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Takeaway: KSS Greatness Agenda Part 2. Tory Burch says no IPO, likely waiting for a better public market premium.

KSS - Kohl’s part 2 of Greatness Agenda to include smaller stores, Off-Aisle, and Fila Outlets


The only thing better than a Greatness Agenda is a Greatness Agenda part 2. There wasn't much meat to this press release outside of the new concept announcements (Fila Outlet Stores, KSS Off Price, and 5-10 35k sq. ft. stores) and Mansell reiterating the $21bn in sales by 2017. That sales target has nothing to do with the four pillars the management team adamantly insists are performing at or above plan despite the fact that the actual proof measured by comps in our book has been far below the 3% annual comp the company needs to report if it wants to hit its sales targets. Just to hit the 1.5% - 2.5% guide for the year KSS needs to print a 2H comp of 2% - 4% after a 0.7% in 1H against much tougher compares.

That leads us to believe that if KSS isn't going to hit its $21bn organically. Meaning its going to put more emphasis on non-core business to manufacture a little bit of top line growth with little concern about what that does for either margins or returns.

KSS remains one of our top short ideas. The bigger call on the name is that annual earnings are likely to never grow again. To put that into context, we’ve got numbers between $3.25-$3.75 from 2016-18. That’s 30% below the consensus, which has earnings marching over $5.00.

Tory Burch - Tory Burch and Roger Farah say they have no plans to go public and they enjoy running a privately held company.


Ms. Burch can say all she wants that she has no intention of going public -- but that was not always the case. Farrah was brought in from Ralph Lauren to drive the next leg of growth and then take it public. But a couple of things have happened since. 1) the 'space' imploded' in the equity market, and 2) trends at Tory Burch have been a lot closer to Kors, Coach, or even Ralph Lauren than Kate Spade (which is crushing it). Our sense at this point is that Farrah will do his 'thing' at Tory over the course of a couple of years until the growth characteristics of the company will allow it to go public at a premium multiple regardless of the liklihood that Coach will still be clinging to unrealistic margin and growth targets.

Retail Callouts (10/28): KSS Greatness Agenda Part 2, Tory Burch, BGFV - 10 28 2015 chart1

BGFV  - 3Q15 Earnings

The headline earnings number and revenue were a little weak, but that underscores the actual trends in the business. Earnings were down 20% in the quarter on a -0.4% comp. The mid-point of the 4th quarter guide if we back out the benefit from the 53rd week implies earnings down 30% in the 4th quarter as QTD comp trends are down in the LSD rate. Add to that the fact that BGFV just hired a consultant to assess growth plans and try to fix the P&L after the e-comm launch ate away 200-300bps of margin.

Retail Callouts (10/28): KSS Greatness Agenda Part 2, Tory Burch, BGFV - 10 28 2015 chart2

ETH  - 1Q16 Earnings

Retail Callouts (10/28): KSS Greatness Agenda Part 2, Tory Burch, BGFV - 10 28 2015 chart3 B

TGT - Target tests international expansion through online portals


FDX, UPS, AMZN - FedEx and UPS expecting 12% and 10% increases in holiday shipping volume respectively.



RAD, WBA - Walgreens Boots Alliance to Acquire Rite Aid for $17.2 Billion in All-Cash Transaction


CHS - Chico's FAS Announces Shelley Broader as President and Chief Executive Officer