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R3: REQUIRED RETAIL READING

December 17, 2010

 

 

 

 

RESEARCH ANECDOTES 

  • While Gap is noticeably absent from this holiday’s TV commercial onslaught, it hasn’t stopped the apparel retailer from being creative.  Enter Project Reindeer.  The company has tagged 8 reindeer with GPS and is tracking their movements to determine which deal will be offered each day over a 5 day period.  Thanks to “Bailey’s” long distance movements, customers will get 50% off sweaters today!
  • According to the National Retail Federation and BigResearch, nearly 30% of consumers ranked Target's holiday commercials as their favorite, compared to 17% for Wal-mart.  Additionally, more than one-quarter of consumers selected Amazon as their favorite online or email ad, while 14% chose Wal-mart.  Last year consumers chose Wal-mart’s money-saving commercials as their favorite.
  • Happy Free Shipping Day!  Shop online today, and 1,721 merchants will send your order for free wherever it needs to go, with many including priority deliveries in their offer.  2010 marks the third year of the event.

 

OUR TAKE ON OVERNIGHT NEWS

Shakeup Continues at Neiman Marcus - Following this week’s shuffling of responsibilities across the senior merchant team, Neiman’s has moved on to its store organization, naming Ann Paolini senior vice president and managing director of Last Call. She was NMG’s senior vice president and director of stores. No successor was named. At Last Call, Paolini succeeds Tom Lind, who has just become senior vice president, project management. NMG said Lind will lead the newly established project management office which will “analyze and define the standards of process within the organization.” The changes show that Neiman’s new management team, led by NMG chief executive officer and president Karen Katz and Jim Gold, president of the specialty retail group, is determined to accelerate the luxury chain’s recovery and take it in new directions. In October, Katz succeeded Burt Tansky and Gold stepped into his new slot after serving as ceo of the Bergdorf Goodman division.  <WWD>

Hedgeye Retail’s Take: Even with all the personnel changes, we wonder if the company’s ownership realizes that this super-luxury retailer needs help from the economy to ever get back to peak productivity?

Everlast Moves Exclusively to Sears and Kmart- Everlast apparel and footwear will be available exclusively at Sears and Kmart stores beginning next year. On Thursday, the $500 million fitness brand revealed it has signed an exclusive long-term licensing deal with Sears Holdings Corp. for apparel, footwear and accessories for men, women and children. Under the terms of the deal, the Everlast brand will be sold in 850 Sears stores, and a new diffusion brand, Everlast Sport, will be available in 1,325 Kmart locations. The product will also be available online. “Our parent company [Brands Holdings Inc.] bought this brand three years ago,” said Neil Morton, chief executive officer of Everlast. “And since then, we’ve been looking at the structure of the business and the opportunities both regionally and globally. In the U.S., we believe that a direct-to-retail partner is the best way to get the product into the consumers’ hands.” <WWD>

Hedgeye Retail’s Take:  Looks like a deal out of the Iconix playbook here.  Unfortunately, this will still not move the needle for stemming either retailer’s market share losses. 

Coty Extends its Global Reach - Coty Inc. is on a roll with its recent rapid-fire round of acquisitions, and chief executive officer Bernd Beetz is in no mood to let up. “It is important that we broaden our footprint and build strength in color cosmetics and skin care,” he said in an interview. He was speaking just a few days after winding up a series of deals for buying Dr. Scheller Cosmetics AG in Germany; the Philosophy skin care brand and nail enamel firm OPI Products Inc. in the U.S., and Tjoy, a Chinese skin care brand. Beetz laid out his vision for the company by detailing how these acquisitions were designed to diversify and build up the separate product pillars of the company, but also make Coty more of a power in the BRIC countries. Already, the buying spree, which industry sources estimate had a combined price tag of $2 billion or more, has had an impact. According to the company, after the acquisitions, the dominant fragrance share of Coty sales shrank in influence by 7 percent to 55 percent, color cosmetics swelled by 3 percent to 26 percent of Coty volume, skin care jumped from 4 percent to 10 percent and the share of toiletries was reduced by 2 percent to 9 percent. Following the first acquisition, Dr. Scheller, which bolstered Coty’s share of the German color market with sales estimated at $70 million, the company’s total sales were nudged upward toward $4 billion. That deal was seen as paving the way for Coty to realize its ambition by hitting $7 billion in sales by 2015.<WWD>

Hedgeye Retail’s Take: One of the more aggressive rollup strategies we’ve seen in the last few years. Given the company’s recent deal pace, we should see another close before year-end.

FTC Introduces New Regulations for Jewelers - The Federal Trade Commission on Thursday released guidelines for jewelry that will impact how certain platinum products can be marketed or advertised. The issue involves the marketing of jewelry that mixes other metal alloys with platinum. The practice, according to the FTC, has made “platinum” more affordable for consumers, but necessitated a clarification of acceptable marketing for the products. The new agency rules require that for products containing between 50 and 85 percent platinum, marketers disclose the composition of the item using the full names of the alloys and metals used, not abbreviations. In addition, marketers must make it clear to consumers that the product may not have the same qualities as a product made entirely of platinum. The FTC released two new publications to help businesses and consumers understand the changes. The FTC can issue cease-and-desist orders to companies that could result in fines if ignored. <WWD>

Hedgeye Retail’s Take: Hard to believe that “platinum” wasn’t always “platinum” when it came to jewelry.  Seems like a fair and reasonable crackdown, especially in light of commodity prices going through the roof.

 

John Hardy Launches First Store - After 20 years in business, luxury jeweler John Hardy is heralding a more mature phase with the opening of its first store on Monday in Jakarta, Indonesia. There are plans for another four units in the next three years. “We’re just getting out of the teen years,” chief executive officer Damien Dernoncourt said. “It’s probably a new chapter.…The brand grew up over 20 years, and we’re now very comfortable with who we are and what we stand for, and we know where we want to go.”  Dernoncourt said John Hardy wanted its first store to be in Indonesia because the company started in Bali, and it was appropriate to start building a retail presence “in your own garden.”<WWD>

Hedgeye Retail’s Take: Brands becoming retailers is a trend that we’ve seen in apparel/footwear over the last decade and is now starting to take hold in the jewelry industry. Following the likes of fine watch brands Omega and Panerai, Hardy becomes the latest to grow direct distribution.

 

UK Social Network Ad Spending to Double by 2012 - The rise of social networking, and the involvement of advertisers in these channels, was one of 2010’s mega-stories—not least in the UK. Though spending in social networks is still a fraction of total online ad spending, many UK brands have leapt at the chance to engage with consumers in an environment where they spend increasing amounts of time and are highly motivated to share their thoughts. eMarketer estimates social network ad spending in the UK will rise from £130 million ($203 million) this year to £275 million ($430 million) by 2012, an increase of more than 110% in two years. This will boost social network ad spending from 3% of all online ad spending to 6% over the same time period. Facebook, the most popular social network in the UK as in the US, will take the greatest share of spending as marketers continue to follow their customers to social media. “There’s a new breed of advertisers that have recognized this shift and understand that he who adds the most value to the consumer wins,” a representative from Facebook told eMarketer. “Agencies have been quick to recognize and harness the power of social but in the last six months alone, we’ve seen marketing directors start to truly understand the opportunities in this space and build a great social experience for customers.”<eMarketer>

Hedgeye Retail’s Take: No surprise given the push and popularity domestically. Moreover, many domestically based multi-nationals that have tested the waters in 2010 will be rolling out programs across other regions if for no other reason than e-commerce sites are just now being rolled out on a global scale. Case in point, RL with extensive e-commerce expertise and experience just launched its UK site back in October – you can bet foreign social media based advertising is on the 2011 budget.