November 24, 2010






  • Score one for Macy’s on the collaboration front.  Rumor has it the mega department store operator is close to announcing a deal with Karl Lagerfeld to produce an affordably priced ready-to-wear line.  The offering is expected to range from denim to gowns and is likely to launch in Fall 2011.  Interestingly, Lagerfeld’s namesake brand is owned by private equity firm Apax Partners, the same former owners of Tommy Hilfiger (another high profile Macy’s exclusive).
  • Celebrity sells.  Replica copies of soon to be royalty, Kate Middleton’s engagement dress sold out within 1 hour in the UK.  Even more interesting, the $26 dollar dress was sold at Tesco, a retailer more known for groceries than fashion!
  • A strong boot season last year which was driven by a perfect cold-weather set up and a growing fashion boot trend does not appear to be too big of a hurdle for footwear retailers hoping to “comp the comp”.  DSW reported yesterday that it’s boot business is up 10% on top of a 47% increase last year! And, it’s finally cold out.



More on JCG - Millard “Mickey” Drexler may have just fired the starting gun for a new and potentially transformative round of industry dealmaking. By joining with private equity firms TPG Capital and Leonard Green & Partners in a $3 billion buyout of J. Crew Group Inc., Drexler is also readying the company for expansion and giving its new concepts like Madewell and Crewcuts a chance to mature away from Wall Street scrutiny. Under terms of the deal signed Tuesday, Drexler will remain chairman and chief executive officer and keep his equity stake in the business, which is currently 5.4 percent. Stockholders will be paid $43.50 a share — a 15.5 percent premium over Monday’s closing price but still below the more than $50 the stock sold for in April. The holiday season could single out the best retail opportunities and lead to a “very active” round of mergers and acquisitions in the first quarter, Bassuk said. “You will see more retail deals in the $1 billion to $3 billion range,” said David Shiffman, investment banker and managing director at Miller Buckfire & Co. “At that size range, large-cap and midcap [private equity] firms can put significant capital to work. In addition, strategic acquirers are building large cash balances and will use M&A for growth.” <WWD>

Hedgeye Retail’s Take: Implications that Mickey is becoming a banker with this deal might be premature.  Anyone who knows Mickey is aware that he is the merchant of all merchants and not a dealmaker in the making.


WMT Gears up For Black Friday - Global economic crisis? Lingering recession? Apparently, retailers didn’t get the memo. They’re amping up shopping opportunities for Black Friday with aggressive incentives and promotions both online and in stores, which are opening earlier and staying open longer than ever before. Many stores didn’t save their best deals for Black Friday, offering specials typically associated with the day after Thanksgiving, some as early as Halloween. Most projections are calling for a low-single-digit increase of 2 percent to 4 percent, which would mark the best holiday results in four years. MasterCard Advisors’ SpendingPulse said sales of apparel from Oct. 31 to Nov. 13 rose 9.7 percent against the same period last year. This is on top of October’s 8.2 percent gain. Kurt Salmon Associates said that while consumer confidence “remains shaky,” retail sales are expected to show a “modest increase through the holiday season.” Wal-Mart Stores Inc. is being aggressive, starting a three-day promotion on Monday of savings typically reserved for Black Friday. It advertised 150 online specials at walmart.com, three-times as many as last year, with savings of up to 40 percent on electronics, video games and toys among other categories. Wal-Mart said it will match the price of competitors’ ads on Black Friday and is offering free shipping on electronics as well as the majority of online specials available through the Site to Store program. Most Wal-Mart units will be open 24 hours on Thanksgiving Day, with Black Friday in-store specials kicking off at midnight and 5 a.m. Starting at midnight, Wal-Mart will provide entertainment and treats for customers. <WWD>

Hedgeye Retail’s Take: WMT is the master of the deal focused press release.  At least from what we’ve seen, there is no evidence to suggest that deals will be any  better than they’ve been on past Black Fridays.  The difference is in how the message is being conveyed.


Bulgari Signs Watch Deal for China - Raising its profile in a fast-growing market, Bulgari SpA said Tuesday it has signed a five-year agreement with Hengdeli Holdings Ltd. to distribute high-end watches through more than 50 multibrand watch stores in China. The partnership will allow Bulgari to further increase the visibility of its timepieces in China as the multibrand stores open over the next five years. Hengdeli will be the sole distributor of Bulgari watches in the country. Bulgari chief executive officer Francesco Trapani said the deal was “very important” for the Rome-based firm because it helps “to even more effectively cover the watch market, in an area with a huge potential such as mainland China,” where Bulgari already counts 20 monobrand stores. “On the other hand, this agreement, signed with one of the most important companies in the world for the distribution of international high-end watch brands, proves that our strategy for the watch business is correct and extremely competitive.” China has been particularly resilient during the global economic downturn and it ranked first among world markets with the highest potential for retail development in A.T. Kearney’s ninth annual study of areas ripe for expansion. <WWD>

Hedgeye Retail’s Take: Given the recent strength in the category, particularly from southeast Asia – there’s little risk embedded in this agreement and likely plenty of growth ahead in one of retail's hotest sub-segments.


Google's Local Availability Feature - Moosejaw, the muti-channel retailer of outdoor gear and apparel, will be part of the new Google Local Availability feature that recently launched. Moosejaw and Google have a long-standing relationship through Moosejaw's successful paid search programs. When Google asked Moosejaw to be one of the first participating retailers, Moosejaw jumped at the chance.  "We're really excited to be included with this new feature,s aid Kate Runyon, Moosejaw's Internet Marketing Manager. "We offer a lot of hard-to-find outdoor products, so this will really help drive people into our stores. We see Google Local converting some online shoppers back to local, as they discover specialty retailers like Moosejaw." Google Local Availability will be both available for online and mobile shoppers. The participating retailers upload inventory feeds from all their retail locations, along with their online availability and Google will offer options that are both online and in store fronts that are in close proximity to the customer. 'Google Local Availability should really drive sales, not just traffic, as this program is designed to bring in buyers that know the product that's in stock at a price they like," said Eoin Comerford, SVP of Marketing and Technology. <SportsOneSource>

Hedgeye Retail’s Take: Yet another example of new e-commerce/mobile technologies benefitting those with the exposure and systems in place to capitalize. With only seven retail locations, Moosejaw provides a limited, but important example of the evolution in the competitive landscape.


TRU Looking to Lure Customers - Toysrus.com will launch a weekend of Web-only deals at 12:01 a.m. on Thanksgiving Day. Free shipping will also be offered on thousands of toys with purchases of $49 or more.

Product highlights will include:

  • Up to 70 percent off on select action figures and play sets
  • Up to 60 percent off select vehicles, trains and radio controls
  • 30 percent off Crayola Pop Art
  • 20 percent off Hasbro Ultimate gifts
  • 30 percent off Club Penguin
  • 20 percent off all Tron action figures
  • 15 percent off Bratz, Liv and Taylor Swift dolls and play sets

"As gift-givers head online to begin their holiday shopping, we're planning our biggest cyber weekend ever, including our best free shipping event of the season," says Greg Ahearn, senior vice president of marketing and e-commerce at Toys"R"Us. "We know that online shoppers turn to Toysrus.com for the broadest selection of toys, and we will offer extraordinary deals on thousands of items sure to wow kids on Christmas morning." <licensemag.com>

Hedgeye Retail’s Take: While TRU’s $49 hurdle for free shipping isn’t the lowest in retail, there’s certainly no shortage of deals.

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

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7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

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Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

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GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

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Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

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Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

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Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

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People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

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UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

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Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

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