Market Monitor WINTER 2019

Transcription

1 Market Monitor WINTER 2019

2 Select Tombstones 2

3 Select Companies Experiencing Record Years Despite Store Closures Industry Update Consumer Spending Indicators December seasonally adjusted retail sales declined 1.2% from a month earlier, well below economists expectations of a 0.1% increase. Additionally, seasonally adjusted retail sales increased 2.3% as compared to December 2017 while the entire year increased 5.0% from 2017 to Some economists believe this suggests that consumers might be cutting back on consumer spending heading into 2019, while others believe the decrease was a fluke and positive economic tailwinds such as the strong labor market and recent drops in energy prices will continue to increase momentum into Q With trade talks stalling between the United States and China, many U.S. companies are facing tough decisions on whether to move their Chinese manufacturing operations, to absorb the additional costs or pass along the extra costs to their customers to deal with current and potential tariffs. Juniorswear manufacturers such as BeBop and Gypsies & Moondust began moving their manufacturing businesses from China to Vietnam in late 2018 to avoid the uncertainty surrounding tariffs. 12% 10% 8% 6% 4% 2% 0% (2%) (4%) (6%) Unemployment Rate (left-axis) Non-Farm Payroll y/y growth (leftaxis) Apparel Retailer Sales y/y Growth (left-axis) Consumer Confidence (right-axis) Despite several big name companies filing for bankruptcy and/or closing a significant number of retail locations, such as Gymboree, Toys R Us and Sears, IHL Group stated in a report that North American retailers opened an estimated 12,663 stores and closed an estimated 8,828 in 2018, resulting in a net increase of 3,835 stores. The report further stated that 66% of 2018 s total store closings are expected to come from only 16 companies. In June 2018 the Supreme Court ruled 5-4 in favor of South Dakota in South Dakota v. Wayfair Inc. This ruling concluded that states can require online retailers to collect sales taxes even if that retailer does not have a physical presence in that state. This change is expected to mitigate some of the advantages online retailers have over their brick & mortar counterparts, as well as increase tax compliance costs. Several states, such as Nevada, Utah, and Wyoming, are already compliant with the new court rulings, allowing them to implement any changes effective immediately. However, many states will need to make legislative changes to be able to fully enact new taxation policies associated with the court ruling, with many of these states hoping for changes to be made in early Same Store Sales Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Abercrombie & Fitch (5.0%) (3.0%) (1.0%) 4.0% 3.0% 5.0% 3.0% 3.0% American Eagle 0.4% 2.0% 2.0% 3.0% 4.0% 9.0% 9.0% 8.0% Buckle (15.7%) (12.8%) (7.8%) (6.2%) (7.2%) (3.1%) 1.4% (1.4%) DSW (7.0%) (3.0%) 0.6% (0.4%) (0.4%) 2.2.% 9.7% 7.3% Gap (2.0%) 2.0% 1.0% 3.0% 3.0% 1.0% 2.0% 2.0% Genesco 0.0% (1.0%) (2.0%) (2.0%) 4.0% (1.0%) 3.0% 4.0% Guess? North America (7.4%) (15.0%) (10.0%) (10.0%) 6.0% 1.0% 3.0% 4.0% Tilly's 0.1% 0.6% 2.1% 1.5% 0.1% 0.1% 4.4% 4.3% Urban Outfitters 0.0% (3.1%) (4.9%) 1.0% 0.8% 10.0% 13.1% 7.7% Zumiez 5.1% 1.8% 4.7% 7.9% 5.9% 8.3% 6.3% 4.8% Median (1.0%) (2.0%) (0.2%) 1.3% 3.0% 1.0% 3.7% 4.2% Source: U.S. Department of Commerce, National Retail Federation, CapitalIQ, Bloomberg, Business Insider, Tax Foundation. Fortune, & Moss Adams Capital estimates.

4 Public Company Valuations ($U.S. in millions, except per share amounts) 2/7/19 TTM Data NTM Est. Growth EV Multiple Company Name Performance Share Price 52 Week High - Low Market Cap Enterprise Value Sales EBITDA EBITDA Margin Sales EBITDA NIKE, Inc. $82.39 $ $62.46 $129,665 $129,105 $38,095 $5, % 6.7% 14.4% 3.39x 23.5x 3.18x 20.6x adidas AG ,374 44,151 25,256 3, % 3.6% 11.2% 1.75x 13.9x 1.69x 12.5x Lululemon Athletica Inc ,400 18,696 3, % 17.3% 19.9% 6.13x 24.9x 5.23x 20.7x Under Armour, Inc ,739 9,374 5, % 2.9% 22.7% 1.82x 29.0x 1.77x 23.6x PUMA SE ,062 7,778 5, % 8.2% 14.3% 1.50x 16.4x 1.39x 14.4x Columbia Sportswear Company ,380 5,695 2, % 5.4% 3.9% 2.03x 13.9x 1.93x 13.4x TTM Sales TTM EBITDA NTM Sales NTM EBITDA Median $14,035 $5,172 $ % 6.1% 14.4% 1.92x 20.0x 1.85x 17.5x Average $35,800 $13,258 $1, % 7.4% 14.4% 2.77x 20.3x 2.53x 17.5x Casual Fashion Burlington Stores, Inc. $ $ $ $11,451 $12,453 $6,606 $ % 8.0% 13.9% 1.89x 16.6x 1.75x 14.6x The Gap, Inc ,509 9,504 16,735 1, % 1.0% 0.4% 0.57x 5.0x 0.56x 5.0x Farfetch Limited ,755 4, (171) NA 33.0% NA 8.95x NA 6.73x NA 4 American Eagle Outfitters, Inc ,793 3,434 4, % 4.5% 0.2% 0.85x 6.5x 0.82x 6.5x Urban Outfitters, Inc ,395 2,829 3, % 3.7% 7.4% 0.72x 5.8x 0.70x 5.4x Stitch Fix, Inc ,169 1,911 1, % 22.0% (32.1%) 1.47x 34.2x 1.21x NM DSW Inc ,100 1,806 3, % 19.3% 3.9% 0.59x 6.4x 0.50x 6.2x Guess?, Inc ,705 1,624 2, % 5.0% 15.5% 0.63x 8.9x 0.60x 7.7x Abercrombie & Fitch Co ,443 1,228 3, % (1.1%) (8.7%) 0.34x 3.7x 0.34x 4.1x Duluth Holdings Inc % 19.8% 29.7% 1.63x 18.5x 1.36x 14.3x Boot Barn Holdings, Inc % 11.1% 17.2% 1.12x 10.6x 1.00x 9.1x J.Jill, Inc % (0.7%) (5.6%) 0.62x 4.3x 0.62x 4.5x Vince Holding Corp % NA NA 0.73x 21.5x NA NA Median $1,806 $2,565 $ % 6.5% 3.9% 0.73x 7.7x 0.76x 6.3x Average $3,220 $3,433 $ % 10.5% 3.8% 1.55x 11.8x 1.35x 7.7x Note: Not meaningful (NM) if EV/Sales is greater than 10x, or EV/EBITDA is greater than 40x. NA if denominator is 0, for percentages and multiples, or if estimates are not available. NTM figures are based on the median estimate of Wall St. analysts. Source: CapitalIQ, company filings.

5 Public Company Valuations ($U.S. in millions, except per share amounts) 2/7/19 TTM Data NTM Est. Growth EV Multiple Company Name Diversified - Large Cap Share Price 52 Week High - Low Market Cap Enterprise Value Sales EBITDA EBITDA Margin Sales EBITDA TTM Sales TTM EBITDA NTM Sales NTM EBITDA V.F. Corporation $86.04 $ $67.18 $34,038 $36,321 $13,507 $1, % 7.0% 21.6% 2.69x 18.5x 2.51x 15.2x PVH Corp ,422 11,177 9,672 1, % 0.7% 13.8% 1.16x 9.7x 1.15x 8.5x Skechers U.S.A., Inc ,378 3,657 4, % 9.1% 8.7% 0.78x 6.7x 0.72x 6.2x Deckers Outdoor Corporation ,099 3,615 2, % 1.5% 0.8% 1.78x 10.4x 1.76x 10.3x Wolverine World Wide, Inc ,312 3,752 2, % 2.8% 36.2% 1.68x 16.0x 1.63x 11.8x Steven Madden, Ltd ,972 2,749 1, % 7.5% 32.0% 1.71x 15.9x 1.59x 12.0x Crocs, Inc ,806 1,789 1, % 5.7% 29.0% 1.67x 16.5x 1.58x 12.8x G-III Apparel Group, Ltd ,706 2,334 3, % 6.6% 14.3% 0.77x 9.1x 0.72x 8.0x Oxford Industries, Inc ,309 1,333 1, % 3.6% 5.5% 1.21x 9.9x 1.17x 9.4x Caleres, Inc ,213 1,671 2, % 6.2% 2.9% 0.59x 8.4x 0.56x 8.2x Median $3,182 $2,528 $ % 6.0% 14.0% 1.44x 10.1x 1.37x 9.8x Average $6,840 $4,173 $ % 5.1% 16.5% 1.40x 12.1x 1.34x 10.2x 5 Diversified - Mid/Small Cap Weyco Group, Inc. $27.17 $ $26.70 $272 $259 $289 $28 9.8% NA NA 0.90x 9.2x NA NA Rocky Brands, Inc % 1.8% 8.5% 0.75x 8.4x 0.74x 7.8x Centric Brands Inc % NA NA 1.69x NM NA NA Iconix Brand Group, Inc % (14.5%) (3.1%) 3.52x 8.2x 4.12x 8.5x Median $264 $225 $25 9.3% (6.3%) 2.7% 1.29x 8.4x 2.43x 8.1x Average $353 $225 $ % (6.3%) 2.7% 1.71x 8.6x 2.43x 8.1x Aspirational LVMH Moët Hennessy Louis Vuitton S.E. $ $ $ $161,844 $170,278 $53,613 $13, % 7.8% 11.4% 3.18x 12.7x 2.95x 11.4x Ralph Lauren Corporation ,095 8,719 6, % 0.8% 5.3% 1.38x 8.8x 1.36x 8.4x Tapestry, Inc ,708 9,815 5,988 1, % 4.3% 14.3% 1.64x 8.5x 1.57x 7.4x Median $9,815 $6,337 $1, % 4.3% 11.4% 1.64x 8.8x 1.57x 8.4x Average $62,937 $21,979 $5, % 4.3% 10.3% 2.06x 10.0x 1.96x 9.1x Note: Not meaningful (NM) if EV/Sales is greater than 10x, or EV/EBITDA is greater than 40x. NA if denominator is 0, for percentages and multiples, or if estimates are not available. NTM figures are based on the median estimate of Wall St. analysts. Source: CapitalIQ, company filings.

6 EV/LTM EBITDA Strong Economy & Low Unemployment Continue to Drive Growth Publicly traded Performance Apparel companies (slide 4) are expected to outperform the S&P 500 in both NTM sales and EBITDA growth, growing 6.1% and 14.9% respectively. This growth is driven by performance apparel companies realizing their investments in direct-to-consumer strategies as well as more consumers developing a wellness state of mind. Next 12 Months: Estimated Growth Publicly traded AAF companies EBITDA multiples have declined 0.7% since January 2018, decreasing less than the broader S&P 500 which declined 13.1% in the same period. Despite recent equity market sell-offs, AAF companies are trading at a 17.2% valuation premium to the S&P 500 index led by strong valuations for Performance Apparel and fast-growing, newer companies. Public Market Valuations Sales EBITDA 16.0x 15.0x AAF 13.7x S&P % 10.6% 14.0x 13.0x 6 Performance 6.1% 14.9% 12.0x Aspirational 4.3% 12.3% 11.0x 10.0x S&P x 9.0x Casual Fashion 6.5% 2.1% 8.0x 7.0x Diversified - Large Cap 6.0% 14.0% 6.0x Diversified - Mid/Small Cap (6.3%) 2.7% Note: is composed of the public companies included on slides 4 & 5. Source: CapitalIQ.

7 Select, Notable M&A Activity with Disclosed Values $ in millions Close EV/ EV/ Date Target Acquirer/Investor Target Description Implied EV Revenue EBITDA Dec-18 Gianni Versace S.p.A. Michael Kors Holdings Limited (nka:capri Holdings Limited) Designs, manufactures, and distributes fashion and lifestyle products $2, x - Nov-18 CafePress Inc. Snapfish, LLC Retailer of personalized products including apparel and accessories $ x - Nov-18 CITY GEAR, LLC Hibbett Sporting Goods, Inc. Operates men's apparel, footwear, and accessories retailers $ x - Nov-18 TP Apparel LLC/TP Apparel Europe Ltd Redbubble Limited Manufactures men's women's, and kid's apparel $ Oct-18 MVMT Watches Inc. Essilor International Société Anonyme Distributes and sells watches and sunglasses $ x - Oct-18 South Cone, Inc. The Relay Shoe Company Manufactures sandals $ x - Oct-18 Luxottica Group S.p.A. Essilor International Société Anonyme Provides fashion, luxury, sports, and performance eyewear $25, x 12.3x Oct-18 Perry Ellis International, Inc. George Feldenkreis Manufactures apparel products, accessories, and fragrances. $ x 8.7x Oct-18 Vionic Group, LLC Caleres, Inc. Manufactures footwear and foot care products $ x - Jun-18 Rawlings Sporting Goods Company, Inc. Seidler Equity Partners; Major League Baseball Enterprises, Inc. Manufactures and markets sporting goods including apparel $ x - Jun-18 The Finish Line, Inc. JD Sports Fashion plc Retailer of athletic shoes and apparel $ x 5.8x May-18 CID Resources, Inc. Superior Group of Companies, Inc. Manufactures and distributes scrubs and other medical uniforms $ x 13.1x Apr-18 Icebreaker New Zealand Ltd. V.F. Corporation Produces lifestyle clothing $ x - Apr-18 Thompson and Company of Tampa, Inc. Scandinavian Tobacco Group A/S Multi-channel merchant that offers designer linens, fashion apparel $ x - 7 Apr-18 Billabong International Limited Boardriders, Inc. Manufactures and sells surf apparel and accessories $ x 7.1x Mar-18 Oboz Footwear, LLC Kathmandu Holdings Limited Manufactures and sells running footwear for men and women $ x 16.3x Jan-18 AmeriPride Services Inc. Aramark Offers uniform rental and linen supply services in North America $1, x - Jan-18 ADO Products Inc. TopBuild Corp. Manufactures protective wear $ x - Nov-17 Jimmy Choo Group Plc Michael Kors Holdings Limited (nka:capri Holdings Limited) Luxury handbags, accessories and fragrances $1, x 18.2x Oct-17 Alternative Apparel, Inc. Hanesbrands Inc. Manufactures and sells apparel and accessories $ Oct-17 Williamson-Dickie Manufacturing Company, LLC V.F. Corporation Manufactures primarily work wear apparel $ x 11.0x Oct-17 Taylor Made Golf Company, Inc. KPS Capital Partners, LP Golf apparel and equipment $ x - Sep-17 Cabela's Incorporated Bass Pro Group, LLC Outdoor apparel and accessories $8, x 18.3x Sep-17 West Marine, Inc. Monomoy Capital Partners Boating apparel, accessories and equipment $ x 7.7x Aug-17 travismathew, LLC Callaway Golf Company Lifestyle apparel $ x 11.8x Jul-17 Globe Manufacturing Company, LLC MSA Worldwide, LLC Survival gear $ x - Jul-17 Grandville SA (Christian Dior Couture) LVMH Moët Hennessy Louis Vuitton S.E. Footwear, apparel, and accessories $7, Jul-17 NGX, LLC Segabo USA Designs apparel for men $ Jul-17 Sebago USA, LLC TOS S.r.l. Manufactures and sells footwear $ Median $ x 11.8x Source: CapitalIQ, PitchBook, company filings, news releases.

8 Select, Recent M&A Activity without Disclosed Values 8 $ in millions Close Date Target Acquirer/Investor Target Description Announced ELOQUII Design, Inc. Walmart Inc. Designs and sells fashion apparel for women Announced Murse World, Inc. AvaCare Medical Owns and operates an online medical scrubs store for men Jan-19 Nucleus Brands 20nine Design Studios, LLC Operates a portfolio of brands which includes men's apparel Jan-19 Sector Six Apparel LLC We Are Nations, Inc. Manufactures and markets jerseys and custom apparel for teams Jan-19 Racetrackers Enterprises, Inc. Running Awards and Apparel, Inc. Supplies promotional apparel and accessories Jan-19 Stadium Goods Farfetch Limited Online retailer of sneaker and streetwear footwear and apparel Dec-18 Level Brands, Inc. Cure Based Development, LLC (nka:level Brands, Inc.) Brand house that owns an apparel and accessory licensing division Nov-18 Camuto/CCI Operations/Chaus IPCo DSW Shoe Warehouse, Inc.; ABG-Camuto, LLC Designs and manufactures footwear Nov-18 Neil M Footwear Inc. Private Investor Designs and manufactures men's shoes and boots Nov-18 LogoSportswear, Inc. Digital Room, LLC Sells customized uniforms and apparel for men and women Oct-18 Woolrich, Inc. Goldwin Inc.; L-Gam Advisors Sarl Manufactures and sells outdoor cothing and furniture Oct-18 Sundance Holdings Group, LLC Webster Capital; Webster Capital IV, L.P. Provides clothing, footwear, and accessories for men and women Oct-18 North American Licensing Business of GBG USA, Inc. Differential Brands Group Inc. (nka:centric Brands Inc.) Designs, manufactures, and sells kids apparel and accessories Oct-18 BareWeb, Inc. Walmart Inc. Operates an online specialty retailer of intimate apparel Sep-18 Ergodyne Corporation Klein Tools, Inc. Manufactures and markets apparel and accessories for workers Sep-18 Team Sports, Inc. Athletic Supply, Inc. Supplies athletic apparel, uniforms, equipment, and footwear Sep-18 Darwood Manufacturing Company Fire-Dex, LLC Manufactures men's, women's, and children's apparel Sep-18 Lime Lush Boutique LLC Private Investor Online retailer of men's and women's apparel and footwear Jul-18 Wellen, LLC Huckberry LLC Manufactures and distributes apparel Jul-18 Nine West and Bandolino Footwear and Handbag Business of Nine West Holdings, Inc. Authentic Brands Group LLC Manufacturers women footwear and apparel Jun-18 Naked Brand Group Inc. Bendon Ltd. (nka:naked Brand Group Limited) Designs men's and women's underwear and intimate apparel Jun-18 Altra Footwear Brand of Icon Health & Fitness, Inc. V.F. Corporation Manufacturers lifestyle footwear May-18 Pacifier, Inc. Private Investor Retails baby products and apparel Apr-18 Nautica brand business of V.F. Corporation Authentic Brands Group LLC Manufacturers apparel and clothing Apr-18 Lone Star Western & Casual LLC BootBarn Inc. Retails family apparel, footwear, and accessories Apr-18 IMPACT Plus, Inc. Shumsky Enterprises, Inc. Retails company uniforms Apr-18 Certain Assets of Kizan International Inc. Haggar Clothing Co. Designs, manufactures, and retails men's wear and apparel products Mar-18 Destination Maternity Corporation Private Investor Designs and retails maternity apparel Mar-18 Chervo USA, Inc. Chervo' S.p.A. Operates apparel stores Feb-18 Tenoversix, LLC HEADINGTON OIL COMPANY LLC Operates a fashion and design store Source: CapitalIQ, PitchBook, company filings, news releases.

9 Overview of Select, Notable Transactions acquired October 2018 The Relay Shoe Company, LLC ( Rockport ), a leading casual and dress shoe manufacturer and a portfolio company of Charlesbank Capital Partners, LLC, acquired South Cone, Inc. ( Reef ), the parent company of the Reef footwear brand, from VF Corporation for $139.4 million in cash. Rockport, which filed for bankruptcy in May 2018, was acquired by its stalking horse bidder Charlebank Capital Partners in July. Charlesbank purchased Rockport in anticipation that a new capital structure would free up the company to achieve future growth, including acquisitions. Reef is expected to operate as an independent brand under The Rockport Group and will remain at its headquarters in Carlsbad, California. Apparel, Accessories, & Footwear M&A 1 AAF M&A activity in the U.S. in 2018 was down 16.7% compared to 2017 s activity. The decline is primarily caused by the lack of quality targets as well as investors becoming more picky due to cyclicality concerns. However, transaction multiples remain consistent for companies with comparable characteristics acquired October Caleres, Inc. (NYSE:CAL) ( Caleres ), a diverse portfolio of global footwear brands, acquired Vionic Group LLC ( Vionic ), a footwear and foot care brand, for $360 million (2.0x Revenue). The transaction was funded through Caleres revolving line of credit Diane Sullivan, CEO of Caleres, stated, The acquisition of Vionic is another fantastic opportunity to add a growing brand with strong consumer loyalty and a solid cultural fit to our Brand Portfolio... We re looking forward to supporting the brand in their continued success and to sharing our extensive infrastructure Diane Sullivan also noted in a recent earnings call that Vionic had been taking market share in the premium contemporary comfort footwear category and the acquisition of the brand not only allowed Caleres to acquire that market share, but also diversify its existing portfolio of footwear brands and reach new customers. 50 Vionic s TTM sales were $180 million at the time of the acquisition, representing a CAGR of nearly 20% since Vionic generated ~25% of the TTM sales via e- commerce. 0 Source: CapitalIQ, company filings, news releases. 1) Includes closed transactions in the U.S.

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