NATU3.SA, Natura Cosmeticos SA (R$46.50) /Listening to Customers and Reps

NATU3.SA, Natura Cosmeticos SA (R$46.50) /Listening to Customers and Reps

Lore.Serra@morganstanley.com, Jeronimo.De.Guzman

We present our findings from a joint project with our US team that surveyed 800 women in Brazil, spread across income classes and geographies, as well as 90 reps for Natura and Avon. We compare our findings with a similar survey we conducted five years ago, to gauge the underlying trends in the beauty industry in Brazil. We also update our earnings estimates for Natura to reflect stronger near-term growth. We expect that the pace of growth in the Brazilian beauty industry will slow to 10-12% per year over the next five years, vs. the 14-15% growth pace since 2005. Our survey data suggests that a disproportionate amount of historical growth came from Class C consumers. These consumers now spend at high levels relative to their A/B counterparts, who have increased consumption at much lower rates.

Barron's: Ford's Better Ideas

The auto maker's strong results reflect a changed mindset and a new willingness to take risks. Sticking to the Mulally plan is paying off. Ahead: even better days.

WMT: Barron's: Load Up the Shopping Cart

• WMT's market value ($182 b) is less than half its revenue
• At $48.58, Wal-Mart's stock is every bit as discounted as its merchandise. If some of the retailer's new initiatives succeed, the stock could surge by 33%.
• Company's execs still make appearances at growth-stock conferences, but shares are increasingly showing up in portfolios of classic value-investing crowd (ex: Harris Associates' Oakmark Funds, Tweedy Browne and Wally Weitz & Co.'s Weitz Funds)
• Berkshire Hathaway doubled its position last November and kept the stake at least through the first quarter
• Citi's Weinswig: potential for as much as 33% appreciation in the shares ($65) if the company can improve its same-store sales growth and boost customer traffic in its U.S. operation (nearly 64% of sales)
• Capturing more growth in its international division (about 25% of sales) also key
• Fashion is a problematic area for WMT. Apparel represents 10%, or $40 billion, of total sales, down from 12% two years ago. WMT struggles to get trends right, missed the boat while TGT collaborate with designers
• Sam's Club is getting a facelift and adding more fresh foods and gourmet items, aiming to be more competitive with No. 1 Costco (COST).
• More emphasis on its online operations, at a time when more shoppers are making purchases with their smartphones
• Starting to press into urban markets with stores that are smaller than the supercenters it typically builds in rural markets.
• The man charged with reinvigorating the U.S. business, Bill Simon, was promoted to chief executive of Wal-Mart U.S. in early June. He succeeds Eduardo Castro-Wright, who was put in charge of the Global.com and Global Sourcing units. Simon joined Wal-Mart in 2006 from Brinker International and has been on a growth trajectory ever since, most recently serving as chief operating officer of Wal-Mart U.S. Considered a strong operator, Simon played a key role in launching a Wal-Mart U.S. prescription program that charges just $4 for a 30-day supply. He also was behind an effort to improve customer service by providing faster checkouts and spiffing up stores. Under his leadership, Wal-Mart shares could start shining, too.

Hanes Brands (HBI)--Barclay's Bullish

Hanesbrands (1-OW/Neu, $24.95) Bullish: Matt McClintock argues that HBI is at an inflection point and that earnings can double from 2009 to 2012 on very modest top line growth assumptions. Following several years of necessary reinvestment post the spin off from SLE, HBI is now poised for notable margin expansion, debt reduction, and sales growth from product innovation & international expansion.

Consumer Metrics' Indicators Rolling Over - C. deR

These are very broad based, and include chain stores as well as mom & pops and Ebay, which may explain why these numbers are flat vs. what we are hearing from public chains which benefit from small stores disappearing.