QMG Newsletter -Matter of Fact – 1 st June 2015

1. MATTER OF FACT – W/C 1ST JUNE 2015
01/06/2015 in Newsletters
1.More on AutoZone’s FQ3
2.Signet misses by $0.01, misses on revenue
3. Michael Kors and Tiffany & Co results
CONSUMER DISCRETIONARY
1. More on AutoZone’s FQ3
Source – Seeking Alpha
Company: AutoZone (AZO US)
QMG product view: Auto Parts Retailers – US50.3
Event: 3Q FY15 Earnings – 26th
May 2015
Highlights:
 AutoZone (NYSE:AZO) reports same-store sales rose 2.3% in FQ3.
 Total auto parts sales increased 6.5% to $2.40B.
 Gross profit rate +30 bps to 52.3% attributable to higher merchandise margins.
 Operating expense rate +12 bps to 31.64%.
QMGI comment:

2.  AZO returned slightly under analyst expectations of +6.7% sales growth for 3Q FY15 YoY.
The negative trend our data guiding towards a slight miss on Sales figures.
 Data we had prior to earnings announcement was from March statistics figures and April
figures that came out during the week support the view of negative sales growth.
 Sales and Margins are at -2.2% and -2.35% for April continuing this negative view on the
product group. It is important to remember that our data groups sales of listed equities
and other companies that make up the US Auto Parts Retailers space.
 Whilst the actual sales of AZO is still positive we correctly saw the downward trend that
played out in the actual results and it is a trend that is looking to continue based on April
figures.
2. Signet misses by $0.01, misses on revenue
Source – Seeking Alpha
Company: SIGNET Group (SIG LN and SIG US)
QMG product view: Jewellery Retailers – 52.48_4: US and UK
Event: Q1 FY15 Earnings – 28th
May 2015
Highlights:
 FQ1 EPS of $1.62 misses by $0.01
 Revenue of $1.53B (+44.3% Y/Y) misses by $10M.
QMGI comment:
 The market was expecting +47% growth YoY for FQ1 and the results turned out to be a
miss.
 Q1 for SIG was a 13 week quarter, so the +3.6% sales number gets an extra week benefit.
 UK was the stand out business with lfl +6.2% (consistent with QMG +4.5%), BUT entirely
wiped out by the stronger USD (-10%) and is very likely to remain a headwind for them
(even though UK is only 13% of sales).
 US looks very weak (our data for April -5.6% sales based on -2.2% vol and -3.4% price).
SIG have guided lfl sales at group level to be 2-3% range (low against the +3.6% Q1 result,
and i think will be a challenge against what our data is showing for the US and diamond
prices which remain very weak (down from c$8100/ct this time last year to c$7100/ct)
 This is a see through price for consumers, so not like SIG can benefit from keeping prices
high, and DEMAND related weakness (ie there is no more diamond supply that has come
on)
 Other consumer discretionary stocks remain better opportunities eg US/UK
housebuilders, which trade on closer to 10x forward earnings vs SIG on c20x
3. Michael Kors and Tiffany & Co results
Source – Bloomberg
Company: Michael Kors (KORS US) and Tiffany & Co (TIF US)

3. QMG product view: US52.48/4 – Jewellery Retailers
Event: Earnings announcements
Highlights:
 Tiffany (NYSE:TIF): Q1 EPS of $0.81 beats by $0.11.Revenue of $962M (-4.8% Y/Y) beats by
$43.32M.
 Michael Kors Holdings (NYSE:KORS): FQ4 EPS of $0.90 misses by $0.01.Revenue of $1.08B
(+17.7% Y/Y) in-line.
QMGI comment:
Micheal Kors (KORS US) – shares fell -23% after missing EPS and guiding same store sales
substantially lower across full year. This comes on the same day that Tiffanys (TIF US) delivers
results that beat (pretty low) expectations (and shares improved +11.4%). The read here is that
our data has been very negative on jewellery retailing in both US and UK. TIF is a high end brand
with global reach, KORS is mid-tier fashion retailer with a US focus. TIF results did show weak Q1
consumer in US (+1%), with Europe being the real boost for them (+17%), Japan was also very
bad with sales down 24%). TIF results were not necessarily good, they were just not as bad as
expected against pretty low estimates leading to the bounce in shares. For KORS, TIF and SIG
(mentioned in story 2) the question remains, if the US consumer is weak are consumers buying
more jewellery?