reports
- Jaime Katz
Morningstar | Lowering Kingfisher Moat Rating to None as Efforts to Un...
We are lowering our economic moat rating for Kingfisher to none from narrow after reassessing the firm’s brand intangible assets and scale, now that the firm is halfway through its five-year One Kingfisher restructuring plan. Our contention is supported by returns on invested capital (including goodwill) that have remained depressed, dropping to 7.1% in 2018 (below our 9% weighted average cost of capital) and averaging 7.3% over the past five years. This in turn has led us to downgrade our ste...
- Jaime Katz
Morningstar | Lowering Kingfisher Moat Rating to None as Efforts to Un...
We are lowering our economic moat rating for Kingfisher to none from narrow after reassessing the firm’s brand intangible assets and scale, now that the firm is halfway through its five-year One Kingfisher restructuring plan. Our contention is supported by returns on invested capital (including goodwill) that have remained depressed, dropping to 7.1% in 2018 (below our 9% weighted average cost of capital) and averaging 7.3% over the past five years. This in turn has led us to downgrade our ste...
- Jaime Katz
Morningstar | Kingfisher Moat Rating Falls to None as Competition Rema...
Kingfisher has undertaken significant initiatives through its One Kingfisher plan to improve the operating profit profile of a previously siloed business model by unifying the organization. In focusing on a united product offering across regions and brands, an increased digital presence, and the elimination of redundancies in goods not for resale, the firm’s margin and cost profile should be on a modestly improving trajectory despite ongoing struggles in the French market; we model operating m...
- Jaime Katz
Morningstar | Kingfisher Moat Rating Falls to None as Competition Rema...
Kingfisher has undertaken significant initiatives through its One Kingfisher plan to improve the operating profit profile of a previously siloed business model by unifying the organization. In focusing on a united product offering across regions and brands, an increased digital presence, and the elimination of redundancies in goods not for resale, the firm’s margin and cost profile should be on a modestly improving trajectory despite ongoing struggles in the French market; we model operating m...
- Jaime Katz
Lowering Kingfisher Moat Rating to None as Efforts to Unify Business F...
We are lowering our economic moat rating for Kingfisher to none from narrow after reassessing the firm’s brand intangible assets and scale, now that the firm is halfway through its five-year One Kingfisher restructuring plan. Our contention is supported by returns on invested capital (including goodwill) that have remained depressed, dropping to 7.1% in 2018 (below our 9% weighted average cost of capital) and averaging 7.3% over the past five years. This in turn has led us to downgrade our ste...
- Jaime Katz
Lowering Kingfisher Moat Rating to None as Efforts to Unify Business F...
We are lowering our economic moat rating for Kingfisher to none from narrow after reassessing the firm’s brand intangible assets and scale, now that the firm is halfway through its five-year One Kingfisher restructuring plan. Our contention is supported by returns on invested capital (including goodwill) that have remained depressed, dropping to 7.1% in 2018 (below our 9% weighted average cost of capital) and averaging 7.3% over the past five years. This in turn has led us to downgrade our ste...
- Jaime Katz
Kingfisher Moat Rating Falls to None as Competition Remains Fierce
We don't plan to alter our GBX 300 fair value estimate for narrow-moat Kingfisher after assessing the third-quarter sales update. We view the shares as undervalued. While total sales in constant currency rose 1.2%, in line with our 1.4% outlook for the second half, currency provided some headwinds in the period, leading to reported growth of just 0.2%. The France business (37% of sales) continues to track slightly worse than our more than 1% decline forecast for the second half, with Castorama d...
- Jaime Katz
Kingfisher Moat Rating Falls to None as Competition Remains Fierce
We don't plan to alter our GBX 300 fair value estimate for narrow-moat Kingfisher after assessing the third-quarter sales update. We view the shares as undervalued. While total sales in constant currency rose 1.2%, in line with our 1.4% outlook for the second half, currency provided some headwinds in the period, leading to reported growth of just 0.2%. The France business (37% of sales) continues to track slightly worse than our more than 1% decline forecast for the second half, with Castorama d...
- Jaime Katz
Morningstar | HOG Updated Star Rating from 05 Mar 2019
With a long history of manufacturing experience, Harley-Davidson has brand strength and a dealer network that give the company a wide economic moat and dominant position in the U.S. motorcycle market. However, there are no switching costs to protect Harley's brand when consumers replace their bikes, and the premium price Harley commands relative to its peers has proved problematic during cyclical downturns and periods of competitive pricing. During these periods, lower peer pricing has dragged o...
- Jaime Katz
Morningstar | Norwegian Pushes Toward Full Speed Ahead 2020 Goals Than...
Norwegian Cruise Line's capacity has risen to more than 54,000 berths from around 30,000 prior to the acquisition of Prestige, making it an increasingly relevant competitor in the cruise industry. Capitalizing on decades of consumer analytics and best practices across brands, the firm can nimbly cater to changing trends, in our view. Additionally, we view Norwegian's freestyle cruising as a differentiated product, catering well to an older demographic, who may want to take their families on holi...
- Jaime Katz
Norwegian Pushes Toward Full Speed Ahead 2020 Goals Thanks to Solid De...
We don’t plan any material change to our $69 fair value estimate for narrow-moat Norwegian Cruise Line and view the shares as undervalued, trading at about 10.5 times the midpoint of updated earnings per share guidance of $5.20-$5.30. With a mostly organic year ahead (Encore doesn’t enter the fleet until the fourth quarter), the company’s initial take on 2019 wasn’t much different than our forecast. Our net yield forecast of 2.5% was at the low end of Norwegian's 2.5%-3.5% as-reported yi...
- Jaime Katz
Morningstar | Wayfair's Spending to Build Out Infrastructure Continues...
Wayfair continues to take share in the fragmented home goods market, which it believes represents a $300 billion opportunity in North America and another $300 billion addressable market in Europe. The firm’s differentiation comes by way of product breadth and its logistics network, which permits faster delivery of both small and large parcels than most of its peers. Faster delivery is a function of fewer touch points, reducing damage and improving Wayfair’s brand equity with each positive de...
- Jaime Katz
Wayfair's Spending to Build Out Infrastructure Continues to Weigh on P...
No-moat Wayfair continues to outpace its home furnishings peers, increasing sales 44% to $6.8 billion in 2018. This pace is well ahead of other operators in the space as well as the furniture and home furnishings industry, which rose at a mid-single-digit clip in 2018. But growth comes at a cost, and spending on customer acquisition remains an overhang, making our outlook less sanguine. Direct advertising retail spending increased 42% and customer acquisition costs rose 10% (by our math). Revenu...
- Jaime Katz
Morningstar | Solid Content and Power Rangers Launch Provide Growth fo...
Hasbro continues to hold a leadership position in the $28 billion domestic toy industry, developing, manufacturing, and marketing global brands that include Transformers, My Little Pony, and Nerf. The firm operates a relatively differentiated business model, thanks to its digital properties exposure, content creation ability, and key licensing arrangements. Business relationships with firms like Backflip Studios and Activision have expanded Hasbro's presence in the digital arena, but also import...
- Jaime Katz
Solid Content and Power Rangers Launch Provide Growth for Hasbro in 20...
The dislocation that the Toys 'R' Us liquidation has caused across the toy industry is set to subside slowly as inventory find its ways to new distribution outlets and channels over the next few years. For narrow-moat Hasbro, this has waylaid profit growth as the firm now anticipates it will revisit 2017 sales and operating margin levels again ($5.2 billion and +15%, respectively), but not until 2020. This implies mid-single-digit sales and double-digit operating margin increases over the next t...
- Jaime Katz
Morningstar | GPS Updated Star Rating from 01 Mar 2019
No-moat Gap ended 2018 on a mixed note with Old Navy continuing to outperform the company average while Gap lagged. For the year, sales grew 4.5% on 38.1% gross and 8.2% operating margins behind our estimates of 6% sales growth on 38.4% gross and 8.5% operating margins. Headlining the quarter were the firm’s strategic initiatives of spinning off the Old Navy business (47% of 2018 revenue) by 2020 and restructuring the Gap segment by closing 230 stores (19% of the 2018 store base) over the next...
- Jaime Katz
Morningstar | Gap Closes 2018 With Plan To Spin Off Old Navy and Redu...
No-moat Gap ended 2018 on a mixed note with Old Navy continuing to outperform the company average while Gap lagged. For the year, sales grew 4.5% on 38.1% gross and 8.2% operating margins behind our estimates of 6% sales growth on 38.4% gross and 8.5% operating margins. Headlining the quarter were the firm’s strategic initiatives of spinning off the Old Navy business (47% of 2018 revenue) by 2020 and restructuring the Gap segment by closing 230 stores (19% of the 2018 store base) over the next...
- Jaime Katz
Gap Closes 2018 With Plan To Spin Off Old Navy and Reduce Gap Brand Fo...
No-moat Gap ended 2018 on a mixed note with Old Navy continuing to outperform the company average while Gap lagged. For the year, sales grew 4.5% on 38.1% gross and 8.2% operating margins behind our estimates of 6% sales growth on 38.4% gross and 8.5% operating margins. Headlining the quarter were the firm’s strategic initiatives of spinning off the Old Navy business (47% of 2018 revenue) by 2020 and restructuring the Gap segment by closing 230 stores (19% of the 2018 store base) over the next...
- Jaime Katz
Morningstar | L Brands Ends 2018 With Everything on the Table for the ...
Narrow-moat L Brands' fourth-quarter  story remained consistent with bifurcated trends in recent periods, as Victoria’s Secret struggled and Bath & Body Works outperformed. Full-year results tracked our estimates, with sales growing 4.8% on 37% gross, and 10.9% adjusted operating margins (versus our estimates of 4.9%, 37%, and 10.5%, respectively). While performance has been volatile with VS, the new brand CEO could reinvigorate the merchandise, and we remain confident in our long-term fore...
- Jaime Katz
L Brands Ends 2018 With Everything on the Table for the Turnaround at ...
Narrow-moat L Brands' fourth-quarter story remained consistent with bifurcated trends in recent periods, as Victoria’s Secret struggled and Bath & Body Works outperformed. Full-year results tracked our estimates, with sales growing 4.8% on 37% gross, and 10.9% adjusted operating margins (versus our estimates of 4.9%, 37%, and 10.5%, respectively). While performance has been volatile with VS, the new brand CEO could reinvigorate the merchandise, and we remain confident in our long-term foreca...
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