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December 10, 2010





  • Just what every kid needs.  Gucci launched an iPad app that allows users to dress up a virtual kid in the brand’s just launched children’s line.  While the paper doll motif is somewhat clever, we wonder just how many children will be asking their parents to replace their Dora apps with Gucci’s Playground?
  • According to the Pew Research Center, one in ten internet users are Twitter users.  Approximately 74% of Americans use the internet, which implies about 6% of the entire population is now Tweeting.  Interestingly, females outpace males by about 1/3 with their Twitter usage.
  • Just as Bebe introduced its latest resort collection for the company’s Kardashian line, the company’s president also indicated that the collaboration with the pop-culture icons may also be nearing an end.  So much for a long-term partnership – “at Bebe we need to move with fashion and we want to be first in the fashion world with everybody else and not fall behind. We are definitely assessing the situation.”  


Jones Group to License Kids' Brands The Jones Group is taking its children's’ footwear business out of house. The company’s portfolio of kids' brands, which includes Nine West, Sam & Libby and Mootsies Tootsies, has been licensed to Edison, N.J.-based LJP International, the firm founded by children’s market veteran Larry Paparo. The Dockers boys’ line will not continue under the new partnership. Current Nine West kids’ exec Joe Truglio will join LJP as director of sales. Rick Paterno, group president of footwear for Jones, said the move, which will be effective Jan. 1, is a logical one. “While kids’ has always been a good business for us, it’s somewhat outside our core competency. We’re a women’s house and that’s what we’re experts at,” Paterno said. “This licensing arrangement gives the children’s business a dedicated focus from Larry and his team, while still allowing us to control the design and direction of the product.” Paparo, whose company has extensive sourcing networks in China and Brazil, had been working with Jones for some time as a production agent for its kids’ lines. “We think Larry will do a fantastic job running the business,” Paterno said. “He has his ear closer to the children’s market and really understands it, and he has great relationships in the marketplace.” <WWD>  

Hedgeye Retail’s Take: While kids footwear may not be a “core competency” of Jones, it’s also likely that recent top management departures have forced the footwear division to clean house.  


Innovation Out of Reebok - Reebok International Ltd. and Cambridge, MA-based MC10, Inc. announced an R&D collaboration to create a new class of athletic apparel and equipment, combining market leading sport design with advanced electronics. Reebok said the collaboration will use MC10's conformal electronics platform and Reebok's design capability to bring new products to the athletics market. When combined with Reebok's heritage of innovation for the athlete, MC10's proprietary approach to making high performance electronics "skin like" and invisible to the wearer will enable entirely new classes of intelligent sports equipment and apparel. Reebok also noted that it has a strong history of innovation with iconic products in the sporting goods industry like The Pump, and more recently EasyTone, and ZigTech. <SportsOneSource>

Hedgeye Retail’s Take:  We see this collaboration going one of two ways – using innovative technology to enhance performance intelligence in athletic apparel product (positive); or harnessing electromagnetic currents to stimulate muscles in order to encourage weight loss at all times (just bad). Yes, a bit tongue-in-cheek, but pushing the brands as the next great innovator seems a bit of a stretch.

Burberry Expanding in India - The Burberry team hit India this week with much fanfare and for a simple reason — to celebrate its presence in the emerging market, which company executives consider key for the brand’s global retail expansion. Chief executive officer Angela Ahrendts and chief creative officer Christopher Bailey, on his first trip to India, arrived in Mumbai earlier this week, and on Thursday night, descended on the Aer Bar at the city’s Four Seasons Hotel roof terrace for a fete with 200 guests. This being Burberry, there had to be a distinct Brit flavor to the affair, so the brand flew in musician Rory Cottam from English band The Cheek, who appears in Burberry’s fall campaign and did a DJ set that night. Indian musicians and brothers Aman and Ayaan also gave a live acoustic set, and Indian DJ Aqeel spun tunes. There are four Burberry stores in India. The brand has a presence at the Palladium Mall in Mumbai, the Emporio Mall in New Delhi, UB City Mall in Bangalore and the Taj Krishna hotel in Hyderabad. The brand will open a fifth unit at Oberoi Hotel in New Delhi this month. The stores are operated by Burberry India, a joint venture with Genesis Colors that was unveiled late last year. “This was my first visit to India,” said Bailey, who has kept the brand’s Facebook fans abreast of the trip. “It’s a country that we are so excited by. They have a huge appreciation for luxury and Britishness, so being there and meeting everyone and feeling the energy behind the country was incredible and we had a great night in Mumbai.” <WWD>

Hedgeye Retail’s Take: While not nearly the same opportunity as China, the UK/India history is certainly one that should help build the re-emergence of the British luxury brand.  Keep in mind that the luxury biz in India is highly concentrated on a handful of urban centers, which for now makes substantial unit growth a challenge (despite housing the world’s second largest population). 

Mulberry Opens Flagship Amidst Strong Demand - Profits at Mulberry Group PLC more than tripled in the six months to Sept. 30 to 3.3 million pounds, or $4.9 million, from 1 million pounds, or $1.5 million, on the back of strong, full-price sales growth in robust markets including the U.K. and the U.S. And sales show no signs of flagging: In the ten weeks to Dec. 4, Mulberry said global retail sales rose 47 percent, and that full-year performance was likely to exceed market expectations. The spring 2011 wholesale order book is 91 percent higher than last year and orders have not yet closed, the firm said. The group reported the results Thursday, just days after opening a 5,400-square-foot flagship store at 50 Bond Street, an open, environmentally-friendly space that showcases the brand’s accessories and ready to wear together for the first time. “It’s the largest single-floor space on Bond Street – there aren’t even any pillars,” said Godfrey Davis, chairman and chief executive, during a walk-through. “And it was a logical move for us. Finally, we’re all on one floor.” Mulberry’s former shop, at number 42, was smaller, narrow and on various levels. <WWD>

Hedgeye Retail’s Take: While not likely a key influence in the UK, we wonder if the company’s second collaboration with Target has been a key driver of the brand’s growth here in the U.S.  Unfortunately the company’s nine Target SKU’s are now sold out.

Luxury Watch Retail Expansion Continues - Officine Panerai has retail expansion on its timetable. The storied watch brand, which was founded in 1860 and bought by Compagnie Financière Richemont SA in 1997, currently sells its watches in only 500 points of sale around the world, including around 100 locations in the U.S. There are also 24 company-owned boutiques worldwide, with three in the U.S., on Madison Avenue in New York, Beverly Hills and the latest addition, Boca Raton, Fla., which opened in September. Over the next several years, Panerai will add significantly to its retail stable, revealed chief executive officer Angelo Bonati. “In three years, we will grow to 100 stores,” he said. “We’re convinced that opening boutiques is the right [strategy]” to attract Panerai’s customers. London and Paris will be added over the next three months and, within three years, six to seven stores will open in key luxury markets in the U.S., as well as additional units in Europe, the Middle East and Asia. <WWD>

Hedgeye Retail’s Take: The surge in luxury watch demand is driving a notable push for retail expansion of late – recall Omega made an even more aggressive announcement just last month. While demand is certainly present heading into the holidays, one has to question just how sustainable demand will be as brands ramp store growth into the 2H of 2011.  


PPR Primed to Offload Conforama - French retail-to-luxury group PPR said it has entered into exclusive negotiations with South Africa’s Steinhoff International Holding Ltd. for the sale of furniture chain Conforama for 1.2 billion euros, or $1.58 billion at current exchange. Under the terms of the deal, Steinhoff would also take over Conforama’s debt to PPR, an undisclosed sum. “This planned cession to a global furniture sector player is a major strategic opportunity for Conforama,” PPR chairman and chief executive officer François-Henri Pinault stated. “Steinhoff International has an intimate understanding of Conforama’s business and the two companies operate in complementary markets.”PPR has said it wants to sell its retail assets, including music, books and electronics retailer Fnac, in order to fund expansion in the lifestyle segment, which should eventually dwarf its luxury division, Gucci Group. With 41,000 employees, Steinhoff is already one of the largest furniture and household goods suppliers in Europe and had been looking to reinforce its position in France and other territories. Natixis analyst Boris Bourdet estimated Conforama’s debt at roughly 400 million euros, or $529 million, which would bring the total purchase price to around 1.6 billion euros, or $2.12 billion. <WWD>

Hedgeye Retail’s Take: Lots underway going into yearend for CEO Pinault with the pending sale of PPR’s furniture business while at the same time revisiting the acquisition of a skate/lifestyle brand. Recent headlines (and the market) suggest the company is near a deal with Quicksilver, though apparently Billabong is also under consideration. Given the prospect of capital gains tax relief, the urgency to close deals before year end is less pressing, but the reality is that activity is likely to accelerate.

Outdoor Product Sales Rise in November - The outdoor market outperformed the broader markets in November posting an impressive 8.7% retail sales increase versus the same month in 2009.  Footwear category sales were up 9.6% (largely due to late-arriving winter boot sales), apparel category sales were up 11.7% and hardgoods category sales grew 4.1% over the same time period in 2009. Aggressive promotions, pent-up consumer demand and colder weather patterns combined to drive retail chains and outdoor vendors to their best November in four years.  According to retail point-of-sale data compiled by SportScanInfo for OIA VantagePoint™, sales trends in the outdoor market are mirroring the trends at retail overall, with luxury and specialty out-performing lower-end stores and the Internet channel continuing to take market share from traditional brick and mortar business. Despite higher than anticipated unemployment and tax uncertainties, holiday gift-giving and winter weather patterns combined to loosen consumer purse strings.  Sales motivators began shifting in November, with consumers driven both by wants and needs instead of just needs.  For example, Winter Boots made up 36.0 % of total outdoor footwear sales in November 2010, while comprising only 8.8 % of sales for the entirety of third quarter 2010 (retail calendar third quarter is August-October). <SportsOneSource>

Hedgeye Retail’s Take: primarily a function of two factors, the obvious is favorable weather, less obvious is the fact that holiday creep continues to push consumer purchasing earlier and earlier.