平價奢侈品滯后：掛毯和卡普里便宜是有原因的

1、GlobalEquitiesLuxury GoodsTapestry and Capri cheap for a reasonThe affordable luxury lagAffordable luxury faces risks from oversaturation, a lack of interest from consumers and a weakening US homemarketGlobalEquitiesLuxury GoodsTapestry and Capri cheap for a reasonThe affordable luxury lagTapestry a

2、nd Capri have different M&A strategies and strengths but face many similar challenges; execution iskeyDowngrade Tapestry to Hold and maintain USD27 TP; maintain Buy and USD50 TP onCapriFacing the same ghosts?in is it is in in a in A tale of two familiesWe is a is a ValuationWe to a We is 2% is With

3、this report, Alexis Cooper assumes primary coverage of Tapestry and Capri.Key changes to ratings and estimates28 October 2019Alexis CooperAnalyst, Global Consumer and Retail HSBC Securities (USA) Inc. HYPERLINK mailto:er er+1 212 525 4394Erwan RambourgGlobal Co-Head of Consumer and Retail Research H

4、SBC Securities (USA) Inc. HYPERLINK mailto:erwanrambourg erwanrambourg+1 212 525 8393Antoine Belge*Global Co-Head of Consumer and Retail Research HSBC Bank plc, Paris branch HYPERLINK mailto:antoine.belge antoine.belge+33 1 56 52 43 47Anne-Laure Bismuth*Analyst, Global Consumer and Retail HSBC Bank

5、plc HYPERLINK mailto:annelaure.bismuth annelaure.bismuth+44 20 7991 6587Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andis not registered/ qualified pursuant to FINRAregulationsCurrentTarget Rating Upside/ PE EV/EBITDA CompanyTickerCurrencypricepriceOldNewdownside2019e2020e2019e2020eCapriCPRI

6、USUSD31.8250.00BuyBuy+57.1%8.6x6.8x6.1x6.0 xTapestryTPR USUSD26.4127.00BuyHold+2.2%10.1x10.0 x6.5x6.3xSource: Bloomberg, HSBC estimates. Priced as of close at 22 October 2019Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications in the Disclosure appendi

7、x, and with the Disclaimer, which forms part of it.Issuer of report: HSBC Securities (USA) IncView HSBC Global Researchat:https: HYPERLINK / /The affordable luxury lagAffordable luxury faces risks from oversaturation, a lack of interest from consumers, and a weakening US homemarketTapestry and Capri

8、 have different M&A strategies and strengthsbut face many similar challenges; execution iskeyDowngrade Tapestry to Hold on need to rebuild track record, maintain USD27 TP; maintain Buy and USD50 TP onCapriWhen theory gives way to realityis 9 in a in in a ininWhats still relevant?Consumers just arent

9、 dazzledis is is in by Gucci and Vuitton sales are booming. Coach and Kors? Not so much (% yoy)1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19501Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19403020100-10-20

10、CoachKorsLouis Vuitton(HSBCestimate)GucciSource: Company data, HSBC estimates. Note: Organic sales growthMainland China penetration in the affordable luxury space lags high-end peers MainlandChina Brand*Sales by consumer region of originSales by geographyGucci brand35%14%LV brand33%10%Tapestry18%10%

11、*Note: Capri does not disclose, latestFYSource: HSBC estimates, companydataThe price of ubiquityThe line between exclusivity and ubiquity is fine, and both sides have their challengesbe too exclusive and miss potential customers, or be too visible and not only alienate higher-paying customers who wa

12、nt exclusivity, but also potentially empower the customer base to resist price increases that would allow a brand to move up. The affordable luxury space, by nature, is more ubiquitous than premium European luxury, which makes it harder for Coach and Kors to move up into a more premium space and har

13、der to maintain brand equity, especially as their business is dominated by outlets.Coach and Michael Kors have considerably more stores in North America than higher- end luxury brandsBrandNumber of stores in North AmericaCoach391Michael Kors371Louis Vuitton105Gucci94Herms41Source: Company data and w

14、ebsitesThe struggle to break into the white spaceis is a few We is by or Facilitating this trend is the growing success of second-hand luxury and luxury rental services, such as The RealReal and Rent the Runway. Both rental and second-hand luxury are more affordable than buying something brand new,

15、particularly for higher-end brands, and they are also a solution to many of the sustainability concerns that are so important to millennials and Gen Z, as outlined in the note Who cares wins (25 February 2019). According to The RealReal, 56% of its consignor base have said that the environmental imp

16、act or extending the lifecycle of luxury is a key motivator to consign.1Very fewPrice Points in USDNumber of points of saleHermsPremium luxuryBottega Veneta Dior ChanelPrada Louis Vuitton 1,500 Tory BurchMichael Kors CollectionBridgeMulberryLongchampLancel600 Very fewPrice Points in USDNumber of poi

17、nts of saleHermsPremium luxuryBottega Veneta Dior ChanelPrada Louis Vuitton 1,500 Tory BurchMichael Kors CollectionBridgeMulberryLongchampLancel600 Cachichael bctlKrsAffordable luxuryKate SpadeFurlaLongchamp Le PliageVIPManySource: Company dataManyThe US is on shakier ground than before/ in a is a i

18、s With in in - in is to 1 The RealReal. 2Q investor presentation (August 2019)Consumers feel really good about things right now, but they are not as optimistic about the future, and spending growth has slowed over the past five years1804.71604.21403.71203.21002.7802.260Jun-14Jun-15Jun-16Jun-17Jun-18

19、Jun-19Howdoconsumersfeelrightnow?(Left)Howdoconsumersfeelaboutthefuture?(Left) Real consumer spending, % y-o-y(Right)Source: Bureau of Economic Analysis, Conference Board indices1.7Moreover, due to a stronger dollar and mainland China/US trade tensions, mainland Chinese inbound tourism flows are dow

20、n in the US an important group of consumers in the luxury space (see Future Consumer, July 2019). Companies that rely heavily on consumption in the US to drive growth have found themselves with a dwindling tourist base, putting even more pressure on domestic consumers to spend in order to sustain gr

21、owth in this market.Inbound tourist arrivals to the US have been slowing, and inbound mainland Chinese tourism has declined over the past two years70%60%50%40%30%70%60%50%40%30%20%10%0%-10 Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Aug-18 Jan-19 Jun-19%-20%Y-o-y tot

22、al inboundarrivals(%)Y-o-y mainland Chinese inbound arrivals(%)Source: US National Travel & Tourism OfficeWholesale still dragsWholesale tends to be a greater proportion of sales for affordable luxury names, more so for Michael Kors than for Coach. Lately, wholesale has been struggling. Macys (M US,

23、 USD15.86, not rated) cut its outlook for the year and trimmed guidance on concerns about tariffs and foot traffic in August this year. Saks Fifth Avenue (HBC CN, CAD9.97, not rated) has suffered from a hyper-promotional market most felt in the US and Canada, representing one-third of the parent com

24、panys decrease in gross margin in 2Q19. Department stores are trimming orders for the rest of the year and, as a result, Capri cut its top line estimates for its full fiscal year in August, largely due to a less supportive wholesale environment in the US.In our own survey data, we found that US cons

25、umers are more price conscious than our Chinese respondents, supporting shopping in department stores and outlets over full-price stores and websites (see US Holiday Deluxe, 3 December 2018). This trend was particularly evident as our respondents ranked department stores and outlets as among their t

26、op choices for where to buy luxury. For outlets, price was the main factor in preferences, while for department stores, price came third.The biggest appeal of luxury outlets is the price, per our respondents7%9%25%59%I like shopping in outlets because they are cheaper prices for7%9%25%59%similar qua

27、lityI like shopping in outlets because they are closer to me than the full-price storesI do not like shopping in outlets because the products are cheaper quality than full-price productsI do not like shopping in outlets because it is not the same experience as in full-price stores*In response to the

28、 question, “What do you think about shopping for luxury products in outlets?” Source: HSBC, Tolunawhile for department store appeal, proximity and variety outweighed price4% 5%21%45%25%I like shopping in department stores because they are cheaper prices for similar quality4% 5%21%45%25%I like shoppi

29、ng in department stores because they are closer to methan the full-price storesI like shopping in department stores because they offer a greater variety than single-brand storesI do not like shopping in department stores because the products arecheaper quality than full-priceproductsI do not like sh

30、opping in department stores because it is not the same experience as in full-pricestores*In response to the question, “What do you think about shopping for luxury products in department stores?” Source: HSBC, TolunaAnd overall, outlets and department stores are preferred locations to buy luxury for

31、US consumers80%70%60%50%40%30%20%10%0%In adepartmentstoreOn the websiteIn abrandoutletIn full-pricebrandstoresOn anotheronlineplatform1stchoice2ndchoice3rdchoice*In response to the question, “When I want to buy luxury, I shop Please rank your top three choices.” Source: HSBC, TolunaMainland China is

32、 still the next frontier, but can affordable luxury gain a foothold?by is in in in of in is in in in in in is a of in in or In is in US in as in in is a is Whenofain ainisWe is in so in by in be 1351301251351301251201151101051009590ConsumerConfidenceIndexConsumerSatisfactionIndexConsumer Expectation

33、sIndexSource: Bloomberg99 problems, but tariffs aint oneUS, is by Wall a in in is in in in it in is in a of in in Both Tapestry and Capri face limited exposure to tariffs in China (latest FY)% produced in China Size of category (%ofsales)% of salesaffectedTapestry handbags & small leather accessorie

34、s3-4%68%2.4%Tapestry RTW & footwear7%32%2.2%Total Tapestry exposure4.6%Capri handbags5%60%2.7%Capri RTW & footwear8%40%3.2%Total Capri exposureSource: Management statements, company data, HSBC estimates5.9%Wernau, Julie. Wall Street Journal (12 October 2019). America is losing the Chineseshopper.Cap

35、ri and Tapestry: A tale of two familiesWe compare Tapestry and Capri in seven areas that we believe are relevant to the investment story. As both groups have acquired two brands and are in various stages of the integration process, we take a look at how these changes modify the group structure and h

36、ow both groups are positioned for future growth.GroupdiversificationCantoomuchdiversityeverbeabadthing?Weliketheideaofdiversificationinsoftluxury.As weve explained in our note Too Bling to Fail (26 February 2019), brand diversification can provide a sounding board for best practices across price poi

37、nts, as well as insulate against fashion risk and provide opportunities for economies ofscale.In this case, diversification into high-end luxury can also somewhat insulate groups from the slower growth of the affordable luxury space as premium assets tend to grow faster than in the affordable space.

38、 Theoretically, then, Capri should grow at a faster pace than Tapestry in the long term. However, in practice, the integration of new brands must be handled well in order to trulypayoff,especiallywiththeriskofoverpayingformorepremiumassets,whichhasoccurred with Versace. This is a risk Capri faces as

39、 it continues to integrate Choo and Versace, and a lessonTapestrylearnedalltoowellwhenitmisseditsguidanceonKateSpadein4Q19.Therefore, for group diversification, we like Capri as it is been more focused on diversifying into a higher growth space than Tapestry. Capri Capri Tapestry BrandRange (in USD)

40、BrandRange (in USD)VersaceKate SpadeHaute CoutureUp to 100,000Handbags98-598 (AUR 300)Ready-to-wear275-4,000Ready to wear58-2,298Accessories150-3,500Footwear40-648Footwear275-2,500Accessories, jewelry and other28-250Jimmy ChooStuart WeitzmanWomens luxury shoes425-4,600Footwear275-895Accessories600-4

41、,800Handbags350-795Mens shoes170-2,500 MichaelKors Coach Michael Kors CollectionCoach WomenWomens handbags, leather goods300-6,000Handbags150-7,000 (AUR c300)Footwear300-1,500Accessories45-995Ready to wear400-7,500Ready to wear95-2,650Footwear95-595MICHAELHandbags200-750Small leather goods45-250Foot

42、wear50-300Apparel75-600Michael Kors MenCoach MenApparel50-1,000Bags175-895Accessories40-800Accessories10-350Footwear200-400Ready to wear95-3,000Footwear95-395Source: Company data, company websites, AUR=average unit retailAs a result of the diversification at the group level, Capri is positioned to c

43、apture value across a variety of price points at both the high end and the more affordable end. Tapestrys brands, meanwhile, are largely clustered around the same band and many of its price points overlap, even though the average unit retail (AUR) for Coach is slightly higher than for Kate Spade. We

44、 like Capri here.Health of the corebrandFor both and Capri, Coach and Kors for over 70% of the group As such, the and the potential of the core luxury brand is critical to of the A issue both Coach and have faced reckoning promotionality and Coach began to address problem in and by FY16, these large

45、ly addressed. brand began to see positive again 4Q16 and the have stayed stable positive for the past seven quarters in a Kors is still up promotional reset, to finally up by the end of All else equal, brands should be able to see now that promotionality has been reined in stuffing has largely been

46、We think Coach is a healthier and better-positioned brand than Michael Kors, but both brands are going ex-growth, in our view.On a pro-forma basis, Michael Kors accounted for 75% of the FY19 group sales75%10%86%15%3%11%100%75%10%86%15%3%11%80%Coach accounted for 71% of FY19 group sales71%23%6%100%71

47、%23%6%80%60%40%20%0%FY19reportedFY19 proforma*FY19 reportedMichaelKorsJimmyChooVersace*Proformaincludes1wholeyearofVersacesales,vs1quarterofreportedsales Source: CompanydataCoachKateSpadeStuartWeitzmanSource: Company dataPost the wholesale channel reset that began in FY17, MK comps should return to

48、positive growth. Coach is already there after its own reset from FY14-FY16.Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q12011 Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q12011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 201940%30%20%10%0%-10%-20%-30%KorscompsCoachcompsSource: Company data, H

49、SBC estimates, note: Coach comps are the global compProductmixis in or is in in is of is in by is a in in is is in is in in At the group level, Capri is skewed towards accessories (% sales, FY2019)60%20%13%7%60%20%13%7%CapriAccessoriesFootwearApparelFor Tapestry, handbags and accessories comprise 68

50、% of sales at the group level (% sales, FY2019)50%18%18%14%100%50%18%18%14%80%60%40%20%0%TapestryWomensHandbagsWomens accessories Footwear&otherMensSource: CapriFY19resultsSource: Tapestry presentation, 4 September2019Geographyin by is in it is We in is at Vu, 8 When it is a a in a is a a in in ina

51、a We in is a in in in a by Michael Kors is heavily skewed to the Americas, but both Choo and Versace have a more diversified footprint(% sales, FY2019)16%18%29%61%46%68%15%12%36%54%20%24%100%16%18%29%61%46%68%15%12%36%54%20%24%80%60%40%20%0%CapriMichael Kors Jimmy Choo Versace*AmericasAsiaEMEASource

52、: Capri FY19 results, Versace acquisition presentation *Note: Versace sales on a full-year basis per the presentation, as FY19 only included 1 quarter of sales All of Tapestrys brands have similar geographic exposureheavy on the Americas (% sales, FY2019)55%56%61%27%78%16%38%32%18%6%6%7%100%55%56%61

53、%27%78%16%38%32%18%6%6%7%80%60%40%20%0%TapestryCoachKateSpadeStuartWeitzmanNorthAmericaAsiaRoWSource: Tapestry presentation, 4 September 2019In China, Coach was the clear favorite in our deluxe surveyCoach MichaelKate Tory Burch MCMOther0%20%40%60%80%1stchoice2ndchoice3rdchoiceSource:HSBCChinasurvey

54、,February2019.Inresponsetothequestion“Whatare your favorite brands for affordable handbags/leather goods? Please rank your top threechoices.”In the US, Michael Kors came out on top, followed by Coach and Kate SpadeMichaelKorsCoach Kate Tory Burch MCMFurla0%10%20%30%40%50%1stchoice2ndchoice3rdchoiceS

55、ource: HSBC US Holiday Deluxe, Dec 2018. In response to the question “What are your favorite brands for affordable handbags/leather goods? Please rank your top three choices.”ChannelmixOn wholesale, Tapestry might be in a sweeter spot right now than Capri given Coach implemented its wholesale reset

56、in FY14, years before Michael Kors began its own reset, and we continue to believe that Kors will never fully migrate away from wholesale as wholesale is so much more profitable than retail. When it was last disclosed in FY18, wholesale represented 36% of Kors sales and 49% of Kors EBIT, with a repo

57、rted EBIT margin of 23%. In contrast, in FY19, wholesale represented only 8% of Coach sales.As we mentioned in our note from last year Affordable luxury is cheap (9 July 2018), our concern with high outlet penetration is the risk of brand impairment as consumers stop associating the brand with highe

58、r price tags and higher quality and instead begin to see it as likely to be discounted and are unwilling to pay full price for the products. A core concern we see for the aspirational value and brand impairment of both brands is that they both have similar outlet penetration. For Tapestry, both Kate

59、 Spade and Coach have significant outlet presence in North America, while Choo and Versace do not for Capri.On channel mix, we prefer Coachs smaller exposure to wholesale to Capri, but we are wary of both brands significant outlet exposure as this has affected brand equity, in our view. Capris decis

60、ion to acquire more premium European assets has helped reduce outlet exposure at the group level, whereas Tapestrys acquisitions of similarly positioned brands has not.Outlet penetration in North America*RetailOutletTotalOutlet (%)Coach20019139149%Kate Spade9411921356%Stuart Weitzman6387111%Tapestry