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Retail Comparison Proj.

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  • *most recent quarter
  • Operating activities are so high because of the huge amount of merchandise inventory American Eagle holds
  • Transcript

    • 1. Retail Company Comparison
      AMERICAN EAGLE
      OUTFITTERS, INC.
      COACH INC.
      Darrin Nandhavan
    • 2. Table of Contents
      Retail Industry Overview
      Company Overview
      Financials
      Valuation and Ratios
      SWOT Analysis
      Stock Price History
      Discounted Cash Flow
      Questions and Comments
    • 3. Retail Industry Overview
      Retail multinationals expanding to middle class outside of US
      Consumer spending remains fragile and depends on job creation and income growth
      Input costs increasing
      Must increase prices to maintain margins
      Must cut costs by finding cheaper inputs and suppliers
      Companies discounting heavily to drive sales
    • 4. American Eagle Outfitters, Inc.
      Stock price: $12.49
      Consists of AE brand, 77kids, Aerie and Aerie Fit
      Closed down MARTIN+OSA operations by end of June
      Opening new stores outside of North America
      Significant market share in denim
      Denim price points between competitors Aeropostale and Hollister
      Targets15-25 year olds for AE and 2-10 year olds for 77kids
      Implements aggressive promotional strategies
    • 5. Coach Inc. Overview
      Stock Price: $37.28
      Coach operates factory and Coach stores
      Expanding in Western Europe with growing market in China and Japan
      Partnership with Printemps and Hackett Ltd.
      Opened distribution center in China
      Sweet spot of price points between $298-$358
      Poppy line, released in April extremely successful
      Launching Reed Krakoff Collection
    • 6. American Eagle OutfittersSnapshot of Income Statement
    • 7. American Eagle OutfittersSnapshot of Balance Sheet
    • 8. American Eagle Outfitters Snapshot of Statement of Cash Flows
    • 9. American Eagle OutfittersMargins
    • 10. Coach Inc.Snapshot of Income Statement
    • 11. Coach Inc.Snapshot of Balance Sheet
    • 12. Coach Inc.Snapshot of Statement of Cash Flows
    • 13. Coach Inc.Margins
    • 14. American Eagle Outfitters Valuation and Ratios
      Retail-Specific Ratios
    • 15. COACH Inc. Valuation and Ratios
      Retail-Specific Ratios
    • 16. American Eagle Outfitters SWOT Analysis
      Strengths
      Retains significant market share in denim category
      Strong brand awareness
      Implemented aggressive stock buyback program – 6M shares YTD; 24 M remaining
      Weaknesses
      Struggling for market share in women’s knit top category
      Weak comp sales in most recent quarter
      Gross margins under pressure in 2011
      Threats
      Struggle for market share in teen space with Aeropostale’s high brand awareness and Hollister’s more promotional business
      Opportunities
      Opening stores in Middle East
    • 17. Coach Inc.SWOT Analysis
      Strengths
      Affordable high quality leather products
      More design innovative than competitors
      Positive handbag comps – 22% more units sold
      High brand awareness
      $1.2 billion stock repurchase plan
      Weaknesses
      Cannibalization – factory stores stealing sales from Coach stores
      Small men’s market share in global market
      Threats
      Gross margin pressures in 2011
      Opportunities
      Expansion into Western Europe
      Initiative to expand men’s line
    • 18. Stock Price History and Movement
      COACH vs. AMERICAN EAGLE vs. S&P500
      (Index, 2 year period)
      10/08
      1/09
      4/09
      10/09
      7/09
      4/10
      1/10
      7/10
    • 19. Discounted Cash Flow Analysis
      Coach, Inc.
      American Eagle Outfitters, Inc.
      Neutral, Underpriced
      Stock highly undervalued; most undervalued in teen space – seen in EV/EBITDA measure
      Currently has high levels of inventory and low comps, trouble with operating margins
      Stock price will look up next quarter with decrease in inventory (back to school and holiday season)
      Solid balance sheet with little debt
      Overpriced
      More pricey but stock has beaten S&P500; upward trend
      Many opportunities for growth abroad will increase market share and sales
      Margin pressure will be mitigated with Coach‘s new distribution center in China
      More innovative in design than competitors
      Solid balance sheet
    • 20. Discounted Cash Flow Analysis
      American Eagle Outfitters Outputs (In Millions)
      Conclusion: Neutral
      Enterprise Value: $2,510.62
      Fair Value of Equity:$2,493.12
      Fair Value Per Share: $11.87
      • Current Stock Price:$12.49
      Target Price: $9.50
      Coach, Inc. Outputs (In Millions)
      Conclusion: Neutral
      Enterprise Value:$13,804.50
      Fair Value of Equity: $13,775.00
      Fair Value Per Share: $45.16
      Current stock price: $37.28
      Target Price: $31.61
    • 21. Works Cited
      Yahoo Finance
      Google Finance
      FactSet CallStreet
      Reuters.com
      EDGAR SEC Filings
      Lots of help from Amory and Thad