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I am fairly neutral towards Estee Lauder. Using DCF analysis (data shown at the end), the implied growth rates of these KORS, RL, COH, and EL are estimated. I will use net revenue and income growth, comparable store sales, international exposure, return on invested capital, and fashion trends to determine which retailer is most attractive. The implied growth on EL is lower than those of RL and COH, despite the lower P/E, because free cashflow was used to calculate the implied growth rates. KORS, the most recent of its peers to IPO, has very high growth expectations. Sales increased 63% and 69% from 2011 to 2012 and 2012 to 2013 respectively. Gross margins increased from 59% in 2011 to 62% in 2013. Alongside, SG expenses, as a percentage of revenues, have decreased from 37.7% in 2010 to 28.5% in 2013, demonstrating that KORS has been able to effectively take advantage of economies of scale. RL, given its performance over the past few years, may find difficulties achieving the market's estimated implied growth rate. Sales increased 1.2% (2.9% without any adverse currency effects) in 2013.
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