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December 8, 2010






  • Is “big and tall” the next “big” growth concept in retail?  After Casual Male announced a collaboration with Sears and JC Penney announced its intentions to build a freestanding big and tall concept, Men’s Warehouse now plans to test a few freestanding stores.  While MW already has a $300 million business serving this growing customer segment, this “test” will represent the company’s first efforts at running stores with a dedicated big and tall product offering.
  • AutoZone noted that the company’s acceleration in same store sales was likely due to two key factors.  First, the extended warm weather trends that carried into the fall were favorable for DIY auto purchases.  Second, the extended macroeconomic malaise continues to be a key factor in consumers holding onto their vehicles longer and as such require more maintenance.
  • With holiday e-commerce sales up 12% so far (Nov 1-Dec 3), there is clear bifurcation between the performance of the larger retailers vs. the smaller ones.  Market share for the top 25 largest online retailers has increased by 6% so far this holiday season, topping out at 68% of the overall market.  Sales growth for the top 25 retailers has been about 20% while small and medium sized business have been trending flat. 


Break Up at Fortune Brands - Fortune Brands Inc., facing pressures from an activist shareholder, announced plans to either sell or spin off its Acushnet Company golf unit, which includes Titleist and FootJoy. The company will also spin off its home and security unit to shareholders in a tax-free transaction while keeping its distilled spirits business. Fortune Brands said its Board has directed management to develop detailed separation plans for consideration and final approval by the Board. The company expects to complete development of these plans - including the structure, timing, and other related matters for each business - within the next several months. "We are taking the next logical step in the evolution of Fortune Brands, which we believe will maximize long-term value for our shareholders and create exciting opportunities within our businesses," said Bruce Carbonari, chairman and chief executive officer of Fortune Brands. "Today's announcement is the result of an ongoing strategic review process conducted by the Board and management over the past four years that included regular evaluation of separating the businesses at the right time to serve the best interests of our shareholders. While the breadth and balance of our portfolio have served shareholders very well, we see the potential for even greater value by separating our businesses into focused companies at a time when they have emerged from the economic downturn in such strong positions. We believe now is the right time to move ahead with this tax-efficient approach, and we're confident the course we've outlined today generates greater potential long-term value than all other alternatives." <SportsOneSource>

Hedgeye Retail’s Take: Expect the common denominator of Bill Ackman to add confidence to those who believe he will have success influencing change at JCP.  Unfortunately, JCP’s same store sales appear to be accelerating which makes a true case for change (be it strategic or management) less credible. 

Wal-Mart Plans to End Extra Pay in U.S. for Sunday Shifts - Wal-Mart Stores Inc., the largest private employer in the U.S., plans to stop paying staff there an additional $1 an hour for working Sundays, taking a bite out of its single biggest expense.  The move, which takes effect next year, applies only to employees hired after Jan. 1, spokesman Greg Rossiter said in an interview yesterday. The move wouldn’t affect the Bentonville, Arkansas-based retailer’s 1.4 million current U.S. staff. Since taking over almost two years ago, Chief Executive Officer Mike Duke has pledged to slow cost growth as the retailer copes with six straight quarters of sales declines at U.S. stores open at least a year. Operating expenses rose to about $80 billion last year, partly because of health benefits. “It’s sad -- people who work on Sunday need that extra dollar,” Cynthia Murray, a Wal-Mart employee at a supercenter in Laurel, Maryland, said in an interview. Murray said she makes $11.20 an hour, and doesn’t work Sundays. The move won’t apply to employees based in Rhode Island and Massachusetts, who weren’t eligible for the extra pay owing to state employment laws, Rossiter said. The retailer has 49 stores in Massachusetts and 10 in Rhode Island as of this month, according to its website. The change will take effect at Wal- Mart stores, Sam’s Club outlets and warehouses. <Bloomberg>

Hedgeye Retail’s Take: While prudent cost cutting is necessary to protect WMT’s bottom line in the wake of a sluggish topline, we wonder if the negative PR associated with this announcement is actually worth it.  Happy employees usually equal happy customers.  Will there now be a growing riff between new and old employees working on Sundays given the wage discrepancy? 

Jessica Simpson Brand Expands into Sportswear - The Jones Group has partnered with Camuto Group to design sportswear for the Jessica Simpson Collection for fall 2011. The line, retailing from $39 to $129, will include jackets, woven and knit bottoms, tops, dresses and skirts. The apparel will be available at specialty and department stores in the U.S. and Canada.<LicenseMag>

Hedgeye Retail’s Take: What few realize is that Simpson’s fashion company made close to $1Bn this past year and has quickly become a major brand at retail. With product across 20+ categories including shoes, jeans, swimwear, watches, and fragrance, a sportswear line is the next logical progression particularly with Jones and Camuto – both of which are current licensees of Simpson’s other lines.

Hermes Seeks Exemption- Hermès has filed a request with France’s market regulator AMF to be exempted from the obligation to launch an initial public offering for the company after grouping more than 50 percent of its capital into a nonlisted holding company, an Hermès spokeswoman said Tuesday. The company made the move after a family meeting last Friday to discuss how to fend off a potential takeover by LVMH Moët Hennessy Louis Vuitton, which in October surprised the market by revealing it had built a 17.1 percent stake in the maker of Birkin bags and silk scarves. Hermès subsequently clarified that the creation of the nonlisted holding company was conditional on the AMF granting it a full exemption from rules that oblige anyone crossing the threshold of a third of capital or voting rights to bid for the remaining shares on the market. <WWD>

Hedgeye Retail’s Take: Yet another chapter in the LVMH soap opera saga.  Didn’t LVMH say this was a passive investment?  Certainly seems more complicated.


Vera Wang to Launch Cosmetics With Kohl's - Vera Wang is making the move into cosmetics at the mass level. Kohl’s Corp., which renewed its long-term license to manufacture and market Simply Vera Vera Wang merchandise, plans to expand the brand into cosmetics by spring 2012. The branded cosmetics line will include makeup and color, skin care, bath and body products and beauty accessories, available exclusively at Kohl’s stores nationwide and kohls.com.“As part of my incredible partnership with Kohl’s, I will now be able to offer women all over America my own personal regimen for skin care and makeup,” said Wang. “It is an easy, light, modern and effortless approach to beauty and creativity. Like fashion, makeup is also transformational. I love the artistry of makeup to accentuate, enhance or create a mood for any time of day or occasion.”First licensed to Kohl’s in 2006, the Simply Vera Vera Wang lifestyle collection includes all women’s apparel, intimates and sleepwear, handbags, leather accessories, jewelry, footwear, bedding and bath. Kohl’s private brands, which accounted for 48 percent of sales in the third quarter of 2010, have become an increasingly important part of the store’s strategy. According to Kohl’s, since its launch in 2007, Simply Vera Vera Wang has consistently been a strong performer and is the leading exclusive brand in its women’s contemporary category.<WWD>

Hedgeye Retail’s Take: While a new category for Vera, this category extension (if successful) should be a nice margin enhancer to the company’s cosmetic efforts.  Already amongst the higher margin products, Wang’s private/exclusive label product is sure add some excitement to the category and Kohl’s itself.   This also marks the beginning of what we expect will be a string of announcements pertaining to exclusive merchandise distribution for 2011.

Men's Wearhouse Slated Big & Tall Test - The Men’s Wearhouse Inc. is the latest retailer to jump more aggressively into the big and tall business. The Houston-based firm revealed Tuesday that it will test freestanding big and tall stores, beginning with three units, under the Men’s Wearhouse name early next year. Doug Ewert, president, said the company currently has a $300 million business in extended sizes, and year-to-date growth is 40 percent higher in these categories than in the regular-size business. “We are not new to big and tall and have built this business over the last three decades,” he said. “We believe we have a strong brand among big and tall customers.” The company didn’t provide any further details about the locations or mix for the stores.  <WWD>

Hedgeye Retail’s Take: It was only a matter of time. After Casual Male’s success in testing its DXL concept in 2010 and  recent announcement to ramp doors aggressively from 4 test locations this year to 75-100 by 2015 – it looks we have another store growth race on our hands outside of sporting goods.


Amazon punches back at Google’s eBookstore - Yesterday Google Inc. launched a direct attack on Amazon.com’s Kindle store with the opening of the eBookstore, which sells e-books that are accessible from just about any web-enabled computer or mobile phone. And today Amazon.com punched back. Amazon, No. 1 in the Internet Retailer Top 500 Guide, today expanded Kindle for the Web to allow anyone with access to a web browser to buy and read full Kindle books without requiring a download or installation of a Kindle application. The offering previously allowed consumers to read for free first chapters of Kindle books through web browsers <Internet Retailer>

Hedgeye Retail’s Take: Another step towards an “open” system of distribution for ebooks.  Expect Barnes & Noble to follow suit.

Deckers Sues Emu For Infringing on Trademark - Deckers Outdoor Corporation filed a trademark infringement suit Tuesday in United States District Court in the Central District of California against Emu Australia, Inc. and Emu (Aus) Pty Ltd. Deckers is seeking a Court order to stop Emu from using its trademarks. Deckers filed a similar lawsuit against Bearpaw last month. According to Angel Martinez, Deckers Chairman and CEO, "The success of UGG Australia has created an entire industry of companies that market their wares by deliberately confusing consumers. Emu's trademark infringement is intentionally misleading consumers into believing they are buying a genuine UGG Australia product when in fact, they are not." <SportsOneSource>

Hedgeye Retail’s Take: Between recent customs support and ruling on the eBay vs. Tiffany case, the clear message to brands is that they have to support efforts to protect trademarks out of their own pocket. Deckers is leading the charge doing just that and aggressively.

Dior Reopens 57th Street Flagship  - With its 57th Street flagship reopening this week, Christian Dior is making the ultimate statement for all things Français.The 5,000-square-foot, two-story boutique, which was closed for five months during renovations, is returning with a complete makeover in the spirit of the iconic Dior boutique on Avenue Montaigne in Paris. The opening comes with the same amount of fanfare Dior had when it first introduced the Peter Marino-designed store concept at its landmark Paris store in 2007. LVMH Moët Hennessy Louis Vuitton chief Bernard Arnault, Dior president and chief executive officer Sidney Toledano and designer John Galliano are in town for the celebrations; the house planned two dinners; Natalie Portman will light the store facade tonight, and a cocktail party to introduce the store is expected to draw Liv Tyler, Amy Adams, Chace Crawford and Dior model Karlie Kloss. The notables at the party and dinners, as well as shoppers who will be able to see the store on Saturday when it officially opens, will find an uncompromisingly French showcase for Dior’s entire assortment, including ready-to-wear, accessories such as handbags and shoes, a separate salon for fine jewelry and special VIP rooms. <WWD>

Hedgeye Retail’s Take: Just in time for the holidays – could Dior be next on the list for LVMH’s Arnault?

China: October leather exports, production and shoemaking show promising growth- China’s leather exports posted a year on year increase of 38.2% in October and 33% in the first ten months, with the value reaching US$ 43.5 billion, as compared to a decrease 7.3% in the previous year. Importantly, the industry saw a growth of 27.7% in value in October, 1.7% less from previous month. The import value for the first ten months reached US$ 5.03 billion, up 36.1% year on year. <FashionNetAsia>

Hedgeye Retail’s Take: With export growth exceeding the YTD rate, but value down sequentially and wages on the rise, manufacturers are clearly getting squeezed – you can bet retailers are feeling the ripple effect as well.