Guggenheim’s Simeon Siegel calls Lululemon’s proxy fight the ‘friendliest’

Sara Eisen (Co-Anchor of Squawk on the Street) 00:00.000

Let's talk more about retail with Simeon Siegel, senior managing director and consumer equity research analyst at now Guggenheim Securities. Welcome back and congrats on the new

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 00:08.800

job. Thank you. Good to be back.

Sara Eisen (Co-Anchor of Squawk on the Street) 00:10.480

So, you're you're still covering all the the big retailers, but I guess have a new fresh slate cuz you're starting at at Guggenheim. Who do you like best right now? Isn't

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 00:18.560

it fine to take a fresh slate? You get Yeah to re-examine everything, you get to hear about returns. Listen, I think it's a fresh slate, but it's also a similar approach because what I want to do is I want to recognize there are really good businesses that sometimes are

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 00:30.000

expensive stocks. And so that's TJX, Planet Fitness. And then there are things that get a little bit more fun. There are things that are maybe better businesses than the stock show and they're a little bit dirtier for lack of a better word. And Birkenstock right now looks like

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 00:41.160

one of those. One we haven't typically spoken about. And so if I can find a business that is growing like a growth stock but not trading like a growth stock, that gets really interesting.

Sara Eisen (Co-Anchor of Squawk on the Street) 00:49.640

Yeah, so that's a Birkenstock, you say?

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 00:51.360

Birkenstock.

Sara Eisen (Co-Anchor of Squawk on the Street) 00:52.000

Anybody else?

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 00:53.600

Yeah, there are. I I think that as we get dirtier, I like how you're like pushing me from the easy ones and go to the ones that are more

Sara Eisen (Co-Anchor of Squawk on the Street) 00:59.600

fun. opportunities, right?

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 01:01.000

So, they are, but listen, I want to be clear. TJ& Planet have been great too. And so, compounding is powerful. So, now looking though to try to go to your question, I still Call me a glutton for punishment. I still think Capri, Michael Kors, we've spoken about this one a lot. I

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 01:14.840

still think it's

Sara Eisen (Co-Anchor of Squawk on the Street) 01:15.240

under value. But it's a disaster. And it's

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 01:16.840

And you know what? It's been coming back though, right? So, you pull up that chart, ever since the Versace sale, we finally got We're realizing this balance sheet is a lot cleaner than it looks. And so, there's a turnaround story, but there's also a balance sheet cleaning story.

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 01:26.680

And so, that's the beauty of retail where you can find these businesses that you and I we know so well consumers. But from a stock perspective, sometimes they get neglected.

Sara Eisen (Co-Anchor of Squawk on the Street) 01:33.800

So you think TJ Max TJX and and Planet Fitness, good businesses? Expensive

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 01:38.880

Expensive for reason. Expensive for a reason and they'll always be expensive. And you and I will never be able to justify the peg ratio. I know we talk about hyper scalers lot. I'm watching these like, who knows what valuations mean right now? Valuations can mean growth, they

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 01:50.080

can also mean sleep easy at night. TJ Planet Fitness let you sleep easy at night. Burkinstock, Capri, you find these opportunities that have these torque, let's say, when things start working again.

Sara Eisen (Co-Anchor of Squawk on the Street) 02:00.000

I mean Walmart, I think about Walmart. I know it's not necessarily on your I don't think it's on your coverage list, but trading at 40 times it's done it's done very well. It doesn't appear that investors are questioning the multiple yet. I

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 02:12.080

think there's this beautiful thing and we've talked about this a bunch of why things are expensive. So what makes valuation to pretend to get philosophical here, it's supposed to be growth. You pay a lot because in a few years you won't be paying a lot. It's time value of money

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 02:24.680

and to say if things are going to grow in 5 years, then I'm not actually it's not a high multiple. It's a low multiple 5 years from now. But that has evolved. We have this idea of this consistency premium, the sleep easy at night premium where you can look at a business and say,

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 02:38.200

"I'm not buying the growth. I'm buying the consistency. I'm buying the fact that it's not going to trip me up." And whether or not that's in the books, whether or not you'd find that in an MBA class, that's what we're seeing in reality. And so what you see with Walmart, Costco,

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 02:49.920

TJX, right? Some of these businesses that have seen multiples or at multiples that they've never seen before, it's

Sara Eisen (Co-Anchor of Squawk on the Street) 02:55.360

because of that thing. The premium to sleep at night.

David Faber (Co-Anchor of Squawk on the Street) 02:57.200

You know, you don't cover Walmart, but you do cover Amazon and I I'm curious as to how you see Walmart's ascendance in terms of online using the ubiquity of its store presence in terms of what it's been able to do. It feels as though they've really made significant gains.

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 03:11.280

Yeah, it's funny because I think with the Walmart conversation and I don't cover it's covered by John John Haybockle in our in the firm. So I will let him opine on the company. But I think people do talk about this spread between is it a tech business? Is it consistency? Is it

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 03:24.400

growth? And so this notion of when you look at what Amazon has done to retail and also obviously what it's done on the AI front. And if you can dream, right? This idea of retail media that pops up. Everyone wants to put technology into retail. I think retail is best when we

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 03:36.080

think about it as the age-old business of bartering. It's you're convincing me to spend the dollars that I work so hard on to buy your product or your service. And if you can get me to do that on a repeated basis, it's a very hard thing to fight. But

David Faber (Co-Anchor of Squawk on the Street) 03:47.240

my question was, is has Amazon has Walmart's success threatening Amazon in a way is there a response that you expect from the retail side of Amazon here given that's what you covered?

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 03:57.400

I would say no. I would say there's a lot lot of volume to win. I think we're still watching Amazon sell a lot of things and I don't think that's going to stop. I think that the reality is what you want to see is you want to see a lot of different You want to see some really

Simeon Siegel (Senior Managing Director and Consumer Equity Research Analyst) 04:09.680

strong competitors. When you think about Big Box Retail, who's taking from who? I think we can see Walmart and Amazon as winners. I think there's others on the other side where you're watching the market share are being donated. Yeah, I can

David Faber (Co-Anchor of Squawk on the Street) 04:18.800

imagine what some of those names are. You

Sara Eisen (Co-Anchor of Squawk on the Street) 04:20.840

also um you're neutral on Lulu Lemon, which has been in the news. What would it take to move you into buy now that it looks like Chip Wilson is launching a proxy fight, although we're heard from Lulu Lemon yesterday is that they are going to evaluate his his options for board

Sara Eisen (Co-Anchor of Squawk on the Street) 04:35.360

directors and maybe they won't have a fight.