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…