This company that primarily designs, sources, markets, sells women’s accessories including handbag, leather goods, footwear, and apparels has been grouped into women’s accessories sector in personal items industry.
It seems that, based on the typical company data, the demand for handbag and other women accessories in the past three years has been weak and declining for some of brands, primarily attributable to declining store traffic from their own stores and stores of their wholesale clients. The decline reached the lowest in 2016 but seems to be re-bouncing since 2017 as indicated by the slowing down decline in the same physical store sales ( -3%,-5%, and 3% for 2017, 2016, and 2015 respectively) and continuingly increasing online sales.
Companies, facing the unfavourable retail environment, have responded to the slowing down traffic by expansion of business (including acquisition and opening new stores) and lower price.
Expansion in new store in China market have been successfully offsetting the decline in same stores sales of North American market for some of companies in this sector during the same period. However, their profitability seems to be damaged largely due to deleveraging of expenses in new stores.
The typical companies’ gross margins are down to about average 60% in 2017. The SG&A as percentage of sales (including store occupancy and staffing costs) went up to about 41% in 2017; the typical operating margin went down from 29% to 18% in 2017. Companies’ cash flow thus significantly decreased during the same period.
The typical average stock price/cash flow ratio is about 17.
It seems that the demand for the products of this company has been weak in the past three years as indicated by its continuingly decreasing same stores sales (physical stores). However, the decrease in same store sales seems to be slowing down in 2017 than 2016 and the same store sales of e-commerce has been seen continuingly growing during the same period of time.
Expansion of new stores in US market and the fast growing demand from China market account for the most of increase in sales of 2017.
The first nine months of fiscal 2018 compared with the 2017
Organic net sales (excluding currency) increased 2.4%.
Comparable store organic sales (excluding currency) decreased 4.3% due to decrease of 6% in physical stores sales offset by increase of 2.5% in e-commerce.
New stores, especially in China, contribute significantly to increase in sales.
The fiscal 2017 compared with 2016
Organic net sales (excluding currency, acquisition, and extra weeks) decreased about 8.7%.
Comparable store organic sales (excluding currency) decreased about 8% due to decrease of 11% in physical stores sales offset by increase of 3% in e-commerce.
New stores, especially in China, contribute significantly to increase in sales.
The fiscal 2016 compared with 2015
Organic net sales (excluding currency, acquisition, and extra weeks) increased about 10.5%.
Comparable store organic sales (excluding currency) decreased about 1% due to decrease of 3% in physical stores sales offset by increase of 2% in e-commerce.
New stores contribute significantly to increase in sales.
Its gross margin has decreased slightly at around 60% since 2014 due primarily to a combined impact from both promotion and lower product costs and sales mix shifting. However, we have seen a large increase in the SG&A as percentage of sales (from 32% to about 41% in 2017) as a result of expansion of new stores, its operating margin decreased to about 19% in 2017.
Stock performance
This stock currently has a stock price/cash flow ratio of 17. We think that its stock is being relatively undervalued compared with its peers
