from .35 to .30

  11. Kohl’s

  12. Business Analysis • Businesses • Retail • Distribution • Sales • Products • Moderately priced apparel, shoes, accessories and home products

  13. Kohl’s Cash Flow Analysis

  14. Kohl’s Dupont Analysis

  15. Kohl’s: Valuation Analysis

  16. Kohl’s Valuation Analysis

  17. Recommendation • Buy Kohl’s • Use profits from sale of A&F • Why? • Huge buying opportunity (stock recently took a hit) • Record sales (up 13.2% to $2.12 billion) • Profits up 4.1% YOY

  18. Other Holdings • Lowes • McDonalds • Panera

  19. Final Recommendation • Sell Abercrombie • Replace with Kohl’s • Maintain Lowes, McDonalds, Panera

  20. QUESTIONS???

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