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December 16, 2010


  • Green Monday sales (the historical peak day for online holiday spending) reached $954 million, representing an increase of 12% year over year.  This growth rate is inline with overall e-com growth holiday-to-date.  Through December 13th, it is believed only 1/3 of consumers have completed their holiday shopping.
  • According to Google, 64% of consumers anticipate shopping  post-holiday sales.  Not surprising given the increasing emphasis on January as a “profit center” vs. a “clearance center” over the past several years.
  • According to Dollar General, the company’s price points are 38% cheaper than drug stores, 20% cheaper than grocers, and at parity with the discount stores.


Margin Concerns for H&M and Inditex grow -  Fast-fashion retailers continued to thrive in the run-up to the holiday season, but rising input costs threaten to pressure their margins heading into 2011, figures published Wednesday by market leaders Inditex SA and Hennes & Mauritz showed. Spain’s Inditex, Europe’s largest clothing retailer and owner of the Zara chain, said net profit rose 42 percent in the first nine months of its 2010 fiscal year as the group continued to rapidly expand in Asia and roll out its Zara online store across Europe. Meanwhile, H&M reported that same-store sales rose 8 percent in November, the same month its collaboration with French luxury label Lanvin was introduced, helping to fuel a 5 percent increase in sales for the financial year as a whole.  Inditex posted net profit of 1.18 billion euros, or $1.55 billion, between Feb. 1 and Oct. 31. Sales totaled 8.87 billion euros, or $11.64 billion, up 14 percent versus the same period last year. Dollar figures are converted from euros at average exchange rates for the period in question.The gross margin stood at 59.9 percent of sales, up from 57.1 percent in the first nine months of fiscal 2009. Store sales in local currencies climbed 10 percent year-on-year between Aug. 1 and Dec. 12. Analysts said the figures were broadly in line with expectations, although, based on the available data, they calculated that sales growth slowed somewhat during the first six weeks of the fiscal fourth quarter.  <WWD >

Hedgeye Retail’s Take:  Anyone get their hands on the Lanvin collab at H&M?  This has got to be one of the most successful luxury/fast fashion collaborations we’ve seen in the past 5 years.   Sold out.  Everywhere.

VF Corp. expects increase of 3B in sales for North Face by 2015 - VF Corp. plans to more than double The North Face’s volume to $3 billion in the next five years. The strategy, which would add $1.6 billion to its current sales of $1.4 billion by 2015, is built on reaching new customers by broadening category offerings, driving growth in foreign markets, expanding the direct business and investing in technology.

At an investor conference in New York Wednesday, Steve Rendle, president of North Face and VF’s Outdoor Americas unit, said, “North Face is one of a handful of brands that has the permission to extend beyond what it began as.” The business is expected to reach $1.4 billion in sales by the end of 2010, or 18.4 percent of VF’s anticipated $7.6 billion in revenue for the year.  <WWD>

Hedgeye Retail’s Take:  After moving to an Activity Based Model in early 2008, the company is focused on growing its Action Sports (skiing, snowboarding, etc.) and Performance (running, training, etc.) categories as the primary drivers of incremental growth over the intermediate-to-long-term. In turn, this categorization will help in tiering product across distribution more effectively – a necessary adjustment as the brand targets aggressive door growth plans.


Della Valle Brothers Sell 10 Percent of Tod's Shares - Christmas clearly comes more than once a year for Diego Della Valle, chairman of Tod’s SpA. Having already made a paper profit of more than $180 million on his investment in Saks Inc., Della Valle, along with his brother Andrea, has just received more than $300 million from the sale of 10 percent of Tod’s shares. The brothers had asked Italy’s merchant bank Mediobanca to place just over three million shares of the luxury goods group on the market, which amounts to about 10 percent of Tod’s capital. Italy’s Bourse said Wednesday that Mediobanca completed the operation at the price of 76 euros, or $101.90 at current exchange, a share, through an accelerated book-building offer. The operation netted the Della Valle brothers 232.5 million euros, or $311.7 million at current exchange. The Della Valle family remains the company’s largest shareholder after the placement, retaining almost 58 percent of the Italian firm, parent to the Tod’s, Hogan, Fay and Roger Vivier brands. Andrea Della Valle is vice chairman of the group. “We have been receiving indications from the market for some time to increase the liquidity of our shares in order to facilitate the investments of primary investors, who are often limited by a restricted free float,” said Diego Della Valle. “We have therefore tried to follow the investors’ requests, even if this means we have had to temporarily sacrifice the value of our investment.” <WWD>

Hedgeye Retail’s Take:  Nice gesture to cash out a $300 million equity stake to help investors increase their liquidity.  Or perhaps, the proceeds are about to be plowed into another luxury brand/retailer?

Heather Morris of 'Glee'  becomes new  Flirt Ambassador-  Flirt has signed “Glee” star Heather Morris as its Flirt ambassador. Morris, who plays cheerleader Brittany Pierce on the popular Fox TV sitcom, will hold the ambassador spot through next fall. The strategy, originated in 2004, is intended to match up-and-coming stars with the brand, which is owned by the Estée Lauder Cos. Inc.’s BeautyBank division. Past ambassadors have included Michelle Branch, Mila Kunis, Serena Williams and Vanessa Minnillo. According to Morris, the partnership works on many levels. “Brittany is the biggest flirt on “Glee,” so there’s that — not to mention I’m obsessed with the Flirt makeup,” she said, naming a lip color named Tootsie as her favorite. <WWD>

Hedgeye Retail’s Take:  What’s surprising is how long it has taken for Glee’s cast to cash in on their endorsement potential. 

Men's Tailored Clothing Industry weakened by commodity inflation -  "The industry is in turmoil.” That was the assessment of Ronny Wurtzburger, president of Peerless Clothing International, as he addressed the outlook for the tailored clothing industry next year.  Price increases on cotton, wool and polyester, coupled with a decrease in production capacity in factories overseas, is expected to add $10 to $20 to the wholesale cost of most suits by fall 2011, he said. Additionally, the economic uncertainty that still lingers in the U.S. continues to impact manufacturers and retailers seeking to boost sales. “Tailored clothing is necessary but not crucial,” said Jim Ammeen, president and chief executive officer of Neema Clothing. “It’s a postponable purchase.” Despite the challenges, manufacturers believe that by offering fresh fabrics, silhouettes and detailing, men will be stimulated to add to their wardrobes next year.  “Buying piece goods for next season is like playing the stock market,” said Wurtzburger. “You call for a price every day, and every day it’s different. If it were the stock market, we’d be happy, because it’s only going up.” <WWD>

Hedgeye Retail’s Take:   With JOSB and MW both recently reporting disappointing results, the supplier community certainly isn’t adding any hope to the industry’s outlook.  With that said, this is likely just one category where the pressure is going to be meaningful.

Sidney Kimmel moves to Non- Executive Chairman - Sidney Kimmel, founder of The Jones Group Inc., will move to the post of non-executive chairman of the company from his current post as executive chairman on Jan. 1, as Jones completes its 40th year in business. To commemorate Kimmel’s service, the company will donate $6 million to the Sidney Kimmel Comprehensive Cancer Center at Johns Hopkins in Baltimore and $2 million to establish a trust for post-secondary educational assistance for qualifying children of company personnel. The trust will be administered by an independent third party. Kimmel established the Sidney Kimmel Foundation in 1993. The philanthropic group and its cancer research subsidiary since have donated more than $550 million to cancer research.<WWD>

Hedgeye Retail’s Take:   The end of an era for one of the most tenured and pioneering apparel executives.  While Kimmel may be better known in the recent past for his investments in Hollywood productions, his roots are clearly tied to 7th Avenue.

L'Oreal to spend 26B to avoid take over , Exane Says - L’Oreal SA, the world’s largest cosmetics company, has capacity to spend as much as 20 billion euros ($26 billion) on acquisitions to help it avoid being taken over by Nestle SA, analysts at Exane BNP Paribas said. Fragrance makers Estee Lauder Cos. and Elizabeth Arden Inc. are among the possible targets for Paris-based L’Oreal, analysts Eamonn Ferry, James Bushnell and Jeff Stent wrote in a research note dated yesterday. L’Oreal will have net cash of about 2.7 billion euros by the end of 2012, and owns 9 percent of Sanofi- Aventis SA that it should sell, the analysts said. The stake is worth about 5.8 billion euros at current market values. Nestle owns about 30 percent of L’Oreal and probably wants to buy the French cosmetics company, the analysts said. Nestle Chief Executive Officer Paul Bulcke said in October that the Swiss food company is “sticking to the status quo” on L’Oreal. The French government and Bettencourt family, which owns about 31 percent of the cosmetics maker, would probably prevent a takeover by Nestle, the Exane analysts said. L’Oreal is more likely to make acquisitions than repurchase shares with its cash, because a buyback would increase Nestle’s stake, the analysts wrote.  <Bloomberg>

Hedgeye Retail’s Take:  Add to the list of takeover soap operas.  Interestingly, most of these “sagas” appear to have roots in France.

China: Retail sales of consumer goods up 18.7% in November -  China's retail sales of consumer goods grew 18.7 percent in November year on year, 0.1% higher than the same period in the previous month, said the National Bureau of Statistics (NBS).Retail sales of consumer goods stood at CNY1.39 trillion yuan (US$208.1 billion) in November, said the NBS spokesman Sheng Laiyun. Retail sales of consumer goods in the January-to-November period reached CNY13.92 trillion, up 18.4 percent from the same period last year. <FashionNetAsia>

Hedgeye Retail’s Take:  More fuel for retailers and western brands chasing China growth prospects.

China: Children’s shoe sector saw increasing growth - China's children shoemaking industry has recently been undergoing an ever-increasing growth, said industry representatives and experts from China Leather Industry Association who gathered in Quanzhou city to discuss the future of the sector.  According to the meeting report, China has 380 million children under the age of 16, with an increase of 27 million new born babies each year that accounts for one fourth of national total population and provides a market value of CNY30 billion. The report also pinpointed that in many Chinese families 40% of the household income are spent on children, and that represents a tremendous potential for business in China. Health, safety and comfort have currently become the essential factors for children’s shoemaking enterprises to take into consideration, and therefore designers should pay close attention to safety and health elements when designing, industry experts stressed. <FashionNetAsia>

Hedgeye Retail’s Take:  With Payless announcing its Stride Rite licensing agreement in China just last month, demand appears to be coming in strong at the right time.