R3: COST, DDS, OSTK, Groupon

R3: REQUIRED RETAIL READING

December 14, 2010

 

  

 

RESEARCH ANECDOTES 

  • While China remains a key growth market for many western brands,  there are some that actually have a disproportionate amount of doors already open.  It turns out that Versace just celebrated the opening of its third jewelry boutique in Beijing, which keeps the luxury brand on track for having 67 stores in China by year end.  Interestingly, this compares to just 10 locations in the U.S.  Sounds like Versace is taking its cues from Yum Brands!
  • While Groupon continues to be the talk of the town stateside, it’s actually growing at a furious pace outside of the U.S.  In just this year alone, the company’s footprint has expanded into 35 countries from just one.  Approximately 52% of Groupon’s website visitors are coming from Europe, 33% from North America, 12% Latin America, 2% in Asia, and .2% from the Middle East/Africa. 
  • According to new data from Comscore, holiday spending online between November 1st and December 10th  has increased by 12%.  Trends over the last week were up 11%.  Free shipping continues to be a key driver of e-commerce and holiday growth, with a full 50% of transactions over the past three weeks including a free shipping component.

OUR TAKE ON OVERNIGHT NEWS

 

Supreme Court Backs Ruling on Costco Copyright Case- Discounters, beware. The Supreme Court’s narrow decision on Monday to let stand an appeals court ruling that found Costco Wholesale Corp. liable for copyright infringement when it sold Omega watches at heavily discounted prices without the Swiss company’s authorization has broad implications in the fashion world. The court’s ruling could have a significant impact on discount retailers and off-price merchants that often purchase imported goods from middlemen and distributors at lower prices, rather than buying direct from a manufacturer or its authorized U.S. distributor. These retailers then sell the products in the U.S. below the brand’s official price, legal experts said. Experts said the Supreme Court’s ruling now will make it harder for retailers to engage in this technique. It also will hit online auction sites such as eBay, they said, because gray market goods are often sold on the site and it could be held liable But while the high court’s decision was a blow to retailers, it was a victory of sorts for brands. The decision upholds a company’s right under U.S. copyright laws to regulate the distribution, price and resale of products that are made overseas and reimported to the U.S.  <WWD>

Hedgeye Retail’s Take: No question that this deals a blow to those procuring goods from a third party and selling them below manufacturer’s suggested retail prices.  While this likely means less “deals” for the consumer at off-pricers, discounters, and private sale operators, it also suggests that when the consumer actually sees a deal it will have been “approved” by the brand itself.  Additionally, the middle man loses out on alternative distribution as they will now be under even greater scrutiny. 

 

Neiman's Shuffles Buying Staff - Neiman Marcus, in a sweeping realignment of the responsibilities of its top merchants, has put senior vice president and general merchandise manager Jonathan Joselove in charge of designer sportswear, couture, handbags, women’s shoes and accessories. Ann Stordahl, executive vice president and general merchandise manager, will oversee precious jewelry, designer jewelry and beauty. For many years, Stordahl handled all women’s apparel, including designer sportswear and couture, intimate apparel, coats and furs, while Joselove oversaw beauty, coats, handbags, ladies shoes and accessories. In addition, Lisa Kazor, senior vice president and gmm, will be responsible for designer II, which is Neiman’s designation for bridge sportswear; St. John; contemporary sportswear; dress collections; furs; coats; intimate apparel, and children’s. Previously, she had the gift galleries, precious jewelry, designer jewelry, intimate apparel and children’s. Russ Patrick, senior vice president and gmm, will be responsible for men’s, gift galleries and the Cusp division, which operates freestanding stores and shops inside Neiman’s stores, both of which sell contemporary sportswear and accessories. Patrick previously oversaw men’s and Cusp. Neiman’s is examining Cusp to see whether it becomes a rollout strategy or not. <WWD>

Hedgeye Retail’s Take: Management changes as a precursor for an IPO?  With minimal growth prospects, something will have to be different if one of the most expensive takeouts in retail history is going present well on the road.

 

Dillard's to Launch Cremieux Women's Line - Poised, stylish and approachable, Alexandra Dillard looks to be just the type of customer who will take to Cremieux’s new women’s collection. As brand manager, Dillard, whose father, Alex, is president of the company, is championing this collection, which she described as having “a modern fit and is a little more dressy than casual,” and should compete with labels such as Michael Kors and Kenneth Cole. While the exclusive Daniel Cremieux label has been a men’s wear top performer in the Dillard’s stable for 10 years, this spring will mark the debut of the women’s Cremieux line.  Going forward, the men’s line is being marketed as Cremieux to keep everything in sync. To get shoppers excited about next month’s launch, there will be outdoor advertising, colorful in-store signage, online ads, catalogue placement and e-mail blasts. The fact that many Dillard’s shoppers are familiar with the name, which is also used for home items, should help generate interest, she said. “We are trying to trade off the base of Cremieux customers who are familiar with the label, know that it offers fashion and comfort and that it is exclusive with Dillard’s,” said Dillard, adding that luggage will be introduced this spring. <WWD>

Hedgeye Retail’s Take: Often off the radar screen of many investors, Dillard’s appears to be working harder to differentiate its merchandise.  Even more interesting is that the company made a recent appearance at an investor conference after staying away from face-time with potential investors for several years.

 

Denim Makers Seeking Next-Generation Fabric -Sustainability was front and center at the two-day Denim by Première Vision salon held at La Halle Freyssinet. Volatile cotton prices were among the factors helping to raise the profile of sustainable alternatives such as recycled denim and cellulose-based fibers. “It’s definitely the season to add Tencel and Modal, which previously have been regarded as premium fabrics,” said Gayle Johnston, head of women’s wear fabric trends and sourcing at Marks & Spencer, which has a major sustainable program under way. Denim guru Adriano Goldschmied said a “widening of vision” will be necessary for the denim industry. “[In the future], jeans could be made out of milk, a tree or bamboo,” Goldschmied said. “Cotton can be a component of that…but there are amazing things that are giving a new look to denim.” He cited as examples Cupro, MicroModal, Tencel, viscose and rayon. <WWD>

Hedgeye Retail’s Take: Between the growing shift toward green/sustainable practices by industry pioneers and the rising cost of cotton, customers will come to expect an introduction of several new alternative materials in the coming year.

  

Avril Lavigne Sings New Fashion Tune - Avril Lavigne is getting ready for her solo act in fashion. Two years after launching her juniors line Abbey Dawn exclusively at Kohl’s, the entertainer is branching out on her own to sell her rock-inspired tops for men and women directly to customers on the Web and in boutiques worldwide. Working with San Diego-based manufacturer Blank Generation, Lavigne is launching Abbey Dawn’s e-commerce site on Friday, a month before she begins wholesaling to shops such as Trash and Vaudeville in New York and the 14-store Blue Banana chain in the U.K. By introducing monthly mini collections of new product throughout next year, Lavigne is ramping up for the spring 2012 debut of a full-fledged juniors fashion line with sportswear, denim, swimsuits, dresses, loungewear, activewear, shoes and handbags. “[Kohl’s] was a great way to start my line and a great home for it for two-and-a-half years,” said Lavigne, 26, curled up on a purple velvet couch before practice with her band in a San Fernando Valley recording studio. “The thing with me is…I really want my clothes to be available internationally.” <WWD>

Hedgeye Retail’s Take: A bold move by the young entrepreneur to drop the department retailer in order to pursue global reach – the reality is however, no time is like the present to take a shot on her apparel line with music still Lavigne’s primary revenue generator.

 

Overstock.com to Open Tech Center in 2011 – Overstock.com Inc. says it will open a software development center in early 2011 in Provo, UT. The company says it expects to hire 150 software developers to staff it. “We are expanding our tech presence in Utah and actively recruiting. We have more innovation in the pipelines than we have developers,” says Overstock.com president Jonathan Johnson. The company is offering individuals who refer qualified software developers $5,000 if Overstock hires the workers and they stay at Overstock for at least 90 days. The company says it expects to hire 100 developers within a year. The e-retailer employs more than 1,500 people in Utah through a call center and three other facilities.<InternetRetailer>

Hedgeye Retail’s Take: One of the more aggressive internal growth plans we’ve heard about over the past year, OSTK is clearly geared to ramp SG&A investment in ’11. After missing expectations in 4 of the last 5 quarters, a focus on organic growth is not the quickest path to reaccelerate top-line growth, but arguably the most sustainable.

 

Sen. Schumer Calls for Online Restocking Fee Investigation - A U.S. senator has called on the Federal Trade Commission to pressure retailers to disclose fees charged consumers for returning products bought online. Charles Schumer, a Democrat from New York, sent a letter to the FTC asking the agency to investigate what are commonly called restocking fees for returned goods. “I urge you to investigate whether the failure to disclose restocking fees online could constitute a deceptive trade practice, and to take swift action to crack down on it,” the letter states. “Consumers deserve to know if these charges will apply prior to a purchase.” <InternetRetailer>

Hedgeye Retail’s Take: With e-commerce accounting for a larger portion of holiday spend, this issue is sure to come into greater focus following the holidays when recipients realize the fees associated with returns. As a case in point, <$1,000 computers can generate more than $200 in return/restocking related fees alone, a material portion of ticket product value.

 

 


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