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October 27, 2010 


Wal-Mart may be onto something with its Groupon-style Facebook promotion.  With consumers required to “buy in” to a particular offering, we wonder if this isn’t the newest and most clever way of clearing large amounts of a single item in a very short, efficient time frame. 


- Yet another reason why pet products continue to sell well.  Think the canine costume concept is crazy? Online searches for Halloween “dog costumes” outpaced searches for baby and toddler costumes this year, according to search analytics provider Searchmetrics.  Sounds like a positive for PETM.


- As Carlyle plans its IPO for luxury skiwear company Moncler, it’s clearly painting a retail growth story.  After only having one boutique in the US for years, two new stores have opened in NYC and Chicago over the past several months.  Expect to hear about unit growth on the roadshow as the model shifts towards owned distribution.


- Under Armour is back in Manhattan for another holiday season, this time with a pop-up store in Soho. Recall that last year’s location occupied a vacant location on 57th st and 6th Ave.  This year’s Spring St. location fills a spot that Limited used last year as a pop up location.


Wal-Mart Takes A Hint From Groupon - Daily deals service Groupon is the current belle of the ball when it comes to the digital world. It's no surprise that retail giant Walmart is paying attention. Yesterday Walmart began running Facebook ads promoting a new service it is calling CrowdSaver. The offer: Walmart will give 18% off a plasma TV if it gets 5,000 likes. Walmart encourages its fans to rally their friends in order to ensure the deal happens. The move is a twist on the Groupon model, which offers steep discounts on goods and services if a critical mass of people take up the offer. <brandweek.com>

Hedgeye Retail’s Take:  With peer influence at the top of the list of purchasing drivers, we’d expect the Groupon model to move beyond imitation at just Wal-Mart.  There’s nothing better to a retailer than knowing exactly what demand is for a particular item.  If executed properly, Groupon can act like a “forward” order book on the consumer level. 


Saks and Macy's on E-Commerce - Saksfifthavenue.com is Saks Inc.’s second-largest store, and although it lags the revenue of the chain’s Fifth Avenue flagship, the luxury retailer’s e-commerce unit is generally twice as profitable as the brick-and-mortar business, Denise Incandela, president of Saks Direct, said during a panel discussion. The emphasis has shifted to making sure e-commerce continues to grow and takes a disproportionate piece of total market share as it does so. Macy’s Inc., with more than 600,000 Facebook fans, is also using social media primarily for relationship building. Digital garnered about 10% of Macy’s media spending this year ­­­­­­— compared with zero three years ago — and the percentage is expected to double in another couple years. When it comes to digital media, Macy’s knows what it’s getting. <wwd.com/business-news>

Hedgeye Retail’s Take: When your core business is barely profitable, it’s not saying much when your e-commerce platform runs at 2x the profitability of the base. 


Amazon and QVC Meet the iPad - Both Amazon.com and QVC have reworked their sites specifically for the iPad. The Amazon app enables consumers to post products on Facebook and Twitter, while QVC shoppers can watch a high-definition feed of the retailer’s live broadcast.  <internetretailer.com>

Hedgeye Retail’s Take:  With so many iPads in the market already, it won’t be long before this is no longer news.  The iPad is essentially a modern day HD, live action catalog.  Clearly a big opportunity here for retailers looking to sell their wares anytime, anywhere.


REI to Appear on Oprah Friday - National outdoor gear and clothing retailer REI will be featured on two upcoming episodes of “The Oprah Winfrey Show.” The episodes, titled “Oprah and Gayle’s Big Yosemite Camping Adventure,” highlight their first-time camping adventures in Yosemite National Park and a trip to the REI store in Fresno, Calif. <sportsonesource.com>

Hedgeye Retail’s Take: The ‘Oprah Effect’ still matters and hits REI in stride as the retailer continues to open stores aggressively. With an typical footprint of ~25,000 sq. ft., the outdoor retailer has been opportunistic in taking over locations from defunct concepts like Linens-N-Things and is now planning three new locations in the New York tri-state area in 2011 including a Manhattan location next fall.


Fleece-Maker Polartec Said to Be Seeking Acquirer in $200 mm Sale - Polartec LLC’s parent, Versa Capital Management, is seeking a buyer for the century-old maker of the Polarfleece material, according to two people with knowledge of the matter. <bloomberg.com/news>

Hedgeye Retail’s Take: Couldn't be better timing for soliting bids with cotton hitting new highs again this week.


Luxottica Group Sees Renewed Interest in Luxury - Strength at retail and wholesale across all regions and renewed interest in luxury brands helped Luxottica Group SpA lift its sales 19.7%. Sales in Europe and in the U.S. grew 12.7% and 8.5%, respectively. Emerging markets gained 26.2%. Luxottica, which owns the Oakley and Ray-Ban labels, holds eyewear licenses with brands including Bulgari, Burberry, Chanel, Dolce & Gabbana, Donna Karan, Polo Ralph Lauren, Prada, Salvatore Ferragamo, Tiffany and Versace. Earlier this month, the company also inked an agreement with Coach starting in January 2012.  <wwd.com/business-news>

Hedgeye Retail’s Take: With an increasing amount of product shortages across the luxury sector (LV, Chanel) it should come as no surprise that licensed eyewear is also following suit with strength.


Mastercard's Web View - Although coming off a smaller base, e-commerce is growing at a significantly higher percentage than overall retail. In September, total e-commerce rose 7.8%; apparel e-commerce was up 13.4%; children’s e-commerce gained 14.4%, women’s apparel e-commerce rose only 1%, and jewelry was off 5.9%, versus a year ago. E-commerce in women's apparel has grown from a 9% share in 2007 to 13.8% of total sales year-to-date in 2010, and the year’s not over yet. But, they’re not seeing the same progress in jewelry as they’re seeing in apparel categories. Looking at the pace of online business this year there were online peaks in terms of share due to weather and people at work an not on vacation with January peaking at 18.6% of sales. Online holiday sales will ramp up on Nov. 9 with 14 of the top 50 online spending days in the last 22 days of the month. The top spending online day is expected to be Dec. 14., and the biggest day for retail overall is Nov. 26, which is forecast to do $19 billion in sales. The top 10-day total is estimated to be a $151 billion spending opportunity. <wwd.com/business-news>

Hedgeye Retail’s Take: More confirmation that e-commerce remains the bright spot of growth within the retail space.  Recall that December 14th is now known as Green Tuesday. 


Ni hao, Big Chinese Tourist Who Spends - China’s fast-growing economy is fueling a rise in outgoing tourism, with shopping for high-end fashion and beauty products near the top of travelers’ agendas — a windfall that is creating happy smiles among luxury brands and retailers from Paris to Los Angeles. Brands from Louis Vuitton to Ralph Lauren, Graff to Gucci have all pointed to the wave of Chinese tourists traveling abroad as a key factor in luxury’s resurgence after the global recession of 2008. Indeed, the China Tourism Academy estimates Chinese tourists spend about 500 euros, or about $700, an hour when shopping in Paris, home to Galeries Lafayette and Louis Vuitton’s flagship on the Champs-Elysées.Chinese tourists made 47 million trips abroad last year, according to China’s National Tourism Research Institute. The pool of tourists from China who like to spend big now largely consists of the country’s wealthiest elite — a small percentage of the overall population. The latest numbers available show that tourists from Mainland China spent $42 billion abroad in 2009, with more than $17 billion of that spent in Hong Kong, by far the most popular shopping destination for wealthy Chinese tourists. <wwd.com/business-news>

Hedgeye Retail’s Take:  China’s growing wealth has been a windfall for retailers with exposure to Hong Kong, particularly luxury watch companies, which have reflected the surge in demand – a trend we expect to continue at least for the near-term.


U.K. Retailers Rush To Develop and Harness Power of E-Commerce - U.K. Retailers are developing more advanced Web sites and own-brand products to drive profit as they seek to stave off “zero growth” in sales in 2011. Online is “an absolute essential priority now as opposed to before when it was seen as something that was an emerging thing, not high on the list,” Ian Geddes, head retail partner at Deloitte, said in an interview at the World Retail Congress in Berlin. Stores are investing in more multichannel options, which allow shoppers to order a product online and pick it up at a store, he said. U.K. retailers are facing a “very tough” first quarter as the government’s spending cuts, unemployment, the value-added tax increase and inflation weigh on consumers’ ability to spend, the executive said. He forecasts zero growth or a slight contraction in retail sales in 2011. Retailers have been showing a renewed online push after the recession pulled their focus towards cutting costs, according to Geddes. They’re becoming more active in social networking sites such as Facebook and Twitter and adding more price comparisons and product reviews to drive sales, he said. Retailers are also using the Internet as a way to expand without having to invest in more store floor space, executives said. <bloomberg.com/news>

Hedgeye Retail’s Take: As we’ve seen here in the U.S., those companies that have been proactively investing in their e-commerce infrastructure will be at a substantial competitive advantage.


Scaring Up Last-Minute Halloween Sales With Shipping Offers - With fewer than five days until Halloween, online retailers are hyping shipping promotions to capture last-minute shoppers. Sites, such as CostumeCraze.com are discounting goods up to 90% and promoting sale prices on their home pages next to  shipping offers that will still get items delivered by Halloween. SpiritHalloween.com puts urgency into a home-page promotion, tagged with “The End is Near” on a tombstone next to a zombie, noting that shoppers can place Halloween orders only until 3 p.m. on Oct. 26 to ship via FedEx’s second-day air service. BuyCostumes.com offered free priority shipping for purchases of $90 or more made on Tuesday, Oct. 26, for delivery on Friday, Oct. 29. The site also offered discounts of up to 90% for costumes for adults, kids and dogs. Some merchants gave an extra push to shipping in e-mail and social media promotions. <internetretailer.com>

Hedgeye Retail’s Take: While free shipping is a key consideration for consumers, expect more of these ‘empty’ offers which present the option at unattractively high levels primarily for marketing purposes.