Ducommun Inc
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Industrials : Aerospace & Defense | Small Cap Blend
Company profile

Ducommun Incorporated is a global provider of engineering and manufacturing services for various products and failure applications used primarily in the aerospace, defense, industrial, natural resources, medical and other industries. The Company is a solution-based provider, offering a range of value-added products and services in its primary businesses of electronics, structures and integrated solutions. The Company operates through two segments: Electronic Systems (ES) and Structural Systems (SS). The ES has over three product offerings in electronics manufacturing for various applications, including complex cable assemblies and interconnect systems, printed circuit board assemblies, and electronic, electromechanical and mechanical assemblies. The SS segment offers over three product offerings to support a customer base, including commercial aircraft, military fixed-wing aircraft, and military and commercial rotary-wing aircraft.

Closing Price
$33.14
Day's Change
1.08 (3.37%)
Bid
--
Ask
--
B/A Size
--
Day's High
33.30
Day's Low
31.86
Volume
(Below Average)
Volume:
61,735

10-day average volume:
70,651
61,735

UPDATE: Macy's, Kohl's suffer as brands, competitors and e-commerce step in to replace department stores

8:02 am ET July 24, 2020 (MarketWatch)
Print

By Tonya Garcia, MarketWatch

Department stores started the coronavirus pandemic in a shaky position and have only weakened, Bank of America says

Macy's Inc. and Kohl's Corp. were downgraded Wednesday to sell from neutral at UBS, with analysts putting their confidence in brands that are able to capture sales on their own rather than relying on third-party sellers like department stores.

UBS halved its price target on Macy's (M) to $3 from $6, and cut its Kohl's (KSS) price target to $14 from $17.50.

The coronavirus pandemic is accelerating the consumer shift to e-commerce, and UBS forecasts that many stores will shutter for good.

"To deliver steady long-term growth, we believe brands can no longer rely on malls or department stores to drive traffic," analysts led by Jay Sole wrote. "Brands have to generate their own audiences and become destinations."

See:The back-to-school shopping season will be a 'dud' one analyst says, but the NRF is forecasting a record breaker (http://www.marketwatch.com/story/the-back-to-school-shopping-season-will-be-a-dud-one-analyst-says-but-the-nrf-is-forecasting-a-record-breaker-2020-07-15)

UBS has six brands that it rates buy for their ability to generate sales on their own: Nike Inc. (NKE) ; Levi Strauss & Co. (LEVI) ; Skechers Inc. (SKX) , which reports its second-quarter earnings on Thursday; American Eagle Outfitters Inc. (AEO) ; Calvin Klein parent PVH Corp. (PVH) ; and Michael Kors parent Capri Holdings Ltd. (CPRI)

Analysts also initiated Canada Goose Holdings Inc. (GOOS.T) (price target $30) and Ugg parent Deckers Outdoor Inc. (DECK) (price target $250) at buy.

UBS also initiated four brands neutral: Crocs Inc. (CROX) , Gildan Activewear Inc. (GIL.T) , Steve Madden Inc. (SHOO) and Lee jeans parent Kontoor Brands Inc. (KTB) .

"We define 'premium' to mean a company's value proposition allows it to earn a high gross margin," UBS said. "This enables a company to have a profitable direct-to-consumer (DTC) business."

With increased control over their branding and inventory, these "premium" brands can drive customer loyalty and "strong returns" that will help them to maintain high margins, analysts said.

"We think the 'Go It Alone' moment has arrived," UBS said. "This means brands should plan for a future that does not rely on department stores or malls to help generate traffic or drive growth. The ideal business model will be one where a brand can profitably sell directly to consumers either online or in-store."

Also:Online food prices jump as food companies struggle to meet demand (http://www.marketwatch.com/story/online-food-prices-jump-as-food-companies-struggle-to-meet-demand-2020-07-13)

All of this is bad news for department stores that are unable to compete with other brands and retailers.

"Brands are increasingly keeping the highest quality merchandise for their own channels," UBS said. "Off-price [like TJX Cos. (TJX) ] has the best value for money. Online pure-plays like Amazon (AMZN) have the widest selection. The mass channel (e.g. Walmart (WMT) ) offers the lowest prices."

UBS forecasts that department stores will account for 13% of the North American market share for clothes, shoes and accessories by 2024. Department stores accounted for 47% of market share in 2003, it estimates.

"The COVID-19 crisis came during an already tough time for department stores," wrote Bank of America analysts in a recent note.

Weak mall traffic hurt sales, and the shift to e-commerce had already begun before the pandemic. With stores closed, department stores had to shift their priorities to liquidity rather than investing in their businesses to keep up with the competition and changing consumer trends.

In March, Macy's drew down all of its $1.5 billion in credit. Macy's and Kohl's were expected to spend hundreds of millions of dollars on labor with all stores closed. Cowen analysts (http://www.marketwatch.com/story/macys-kohls-have-about-5-months-of-cash-available-putting-them-at-risk-from-extended-closures-analysts-say-2020-03-27) anticipated that the retailers had about five months of available cash.

At the beginning of July, Macy's reported losses and revenue (http://www.marketwatch.com/story/macys-stock-gains-after-adjusted-loss-sales-match-expectations-2020-07-01) in line with expectations.

Kohl's has reported (http://www.marketwatch.com/story/kohls-swings-to-loss-as-revenue-falls-below-estimates-during-coronavirus-pandemic-2020-05-19) to a first-quarter loss as well, and missed the FactSet revenue consensus.

Read:Kohl's says it will eliminate eight women's brands including Jennifer Lopez and PopSugar in favor of more active gear (http://www.marketwatch.com/story/kohls-says-it-will-eliminate-eight-womens-brands-including-jennifer-lopez-and-popsugar-in-favor-of-more-active-gear-2020-05-19)

"We expect the investment cycle to continue indefinitely, as department stores play catch-up on store investments and also chase new technologies to remain competitive," wrote Bank of America analysts led by Lorraine Hutchinson.

"However, the budgets available to do so have shrunk, as department stores have had to lever up amidst the COVID-19 crisis in order to shore up their balance sheets. Unfortunately, in our view, department stores that do not keep pace with technological advancements and consumers' demand for increased convenience are at a competitive disadvantage."

The path ahead will be tough as well, with consumer confidence shaky and unemployment rates high. Surges in coronavirus cases (http://www.marketwatch.com/story/coronavirus-update-us-case-tally-climbs-above-39-million-as-trump-finally-urges-americans-to-wear-face-masks-2020-07-22) in a number of states are also putting the brakes on a recovery.

"The challenges of debt will result in a slew of bankruptcies, namely mall-based apparel retailers and department stores," wrote CFRA analyst Camilla Yanushevsky in a report from earlier this month. "Failing retailers are generally highly leveraged and grappling with deteriorating cash flows and weak profitability. Burdened by high debt-servicing costs, many have little wiggle room to invest in new technologies or evolve their business model."

Among the retailers that CFRA says are "among the most highly leveraged retailers and face elevated bankruptcy risks" are Macy's, Kohl's, Dillard's Inc. (DDS) , Nordstrom Inc. (JWN) and Victoria's Secret parent, L Brands Inc. (LB) .

Macy's stock has slumped 60.8% for the year to date. Kohl's is down 56.7%. The ProShares Decline of the Retail Store ETF (EMTY) has fallen 9.4% for the period, and the S&P 500 index has gained 0.2% so far in 2020.

-Tonya Garcia; 415-439-6400; AskNewswires@dowjones.com

(END) Dow Jones Newswires

July 24, 2020 08:02 ET (12:02 GMT)

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