R3: H&M, Groupon, Black Friday, Toning

R3: REQUIRED RETAIL READING

November 22, 2010

 


 

 

RESEARCH ANECDOTES 

  • Groupon continues to battle a speculated $3-$4 billion valuation for the company and repeatedly embarrassing (and frustrating) service outages.  The company’s latest blunder came late last week when it offered a $25 for $50 gift card to Nordstrom’s Rack in San Diego.  The demand caused the site to crash temporarily as well as operate slowly.  Recall that a Gap promotion early in the Fall took the site down completely.
  • H&M finally launched its long awaited designer collab with Lanvin on Friday.  A quick check of the store in Boston revealed that the line sold out in just one day.  In Manhattan, customers were given wristbands and just 15 minutes to shop the new collection as a means for crowd control.  Customers were seen grabbing as many items as they possibly could in order to beat the clock and maximize their 15 minutes.
  • According to the American Family Association (AFA) the percentage of retailers recognizing “Christmas” in their marketing messages has risen from 20% to 80% over the past five years.  Historically the group has targeted retailers promoting “holiday” messages with boycotts in an effort to promote the use of “Christmas” terminology.  This year’s list of boycott targets is relegated solely to Dick’s Sporting Goods- a company whose online site has been branded the “Holiday Shop”.  The AFA uses a 2.3 million member email list to facilitate its actions. 

OUR TAKE ON OVERNIGHT NEWS

SKX Taps Into Kardashian Family Fame - Skechers USA Inc. is about to get another serious dose of star power. The Manhattan Beach, Calif.-based company has tapped Kim Kardashian and her mom, Kris Jenner, for its Skechers Shape-ups global marketing campaign, slated to launch next spring. “The Kardashians are the definition of pop culture. Everything they do, people are inspired to emulate,” said Skechers Fitness Group President Leonard Armato. The mother and daughter duo will participate in a fully integrated campaign, including television, print and online advertisements. “[Skechers Shape-ups] provide something for everyone,” said Kardashian. “And, more important, they maximize your workout.” Kardashian and Jenner will also work with the product team on a new collection, launch an interactive “Shaping Up With the Kardashians” challenge (along with sisters Kourtney and Khloe) and feature the brand on their reality TV show “Keeping Up With the Kardashians.” Shape-ups has already been endorsed by several public figures, though mainly in the sports field. Athletes Joe Montana, Karl Malone and Kareem Abdul-Jabbar have all served as spokesmen. <WWD>

Hedgeye Retail’s Take: So much for dialing back marketing spend in the face of slowing toning sales – instead, the company does the complete opposite. A substantial upgrade to current spokespeople, we expect the cost of securing the Kardashian family fame will also be a substantially higher.

Armani Does Toning - Toning shoes are gaining a little flair. Emporio Armani and Reebok have teamed up to create the first toning sneaker from a major fashion house. Reebok President Uli Becker said the partnership drew on the strengths of both companies. “[The shoes] combine Reebok’s proprietary technologies with the style of one of the world’s leading designers,” he said. Only 1,111 pairs have been produced, and each has been individually numbered. Besides being outfitted with Reebok’s EasyTone technology, the sneakers also feature crocodile-print detailing and come with three different sets of laces. The limited-edition shoes retail for $140 and are available at select Emporio Armani stores and at Emporioarmani.com. <WWD>

Hedgeye Retail’s Take: Latest entry in the toning space comes from none other than one of high fashion’s big houses. While we don’t expect the toning trend to work its way into high fashion in a meaningful way, additional offerings from additional brands make it increasingly difficult for the pioneers (i.e. SKX & Reebok) to maintain share.  In this case, the “halo” effect may actually help Reebok with its Easy Tone aesthetic as we’ve seen with other high profile collabs.

 

Camuto Signs Licensing Agreement with Chaus - Vince Camuto is well versed in building power brands such as Tory Burch, Jessica Simpson and Nine West. Now he’s out to turn his own name into the next big thing. Five years after successfully introducing Vince Camuto footwear, the Camuto Group has signed a licensing agreement with Bernard Chaus Inc. to launch a women’s sportswear collection for fall under the Vince Camuto label. “This is an opportunity for us to fully clothe the woman from head to toe,” said Vince Camuto, creative director and chief executive officer of Camuto Group, a leading footwear manufacturer. For Chaus, the Vince Camuto brand will replace the Kenneth Cole business, whose license was terminated five months early. Kenneth Cole had accounted for more than half of the $101.2 million in volume generated by Chaus in the year ended July 3. The Greenwich, Conn.-based Camuto Group is known for its ability to build women’s lifestyle brands on a global scale. The master licensee for the Jessica Simpson Collection, Camuto develops and manages several exclusive brands for Dillard’s and holds the footwear licenses for BCBGeneration, BCBG Max Azria, Lucky Brand, KensieGirl and Banana Republic. The company, which sells its products in more than 5,400 doors, also designs and sources footwear for Tory Burch and has a partnership with Sanctuary. Vince Camuto was also the co-founder, with Jerome Fisher, of Nine West, which they sold to Jones Apparel Group in 1999. “We are a shoe guy,” acknowledged Camuto, “but we have been involved in ready-to-wear also. As you know, we took the Jessica Simpson [business] in 2005 and we said we wanted to build a $1 billion brand, and we’re three-quarters of the way this year.” Simpson’s ready-to-wear will be launched next fall with Jones Apparel Group, which already has the license for Jessica Simpson jeanswear. Camuto manufactures the Simpson footwear. <WWD>

Hedgeye Retail’s Take: Chaus is struggling to replace the volume it abruptly lost with the Kenneth Cole license moving back in house.  With a multi-brand portfolio under its belt, perhaps Camuto could turn out to be a solid partner for the struggling apparel wholesaler.

H&M to Open in Singapore - Hennes & Mauritz said Monday that it is planning to open its first store in Singapore in the fall of next year. The Swedish fast-fashion giant said the 32,291-square-foot boutique will be located on Orchard Road, a key shopping district of the city.  “We look forward to opening our first store in South East Asia. There is great potential for expansion in this highly populated and fashion conscious region,” said Karl-Johan Persson, H&M’s chief executive officer. Fast Retailing Co. Ltd.’s Uniqlo is also eyeing the South East Asian market. Earlier this month it opened its first store in Malaysia and last year it bowed in Singapore with two boutiques. H&M announced separately that it will open its first store in the southern Japanese city Fukuoka in the fall of next year. H&M entered the Japanese market in 2008 and its presence has since grown to 10 stores in cities such as Tokyo, Yokohama and Osaka. <WWD>

Hedgeye Retail’s Take:  No surprise here as H&M remains one of the few truly global, fast fashion brands. Of all the retail concepts, fast turning cheap fashion apparel clearly resonates across cultures and demographics.

 

Dolce & Gabbana in Pinstripes? - In the latest go-round between fashion designers and crusading Italian authorities, Stefano Gabbana and Domenico Dolce have been indicted for alleged tax evasion, sources said. The designers now may have to face a court trial, which would be the latest step in a case that began in 2008 and which could result in the designers, if they are found guilty, being personally liable for more than $1 billion in unpaid taxes and fines. Dolce and Gabbana have always denied any wrongdoing. The designers are charged with tax evasion and abuse of rights relating to the 2004 sale of the Dolce & Gabbana and D&G brands to the designers’ Luxembourg-based holding company Gado Srl. If the judge decides to proceed, Dolce and Gabbana’s lawyers may decide to negotiate, pay a fine and avoid a drawn-out and costly court trial. In addition, their criminal record would remain clear. However, as the designers have claimed their innocence, they may not be willing to take that route, and an ordinary trial would take place over the coming years. A third alternative is a shortened and speedier trial, based on a reduced number of documents and witnesses, which results in a penalty that is discounted by one third. The designers’ alleged evasion of national income tax carries up to a three-year prison sentence or a fine up to 1 million euros, or $1.3 million at current exchange. <WWD>

Hedgeye Retail’s Take: Not an entirely new development, but certainly getting uglier for the brand’s figureheads.

Birkenstocks Targeting New Consumers - After several years of reorganization, including the sale of the company to its namesake family, Birkenstock USA is on the road to revival. For spring ’11, the firm has already added several key retailers, including Madewell, Steven Allan and Urban Outfitters, and the brand’s appeal is growing across age groups. “We have had a tremendous year exceeding all of our sales expectations,” said VP of sales and marketing Jay McGregor. “We’re continuing to elevate our brand in the consumer’s eye, staying true to our core wellness message but also acknowledging that Birkenstock can be hip and stylish, too.” Shelly Glasgow, director of product development and merchandising, said the company has simplified its advertising message and increased its visibility in the marketplace, in a way that speaks to different demographics. The company’s current advertising campaign features limited copy that speaks to a wide range of consumer ages, from 15-year-olds to 60-year-olds. Glasgow said the company took an aggressive approach to marketing in 2009, followed by an even more vigorous plan in 2010, which topped $2 million. That amount will likely increase for 2011, as the company continues to branch out with ads targeted at male consumers. Those investments have helped the company increase 2010 sales in the double-digits, according to Glasgow. <WWD>

Hedgeye Retail’s Take: Long a brand with a small, but ferociously loyal customer base, this is a great call for a solid brand that has historically spend very little on marketing.

More Promotions Expected This Cyber Monday - According to Shop.org's eHoliday Survey, nearly nine in ten (88.2%) retailers will have a special promotion for Cyber Monday, up from just 72.2% in 2007. Retailers' Cyber Monday plans are more robust this year with nearly half of companies offering specific deals (49.0%, up from 42.9% last year) and many planning one-day sales (41.2% vs. 32.9% last year) and free shipping on all purchases (21.6% vs. 15.7% last year). In addition, the majority of retailers (62.7%) will send promotions and deals to shoppers through a special Cyber Monday email. Cyber Monday, a term coined by Shop.org in 2005, began after retailers noticed a trend of people shopping online on the Monday after Thanksgiving. Today, Cyber Monday is viewed as the online equivalent to Black Friday. <WWD>

Hedgeye Retail’s Take: As expected, with fewer consumers buying anything at full-price, promotional cadence is on the rise this year.

Retailers Look to Facebook For Black Friday - Consumers who Like Macy’s Inc. on Facebook yesterday could click on a Black Friday tab on the retailer’s social network page to view all the special deals the retailer will offer on the day after Thanksgiving, also known as Black Friday. In addition to a catalog that showcases the more than 200 specially priced items that are available, the pages feature a tool that enables consumers to drag and drop items showcased as Black Friday specials onto a shopping list. And, if a consumer doesn’t understand how the tool works, she can watch a video on the page that demonstrates it.  "Macy's is excited to offer some of the season's most desirable gifts at incredibly compelling prices this Black Friday," says Martine Reardon, executive vice president of marketing for Macy's, No. 20 in the Internet Retailer Top 500 Guide. The retailer’s approach to promoting those offers is influenced by a desire to inspire consumers to shop early, she says. Macy’s is not alone in turning to social media to promote its Black Friday specials. 39.2% of retailers say they will use their Facebook page to announce and promote their day after Thanksgiving deals, according to a recent National Retail Federation survey conducted by BIGResearch. <WWD>

Hedgeye Retail’s Take: With 26% of consumers expecting to use their social networks to find promotional deals according to an survey by Lightspeed Research, a solid risk management move by retailers at a minimum.

China Tanners Production up YTD - China’s large-scale tanneries posted an increase of 23.8% in the value of their production for the month of September 2010 compared to the same period last year, according to the China Leather Industry Association. For the first nine months of this year, the state-run industry organisation said the value of its tanneries’ leather output had increased by 24.5% compared to the same period last year. The organisation put the value of the nine months’ worth of leather at $14.1 billion. <FashionNetAsia>

Hedgeye Retail’s Take: It’s important to note that this figure is based on value, not units. With leather in short supply globally, prices have escalated substantially this year, which may more than offset the rise in value. As such, it looks like leather remains in short supply and prices for luxury leather elevated.

Chinese Shoe Production Continues to Slow - Although shoe exports in Guandong province posted a 20.5% growth in pairs to to 3.44 billion and value grew 24.4% to US$ 10.15 billion, the growth during the recent three months continue to drop and indicate a trend of contraction, according to the China Leather Industry Association citing the latest official customs figures. The authorities attribute the decline of shoe exports to the increase of trade barriers, revaluation of RMB and increase in raw material prices. Meanwhile, neigboring rivals like India and Vietnam have shown stronger competitiveness by taking advantage of their low labor costs. Currently, India accounts for 16% of the world production and ranks the second in the world, while Vietnam is the fourth largest country in terms of shoe production and exports.

Hedgeye Retail’s Take: Outflows continue for Chinese footwear producers.