Saturday, 19. August 2017  
06.08.2017 19:57
Author: Nic Wright

STOCK SCREEEN: Intrinsic Stock Values For The World's Largest Retailers When Benchmarked To Amazon Margins

 

Times are tough for traditional retailers with sprawling physical footprints. Amazon is now the world's third-largest retailer, while Macy's, J.C. Penney and others are shuttering stores and shifting resources to beefing up their e-commerce capabilities. Continued sales declines at Macy’s Inc. and Kohl’s Corp. are renewing concerns that the department-store industry is mired in a slump. Shares of both retailers declined after the quarterly results failed to assure investors that a comeback was taking hold. Same-store sales -- a key measure -- dropped 2.5 percent at Macy’s and 0.4 percent at Kohl’s.

 

Wal-Mart and CVS are still the two largest retailers on the planet, but Amazon and Chinese e-commerce giant Alibaba are not far behind. Jack Ma's empire is the only foreign retailer to appear in the top ten of the World’s largest and has leapfrogged Target. In part, Amazon’s massive success is due to offering items at near break-even prices, while subsidizing its online retail activities by its cloud business Amazon Web Services. AWS saw operating income hit $916 million in Q2 2017, compared with a $288 million loss for its combined North American (plus$436 million) and international (minus $724 million) retail operations. For North America, where Amazon has penetrated the market much further, the operating margin was close to 2 percent compared to 4 percent a year ago.

 

It’s tough to compete with an operation that gets rewarded for earning next to nothing on its core business and Amazon has even been pushing further into areas like fashion, where it has rolled out private labels, snapped up online retailers and introduced the Echo Look that can take full-length photographs and suggest different outfits. It has doubled down on online groceries and is also now reportedly thinking about getting into the pharmacy business.

 

The answer, to who can compete, is businesses that have niche products or goods and services that Amazon can't provide. While gas stations at its stores might not be enough for retailers to compete successfully, Home Depot and Lowe's for instance, aren't facing the same headwinds because it's not easy to send drywall and two-by-fours via UPS.

 

This time we calculate intrinsic values for the largest retailers using our MODELER tool. A topline CAGR assumption of 2 percent might in some cases be too generous given weak same store sales trends. Taking Amazon as a benchmark with about 3 percent EBIT-margin in the medium to long term, most general retailer stocks exhibit downside, as margins are on average still at 5 to 6 percent and way above that level in the case of luxury retailers.

 

Here is our list of stocks in alphabetical order. Click a company name in the list below to get to the MODELER, where you can change the AVM's assumptions to your scenario and see the new Intrinsic Value estimate:

CLICK COMPANY NAME FOR STOCK VALUE MODELER

COUNTRY

LAST PRICE

MARKET CAP.

MEAN MULTIPLE UPSIDE [%]

GRAHAM UPSIDE [%]

GREENBLATT UPSIDE [%]

PRICE / BOOK

DIVIDEND YIELD [%]

 ADVANCE AUTO PARTS INC

 United States

142,29

10518

-4,7

-15,9

-12,2

3,2

0,2

 AUTOZONE INC

 United States

604,32

17185

3,3

-3,0

5,9

 

0,0

 BED BATH & BEYOND INC

 United States

35,06

5091

115,5

211,8

229,2

1,8

1,1

 BEST BUY CO INC

 United States

51,43

15770

-35,9

-6,3

-54,5

3,6

2,7

 CANADIAN TIRE CORP-CLASS A

 Canada

151,31

10807

-16,2

-31,3

-22,7

2,2

1,7

 CARMAX INC

 United States

64,74

12010

-10,7

-99,5

-77,8

3,6

 

 CIE FINANCIERE RICHEMONT-REG

 Switzerland

83,55

41766

-3,2

-26,3

-24,6

2,5

2,5

 COSTCO WHOLESALE CORP

 United States

172,81

75853

-28,8

-48,9

-43,4

6,0

1,1

 CVS HEALTH CORP

 United States

76,94

78366

19,2

18,5

11,9

2,2

2,6

 DOLLAR TREE INC

 United States

79,13

18703

26,6

6,7

5,6

2,9

0,0

 DUFRY AG-REG

 Switzerland

156,60

8431

9,4

-72,3

-100,0

2,6

0,4

 FIELMANN AG

 Germany

70,76

5947

-29,7

-52,5

-48,9

8,4

2,7

 FOOT LOCKER INC

 United States

60,01

7879

-12,9

5,2

77,5

2,7

2,0

 GAP INC/THE

 United States

22,21

8881

46,5

108,3

94,6

2,8

4,1

 GENUINE PARTS CO

 United States

90,52

13335

-3,9

-16,5

-16,2

4,3

3,0

 GRANDVISION NV

 Netherlands

22,09

5632

41,0

-45,0

-35,1

5,0

1,5

 HENNES & MAURITZ AB-B SHS

 Sweden

226,00

374212

72,7

6,7

-25,2

5,8

4,3

 HOME DEPOT INC

 United States

155,44

186052

-30,6

-52,5

-32,1

69,0

2,3

 INDUSTRIA DE DISENO TEXTIL

 Spain

33,55

104626

-6,5

-45,0

-43,6

7,4

2,3

 KERING

 France

298,25

37650

-22,7

-55,0

-46,2

3,0

1,9

 KINGFISHER PLC

 United Kingdom

306,40

6717

15,5

15,2

27,4

1,0

3,4

 KOHLS CORP

 United States

37,98

6543

51,3

118,3

58,3

1,3

5,8

 LOWE'S COS INC

 United States

83,12

71343

-18,0

-45,4

-40,2

12,2

1,9

 LULULEMON ATHLETICA INC

 United States

48,83

6682

153,0

14,1

11,0

4,1

0,0

 LUXOTTICA GROUP SPA

 Italy

48,22

23399

0,8

-45,4

-41,5

3,7

2,1

 MACY'S INC

 United States

23,27

7105

53,5

106,9

230,0

1,5

6,7

 MARKS & SPENCER GROUP PLC

 United Kingdom

331,30

5384

24,6

3,6

-74,3

1,7

5,5

 NEXT PLC

 United Kingdom

4403,00

6476

8,0

6,3

24,8

10,9

6,2

 O'REILLY AUTOMOTIVE INC

 United States

237,40

21545

-14,0

-40,5

-18,6

15,0

0,0

 PANDORA A/S

 Denmark

726,50

81905

21,0

-0,7

-0,6

10,3

5,3

 ROSS STORES INC

 United States

61,97

24296

-17,2

-21,0

-2,4

7,9

1,0

 STAPLES INC

 United States

8,67

5673

56,6

16,8

-93,5

1,5

5,6

 SWATCH GROUP AG/THE-BR

 Switzerland

393,50

21631

-1,0

-11,6

-10,5

1,8

1,9

 TARGET CORP

 United States

55,10

30377

27,4

33,3

25,6

2,8

4,5

 TIFFANY & CO

 United States

93,45

11683

-16,1

-36,7

-35,9

3,6

2,0

 WALGREENS BOOTS ALLIANCE INC

 United States

81,51

88119

-25,3

-30,2

-40,0

2,8

1,9

 WAL-MART STORES INC

 United States

78,78

238674

3,1

1,0

-10,5

3,1

2,7