R3: REQUIRED RETAIL READING
January 11, 2010
RESEARCH ANECDOTES
- Add Wayne Gretzky to Skecher’s roster of aging former hall of fame athletes signed on to market the company’s Shape-Ups fitness footwear. While the company is clearly aiming to build some sort of image of authenticity in the athletic space, we still wonder if targeting middle-aged men is the demographic the company needs to sell through its bloated inventory position.
- In a rare move, Wal-Mart is taking its campaign to open a store in Manhattan to the people. The company debuted a website, www.walmartnyc.com, in an effort to educate the people of New York about the benefits of having the retailer open stores within the city limits. The site also features the results of a recent poll which suggests 71% of New Yorkers want Wal-Mart in NYC.
- Going “green” may not be as important now that the economy has stabilized. According to a Harris Poll, 36% of American’s are concerned about the planet they are leaving behind, down from 43% who said so in 2009. Additionally, 33% of those polled now plan to purchase local produce which marks a 600 bps drop from 2009 results.
OUR TAKE ON OVERNIGHT NEWS
Puma Soon to Release BodyTrain - Puma is ready to tone things up for spring with BodyTrain, the women’s toning collection that had its public debut this past weekend in New York after a soft launch pre-holiday. According to the Herzogenaurach, Germany-based company, the shoes were tested at the Chemnitz University of Technology’s Human Locomotion Department and offer 11 percent more muscle activation than traditional walking styles. The shoes use the company’s BioRide rocker outsole, which features flex grooves to allow a natural stride. Two styles from the collection — the $90 BodyTrain Mesh, an athletic sneaker style; and the $90 BodyTrain LS Nbk, a lifestyle-oriented version in nubuck — are available at Lady Foot Locker and Puma retail locations. <WWD>
Hedgeye Retail’s Take: Definitely an improvement in aesthetics vs. many 2010 toning styles but we wonder how long the $90 price point will hold in an extremely competitive toning marketplace.
Ugg Releases Anti-Counterfeiting Results - In 2010, Deckers Outdoor Corp.’s anti-counterfeiting activities gave crooks reason to be afraid. The company on Monday issued preliminary results surrounding its anti-counterfeiting efforts on behalf of its Ugg Australia brand. Included in the data is information on the single largest seizure of fraudulent Ugg product to date: 244,648 pairs of counterfeit Ugg product seized on Dec. 23 in the Fujian Province in China. In all, 118 raids were conducted in 2010. Not including the Dec. 23 enforcement activity, 154,829 pairs of counterfeit Ugg-branded products were seized in 2010, a 245 percent increase over 2009. During the year, the company also successfully pursued a course of action that resulted in the closure of 4,783 websites that sold fake products, and removed 30,444 eBay listings that offered counterfeit goods.<WWD>
Hedgeye Retail’s Take: In a case of proactive management, DECK certainly didn’t wait for the eBay/Tiffany’s verdict to protect their greatest asset. Retailers should and will take notice of one of the more successful examples of a retailer protecting their brand with increasing success – after ‘how,’ one has to ask just ‘how much’ such insurance/enforcement costs.
Joe's Jeans to Pay workers $158K - Joe’s Jeans Inc. reached an agreement with the U.S. Labor Department to pay $158,952 in back wages to 110 workers at one of the company’s Los Angeles contractors. According to the Labor Department’s Wage & Hour Division, the contractor, Angel’s Finishing Inc., did not pay its workers the appropriate minimum wage and overtime required by law. Instead, Angel’s Finishing paid on a piece-rate basis and did not record weekend working hours, the agency said. The contractor worked solely for Joe’s Jeans, based in City of Commerce, Calif. <WWD>
Hedgeye Retail’s Take: Note to company. If you manufacture stateside, you must pay workers appropriately. Fashion denim remains one of the few niche apparel products with a dominant manufacturing base in LA.
Bluefly invests in Prescription Eyewear - Bluefly Inc. this spring will branch into a second e-commerce business — prescription eyewear. The New York-based online retailer of discount designer fashion has entered into a joint venture with A+D Labs, a marketer of fashion eyewear, to form Eyefly and launch the site Eyefly.com, which will provide women’s and men’s fashion frames and single-correction lenses for a fixed price of $99. Melissa Payner, chief executive officer of Bluefly and the daughter of an optometrist, believes the combination of an affordable price point and the convenience of online shopping could help it make inroads into the U.S. eyewear market, which she estimated to be about $33 billion a year in sales. <WWD>
Hedgeye Retail’s Take: While Bluefly’s popularity has not matched that of Gilt, Rue La La, and other online off-pricers, it appears to be taking a lead in developing exclusive merchandise content with this JV.
Evercore Takes Stake in Grupo Axo Grupo Axo is sharing its growing slice of the Mexican retail market with private equity firm Evercore Mexico Capital Partners, which acquired a 20 percent stake in the fashion operator. Evercore, which manages more than $190 million and is part of advisory firm Evercore Partners, did not disclose the size of the investment. Mexico City-based Grupo Axo — which saw revenues jump 30 percent last year and expects another 25 percent rise this year — manages 11 brands in the country, including Coach, Emporio Armani, Marc Jacobs, Thomas Pink and Tommy Hilfiger. Payless ShoeSource and Sephora will be added to the portfolio this year. The company tries to mirror a brand’s international pricing, excluding the varying effects of taxes. It plans to open stores in five new malls this year, taking advantage of a retail commodity the U.S. sorely lacks: new developments. <WWD>
Hedgeye Retail’s Take: While Mexico is not normally thought of as an emerging luxury market, the continued growth in the company’s tourism is likely the driving force behind additional unit growth for Axo.
NRF Speakers: Bigger Not Always Better - In retailing, size won’t matter as much, and fashion will take a toned-down turn this year. Those prognostications came out of day one of the National Retail Federation’s convention at the Jacob K. Javits Convention Center here, running through Wednesday. More than anything, the thousands of retailers who attend NRF’s “Big Show” want to know what the future will bring for their businesses. For retailing’s juggernauts such as Wal-Mart Stores Inc., Carrefour and Tesco, bigger won’t always be much better, according to Richard Hyman, Deloitte’s strategic adviser.” Big is still beautiful, but it’s getting less attractive,” Hyman said at a morning session Sunday. “Scale is an enormous advantage, but it’s becoming a slightly less potential advantage on its own.” Retailers with superior scale “may need to think about adding a few more ingredients to their strategic array.…Branding remains relatively undeveloped in retailing.” <WWD>
Hedgeye Retail’s Take: While branding opportunities are still abundant for most big box concepts, footprint evolution is another key development that has put many ‘supertankers’ at a competitive disadvantage in the current real estate environment. Recall that within the past few weeks, WMT announced a smaller 80k sq. ft. format in order to greater penetrate urban markets – in all likelihood they aren't the only ones thinking smaller = opportunity.
The Demographics of Social Shopping Sites -Many consumers unaware of the category Retailers are eager to jump on social trends, be it a simple Facebook or Twitter presence, customer ratings and reviews, or more sophisticated experiences that bring the social graph to retail sites. Social shopping sites like Groupon and LivingSocial form another piece of the social commerce space, and despite the hype many shoppers have not yet jumped on the bandwagon. According to JPMorgan’s “Nothing But Net 2011” report, two in five online buyers surveyed had not heard of social shopping sites, and another 28% knew what they were but had never used them. <eMarketer>
Hedgeye Retail’s Take: Keep in mind, the act of completing a purchase online isn’t the only criteria for determining success of such efforts. While purchasing rates are 2x higher for those with incomes >$100k vs. <$50, the difference in familiarity is only marginally lower between the two demographics at 46% and 38% respectively, which could very well be translating into traffic at the store level.
Cost Issues to Take Center Stage at N.Y. Fabric Shows Rising raw material costs and dedicated price consciousness will color the textiles shows taking place in New York over the next two weeks. Cotton prices soared to record highs in the last year and prices for wool and other materials have climbed as well, a situation that is starting to creep further along the textile supply chain and causing buyers to eye their bottom line even more closely than they have the last few years during the recession. As Première Vision Preview starts a two-day run today at the Metropolitan Pavilion & Altman Building, there is still a degree of uncertainty in the industry, said Jacques Brunel, general manager of the show. While buyers always took price into consideration, they used to look first for quality and creativity, Brunel said. In the wake of the economic downturn and buffeted by global market forces, buyers want a competitive price above all, he said, and in some cases are looking to trade down for less expensive fabrics.<WWD>
Hedgeye Retail’s Take: The tradeoff between cost vs. quality will ultimately lie at the retailers feet and may certainly be a consideration, but there are also many brands where a deterioration in quality is simply not an option. An interesting byproduct of this challenge will be how companies chose to shape marketing efforts that either highlight or hide such changes to the end product.
