apparel and footwear-market-monitor-fall-2014
TRANSCRIPT
1 APPAREL, ACCESSORIES &
FOOTWEAR
M A R K E T M O N I T O R | F A L L 2 0 1 4
Apparel, Accessories, and Footwear
3 APPAREL, ACCESSORIES &
FOOTWEAR
Contents
Industry Update
Public Stock Performance & Valuations
M&A Activity & Valuations
Moss Adams Overview
Firm Contacts
4
5
9
12
14
4 APPAREL, ACCESSORIES &
FOOTWEAR
Source: U.S. Department of Commerce, CapitalIQ, and Moss Adams Capital estimates.
Consumer Environment Improves, Still-cautious Consumer
• Consumer Confidence (July reached 90.9) soared to highs last seen in late 2007, on strengthening job and home markets, strong stock market performance
• Labor markets remain stable, with steady job creation (1.6 mm jobs added from January through July), and jobless rate hitting 6.2% in July, improving from 6.6% in January. However, continued shrinkage in the labor force remains a concern; labor force participation rate has tumbled to 62.9% (July reading), its worst level since 1978
• Improvements in employment and consumer macro have been countered by loom of inflation (high gas prices, coupled with rising food costs), putting pressure on shoppers to curb spending
• Competition for share of consumer wallet has intensified from increased durables (auto, electronics, home) and health category spending
• Retail environment remains challenging, due in part to an apathetic consumer, lack of fashion newness, an elevated promotional retail environment, weather conditions; Q4 ’13 and Q1 ’14 comparable-store sales performance for a median of selected chain retailers posted declines of 3 to 4%
• Apparel retailer sales are expected to grow 3 to 4% in 2014, boosted by product innovation/differentiation, new fashion trends, promotions; average spending for Back-to-School is projected to be up 5% to $669 in 2014, according to a NRF trade survey
• Key industry trends include (i) attractive price-value propositions / differentiated products, (ii) omni-channel, (iii) wholesale brands selling direct-to-consumer, (iv) international growth, (v) consumer focus on active/healthy lifestyles, and (vi) private label lines for mass retailers
Same-Store Sales Growth – Chain Retailers
Consumer Spending Indicators
Q113 Q213 Q313 Q413 Q114
Abercrombie & Fitch -15.0% -10.0% -14.0% -8.0% -4.0%
Aeropostale -14.0% -15.0% -15.0% -15.0% -13.0%
American Apparel 8.0% 7.0% 2.0% -3.0% -7.0%
American Eagle -5.0% -7.0% -7.0% -7.0% -10.0%
Buckle 1.2% 3.2% -0.5% -2.8% -0.9%
DSW -2.4% 4.4% -0.7% 0.0% -3.7%
Gap 2.0% 5.0% 1.0% 1.0% -1.0%
Genesco -4.0% -2.0% -1.0% 1.0% 1.0%
Guess? North America -9.8% -2.0% -5.0% -4.4% -3.8%
Tilly's 1.1% -0.5% -2.4% -4.9% -6.8%
Urban Outfitters 9.0% 8.5% 7.1% 1.0% 0.0%
Wet Seal -2.9% 3.7% 0.8% -16.5% -16.9%
Zumiez -0.7% 0.9% 1.5% -2.2% 1.8%
Median -2.4% 0.9% -0.7% -3.0% -3.8%
Industry Update
Apparel Retailer Sales
y/y growth
Unemployment Rate
Consumer Confidence (right-axis)
0
10
20
30
40
50
60
70
80
90
100
-12%-10%
-8%-6%-4%-2%0%2%4%6%8%
10%12%
5 APPAREL, ACCESSORIES &
FOOTWEAR
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Aspirational+4%
Diversified -Mid/Small Cap
+9%
S&P 500+17%
Performance+17%
Diversified -Large Cap
+30%
Diversified – Large Cap, Performance Segments Higher
Source: CapitalIQ.
Note: The indices in the chart above are composed of the public companies included on slide 7 and 8.
1 Year Performance: Apparel, Accessories and Footwear vs. S&P
6 APPAREL, ACCESSORIES &
FOOTWEAR
9.0%
18.5%
9.1%
26.7%
21.8%
S&P 500
Diversified -Mid/Small Cap
Diversified -Large Cap
Aspirational
Performance
5.0%
2.7%
5.8%
7.4%
10.2%
S&P 500
Diversified -Mid/Small
Cap
Diversified -Large Cap
Aspirational
Performance
Source: CapitalIQ.
Public Market Valuations Next 12 Months: Estimated Growth
• The outlook for companies in Apparel, Accessories and Footwear, is positive, with 6% sales and 14% EBITDA growth projected for a median of selected apparel companies over the next 12 months
• In comparison, companies in the S&P 500 are projected to have sales and EBITDA growth of 5% and 9%, respectively, for the next 12 months
• Apparel, Accessories and Footwear companies, on a trailing EBITDA valuation basis, are trading at the high range of historical valuation levels
• Since 2011, Apparel, Accessories and Footwear companies have largely traded at a premium to the overall market, on a EBITDA multiple basis
Apparel and Footwear
12.1x
S&P 50010.9x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
EV
/ T
TM
EB
ITD
A
Sales EBITDA
Note: Apparel, Accessories and Footwear is composed of the public companies included on slide 7 and 8.
Apparel Industry Sales Outlook Higher than Market
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