Introduction Our weekly Earnings Insights reports look at key commentary and qualitative insights from major US retailers and brand owners on their recent performance, in terms of revenues and comps, and the impact of the Covid-19 pandemic on fourth-quarter 2020 performance (ended January 31, 2021 for most companies). Companies featured are those within our Coresight 100 coverage list, and in this report, we focus on those that reported in the week ended February 14. For most US retail companies, the quarter under review will be the fourth quarter of fiscal 2020, but some of the companies covered have different year ends (e.g., Coty and Estée Lauder). In November 2020, US retail sales continued to rebound strongly despite several states reinstituting more restrictive mandates owing to the surge in new coronavirus cases. In December, US retail sales growth accelerated to 8.6%, from a revised 8.1% in November, as consumers continued to shift spending away from services and experiences to retail goods. Looking ahead to yet-to-be-reported January sales and projected sales in February, Coresight Research predicts that retail sales will increase by about 7% overall. We assess the recent performance of selected retailers and brand owners below.

Apparel and Footwear Brand Owners

	Hanesbrands (NYSE: HBI) 4Q20
Commentary	Hanesbrands’ sales growth turned positive for the first time since the start of the pandemic. Total sales were up by 2.8% versus a 3.2% decline in the prior quarter, driven by strong performance across the company’s three biggest business segments: Innerwear, Activewear and International. Innerwear saw the strongest sales growth of 19.7%, driven by strong consumer demand for kids’ underwear, continued inventory restocking by retailers and contribution from the 53rd week of 2020. By brand, Champion witnessed the highest sales growth in the quarter. The company defined e-commerce as a category of consumer-directed business, which grew 46% and represented 21% of its total sales in the quarter.
Outlook	Management said that it feels optimistic about the company heading into 2021 and expects 1Q21 net sales to be $1.49–1.52 billion, with the midpoint of guidance representing net sales growth of 14%. Revenue guidance includes a projected benefit of $50 million from changes in foreign currency exchange rates and implies growth of 10% in constant currency. Management said that Hanesbrands continued to implement its “Full Potential Plan,” which includes four pillars: 1.   Grow Champion brand globally: Leverage global design centers to deliver innovative products and drive category expansion (including a greater focus on women’s and kids, as well as layered outwear and casual athletic footwear). 2.   Drive innerwear growth with products and brands that appeal to younger consumers: Shift portfolio to younger consumers, for example, fueling the growth of Bonds and Bras N Things brands in Australia, particularly through direct-to-consumer (DTC) channels. 3.   Build e-commerce excellence across channels: Leverage data analytics to know consumers and build long-term loyalty. 4.   Streamline global portfolio: Increase business focus, such as exploring strategic alternatives for European Innerwear business and moving from PPE (personal protective equipment) businesses, and rationalize stock-keeping units (SKUs) such as by removing 20% of SKUs and improving higher-margin SKUs.
	Under Armour (NYSE: UAA) 4Q20
Commentary	Revenue was down 3% versus flat growth in the prior quarter. By channel, wholesale revenue decreased 12% and DTC revenue increased by 11%, driven by 25% growth in online sales. By category, apparel sales decreased by 4%, footwear sales declined by 7% and accessories sales increased by 32%. By geography, North America witnessed a decline in sales, while Asia-Pacific reported strong sales growth of 26%.
Outlook	For 2021, Under Armour expects total revenue to be up by a high-single-digit-percentage rate, with high-single-digit revenue growth in North America and high-teens revenue growth in its international business. The company expects its gross margin to be up slightly in 2021 versus 2020 and expects an adjusted gross margin of 48.6%, driven by benefits from pricing and supply chain efficiency offset by the sale of its high-margin fitness application business MyFitnessPal, which was announced in October 2020. To elevate its premium positioning with consumers and drive better profitability, the company will continue to constrain demand in 2021 through wholesale door-reduction efforts in North America and ordering slightly fewer products. The company stated that it is carrying forward four areas of focus into 2021: 1.   Continue to strengthen the brand through increased engagement and consideration with the target consumer: For example, in 2020, the company leaned heavier into brand and product marketing to support successful introductions like Infinity Bra, Meridian Pant, Project Rock collection and UA SPORTSMASK, and in footwear, Breakthru, HOVR Machina and Phantom 2. In December 2020, the company partnered with Stephen Curry, an American basketball player, to launch the Curry brand of performance products, which offers apparel, accessories and footwear for multiple sports categories, including basketball and golf. 2.   Continue improvement within its operating model to drive greater efficiency across all end-to-end processes: Rebase cost structure to ensure the company is positioned from a strategic, operational and financial perspective with appropriate foundation and agility to scale with future growth; improve visibility and achieve tighter alignment of consumer demand and supply planning functions. 3.   Elevate a DTC-focused approach to deepen and amplify the most intimate connection with consumers: Evolve store concepts to drive more profitable formats, particularly for full-price brand house locations; accelerate e-commerce and tighten wholesale; and execute a powerful omnichannel strategy. 4.   Drive shareholder value over the long term: Maintain profitability to drive sustainable long-term shareholder value, from the innovation pipeline to operating model refinements and brand strategies to tighter inventory management, as well as a rebased cost structure. Management pointed out four revenue headwinds for 2021: 1.   Absence of MyFitnessPal (following its sale) 2.   Maintaining supply and demand planning and inventory management 3.   The exit from certain undifferentiated wholesale distribution, with the closure of 2,000–3,000 wholesale partner doors in 2H21 4.   Changes to the operating model in Latin America—including by shifting certain countries’ top strategic distributorship models—which will negatively impact revenues but should help improve operating margins

Beauty Brand Owners

	Coty (NYSE: COTY) 2Q21
Commentary	Total sales decreased by 15.9% compared to a 13.0% decline in the prior quarter. By channel, the prestige business has shown strong progress, despite the continued pressure in travel retail. Prestige sales fell by 11.1% versus a 20.2% decline in the prior quarter. Mass business sales decreased by 23.3% versus a 20.2% plunge in the previous quarter. By geographic region, Americas saw sales tumbled by 7.2%, EMEA witnessed a sales decline of 21.9% and sales from the Asia-Pacific region dropped by 13.9%. E-commerce continued to gain momentum, growing by 40% and accounting for 19% of the company’s total revenues. CEO Sue Nabi commented that the solid performance in the prestige business was driven by prestige fragrance, which was back to growth in several markets, including the US, China, Australia, Singapore and Thailand. She further noted that growth appears to be driven by consumers' shift of spending to mood-boosting categories. In recent months, Coty continued to strengthen its executive leadership team: Stefano Curti joined as Chief Brand Officer for Consumer Beauty; Alexis Vaganay was promoted to Chief Commercial Officer for Consumer Beauty; Laurent Mercier was elevated to Coty's CFO; and Stephane Delbos was promoted to Chief Procurement Officer.
Outlook	Management said that the company remains focused on its four strategic priorities and optimizing short-term revenues and sell-out. The company’s four strategic pillars are: 1.   Digital and e-commerce acceleration 2.   Building its presence in China 3.   Expanding into white-space opportunities, including luxury skin care and cosmetics 4.   Strengthening its core business
	Estée Lauder (NYSE: EL) 2Q21
Commentary	Total sales grew 5% versus a 9% sales decline in the prior quarter. Growth was fueled by skin care, which saw sales increase by 28% year over year, led by growth in Estée Lauder, La Mer and Clinique brands, as well as synergy from the acquisition of Dr. Jart+. Makeup, the company’s second-largest category, continued to see weaknesses, with sales plunging 25%. Fragrance sales were up 6%, driven by strength in Tom Ford Beauty, Jo Malone London, Clinique and Le Labo brands. Haircare sales were down 5%. During the quarter, online sales growth remained strong across all the company’s operated regions, with sales growing 60% globally. Travel retail sales rose by single digits, driven by 35% sales growth in Asia Pacific offset by sales declines in the Americas at (15)% and EMEA at (2)%. CEO Fabrizio Freda noted that in the first half of the fiscal year 2021, the number of loyalty program members rose strongly, by double digits, driven by a triple-digit increase in international members.
Outlook	For the third quarter of fiscal 2021, the company expects sales growth of 13–14%, with 10–11% growth at constant currency. The company expects adjusted diluted EPS of $1.10–$1.20, representing an increase of 26–38% at constant currency. For fiscal 2021, the company has not provided specific guidance on sales or EPS due to the prolonged uncertainty around the impacts of Covid-19. However, it expects to maintain momentum and deliver sequentially improved sales growth in the next two quarters.

REITs

	Macerich Company (NYSE: MAC) 4Q20
Commentary	Total revenues declined by 19.5%, in line with the 19.6% decline in the prior quarter. Funds from operations (FFO) declined by 50.7% versus a drop of 37.4% in the prior quarter. The fourth quarter’s FFO was impacted by a $38 million revenue decline from Covid-related rent abatements, a $21 million decline in common area and ancillary revenues, a $12 million revenue decline from occupancy decreases and $6 million of bad debt. Mall portfolio occupancy was 89.7% in the fourth quarter, a decline of 110 basis points from the prior quarter, due to bankruptcy-related store closures.
Outlook	For 2021, the company expects FFO per share of $2.05–$2.25, representing a decline of 26–32%. Management remains optimistic about 2021 and the recovery of the company’s businesses. CEO Thomas O’Hearn said, “Although 2021 is going to be a transitional year, it will be much better than 2020 in almost every respect. Most of the tenant Covid-19 workout agreements will have some impact on us in 2021, both in terms of rent relief as well as higher-than-normal vacancy rates. That being said, we expect to see occupancy gains in the second half of the year and a gradually improving leasing environment.”
	Simon Property Group (NYSE: SPG) 4Q20
Commentary	Total revenues declined by 24.0% versus a 25.1% decline in the prior quarter. FFO declined by 24.8% versus a 33.1% drop in the prior quarter. Occupancy on a same-store basis stood at 91.3%, in line with 91.4% in the prior quarter, mainly owing to lower leasing volumes. Management said that the impact of the pandemic and economic slowdown had reduced revenues due to tenant rent abatements, high uncollectible rents, lower sales-based rents and a decline in ancillary property income from the company's domestic and international operations. On December 29, 2020, Simon completed its acquisition of an 80% stake in The Taubman Realty Group Limited Partnership (TRG) for $3.4 billion. Under the terms of the agreement, Simon acquired all stakes of mall operator Taubman Centers.
Outlook	For 2021, Simon expects EPS of $4.60–$4.85, representing growth of 28–35%, and FFO per share of $9.50–$9.75, representing growth of 4–7%. The company's guidance assumes no further government-mandated shutdowns on its domestic operations and no significant acquisition or disposition activity. Management said that the next set of opportunities will arise in high-quality suburban areas, with the company planning to accelerate its mixed-use redevelopment efforts in Florida, Nashville and Texas, among other areas. Furthermore, Simon Property Group is also in talks with some of its anchor tenants, such as Dick's Sporting Goods, Kohl's and Primark, to take up mixed-use concepts in suburban markets.
	Unibail-Rodamco-Westfield (AMS: URW) FY20
Commentary	Total revenues declined by 21.5% in the full fiscal-year 2020 versus a 35.6% decline in the first nine months of fiscal 2020. The net rental income for shopping centers on a like-for-like basis declined by 24%, with the majority of the decline attributed to €400 million ($480 million) of rent relief. Furthermore, the combination of lower leasing activity and increased bankruptcies led to increased vacancy, from 5.4% in 2019 to 8.3% in 2020. In 2020, the company signed 1,528 leasing deals, down 36% year over year. Gross leasable area contracted by 28% in 2020. The bankruptcies impacted 652 stores (5% of the group’s total stores).
Outlook	Management believes that 2021 will remain challenging with restrictions still in place. CEO Jean-Marie Tritant said, “We'll continue to weather the storm [in 2021] and prepare for the rebound, which we know will come as soon as global herd vaccination is achieved. The rebound may start earlier in some regions like the US, where vaccination is progressing faster. The consensus view is that economic recovery in our geographies will start around Q3 2021—and could be as soon as lockdowns are lifted—and will be accelerated by the further easing of restrictions.” Management said that the company will continue to deleverage the business, including completing the €4 billion ($4.8 billion) disposal program in Europe, reducing exposure in the US market, reducing the development pipeline, reducing its cost base and reducing the dividend to zero for the three fiscal years of 2020, 2021 and 2022.

Looking Forward

This week, we saw apparel and footwear brand owners report mixed results. Hanesbrands, which reported its first positive sales growth since the start of the pandemic, expects growth momentum to continue in the next quarter and forecasts double-digit sales growth. On the other hand, Under Armour’s sales performance slightly deteriorated sequentially; however, the company is expecting strong improvement in the next quarter and forecasts high-single-digit sales growth. By category, demand for innerwear and activewear remained strong, while tailored clothing and footwear saw weaknesses. Going forward, these brand owners will continue to expand their digital channels, target younger consumers and drive category expansion, including a greater focus on casual and athletic wear, kids wear and layered clothing. Like apparel brand owners, beauty brand owners also see a mixed recovery. In beauty categories, skin care is trending, but demand for makeup remains weak. Despite continued pressure in travel retail, Coty is seeing a strong sales recovery in its prestige business. Going forward, we expect these beauty brand owners to continue to boost their digital business, bolster their skincare category and expand their presence in the Asia-Pacific region, particularly in China. REITs continued to suffer from the impacts of the Covid-19 pandemic, as many reopened centers face closures gain. Macerich Company, Simon Property Group and Unibail-Rodamco-Westfield remain impacted from lower occupancy, tenant rent abatement and declines in ancillary income. We expect the leasing environment and occupancy levels to improve in 2021, mainly in the second half, with the progress of vaccinations. Furthermore, we believe prime suburbs offer the strongest opportunities for mall operators and landlords in the near future.