R3: JCP, DECK, PVH, VFC

R3: REQUIRED RETAIL READING

January 10, 2010

 

 

 

RESEARCH ANECDOTES

  • With the NFL season drawing to a close in just about a month, focus will ultimately shift to the 2011 season and the potential for a lockout.  While a year of no football would be devastating for the fans, it will also have a meaningful impact on all constituents whose revenue streams are tied to the league.  If the ’11 season were to be missed, it’s estimated that $12 billion in revenues would be lost.  Now that’s not all jerseys and fan gear, but that’s certainly a big part of it.
  • Amidst reports of particularly strong UGG sales over the last few weeks comes a report out of NYC podiatrist claiming that wearers are subject to a heightened risk of contracting foot fungus. In response, another NYC podiatrist weighed in on the claim suggesting that foot fungus generally affects roughly 40% of the population – a stat that hasn’t changed with the advent of the UGG phenomenon.
  • Add Luyou to the list of Chinese-based footwear companies looking to enter the fray by signing Steve Nash to an exclusive deal after 15-years with Nike. The move is the latest in a line of several such deals with foreign companies looking to leverage the notoriety of ‘seasoned’ NBA players. With both Anta and Li-Ning making similar deals over the past 12-months, expect Luyou to add a few more notable players from the NBA if they expect to compete with their domestic rivals.   

OUR TAKE ON OVERNIGHT NEWS

 

Ken Mangone Succeeds Peter McGrath at J.C. Penney - J.C. Penney has promoted Ken Mangone to executive vice president of product development and sourcing, succeeding Peter McGrath, who retired last month. It’s a critical role, particularly since 50 percent of Penney’s annual volume is generated by private and exclusive brands. McGrath will oversee the PD&S team, which handles all the trend analysis, product design and development, sourcing, manufacturing and quality control associated with private brands such as Worthington, Arizona, Liz Claiborne and St. John’s Bay. Mangone, who joined Penney’s 34 years ago as a management trainee, will report to Myron Ullman 3rd, chairman and chief executive officer. Mangone was senior vice president of product development, reporting to McGrath, and was instrumental in building up the in-house design team from under 50 five years ago to a current 250 textile and fashion designers. Mangone is also credited with sharpening and differentiating the lifestyle images of Penney’s key private brands as well as launching the a.n.a private brand.<WWD>

Hedgeye Retail’s Take: While this transition seems largely as planned, it’s still an interesting time (ahead of clearly rising costs) for the company’s chief of sourcing to change hands.  Perhaps this would be more troubling if the role had sat vacant rather then been filled  internally.

 

Tommy Hilfiger Strengthens Ties with Music Industry - Rolling Stones apparel? The Who sportswear? Tommy Hilfiger, whose brand has been closely associated with the music industry, is strengthening his ties with the entertainment industry. WWD has learned that MESH [Music, Entertainment and Sports Holdings], a company forged by Tommy Hilfiger, Andy Hilfiger, Bernt Ullman, Joe Lamastra and Li & Fung last year, is negotiating with Universal Music Group, which owns Bravado, to do worldwide deals for a host of musical stars. The arrangement would involve developing full apparel lines for Bravado’s entertainment clients that run the gamut from the Rolling Stones and The Who to Lady Gaga, Guns N’ Roses, Metallica and Justin Bieber.

According to sources, the first apparel collections for the musicians could start rolling out in fall 2011.<WWD>

Hedgeye Retail’s Take: One of the more formal approaches we’ve seen to catching a licensing stream while its hot.  History suggests these celeb lines are short lived, but a portfolio approach and tie-in with Universal may help to keep this “act” around for more than just one hit. 

 

Ugg Leads Holiday Season - Ugg continues to deliver big for many retailers. A number of key independents said the brand was their best seller during recent weeks. And the snow that blanketed much of the country during the Christmas holiday helped propel Ugg results even more than expected, retailers said. “Ugg took the cake,” said Joseph Wright, president of Vernon Powell Shoes in Salisbury, Md. Overall, stores were more upbeat about this season than last year’s period, although some said they were still facing obstacles. Below, retailers sound off on the season and the brands that drove business.<WWD>

Hedgeye Retail’s Take: This is hardly surprising for anyone that may have walked by one of the few UGG boutiques in NYC this holiday and saw the velvet rope containing a perpetual line of customers.  We originally noted that the line began to form in Soho in mid-October, only to last the entire holiday season. 

 

Timberland Sells IPATH -Timberland has sold the IPATH skate brand to Klone Lab, according to a memo sent to Timberland employees. In he second quarter of 2010, Timberland took a charge because IPATH had not met the revenue and earnings growth forecasted when it was acquired in August 2007.  A report on shop-eat-surf.com said that CEO Jeff Swartz wrote in a memo last week that IPATH's revenues grew 40% in the past year with increases in its account base domestically and internationally. However, Timberland decided IPATH did not fit with Timberland's core mission to become the No. 1 outdoor company. In the second quarter ended July 2, 2010, Timberland recorded an impairment charge of $5.4 million after concluding that the carrying value of goodwill exceeded the estimated fair value for its IPath, North America Retail and Europe Retail reporting units. It also recorded a separate impairment charge of $7.8 million after concluding that the carrying value of the IPath and howies trademarks and other intangible assets exceeded their estimated fair value.<SportsOneSource>

Hedgeye Retail’s Take: With competition in the outdoor space remaining at heightened levels, TBL’s fledgling side projects are less of a distraction after this divestiture.  Also a good lesson in “not all footwear is created equal”.

 

VF Corp. Promotes Rendle and Baxter  VF Corp. promoted two executives, Steve Rendle and Scott Baxter, to the newly-created position of Group President. Rendle, 51, has been promoted to vice president, VF and group president, Outdoor & Action Sports Americas. Since 2009, Rendle has served as president of VF Outdoor Americas. He will now be responsible for leading VF's Outdoor and Action Sports businesses in North and South America, consisting of The North Face, Vans, JanSport, Eagle Creek, Reef and lucy brands. Kevin Bailey, president of Vans and Jeff Moore, president of Reef will now report to Rendle. He will continue to be based in San Leandro, CA. In addition to continuing to lead its Imagewear coalition, Baxter, 46, will be assuming responsibility for its Jeanswear Americas business. Since 2008 Baxter has served as President of VF's Imagewear coalition, with responsibility for the coalition's Image and Licensed Sports Apparel businesses. Baxter's new title is Vice President, VF and Group President, Jeanswear Americas & Imagewear. Angelo LaGrega, who for the past 5 years has done a tremendous job as President of Jeanswear Americas, will now report to Baxter. Baxter and his family will be relocating to Greensboro, North Carolina in 2011. Karl Heinz Salzburger, currently Vice President, VF and President - VF International and a member of VF's Operating Committee, will assume the new title of Vice President, VF and Group President, International. <SportsOneSource>

Hedgeye Retail’s Take: With the complexity of its global business becoming increasingly challenging, the added layer of senior management to oversee day-to-day operations makes sense – it also happens to free up Wiseman and other key executives to focus on more significant M&A opportunities, which has been noticeably absent of late despite management’s interest.

 

Perry Ellis To Buy Rafaella - Perry Ellis International Inc. is expanding its profile with a deal to buy Rafaella Apparel Group Inc. from Cerberus Capital Management. The purchase price includes $70 million and 106,564 warrants to purchase Perry Ellis stock. The deal is expected to close by Jan. 28 and will help the company expand its women’s offering. The transaction helped lift Perry Ellis shares $2.77, or 10.6 percent, to $28.84 Friday after they reached a new 52-week high of $30.24 earlier in the day. “Perry Ellis will immediately become a more significant player in the women’s apparel industry,” said George Feldenkreis, chairman and chief executive officer. Rafaella designs, sources and distributes women’s better sportswear. The business had revenues of $122 million and adjusted earnings before interest, taxes, depreciation and amortization of $12.4 million for the 12 months ended Sept. 30. <WWD>

Hedgeye Retail’s Take: With low single-digit EBIT margins, the Rafaella acquisition not only adds over 10% to the PERY’s revenue base, but should also help return profitability back near double-digit levels last achieved in ’03.

 

India Trades Cotton for Onions - The Commerce Ministry on Saturday turned down the Indian demand to immediately allow the onions export through land route via Wagha border, however Islamabad would consider the New Delhi’s demand later, most probably in the coming week. “We have been asked by the Indian government through Foreign Office to allow the onions exports to India, as they badly needed the commodity. However the Ministry of Commerce will not allow it at present without consultations of stakeholders. Meanwhile an important meeting of all stakeholders is likely to be held on Monday to consider the Indian demand,” an official of the Commerce Ministry told The Nation. He further said, “The Commerce Ministry cannot make this decision alone, as consultations of all stakeholders are required in this regard and the Government will consider the Indian demand on Monday.”<Nation>

Hedgeye Retail’s Take:  In a change of roles, Pakistan now has the upper hand when it comes to commodity strangleholds on supply. With food inflation rampant, the Pakistan government has found one of the few levers to ease India’s restrictive cotton export policy.

 

 


SECTOR SPOTLIGHT | Live Q&A with Healthcare Analyst Tom Tobin Today at 2:30PM ET

Join us for this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more