Retail Position Monitor Update | DUFN, DBI, LB, NKE, MIK, KSS, TJX, ROST, YETI
Takeaway:
Dufry new long idea this week with 'Huge Idea' written all over it. Also incremental changes on DBI, LB, NKE, MIK, KSS, TJX, ROST, YETI.
- DUFN | New Long Idea. The Mother Of All Reopening Stories. This is more than a reopening. It’s a consolidator of travel luxury retail that’s priced like a discount retailer. 3x upside in 3 years. This is at the top of our Long Bias list – just behind RH (which says a lot) while we complete our research. This name has Best Idea Long written all over it.
- DBI and LB both moving higher on our Best Idea Long list. Our confidence on these names is higher than both NKE and GIL as it relates to both near-term and long-term upside relative to consensus. NKE now sits at the bottom of our Best Idea long list -- which is notable in itself given how long it's been a 'go-to' name for us.
- MIK moved to the bottom of our Long Bias list. The stock is up 900% off the bottom (vs 68% for the S&P). Short interest has come down to 24% from 50%. While Old Wall still hates the name, estimates for the Jan 22FY have gone from $1.50 to $2.30 over the past six months, which is closer to the ballpark of being accurate. Stock still cheap and highly shorted, but the Street is catching up on this one.
- KSS moved to the bottom of our Best Ideas Long list. To be clear, the stock is expensive and we think estimates over a TAIL duration are too high. But stimulus will help near-term, and the credit risk with KSS has been pushed out materially (note Josh Steiner and our Financials team just turned bullish on Capital One – COF – KSS’ private label credit card partner). There’ll be a better time (and Quad) to step up the KSS short.
- TJX and ROST both off Short Bias list. While we think that cheap excess inventory buys will be tough to come by for at least 12-18 months due to the snap-back in demand and lean inventories in the full price channel (bearish for off price), the reality is that they’ll benefit from the rebound in demand just the same. Not long candidates, but dangerous shorts here – especially TJX.
- YETI now near the top of our short bias list. 4Q is looking good, so we’re still early short side. But only 8% of the float is short, and we think that upon reopening the company’s most profitable business (hand-held coolers) will decelerate sharply, and consolidated sales growth will slow by 1,000bp while margins revert to a consumer-durable-esque 13% from 19% currently. Earnings should annuitize ~$2.00 per share, which is worth a low to mid-teens multiple – or a a $20-$30 stock. 60-70% downside from here.
