How to approach Consumer L/S ideas
Specifically asking to those who work in L/S equity (hopefully in consumers).
I have been trying to come up with a pitch on my own on certain retail brand names like RL, LULU, GES, and etc.
I am curious how you approach certain names like this with a long or short lens.
For example, I have already been doing some diligence on these names with store economics (sales per sqft and etc.), growth ranges for different geographies, and etc. However, it is really hard to back my growth projection ranges (comps growth to be specific) with solid, quantifiable evidence. For instance, if I think that the China comps growth rate is 20% for the next fiscal year, how can I justify this and with what evidence?( not just saying some soft shit like customer demand staying strong and customers love this brand)
Really curious to hear what L/S consumer analysts think on how to approach these ideas.
Good question, but ultimately this is where you need to put in the work and figure out how you can quantify things. Thesis’ which are overly based on vague things such as “people like this brand so sales will grow” are poor, but you can probably find datasets and surveys for specific products and brands in specific regions and target market segments to see how they’re evolving
Thanks for the input. As I am building this pitch without any typical resources like bloomberg, capiq, and etc (just strictly desktop research such as googling), do you have any recs on how to approach the datasets you mentioned? I realized it is quite hard to really find updated and useful datasets for forming theses.
Google. Doesn't matter how accurate the source is, as long as you can show the correct thinking.
You can also look for case studies that you think are good analogs to this situation and frame why you think it'll be better/worse/same for this name. This should be the full basis of your thesis, but it is a way to frame your numbers and can provide a good sanity check.
I'd recommend taking a look at more macro figures/environment - look at inflation/CPI for the specific region you are targeting; is the brand discretionary or non-discretionary, perhaps a comps analysis with similar brands and their sales revenue for XYZ location or region, reading up on the specific trends for that demographic or area (for example, for fast fashion or mid-size consumers its a bit easier to market or project growth cause the affordable prices provide a sort of security/safety net - as in the majority will/can afford to purchase X item without impacting their wallet; however for luxuries its a bit difficult cause you are building your thesis around brand desirability and trends - ex. will Golden Goose maintain its existing/projected sales growth or will the high-end sneaker trend decrease). Break down revenue mix by gender/age group and then correlate it to the region's population - for instance if there's a growing increase in the next five years of a majority being between X and Y age - you can tie it/make a case that it will impact growth. If its a public company - look up its financials and any ER reports (some old ones are published online - quick Google search), otherwise search up McKinsey or BCG reports, which should give you a greater understanding/look.
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