This note was originally published at 8am this morning, November 02, 2010. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

"My way of joking is to tell the truth.  It's the funniest joke in the world".

-George Bernard Shaw


Both the Reserve Bank of Australia and the Reserve Bank of India certainly have their version of the truth today as both raised rates on inflation fears; for India’s central bank it’s the sixth such move this year. 


At home we have multiple storytellers giving their versions of the truth.  George Bernard Shaw was most commonly known as an Irish playwright skilled in many spheres of literature.  As you can probably tell from this morning’s quote, his work tended to fall into the satire or black comedy categories.  The black cloud that is the political theatre unfolding in the U.S. certainly would have provided Shaw with some material, were he alive today.


While Shaw held some controversial views that were anathema to many of those around him, his flair for music, literary criticism, journalism and drama was widely recognized.  Reconciling the vilification Shaw endured for his stances on the World Wars and other topics with the broad acclaim he received for his work (including a Nobel Prize for Literature and an Oscar) is difficult.  The bottom line is that most people love a good story line and can appreciate the person who can tell one.


In the run up to today mid-term elections, the Political Partisan Playwrights have been kicking into overdrive.  Political Prose has been weaved around every political theme imaginable; government spending, taxes, and immigration, to name but a few.  The resulting narratives have been recited ad nauseam and I can’t wait until it’s over.  Political commercials seem to get worse every election cycle.


We can argue which political versions of the truth are more tenuously linked to fact than others but the only certainty about every politician on the soap box is this: none is as allied to the truth as they are to their prospects of being elected.


At Hedgeye, we prefer to examine data than listen to political sound bites (however amusing).  As my colleague and Managing Director of Macro, Daryl Jones, wrote yesterday on the election, “The turnout measures for Republicans are very positive and should drive a big Republican win to the tune of a net gain of 9 seats in the Senate and more than 65 seats in the House”.   Daryl’s mathematical reckoning anchored on a selection of political polls that he has been following closely as part of this macro process.  While the likely Republican gains have already been priced into the markets, we will continue to be confronted with political versions of the truth for some time past today’s vote. 


Economic versions of the truth are just as commonplace in our manic media.  The interpretation of the ISM and personal income yesterday are perfect cases in point.  George Bernard Shaw died in 1950 but even if he were alive today, despite his talent for literary criticism, I think he would struggle to follow the convoluted economic plotlines being laid out by some present day commentators – and he was a co-founder of the London School of Economics! 


The main question I have for the storytellers is as follows: how does the economic reality we are faced with marry the expectations imbedded in Wall Street Groupthink?  Yesterday I posted a note on the ISM and personal income print titled, “Q4 2010 THEMES UPDATE – CONSUMER CANNONBALL”, that outlined the moving parts behind a major component of the U.S. economy.  The ISM print was less-than-comforting given that the upside was primarily driven by exports (a small part of the economy) while personal income and spending weakened (pertaining to the largest part of our economy). 


Government support is waning and taxes are going up.  We are in the midst of Jobless Stagflation and the data is continuing to confirm that.  If you ever had any doubt that political motivations can sway departments of government to take artistic license (especially a week before elections) with economic data, take a look at the chart below.


The story of the 3Q10 GDP number would be a masterful piece of black comedy – and a fitting ode to Bernard Shaw – if it were funny.  The consumer services sector is growing while consumer goods are decelerating but the evidence of government propping up the respective components of GDP is obvious.  Inventory accounted for 72% of 3Q10 GDP growth and exports declined even with the Almighty Buck burning at the stake.  Whatever version of the truth you choose to believe, the trends are unsustainable given our ever-increasing deficits. 


One version of the truth that is front of you today is that risk is clearly building in the market and most choose to ignore the facts.  Over the past six trading days the VIX is up 15.2% and the S&P 500 is UP +0.10%.  The inverse correlation of the VIX and the S&P 500 is 0.84.  The prospects of the FED saving the anemic economy are clearly priced in.   


Some may find it unappealing to consider that America’s economy can be as fragile as the data suggests.  As I wrote last week in my Early Look note titled, “BEING A LADY”, “America is a great nation and I’m proud to be an American”.  As a proud American, I would pay good money to see any political party come to grips with reality and face the cold hard truth.    


As Shaw himself would say, “All great truths begin as blasphemies”.


Function in disaster; finish in style,


Howard Penney




In preparation for Hyatt's Q3 earnings release, we’ve put together the pertinent forward looking commentary from Hyatt’s Q2 earnings release/call.




  • “Strengthening group business is also important for us because it allows us to better manage yield relative to transient business as we see increased compression in hotels that have a mix of group and transient business.
  • “We also expect to see higher corporate rates coming out of negotiations this fall.”
  • “We are firm believers in the recycling of capital. This means that at any given time, we may be buying or selling hotels in order to put the capital that we have invested in hotel properties to work for us. For example, we’re currently exploring the sale of 11 properties consisting of approximately 4,500 rooms….We expect this to be a multi-month process, and we will announce completed transactions upon closing.”
  • Looking out a bit further, in the quarter bookings for all future periods were up approximately 35%, compared to the second quarter of 2009.”
  • “Visibility on group remains low as booking windows are short.”
  • “We have tightened the range on expected CapEx to 270 to 280 million. Most of that expenditure will take place in the third and fourth quarter as renovation spending at several of our larger owned hotels ramps up. These projects are currently tracking on time and on budget and will continue into next year as planned, particularly the large renovations at the Grand Hyatt properties in New York and San Francisco.”
  • “Our estimated depreciation and amortization expense remains the same at 285 to 295 million, and our interest expense range has been slightly lowered to 50 to $55 million.”
  • “With respect to growth in openings this year, we said during the last call that we expected to open more than 25 hotels, and I think that’s our current outlook. That was an increase from prior estimate that we had had, which was more than 20. Part of that has to do with some conversions, part of that has to do with some uncertainty about exactly when properties that are under construction will complete and, therefore, be able to open. So that remains our current expectation and outlook for this year.”
  • “Relative to our expense projection, we expect expenses to continue to increase, largely because we believe there will be wage inflation. We hadn’t taken merit increases last year. We restored bonuses from that perspective. So, I think you will see increase in expenses continue.”
  • [# of FTEs] “So we are going to keep that at current levels, at least in the short term.”
  • “In terms of hourly staff, that’s more of a variable expense, and we are beginning to see staffing increase for that group of colleagues, largely because the recovery so far has been demand driven. Now, the key question is going to be, relative to our profit flow-through, is how rates progress over the next six to 12 months.”
  • [Transaction environment]And with respect to the evolution of the opportunities over time, I do believe that there will be a further increase of activity and opportunities both in the latter half of this year and into 2011, and I think a lot of it has to do with people, owners and lenders alike, evaluating what their overall alternatives are. And, at least based on what we’re seeing to date, there has been more interest in trying to put a deal together to put an asset on to a different track, let’s say, or bring in a partner in order to help recapitalize. So, I think it’s very clear that, at least around our offices, we’ve got a lot more activity underway now than we did before.”
  • [Corporate negotiation rates for 2011] “Our best guess at this point is maybe somewhere in the high-single digits.  The only other thing on the corporate negotiation I’ll say, in terms of the sectors where we are negotiating-- the technology, the manufacturing and the financial segments are up; transportation is overall down.
  • [Group rates for 2011] “Tracking in the low double-digits; however, pace is still negative at this point of time, but again, that’s largely because the visibility and the lead times is fairly short at this point of time.”
  • [For 2H 2010, EBITDA impact from renovations] “From a RevPAR perspective, we think for our owned and leased segment, RevPAR is going to be impacted between 200 to 250 basis points. And, if I just take you back to what we had indicated in terms of the sensitivity on RevPAR, one point is anywhere between 10 and $15 million on an annualized basis. We think the EBITDA, in fact, is closer to $10 million or so in the second half of the year…. The renovations will continue until Q4 2011."
  • [International] So the booking curve, so to speak, or the outlook tends to be quite short.
  • “There are opportunities for capital deployment in Europe, mostly for management deals, less so for acquisitions, although we are also looking at and for acquisition opportunities in India on the JV basis and in Latin America also on a JV basis.”

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In preparation for the ASCA Q3 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from ASCA’s Q2 earnings release/call.




  • [St. Charles]Our market share there seems to have stabilized.”
  • [East Chicago] “We’ll see a $20-25 MM annualized negative impact from the bridge closure… A portion of those [road] improvements should be done later this year and the balance through the middle part of 2012.”
  • [Fixed charge coverage ratio] “We’ll see that improve starting in the third quarter now that the swaps have expired and we have substantially lower interest rates going forward.”
  • “Subsequent to the end of 2Q, we’ve retired an additional $16 million of debt. So through seven months, we’ve retired $80 million of debt. That’s created availability in our extending revolver of approximately $20 million over and above what’s required in the non-extending revolver that we have to retire in mid-November of this year. We obviously intend to continue to use free cash flow to retire debt through the balance of the year. For the rest of the quarter, we think we’ll probably end up at about 25 million in total in 3Q for debt reduction, which would be another 11 million from where we are today. And we anticipate having availability in the revolver in December of 45 to 50 million [after 1/2 of CIP] based on our current rate of debt reduction.”
  • “Our Q3 2010 estimate for non-cash stock based compensation expense: should be in the range of $3.4 to 3.9 million. And the blended federal-state tax rate should get back up to about 42.5%.”
  • “Capital spending for Q3 is expected to be between 15 and $20 million in the third quarter…. [For Q4], if we’re going to meet what we told you guys at the beginning of the year, we would have to spend a little more in the 4Q than we have so far on average this year…. Net interest expense in Q3 is expected to be near $28 million. Non-cash interest expense is expected to be between 2.5 and 3 million for Q3. Based on current LIBOR rates, we should see a reduction in the quarterly interest expense for approximately $13 million due to the expiration of the swaps in mid-July.”
  • “We currently expect to make a quarterly dividend of $0.105 per share in Q3.”
  • Pullback in Kansas City promotional spending going forward? “Yes.”
  • [Black Hawk market] “3Q should be the best quarter in that market.”

Risk Rising for PIIGS

Below we show graphically the heightening risk trade in Europe. Although the EU community, IMF, World Bank, and ECB continue to backstop or subsidize the debts of the region’s fiscally bloated countries, the threat of the rising cost of capital remains significant in a world of interconnected risk.


The proverbial ‘PIIGS’ have shown a clear negative divergence across capital markets over the last week, with sovereign CDS spreads blowing out after significant declines in September and most of October (see chart below). Importantly, as Ireland’s ability to meet its sovereign debt obligations this year and next are called into question, Ireland’s CDS rose to a new high of 499bps, as the yield on the country’s 10YR bond widened to 7.22% (or 477bps over German Bunds), the highest yield since the mid-90s. Equally, yields are blowing out in Greece, Portugal and Spain.


Risk Rising for PIIGS - mh1


Risk Rising for PIIGS - mh2


From a quantitative set-up, Spain’s equity index, the IBEX 35, broke its intermediate term TREND line of support at 10,726 today, while Greece’s ASE Index remains broken on both the TREND and immediate term TRADE durations, and is the worst performing index across all global equity indices year-to-date at -30.8%.


Risk Rising for PIIGS - mh3


As the risk premium expands for Europe’s fiscally weaker nations, we want to reiterate our cautious outlook on the region. While we continue to like Germany’s fiscal austerity and relative growth profile into year-end and in 2011, we expect the region’s growth to slow as austerity measures squeeze the consumer via higher VAT, job losses, and wage freezes. Below we chart data out today on the Manufacturing PMI. While the data shows that most countries gained in October versus September, we do not expect to see marked improvement in this data into year-end as Austerity’s Bite plays out.


We’re currently short Italy in the Hedgeye Portfolio via the etf EWI.


Matthew Hedrick



Risk Rising for PIIGS - mh4

R3: Uniqlo, Crocs, Gilt Groupe, GCO


November 2, 2010




  • Private sale pioneer, Gilt Groupe, is said to be exploring an apparel line of its own.  No word yet on whether the line will be private label or an exclusive collaboration with another designer.  Clearly a tightened supply chain and lower quantities of closeouts are taking their toll on the availability of compelling, fashion product.
  • While not the first teen focused retailer to use the smartphone as a promotional “carrot”, Journeys is offering teens a choice of devices for free if they try on a pair of shoes.  The iPhone is not amongst the listed choices.
  • The holidays are here!  According to Responsys, 57% of major retailers have already begun their holiday email campaigns.  A surge emails alluding to the holidays came in the final week of October, outpacing efforts observed in both 2008 and 2009.
  • Add Crocs to the list of brands now participating in the toning category. The shoes are aesthetically consistent with what consumers have come to expect from Crocs with the addition of an Easy Tone Reebok-like sole. Importantly, the shoes sell for $49.99 and $59.99 and well below the industry average, which is now hovering around an ASP of $77 compared to $95 at the start of the year.



Uniqlo Comps Down in October - Fast Retailing Co. Ltd. said Tuesday that Uniqlo’s same-store sales slid 1.1 percent in October, regaining some stability after a steep drop the month before."Temperatures were high until the middle of the month, but fell in the latter half, helping drive sales of winter items," the company said in a release. The figures are a vast improvement on September's comps, which slid 24.7 percent.  Fast Retailing blamed that drop on unusually hot weather. Uniqlo currently operates 799 stores across in Japan after having opened 11 new locations and closed two in the month of October. The chain’s comps refer exclusively to its stores in Japan and exclude its international operations. Uniqlo announced separately that its first store in Malaysia, which is set to be the company's location in Southeast Asia, will open its doors on November 4 in Kuala Lumpur's Fahrenheit 88 mall. To mark the opening of the 23,000-square-foot megastore, Uniqlo is planning to offer customers limited-time bargain prices on popular products such as graphic t-shirts, UJ jeans, and fleece jackets. <WWD>

Hedgeye Retail’s Take: Recall that last year’s launch of Heatech drove substantial comp increases across the globe only to result in disappointment a few months later when the product ended up in short supply.  Clearly Heatech round 2 isn’t helping with warm temperatures across the globe.


China Key Market for Ermenegildo Zegna Group. - In the almost 20 years since the Italian luxury men’s wear company entered the market, China has grown to represent some 25 percent of Zegna’s annual sales of 797 million euros, or $1.11 billion, last year, Ermenegildo Zegna, chief executive officer, said during a presentation Monday. The country may eventually account for as much as 50 percent of sales. From 2005 to 2009, sales in China rose 33 percent, and the brand now operates 62 stores in 33 cities in the country. Those stores, which include a Peter Marino-designed flagship that opened in Shanghai last summer, “have to be big and create a wow effect,” Zegna said, because shoppers there seek excitement and exclusivity. The most important products to the Chinese consumer are luxury sportswear and leather accessories, he said, revealing sportswear accounts for 50 percent of the business there and leather accessories 20 percent. Executives at the top of their fields don’t feel the need to wear suits, opting for high-end casualwear instead. “An owner of an enterprise wears what he wants,” Zegna said. <WWD>

Hedgeye Retail’s Take: A rare example of a “first mover” in China while the majority of western brands are looking at the largest population on earth for the first time. 


PE Head Forecasts Active M&A Environment - John F. Megrue Jr. is looking at retail and likes what he sees. “Right now is really a unique time,” Megrue, chief executive officer of private equity firm Apax Partners U.S., said Monday. “There is a dislocation in the market,” with retail debt financing coming back as some stock valuations in the sector lag. “We are going to see a much more active period in the next six to 12 months than we have historically.” That assessment from one of the key players in Apax’s sale of Tommy Hilfiger to Phillips-Van Heusen Corp. merits attention. Just where all the action will be is unclear. There has been rampant speculation through the market that retailers across a spectrum might be in play. So far, there have been only a few deals. Private equity firms like Apax are expected to drive much of the action. As a group, the firms have tons of money ready for retail deals — $100 billion according to McKinsey & Co.’s reckoning — as well as access to debt markets. Megrue sketched out some of the attributes that draw the interest of the investing giant, which manages $37 billion and focuses on deals worth more than $1 billion. Apax owns British fashion retailer New Look and another of its holdings, Rue 21 Inc., went public in November. In addition to searching for “well-positioned” brands, Megrue is focusing on online businesses, which he described as an “underinvested” category. “We are huge believers in this,” he said. “There’s a lot of low-hanging front in terms of scaling this business.” On the other hand, Megrue said businesses that are made up of a portfolio of brands are prone to distraction and take time to figure out. Niche brands are also a problem. “They tend to be too small to be confident we can take them internationally,” he said.


He also highlighted some of the difficulties faced by publicly held retailers. For more mature stores, “It is a lousy idea to be public,” Megrue said. “Wall Street stops appreciating how core the brands are.” Public companies also face difficulties making high-risk moves. Megrue urged boards to think about going private. “Do it at least once a year,” he said. In addition, he noted: “We pay big premiums. That’s the business we’re in.” <WWD>

Hedgeye Retail’s Take: Recall that M&A within the retail and apparel space was on our top 10 themes for 2010.  Looks like we are now getting confirmation from the horses mouth that this should continue into next year.  We wonder however how a weakening consumer may factor into buyouts of companies with peak margins and minimal growth prospects.


RFID Adoption Gaining Momentum - The apparel industry is moving to adopt radio frequency identification at retail to reduce out of stocks, a group of retailers and brands said Monday. Wal-Mart previously said it will move to item-level tagging, and retailers such as American Apparel and Nine West have revealed they are testing the technology, but this is the first time an industry group has publicly said it plans to use RFID tags in stores for tracking individual items of apparel. The technology can reduce out of stocks by as much as 50 percent. “We believe it is time for the industry to come together to advance the use of this technology throughout the retail supply chain,” said Peter Longo, president of logistics and operations at Macy’s Inc. “We are excited about the business improvement and customer satisfaction opportunities that this industry-led initiative affords us.” Retailers and brands participating in the initiative include Macy’s Inc., Dillard’s, Kohl’s, Wal-Mart, J.C. Penney Co. Inc., Conair, Jones Apparel Group Inc., Li & Fung, VF Corp., Jockey and Levi Strauss & Co. American Apparel, Bloomingdale’s and Banana Republic have previously said they are testing the technology. Marks & Spencer, Tesco, Metro, Carrefour, Misukoshki and Throttleman’s also use RFID. Adoption has come more slowly than anticipated, partly because of the way the initial Wal-Mart mandate was crafted, and also because of public misperceptions about privacy risks posed by the technology. In 2003, Wal-Mart required suppliers to tag every pallet and case, but it had not yet tested the business case for the technology. That approach proved less useful than tagging certain key individual items, such as jeans, for a variety of reasons, including that Wal-Mart already had a sophisticated system in place for tracking every shipment, and RFID does not work with metal and liquid. Consumer groups have raised concerns the tags could be used by the government or others to track people at any time and in any place. But the tags contain no personal data, are difficult to read from a distance and can easily be disabled by removing them or covering the tags with tin foil. <WWD>

Hedgeye Retail’s Take: RFID has long been thought to have potential to be the biggest technological breakthrough in retailing since the POS, but costs have kept mass adoption at bay.  If successful, WMT’s lead here could force the hand of the supplier community to begin broader adoption. WMT however will still have to produce goods that consumers actually want.


Initiatives Underway to Grow & Maintain NYC Fashion Leadership - The Bloomberg administration plans to unveil six initiatives today to bolster New York’s $55 billion fashion industry and secure the city’s status as a global fashion capital. City Hall’s efforts will tackle the future on two fronts: Playing up New York as a hub of innovation for specialty and chain stores, along with helping to develop the next generation of designers, managers and merchants by insuring they have the business know-how to succeed. With 165,000 jobs, the fashion industry accounts for 5.5 percent of the city’s workforce, generating about $2 billion in tax revenues and $9 billion in wages annually. City officials aim to shore up those figures. Just last month, designers and union officials rallied in Midtown because of frustration about stalled talks with the city over rezoning the Garment Center to keep its manufacturing core. “The industry obviously is changing significantly, both in terms of production and the sales model,” Seth Pinsky, president the New York City Economic Development Corp., said Monday. “Production, as we all know and have seen in the last several years and past decades, has moved outside the city and the country. There has also been a change in the sales model. A lot more is being sold online instead of just brick-and-mortar stores. In the new global paradigm — whatever that turns out to be — we want New York to remain the fashion hub it has been for the past several decades.”  The program is expected to get rolling next year and each element will have a manager and corporate partner. The individual annual initiatives are: the NYC Fashion Fund and Institute, Project Pop-up, New York City Fashion Draft, Fashion Campus NYC, New York City Fashion Fellows and Designer as Entrepreneur. <WWD>

Hedgeye Retail’s Take: With costs in NYC presenting substantial hurdles for small, under capitalized brands and designers, it will be key for the Mayor to offer tangible incentives to keep the industry alive and well here.  If not, it will ultimately become too expensive to call NYC the fashion hub of the world.


Footwear News Power 100 of 2010 - After the tough times of 2009, when most footwear executives cut costs, slashed inventories and braced for the worst of the recession, this year was a different story. Corporate leaders began to regroup, restrategize and return to finding innovative ways to conquer the retail market. It’s no wonder footwear has been a leading category, rebounding much faster than apparel and, oftentimes, saving the bottom lines of department stores. As in every year, new players earned their places on the list, such as Scott Savitz, who has grown into an e-tail force, attracting 6.5 million monthly visitors and chalking up $180 million in sales. J.Crew’s Mickey Drexler also joined the industry’s elite this year, after making footwear a larger focus for the company and teaming with Alden, Minnetonka and New Balance for interesting collaborations. And Tony Post, too, made the cut after turning Vibram’s FiveFingers style into a footwear movement. To measure the market heft and influence of each executive on the list, Footwear News studied all sides of the industry — from discounters to luxury houses — to determine who is having the biggest impact on the shoe industry. Sales figures and earnings, of course, factored into the decision process, but so did new store openings, line extensions, collaborations, fashion clout, innovative product, revamped business strategies and, of course, the all-important buzz factor. What follows is a ranking of the industry’s most powerful influencers — those who not only survived the recession but are shaping the footwear landscape in its wake. <WWD>

Hedgeye Retail’s Take: With innovation behind several new additions to this year’s list, Christian Louboutin (#2 from #5) and Wes Card & Richard Dickson of The Jones Group (#9 from #13) represent the most notable moves in the Top 10. Among the factors behind Louboutin’s ascension is an aggressive growth in retail stores to 32 in 2010 from 21 last year while Jones’ stake in Stuart Weitzman in June has provided a significant boost to JNY’s profile in footwear circles beyond Nine West.


R3: Uniqlo, Crocs, Gilt Groupe, GCO - R3 1 11 2 10


Internet Flash Sales Surge in Popularity - While competition has dramatically increased over the last year, insiders said there is still growth potential. That is in large part because established leaders, such as Gilt Groupe and Rue La La, are upping the fashion quotient, adding new features and partnering with key brands on collaborations. “[The category] is here to stay,” said Larry Joseloff, VP of content for at the National Retail Federation. “The hype will die down as with any new tech or business model, but retailers will fine-tune their best practices.” The key for retailers, said observers, is to address new areas of the market with their models. “There are tons of sectors that haven’t been touched, so there is definitely room to grow, ” said Krista Garcia, research analyst at, an all-men’s site featuring contemporary and upscale brands, was also founded to serve an untapped consumer. According to CEO Jordan Rosen, while the flash-sales category as a whole is crowded, the men’s market is not as well represented. “We’re trying to be a place that’s all for men,” said Rosen. “I don’t know if I would feel comfortable shopping at a place geared toward women.” His site, which debuted in September, stocks brands such as Creative Recreation, Circa and Osiris, and showcases one or two sales per day that last about 48 hours and offer anywhere from 55 percent to 65 percent off retail value. Fifteen percent of the site’s mix is footwear. Another new entrant in the category,, is taking a different approach, focusing on high-quality products rather than price. Larger retailers are getting in on the action, too. At, merchandise from the outlet stores is being sold in an exclusive online flash sale on the weekends. And last month, discount retailers TJ Maxx and Marshalls announced they were considering adding a flash sales section to their websites. Despite the influx of new competition, existing players such as Gilt Groupe — which is often credited with creating the flash category in the U.S. — said they are continuing to see growth. <WWD>

Hedgeye Retail’s Take: In addition to a lower quantity of closeouts as noted above, increased involvement from larger more established retailers will  begin to squeeze out marginal players.


Weakness in Golf Rounds Persist - According to Golf Datatech, golf rounds played for the US were down 3.6% in September and were also down 3.6% on a YTD basis. Public access play was down 3.8% for the month and private course activity was down 2.9%. A total of 3960 courses are represented in the report. The biggest decline in September came in West North Central, 9.0%; followed by East North Central, 7.8%; New England, 6.2%; Mid Atlantic, 3.2%; Mountain, 1.6%; South Atlantic, 1.0%; and Pacific, 0.5%. The one positive region was South Central,  up 3.4%. <SportsOneSource>

Hedgeye Retail’s Take: Not much changed here – rounds have been down LSD all year as evident with both September and YTD down -3.6%.


E-Commerce Sales Remain Robust in Q3 - U.S. online retail sales increased 9% in the third quarter, comScore reports today, calling it “a fairly positive indicator for the upcoming holiday season.” That follows 9% year-over-year growth in the second quarter and 10% growth in the first quarter, according to comScore, which makes its estimates based on the activity of some 2 million consumers who agree to have their online behavior tracked. Total U.S. e-retail sales were $32.133 billion in Q3, comScore says. It was the fourth consecutive quarter of year-over-year growth in e-retail sales, following four quarters of flat or negative growth during the recession, according to the web measurement firm. Despite what he calls solid growth in the third quarter, comScore chairman Gian Fulgoni says, “We continue to preach caution due to the continuation of high unemployment, which is creating very divergent spending patterns between the 'haves' and the 'have-nots.' Even Americans who do have jobs still aren't confident enough to spend freely and many are still pained by their loss of wealth since the financial crisis struck in 2008. The top-performing online product categories were Books & Magazines (excl. digital downloads), Computers/Peripherals/PDAs, Computer Software (excl. PC Games) and Consumer Electronics, indicating a higher willingness of consumers to spend on in-home entertainment.  41 percent of online retail transactions included free shipping, down marginally from last year. <internetretailer>

Hedgeye Retail’s Take: Not surprisingly, online sales continue to outperform. Interestingly, the top 25 retailers accounted for 70% of sales this year up nearly 6 points yy suggesting accelerating growth at the top end at the same time the bottom 30% of the industry becomes increasingly more fragmented.


Mobile Couponing Slow to Take Hold - According to some predictions in 2009, mobile couponing was ripe for takeoff. While relatively few mobile users had redeemed a coupon through their phone, many were interested, and Yankee Group predicted an increase in the number of mobile coupons redeemed in North America in 2010 from 200,000 to 2.3 million. But consumers have been slow to climb on board. According to a September 2010 survey conducted by OnePoll for mobile transaction network mBlox, fewer than 15% of US mobile subscribers have redeemed a mobile coupon. This is about twice the penetration Yankee Group found in 2009. Also in September, research from the In-Store Marketing Institute found 12% of US shoppers had used a mobile coupon, and 34% were interested in doing so. mBlox found even greater interest, at nearly 42%, but both these numbers were significantly down from the 73% of US consumers who told Yankee Group last year that they wanted mobile coupons. Overall, respondents to the mBlox survey still preferred to clip coupons the traditional way—receiving them by mail. Email was popular with nearly a third, and a combination of email and text message with nearly 11%. <eMarketer>

Hedgeye Retail’s Take: What’s not captured here is the quality of couponing in the study (as in brands participating) – a key component of true underlying consumer demand. Additionally, the conversion from an email to mobile coupon requires that consumers enable retailers to push content a function that has been historically labeled as a four-letter word.


R3: Uniqlo, Crocs, Gilt Groupe, GCO - R3 2 11 2 10



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