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January 19, 2010





  • Just a day after we noted Kenneth Cole’s flagship store in Rockefeller Center may become a hot property, Michael Kors appears to have stepped up.  Word has it that Kors’ expansion efforts will make their way to 5th Avenue with a lease spanning 10 years.  Kors also recently opened a Bleecker St. boutique and is said to be exploring Meatpacking district locations as well.
  • Gallup reports that 19% of Americans are satisfied with the way things are going in the US at this time, just slightly above the lowest level of the past 12 months, 17% reported for December 2010.
  • Keep an eye on your online bank statement, for discounts.  A handful of retailers and restaurants are experimenting with new marketing technology which allows targeted ads to be inserted into consumers’ online statements.  So for example, if you bought a Big Mac with a debit or credit card, you may see a 10% off coupon show up on your next bill.  Interestingly, the technology allows for the discount to be automatically tied to the consumers account, thus eliminating the need to print or “clip” the coupon.



Target Faces Legal Challenge Over Name - Will the real Target store please stand up? Target Corp., which is paying $1.8 billion to take over about 220 Zellers stores from the Hudson’s Bay Co. and convert them into Target stores by 2013, is facing a legal challenge to its name being used in Canada by a retailer of the same moniker. There are already two Target Apparel stores in Canada owned by Isaac Benitah of Toronto, who also runs Canadian chains Fairweather and International Clothiers and doesn’t want to give up the Target name. But Target Corp. has asked the Federal Court of Canada for an injunction to ban Benitah from using the Target name and signature logo. Benitah responded on Monday by asking the court for exclusive rights to the name and is demanding $250 million in damages from Minneapolis-based Target Corp. <WWD>

Hedgeye Retail’s Take: While we’re no legal experts, this one likely ends in a settlement of some sort.  Given that Target (US) is all about its brand, it would be hard to envision the company renaming itself in order to do biz in Canada.  Bottom line is Benitah is likely to be the big winner here.


J. Crew Extends Deadline for Rival Bids - J. Crew Group Inc. — which has a $3 billion takeover offer from TPG Capital and Leonard Green & Partners — on Tuesday agreed to accept rival bids until Feb. 15 to settle a shareholder lawsuit. The retailer’s November deal with TPG and Leonard Green initially allowed it to consider alternative proposals until this past Saturday. “Despite an active and extensive solicitation of potentially interested parties in connection with the ‘go-shop’ period since the announcement of the merger agreement, the company has not received any alternative acquisition proposals to date,” the retailer said. Sears Holdings Corp., Urban Outfitters Inc. and two private equity firms were reported to be considering offers, or at least taking the chance to look at the retailer’s books as part of their “due diligence.”<WWD>

Hedgeye Retail’s Take: At the 11th hour, it looks the rumor mill may re-accelerate with the lengthening of the “go-shop” period.  Hard to believe someone will step up now if they haven’t already, however. 

Carrefour Said to Be Linking With India's Future Group - Speculation in India is mounting that Carrefour is about to ink a deal with Future Group, one of India's largest retail conglomerates, to open more stores in the country. The French retail giant opened its first cash and carry store in New Delhi on December 30. The parties declined to comment directly on the possibility of a deal but both said that they are exploring new business opportunities and potential partnerships. <WWD>

Hedgeye Retail’s Take: Another move to tap into the world’s second most populous country while foreign direct investment still remains in limbo.  Wal-Mart isn’t far behind. 

Li Ning Ramps U.S. Investment - Li Ning will invest $10 million in its U.S. business this year and enter a joint-venture with Acquity Group LLC to expand U.S. distribution, Li Ning Chief Executive Zhang Zhiyong told the Wall Street Journal. The Chinese athletic apparel and footwear brand also plans to open warehouses this year to broaden its distribution as well as to hire 20 product developers in coming months to better meet the needs of the U.S. consumer. The goal is to  attain U.S. sales of $50 million this year, according to the report. The company said sales outside China accounted for 2% of revenue last year. Li Ning hasn't reported full-year figures but posted revenue of 4.5 billion yuan ($682.5 million) for the first half. Acquity, a Chicago-based brand-consulting firm whose clients include General Motors Co. and the American Airlines unit of AMR Corp., is designing an ad campaign for the Chinese athletic brand. The campaign, scheduled to launch in May with TV, print and online, wil be Li Ning's largest yet for the U.S. market. Li Ning in June unveiled a new logo and global slogan, "Make the Change." <Sportsonesource>

Hedgeye Retail’s Take: What has been a methodical and understated approach to entering the U.S. athletic footwear/apparel market over the last 2-years when the brand first established a foothold on American soil is about to get considerably more vocal. In addition to various running and basketball offerings, expect the company’s lightweight running shoe – the Freemont – to be a visible element of the campaign as the category takes off this Spring/Summer.

Jimmy Choo Men's line - Inspired by the stylish London man, Jimmy Choo’s debut men’s footwear collection features classic styles, with a dash of luxe and glamour. All the models — from Chelsea boots to loafers to the classic monk-strap shoe with English pewter buckle — are fully lined in leather; sneakers are fashioned from cashmere flannel; distressed biker boots have shearling on the inside, while the Wellington boots — a collaboration with Hunter — come embossed with a crocodile pattern. There is even a signature “P*rno Paisley” slipper, with silhouettes of undulating ladies, à la James Bond, and black lacquered soles. <WWD>

Hedgeye Retail’s Take: They’re back! After discontinuing its men’s line in 2002, only time will tell if Choo’s fiercely loyal following will translate to the male consumer the second time around. The line’s new “P*rno Paisley” slippers are likely to create a buzz at minimum.


Fraud Losses Fall - Fraud rates for online merchants in the United States and Canada remained steady at 0.9% in 2010 for the second straight year, says a report released today by CyberSource, a subsidiary of payment card network Visa. The fraud rate for online merchants in the United Kingdom, however, increased to 1.9% last year, up from 1.6% in 2009. CyberSource defines the fraud rate as the percentage of accepted orders that later turn out to be fraudulent. The vendor bases its findings on 334 survey responses from North American online retailers and 200 responses from web merchants in the United Kingdom. The surveys were conducted in September and October.<InternetRetailer>

Hedgeye Retail’s Take: The silver lining here is that fraud figures suggest the practice isn’t becoming more pervasive, however, with a significant portion of the American consumer still unwilling to buy products online for this very reason, this figure needs to shrink – not stabilize.

In-App Purchases Become Major Mobile Revenue Stream - With smartphones in the hands of more than 60 million Americans, according to eMarketer estimates, app stores are growing quickly and the application market continues to evolve as it approaches maturity. According to research from app store analytics provider Distimo, many app developers are changing how they monetize their creations. All major application stores are growing rapidly, with triple-digit increases across the board. Apple’s App Store, the best-established market, is moving slowest but still more than doubled in size between January and December 2010. For all app stores, growth in free apps outpaces that of the store as a whole. <eMarketer>

Hedgeye Retail’s Take: Growth figures well into the triple digits suggests this market is nowhere near maturity. Perhaps most notable is the lack of disparity between BlackBerry’s free vs. total apps reflecting the brands business user base.

R3: TGT, JCG, Li Ning, Jimmy Choo  - R3 1 19 11

Australian Consumer Confidence Falls to 7-Month Low on Queensland Flooding - Australian consumer confidence fell in January to a seven-month low on concern that flood damage in Queensland state will weaken the nation’s economy. The sentiment index dropped to 104.6, the lowest since June, from 111 in December, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers taken Jan. 10-16 and released today in Sydney. Outside the disaster area, perceptions about the national economy and personal finances were “adversely affected” by the deluge, it said. Reserve Bank of Australia Governor Glenn Stevens left the overnight cash rate target at 4.75 percent last month, after seven increases since October 2009, judging policy to be “mildly restrictive.” Higher borrowing costs helped slow third-quarter growth and savings have risen, even as energy and mining investments keep unemployment near 5 percent. <Bloomberg>

Hedgeye Retail’s Take: Catastrophic flooding unfortunately has a very long tail of damage and recovery associated with it. The ripple of deteriorating economic and consumer confidence is likely to be felt through much of 2011.