short: jcp long: bksalphachallenge.org/wp-content/uploads/2018/06/... · 2015: •sales/sqft and...

1

SHORT: JCP

LONG: BKS

Neilay Mehta, CFA

Mark Rosenblum

Ishaan Acharya

2

Short JCP:

• Department stores such as JCP face worst secular headwinds in retail

• New CEO is making grave mistakes by alienating the core customer

• Customers are voting with their feet: “comp” sales are down 20% ytd

Long BKS:

• We believe brick and mortar revenue will decline slower than expected

• Potential to unlock significant value through spin-off of Nook

• College segment is stable and generates solid cash flow

Valuation Summary

Valuation Summary: Short JCP

Current Px: $23.61

52 wk High / Low $43.28 / $19.06

Short Interest 27%

Bear Base Bull

JCP Value/Shr $42 $14 $8

Return -76% 40% 67%

Valuation Summary: Long BKS

Current Px: $16.10

52 wk High / Low $26.00 / $9.35

Short Interest 20%

Bear Base Bull

BKS Value/Shr $15 $26 $37

Return -4% 61% 128%

3

Appendix

Summary

BKS Long Thesis

JCP Short Thesis

Overview

Agenda

JCP Profile

4

Major Holders

Short Interest

Stock Performance vs. S&P 500 Company Data

Revenues & Profits

Top Holders

Pershing Square 17.84%

Vornado Realty 7.75%

Dodge & Cox 7.37%

Fidelity Investments 7.33%

40.29%

Ticker JCP

Exchange NYSE

Current Price 23.4

52wk Range 19.06 - 43.18

Market Value 5,192.3

Enterprise Value 7,455.3

# of Stores 1,104

CEO Ron Johnson

Data as of Nov 5, 2012

Sources: Capital IQ, Company Filings

CEO’s Strategic Initiatives

Pricing & Inventory

• Reduce clearance

• Eliminate coupons

• Reduce brands from 400 to 100

• Create distinct shop-in-shop

atmosphere

• Implement a 3 tier pricing system

Financial Targets

• 40%+ gross margins

• 27% SG&A margins

• 13% EBIT margins

5 Sources: Morgan Stanley Research (June 2012), Company Filings

Sample Pricing

Customer Perception - Pricing

• Customers view JCP as having the

“Best Prices”

• However, more customers stated

that prices went up vs. down

6 Sources: Morgan Stanley Research

Core Perception:

New Perception:

EDLP – More Simple Strategy?

• Best price is difficult to understand and

not seen as a value proposition

• “Switching from PROMO to EDLP is six

times more expensive than migrating the

other way around.” –Stanford Graduate

School of Business

• Example:

• Complex costs to educate consumers

• Repositioning costs to rework channel

relationships

7 Sources: Morgan Stanley Research, Stanford Graduate School of Business

Switching to EDLP increases SG&A costs

Alienating “Core Customers”

As JCP attempts to attract a younger

more affluent customer it risks alienating

its core customer which accounts for 2/3

of spending

8

While a 1/4 of customer are core (lowest

among peers), this groups accounts for

2/3 of spending at JCP

Sources: Morgan Stanley Research

Consumers are Voting with their Feet

• Comps down 20% ytd;

EBITDA margins fall to

6.3% from 9.0%

• Would be EBITDA

negative without the deep

$1B of SG&A cuts

9

Case Study: EDLP / Brands

Problem with Business:

• Couldn’t find its niche between Wal-

Mart and Target

• Repeatedly changed pricing strategy

• Undeveloped distribution network

Strategic Plan:

• Reduced promotions and re-introduced

“BlueLight Always” (2000)

• Introduced high end brands like Martha

Stewart, Kathy Ireland, Disney, Sesame

Street, & Jaclyn Smith

• Spent $2B on technology to overhaul

inventory controls (2001)

Result:

• Strategy failed. Comps / Margins

• Declared bankruptcy in Jan 2002.

Eddie Lampert bought for ~$1B;

(market cap in 1999 was $4.67B)

• March 2005 merged with Sears

10

4.80% 4.80%

1.10%1.70%

1.00%

-1.50% -1.30%

-8.80%

-11.00%

-7.60%

-9.80%

-7.80%

-11.00%

-1.20%

-12.00%

-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

1998 1999 200 Q12001 Q22001 Q32001 Q42001 Q12002 Q22002 Q32002 Q42002 2003 2004 2005

Kmart-SameStoreSalesGrowth

$28

$29 $29

$31

$36

$37 $37

$35

$27

$29

$31

$33

$35

$37

1996 1997 1998 1999 2000 2001 2002 2003

Kmart-SG&A/SqFt

Sources: Company Filings

Case Study: Product Mix

Problem with Business:

• Poor understanding of customer

needs

• High inventory levels

• Expanding store count

Strategic Plan:

• Enhance marketing strategy

• Re-design store image

• Upgrade IT

• Product segmentation strategy based

on customer lifestyle, behavior, and

climate

• Reduce store real estate

Result:

• Strategy backfired: Alienated core

customers

• Bought by private equity (Sycamore

Partners) in 2012 for $2.75 per share

11

1.30%

-3.90%-4.90%

-8.20%

-6.00%

-7.40%

-11.70%

-13.90%

-15.90%

-26.90%

-24.90%

-15.90%

-7.20%

-3.40%

-5.50%

-30.00%

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

2006 1Q2007 2Q2007 3Q2007 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 2010 2011

TalbotsSameStoreSalesGrowth

$404$409

$354

$314

$307

$297 $296$293

$280

$300

$320

$340

$360

$380

$400

$420

$2,004 $2,005 $2,006 $2,007 $2,008 $2,009 $2,010 $2,011

Talbots-Sales/SqFt


Valuation – Base Case

• Reinstate discounts, coupons, ads.

• Company just introduced a coupon to

stimulate traffic

• $300M incremental ad cost (which

JCP just removed)

• Should stabilize sales

• Backtrack on clearance will hit

margin

• Add real estate monetization

($5/share)

12

Analysis: $300mn ad spend to reinstitute coupons/promo to drive traffic

2012E Sales $14,216 $14,216 $14,216 $14,216

2013E Comps -5.0% 0.0% 5.0% 10.0%

2013E Sales $13,336 $14,038 $14,740 $15,442

x Gross Margin (JCP Historical 10yr Avg.) 37.5% 37.5% 37.5% 37.5%

= Gross Profit $5,001 $5,264 $5,528 $5,791

- Cash SG&A plus $300mn Ad Spend $4,627 $4,627 $4,627 $4,627

= EBITDA $375 $638 $901 $1,164

% margin 2.8% 4.5% 6.1% 7.5%

x EV / EBITDA Multiple 5.5x 5.5x 5.5x 5.5x

= Enterprise Value $2,060 $3,508 $4,956 $6,403

- Net Debt ($2,263) ($2,263) ($2,263) ($2,263)

+ Real Estate Arbitrage $1,134 $1,134 $1,134 $1,134

= Equity Value $931 $2,379 $3,827 $5,275

per Share $4 $11 $17 $24

Return -82% -54% -26% 2%

Shares 219 219 219 219

Valuation – Bear Case

• "If Management’s Plan Works" by

2015:

• Sales/Sqft and EBITDAR margins

reach peers

• Comps would have to INCREASE

25% from 2012E; 8% per year 2013-

2015

• EBITDAR Margins improve to 13.2%

from 9.9%

• Real estate monetization:

• Assumes market rent of $4.7/sqft vs.

JCP's $4.5

• Sell/Leaseback of owned real estate

• Close bottom 400 leased stores and

sublease them

• Monetize working capital at bottom

400 stores

13

Sublease Keep All

Ron Johnson Plan Works! Bottom 400 1,102

Stores 700 1102

Sales / Sqft $157 $157

= Sales $13,221 $17,486

EBITDAR $1,739 $2,301

% margin 13.2% 13.2%

Existing Rent Expense $231 $231

EBITDA $1,509 $2,070

% margin 11.4% 11.8%

- Additonal Rent on Sales Leaseback $204 $204

= New EBITDA $1,305 $1,866

% margin 9.9% 10.7%

x EV / EBITDA Multiple 5.5x 5.5x

= Value 7,175 10,261

+ NWC of Liquidated Stores $741

+ REIT Value of Liquidated Stores $85

+ Gain from Sale/Leaseback (a-tax @ 15%) $2,258 $2,258

= Total EV $10,258 $12,519

+ Net Debt ($2,263) ($2,263)

= Total Equity Value $7,995 $10,256

per Share $36 $47

Shares 219 219

PV @ 10% over 3 years) $27 $35

Return 16% 49%

Valuation - Bull Case

• Continue current strategy: reduce

promotion, change customer profile

• Comps continue falling, albeit at a more

moderated pace

• K-Mart SSS comps post ELPD:

• 1.0%, -1.5%, -1.3%, -8.8% (files for

bankruptcy)

• Talbot's SSS comps post new

merchandise:

• -6.0%, -7.4%, -11.7%, -13.9%

• JCP FCF will be permanently negative if

‘comps’ decline in 2013/14

• Vendors will ask for cash-on-delivery

putting pressure on firm liquidity

14

Curr. '12E 2012E 2013E 2014E 2015E

Comps -18.0% -18.0% -5.0% -5.0% -5.0%

Sales $14,216 $14,216 $13,336 $12,511 $11,737

x Gross Margin (JCP Historical 10yr Avg.) 37.5% 37.5% 37.5% 37.5% 37.5%

= Gross Profit $5,331 $5,331 $5,001 $4,692 $4,401

- Cash SG&A excl D&A $4,327 $4,327 $4,127 $4,127 $4,127

= EBITDA $1,004 $1,004 $875 $565 $275

% margin 7.1% 7.1% 6.6% 4.5% 2.3%

x EV / EBITDA Multiple 7.4x 5.5x 5.5x 5.5x 5.5x

= Enterprise Value $7,441 $5,524 $4,810 $3,108 $1,512

- Net Debt ($2,263) ($2,263) ($2,263) ($2,263) ($2,263)

= Equity Value $5,178 $3,261 $2,547 $845 ($751)

per Share $24 $15 $12 $4 ($3)

Share 219 219 219 219 219

Return -37% -51% -84% -115%

FCF (EBITDA-Interest-CAPEX) ($1) ($41) ($100) ($400) ($690)

Leverage (Net Debt / EBITDA) 2.3x 2.3x 2.6x 4.0x 8.2x

BKS Profile

15

Major Holders

Short Interest

Stock Performance vs. S&P 500 Company Data

Revenues & Profits

4,947.5 4,926.8 4,852.9

1,561.6 1,427.0 1,447.4 $50

$80

$110

$140

$170

$200

$230

$0

$1,000

$2,000

$3,000

$4,000

$5,000

2009 2010 2011

Revenues Gross Profit EBIT

Ticker BKS

Exchange NYSE

Current Price 15.9

52wk Range 9.35 - 26.00

Market Value 946.7

Enterprise Value 1,571.9

# of Stores 1,356

CEO William Lynch

Data as of Nov 5, 2012


Summary Thesis – Long BKS


Brick and Mortar

• Potential to unlock significant value through spin-off

Nook


College

16

Segment Breakdown Valuation Summary


Brick and Mortar

17

US Book Sales Declining Secular Trend

BKS’s Brick and Mortar Revenue Will Decline Slower Than Expected

Consumers are slow to adopt

new technologies!

Source: IFPI

Lower Competition

Borders 2011 bankruptcy

led to expected flat SSS

in FY12 and 13

Certain Products not

Suited for Digital

Example: children’s

books

Sources: US Census Bureau

Brick and Mortar Run Off DCF Analysis

18

Low Inventory Risk

BKS can put back 100%

unsold to publisher

Flexible Lease Agreements

Average lease duration ~

2-3 years


College

19

Valuation Key Trends

Stable Valuation

• Strong relationships with colleges

• Stable EBITDA

• BKS paid owner (and BKS Chairman) $514M for College Segment in 2009

Unique Rental Agreement

• BKS pays a % of revenue as rent

• 60-90 days to exit leases if unprofitable


Nook

20

Company Timeline Nook eReader Market Share

15%+ annual estimated unit growth through 2014 (IDC)

Growing eBook penetration (>15% of total book sales in 2011) benefits

positive margin Nook content sales vs. loss leading hardware

Target and Wal-Mart dropped Kindle from stores in 2012 and devoted

space to Nook

25%

30%

0%

5%

10%

15%

20%

25%

30%

35%

2010 2011 2012E

2010 – BKS launches the

Nook

2011 – Liberty Media buys a stake in BKS for $204M

2012 – BKS announces plans to spinoff the Nook and

College segments

2012 – Microsoft buys a 17.6% stake in Nook for $300M

Sources: Company Filings, IDC

Nook Valuation

21

Valuation Summary Comments

• Valuation based on 1x revenue

based on 300+ tech hardware

M&A/spinoffs

• Recently validated by MSFTs

Nook equity investment

• Base case: half of Nook sales

are loss leading hardware

only $750M of $1.5B guidance is

content related

• Bull case: full revenue credit

• Bear case: zero value for Nook


BKS Valuation Summary

22

Retail Segment EV / EBITDA of 2.4x is lower than similarly secularly

challenged peers, BBY (2.6x) and GME (3.4x)

College Segment EV / EBITDA of 4.5x below hardline comps due to

low growth

Sources: Capital IQ, Thomson One Analytics

23

Short JCP:

• Department stores such as JCP face worst secular headwinds in retail

• New CEO is making grave mistakes by alienating the core customer

• Customers are voting with their feet: “comp” sales are down 20% ytd

Long BKS:


• Potential to unlock significant value through spin-off of Nook


Questions

Valuation Summary: Short JCP

Current Px: $23.61

52 wk High / Low $43.28 / $19.06

Short Interest 27%

Bear Base Bull

JCP Value/Shr $42 $14 $8

Return -76% 40% 67%

Valuation Summary: Long BKS

Current Px: $16.10

52 wk High / Low $26.00 / $9.35

Short Interest 20%

Bear Base Bull

BKS Value/Shr $15 $26 $37

Return -4% 61% 128%

JCP: APPENDIX

24

JCP: Comp Set

25 Sources: Capital IQ, Thomson One Analytics

Div Yield

Company NameDay Close

PriceMarket Cap

Enterprise

ValueCY+1 CY+2 CY+1 CY+2 CY+1 CY+2 CY+1 CY+2 LTM

Dillard's Inc. (NYSE:DDS) $79.23 $3,732 $4,494 0.7x 0.7x 5.7x 5.8x 13.2x 12.1x 0.6 0.6 0.3%

Kohl's Corp. (NYSE:KSS) $54.55 $12,792 $16,424 0.8x 0.8x 5.6x 5.5x 11.8x 10.6x 0.9 0.9 2.3%

Macy's, Inc. (NYSE:M) $40.61 $16,346 $21,692 0.8x 0.8x 5.8x 5.7x 11.9x 10.6x 0.9 0.8 2.0%

Nordstrom Inc. (NYSE:JWN) $56.48 $11,352 $13,233 1.1x 1.0x 7.6x 7.0x 16.2x 14.2x 1.3 1.1 1.9%

Saks Incorporated (NYSE:SKS) $10.33 $1,584 $1,828 0.6x 0.5x 6.3x 5.7x 21.5x 17.8x 1.3 1.1 NA

Stein Mart Inc. (NasdaqGS:SMRT) $7.60 $332 $238 0.2x 0.2x 4.8x 4.6x 20.5x 15.8x 1.7 1.3 NA

Target Corp. (NYSE:TGT) $62.71 $41,069 $58,191 0.8x 0.8x 7.8x 7.4x 14.2x 12.7x 1.2 1.0 2.3%

Wal-Mart Stores Inc. (NYSE:WMT) $72.77 $244,609 $296,804 0.6x 0.6x 8.2x 7.7x 14.8x 13.5x 1.6 1.5 2.2%

Avg. 0.7x 0.7x 6.5x 6.2x 15.5x 13.4x 1.2 1.0

Median 0.7x 0.7x 6.0x 5.7x 14.5x 13.1x 1.2 1.1

Min 0.2x 0.2x 4.8x 4.6x 11.8x 10.6x 0.6 0.6

Max 1.1x 1.0x 8.2x 7.7x 21.5x 17.8x 1.7 1.5

J. C. Penney Company, Inc. (NYSE:JCP) $23.70 $5,193 $7,456 0.5x 0.5x 11.3x 6.6x 91.2x 17.4x 2.8 0.5 3.4%

Supplemental InformationLTM

Revenues

LTM

EBIT

LTM Net

IncomeROC ROE 2009 2010 2011 2010 2011 2010 2011

Dillard's Inc. (NYSE:DDS) $6,535 7.3% 7.6% 10.2% 25.1% -10.0% 3.0% 4.0% NA $118 35.6% 35.9%

Kohl's Corp. (NYSE:KSS) $18,841 10.6% 5.6% 11.8% 16.0% 0.4% 4.4% 0.5% $285 $269 38.2% 38.2%

Macy's, Inc. (NYSE:M) $26,838 9.3% 5.0% 12.0% 22.7% -5.3% 4.6% 5.3% $162 $172 40.7% 40.4%

Nordstrom Inc. (NYSE:JWN) $11,382 10.7% 5.9% 15.6% 34.8% -4.2% 8.1% 7.2% $404 $439 36.7% 37.2%

Saks Incorporated (NYSE:SKS) $3,075 5.0% 2.4% 6.0% 6.4% -14.7% 6.4% 9.5% $379 $419 40.1% 40.8%

Stein Mart Inc. (NasdaqGS:SMRT) $1,166 2.1% 1.3% 5.7% 5.6% -5.6% -1.8% -1.1% $161 $161 26.4% 25.6%

Target Corp. (NYSE:TGT) $71,336 7.4% 4.1% 9.9% 18.9% -2.5% 2.1% 3.0% $283 $292 30.5% 30.1%

Wal-Mart Stores Inc. (NYSE:WMT) $460,709 5.9% 3.5% 13.1% 22.9% -0.8% -0.6% 1.6% $432 $439 24.8% 24.5%

Avg. 7.3% 4.4% 10.5% 19.1% -5.3% 3.3% 3.8% $301 $288 34.1% 34.1%

Median 7.3% 4.6% 11.0% 20.8% -4.8% 3.7% 3.5% $285 $280 36.2% 36.6%

Min 2.1% 1.3% 5.7% 5.6% -14.7% -1.8% -1.1% $161 $118 24.8% 24.5%

Max 10.7% 7.6% 15.6% 34.8% 0.4% 8.1% 9.5% $432 $439 40.7% 40.8%

J. C. Penney Company, Inc. (NYSE:JCP) $17,260 -1.0% -3.5% -1.4% -12.9% -6.3% 2.5% 0.2% $159 $155 39.2% 36.0%

Revenue per Sqft

EV / Revenue EV / EBITDA P / EPS PEG Ratio

Same Store Sales Retail Gross Margin

JCP Store & Revenue Mix

• 1104 department stores

• 535 large mall-based

stores

• 135 mid-size off-mall

stores

• 424 smaller legacy

stores

26 Sources: Company Filings

Aggressive Gross Margin Targets

• 40% gross margin targets are a

stretch goal

• 10 year average has been

37.5%

• Shifting product mix profile to be

similar to peers - towards lower

margin national brands

• JCP earns more 3% to 5% more

on private label brands

27

J.C. Penny's Private vs National Mix GM% Math

Current Mix GM%

Private* 55% 37.8%

National 45% 33.8%

Total 100% 36.0%

Target Mix GM%

Private 25% 38%

National 75% 34%

Total 100% 35%

JCP earns 3 - 5% more on Private vs. National

Sources: Capital IQ

Sales/Sqft: Cannot Scale to Peers

• JCP targeting > $300 per sqft

• Currently at $155 per sqft with

111m sqft

• As square footage increases

sales per sqft decreases

28 Sources: Capital IQ

Department Stores Losing Share

- Department store decline

accelerating over the past

10 years

- Online channel is a

growing threat

- Superstores, internet

retailing, and discounters

continue to gain share

29 Sources: US Census Bureau

Pershing Square Long Thesis

Potential for large upside:

• Ron Johnson (8/10/12):

• In a big mall that's 1 million sq. ft., about 600,000 sq. ft. goes to the anchors and the common

area, which leaves about 400,000 sq. ft. for the stores

• And the stores average 3,000 to 4,000 sq. ft.

• So you run the math, there are about 100 to 120 stores in the typical mall we're in. We will have

just as many shops inside J.C. Penney. And that is why we call it a specialty department store, is

it like a mall within a mall

• Bill Ackman (05/16/12):

• 80% of Penney’s on-mall stores are in shopping centers with sales >$300 per sf. For Macy’s,

this figure is roughly ~75%

Why you can’t apply those averages to JCP:

• JCP current $155/sq. ft. needs ~21% of entire mall’s specialty share to get to $300/sq. ft. With

that kind of decline at the rest of the mall, the mall itself could essentially be bankrupt

• Only a handful of specialty stores actually do >$300/sq. ft. at scale (i.e. across 1,000+ locations -

Aeropostale, American Eagle, Banana Republic, Claire’s, Foot Locker, Gap, Old Navy)

• Only 544 of JCP’s 1,100 stores are “on-mall stores” thus only 435 stores >$300/sq. ft.

• Assuming no improvement at other stores, achieving that would bring chain to just $224/sq. ft.

• Macy’s is at $172/sq. ft. and Dillards at $118/sq. ft.


Pershing Square Long Thesis

• If 12x upside potential is realized then

JCP would become a top 5 global

retailer by market cap

• If JCP hits $300 sales / sq. ft. it would

have a larger share of sales than Wal-

Mart


Real Estate Analysis

32

Owned vs Lease Summary Notes

Leased Owned

Stores 676 426

Operating Lease Expense 305 204

Sqft / Store (000s) 101 101

Total Sqft 68,245 43,006

Rent / Sqft $4.47 $4.75 Use peer avg, JCP is slightly below market

REIT Sales Leaseback Arbitrage on Owned Stores Notes

Operating Lease Expense $204 = Rent/Sqft ($4.75) * Total Sqft

x Multiple Paid 13.0x --> Current Cap Rates are 7-8%, implies 12-14x multiple

= Pre-tax Value $2,657 --> Assumes no cost basis, which would lower net gain

Taxes 15% --> Long-term gain, taxed at 15%

= Post-tax Value $2,258

Additional Rent Expense $204 --> Same as Rent paid on owned land

x EV / EBITDA Multiple 5.5x

= Value lost @ Multiple ($1,124)

Net Value Gained $1,134

per Share $5

Shares 219

JCP REIT Analysis

REIT Shares Price Value Notes

Simon Properties Group (SPG) 0.2 $156 $32 Sold 2mm shares for $248mn on 7/23/12

CBL & Associates Properties (CBL) 1.9 $23 $43

Ramco-Gershenson Properties (RTP) 0.1 $13 $1

Total $77

Value per Share $0.35

Shars 219

Sources: Company Filings, CBRE

BKS: APPENDIX

33

BKS: Comp Set

34

Div Yield

Company NameDay Close

PriceMarket Cap

Enterprise

ValueCY+1 CY+2 CY+1 CY+2 CY+1 CY+2 CY+1 CY+2 LTM

Bed Bath & Beyond Inc. (NasdaqGS:BBBY) 57.1 $12,848 $11,939 1.1x 1.0x 6.3x 5.9x 12.3x 11.1x 1.0 0.9 0.00%

Best Buy Co. Inc. (NYSE:BBY) 14.69 $4,946 $6,576 0.1x 0.1x 2.6x 2.7x 5.2x 5.4x -8.9 -9.3 0.00%

GameStop Corp. (NYSE:GME) 23.81 $2,938 $2,799 0.3x 0.3x 3.5x 3.3x 7.6x 6.9x 1.1 1.0 2.31%

GNC Holdings Inc. (NYSE:GNC) 36.16 $3,591 $4,593 1.9x 1.7x 9.6x 8.7x 15.8x 13.4x 0.7 0.6 0.91%

Low e's Companies Inc. (NYSE:LOW) 33.15 $37,811 $45,117 0.9x 0.9x 8.9x 8.3x 20.0x 16.3x 1.3 1.1 1.75%

Office Depot, Inc. (NYSE:ODP) 2.52 $719 $1,349 0.1x 0.1x 4.7x 4.1x NA 31.5x NA NA 0.00%

Staples, Inc. (NasdaqGS:SPLS) 11.47 $7,827 $8,893 0.4x 0.4x 4.4x 4.4x 8.4x 8.1x 1.1 1.1 3.66%

The Home Depot, Inc. (NYSE:HD) 62.02 $93,489 $101,484 1.4x 1.3x 11.0x 10.3x 20.9x 18.3x 1.4 1.2 1.87%

Vitamin Shoppe, Inc. (NYSE:VSI) 54.98 $1,622 $1,572 1.6x 1.5x 12.7x 10.9x 27.2x 22.9x 1.4 1.2 0.00%

Avg. 0.9x 0.8x 7.1x 6.5x 14.7x 14.9x -0.1 -0.3

Median 0.9x 0.9x 6.3x 5.9x 14.1x 13.4x 1.1 1.0

Min 0.1x 0.1x 2.6x 2.7x 5.2x 5.4x -8.9 -9.3

Max 1.9x 1.7x 12.7x 10.9x 27.2x 31.5x 1.4 1.2

Barnes & Noble Inc (NYSE: BKS) $16.10 $947 $1,572 0.2x 0.2x 8.1x 5.6x NA NA NA NA 0.0%

Supplemental InformationLTM

Revenues

LTM

EBIT

LTM Net

IncomeROC ROE 2009 2010 2011 2010 2011 2010 2011

Bed Bath & Beyond Inc. (NasdaqGS:BBBY) $9,887 $1,586 $1,011 25.3% 25.8% 4.4% 7.8% 5.9% $250 $263 41.4% 41.4%

Best Buy Co. Inc. (NYSE:BBY) $50,705 $2,350 ($1,231) 18.9% 5.7% 0.6% -1.8% -1.7% $865 $850 25.2% 24.8%

GameStop Corp. (NYSE:GME) $9,078 $616 $322 12.8% 11.1% -7.9% 1.1% -2.1% $1,015 $1,021 26.8% 28.1%

GNC Holdings Inc. (NYSE:GNC) $2,375 $412 $231 13.5% 25.5% NA NA NA $294 $332 NA NA

Low e's Companies Inc. (NYSE:LOW) $50,882 $3,695 $1,822 9.7% 11.5% -6.7% 1.3% NA $248 $255 35.1% 34.6%

Office Depot, Inc. (NYSE:ODP) $11,186 $116 $113 4.0% 10.5% -1.0% -2.0% NA $422 $433 NA NA

Staples, Inc. (NasdaqGS:SPLS) $24,633 $1,540 $918 10.5% 13.2% -2.0% -1.0% 0.0% $268 $271 26.9% 26.9%

The Home Depot, Inc. (NYSE:HD) $71,718 $7,228 $4,275 15.7% 23.8% -6.6% 2.9% 3.4% $289 $299 34.3% 34.5%

Vitamin Shoppe, Inc. (NYSE:VSI) $917 $95 $56 15.6% 15.2% 5.2% 7.1% 7.4% NA NA 33.2% 34.2%

Avg. $25,709 $1,960 $835 14.0% 15.8% -1.8% 1.9% 2.2% $456 $466 31.8% 32.1%

Median $11,186 $1,540 $322 13.5% 13.2% -1.5% 1.2% 1.7% $291 $316 33.2% 34.2%

Min $917 $95 ($1,231) 4.0% 5.7% -7.9% -2.0% -2.1% $248 $255 25.2% 24.8%

Max $71,718 $7,228 $4,275 25.3% 25.8% 5.2% 7.8% 7.4% $1,015 $1,021 41.4% 41.4%

Barnes & Noble Inc (NYSE: BKS) $7,164 ($25) ($53) -1.1% -6.4% -4.8% 0.7% 1.4% $364 $366 25.6% 26.8%

Same Store Sales Retail Gross MarginRevenue per Sqft

EV / Revenue EV / EBITDA P / EPS PEG Ratio

Sources: Capital IQ, Thomson One Analytics

Tech Hardware M&A/Spin-off Valuation

35

Target/Issuer

EV / LTM

Revenue

EV / LTM

EBITDA

EV / LTM

EBIT

Avg 1.1x 15.0x 20.6x

Median 0.7x 9.4x 13.3x

Min 0.0x 0.0x 0.0x

Max 29.6x 295.6x 159.6x


short: jcp long: bksalphachallenge.org/wp-content/uploads/2018/06/... · 2015: •sales/sqft and...

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