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R3: Loyalty, Royalties, Cotton, and Promos

November 8, 2010



  •  Over the weekend UA’s CEO Kevin Plank experienced a historic win at the track as an owner of Shared Account, the 46-1 long shot filly, who came away with the Breeder's Cup $2 million Filly & Mare Turf race. By far Planks' biggest win Since purchasing Sagamore Farms in an effort to reinvigorate Maryland horse racing, it  may only be a matter of time before he mixes business with pleasure.    Doesn’t every racehorse need compression gear or UA horseshoes?
  • The British are still coming.  This time Brit Prep retailer Jack Wills makes a stateside move with two new retail outlets in the northeast, one in Boston and one in Soho.  The retailer of “university prep” sells a wide range of men’s and women’s apparel as well as accessories.  There is also a fully functional e-commerce site highlighting the company’s collections.
  •  Holiday marketing campaigns are creeping up earlier than ever, with most retailers launching their efforts a full two months in advance.  This year Best Buy launched its official holiday campaign on November 1st, a full 10 days earlier than last year.




 The wellness market is growing beyond its core companies. While rocker-bottom specialists MBT, Ryn and FitFlop remain category leaders, many comfort players are seeking to carve out niches in the rapidly expanding wellness arena. Strong brand recognition, accessible price points and enhanced technical features are giving brands such as Easy Spirit, Spring Step and Waldlaufer an opportunity to join the movement. And retailers said there is space for them, provided they have something new to offer. <wwd.com>

Hedgeye Retail’s Take:   As “wellness” shoes permeate the comfort market, it’s possible this could provide an opportunity for the category to expand far beyond traditional athletic channels and deeper into family, specialty, and brown shoe retailers.


Cashing in on the family name. The Jackson brothers are hoping the fashion business is as easy as ABC.  Jackie, Tito, Jermaine, Marlon and Randy Jackson — along with the estate of the late Michael Jackson — are launching their first licensed apparel line under the J5 Collection name, commemorating their decades as The Jackson 5. The men’s and women’s T-shirts and jackets will be in stores in February and incorporate imagery from their years as the so-called First Family of Music <wwd.com>

Hedgeye Retail’s Take:  With MJ’s secret long lost songs being strategically released what better time to also jump on the Jackson bandwagon. 


Know your audience. From intimate apparel to gowns and fine jewelry, the Middle East is a growth engine for luxury brands, but it takes more than razzle-dazzle to sell in the region.  Understanding Islamic religious practices and cultural traditions, which can vary from country to country, is a necessity and partnerships among Western brands and local companies are the most effective way to surmount obstacles and avoid any misunderstanding. <wwd.com>

Hedgeye Retail’s Take:  While it may sound simple, we would not be surprised to see many Western brands fail at their Mid-East expansion efforts as a result of under spending on market research. 


 Cotton talk commonplace across the globe. Chinese textile companies were quoting price increases of as much as 30% at the massive Canton Trade Fair, telling customers that a global cotton shortage and persistent labor shortages were driving up costs, according to several reports.  Spot prices for standard grade Chinese cotton have risen to 30,000 Yuan from as low as 15,000 yuan earlier this year as a global shortfall of the fiber and speculators have driven up prices. Meanwhile, Chinese factories continue to have trouble recruiting and retaining workers, who increasingly have options closer to home or are demanding higher wages and benefits.  <sportsonesource.com>

Hedgeye Retail’s Take:  Interesting comment here suggests manufacturers and mills have been building inventories of raw textiles in an effort to circumvent near-term price spikes.  


Middle-income not the same in every market.  China’s middle-income and affluent consumers will probably almost triple in 10 years with the bulk of the increase coming from smaller cities, Boston Consulting Group Inc. said today.  There will be 270 million more consumers whose annual household incomes exceed 60,000 yuan ($9,000) in the world’s most populous country by 2020, said Carol Liao, a partner at the Boston-based consulting company. That would lift the total number of middle-class and affluent Chinese to 415 million from 148 million now, she said.  “China is no doubt the highlight of the global consumer sector, and second-tier and third-tier cities are the main driving force within the Chinese market,” Liao said at a briefing in Beijing today. Three-quarters of the growth will come from smaller cities as incomes rise, she said. <bloomberg.com>

Hedgeye Retail’s Take:  With China’s definition of middle income hovering around $9,000 in HHI we remind investors that not all markets are created equal.  Perhaps middle income by local standards, but certainly not the “affluent” audience that western brands need to drive exponential growth. 


Loyalty not what it used to be.  For as long as anyone can remember, companies have relied on the tried-and-true loyalty program to keep customers. You know how it works: The airline, the hotel, the drug chain, etc., gives customers a nifty-looking VIP card and, with it, the chance to earn bonus points that accumulate until the "valued customer" can redeem them for some goody or other. But in an age rapidly redefined by digital technology, I'm prompted to ask: What, exactly, are all these companies really accomplishing with old-fashioned programs like these?  Not as much as they think. The bad news is that the days of bribing and tricking customers with points are over. The good news? A huge opportunity has opened as a result. <brandweek.com>

Hedgeye Retail’s Take:  Keep an eye on truly targeted loyalty offers, which are now sophisticated enough to understand price and item elasticity on a case by case basis.  Loyalty rewards alone are no longer a differentiated factor.

ASOS shoppers won't be hit by soaring prices as online retailers sees its profits jump.
Price rises announced by some fashion firms will not hit ASOS shoppers, the British online fashion retailer said today as it posted a 59 per cent rise in first-half profit.  ASOS, which targets internet-savvy 18- to 34-year-old women looking to emulate the designer looks of celebrities like Kate Moss, Sienna Miller and Alexa Chung but at a fraction of the price, today pledged not to raise the price of its own-brand products which represent half of its total offer.  That is in contrast to rivals such as Next, Britain's No. 2 fashion retailer, which last week warned its shoppers to expect price tags to rise by close to 8 per cent as the group said there was no sign of an end to the bubble in cotton prices. <dailymail.co.uk> 

Hedgeye Retail’s Take:  Complete opposite approach to fashion based retailer, Next, which was vocal last week in expecting to raise prices 8-10% to combat cost inflation.

Traffic generated from a Facebook-based promotion overwhelmed the site.  Lowes.com crashed late last week after traffic generated by a Facebook-based promotion overwhelmed the site. The Lowe’s Black Friday Sneak Peak Party started at 12:01 a.m. and offered 5,000 coupon codes for 90% off on a first-come, first-serve basis, and another 20,000 coupon codes for 20% off, along with other offers. Black Friday is the day after Thanksgiving. The resulting traffic overwhelmed the site, the company says, although the retailer did not say how long the site was down, and information from web monitoring firms was not immediately available. <internetretailer.com>

Hedgeye Retail’s Take:  Facebook promos are heating up and actually having a real impact.  In this case the impact was overwhelming, but the power of a targeted promo is clearly alive and well.