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December 28, 2010





  • Successful sales of the Kindle during the holidays landed it in the top spot as AMZN’s bestselling product in the online retailer’s history replacing Harry Potter’s 7th volume “Harry Potter and the Deathly Hallows.” Amidst stiff price competition in the e-reader market, Amazon’s move to lower the Kindle’s price to $139 back in August to remain the price leader appears to have paid off.
  • Despite its meteoric ascension as one of the fastest growing online companies in 2010, Groupon ranked well below peers when it came to site reliability according to web monitoring firm WatchMouse. While 99.9% availability is the industry standard, Groupon’s site was available only 96.4% of the time during a period from Nov. 22nd - Dec. 22nd. While these results would be tragic for most online sites, solving for overwhelming traffic demand is a far easier task than driving traffic in the first place.
  • Don’t look now, but the New Orleans Saints clinched a playoff berth with their win against the Atlanta Falcons (largely considered the NFC favorite) last night. Recall that championship titles by both the Saints and Alabama added an incremental 2-3% in comp for Hibbett Sports in F09 Q4 and F10 Q1. With the Auburn Tigers playing for the national title on Jan. 10th, could the stars be aligning for HIBB 2-years in a row?


P&G’s Gillette Drops Tiger - Gillette become the latest company to end its multi-million dollar sponsorship deal with Tiger Woods. Gillette had already pulled back on its use of the golfer in advertisements following revelations that Woods of extramatrial affairs. The men's grooming company will not renew its sponsorship deal with Woods as part of a plan to phase out its Gillette Champions marketing campaign in the first quarter of 2011. Other sponsors who have severed or significantly reduced their ties with Woods include AT&T, Gatorade, Accenture and Tag Heuer. Nike and Electronic Arts are the only large sponsors to have stood by Woods. <WWD>

Hedgeye Retail’s Take: After finishing either 1st or 2nd in 10 tournaments last year, Woods’ 2nd place finish in the Chevron World Challenge earlier this month is his only such success in 2010. Gillette now joins the ranks of severed endorsements including AT&T and Accenture earlier this year while Nike, EA Sports and Tag Heuer are among Woods’ eight remaining deals. It’s hard to ignore that after once ranking in the top 100 for “celebrity’s ability to influence consumers,” he now ranks below 2,500 according to the Davie Brown Index.


Continued Impact of Winter Storms - While business wasn’t bad through much of Sunday, it quickly tapered off by late afternoon as the snowfall and winds intensified and buried any hopes of a strong start to post-holiday sales. Many retailers and malls were forced to close early Sunday and delay openings on Monday or remain closed, particularly in Manhattan and outlying areas. At Scoop, “We had a great Christmas, including a massive surge last week, then the storm came and we closed eight stores in the Northeast,” said chief executive officer Susan Davidson, who was supposed to travel from Chicago to New York and then to Puerto Rico, where she has a home, but she bypassed New York and went straight south. “We will open some stores on New Year’s Day to make up for today. We’ve never done that before. I’m not sure, but I think we can make up the business. It’s been so good, I don’t want to give any of it back.” “The storm totally puts a dent into things. When you lose one of the top six days of the year you feel it,” said Marshal Cohen, chief industry analyst for The NPD Group. “The loss of post-Christmas weekend is brutal. This weekend was shortened already,” with Saturday being Christmas. <WWD>

Hedgeye Retail’s Take: Keeping stores open New Year’s Day in an effort to offset Sunday’s lost sales is not exactly a comparable exchange. Call us crazy, but our sense is that consumers hung-over from celebrating the New Year are not quite as active/productive as those the day after Christmas.

Sears Gift Card Deal Was Indeed Too Good to Be True - Sears Holdings Corp. is trying to figure out why a promotion for Christmas items turned into a 50% discount for online gift cards over the weekend. The promotion that offered half off on holiday-themed items bought online, and which was e-mailed to consumers, somehow resulted in 50% price cuts for online gift cards for a few hours Sunday, a Sears spokeswoman says. She adds that the retailer was looking into the technical reasons for the problem. The spokeswoman would not say how many consumers bought the cheaper gift cards, or how many shoppers received the original offer. Nor would she say if consumers who bought the gift cards at 50% would be able to redeem them. “We will continue to investigate the matter,” she says. <WWD>

Hedgeye Retail’s Take: Who knows, perhaps this Groupon-like deal will prove to be a positive for Sears from both a sales and marketing perspective.  

Pending Raw Material Shell Game - High fiber prices are expected to create some upheaval throughout the supply chain in the coming months. Rising costs of raw materials deep in the supply chain haven’t yet made their way through to retail apparel prices, but that can’t continue indefinitely, experts said. Volatile cotton prices in the last year have soared to record highs, wool prices are higher than they have been in years and synthetic fiber prices, while not seeing upward pressure anywhere near the natural fiber industries, are also elevated. “The assumption is they’re going to have to pass some of this on at the retail level; the question is how much,” said Nate Herman, vice president of international trade for the American Apparel & Footwear Association. “It won’t be the full amount of the additional costs people are paying in the supply chain.” Retail prices for apparel are likely to register increases in the low- to midsingle digits next summer or fall given the production schedule of apparel, Herman said. Pushing costs back up the supply chain is trickier now because of a consolidation of the sourcing base following the economic crisis, when many factories were forced to close. <WWD>

Hedgeye Retail’s Take: Interestingly, it was reported in the China Daily overnight that relationships between supermarkets and suppliers are becoming increasingly strained over this same issue with parties disagreeing on price increases at retail. A likely preview of what lies ahead for U.S. retailers in 2011…

Issa Brand Coming to U.S. - Kate Middleton may have introduced the world-at-large to a small British label called Issa, but that bright, royal blue jersey dress the young royal-to-be donned on Nov. 16 is a longtime fashion favorite — with something of a dramatic past. Brazilian-born, London-based Daniella Helayel, Issa’s founder and designer, recalls that when she first introduced her now famous collection of figure-flattering, brightly colored silk jersey dresses in 2001, hardly anyone even noticed. “The first collection I ever showed was filled with leather and suede pieces and jersey dresses that were easy to pack, easy to take away on a trip. I thought it was a fabulous idea,” said the stylish and ever-smiling Helayel over lunch at an old-time Italian restaurant in London’s Chelsea. Next year, Helayel plans to relaunch her business in the U.S.; introduce e-commerce on the Issa Web site; open the first of six stand-alone stores in Brazil; begin selling a children’s collection called Baby Issa, and transform what’s now a clothing label with 200 stockists into a global brand. And contrary to British press reports, which have named her as one of the front-runners to design Middleton’s wedding gown, Helayel has not launched a stand-alone bridal collection. “I’ve done one-off designs for friends. That’s all,” she said. <WWD>

Hedgeye Retail’s Take: Think Michelle Obama and J.Crew except Issa is infantile by comparison. Let’s just hope that Helayel is well advised in regard to site infrastructure before launching her U.S. e-commerce site. Keep an eye out for this brand in 2011.

Mexico's Liverpool Looks to Expand in 2011 - Liverpool, Mexico’s largest department store chain, plans to open 40 stores by 2014 as it rushes to capitalize on the country’s booming department-store market, which is growing by 10 percent a year. Profits are expected to rise by 20 to 25 percent a year as the chain expands and works to bring new exclusive brands to its stores, general sales manager Eduardo Flores told WWD. Along those lines, the retailer recently signed a deal to exclusively carry Jones New York beginning with spring 2011. It also hopes to bring in teenage casualwear brand Alex Canon during the same period. Traded on the Mexican Stock Exchange, Liverpool operates 81 stores, after opening six units in fiscal 2010. It competes head to head with Sears Mexico, which is majority owned by billionaire Carlos Slim Helú, and smaller upmarket chain Palacio de Hierro. Unlike Palacio de Hierro, however, Liverpool caters to Mexico’s large demographic of middle-class consumers. Liverpool’s most popular apparel brands include Polo Ralph Lauren, Nautica and Levi’s. Flores said 2011 will mark a return to aggressive expansion after Liverpool virtually froze its growth plans in fiscal 2009 when the recession forced it to open only two stores, down from eight in 2008. Flores said the competition is also scrambling to become the market leader and he pointed out Coppel, a fast-growing rival chain that also targets the middle class, as a growing threat for the established players. “They [Coppel] are opening 20 to 30 stores a year so everyone’s watching what they are doing,” Flores noted. According to Flores, Mexico’s department-store sector is growing by 8 to 10 percent a year on the back of a thriving and young middle class that favors American-style shopping in big malls. <WWD>

Hedgeye Retail’s Take: With new square footage growth still tough to come by domestically, perhaps U.S.-based retailers will give more thought to expansion in Mexico given the growth outlook in the department store sector.

Consumers Remain Skeptic of Behavioral Advertising - A whopping two-thirds of internet users don’t believe advertisers should be allowed to target online ads to their interests based on the sites they have visited, according to a survey by USA Today and Gallup. Respondents were only slightly more sympathetic when asked whether free access to content made targeting worth it; 61% disagreed while 35% thought the practice was OK. Younger and wealthier internet users were less likely to be against behaviorally targeted advertising, but even among those groups only a minority tolerated the practice. Respondents were more amenable to allowing behavioral targeting from select advertisers. The youngest respondents, ages 18 to 34, were most likely to say they would be willing to allow targeting from chosen advertisers, at 57%. The most affluent users fell behind, however, and those making between $30,000 and $75,000 were more apt to say yes. The Gallup survey is hardly the first poll to show widespread antipathy toward behavioral targeting. While many marketers, led by the Interactive Advertising Bureau (IAB), still hope for the success of self-regulation, public opinion has encouraged involvement from legislative and regulatory officials. And research suggests that education about behavioral targeting—which marketers hope will assuage the concerns of web users—may actually create worse feelings. A May 2010 study from online a preference management provider PreferenceCentral found that web users’ willingness to trade off free content for targeted ads dropped by 15 percentage points after survey respondents received information about what behavioral targeting is and how it works. The fact that over time, as behavioral targeting has featured prominently in the news, Americans continue to regard it as invasive. <emarketer>

Hedgeye Retail’s Take: While the technology behind profiling based advertising as seen in the Minority Report is not far from reality, consumers’ willingness to oblige still is. Not surprisingly, younger consumers are more willing suggesting it’s only a matter of time.

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