R3: Boots, Rentailing, SHOO, & Taxes


January 31, 2010




  • American Express is taking the commercialization of NY’s Fashion Week to new heights this year.  As a cardholder, you are now entitled to buy a ticket to your favorite designer show for as little as $50.  Paying a little more gets you a meet and greet as well.  With costs on the rise, perhaps the organizers are looking to generate a little income as an offset?
  • Two major bridal launches will take place over the next couple of weeks.  First up is the collaboration between David’s Bridal and Vera Wang called White.  The items in the collection are expected to price between $600 and $1400.  Up second, is the long-awaited URBN bridal concept called BLDHN which launches in online-only form on February 14th.  The brand’s first prototype store is expected later in the year.
  • With much of 2010 focused on private/flash sale websites and early 2011 hyper focused on all things Groupon, it’s worth pointing the recent winner of the Fashion Group International rising star in retail award.   This year’s winner is Rent The Runway, a site that allows women to rent couture for single usage.  With costs escalating and fashion changing at an exhaustive rate, perhaps this will be the next trend in “Rentailing”.




American Apparel Could Breach Debt Covenant -  It’s crunch time once again for Dov Charney, chief executive officer of American Apparel Inc., who has made a habit out of living on the edge, financially and otherwise. The company, which has most recently courted controversy by featuring explicit drawings of topless women in its advertising, faces a key financial test today — a minimum consolidated earnings before interest, taxes, depreciation and amortization covenant in its loan agreement with Lion Capital, which will be tested monthly this year. <WWD>

Hedgeye Retail’s Take:   While the media loves to focus its attention on Dov Charney’s extravagant image, the rapid expansion across the globe in almost every major high rent district is the culprit here.  And, with cotton at all time highs it’s hard to envision the monthly “tests” being passed with consistency.


Retailers at Cobb Show Still Struggling - Huge discounts from the major retailers bit into holiday business for most specialty stores shopping the Cobb Show here last week, and they haven’t recovered yet. “The urban market didn’t do well because the big stores were dumping their goods,” complained Neil Rama, co-owner and buyer of Brite Creations in Atlanta. “The smaller stores can’t do that.”“The holiday season was our worst in 40 years,” said Khair Askar, owner of New York Men’s Clothing in Boynton Beach, Fla. “We were giving away merchandise — selling at very low prices, and business still wasn’t good.” <WWD>

Hedgeye Retail’s Take:   While it’s no secret that holiday was promotional, it certainly appears that this has taken a disproportionate toll on the little guy.  Not only was there pricing pressure, but inventories now remain tight in the supply chain as cost pressures mount.


 Boot Sales Rise on Record Snowfall - Record snowfalls blanketing the Northeast have been a boon for the footwear business. Retailers across the region told Footwear News boots, in particular, are marching them out of an otherwise slow season. “Snow is like heaven — it’s actually the best thing that could happen at this time of the year because January and February are usually sale periods with real markdowns,” said Danny Wasserman, owner of Tip Top Shoes in New York. <WWD>

Hedgeye Retail’s Take:  Perfect timing for record snow as clearance activity has been kept to a minimum in the boot category.  Even more impressive is that this marks the third year in a row of a strong boot season, a trend that very rarely occurs.


Barney's new era - One of the most-watched acts in fashion is beginning to play out: Mark Lee's reinvention of Barneys New York. The highly regarded Lee has been Barneys New York's chief executive officer for only four months yet already has made sweeping changes in the retailer's senior fashion ranks and overhauled its creative leadership. On Friday, the retailer tapped a new vice president and fashion director, Amanda Brooks, former creative director of Tuleh and a Vogue contributor. And more changes are said to be on the horizon. <WWD>

Hedgeye Retail’s Take:  With an ever increasing focus on more contemporary designers over the past several years it will be interesting to see what changes truly make their way one of the world’s most iconic luxury retailers. 


Steve Madden Plots Betsey Johnson's Growth - Rather than wait out the still-stalled economy, Steve Madden is on the hunt for new labels and is ramping up Betsey Johnson’s business.  Last fall Steven Madden Ltd. took over a $48.8 million loan to Johnson’s firm and absolved it in exchange for ownership of the brand’s intellectual property. Madden is so comfortable with the designer’s stewardship that he will be at a Las Vegas shoe show instead of her Feb. 14 runway show at Lincoln Center. <WWD>

Hedgeye Retail’s Take:  With portfolio of growing brands beyond shoes, Madden is quickly becoming a meaningful player in the moderate priced fashion space. It’s likely we’ll see exclusive collaborations with major department stores as part of the strategy to drive stable volume in these growth brands and categories.


Demand in China for polyurethane materials on the surge - Demand on polyurethane materials for making footwear soles will be growing substantially if the EU's anti-dumping duty on Chinese leather shoes can be ended at the end of March this year, according to China Leather Industry Association. The shoe production and export will increase definitely if the duties are removed, said industry expert. Leather shoe production dropped significantly as EU anti-dumping and trade protection from Brazil, Argentina, Peru and Ecuador against Chinese shoes. <FashionNetAsia>

Hedgeye Retail’s Take:   Footwear inflation potentially on the horizon?  Or will production from China actually drive prices down?


E-retailers win tax ruling in Colorado - Colorado isn’t going to get the help it hoped for from online retailers in collecting sales taxes on web purchases made by state residents, at least not now. A federal judge in Denver has granted a preliminary injunction against parts of a Colorado law that require Internet and catalog retailers to provide the state with information including an annual report providing the amount of sales to individual Colorado residents. The ruling came in a lawsuit filed by the Direct Marketing Association, a trade group for direct-to-consumer retailers and marketing companies. <InternetRetailer>

 Hedgeye Retail’s Take:  While the battle to collect state sales tax from online retailers appears to have met some obstacles in Colorado, don’t expect the issue to go away anytime soon.  The technology is in place to make the collection process seamless and state budget gaps are not likely to disappear anytime soon.


Carrefour Rises on Report Retailer Mulling a Split - Carrefour SA advanced in Paris trading after a French newspaper reported that the world’s second-largest retailer may be split into three parts to boost the value of its shares.  The stock rose as much as 3.3 percent to 35.10 euros and traded at 34.70 euros as of 12:05 p.m. in Paris. The company, with the backing of shareholders including Bernard Arnault, may create separate stock-exchange listings for its Dia discount chain and real-estate units, Le Figaro reported, without saying where it got the information. Florence Baranes-Cohen, a spokeswoman for Carrefour, declined to comment. <Bloomberg>

Hedgeye Retail’s Take:  Bigger doesn’t appear to be better, at least for the moment.  Likely much more to come from this speculation in the coming days.

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.”

read more

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.

read more

Cartoon of the Day: Crash Test Bear

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

read more

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.

read more

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

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

read more

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.

read more

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."

read more

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.

read more

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."

read more

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.

read more

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.

read more

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.

read more