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Athletic Apparel Trends Stable


The weekly athletic apparel data reflects positive sales for the week adding to a more stable trend of positive sales observed for each of the last four weeks. The family retail channel continues to strengthen posting the only sequential improvement on the week.  It’s also worth noting that prices firmed up, with ASP’s increasing across each of the channels.  This marks a change in trend for the first time since the week before Christmas and coincides with recent anecdotes coming out of January that inventories may indeed be in healthy shape.


In looking at the brands, we highlight the disparity in outerwear between the growth in The North Face at up +10%, while Columbia continues to decline down -1% posting the only such loss on the week.  Lastly, the Pacific region continues to underperform all other regions for the third week in a row – a trend worth noting in our book and unfavorable for retailers over-indexed to the west coast such as BGFV. It just so happens the company cited negative comps in December as the reason for negatively preannouncing last month. A trend that may have continued so far in 2011.


Athletic Apparel Trends Stable - FW App App Table 2 10 11


Athletic Apparel Trends Stable - FW App App 1Yr 2 10 11


Athletic Apparel Trends Stable - App Region chrt 2 10 11


Casey Flavin



Thank you to those who joined us for Hedgeye’s conference call: “Mayhem in Munis: Framing Up the Muni Bond Debate and How to Play It” with our CEO Keith McCullough, Managing Director Daryl Jones, and Analyst Darius Dale.


The replay of the call is now available to Hedgeye MACRO clients. 

The prepared remarks were roughly 30 minutes with an additional 25-30 minutes of live Q&A. Topics included:

  1. Will we see "hundreds of billions" of defaults in 2011?
  2. Will or won't States go bankrupt?
  3. What will the impact of Federal, State, and local austerity measures be?
  4. Will the Federal Government backstop State level debt?
  5. What are the lessons of history?
  6. How much do fund flows matter?

Please contact us at if you have any follow up questions.


We thank you in advance for your continued support.


Warm regards,


The Hedgeye Macro Team

FL/Sporting Goods: More or Less Volatility?

For all you watchers of the weekly footwear and apparel data that comes from NPD and Sportscan, you may be in for more volatility on earnings reports. Why? Two days ago Foot Locker told NPD that it needs to make a choice – sell a weekly data product to Wall Street WITHOUT Foot Locker participating, or simply pull all weekly data distribution to the Street.


The catalyst was Ken Hicks at Foot Locker realizing that NPD was having its cake and eating it too. With an analyst taking his forecast lower two weeks ago based in part on NPD data, it led management to question why they were being subject to increased weekly volatility and speculation by the Street.  Didn’t we get out of the weekly sales reporting game years ago? At the same time, FL became more aware than ever that NPD has been servicing the Street and the trade with the same data, for which FL is a large contributor.   Ultimately something has to give here, and it’s likely that the days of weekly data feeds to the Street are over.   


Now there are two notable items…


1)      Our sense is that monthly data will still be available. Monthly numbers in this space are actually quite accurate and smooth out the weekly gyrations that can be the result of a variety of factors (weather, promos, and product launches).  Plus the monthly data offers more specificity into products, brands, and channel performance. Weekly numbers in the past only reflect the specialty athletic channel.


2)      People are likely to pick up the phone and call Sportscan to subscribe to SSI’s footwear data, a similar product but one with its own limitations.  SSI is less accurate. Instead of reporting only the sales data provided by the retailers, SSI includes its own estimates for retailers absent from the sample.  This is similar to the process IRI uses with estimating Wal-Mart’s sales.  While SSI may now be the only solution, we point out that even the big brands like Nike don’t even use SSI’s footwear data. They use apparel, which is more accurate.


Brian P. McGough
Managing Director

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Heading into CMG’s earnings after the market closes the stock is near an all time high and up 10% over the last 5 days and 15% over the past month.  Consensus expectations are for CMG to have a good quarter - revenue is estimated to be $462.0M and EPS is expected to come in at $1.31.  Same-store sales and restaurant level margins are expected to be +9.9% and 25.3%, respectively.  


Guidance going forward is likely to be very different that what the company talked about last quarter.  Last quarter, CMG was looking for 3% food inflation and since them food prices have surged.  In addition, they now have a potential labor problem with the ongoing probe into the hiring of illegal immigrants by Chipotle restaurants.  It will be interesting to see how they forecast what incremental costs will be in 2011. 


Here is a look at CMG’s commentary on some forward-looking commentary during their most recent earnings call on October 21st, 2010.




“Food costs were 30.6% for the quarter, which is down 20 basis points from last year.  Prices for avocados, corn, rice and chicken were slightly lower in the quarter, which were partially offset by increases in barbacoa and steak due to the continued rollout of naturally raised beef.  We continue to expect modest increases in our food costs for the fourth quarter as we continue to invest in increasing our supply of naturally raised chicken and as prices for avocados increase due to a Chilean freeze…As we look to 2011, we will continue to invest in our Food With Integrity initiative and we expect inflationary pressure on many of our ingredients, especially chicken, beef, pork and avocados. As a result, we anticipate overall food cost inflation in the low- to mid-single digit range for 2011.”


“If we had 3% inflation, for example, that would be roughly 100 basis points on the food line” [assuming no price increase]

“If corn prices are going to increase, that’s generally going to cause both naturally raised and commodity meats to go in the same direction”


The chart below show the prices of key commodities since the last quarter's call. 







[In the event of a food price increase] “We would like to leak out smaller price increases than do a big giant increase all at one time.”


“We feel good that we have pricing power, it’s been two years now since we’ve raised prices in most of our markets…but we’re going to be patient about it.  I think what we’ll do is watch what happens…see how the consumer responds to price increases of other competitors and if it looks like inflation is going to hold, increases are generally being accepted by consumers, then we’ll be prepared to increase prices if need be.”


“Typically if we’re going to try to offset inflation, and inflation’s 3%, if we’re going to raise prices at all, we would look for something in the same ballpark as inflation would be, so somewhere around 3%.”





“If you have 3% inflation on food, we typically have inflation on our labor line of somewhere between 2% and 2.5% as well, something in that ballpark across many of the other line items”


“In the quarter, labor costs decreased 70 basis points to 24.2% and a 50 basis point decrease to 24.7% for the year.  The decrease for the quarter was the result of labor leverage driven by the comp increase, as our restaurant teams did a nice job recapturing some of the labor leverage lost in 2Q, along with the 40 basis point accrual adjustment I mentioned earlier, which we don’t expect to continue in the fourth quarter.


Howard Penney

Managing Director



Mayhem in Munis Macro Presentation: Dial-In & Materials Details

TODAY, FEB. 10, 2011 11AM EST


Valued Client,


5-10 minutes prior to the 11 AM EST start time please dial:

(Toll Free) or (Direct)
Conference Code: 861369#


To access the "Mayhem In Munis" materials please cut and copy the following link into your web browser:



To submit questions for the Q&A, please email .









Join Hedgeye's CEO Keith McCullough, Managing Director Daryl G. Jones, and Analyst Darius Dale who will discuss the Municipal Bond Market. The key questions being answered include:



-Will we see "hundreds of billions" of defaults in 2011?


-Will or won't States go bankrupt?


-What will the impact of Federal, State, and local austerity measures be?


-Will the Federal Government backstop State level debt?


-What are the lessons of history?


-How much do fund flows matter?



Please contact if you have any questions.



Jen Kane

Managing Director and Head of Institutional Sales



111 Whitney Avenue

New Haven, CT 06























Daily Oil & Gas Perspectives

From the Global Oil and Gas Patch: February 10, 2011


Current Long Positions in Hedgeye Virtual Portfolio……

  • Oil (via the etf OIL) – Initiated 2/2/11 @ $25.21
  • CNOOC (CEO) – Initiated 2/9/11 @ $210.25

Current Short Positions in Hedgeye Virtual Portfolio……

  • Murphy Oil (MUR) – Initiated 2/3/11 @ $42.65

Chart of the Day……


Daily Oil & Gas Perspectives - APC DAILY GHANA FEB 10 2011


Daily Oil & Gas Perspectives - APC DAILY MOZAMBIQUE FEB 10 2011


Key Metrics……


Daily Oil & Gas Perspectives - table


Must Know News……


PetroChina and Encana Team Up in Western Canada……PetroChina Co. (PTR), China’s biggest energy producer, agreed to buy a 50% stake in Encana Corp.’s(ECA) Cutbank Ridge gas assets in Canada for C$5.4 billion ($5.4 B-billion) in its largest overseas acquisition.  PetroChina would get daily production of 255 MMcf of natural gas from 635,000 acres in the provinces of Alberta and British Columbia, Encana said yesterday. Proven reserves are 1 Tcfe.  The companies will also form an equal venture to increase output, the Beijing-based producer said in a statement today.  Each company would contribute 50/50 to future development capital requirements.  Encana will initially operate the joint venture's assets and market the production.  (Bloomberg, Street Account)


Hedgeye Energy’s Take: ECA has been marketing for a partner since early 2010 to secure development of these assets. The Chinese have deep pockets and need reserves; ECA wanted to spread the development/capital risk and has found a willing partner in PTR willing to pay top dollar. The price appears high for natural gas assets in Canada at roughly ~C$8,500/acre, or ~C$5.40/Mcf of proven reserves, and marks PTR’s entry into North American gas assets. Asian partners, primarily the Chinese, have invested ~C$15 B in Canadian resources. Indeed, since the beginning of 2010, Chinese Companies have spent nearly ~$46 B in global resource acquisitions.


Chevron Buys Shale Gas Assets……Oil giant Chevron Corp. (CVX) said Wednesday it has recently acquired about 200,000 acres of land in the Duvernay shale gas formation in Alberta, Canada.  "This has established an important core land position for Chevron Canada in shale gas," said Kurt Glaubitz, a company spokesman. Chevron is planning to commence appraisal drilling during the second half of this year, he added.  The Duvernay shale sits nearly four kilometres below the surface. In its broad reach across central Alberta, it underlies fully 10 other rock zones that contain commercial quantities of natural gas.  Also, compared to more proven areas, Duvernay land remains abundant enough that major companies can make a large bet on it. It lies in an area thick with pipelines and other infrastructure, making it potentially cheaper to develop than plays in the northern hinterland. (Company statements, The Globe and Mail)


Hedgeye Energy’s Take: We expect CVX to step up its activity in North American shale development as CVX pursues production growth at a lower political risk profile. While the production is not immediate for 2011, CVX is seeking to become gassier with a greater footprint in North America, and it has the deep pockets to invest through the price cycles. CVX is thinking long-term.


Chinese Oil Demand Growth to Slow…… China’s oil demand growth may slow “noticeably” this year as the economy expands at a reduced pace and the country improves energy efficiency, according to the International Energy Agency.  China, which consumes more oil than any country except the U.S., may boost efficiency as it burns more natural gas and restricts car use, according to the energy security adviser to the Organization for Economic Cooperation and Development. Fuel demand may increase 6% this year, from 12% in 2010, the IEA said today in its monthly Oil Market Report.  “The economy should cool down slightly, gasoil shortages ease and oil intensity fall,” the Paris-based agency said. “New sources of energy should provide some degree of inter-fuel substitution.”  “China’s oil demand outlook has become increasingly crucial for global oil balances,” the IEA said. “We remain cautious so far, expecting China’s oil demand to rise by a much more modest but nonetheless significant 570,000 barrels a day.”  (Bloomberg)


Hedgeye Energy’s Take: Indications are that China will slow its economy in 2011, as recent interest rates hikes are pointed at curbing rising inflation. A slowing economy will ease oil consumption demand, which depending on how fast inflation accelerates and the global economic situation deteriorates will put downward pressure on crude prices, particularly Brent marker crudes, which Chinese refineries rely upon.


Anadarko Announces Discovery Offshore Ghana……APC announced a discovery at the Teak-1 exploration well in the West Cape Three Points Block offshore Ghana, where Anadarko owns a 30.875% working interest. The Teak-1 well encountered a total of approximately 240 net feet of oil, condensate and natural gas pay in five separate Campanian and Turonian-age reservoirs. More specifically, the well encountered approximately 70 net feet of oil pay and almost 108 net feet of natural gas pay in the Campanian, and about 46 net feet of gas condensate pay and 16 net feet of oil pay in the Turonian reservoirs of a similar age to the Jubilee field. Oil samples recovered from the Teak-1 well indicate oil of approximately 40 degrees API gravity in the Campanian reservoirs and 32 degrees in the Turonian reservoirs. The Teak-1 discovery well, which is located more than two miles northeast of the Mahogany-2 well, was drilled to a total depth of approximately 10,400 feet in water depths of approximately 2,850 feet. The partnership plans to suspend the well for future use and mobilize the rig to drill the Teak-2 prospect. West Cape Three Points Block, is operated by Kosmos Energy (30.875%), Tullow Oil plc (TLW LN)(22.896%), the E.O. Group (private) (3.5%), Sabre Oil & Gas Holdings Ltd (private) (1.854%) and the Ghana National Petroleum Corporation (10%). (Street Account)


Hedgeye Energy’s Take: APC has had considerable exploratory success offshore West Africa in Ghana and offshore East Africa in Mozambique. In Mozambique, APC made a fourth gas discovery offshore Mozambique in the Rovuma Basin, the discovery well was at the Tubarao prospect. Appraisal drilling is expected within the year for offshore Ghana, but initial indications are the hydrocarbon potential i as Ghana has become a core area of development for APC and its partner TLW. First oil at the massive Jubilee Field in Ghana, with reported ~1 B bbl of resource potential was achieved in December 2010, with gross production targeted at 120,000 b/d by mid-2011.  See our charts of the day above for maps of APC's recent discoveries.


Lou Gagliardi


Kevin Kaiser

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