R3: GOOG, PVH, COH, UA

R3: REQUIRED RETAIL READING

November 15, 2010

 

 

 

RESEARCH ANECDOTES

  • Tommy Hilfiger ups its ante in the menswear business by adding Simon Spurr to its list of creative consultants.  The British menswear designer is said to be collaborating on the fall 2011 men’s runway line as well as working closely with Tommy himself. 
  • Coach’s efforts to give its chief designer, Reed Krakoff, a line of his own continues to push the envelope.  Krakoff will be launching a limited edition fragrance, with just a 400 bottle production run, for $695.  Clearly the pet project of Krakoff is looking to hit a very, very small demographic and one that is so narrow it is unlikely to ever yield tangible benefits to the parent company.
  • According to the 2010 Morepace Omnibus Study on holiday spending, 40% of consumers do not anticipate putting their holiday purchases on credit cards this year, up from 35% last year.  Even more interesting is that 53% of consumers with annual incomes of $50,000 or below will be staying away from plastic this holiday season.
  • With a win over the Steelers Sunday night, the Patriots’ Tom Brady improved his vaunted record against the Steelers to 6-2 compared to Roethlisberger’s 2-4 against the Patriots. It’s important to note this is Brady’s first game as part of the Under Armour team. With many of the team’s stats rather pedestrian, he’s proving to be more valuable than ever leading the team to a 7-2 record – one of only three teams in the league to have no more than 2-losses.

OUR TAKE ON OVERNIGHT NEWS

Google's e-Commerce Site Confirmed - Google is venturing into fashion with a new Web site and virtual designer boutiques, set to launch Wednesday. The fashion world is abuzz with talk about the venture, according to sources who have been briefed on the search giant’s plans. Anyone will be able to create and share their own personalized shop by selecting style preferences and the looks, brands and items they love — in the end making it easier and more stylish to buy fashion on the Web. The search company has tapped Sarah Jessica Parker to set up her own personalized shop and is reportedly wooing Katie Holmes to do the same. Oscar de la Renta, Tory Burch, Cynthia Rowley, Marchesa, Isaac Mizrahi, Tracy Reese and Erin Fetherston are some of the big names Google has invited to set up their own virtual stores on the site, although shoppers will most likely also be able to draw on a huge variety of fashion brands for sale online to stock their virtual shops. Visitors will not actually complete a purchase on Google, but will click through to a brand’s online store or a retailer who carries the item, such as Saks Fifth Avenue, Barneys New York, Net-a-porter or Yoox. Google executives declined all comment on the site, which is being unveiled Wednesday and celebrated with a party in New York that night at Skylight SoHo. The new site, dubbed — for now — Boutiques.com, is part of a bigger trend toward new retail formats that the Internet and social media have made possible. <WWD>

Hedgeye Retail’s Take: Another step in the democratization of fashion and, as we stated last week Google is not becoming a retailer.  Rather, the search behemoth is happy to collect its referral fee allowing the transaction to take place directly between the consumer and the merchant.

Carrefour Sells Sells Thailand Ops to Big C - Carrefour has agreed to sell its Thailand operations to Big C, a subsidiary of Groupe Casino, for 868 million euros, or $1.19  billion at current exchange rates. Carrefour, the world’s second-largest retailer behind Wal-Mart Stores Inc., said the move was in line with its strategy to focus on markets where it holds a leadership position. “Carrefour’s growth prospects in Thailand did not allow the group to envisage occupying a leading position in this market in the medium or long term,” it stated. The sale price corresponds to 120 percent of the net sales of the business and a multiple of 13 times earnings before interest, taxes, depreciation and amortization, Carrefour added. The retailer operates 42 stores, including 34 hypermarkets, in Thailand, where it has been present since 1996. It is the fifth biggest organized food distributor in the country, with a market share of 6 percent and net sales of 723 million euros, or $1 billion, in the 12 months to June 30. Big C is the second largest hypermarket operator in Thailand, with 69 hypermarkets and net sales of 1.7 billion euros, or $2.36 billion, in the year to June 30. Dollar rates are calculated at average exchange rates for the period in question. Casino said the sale would allow Big C to become joint leader in the Thai hypermarket segment. <WWD>

Hedgeye Retail’s Take: Pretty impressive multiple for a non-core asset.  Certainly makes cleaning up one’s global portfolio more attractive.

UA Partnering With Thermos - Thermos is partnering with Under Armour to create a line of BPA-free, co-branded and insulated bottles that will be available beginning in May 2011 at sporting goods retailers. The line will include insulated stainless steel bottles, Tritan plastic bottles and squeezable bottles and feature four  interchangeable lids, which includes a range of designs from a traditional screw top lid to an innovative flip-top spout lid with one hand push button operation. “This partnership allows us to reach a segment that already makes up Under Armour’s core consumer, the active athlete who relies on staying hydrated to perform at his or her best,” said Rick Dias, President and Chief Operating Officer at Thermos. “Given the strong correlation between cold hydration and improved athletic performance, we’re confident that this partnership will result in superior hydration for better performance at all athletic levels.” “Under Armour is constantly pursuing new innovations and products to help give athletes an edge in performance,” said Edward Giard, VP Licensing and Accessories at Under Armour. “Our partnership with Thermos, a leader in the hydration bottle category, allows us to continue our mission to make all athletes better and equip them with the best performance gear possible.” <SportsOneSource>

Hedgeye Retail’s Take: Strategically brand enhancing – this move will have little impact on the P&L. Recall it wasn’t long ago when green Gatorade bottles played a key role in the brand becoming ubiquitous in sports and synonymous with hydration.

Simple Shoes Rebranding Plan - After 20 years in business, Simple Shoes is charting a new course. Known for its leadership in the sustainable footwear business, the brand, a division of Goleta, Calif.-based Deckers Outdoor Corp., is entering 2011 with this agenda: Keep the green features, but lose the eco-only categorization. By emphasizing Simple’s casual sneaker roots, Teva and Simple President Pete Worley wants to position the brand to compete with players such as Vans and Converse. “Our challenge is to broaden that eco-friendly message and make it more palatable to a broader audience, and create a brand message that is more welcoming, not shouting, ‘You’re a bad person if you don’t wear eco-friendly shoes,’” Worley said. Simple was placed under Worley’s direction in January (previously it was part of the Ugg division). He said the brand had lost sight of its identity. “The original roots of the brand — and the reason it’s called Simple Shoes — was that it was all about the simple life, of which environmental consciousness was a very important element,” he said. “But over the years, that eco story took over and became the entire platform, and it even took on a bit of a preachy tone, if you will.” Worley said market research conducted early this year showed that the brand message was “too serious” for most consumers. “We believe that has held Simple back and caused it to be less approachable than it should be,” he said. “[Simple’s] high-water mark, sometime in the late 1990s, was just north of $30 million. Since then the brand has lived in the $15-to-$25 million range in global sales. That’s barely scratching the surface, so there’s huge potential out there.” Now he wants to more than double the business to $50 million to $60 million in the next few years. <WWD>

Hedgeye Retail’s Take: In a rare case of a company shifting away from its eco-friendly efforts, this is ‘simply’ an example of too much of a good thing can indeed be too much.

Pop-Up Shop Momentum Continues - It’s no secret that pop-up shops are hot. As the format continues to gain steam, more brands are seeing it as a chance to stand out — and not just to sell shoes. These temporary shops offer an opportunity to generate buzz for a brand, test the viability of operating retail stores and connect with consumers in a more intimate way — and they’re much less risky than traditional stores, which require firms to be locked into a lease. With their now-you-see-it, now-you-don’t allure, pop-up shops have been a bright spot in a dismal retail environment. And the glut of available real estate due to the stagnant economy has meant short-term leases for prime storefronts are much easier to come by. Florsheim, Piperlime, Manolo Blahnik and Frye are just a few of the footwear companies that have recently jumped on the bandwagon. “The pop-up phenomenon has gone mainstream, and we’re seeing a diverse and broad set of companies embracing the format,” said Janet Hoffman, managing director of Accenture’s retail practice. “[Everyone is] seeking new ways to grab consumers’ attention and reignite their desire to spend.” According to John Florsheim, president and COO of parent firm Weyco Group Inc., the success of the venture already has the company thinking about pop-ups in other cities. The Soho shop, meanwhile, is slated to remain open through February, but Florsheim said the brand isn’t ruling out staying in the space permanently.<WWD>

Hedgeye Retail’s Take: Not surprisingly, the pop-up concept, is becoming more mainstream.  Unfortunately that means the whole idea becomes less exciting and economically beneficial to retailers if in fact everyone is doing it.  How long before malls set aside a certain amount of square footage for rotating retail concepts?

COLM's Gert Boyle Bests Robber - Gert Boyle, the 86-year chairman of Columbia Sportswear, certainly last week lived up to the "One Tough Mother" role she plays in her company's advertising campaigns, According to The Oregonian, Boyle was confronted outside her home in West Linn, OR last Wednesday by a man claiming to be making a delivery. When she got suspicious, he pulled a gun and ordered her inside the house. Stating she had to turn off the house alarm system, Boyle tripped a silent panic button to summon the police. Unaware that the alarm had been triggered, the robber "tied Boyle's hands, roughing her up a little, and began rifling through the house." After police arrived a few minutes later, the robber headed out the back door. He was later  apprehended and was arraigned on charges of robbery, kidnapping and burglary. Boyle is apparently in good shape. "Gert is fine," said Kerry Tymchuk, a PR specialist who helped Boyle write her 2005 book. "She's just a bit shaken up, and she has a fat lip. It really was a long night for her. But it's typical of her that she outwitted the burglar. She's a pistol." <SportsOneSource>

Hedgeye Retail’s Take: The second best bit about this story aside from a positive conclusion was Gert’s response to the police chief  – “I was OK until that jacket walked in here” – the robber was sporting North Face outerwear.

H&M SSS Slow in October - Hennes & Mauritz AB said same-store sales in October increased 3 percent, compared to 8 percent in September. Including new stores, total revenues for the month of October grew 13 percent, versus 16 percent in the previous month. The October figure compared with a 3 percent decline in same-store sales in the same month last year. <WWD>

Hedgeye Retail’s Take: Still positive, but slowing sequentially over the last 3-months reflecting modest improvement in underlying demand.

 

Rue La La Goes Local in Boston - Rue La La, one of the earliest luxury flash-sale sites, said this week that Rue Boston will be the first city in its Rue Local series. The site will offer daily deals for Boston-based restaurants, spas, salons, retailers and events, says Rue La La, No. 103 in the Internet Retailer Top 500 Guide. All Rue La La members in the greater Boston area will receive an offer by e-mail every day featuring a Rue Boston Pick at up to 70% off retail prices.  Rue Boston offers will be available for 24 hours though consumers can redeem the deals for varying amounts of time. Rue La La members in Boston also can access local Rue Boston offers on RueLaLa.com, where they’ll see local deals alongside other, non-local discounts. <internetretailer>

Hedgeye Retail’s Take: Hmm, sounds like Gilt City.  Good news for Bostonians however looking for a deal.

China Launches Campaign Against IP Violations - China has launched a half-year campaign to crack down on the violation of intellectual property rights (IPRs) and the production and distribution of fake products, reported the China Leather Industry Association. The campaign, beginning in November, targets pirated publications, software products, DVDs, designs and other products with IPRs, focusing on violations of registered trademarks and patents at both the production and distribution level. Fourteen provinces, municipalities and autonomous regions including Beijing, Guangdong, Zhejiang and Shanghai will be affected. <FashionNetAsia>

Hedgeye Retail’s Take: This is big for luxury retail brands that have had to fight (and fund) the good fight themselves for…ever. With U.S. customs starting to step up efforts and now Chinese associations doing the same, a groundswell is finally underway. Is this a near-term positive – no, but certainly an intermediate-to-long term benefit as brands recapture a greater percent of real consumer spend.