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R3: REQUIRED RETAIL READING

November 12, 2010

 

 

 

RESEARCH ANECDOTES

  • JCP noted that “Cotton prices are the biggest driver of concern throughout 2011 and particularly in the second half.  In some cases, manufacturers aren't taking orders at this point. They don't feel like they can anticipate what their costing is going to be.”
  • During a recent walk through of FL’s flagship in Manhattan, Timberland had a prominent presence at the front entrance with a standalone display as well as several panels throughout the store with signage rivaled only be a few key basketball launches (UA’s new Micro G and Reebok’s new John Wall ZigTech shoe). It appears that additional SKUs in the company’s Mountain Athletics line is starting to play a key role in shelf space gains.
  • If you’re in the market for new work threads take a look at Jos. A. Bank’s weekend sale. These deals are noise at this point on the radio, but this one’s worth a callout. In a painfully obvious move to shed excess inventory, the company’s offering 2 pants, 2 shirts, and 2 sweaters with the purchase of a sportcoat or leather jacket for the first time ever. In taking a closer look, the sale applies even for sportcoats on sale for as low as $125! If a closet worth of goods for $125 doesn’t drive traffic to stores this weekend, what will…

OUR TAKE ON OVERNIGHT NEWS

Google Going Retail? - Google may be taking a page from eBay’s recent foray into exclusive collections with designers, if a certain anonymous fashion tweeter is to be believed. “Breaking news: Google is launching an ecommerce site with shop in shops by major designers #google #theyrgonnabepissed #geturshopon” went the tweet from @NoBtotheS. This could explain why the search company is planning a big bash in New York Wednesday night with retailers, designers and other fashion industry insiders, including a performance by the Misshapes. A Google spokeswoman said, “We are hosting an exclusive fashion party to celebrate our partners. We don’t have further details to share.” <WWD>

Hedgeye Retail’s Take:  Don’t expect GOOG to actually sell anything, but rather act as a virtual mall for the holidays.  GOOG remains very focused on driving traffic to retailers via its shopping search tool.

Skechers Int'l Retail Expansion - Skechers USA Inc. is expanding its retail license. The Manhattan, Calif.-based company bowed its first branded retail store in Ireland last month, and in December will open a second location in Portugal. And early next year, the retailer will open three stores with Canadian partners. “Every Skechers retail store is a highly effective outlet for consumer interaction with our brand,” President Michael Greenberg said in a statement. “We’re excited to deliver the complete Skechers experience through our partnerships in Ireland, Canada and Portugal. This growth illustrates the strength of our brand and Skechers’ retail licensing opportunities around the globe.” With the addition of the new stores, Skechers’ global presence will rise to more than 200 locations. <WWD>

Hedgeye Retail’s Take:  In an effort to sell through a 70% increase in inventories, it’s no surprise to see incremental openings taking place on foreign soil.  Recall that the licensed retail model is a low cost, lower risk strategy to expansion rather than pursuing company-owned locations.

Victoria's Secret Next on Facebook -  Victoria’s Secret is hitting the New York streets with an interactive slice of its annual fashion extravaganza that will be promoted on Facebook. The lingerie specialist is launching a campaign on the social media Web site to promote a display of nine vintage Angel Wings near the brand’s SoHo store, on Broadway between Houston and Prince streets, from Nov. 19 to 30. “It’s fun and artistic and engages people with the brand,” Sharen Turney, president and chief executive officer, said during the 16th annual Victoria’s Secret fashion show on Wednesday night at Manhattan’s 69th Regiment Armory, where Katy Perry was the headliner along with R&B singer Akon. “The wings represent angels and they really a re an icon for the brand.” The exhibit, which follows a test launch in Chicago last year, will showcase Angel Wings worn by models such as Heidi Klum, Miranda Kerr and Adriana Lima in huge, sealed Plexiglas cubes. The boxes will have a small step in front where visitors will be able to stand and have a picture taken. <WWD>

Hedgeye Retail’s Take:  Interestingly, though not surprisingly, Victoria’s Secret’s facebook fans are predominately male.

Nail Polish Key M&A Target? - Nail polish is the latest hot accessory in the M&A game. Coty Inc., which already controls roughly half the retail nail market with its Sally Hansen and New York Color brands, is said to be the leading contender to snatch nail lacquer company OPI Products Inc. from the hands of its competitors in an auction. If Coty doesn’t nail down OPI — the company is believed to be asking upward of $1 billion — the runner-up could be Procter & Gamble Co., the consumer packaged goods behemoth that many consider the most logical partner for OPI because of its nail polish position, which is weaker than Coty. Private equity firms are also circling OPI. Whoever ends up owning it, the pending OPI deal could be the largest in the history of lacquered nails, trumping Coty’s $800 million purchase of Sally Hansen and New York Color owner Del Laboratories in 2007, and far exceeding L’Oréal USA’s April purchase of Essie Cosmetics, which was thought to be around $100 million. The estimates of OPI’s wholesale volume vary wildly from $180 million to $400 million. In any event, it is at least five times larger than Essie, which registered $25 million in wholesale sales in 2009, but the $1 billion price tag estimated for OPI would still be a nail care industry stunner. Recent color cosmetics mergers and acquisitions have commanded 1.8 times revenues. <WWD>

Hedgeye Retail’s Take:  Over the past year we have periodically highlighted nail polish as one of fashions most popular accessories.  Perhaps the sign of a top in the “polish” market was the recent launch of Justin Beiber’s exclusive nail polish line at Wal-Mart.  Purples and metallics are this seasons hot color themes.

Hilfiger Coming Back to TV - After a five-year hiatus, Tommy Hilfiger will return to the airwaves with a holiday TV campaign called “Feast Interruptus.” It will launch Monday on U.S. national and local TV networks, as well as tommy.com. Featuring “The Hilfigers,” who made their debut in the fall 2010 global ad campaign dubbed “The Ultimate Tailgate,” the commercial is directed by Francis Lawrence and styled by Karl Templer. Trey Laird, chief executive officer and executive creative director of Laird + Partners, Hilfiger’s ad agency, is the creative director. <WWD>

Hedgeye Retail’s Take:  Good news for Macy’s which is likely the key beneficiary of increased Tommy advertising given its exclusive distribution agreement.

O"Mega" U.S. Store Growth - Omega, the Swiss watch manufacturer, is planning a significant retail rollout. The company will open nine stores in the U.S. in the next six weeks, including locations in Chicago, Seattle, Los Angeles, Nashville and Jacksonville, Fla. The company currently operates one unit in the States, on Fifth Avenue in New York. Omega president Stephen Urquhart will hit Manhattan next week to reveal the company’s retail plans, which include the addition of 20 to 22 locations in 2011. <WWD>

Hedgeye Retail’s Take:  This has to be one of the more aggressive luxury growth rollouts we’ve seen in a long, long time.  We wonder if the effort actually includes taking the brand a bit downstream given its choice of locations in a-typical luxury markets such as Nashville and Jacksonville.

Social Site Marketing at its Best - Jay-Z is launching his first book, “Decoded,” with a scavenger hunt of sorts sponsored by search engine Bing — with Gucci in on the game. Pages of the book have been placed in various places meaningful to the hip-hop impresario, with clues revealed on Jay-Z’s Facebook and Twitter pages, Jay-Z.com and on a dedicated Bing site, with fans winning prizes for finding them. On Thursday, Gucci revealed two of the pages in the windows of its Fifth Avenue flagship, printed on the lining of a one-of-kind leather bomber jacket designed by creative director Frida Giannini. The display will remain on view until Nov. 16, when the book goes on sale — and then the jacket will be gifted to Jay-Z. Other places where pages from the book can be found include the bottom of the pool of the Delano hotel in Miami and underneath plates at the Spotted Pig restaurant in New York. <WWD>

Hedgeye Retail’s Take:  2010’s version of the scavenger hunt actually seems pretty cool.  Most interesting is the traffic-driving component which directs “fans” to actually physical locations as part of the hunt.  We’re just wondering who has time to run around the city collecting Jay-Z’s pages?

California Sues Brazilian Blowout - The state of California filed a complaint in Superior Court for injunctive relief and civil penalty against GIB LLC, the company that is doing business as hair-smoothing treatment Brazilian Blowout, alleging that it failed to warn consumers and stylists that the treatment contains formaldehyde, a violation of California’s Safe Cosmetics Act. The firm has “knowingly and intentionally exposed salon workers and customers to formaldehyde,” states the document, which was filed in Alameda County by the state attorney general’s office of Jerry Brown, governor elect of California, on Wednesday. The formula of Brazilian Blowout was brought into question in early October after the Oregon Health & Science University’s Center for Research on Occupational and Environmental Toxicology released lab results that indicated the Brazilian Blowout formula contained formaldehyde. The tests were conducted after stylists at two Portland-based salons complained of eye irritation, burning noses and other symptoms, and submitted samples of the product from their salons to the center. <WWD>

Hedgeye Retail’s Take:  Formaldehyde=bad PR=not good for business.

Social Stickiness - Social media marketers who have successfully attracted fans of their brand to their Facebook or Twitter page have only just begun their real task: keeping those fans interested and engaged, and hopefully turning them into advocates on the brand’s behalf. According to a September 2010 survey by social media marketing agency Cone, incentives remain the biggest draw for consumers connecting with brands online. New-media users expect deals, but also look for brands to help solve their problems and get their feedback on products and services.  What they aren’t looking for is equally important. The top two reasons new-media users said they stopped following brands online, tied at 58%, were brands sending out too many messages or acting irresponsibly. A majority of respondents also complained about content being irrelevant. <emarketer>

Hedgeye Retail’s Take:  Note to brands, don’t over saturate your most loyal customers with relentless digital marketing.  These are already your most informed consumers, not ones that need additional motivation to spend.

R3: JCP, JOS, GOOG, SKX - R3 11 12 10

China's Expanding Sportswear Market - China’s leading sports shoe company Pou Chen has further stepped up its production of sports goods and marketing to seek more business opportunities in the mainland market. Currently, China and other Asian countries have overtaken the US and the EU to become the world’s largest sports footwear market. For example, mainland China consumes 2.2 billion pairs of shoes each year. Sportswear market in China represents 0.3% of total gross domestic product. There is still a huge gap as compared with 1% to 3% in developed countries. With increasing of income and sales of outdoor sports clothing, China’s fashion sportswear market is expected to expand to US$5.1 billion by the year 2012. <FashionNetAsia>

Hedgeye Retail’s Take: Don’t think Chinese domestics are the only brands salivating at the fat-tailed growth potential here. With foreign brands stepping up their own presence on domestic soil, expect U.S. powerhouses to step up their own offensive in this nascent athletic market.