A brand that has (temporarily?) lost its luster. Now it can offer twice as much.

When the market loses confidence, an investment opportunity can arise. Shares in this iconic retail player have plunged more than 35% this year - even though the company is still generating billions in cash flow, has a return on equity of more than 25% and is expanding at a double-digit pace in Asia. Does this mark the end of an era, or the beginning of a reinvention?

When a company with a legendary brand, zero debt and a return on capital that even Apple would envy is trading at less than 9X EV/EBIT in a matter of months, something is wrong. The market has turned its back on a worse outlook, weaker US sales and fears of losing relevance. But this is where the asymmetric bet may arise: if growth resumes - even if only modestly - the stock has room to rise by tens of percent. If not, fundamentals still dampen the fall. This raises the question we will ask in this analysis: Is the slump the beginning of the end, or the ideal entry into a premium growth brand at a discount?

Why is this…