Retail Picks: DA Davidson Bullish On PVH, TJX, Burlington, Canada Goose, Neutral On Lululemon

D.A. Davidson was out bullish this week on three retail names, while the sell-side firm took a neutral stance on one athleisure retailer that has shown strong growth.

Calvin Klein, Tommy Hilfiger Drive Bullish PVH Stance

Analyst John Morris initiated coverage of PVH Corp (NYSE: PVH) with a Buy rating and $167 price target.

Over the next five years, Morris sees the duo of Calvin Klein and Tommy Hilfiger growing to a combined $10 billion in global sales, driving more than 7-percent compound annual sales growth and $1.4 billion in earnings power for PVH. (See the analyst’s track record here.)

“Under talented new leadership, both brands are delivering on-trend products that appeal to the millennial demographic,” Morris said.

Calvin Klein now has famed designer Raf Simons, whose team is just beginning to have a significant impact on assortments, he said.

TJX The ‘Leading Player In The Off-Price Sector’

Morris called TJX Companies Inc (NYSE: TJX) an “800-pound gorilla” after initiating coverage with a Buy rating and $130 price target.

“As the leading player in the off-price sector, TJX is in the best position to capitalize on the secular decline of department and chain stores as a destination retailer for apparel brands at great values,” the analyst said.

Burlington: Opportunities In Other Retailers’ Bankruptcies

Morris initiated coverage of Burlington Stores Inc (NYSE: BURL) with a Buy rating and $187 price target.

Recent retailer bankruptcies this year create real estate opportunities and the potential for market share gains by product category for Burlington Stores, the analyst said.

“With brick-and-mortar retailer disruption from e-commerce resulting in a number of headline bankruptcies, BURL can cherry-pick the best locations on favorable terms as it continues its expansion in the way it did with The Sports Authority and Toys-R-Us.”

International Expansion At Canada Goose

The analyst initiated coverage of Canada Goose Holdings Inc (NYSE: GOOS) with a Buy rating and $68 price target.

The stock’s valuation underestimates potential contributions from expansion in the Far East; scale economics from in-house manufacturing growth; product pricing upside; and the potential for store acceleration and unit contribution, Morris said.

Canada Goose could reach over $1.5 billion in revenue in five years and has ample whitespace to expand in the U.S., Europe and Asia, the analyst said.

Lululemon’s Growth Will Slow

Morris took a more cautious approach to Lululemon Athletica inc. (NASDAQ: LULU) after initiating coverage with a Neutral rating and $155 price target.

The quality of Lululemon’s long-term growth rate moving forward will not be as robust as it has been, since its future growth has higher risk associated with the complexity of international expansion and fashion cycle headwinds in athleisure, the analyst said. 

“These factors make it harder to argue for further multiple expansion in light of LULU’s 20-percent sustainable growth rate.”

Related Links:

Lululemon Has Room For Valuation, Earnings Upside This Year

Jim Cramer Shares His Thoughts On Lululemon And Canada Goose