開(kāi)學(xué)和假期該穿什么

1、Retail Sector FocusWhat to put on for Back-to-School & HolidayNorth America Credit Research10 September 2020After a bumpy first half, with retail a mix of the “haves” (or essentials) and “have nots” (non-essentials), we are expecting a somewhat better second half. Students are filtering back to scho

2、ol with mixed retail trends in that schedule tech spend apparel, home projects dorm, and the season now stretching from the traditional July-Aug into October. Consumers are in a good place as they head back to work (many from home), after several months of government stimulus and reduced spending. R

3、etailers are well positioned having managed better than feared; low and clean inventory should help to protect margins, though it may keep a ceiling on sales improvement if the consumer comes back for holiday, particularly if the money spent in 2019 on experiences is shifted to goods and apparel (we

4、 see scarcity risk). IG Retailers benefited (driving tight spreads) from their largely essential status (other than the department stores). HY Retailers are more mixed driving 5 bankruptcies (JCP, JCG,US Credit Research Carla Casella, CFA AC (1-212) 270-6798 HYPERLINK mailto:carla.casella carla.case

5、lla Virginia Chambless, CFA (1-212) 834-5481 HYPERLINK mailto:virginia.chambless vi HYPERLINK mailto:rginia.chambless rginia.chamblessSarah S Clark(1-212) 834-5488 HYPERLINK mailto:sarah.s.clark sarah.s.clarkJ.P. Morgan Securities LLCHG Retail RecommendationsNMG, TLRD, HRFITW), and 1 stressed exchan

6、ge (PRTY), but the rest of the group has largely financed their way to get through COVID disruption.Back-to-School brings us quickly to Holiday, where we are expecting sequential improvement but YOY to remain down through 20 and 21 (vs 19). Across HY we see 20 sales down 12% on average, and EBITDA d

7、own 40% (- 60% excluding food/drug/convenience). Differentiating winners from losers will depend on 1) strength of ecom & BOPIS, 2) category mix (essentials, electronics for BTS, etc), 3) ratings falling angels vs rising stars (JWN down, ACI up), and 4) liquidity or financing needs.We recommend inve

8、stors Underweight the HG Non-Food Retail sector based on rich relative value, with the sector currently trading 32bp inside the JULI. The pandemic has driven a significant surge in sales for many of the large “essential” IG retailers. Higher employee, store and logistics costs have been partial offs

9、ets but in general the sector is performing very well. We recommend investors Overweight the HG Food/Drug Retail sector, where valuation is more attractive about 10bp wide of the JULI. Performance across this sector has been mixed with very strong results at grocers while restaurants have seen reven

10、ues decline sharply, and drug stores have experienced modest headwinds.We remain Neutral HY Retail, based on the balanced upside/downside. On the downside, we expect structural industry issues will persist and that we will see more closures than openings, a need to invest in IT, and control cost els

11、ewhere. On the upside, most of the HY set that remains (after a handful of bankruptcies/ exchanges) have the liquidity to weather the turbulence. We are OW grocer ACI. Our highest yield pick is ANF. We are upgrading LB, and its bonds (ex the secured 25s) to OW from N (we had been OW the 27-29s). We

12、like a few swaps to pick up 200-300bsp spread: out of GPS 27s into M 25s or ANF 25s, or out of BBBY 24s into LB 27s (+50bps). Non-Food RetailUnderweightAZOOverweightCOSTUnderweightHDNeutralJWNUnderweightKSSNeutralLOWUnderweightTGTUnderweight WMTNeutral Food/Drug RetailOverweightKROverweightMCDNeutra

13、l WBAUnderweightSource: J.P. Morgan.HY Retail Recommendations HY RetailNeutralACIOverweightNEWALBNeutralSWYNeutralANFOverweightBBBYNeutralBURLNeutralGPSNeutralLBOverweightMNeutralMIKNeutralMUSANeutralPRTYNeutralQVCNNeutralRADNeutralSBHNeutralNot covered: PKICNSource: J.P. MorganSee page 30 for analy

14、st certification and important disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this r

15、eport as only a single factor in making their investment decision. HYPERLINK / Table of Contents HYPERLINK l _bookmark0 Investment Grade Recs & Relative Value 3 HYPERLINK l _bookmark1 High Yield Retail Recommendations & Relative Value 7 HYPERLINK l _bookmark2 Top HY Retail Picks 8 HYPERLINK l _bookm

16、ark3 The post-COVID retail landscape - takes from Jan Kniffen 14 HYPERLINK l _bookmark4 What to put on for BTS/Holiday 16 HYPERLINK l _bookmark5 2Q findings 16 HYPERLINK l _bookmark6 What to put on for Holiday? 19 HYPERLINK l _bookmark7 What we are watching most 19 HYPERLINK l _bookmark8 Retail Sale

17、s show the category shift 22 HYPERLINK l _bookmark9 Category shifts drive essentials like grocery + electronics 22 HYPERLINK l _bookmark10 Ecommerce is a differentiator, not only for digitally native 23 HYPERLINK l _bookmark12 Financing + Fallen Angels + Rising Stars 26 HYPERLINK l _bookmark11 Finan

18、cing Need to vs nice to have 26 HYPERLINK l _bookmark13 Fallen Angel vs Rising Stars 28We recommend an UW on Non-Food Retail, based on rich relative value; we recommend OW on Food/Drug Retail based on attractive relative value following slight underperformance in the past few months.Investment Grade

19、 Recs & Relative ValueFigure 1: JULI All vs JULI Non-Food Retail vs JULI Food/Drug RetailSpread (Treasury)400350300250200150100500 JULI AllJULI Non-Food RetailJULI Food/Drug RetailSource: J.P. Morgan.IG Retail Issuance UpdateYear to date supply in 2020 has totaled $56bn, more than double than our or

20、iginal expectation of $22bn for the full-year, as the business impacts related to COVID-19 (i.e. government mandated restrictions) prompted a wave of issuance to bolster liquidity positions. The pace of issuance has slowed since March-April, though we think companies will look to maintain elevated l

21、iquidity buffers into the important fall/holiday season, which for some credits has been pulled forward. We revised our full-year 2020 estimate to $90bn back in May.Table 1: Retail $ Issuance 2020 YTD$ in millionsIssuerAmountHOME DEPOT INC$8,000MCDONALDS CORP$6,500NIKE INC$6,000STARBUCKS CORP$4,750C

22、OSTCO COMPANIES$4,000LOWES COS INC$4,000TJX COS INC$4,000TARGET CORP$3,250VF CORP$3,000ROSS STORES INC$2,000AUTOZONE INC$1,850DOLLAR GENERAL$1,500WALGREENS BOOTS$1,500KROGER CO$1,250RALPH LAUREN$1,250KOHLS CORP$600NORDSTROM INC$600OREILLY AUTOMOT$500 PVH CORP$500Source: Bloomberg.IG Retail Ratings U

23、pdateThe onset of the pandemic had profound negative effects on several segments of retail (off price, restaurants, department stores) due to closures and changes in consumer shopping priorities and patterns. As a result, negative rating actions have far outweighed positive year to date. Two IG depa

24、rtment stores slipped to high yield: Macys and Nordstrom. Several other credits took negative outlook changes and/or downgrades within IG.Table 2: Retailer Rating Actions 2020 YTD Skew NegativeDateCompanyAgencyCurrent RatingCurrent OutlookPrior RatingPrior Outlook09/03/2020Nordstrom IncS&PBB+NBBB-N0

25、8/07/2020Walgreens Boots Alliance Inc MoodysBaa2NBaa2S07/23/2020Walgreens Boots Alliance IncS&PBBBNBBBS06/30/2020Nordstrom IncFitchWDWDBBB-N06/01/2020Ralph Lauren CorpMoodysA3NA2N05/04/2020Starbucks CorpS&PBBB+NBBB+S05/04/2020Starbucks CorpFitchBBBNBBB+N05/04/2020Starbucks CorpMoodysBaa1NBaa1S04/21/

26、2020VF CorpMoodysA3NA3S04/17/2020VF CorpS&PANAS04/09/2020Nordstrom IncFitchBBB-NBBBN04/09/2020Walgreens Boots Alliance IncFitchBBB-SBBBN04/08/2020Nordstrom IncMoodysBaa3NBaa2N04/06/2020Ralph Lauren CorpS&PA-CWNA-S04/02/2020Ralph Lauren CorpMoodysA2NA2S04/01/2020Starbucks CorpFitchBBB+NBBB+S04/01/202

27、0Capri Holdings LtdFitchBB+NBBB-N04/01/2020Darden Restaurants IncS&PBBB-NBBBCWN04/01/2020Darden Restaurants IncFitchBBB-NBBBS04/01/2020Kohls CorpMoodysBaa2NBaa2S04/01/2020Kohls CorpFitchBBB-NBBBS04/01/2020Nordstrom IncMoodysBaa2NBaa2S04/01/2020Nordstrom IncFitchBBBNBBB+N04/01/2020Tapestry IncFitchBB

28、NBBB-N03/27/2020Tapestry IncMoodysBaa2NBaa2S03/25/2020Capri Holdings LtdS&PBBB-NBBB-S03/25/2020McDonalds CorpS&PBBB+NBBB+S03/25/2020Tapestry IncS&PBBB-NBBB-S03/23/2020Darden Restaurants IncMoodysBaa3NBaa2S03/23/2020Kohls CorpS&PBBB-NBBBS03/23/2020Nordstrom IncS&PBBB-NBBBS03/19/2020Darden Restaurants

29、 IncS&PBBBCWNBBBS03/09/2020Best Buy Co IncMoodysBaa1SBaa1URU03/03/2020Capri Holdings LtdFitchBBB-NBBB-SSource: Bloomberg, Moodys, S&P and Fitch Ratings.Table 3: HG Non-Food Retail CoverageTickerIssuerRecommendationRatingAdjusted LeverageSummary CommentsAZOAutoZone IncOverweightBaa1/BBB/BBB2.7xWe rec

30、ommend an Overweight on AZO based on attractive relative value and its position as a leading national auto supplies retailer. AZOs business has been resilient through economic cycles, as its auto parts offering meets a relatively non-discretionary demand. The company is committed to investment grade

31、 ratings, and lease adjusted leverage has remained steady at 2.8x. Risks to our recommendation include changein underlying retail trends, M&A activity and change in financial policy.COSTCostco Wholesale CorpUnderweightAa3/A+1.7xOur UW recommendation on COST is due to rich relative valuation, as its

32、businessmodel continues to outperform other formats and competitors. Balance sheet and credit profile is very strong, in our view. Risks to our recommendation include a weaker market backdrop that results in COST outperformance despite tight trading levels.HDHome Depot IncNeutralA2/A/A2.0 xWe recomm

33、end a Neutral rating for HD, given its credit profile is very strong, in ourview, and its operating performance has benefitted from an improving US housing market and the pandemic/work from home mandates has accelerated home related projects. The company targets a moderate lease-adjusted leverage of

34、 2.2x. We think these credit positives are reflected in relative tight spreads. Risks to our recommendation include change in underlying retail and housing trends, M&A activity and change in financial policy.KSSKohls CorpNeutralBaa2/BBB-/BBB-5.3xWe have a Neutral recommendation on KSS. We view KSS a

35、s best positioned withinthe challenged department store sector, with its off-mall store footprint, value price positioning, and loyal customer base. Liquidity is adequate for near term needs in our view, as KSS is focused on maintaining financial flexibility given the uncertain environment, and KSS

36、does not have any bond maturities until 2023. Spreads trade much wider than most IG retail credits. Risks to our recommendation include change in underlying retail trends, M&A activity and change in financial policy.LOWLowes Cos IncUnderweightBaa1/BBB+2.4xWe recommend investors UW Lowes due to its m

37、ore aggressive financial policythough we do acknowledge improved results, in part benefitting from COVID-19 related demand. LOW bond spreads trade notably wider than home improvement peer HD, which we think is justified given the stronger operating performance from HD over time and LOWs more aggress

38、ive financial policy. Risks to our recommendation include unexpected improvement in underlying business trends or its credit profile.JWNNordstrom IncUnderweightBaa3/BB+NMWe recommend UW on JWN, as the headwinds facing the department store sectorhave been further exacerbated by COVID-19. While we bel

39、ieve JWN has taken prudent cash preservation actions and has some real estate ownership, we are concerned about the recovery of its department store business, especially its full line, as its largely mall-based with a higher price point and more fashion oriented. Recent rating actions have been nega

40、tive, including S&P downgrading to BB+/Negative.Risks to our recommendation include unexpected improvement in underlying business trends or its credit profile.TGTTarget CorpUnderweightA2/A/A-2.1xWe recommend investors Underweight Target, as we prefer WMT and HD at similarspreads. Targets overall rev

41、enues have seen a significant boost due to COVID-19, while its profit margins have been hurt due to elevated operating/employee costs and softness in its higher margin apparel segment. Target maintains a commitment to its current A rating and Tier 1 commercial paper. Pre-COVID, Targets results were

42、showing improvement following a successful strategy to increase operational and capital investments including lower prices, store remodels, supply chain improvements and digital/online capabilities. Risks to our recommendation include change in underlying retail trends, M&A activity and change in fi

43、nancial policy.WMTWalmart IncNeutralAa2/AA/AA1.9xWe recommend a Neutral weight on WMT. Recent results have been very strong andWMT is managing well in a challenging operating environment due to COVID-19 and its credit profile/leverage has been stable. We like many of WMTs recent strategic moves to e

44、xit underperforming international markets, focus on its ecommerce business, store remodels, customer initiatives, technology, and supply chain. We think WMTs credit positives are reflected in relatively tight trading spreads. Risks to our recommendation include unexpected improvement or deterioratio

45、n in underlying business trends or its financial policy.Source: Company reports and J.P. Morgan estimates.Table 4: HG Food/Drug Retail CoverageTickerIssuerRecommendationRatingAdjusted LeverageSummary CommentsKRKrogerOverweightBaa1/BBB3.0 xWe recommend Overweight on KR given its improved credit profi

46、le, helped by strong business performance year to date due to consumer trends because of the pandemic. KR was well positioned heading into 2020, as it had taken several positive strategic actions over the past couple of years (exit C-store operations, partnership with Ocado, Home Chef) to better pos

47、ition itself in the intensely competitive landscape. KR has a clearly defined financial policy for mid BBB ratings and leverage of 2.3-2.5x. Risks to our recommendation would include a notable weakening in operating performance orchange to a more aggressive financial policy.MCDMcDonalds CorpNeutralB

48、aa1/BBB+4.8xWe recommend investors Neutral weight MCD, as relatively rich spreads reflect itsstrong credit profile, high margins, and global scope. MCD took several actions to preserve cash and bolster its liquidity (suspended repurchases, reduced marketing, and issued $5.5bn of new debt) as its fra

49、nchisees face pressures related to restaurant closures/limited hours of operation. Pandemic related headwinds have begun to ease, and MCD operations are improving sequentially. Risks to our recommendation include permanent changes in underlying business trends and credit profile or a change to its f

50、inancial policy.WBAWalgreens Boots AllianceUnderweightBaa2/BBB/BBB-3.8xWe recommend investors Underweight Walgreens based on business headwinds,elevated event risk, and potential opioid liability given its 28% stake in ABC. WBA is undergoing several senior management changes including a new head of

51、its US business and ongoing search to replace the CEO. Relatively wide spreads reflect the credit headwinds, in our view. Risks to our recommendation include unexpected improvement in the underlying business trends or adoption of a more conservative financial policy.Source: Company reports and J.P.

52、Morgan estimates.High Yield Retail Recommendations & Relative ValueAt the peak of COVID-19 disruption, HY Retail traded to 15% YTW, 700bps wider than January levels. The index has since rallied with the broader market (and as the widest names “exited” the market through bankruptcy filings JCP, JCREW

53、, NMG, and TLRD). Today HY Retail trades with a current yield only 50bps wide to HY and YTW only 100bps behind HY (Retail 7.15%), keeping us Neutral overall.Figure 2: JPM Domestic HY vs HY RetailJPM HY YTWJPM HY Retail YTW JPM HY B YTW JPM HY Split B YTWJPM HY CCC/Split CCC YTW19%17%15%13%11%9%7%5%2

54、-Jan-202-Feb-202-Mar-202-Apr-202-May-202-Jun-202-Jul-202-Aug-202-Sep-2Source: Data QueryTable 5: HY Retail vs US HY (as of 9/9/20)Sector statisticsSectorUS HY IndexYTD total return-1.38%-0.81%Spread to worst681bp588bpYield to worst7.07%6.16%Current yield6.82%6.34%Average price$82.23$92.07Average rat

55、ingBSplit BB% of Distressed debt (70 & below)5.2% of Domestic Index2.67%Source: J.P. Morgan estimatesHY Retail trades about 150bps inside the year-ago levels and 800bps inside the March wides. The YOY tightening seems off, given the pandemic, store closures, and concerning go-forward retail landscap

56、e, but is explained by the HY retail composition, justified by the “cleaning out” of the stressed retailers over the past year (bankruptcy filings). This years bankruptcies + a few higher quality adds (fallen angels) has left HY Retail higher quality than LY.In the top-10 HY Retailers today, 9 have

57、a double-B ratings (on at least some of its bonds), vs a year ago only 7 of 10 had a double-B and 3 were triple-C rated (Rite Aid, J.C. Penney, and Party City).Albertons remains the top issuer and the only one holding 15% weighting of the JPM HY Retail Index. Macys and QVC fell into our HY index thi

58、s year and are among the top-5 issuers, edging out JCP (filed for bankruptcy this year) and Party City (exchanged bonds, reducing principal outstanding).Figure 3: HY Retail top issuers in JPM HY coverage16.0%14.0%12.0%10.0%8.0%6.0%4.0%2.0%0.0% 15.1%8.5%8.3%7.9%5.6%4.7%4.5%3.8%3.7%2.7%ACIGPSMLBQVCPKI

59、CNSBHMUSABBBYRADSource: J.P. Morgan; Company ReportsTop HY Retail PicksSee our recent HY 1Q wrap and 2Q Preview for our full forecasts and capital structures for our HY coverage group. In that August report, we initiated on ANF (Overweight), BURL (Neutral), and QVC (Neutral).We initiated coverage on

60、 Abercrombie & Fitch (ANF) and its 8.75% secured notes due 2025 with an Overweight recommendation, as we believe the company has ample liquidity to weather a weak 2020 and stayed overweight following the company posting a better than expected 2Q. ANF has more cash than debt ($767mn cash, $350mn of b