VFC For TRLG? Not a Chance

VFC For TRLG? Not a Chance


The rumor mill is saying that TRLG is exploring a sale – and it absolutely should before margins collapse.  Any buyer with half a due diligence process should realize this. VFC has learned its lesson with 7.


The good ‘ol rumor mill is churning this fine Friday afternoon. An interesting one is that True Religion has hired Goldman to explore a sale, and that VFC could be interested. Now… the first part of that might very well be true. After all, this is the exact time TRLG should sell – before margins erode further as the company tries to establish itself as a lifestyle brand with more of a direct-to-consumer (i.e. Retail) strategy. This will fail.  Any buyer with half a due diligence process should realize this. That brings us to the second part of the rumor – that VFC is interested.  Not likely… Let’s YouTube VFC on its acquisition of 7 For All Mankind.




VFC’s tone is changing on its premium denim line, 7 For All Mankind, as it hits a critical juncture in the contemporary brands portfolio.  The original business of 7, which was purchased at the top of M&A cycle in 2007 for $775 mm, is under pressure as premium denim is no longer selling at price points it once did.  Average price has now fallen from a peak $180 to $150, down 17%.  Despite oversupply and weakening prices in the premium denim space overall, VFC is following its original growth plan for the brand.  Such strategies include opening retail locations, expanding internationally, and extending product line offerings beyond denim and into sportswear and accessories. The challenge however lies in the fact that the wholesale channel is suffering (primarily department store distribution), the retail stores aren’t performing as well as Vans and North Face stores, and overall contemporary coalition margins are being deluted by investment spend with no near-term incremental revenue return.


Most notably,  management’s tone has changed on the company’s quarterly conference calls.  What was once the trio of investment spending – North Face, Vans, and 7 For All Mankind – has now become the duo with a side of everything else - 7 included.  It will likely be a long time before $200 jeans return on such a widespread scale.  There’s no question that there will always be a niche market for premium denim, just not one that shares distribution and price points all the way from Macy’s to Barney’s.  With that said, we’re more likely to hear about efforts to  diversify the product assortment from 75% denim to 66% and ultimately lower as original expectations for the “lifestyle” denim brand are paired back.  7 stores will still be opened but this is not a needle moving strategy at this point or in the near future. If one thing was clear on yesterday’s call, it’s that the company’s growth drivers remain rooted in North Face, Vans, and in Asian (China) expansion.


The 7 For All Mankind YouTube:


Q3 09

  • 7 For All Mankind should continue to enjoy mid-teen operating margins this year. The growth opportunities we identified at the time we purchased the brand – international expansion, retail store growth, and product line extensions – remain intact, and we continue to see excellent long-term potential for the brand.


Q4 09

  • 7 For All Mankind’s international revenues grew by 23% in constant dollars.
  • This year we will step up our investments to drive future growth. These investments, totaling $50 million, will be very targeted and concentrated in those businesses with the strongest opportunities for growth, including The North Face, Vans and 7 For All Mankind brands, and our business in Asia.
  • Our Outdoor & Action Sports and our Contemporary and Sportswear businesses achieved growth in revenues on a constant currency business in the fourth quarter. The strongest growth was in our 7 For All Mankind, Eastpak, Vans and The North Face brands.
  • Our 7 For All Mankind brand has also gotten off to a fast start in Asia. We have 15 new freestanding partnership stores planned in ‘10, and we also be investing to support our distributors in both China and Korea to build market leadership in the premium jeans category.
  • Obviously, there’s mixed numbers in there with all the retail formats we have around the world. And as you’d expect, our retail formats in businesses like The North Face and Vans and 7 For All Mankind posted stronger comps.
  • The 2010 outlook, the best way I think to deal with that, we’re looking at 80 to 90 stores [globally]. Two-thirds of [of the store openings will be] between The North Face, Vans and 7 For All Mankind. We’re very focused this year in our marketing spending, and we’re very focused supporting strongest brand opportunities. And so, really, it’s 7 For All Mankind, The North Face and Vans will be where we’re focused in new stores. A lot of them internationally


Q1 10

  • Double-digit growth in the 7 For All Mankind direct-to-consumer business was driven by both new store openings, as well as very strong comp store increases. We’re looking forward to double-digit revenue growth for our 7 For All Mankind brand starting in the second quarter. Investments in new 7 For All Mankind retail stores reduced margins in this seasonally low period for revenues, these new stores are expected to contribute to significantly stronger margins throughout the remainder of the year. We are also expanding the direct-to-consumer business for 7 For All Mankind to the opening of a combined total of over 15 owned and partnership retail stores in key European cities this year.
  • The 7 wholesale business is getting better than it was last year for sure. Last year was a particularly tough year. But we still don’t have positive trend in our wholesale shipments business. Part of the reason for that is we lost a lot of customers to bankruptcy over the recession – small customers and specialty stores. And that’s part of the reason we’ve invested in some of our own specialty store business and that business is strong for us. Our comps are good and our overall global trend in opening 7 For All Mankind stores is strong.
  • Yeah, I can comment on what gives us confidence in our product direction being back on track and that is the performance of the products we have in our own stores where we get obviously instant feedback on whether or not we’re on trend. And our own stores are performing well. So that tells us that consumers are relating to the products we have in the stores. And our team out there has done a nice job of getting the brand back on – into the right product mix. Unfortunately, we have a lot less customers to sell those products to because of the massive amount of closures in the specialty store industry during the recession.
  • And what we can say is that later in the year is when we’ll see the most substantial improvement in terms of the retail side of things. So, as Eric said, we’re in the pretty early stages of our overall retail business within 7 For All Mankind and especially in a lower quarter of revenues which is, as you know, this is a low retail quarter for us and it picks up in the third and fourth quarters and that’s true for our 7 For All Mankind business as well. So we’ll see some substantial improvement in terms of the profitability of those stores beginning in the second half of this year.


Q2 10

  • Our 7 For All Mankind brand continues to expand in Europe, with 24% revenue growth in the second quarter. Strong bookings and additional new stores should drive double-digit growth in the second half of the year as well. New stores opened in the quarter include in Milan, Berlin, and Antwerp, and we are looking forward to opening our second store in Paris this quarter. We remain on plan to open a combined total of about 15 owned and partnership retail stores in key European cities this year.
  • 7 For All Mankind shifted on us a little bit here in the second quarter. You know, we had a really strong first quarter with 7. We had a strong second quarter with 7 as well. We have seen a slowdown in the premium denim space in the last few weeks – the last eight weeks, really, since May. That segment in particular has been a soft spot. So our stores are still working for us and we are continuing to invest in our stores, but there clearly has been sort of ‘how long does that last?’ I wish I knew the answer to that. The answer for us is to make sure we create compelling product, which obviously we’re working on that. And we are increasing our investment in the brand. In fact, we are just about doubling our marketing spend behind 7 For All Mankind right now because we think it’s a great brand. And even though it’s under pressure right now, we are going to spend on it to make sure that we connect with consumers in the right way. We underspent on it a bit in the last few years. So we are going to reinvest in it and hope we have the right products at the time and the fall gets better than the last eight weeks have been.
  • In the contemporary space in terms of price points, there was a significant reduction in price points during the course of the recession over a two-year period. The average price point for a pair of premium jeans regardless of brand came down. It didn’t mean that we didn’t still offer the high end of the range, but the consumers bought more at the lower end of the range. So we saw a reduction in AURs. That stabilized in the first four months of this year. And I think it’s under question right now because there’s been a change that really has just happened. And as you know, we’re also in a period of year, it’s been a very warm June and July across the United States. And I’m not sure if people are waking up thinking I am going to buy a pair of long jeans – long-bottom jeans right now because that’s what I want to wear today. In fact, I’m pretty sure they aren’t. The question will be during back to school, does that come back and what does that mean to the average unit retails?


Q3 10

  • We’re investing over half of our incremental marketing spend in outdoor and action sports initiatives, the balance of the spending increase is strategically allocated to important growth initiatives in our U.S. and our Asian jeanswear business and in our Nautica, 7 For All Mankind and other brands.
  • Relative to our 7 For All Mankind brand, the premium denim business is softening from the strength we experienced in the first half when we were up 8% globally. In tough economic times, consumers are more value conscious than ever, more focused on savings and spending and looking for something new as a trigger to spend. Fortunately, while 7 For All Mankind continues to be the brand leader in the category it’s more than a denim brand. In fact, a quarter of the brand’s volume in our own stores is nondenim currently and that’s going to be increasing to a third of the business next spring.
  • Also our retail partners are adding more sportswear into their premium denim departments which will add variety to the current offerings and help spark consumer interest. The 7 For All Mankind continues to resonate strongly with consumers and we’re capitalizing on this by adding new retail stores and we’re investing heavily in marketing, expanding into Europe and Asia and building our sportswear and accessories business. This brand still has a lot of room to grow but faces some short-term challenges.
  • There’s no question that the premium denim category is soft which resulted in a slight decline for 7 For All Mankind revenues in the first third quarter. There are, however, a number of bright spots. European revenues for the brand increased 8% on a constant currency basis and we are on track to open 19 stores this year. As mentioned in the release we are investing in the 7 For All Mankind brand and will continue to do so in the upcoming quarter.
  • Let me give you color on 7 For All Mankind for us globally. The domestic business year to date is up low single digits due mostly to the success we’re having with our own retail stores. The international business is up high single digits in constant dollars. And around the world we’re seeing that driven by the stores that we’re opening are working for us and some softness in the wholesale business in general.
  • The reason I’m confident in our future is we expect to continue the rollout of our own retail stores. We’re just really getting started in Asia and Europe. We have a lot of runway ahead of us there and we continue to build the brand into new product categories, into the sportswear and accessories business where it’s very early days for those initiatives. We do expect pressure on the core denim business at least in the short-term. But, and I don’t know what that will look like in five years, nor does anyone else. So that’s, when you look at total model, we think that we can weather through this because of the strength of the brand and the success we’re having on the initiatives I mentioned. The total premium denim business is soft. That’s really a U.S. comment. That’s why you’re seeing many of the brands expand their businesses into sportswear.

Real Commotion in Brazil

Conclusion: Recent moves in the Brazilian bond market have been attributed to the “currency war”, but analysis of the fundamentals suggest the moves are warranted. While we don’t currently have a position, we remain favorably disposed to the Brazilian real against the U.S. Dollar over the long term.


Yesterday, Brazilian Treasury officials walked away from a debt auction for the first time since July 22, citing bids that were deemed “unreasonable”. Why they think bids are unreasonable after effectively squeezing out half of the investor base, is beyond us. Earlier in the week, Brazilian Finance Minister Guido Mantega raised taxes on foreign inflows on fixed income investments (for the second time this month) to 6% (from prev. 4%) and to 6% on margin deposits for futures (from prev. 0.38%). A loophole that allowed Brazilian financial institutions to swap assets to foreigners was also closed.


The aggressive move to curb real appreciation brought on by inflows of dollars has triggered a bond market sell-off, with yields on Brazil’s longest fixed-rate securities increasing 60bps this week to 12.08%. Today’s failed auction highlights the lack of domestic demand needed to sustain Brazil’s “low” interest rates, causing Treasury Secretary Arno Augustin to suggest Brazil will have to accelerate international sales of real-linked bonds to counter waning domestic demand.


Brazil, like every other emerging market growth country, has been guilty of riding the yield-chasing liquidity wave brought on by expectations of QE2 in America. And while self-imposed, yesterday’s failed auction tells us exactly what direction the real is headed alongside Brazilian interest rates – up.


Mantega may be successful in slowing down the rate of real appreciation vs. the dollar in the intermediate term with taxes and regulation, but longer term, the fundamentals driving Brazilian interest rates higher will be tough for him to overcome:


Fiscal Policy: The latest polls show voter support for Lula endorsee Dilma Rousseff is growing; she currently has an 11-12% margin over rival Jose Serra and is likely to win the October 31st runoff election, barring any catastrophic campaign mistakes. This is meaningful as it relates to the direction of Brazil’s debt/deficits, as she is on record saying promoting spending cuts is a “crime”. Her fiscal policies are in stark contrast to the much more austere Serra, whose previous surge in the polls sparked a bond market rally. Currently, Brazilian government spending is growing more than twice the rate of GDP, and with Rousseff’s promise for continuity with Lula’s welfare policies, we don’t see that changing anytime soon. Further, her lax spending policies create incremental support for the next factor we outline below:


Inflation: September marked the first sequential uptick in Brazilian inflation in five months, coming in at +4.7% YoY vs. +4.5% in August. Prior to that, inflation was being tamed by the strengthening real, which is up around 3% YTD. We have been increasingly cognizant of the likelihood that the dollar finds an intermediate-term bottom around in the $78-$82 range. Should the dollar strengthen marginally over the next three months, as we expect it to, we will see downward pressure on the real over the near term, limiting Brazil’s ability to fight inflation with FX appreciation alone.


Moreover, demand from Brazilian consumers is being supported by a significant confluence of tailwinds. Brazil’s unemployment rate fell 50bps MoM to a record low in August, coming in at 6.2%. Average real incomes also increased +1.3% MoM and +6.2% YoY and the latest data (April-July) show Brazilian consumer borrowing rates are at the lowest level since 1995 (6.74% per month).


Real Commotion in Brazil - 1


All told, the direction of fiscal policy and consumer demand will continue to put upward pressure on Brazil’s inflation rate over the intermediate-to-long term, necessitating the need for future rate hikes. While we don’t currently have a position, we remain favorably disposed to the Brazilian real against the U.S. Dollar over the long term, largely based on diverging growth prospects. As mentioned, over the intermediate term, the dollar could catch a bid from 1) hawkish fiscal rhetoric from the likely-to-be Republican Congress; 2) mean reversion; and 3) widespread reflexive declines in equities and commodities globally.


Darius Dale



Real Commotion in Brazil - 2

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
  • SHORT SIGNALS 78.68%

FL Takes the Prize on Launch Day

In case you missed the 15 second teaser spots on Monday Night Football this week, we remind you that Under Armour’s basketball launch hits the marketplace tomorrow.  Interestingly, Foot Locker appears to have locked up THE key player in the whole marketing effort, Brandon Jennings.  He’ll be appearing at a Milwaukee mall for the launch.  No, not the UA flagship store in Maryland.  The Foot Locker in Milwaukee.  Who cares?  Footlocker and UA do.  This is a subtle but relevant start to a partnership that historically got off on the wrong foot (pun actually intended).  Look for FL to be a key component of the basketball strategy as it moves beyond its four shoe debut.


FL Takes the Prize on Launch Day - brandon jennings


Beyond UA, we’re also including a banner ad from today’s ESPN homepage.  Yes, the NBA starts up again this weekend so it makes sense to see an increasing marketing push behind the category.  However, we point out another subtlety which supports our ongoing thesis that the retailers win when R&D, marketing, and competition heat up in the space.  Take a look at the co-op branding below.  Can you guess who paid for this one?


FL Takes the Prize on Launch Day - espn


Eric Levine


Bear/Bull Battle: SP500 Levels, Refreshed...

We are about 25% of our way through earnings season with 132 companies in the S&P 500 having reported earnings to date.  The non-financial sectors appear to be holding up well this season, supporting the +10.9% move in the S&P last quarter. 

  1. 113 or 85% (80.9% for all of 2Q10) have posted positive surprises on EPS - the Industrials are the only sector with a perfect batting average  - 23 of 23 companies have beaten on EPS
  2. 87 or 66% (57.8% for all of 2Q10) have posted positive surprises on Revenues.  

Not surprisingly, we are seeing the cream of the crop get the good news out first and would expect the tone of earnings season to deteriorate from here.  This is an important factor to keep an eye on; as positive as earnings have been, a reversal in tone could have strong implications given how high this market has run.


In addition there are two important MACRO data points out next week:

  1. The BEA is expected to release the advance estimate of 3Q GDP on Friday, October 29th.  There is a significant chance that this GDP report is close to consensus expectations as it is the last major piece of economic data before the midterm elections.  The economic data reported of late suggests that.  However, reporting risk remains for a downside surprise to those expectations and here is why: 
  2. We expect the Case/Shiller print on Tuesday next week to decline sequentially and to show acceleration in the downward trend.   That said, the “bomb” print won’t be for another month when the April data, and with it the last impact of the home buyer tax credit, finally comes out of the calculation. 

We’re short the SP500 (SPY) and our refreshed immediate term TRADE line of resistance is now 1187 and there’s plenty of resistance all the way up to the YTD highs established in April during the frenzy of the 1Q10 earnings season.   


Enjoy the weekend,


Howard Penney

Managing Director


Bear/Bull Battle: SP500 Levels, Refreshed...  - 1



October 22, 2010


Following a successful IPO of Vera Bradley (as measured by day one), continue to expect high premiums on growth given its scarcity.  We challenge anyone to name 5 retail concepts with square footage growth over 10%.




- According to a Gallup poll tracking average daily spending for low and in middle income consumers, new YTD lows were reached in September.  The self-reported survey for September reported average daily spend of $48, down sequentially from $54 in August and $64 in July.  On a year over year basis, spending also declined significantly from last year’s average spend of $60.


- While traffic has doubled on COLM’s e-com site a year after shifting from simply a marketing to a commerce site, management noted that conversion rates are in-line with the rest of the industry – nearly 90% of consumers that visit research the product then buy it elsewhere.


- After winning numerous awards with the Kinvara, Saucony’s first lightweight running shoe, expect the brand to be a primary player in this emerging category in 2011. A discussion with the head of the brand suggests that initial plans are to offer at least four more lightweight models next year. Following the mantra of ‘less is more,’ the weight of next year’s line is going to make the Kinvara heavy by comparison.





General Growth Property's Reorganization Plan Confirmed - A Manhattan bankruptcy court judge has confirmed General Growth Property’s plan of reorganization, paving the way for GGP to exit bankruptcy court proceedings on Nov. 8. As part of the restructuring, GGP will split into two publicly traded companies. The new GGP will continue to be the second-largest shopping mall operator, with more than 185 regional malls in 43 states. The spin-off, called The Howard Hughes Corp., will own the master-planned communities and work on development opportunities. GGP filed for Chapter 11 bankruptcy court protection in April 2009. It has since restructured $15 billion in mortgage debt. The reorganization plan provides a full recovery to creditors and shareholders. William Ackman’s Pershing Square Capital Management is among the firms supplying $6.8 million in equity commitments to GGP, and Ackman will serve as chairman of the spin-off. <>

Hedgeye Retail’s Take:  With a very efficient bankruptcy process, it appears that retailers will be heading towards more visibility with the second largest mall landlord in the near future.  In reality, the bankruptcy process was nothing more than a headline distraction for the tenants.  Over the past year, there were no reports of service level disruptions or operational issues as a result of the company’s financial collapse.


Vera Bradley IPO Has Successful First Day - After pricing at the high end of its expected range, Vera Bradley Inc. ended its first day of he-counter trading by spiking up 55.3% in its initial public offering debut. The 28-year-old handbag and accessories firm priced its IPO of 11 mm shares of common stock at $16 a share, raising $176 million. The shares, which trade under the symbol “VRA,” opened at $23 and closed at $24.85. Based in Fort Wayne, Ind., the company sells through a network of 3,300 independent specialty retailers, company-owned stores and on its Web site. The firm operates 31 full-price stores and two outlet locations. According to the prospectus, it plans to open nine full-price stores and three outlets in 2011, with at least another 14 stores each year thereafter for the next five years. The company-owned stores average 1,800 square feet. The company is focused on expanding distribution in underpenetrated markets in the U.S. <>

Hedgeye Retail’s Take:  With growth a premium in retail, it will be interesting to see how more mature retail companies fare in the IPO market (TOY, TSA).  Clearly a brand with just 31 stores has room to expand, hence the excitement.  We challenge anyone to come up with 5 retail brands growing at over 10%.


JCP Ends Big Book Catalogues - J.C. Penney Co. Inc.’s transition from “Big Book” catalogues to “look book” mailers is now complete. J.C. Penney will still be in the print media business, but the new books will become “specialty in-store” mailers showcasing select fashion looks or must-haves to encourage consumers to shop in-store or online. The traditional catalogue format featured everything in a particular category. Penney’s catalogue dates back to 1963 and grew to $1 bn in 1979. Shoppers who relied on the catalogues for their purchases can either go to or contact a Penney customer care center, which will input the order through the Web site. <>

Hedgeye Retail’s Take: The end of an era and the end of having to talk about “Big Book” compares.  Time to focus solely on e-commerce.


KCP and Macy's Work Together - Kenneth Cole Reaction launched at Macy's stores Wednesday, solidifying an exclusive collaboration built on a new partnership model that will in turn drive sales higher. This has proved to be the case with partners as diverse as Tommy Hilfiger and Rachel Roy, and Macy's expects similar results from Reaction. Since Macy’s started working with the Kenneth Cole team on the sportswear, the product has already evolved. The sportswear is intended to appeal to the young, contemporary guy. The retailer initially carried Reaction outerwear, footwear, tailored clothing, dress shirts and ties, pants and accessories, and the brand had had a track record of success. Since hitting the floor last week, bestsellers have included dress pants, sport coats, slim suits and patterned suit separates. Long-sleeve wovens, novelty knits, cardigan sweaters and graphic T-shirts have also been strong, said a Kenneth Cole spokeswoman. Beginning in February and continuing through the year, the retailer will work with designers to create capsule collections of women’s apparel that will rotate on the floor every two months. <>

Hedgeye Retail’s Take:  While exclusivity has worked in the past with M, we’re still not convinced that KCP has turned the corner on its apparel efforts.  There is still much work to do here, although the M collaboration and the acquisition of its sportswear license from Chaus are a start.


Espirit Targets Growth Through Outlet Expansion - Targeting cost-conscious shoppers, Esprit Holdings Ltd. is accelerating its U.S. retail growth with outlet stores, initially focusing on the West Coast and Southwest. The U.S. expansion strategy will be dominated by 3,500- to 5,000-square-foot outlets. Esprit plans to add 15 to 20 outlet stores over the next year — five this month in the California cities of Los Angeles, Gilroy, Vacaville, Desert Hills and Milpitas — and no full-price stores. Esprit manufactures merchandise specifically for its outlets and that constitutes 95% of what is on the floor. The average price is 30% less than Esprit’s full retail prices. <>

Hedgeye Retail’s Take:  Late to the outlet party but probably not a bad time to pick up some quality locations as even outlet malls have recently suffered a bit on both productivity and traffic levels.


Hilfiger Launches Younger Targeted Retail Store - On Thursday, Tommy Hilfiger unveiled the first Tommy boutique in the U.S., a 1,000-square-foot store at 375 Bleecker Street in Manhattan, in a former Hilfiger collection location. Two other U.S. Hilfiger stores will be converted to Tommy boutiques and two more Tommy stores were recently opened in Toronto. Tommy differs from the Tommy Hilfiger flagship sportswear stores, which are more uptown prep, more refined and more grown up. This is focused on the younger customer. The line will also be available at beginning in the spring. Aimed at 20- to 30-year-old customers, the Tommy merchandise is accessibly priced. For example, Tommy knits will retail from $24 to $59, denim will run from $69 to $129, and outerwear will start at $129 for men and $139 for women. The collection is sourced through Li & Fung Ltd. and manufactured in the U.S., Asia, India and Mexico. <>

Hedgeye Retail’s Take:  While probably not a huge growth vehicle given the high cost real estate strategy (at least to start), this sounds very similar to Rugby.  Something to keep an eye on over the intermediate term.


Supply Constraints Dent Lacrosse Footwear - Supply constraints in China continued to impact LaCrosse Footwear Inc.’s business in Q3. The Portland, Ore.-based company saw stronger demand in the quarter for both its core work and outdoor products but revenue for both categories suffered from the capacity limitations of the firm’s third-party manufacturing partners in China.As a result, LaCrosse had a significant volume of work and outdoor boot orders that it was unable to fulfill, but it expects to ship them early in the fourth quarter. <>

Hedgeye Retail’s Take:  Add Lacrosse to the list of companies including COLM and FINL expressing challenges in the supply chain over the past 3-4 months.


Sport Chalet Secures Credit Agreement - Sport Chalet, Inc. has secured a four-year, $65 million credit agreement with Bank of America, capping what it said was the first phase of a strategic plan to align its business with post-Recession reality.  Sport Chalet has embarked on a multi-pronged strategy to better align its business with the challenging economic environment. Initially, these directives included renegotiating rent on existing stores, deferring store openings, improving inventory management and reducing selling, general, and administrative expenses. To achieve sales growth, the company enhanced its online presence, aggressively growing its vendor brand shops, along with product and service offerings, while further expanding its Team Sales division. Additionally, the company continues to source the best technical performance and lifestyle merchandise in order to further differentiate the Sport Chalet shopping experience. Sport Chalet has implemented new micro-merchandising strategies to more accurately reflect each store's customer demographics, including specialty concepts such as new running and triathlon shops.  <>

Hedgeye Retail’s Take: The company’s updated strategic plans may buy SPCHA time, but with competition heating up for west coast locations from the east, it may only be prolonging the inevitable.


Russell Athletic Partners with the Harlem Globetrotters - Russell Athletic has signed a three-year deal to become the official uniform, practice gear and travel gear provider for the Harlem Globetrotters. Under the agreement, sister companies Brooks will be the Globetrotters' official supplier of casual footwear, and Bike is the team's official provider of athletic training supplies.  <>

Hedgeye Retail’s Take: Assuming the deal came at minimal cost relative to other opportunities, the ‘Trotters will give the brand a great opportunity for some highly recognizable marketing & advertising. Says 2010 Sales May Triple on China Growth, Plans Nasdaq Listing -, China’s biggest online clothing retailer, expects sales to triple this year as more people in the world’s largest Internet market use the Web to buy apparel, the company’s chief executive officer said. <>

Hedgeye Retail’s Take: The shift towards increased domestic demand has been underway for much of the year, but 3x is material step function up in anyone’s book. With e-commerce a robust growth channel, there is sure to be interest in the ADR should it get listed on the NASDAQ.


Ikea Plans Growth in China - Ikea, whose biggest Asian store is in China, plans to more than double its outlets in the country by 2015 as rising incomes turn more dozing visitors and diners at in-store restaurants into furniture buyers. The home-furnishings market is projected by Euromonitor International to surge 17% this year in China, the world’s fastest-growing major economy. Ikea said this month it will add $300 mm to the $1.2 bn being spent by a mall developer part-owned by the furnishings company, as the chain increases its stores in China to 18 from 8. The retailer also has three outlets in Hong Kong among more than 300 worldwide. China’s economic transformation lifted 300 mm citizens out of poverty during the past three decades, according to the United Nations. The growing prosperity will help the nation’s home-furnishings market expand to 186.9 bn yuan ($28 bn) this year. <>

Hedgeye Retail’s Take: As the country’s economy grows – so does the nations wealth. Natural focus for the affordable home furnisher.



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