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R3: REQUIRED RETAIL READING

January 24, 2010

 

 

 

 

RESEARCH ANECDOTES 

  • Among the product highlights out of this year’s Outdoor Retailer Show is Merrell’s new “Glove” line of minimalist footwear set to launch in February – one of several new brands to enter the category in 1H 2011. Interestingly, the brand will be providing ‘instructions’ on barefoot/minimalist running techniques with each pair in an effort to reduce the risk of injury to ‘heel-strikers’ (i.e. just about every runner out there) who are unlikely to transition naturally to running on their toes.
  • In a sign that mobile texting/social networking/emailing is becoming ever more pervasive, a video gone viral shows a women falling into a mall fountain while texting on her phone. While the ‘victim’ is exploring the potential outcomes of litigation, the whole charade begs the questions of just how much mobile push interaction is too much. (view the video here).
  • It was only a matter of time before Twitter and a merchandising opportunity came about.  Enter Tweet Rings, customizable rings engraved with your favorite Tweet.  In the old days this would have more of a “quote” ring but limiting the text to 140 characters is certainly much cooler!

OUR TAKE ON OVERNIGHT NEWS

 

J.C. Penney Appoints Ackman and Roth as Directors - J.C. Penney Co., the third-largest U.S. department store chain, named William Ackman to its board after the activist investor became its biggest shareholder.  Steven Roth will also become a director after his Vornado Realty Trust built a stake in the retailer, J.C. Penney said today in a statement. The company also announced plans to close some stores and wind down its catalog and outlet operations.  Ackman’s Pershing Square Capital Management LLP bought a 16.5 percent stake in the Plano, Texas-based retailer in October, at the same time that Vornado disclosed owning 9.9 percent. The investors “intend to consult with each other in connection with their respective investments in the common stock,” they said at the time. <Bloomberg>

Hedgeye Retail’s Take: Now what?  With these two now on the board, does that make it easier of harder for them to influence a major shake up? 

 

Old Navy and Ann Taylor Look to Summer - For the summer season, Ann Taylor is taking some risks and adding variety, while Old Navy is emphasizing bold colors and crisp patterns in sync with its perennial casual, upbeat attitude. “We were inspired by the idea of road trips, whether it’s a family vacation or a single dude heading to Las Vegas. It’s about freedom, and hitting the open road,” said Chad Hinson, creative director for marketing at Old Navy. “There is such an optimism about summer.” He was interviewed at the Old Navy showroom on Sixth Avenue, which was adorned with retro travel posters of spots such as the Grand Canyon and the Cedar Point amusement park in Ohio to set the mood for the men’s, women’s and kids merchandise displayed. Among the outfits were a one-piece polka dot swimsuit with a tropical print sarong and V-neck cardigan, and a banded, gathered skirt with a printed chiffon tank and long knit vest seen in the “summer nights” group.<WWD>

Hedgeye Retail’s Take: You have laugh at the prospects of summer with the majority of the country sitting in a deep freeze at the moment.  That “road trip” does sound good right about now. 

 

Intermix Opens Flagship in Toronto -The retailer’s first international store, a 2,500-square-foot flagship on Bloor Street in Toronto, will bow in the fall, and a Canadian rollout is planned. “Why shouldn’t we be in every international city in Canada?” said Khajak Keledjian, chief executive officer of Intermix. “After that, it will be easier to go to Western Europe.” Intermix will open six to eight stores this year, including a 2,700-square-foot unit in Greenwich, Conn., this spring and a 2,800-square-foot shop in the Meatpacking District here in the fall. Other growth opportunities include men’s-only stores. “Not a day goes by that I’m not asked to do men’s,” Keledjian said. Intermix did $100 million in sales last year, a strong, double-digit increase over 2009, Keledjian said. “We had a great fourth quarter revenue-wise, but it was questionable in terms of margins,” he admitted. Intermix’s 24 units average $1,500 in sales per square foot, he said. <WWD>

Hedgeye Retail’s Take: Impressive performance for the boutique chain.  However, with a heavy Manhattan footprint it will be interesting to see how growth beyond one of the world’s fashion capitals treats productivity and margins.  Nonetheless, $100 million from 24 units certainly trumps most specialty retailers.

Sales Shortfalls spur Inventory Concerns - Not even a month gone, and 2011 is already proving problematic.  A string of fashion firms have revised fourth-quarter guidance in the last two weeks — with many warning along the way that the consumer mood might not remain quite as buoyant as they hoped it would after the sales boom early in the holiday shopping season. Now that New Year’s hangovers are long gone, consumers may once again be slamming their wallets shut in the face of continuing high unemployment, ongoing mortgage foreclosures and spiraling prices — on everything from food to clothes to gasoline. The result is an inventory overhang for both retailers and vendors. <WWD>

Hedgeye Retail’s Take: Despite some C-level types suggesting unit shortage will help drive demand out in California a few weeks ago, the risk of over-inventoried retailers/brands is increasing, which will only add fuel to the fire of pricing dynamics over the near-to-intermediate term.

 

Diesel Pumps Up Shoes - Diesel footwear is getting a makeover. For fall '11, the lifestyle brand will embark on some major moves to boost the fashion in its footwear offering and depart from its athletic-inspired roots.  "It's good for us," said Luigi Mezzasoma, CEO of Diesel shoes and bags, noting that the company has built a footwear collection that better aligns with the brand's image as sophisticated denim. "We can be closer to our DNA, which is strong and sexy, and be on trend in the market as we move from athletic to hybrid and more fashionable [styles]." "We're a fashion company, not an athletic company," added Tony Strippoli, Diesel's VP of sales for footwear, bags and kids' product. "We can credibly interpret trends from athleisure to runway [and] take the footwear in any direction we want to." <WWD>

Hedgeye Retail’s Take: It may be tough to argue its ‘athletic’ heritage, but given the company’s fashion focus on the apparel side of the business and an increasingly competitive athletic category, the move is a step in the right direction and one the company should have made a long time ago.

Snow and Taxes Might Benifit U.K. Online Retailer’s - Snow and frigid air, along with the approach of new taxes, helped boost online sales last month in the United Kingdom, where shoppers spent 25% more than they did in December 2009, according to a report released today by Interactive Media in Retail Group, a trade group, and Capgemini, a consulting firm. U.K. consumers spent 6.8 billion pounds (US$10.9 billion) in December, the report says.  That also represents a 7% increase over November. Unusually severe winter weather led more consumers to shop online last month, the report says. Spending also increased as consumers bought items ahead of the 2011 increase in the value-added tax, which resembles a national sales tax. The standard tax rate this year increased to 20% from 17.5%. “The ongoing trend of consumers putting down the car keys and turning on their computers is only set to continue particularly as consumers use the power of the web to make their money go further as the economy recovery remains fragile,” says Chris Webster, head of retail consulting and technology at Capgemini. <InternetRetailer>

Hedgeye Retail’s Take: Expect a similar effect stateside after anomalous January weather– something we expect to hear more about on sales day next week. Retailers over-indexed to e-commerce on a relative basis like Williams-Sonoma, J.Crew, Cabelas, The Limited, Urban Outfitters, and Saks to name a few with e-commerce accounting for over 15% of sales will have a competitive edge near-term.

Eastern Mountain Sports to Open New Store in Manhattan - Eastern Mountain Sports announced it will open a new store on the Upper West Side of Manhattan this fall at 76th and Broadway. The 13,000-square-foot store will provide its respected, authentic service to the community’s outdoor enthusiasts while taking advantage of its proximity to Central Park and the wide array of outdoor activities that take place throughout the year. The store will showcase apparel and gear for cycling, kayaking, backpacking, camping, climbing, hiking, snowshoeing and skiing. In addition, Eastern Mountain Sports’ signature services will include expert bike and ski technicians, foot gurus for personalized fittings, a paddlesport section, and a comprehensive travel-planning library. <SportsOneSource>

Hedgeye Retail’s Take: Recent store growth at both REI and EMS reflect the strength that’s been evident in the outdoor industry for the past year. While we’d expect productivity of stores in Manhattan to be considerably higher than more rural locations, it will have to be in order to offset rents that are undoubtedly multiples higher.

 

Twitter Ad Revenues to Soar This Year - Twitter has received enough media attention to be a household word, but still has a relatively small audience. The Pew Internet & American Life Project found in September 2010 that just 8% of online Americans used the service. But eMarketer is cautiously optimistic about Twitter’s fledgling ad products. eMarketer expects Twitter to earn $150 million in revenues this year, the vast majority of which will come from the US. This represents a substantial increase over revenues of $45 million during 2010, the first year Twitter sold advertising. <eMarketer>

Hedgeye Retail’s Take: More importantly here is not the volume or penetration rates, but rather the quality of impact, which is where social sites like Twitter and Facebook have a decided edge on alternative options.

R3: JCP, WWW, GPS, Twitter - R3 1 24 11