We don’t care much for ASNA – and never really ‘got’ the whole value-play. We actually have grown to not like Retail value-stocks. They’re ‘value’ for a reason, which is not where you want to be in this environment unless the Street is overly penalizing the company for investing in its future (RH, NKE, DKS). ASNA is a good example of the former. We think HBI is next in line.
Here’s what we can all learn from ASNA:
a. Great example of ‘the calendar rule’ – why you should mark your calendar for 12 months after we see a questionable acquisition.
b. It’s been just 5 quarters since ASNA bought and integrated Ann Taylor. We can finally see the real earnings power, and it’s not good. 12 months of first-year integration obfuscated the real earnings power of this company (ie it made it look too large).
c. The company missed the quarter by 50%, cut expectations by 24%, the super-bullish ‘buy rating’ ratio fell by 30%, and the stock is currently trading down 27%.
d. All this brings to question 1) ASNA’s ability to consummate deals, but more so, 2) Why it chose to do this deal in the first place. Great example of why defensive deals don’t win.
Hanesbrands is the king of defensive deals. It has made some of the most egregiously priced deals or questionable assets that we have seen in this economic cycle. Will it implode this quarter? Probably not. But Rich Noll has 12 days left on the job. Mark your calendar for 3Q17 – or sooner.
LINK: Video Replay | HBI Black Book Presentation
LINK: HBI | Why Bloomberg is So Wrong on a VFC/HBI Deal
LINK: HBI | Press the Short
