Sector financial performance:

This company, who primarily designs, sources, markets, and retails sportswear for men and women mainly through their own stores and ecommerce sites (more than 60% of total sales) and as well though wholesale, has been grouped into sportswear (retailors) sector in clothing industry.

While the demand for sportswear products seems to be strong as indicated by the increased sales of those companies in this sector, those increases mainly have come from new stores and ecommerce. There is a huge pressure on in-stores sales for those products in 2016/17 as indicated by the slowing down growth in comparable stores sales among companies (average growth down to 0% from 4-7% previous year).total comparable sales seem to be coming back to the level of 2015 thanks to the growth from e-commerce, which has been fast in the past three years and contributed significantly to the total growth in net sales for some of companies.

Due to relatively stronger demand from those companies’ own retail channel, it seems there is no need to intensively use promotion to boost sales yet in this sector as it is in related sectors. Gross margin went up to around 56% (distribution costs and occupancy costs included) with SG&A as percentage of sale of 42%. Companies present operating margins in a range between 8-20%.

According our analysis, companies’ enterprise price/EBI is around 38 (30-47) with interest/EBI ratio of 3%.

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Company performance:

Data indicated that the sales of this company have increased due to general increase in demand and from new stores in the past three years. Growth in comparable stores sales continued to be strong but wholesale declined largely in 2018.

First quarter of fiscal 2018 compared with 2017

The net sales of this company increased 0.1%, primarily attributable to acquisition and new stores and comparable stores sales increase of about 5% offset by about 10% decline in wholesale.

Fiscal 2017 compared with 2016

The net sales of this company increased 6.2%, primarily attributable to acquisition and new stores and comparable stores sales increase of 3%.

The net sales of this company increased 3.3% in the first six months of fiscal 2017 compared with the same period of 2016, primarily attributable to acquisition and new stores. Comparable stores sales increased 1%.

The net sales of this company increased about 5.5% in fiscal 2016 compared with 2015, primarily attributable to acquisition and new stores. Comparable stores sales decreased 2%.

The net sales of this company increased about 5.3% in fiscal 2015 compared with 2014, primarily attributable to acquisition and new stores. Comparable stores sales increased 7%.

This company’ gross margins is currently 57% (distribution included and stores rental costs excluded) up from about 56% of 2014 primarily due to changes in product and sales channels mix. While sales continued to increase, the SG&A as percentage of sales increased due to additional expenses from opening of new stores. As a result, its operating margin went down by 120 basis points to 7.7% in 2018.

Stock price

This stock currently has an enterprise price/EBI ratio of 30 ($78). We think that its stock is being relatively slightly undervalued considering that while unfavourable industry situation and uncertainty of sales this stock may be still undervalued compared with its peers.