KTB: Lower conviction on this one as a short. Stock has pulled back 25% from June highs and is now only ~20% from the Covid shock lows. Long term (2022) consensus EPS expectations only have a recovery to about 60% of 2019 levels. Near term sales should be improving. This remains on short bias, as the expected rate of sales recovery over several quarters might be overly bullish, back to school season is still uncertain, and leverage is still a concern. But on the margin this name is lower conviction at this price as 2020 EPS expectations have fallen nearly 40% in the last 2.5 months.
DOL: Lower conviction long side (currently on Long Bias list). Dollarama making 10month highs taking the NTM PE to near the levels of summer 2018. We still like the long term comp levers of price ‘increases’ and new price point introductions, but there still a lot of sales/profit uncertainty over the coming quarters with stock at 25x EPS and 16x EBITDA.
CRI: No change on overall conviction, but some updated thoughts. Probably early to be buying, but we’ve been warming up to this one relative to other parts of basic apparel. Recent news articles have highlighted the weak US fertility rates, so CRI is perhaps fighting that headwind though at the same time the “make big life decisions later” wave millennials are hitting their mid 30s. Its becoming now or never for a rate of change improvement in fertility. For CRI’s category overall, it's less discretionary than the majority of apparel. It's a brand the wholesale channel will want to carry as much of as possible. And a shift to eCommerce is net bullish for margins. Expectations are probably still too high over the upcoming 2-3 quarters (especially as wholesale channel resets), but looking for a potential time/price to be long this one.
