R3: WMT, KCP, JCP, and ANF


February 4, 2010



  • In a marketing driven, fashion world sometimes it’s just better to remain silent.  Yesterday, Kenneth Cole used poor judgment by Tweeting that the “uproar in Cairo” is a result of the people hearing the company’s new Spring line is now available.  The backlash has already begun in full force, with the creation of a parody Tweet feed called KennethColePR which mocks the original statement.
  • Duane Reade and Walgreen’s watch out.  A new drugstore hybrid concept called Prime Essentials is about to open in NYC with high hopes of becoming a citywide chain.   The store looks to combine traditional drugstore offerings with groceries as well as home goods.  The first location opens in Tribeca next month.
  • According to a Harris Poll, 34% of Americans have no retirement savings and 27% have no personal savings.  Eighteen months ago the same survey produced modestly lower results, with 30% indicating no retirement savings, and 22% with no personal savings.



New York City Council Holds Wal-Mart Hearing - Wal-Mart Stores Inc. declined to attend Thursday’s New York City Council hearing on how its stores affect small businesses and communities, but it dropped off a petition with 30,000 consumers’ signatures in support of opening units in the five boroughs.  The hearing was spearheaded by City Council speaker Christine Quinn, a vocal critic of Wal-Mart, who is bent on preventing the retail giant from entering New York City.  Wal-Mart has yet to identify a site in New York, but has expressed interest in Gateway II, a shopping center near Jamaica Bay in Brooklyn that doesn’t require City Council approval.

Pasted from <WWD>

Hedgeye Retail’s Take:  We wonder if the media is taking this subject to new highs while at the same time WMT is methodically plotting its moves behind the scenes to amicably enter the NYV market.  While the issues at hand are union and job related, the reality of lower prices in one of the most expensive markets in the world may be overlooked by those who have actually never shopped a supercenter.


Low Inventories Hit January Comp-Store Sales - January exhibited the balancing act retailers face for all of 2011: keeping inventories lean, but not so low that they lose sales. Unfortunately, many stores last month cut back too much — and the harsh winter weather didn’t help matters. The International Council of Shopping Centers said retailers logged a 4.8 percent jump in comparable-store sales, which generally bested analysts’ estimates of a 2 to 3 percent rise. But it was clear some stores went into the month light on inventory and came out on the other end light on sales. <WWD>

Hedgeye Retail’s Take:   It would be hard to find a retailer complaining that they ran out of goods by the end of the holiday clearance season, only to come into Spring clean.  More interesting is that this scenario played out after what some viewed as a disappointing December. 


Modern Bride enters JC Penney's - Within the past week, Modern Bride bridal jewelry shops have popped up inside more than 1,000 J.C. Penney stores, recasting the category with a fresher, younger image and extending the retailer’s strategy of partnering with publishers in nontraditional ways. Modern Bride magazine was shut down in fall 2009, but Penney’s licensed the name from Condé Nast believing it still conveys brand authority. Penney’s executives also said the Modern Bride name could be seen in other wedding-related businesses, but didn’t specify. The assortment includes engagement rings and wedding bands for 24- to 30-year-olds

Pasted from <WWD>

Hedgeye Retail’s Take:   With marriage rates mostly consistent from year to year at around 2 million couples, it’s notable to see so much effort being put into the refreshing/reinventing the bridal business.   Recall that JCG, URBN, David’s Bridal, and now JCP are all upping the ante with new merchandising efforts.


BJ’s Surges as Board Decides to Explore Options, Sale - BJ’s Wholesale Club Inc. surged the most in almost three months after saying its board has decided to explore strategic options, including a possible sale.  The Westborough, Massachusetts-based retailer has hired Morgan Stanley as its financial adviser, according to a statement today. The company had a market value of about $2.35 billion as of yesterday’s close. BJ’s hired the investment bank last year after receiving an offer from private-equity firm Leonard Green & Partners LP, three people with knowledge of the matter said at the time. <Bloomberg>

Hedgeye Retail’s Take:  Now the question shifts to deal or no deal?  Clearly Sara Lee must give some pause to those who believe a sale is imminent. 


Gains Expected for Cosmetics- Mass cosmetics are on a roll. On the heels of 4 percent sales increases for 2010, retailers and manufacturers are confident the category is poised for another year of growth, possibly even outpacing last year. They cite expansion into global markets and heightened consumer confidence as the main drivers.  Carmen Bauza, vice president of beauty for Wal-Mart Stores Inc., said, “The customers are feeling enough is enough. We’ve dealt with this [recession] for two years and they’ve been able to manage through this environment. Customers have learned to manage their finances and to manage their priorities.” Bauza speaks from experience. She and other Wal-Mart employees are expected to live on a budget for a period of time so they know how far a dollar actually stretches.< WWD>

Hedgeye Retail’s Take:  While a bottoming in the consumers wallet may be in part the reason behind a mass cosmetics improvement, the quality of the products being sold at Mass may also be a driver as well.  Anyone notice the sales-assisted departments at TGT or CVS lately?

Canada's Aritzia Arrives in New York - As American retail’s migration north continues — Target recently said it will open stores in former Zellers units — Canadian retailer Aritzia is heading in the opposite direction.  A temporary location on the third floor of 524 Broadway and Spring Street will debut Sunday, a precursor to Aritzia’s permanent 10,000-square-foot bi-level unit opening in May.  Aritzia, a vertically integrated multilabel retailer for women ages 18 to 35, produces eight proprietary brands with names such as Wilfred and A Moveable Feast. All are designed in-house and are far from basic. “They’re there to stand on their own as individual brands and to complement the other brands,” said Brian Hill, chief executive officer. <WWD>

Hedgeye Retail’s Take:   A competitor to Scoop and Searle arrives on their home turf. 


Acushnet Sales Process Begins - Morgan Stanley has sent out marketing materials and non-disclosure agreements for the sale of Acushnet, the parent of Titleist or Footjoy, according to a report on CNBC. The number of potential suitors include Nike, Adidas, Callaway, Cleveland/Srixon parent Sumitomo Rubber and Mizuno. Callaway would likely have to partner with a PE firm to make an acquisition, the article stated. The first round of bidding will complete in late February. If bidding is less than desirable, an IPO-based spinoff of Acushnet could be the end result. <SportsOneSource>

Hedgeye Retail’s Take:  The interesting scenario surrounding this sales process lies within the fact that the potential buyers are amongst a very small group.  With very little growth in the industry overall, it will be interesting to see which strategic buyer views scale as a key driver of success despite that fact that owning multiple brands is likely cannibalistic.


The web grows almost six times faster than stores for Abercrombie - Sales were up across the board for specialty apparel retailer Abercrombie & Fitch Co. last year, but the Internet grew nearly six times faster than stores. For the fiscal year 2010 ended Jan. 29, Abercrombie, No. 65 in the Internet Retailer Top 500, reported:E-commerce revenue grew year over year 41.3% to $352.5 million from $249.4 million in fiscal 2009 and total sales increased year over year 18.5%. <InternetRetailer>

Hedgeye Retail’s Take:  E-com sales now top out at 10.2% of total, which puts the company in line with the historical averages for retailers with direct businesses. 

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