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1、GlobalLuxuryGoodsCONNECTIONSSERIESLookingforthenextbrandturnaround■AssessingturnaroundpotentialatsixUS/Europeanluxurygoodscompanies:WiththesuccessofCoach,GucciandCalvinKlein,investorsarelookingforthenextturnaroundstoryinthesoft-luxuryuniverse.Webelievecompaniesthathaveseen
2、decliningsales,marginpressureandfallingCFROI®largelyasaresultofbrandfatigueandlackofcostdisciplinecouldqualify.Inthisreport,weidentifyBurberryandRalphLaurenasourtoppremium/luxuryturnaroundpicks,whileweremainpositiveonTod'sGroupandcautiousonFerragamo,HugoBoss,andMichaelKors
3、.■Welookatsevenfactors:(1)thehealthoftheunderlyingmarket,(2)brandvalue/equitycurrentlydiscountedinthestockprice,(3)theexistingprice/valueproposition,(4)changestomanagementandcreativeteams,(5)theprogressmadesofarregardingcleaningupdistribution,(6)costcuttingpotential,and(7)
4、potentialmarginupside.■WeupgradeBurberrytoOutperform(newTP2,000pfrom1,650p):WenoteBurberryhasundergonethebiggestmanagementreshufflesinceits2002IPOandwebelievethebrandiswellplacedtocapitaliseontheneedfornewnessinluxurythankstoitsapparelexposure.Marginsareclosetohistoricallo
5、wsandthecostcuttingplaninplaceshouldalleviateconcernsaboutfurtherearningsdowngrades.Withsell-sidepositioningthemostnegativeithasbeensince2009,wethinkthiscreatesabuyingopportunity.■WeupgradeRalphLaurentoOutperform(newTP$111from$91):Webelievethecompanyisontracktoreturntomean
6、ingfulgrowthandmarginexpansionfromFY19.Thisfollowssignificantchangestomanagement,visibleeffortstoreinvigoratethebrand/products,cleaningupdistributionandrightsizingofthecoststructure.■WeremainNeutralonHugoBoss,FerragamoandMichaelKors:WebelieveHugoBoss(newTP€65)stillfacesach
7、allengingsuitmarketandwethinkitscurrentprice/valuepropositionmaynotyetbeadequate.WelikeFerragamointhelongtermbutthetransitionphaseislikelytohurtmarginsandtriggerfurtherearningsdowngrades.WeremainconcernedaboutMichaelKors’underlyingbrandhealthwhichisnecessitatingstoreandwho
8、lesaledistributionrationalisationandare-focusonpricingdiscipline.Moreover,wefindcostsavin
