edition v market update
By Maryem Manseur and Ava Wildstein
State of the US Economy:
Coming out of the pandemic, there continues to be a secular shift away from brick and mortar shopping in favor of e-commerce, maintaining the momentum that the e-commerce sector experienced due to the pandemic. Retail stores are continuing to suffer from supply chain disruptions and cost inflation, as wages for employees continue to rise, and the availability of labor is at an all time low. Conversely, new technological enhancements allow online shoppers to instantaneously participate in trends and select a wide range of styles at the click of a button. The continued penetration of online shopping on social media platforms such as Instagram and TikTok create a value proposition for new businesses to leverage directly to consumer channels and effectively compete with previously entrenched large retailers.
Company Highlights:
Aritzia (TSX:ATZ):
Market Capitalization: C$5.6 billion
Aritzia is a publicly traded Canadian company that designs and sells apparel and accessories for women. Founded in 1984 by Brian Hill, Aritzia encompasses upscale retail stores and an online platform. For the latest twelve months, ending August 2021, the company generated a total revenue of approximately C$1.1 billion, and C$228 million of EBITDA (earnings before interest, taxes, depreciation and amortization). Because of strong e-commerce performance, Aritzia sales have surpassed pre-pandemic levels and its active client base has grown by over 50%. Aritzia trades at a healthy 20x EBITDA and is only modestly leveraged, with total debt to EBITDA at just 1.8x. This means that the businesses’ ability to generate cash flow is rather exceptional. The company has been trading at a near 52 week high, and many of the equity research analysts that cover the stock have been boosting their ratings, or a measure of a stock’s performance, as well as their anticipated price targets. Aritzia last issued its quarterly earnings on October 13th. The company reported C$0.32 earnings per share (EPS) for the quarter, beating the Zacks’ Consensus Estimate of C$0.22. From a top line revenue perspective, the company navigated the pandemic reasonably well, with revenues declining only 12.5% in fiscal 2021 as compared to fiscal 2020. However, EBITDA was more significantly affected, declining 50% over the same period. Over the course of the last six months, the company has continued to see a strong recovery, with the latest twelve month (LTM) revenues up 33% over the prior fiscal year end. More impressively, the company’s EBITDA has increased by 170%.
Macy’s (NYSE:M):
Macy’s Inc. operates stores, websites and mobile app locations under the Macy’s, Bloomingdales, and BlueMercury brands. Founded in 1830 by Rowland Hussey Macy, Macy’s Inc. encompasses over 75,000 employees across 727 store locations in 43 states. For the latest twelve months, ending August 2021, the company generated a total revenue of approximately $21.9 billion, and $2 billion of EBITDA. The company has a total enterprise valuation of approximately $15 billion and the market capitalization of its equity is $9.2 billion. Macy’s Inc. trades at a depressed 6.2x EBITDA, with proportionally high leverage, at 3.3x EBITDA. At $31 per share, the company is operating at a near 52 week high coming off of the pandemic. Shares of Macy’s Inc. have earned a consensus rating of “hold” from the fourteen equity research analysts that are presently covering the company. For the period ending July 31st, quarterly net sales grew to $5.65 billion from $3.56 billion a year earlier. This is significantly higher than the analyst estimates of $5 billion. The company expects full year adjusted earnings to be in the range of $3.50 per share up from guidance of approximately $2 per share. This indicates a very strong recovery, as the company rebounds from the pandemic driven lows. Macy’s Inc. shares are now up 91% year to date.
Saks Fifth Avenue
Founded in 1867, Saks Fifth Avenue is one of the oldest luxury department retailers in business. Saks’ parent company, Hudson's Bay Co. recently made the decision to go public in 2020 in an effort to focus on reinvesting in the business. Following this decision, Saks has recently decided to split off their e-commerce sector of the business earlier this year into a separate business entity and take this portion of the business public in early 2022. Recently valued at $6 billion, the e-commerce unit is expected to see continued growth in the next year, based on their impressive performance during the pandemic. The online unit’s gross merchandise value increased 82% from Q2 in 2019 to the same period this year, showing consistency with the overall market trend towards increased online shopping. Although the separation has little effect on customers’ shopping experience, the e-commerce IPO will be an interesting start to the next fiscal year for Saks.
Spanx
Spanx is a woman-owned shapewear company founded in 2000 that essentially launched the niche shapewear market as we know it. As the pandemic subsides, the demand for shapewear is increasing as people are beginning to attend in-person events and look their best while doing so. Demonstrating high growth during the pandemic and increased strength in their online business, which accounts for two thirds of their revenue, Spanx is looking to go public in the near future. Spanx recently entered into a deal with Blackstone, the world’s largest private equity firm, acquiring a majority stake in the company. Blackstone valued Spanx at $1.2 billion and hopes to expand the company’s global operations while helping to maintain their digital growth. This is a milestone deal in the history of Spanx, and marks an important phase in the current pandemic market with people returning to work and in-person events.
Coming out of the pandemic, there continues to be a secular shift away from brick and mortar shopping in favor of e-commerce, maintaining the momentum that the e-commerce sector experienced due to the pandemic. Retail stores are continuing to suffer from supply chain disruptions and cost inflation, as wages for employees continue to rise, and the availability of labor is at an all time low. Conversely, new technological enhancements allow online shoppers to instantaneously participate in trends and select a wide range of styles at the click of a button. The continued penetration of online shopping on social media platforms such as Instagram and TikTok create a value proposition for new businesses to leverage directly to consumer channels and effectively compete with previously entrenched large retailers.
Company Highlights:
Aritzia (TSX:ATZ):
Market Capitalization: C$5.6 billion
Aritzia is a publicly traded Canadian company that designs and sells apparel and accessories for women. Founded in 1984 by Brian Hill, Aritzia encompasses upscale retail stores and an online platform. For the latest twelve months, ending August 2021, the company generated a total revenue of approximately C$1.1 billion, and C$228 million of EBITDA (earnings before interest, taxes, depreciation and amortization). Because of strong e-commerce performance, Aritzia sales have surpassed pre-pandemic levels and its active client base has grown by over 50%. Aritzia trades at a healthy 20x EBITDA and is only modestly leveraged, with total debt to EBITDA at just 1.8x. This means that the businesses’ ability to generate cash flow is rather exceptional. The company has been trading at a near 52 week high, and many of the equity research analysts that cover the stock have been boosting their ratings, or a measure of a stock’s performance, as well as their anticipated price targets. Aritzia last issued its quarterly earnings on October 13th. The company reported C$0.32 earnings per share (EPS) for the quarter, beating the Zacks’ Consensus Estimate of C$0.22. From a top line revenue perspective, the company navigated the pandemic reasonably well, with revenues declining only 12.5% in fiscal 2021 as compared to fiscal 2020. However, EBITDA was more significantly affected, declining 50% over the same period. Over the course of the last six months, the company has continued to see a strong recovery, with the latest twelve month (LTM) revenues up 33% over the prior fiscal year end. More impressively, the company’s EBITDA has increased by 170%.
Macy’s (NYSE:M):
Macy’s Inc. operates stores, websites and mobile app locations under the Macy’s, Bloomingdales, and BlueMercury brands. Founded in 1830 by Rowland Hussey Macy, Macy’s Inc. encompasses over 75,000 employees across 727 store locations in 43 states. For the latest twelve months, ending August 2021, the company generated a total revenue of approximately $21.9 billion, and $2 billion of EBITDA. The company has a total enterprise valuation of approximately $15 billion and the market capitalization of its equity is $9.2 billion. Macy’s Inc. trades at a depressed 6.2x EBITDA, with proportionally high leverage, at 3.3x EBITDA. At $31 per share, the company is operating at a near 52 week high coming off of the pandemic. Shares of Macy’s Inc. have earned a consensus rating of “hold” from the fourteen equity research analysts that are presently covering the company. For the period ending July 31st, quarterly net sales grew to $5.65 billion from $3.56 billion a year earlier. This is significantly higher than the analyst estimates of $5 billion. The company expects full year adjusted earnings to be in the range of $3.50 per share up from guidance of approximately $2 per share. This indicates a very strong recovery, as the company rebounds from the pandemic driven lows. Macy’s Inc. shares are now up 91% year to date.
Saks Fifth Avenue
Founded in 1867, Saks Fifth Avenue is one of the oldest luxury department retailers in business. Saks’ parent company, Hudson's Bay Co. recently made the decision to go public in 2020 in an effort to focus on reinvesting in the business. Following this decision, Saks has recently decided to split off their e-commerce sector of the business earlier this year into a separate business entity and take this portion of the business public in early 2022. Recently valued at $6 billion, the e-commerce unit is expected to see continued growth in the next year, based on their impressive performance during the pandemic. The online unit’s gross merchandise value increased 82% from Q2 in 2019 to the same period this year, showing consistency with the overall market trend towards increased online shopping. Although the separation has little effect on customers’ shopping experience, the e-commerce IPO will be an interesting start to the next fiscal year for Saks.
Spanx
Spanx is a woman-owned shapewear company founded in 2000 that essentially launched the niche shapewear market as we know it. As the pandemic subsides, the demand for shapewear is increasing as people are beginning to attend in-person events and look their best while doing so. Demonstrating high growth during the pandemic and increased strength in their online business, which accounts for two thirds of their revenue, Spanx is looking to go public in the near future. Spanx recently entered into a deal with Blackstone, the world’s largest private equity firm, acquiring a majority stake in the company. Blackstone valued Spanx at $1.2 billion and hopes to expand the company’s global operations while helping to maintain their digital growth. This is a milestone deal in the history of Spanx, and marks an important phase in the current pandemic market with people returning to work and in-person events.