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Athletic Apparel Uptick

The weekly athletic apparel data shows a slight uptick this week as retailers close their books on the fiscal year. The biggest improvement comes from the discount/mass channel with modest sequential improvement reported in the specialty channel. 


Athletic Apparel Uptick - Sports Aparrel Trends

R3: WMT, GPS, LVMH, and Obesity


February 2, 2010




  • With increased focus on Walmart’s ability to take prices higher (or lower) and to clear excess inventory (as per a recent NY Post expose), the company continues to seek out real estate in New York City.  The latest word suggests WMT and Shoprite both have their eye on the same Brooklyn retail center.  Union opposition is already heating up as organized labor is clearly opposed to non-union Walmart.
  • Offense or defense?  The moves at Gap in which the brand now has a new CEO (was former head of outlets), a new advertising agency in NY, a newly created position called Global Chief Marketing Officer, and a new NY based global creative center all come at time when sales momentum appears to have taken a step back.  Change can be good, although we note that traffic driving initiatives have been the key challenge for the brand over the past five years.
  • More than six in 10 American adults (62.9%) were either overweight (36.3%) or obese (26.6%) in 2010, which is essentially unchanged from 2009 as measured by the latest Gallup-Healthways Well-Being Index.  Sadly, a Gallup analysis found that if the 10 most obese US cities reduced their rates to the national average, they could collectively save about $500 million in healthcare costs a year!



Gilt Groupe Teams up With Nicole Richie - Gilt Groupe has teamed with Nicole Richie for a full-price sale event of the celebrity-turned-designer’s House of Harlow 1960 and Winter Kate spring collections. The sale will start Thursday at noon Eastern time and end at midnight Sunday. Gilt in August ventured into uncharted flash sale territory when it offered the Tucker by Gaby Basora and Mulberry collections for Target before the lines hit the mass merchant’s stores. <WWD>

Hedgeye Retail’s Take:  With the supply chain extremely tight, the market for off price luxury apparel and accessories is not nearly as plentiful as it was over year ago.  Expect to see Gilt continue to incubate its full-priced offerings in collaboration with smaller, upscale brands.


Teen Retailers to Opt Out of Monthly Same-Store Sales Reports - American retailing’s monthly same-store sales reporting ritual is about to get hit by a case of empty-nest syndrome. Following reports on January sales this Thursday, the list of retailers participating in the comparable-store routine will get three companies shorter when the three A’s of teen retailing — Abercrombie & Fitch Co., American Eagle Outfitters Inc. and Aéropostale Inc. — end their participation.  Although the move is part of a larger trend among companies seeking refuge from the spotlight of monthly disclosure, the recent developments could be more indicative of precipitous pressure in the teen space, according to analysts. <WWD>

Hedgeye Retail’s Take:  Within the next few years, the 20 or so companies reporting monthly sales will likely opt out as well.  Long a legacy of the industry, but now more of a distraction and fuel for trading volatility, there is very little incentive for a retailer to report on such a frequent basis.


The Ralph Lauren Man - Ralph Lauren’s world just keeps expanding.  At his fall men’s wear preview on Tuesday, the designer showcased what he called a “multilevel sensibility of how men could dress” that created individual statements for each brand while maintaining his overall vision. New this season is a distinct denim collection under the Black Label Denim moniker, as well as an expanded accessories assortment that covers shoes, leather goods and watches. <WWD>

Hedgeye Retail’s Take:   With solid momentum in men’s apparel over the past few months (across the board), Ralph should continue to benefit as one of “the” key resources in the men’s arena.


Prices Paid by U.S. Manufacturers Increased in January - An index measuring prices paid by U.S. manufacturers rose to its highest level since July 2008, according to the latest Manufacturing ISM Report On Business, which is based on data compiled from purchasing and supply executives nationwide.  The Index shows that new orders, production, employment, inventories, prices, exports and imports all grew faster in January then in December. The ISM Prices Index registered 81.5% in January, 9 percentage points higher than the 72.5% reported in December and the highest reading since July 2008. This is the 19th consecutive month the Prices Index has registered above 50%. While 64% of respondents reported paying higher prices and 1% reported paying lower prices, 35% of supply executives reported paying the same prices as in December. <SportsOneSource>

Hedgeye Retail’s Take:  Very much as expected, with rising costs continuing to permeate the broader domestic manufacturing space.  


Direct Marketing Association to Investigate Online retailers - A program designed to reassure consumers about their online privacy is taking effect this week. The Direct Marketing Association, a trade group, says it is ready to investigate marketers that do not display the Advertising Option icon on online ads that they serve to consumers based on their prior online behavior. The icon links consumers to information about online behavioral advertising and allows them to opt out of receiving ads based on their online behavior. The Advertising Option program is a self-regulation effort launched by a consortium of advertising trade groups in October that includes the Interactive Advertising Bureau, the Association of National Advertisers and the American Advertising Federation. As of yesterday, the DMA says it is now enforcing the rules it set out in October. <InternetRetailer>

Hedgeye Retail’s Take:  Is this the end of “cookies” and the contextual banner ad?  Probably not, but this certainly seems like a step in the right direction for consumers looking to keep their online activities private.


Phoenix Footwear's Shareholders Authorize Reverse/Forward Stock Split - Phoenix Footwear Group, Inc., the owner of Trotters, SoftWalk, and H.S. Trask, announced that at a special meeting on Jan. 28 its shareholders approved a 1-for-200 reverse stock split of the company's common stock, to be immediately followed by a 200-for-1 forward stock split of the common stock.  As a result, registered shareholders owning fewer than 200 shares of common stock of record prior to the Reverse Stock Split will have such pre-split shares cancelled and converted into the right to receive cash consideration of 75 cents per pre-split share.  The Reverse/Forward Stock Split will be effective following the close of business on Jan. 31, 2011. <SportsOneSource>

Hedgeye Retail’s Take:   Still not sure this move helps liquidity enough to put Phoenix under a bigger market spotlight. 


LV to open stores in Zhengzhou, China - Aiming at the 100-million population, Louis Vuitton has opened news stores in Zhengzhou, Henan province, China. The huge population and the number of billionaires in the province that reaches the 12th nationwide are the key reasons why the French luxury brand expanded their retail network in the city, according to  the Rupert Hoogewerf Fortune Report in 2010. The survey also show edthat consumption of luxury products in second- and third-tiered cities exceeded those in first-tiered cities both in value and volume for the middle-class. Private enterprises owners, affluent second generation and white collar workers are the main consumers. <FashionNetAsia>

Hedgeye Retail’s Take:   While the biggest cities are clearly important from a strategic marketing standpoint, it’s interesting to note that the actual purchasing power resides more in the second and third tier population centers.


In preparation for PENN’s Q4 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from PENN’s Q3 earnings release/call and subsequent conferences.

Post Earnings Conference Commentary

  • “I think going into 2011, you will probably see our CapEx about the same as it was this year. It won’t go up and in fact, it may go down a little bit. And the reason that is the case is that, over the last decade, let’s say, the price of the slot machine boxes have gone up pretty dramatically. I mean we – I think at the beginning of this decade they were probably in the 8,000 to 10,000 range and now we are looking at boxes in the $18,000 range. And I think that what we’ve decided to do is we’ve started to look a little bit more closely at our slot machine purchases to say, okay, here is what we are paying for the slot machines, here is the type of win per units that we are getting on the slot machines, they are not increasing. And in fact with additional competition that comes on the feature, win per units may go down. And so we have to adjust the number of slot machines that we actually are serious about replacing on a go-forward basis. So that’s why I think with going forward, you will probably see our number, our slot maintenance number about the same, of course slightly less than it is right now.”
  • “Gaming spend per visit and visits... have been pretty flattish on an absolute level for quite some time. I think probably what you’ll see going into the fourth quarter and the first quarter of next year is that those numbers across the country will be flattish for the first time in a long time.”
  • “What we’ve seen with West Virginia is ... numbers sort of rise and then continue to rise, and I think that has been surprising to us. I mean, I think normally when we go and we model these type of expansion opportunities, we think that table games should add about 15% to 20% or maybe 10% to 15% of your total casino win, and this one was closer to 25% for Charles Town and it continues to ramp…. We just recently added in November, a steakhouse there. I am not sure if you saw that when you were on your trip there, but we just added that. And we are – in the spring, we are going to add an entertainment venue as well and I think once we have the full package, I think we’ll be able to even further mine and market that high end table game customer, the Charles Town.”
  • [M resort] “The transfer of ownership... that’s probably going to be a first quarter, maybe early second quarter event.”
  • [Ohio slots] "The new Governor Casich ran on a platform of not increasing gaming taxes. And so when you think about what are your options in terms of reducing the budget there or the deficit, gaming is got to be one of them. And so potentially he is using this study period as a way to sort of shore up his base and find a way where additional gaming at the tracks can be palatable. He may come back and say that it’s not possible. And so I think either way, we’ll probably find out sometime by the middle of this year or by 2011."
  • “We’re encouraged by the fact that some of the numbers that we’re seeing out of some of the major Las Vegas locals operators like Station have been closer to flattish in the third and fourth quarter now on the revenue and EBITDA line rather than the double-digit declines that you’ve seen over the last two or three years. And I think that that’s probably where you stand going forward is sort of flattish to maybe modest inflationary type growth going forward in that market.”
  • [Casino Rama contract] “We’re going to be part of the new management contract there or at least we want to be a player there. We want to be potentially chosen there, and that’s probably an April or May of 2012 event.”

Q3 Conference Call

  • [Margins in Pennsylvania & West Virginia] “I’d be hesitant, though, to say that there’s going to be further improvement going forward from what you saw in the third quarter, given all the noise of the introduction of the new offerings at these two businesses.”
  • “Looking into the fourth quarter, we’re looking at total CapEx for 89.7 million, which we’ve broken down between new projects of roughly 69.3, and maintenance CapEx of roughly 20.4 million.”
  • “Some of the competitors have actually started to pull back [on marketing/promotional spending], noticeably Pinnacle, which we’ve seen in the markets we compete head-to-head with them....which is encouraging to see.”
  • “I certainly believe we’re going to see year-over-year margin improvement in the fourth quarter, Steven, as we continue to do that and fine-tune it. I would be hesitant to go into 2011 that far out until we have more data points into the fourth quarter to talk about how the P&Ls are looking in these businesses, but certainly I’m confident that you’re going to continue to see margin improvement in the fourth quarter.”

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The Macau Metro Monitor, February 2, 2011



The Genting Board of Directors announced that RWS has obtained syndicated secured credit facilities for up to S$4.1925BN. The New Facilities comprise S$3.5BN in term loan facilities and S$0.5 BN in revolving credit facilities from 19 lenders and a S$192.5MM banker's guarantee facility from DBS Bank Ltd. and Oversea-Chinese Banking Corp Limited.


MGM Macau announced a 5% salary increase for all non-management team members, starting March 1.


Notable news items/price action from the past twenty-four hours.

  • DRI is a “Buy” at current levels, according to JP Morgan.  The restaurant company is considering some “nontraditional opportunities” such as college campuses and airports, according to Darden executives during their annual investor-analyst day.
  • MCD Japan SSS rose 2.2% in January.   This is a significant sequential slow down from December’s +11.6% number.
  • WEN share price gained on strong volume as the company’s plan to sell Arby’s and focus on its core business continues to be viewed positively by the investment community.
  • DPZ shares rose on accelerating volume as expectations rose for pizza sales during the Super Bowl increased.  According to media reports, Pizza Hut expects to sell a record 2 million pies on Super Bowl Sunday and Papa John’s expects to sell 1 million pizzas in the U.S.
  • SBUX and YUM also gained on accelerating volume as MCD, GMCR, BAGL and COSI declined on accelerating volume. 
  • BWLD gained on accelerating volume, rising 3.8% and outperforming the casual dining space.  TXRH and EAT also gained on accelerating volume.



Howard Penney

Managing Director

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