January 20, 2010





  • It didn’t take long for Amazon’s investment in livingsocial to result in a deal.  Yesterday livingsoical featured a $20 Amazon giftcard for $10 which resulted in 1.3 million cards purchased!  This beats the previous social/local coupon record in which Gap sold $11 million worth of Groupons.  While the total value of the Amazon deal is unlikely to move any needle, it’s interesting to see the online retailer using new methods to universally promote given that the company is historically known for its everyday low price strategy and targeted promotion.
  • Green manufacturing takes a step forward with the impending introduction of Levi’s WaterLess jeans.  The new denim pants use 11 gallons less water to manufacture conventional jeans, for a reduction in water consumption of 26% to 96%.  A normal pair of jeans takes about 11.1 gallons to produce as a result of the washing process which spans three to ten cycles!  Perhaps it’s just coincidence but the new “line” arrives just at a time when costs are on the rise and “content” will be more important than ever to facilitating pricing power.
  • In an effort to five fashionistas, bloggers, and consumers a sneak peak at what’s in-store for Spring, TJ Maxx and Marshalls offered a live spring/summer preview in NYC.  The event featured a wide range of merchandise that is likely to be available over the coming months, complete with price comparison signage highlighting the massive savings on like-items between the offpricer and traditional department stores.  We suspect the pricing message is about to get louder as cost pressures mount.



Dillard's to Form REIT - Dillard’s Inc. — a family-run but publicly traded department store chain known for going its own way in areas of corporate policy — plans to spin off some properties into a real estate investment trust and then lease the properties back. Real estate investment trusts, or REITs, bring certain tax benefits that aren’t available in other corporate structures. The Little Rock, Ark.-based firm has doors in 29 states and, according to last year’s annual report, owned 241 of its 309 stores. <WWD>

Hedgeye Retail’s Take: With the Dillard’ family in complete control of DDS, this is just another chapter in the clever structuring of the pubicly traded, but family run business.  Regardless of the REIT structure, has anyone noticed the company’s high single digit holiday comps?


Brown Shoe Reportedly Looking at Acquiring American Sporting Goods - Brown Shoe Co. Inc. is said to be in talks to buy American Sporting Goods Corp., but analysts are undecided if the purchase will be good for the Missouri-based firm. According to a report by Sporting Goods Intelligence, Brown Shoe may pay $150 million, which BB&T Capital Markets said is as much as 10 times the earnings potential of ASG. ASG, the parent of Avia, Ryka and several other brands, reportedly had sales of $220 million last year and earnings in the range of $10 million to $15 million. The California-based company has been on the market since 2005, and has gone through at least two unsuccessful formal auction processes due to the relatively weak stature of its key brands in an increasingly concentrated athletic market, according to the note. <WWD>

Hedgeye Retail’s Take: While it can be argued that acquiring brands falls into one of management’s key priorities for 2011 (i.e. people and product) – integrating a deal could easily prove to be more of a distraction. That said, adding a few athletic brands to the BWS portfolio could be viewed favorably with more exposure to one of the more robust categories within the space.  


Tony Fisher Appointed Head of Target Canada - Target Corp. has promoted Tony Fisher to the new post of president of its Target Canada unit. Fisher, with Target since 1999 and vice president of merchandise operations since his promotion last year, will be responsible for “building the team, establishing the headquarters and leading the day-to-day operations” of the company’s expansion into Canada, details of which were disclosed last week. <WWD>

Hedgeye Retail’s Take: While this is a large opportunity for TGT over the next 3-5 years, expect numerous announcements to trickle out as the team, infrastructure, and strategic plans begin to take form.  This will be a long, methodical process and one that will not accrue overnight benefits. 


SKNL and Li & Fung Eye JA Apparel  - JA Apparel Corp. could have a buyer in the wings at last. The owner of the Joseph Abboud and Joe by Joseph Abboud brands has been on the market since 2006 but is coming under closer scrutiny as potential buyers kick the tires, according to market and financial sources. Two prospective buyers said to have signed confidentiality agreements are SKNL International, the owner of HMX Group, and Li & Fung, the Hong Kong-based conglomerate. <WWD>

Hedgeye Retail’s Take: With both bidders entrenched in sourcing, it’s clear that the synergy lies with marrying a well known US mens brand with lower-cost, efficient manufacturing.  Interestingly, a purchase by SKNL would mark one of the first brands to be bought by an Indian retail/textile conglomerate.  On the Li & Fung side, this would be just another step in building out the company’s diversified content portfolio.


Nau Introduces QR Coded Hangtags - Urban + Outdoor apparel maker Nau will showcase how QR codes can be used on hangtags to help outdoor specialty retailers engage smartphone users in their stores by directing them to branded websites and away from price comparison sites.  Nau will showcase key styles labeled with QR codes designed by ExtraTags, a company launched earlier this year by the man who helped build Amazon.com's outdoor business. The demo at Nau's booth (#30049) comes as Nau and its sister company's Horny Toad and Lizard Lounge launch a blog to help specialty outdoor retailers improve their merchandizing and share best practices.<SportsOneSource>

Hedgeye Retail’s Take: Even before mobile price comparison has been fully adopted, we’re beginning to see moves to divert attention away from price and towards content.  With smartphones essentially turning in to personal POS’s, will charging stations become commonplace in the mall? 


Usablenet and PayPal Team Up to Ease Mobile Checkout - Mobile commerce technology provider Usablenet Inc. has teamed with eBay Inc.’s PayPal to integrate the online payment company’s Mobile Express Checkout with Usablenet m-commerce sites, mobile apps, tablet apps, Facebook applications and kiosk systems. Consumers with PayPal accounts enter their user name and password and then buy with one touch; the system uses the consumer’s stored default shipping and billing information.<InternetRetailer>

Hedgeye Retail’s Take: Paypal’s involvement in the mobile transaction landscape is likely to ease consumer fears regarding security, or more aptly the lack thereof over mobile devices. While a step in the right direction, it’s going to take far more to get most consumers over the hurdle in this regard.


TSA to Open Largest Store in U.S. - The Sports Authority plans to open a 56,000 square-foot in August to open in Orland Hills, IL, representing its largest store in the U.S. The store will be located in a site of a former Circuit City and an Office Max. Orland Towne Center owner Tony Youshaei, speaking to the Orland Hills Patch, described the new store as a "flagship" for the national chain. The new store will represent a relocation. A 40,000 square-foot Sports Authority store now operates in the Orland Park Place shopping center, next to a Dick’s Sporting Goods store.  When the Orland Park Sports Authority will close for the relocating has not yet been determined. < SportsOneSource>

Hedgeye Retail’s Take: Within a year of launching its smaller S.A. Elite concept, Sports Authority comes out with its biggest store yet. While contrary to the company’s growth initiative in smaller format stores, empty Circuit City boxes are more readily available while smaller footprints continue to be more challenging to line up.



Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

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7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

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Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

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GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

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Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

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Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

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Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

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People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

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UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

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Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

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