HBI: Pinched at JCP?

 

MFB announced on their call today that they will be building a JCP shop to showcase its brands. This matters for HBI with MFB a primary competitor. Consider the following:

  • While HBI’s brand portfolio is largely skewed towards men, the women’s intimates business accounts for ~40% of HBI’s Innerwear business and ~20% of sales overall.
  • The Innerwear business accounts for half of HBI’s EBIT.
  • If we assume that women’s is at a comparable margin if not slightly below men’s and that JCP accounts for ~2% of women’s Innerwear sales then we’re looking at roughly $5-$6mm in EBIT at risk, or $0.04-$0.05 in EPS.
  • Anecdotally, HBI’s (Playtex, Bali, and Barely There) brands represent the largest portion of JCP’s bra offering at roughly 17% with MFB at half the size accounting for ~10%. While a MFB shop doesn’t automatically eliminate HBI from contention, the likelihood is very high.
  • This might appear modest with consensus EPS of $2.55 in FY12, but it’s just one example of increasingly disruptive competition HBI and others have to manage through as a result of JCP’s evolution and open-for-bid Shop process.

 

Casey Flavin

Director








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