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
  • Retail Comparison Proj.

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

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