R3: AMZN, JCP, WMT, Groupon


February 14, 2010






  • Docker’s continues its efforts to elevate the “khaki” and bring some excitement to the middle market brand.  This time the company is collaborating with recently announced GQ menswear designer of the year, Alexander Wang, to create a limited edition capsule collection.  Recall that Docker’s has also partnered with Steven Alan.
  • While Wall St and most of the media is enthralled with the multi-billion dollar valuation hypothetically placed on Groupon, the hot social couponing site continues make missteps.  Just a few days after the company pulled it’s TV commercials that originally debuted during the Superbowl, the company is now offering refunds to consumers who purchased a deal for flowers at FTD.  It turns out a special Valentine bouquet would have actually cost MORE to those who bought the coupon rather than purchase the item directly from FTD.com.  Backlash ensued.
  • If you didn’t see the NY Times article this Sunday exposing JCP’s search engine optimization strategies it’s worth taking a look.  Incredible insight into the lengths the retailer  went to in an effort to reinvigorate growth in its .com platform.  http://www.nytimes.com/2011/02/13/business/13search.html



Amazon’s Texas showdown - Amazon.com Inc. says it will close its Dallas area fulfillment center and reverse its plans to build additional centers in Texas, where the world’s leading web-only retailer was unable to reach an agreement with state officials to avoid collecting sales tax on purchases made by Texas residents. “Closing this fulfillment center is clearly not our preferred outcome,” Dave Clark, Amazon’s vice president of North American operations, said in a memo distributed this week to employees. “We were previously planning to build additional facilities and expand in Texas, bringing more than 1,000 new jobs and tens of millions of investment dollars to the state, and we regret the need to reverse course.” <InternetRetailer>

Hedgeye Retail’s Take:   Surprising move here by AMZN to actually pick up and leave the state.  Clearly the stakes on both sides of the Internet taxation debate have heated up.  Expect to see more talk on the topic as states look for all possible ways to close their budget gaps.


Wal-Mart’s Massmart Bid Clears First Antitrust Hurdle - Wal-Mart Stores Inc., the world’s largest retailer, received clearance from South Africa’s Competition Commission for its $2.3 billion bid for a 51 percent stake in Massmart Holdings Ltd. The commission referred the offer to the country’s Competition Tribunal and recommended its approval without conditions, according to an e-mailed statement today from an external public-relations agency for Johannesburg-based Massmart. The tribunal makes the final recommendation on antitrust matters in the country. <Bloomberg>

Hedgeye Retail’s Take: With the stock near multi year highs, the focus still remains the momentum of the domestic business.  Acquisitions like this one will not move the needle any time soon.


DVF Goes Exclusively to Bloomingdale's - “We’re playing it very big. When we get an exclusive, we make a big deal of it.” That’s Bloomingdale’s chairman and chief executive officer Michael Gould expressing what’s been standard procedure at the store for years — getting the jump on the competition with a high-profile label. On Friday, Gould whisked Diane von Furstenberg through Bloomingdale’s 59th Street store, which was decked out in DVF tabletop and bedding on the home floors, in the windows, along the escalator banks and with statements in ready-to-wear areas. It’s the designer’s first true crack at the category, though she’s dabbled in home decor before, and it’s comprehensive — about 500 stock-keeping units in tabletop and another 400 in bedding. <WWD>

Hedgeye Retail’s Take:  Big move on the merchandising front for both parties involved as the iconic designer known for her prints (and wrap dress) makes her way into the home.  This should be a hit.


Olsens Collaborate with Toms Shoes - First, it was the perfect T-shirt; then, the iconic sunglasses, and now, Mary-Kate and Ashley Olsen are delving into shoes. The two are continuing to build their designer label The Row, and for fall, they are collaborating with philanthropy-driven Toms Shoes. The partnership resulted in three groups of shoes that offer a new take on Toms’ espadrilles. Toms + The Row shoes will be available in plaid, wool-cashmere and herringbone, at a suggested retail price from $98 to $150. Blake Mycoskie founded Toms Shoes in 2006 after coming across an Argentine village on his travels that was so poor its children didn’t even have shoes.  <WWD>

Hedgeye Retail’s Take:  Tom’s has embraced the “collaboration” from the very beginning which has helped to keep the brand from becoming just another commodity product (even with the unique social premise of the brand).


Burton Cuts Ties with Dealers Suspected of Gray Marketing - Burton Snowboards said it recently terminated dealer agreements with several US shops suspected of re-selling products through unauthorized channels. This move reflects Burton's ongoing efforts to protect and support its global network of specialty retailers by aggressively combating gray marketing. "I've said it many times, and I'll say it again - I have absolutely no tolerance for gray marketing," said Jake Burton, founder and CEO of Burton Snowboards. "I don't get why a snowboard shop in one part of the world has a right to sh*t on a local shop in another part of the world for short-term gains. I often think of it in the context of a Japanese dealer shipping product back to Walmart in the US. We want to build a global network of specialty retailers that cares about the sport, the brand, the product and each other. So we're not afraid to end relationships with dealers that gray market anywhere in the world." A few months ago in mid-season, Burton took unprecedented action by canceling millions of dollars in US orders that were most likely intended for the gray market in Japan. For the sake of all its retail partners around the world, Burton's goal is to ultimately eliminate gray market activity, the company said. <SportsOneSource>
Hedgeye Retail’s Take:   While most illegal activities in retail and apparel usually surround counterfeiting, this issue also one to watch. For those brands that do not operate a critical mass of owned-stores, reliance on a dealer network is certainly not without risk.


Tanneries in Argentina are Outbid - The government of Argentina said it will take steps to offer help to the sheepskin industry in view of the raw material supply problem that the country has been facing.  Tanners in Argentina have complained of a lack of raw material after what they have called “an explosion in demand” for skins from rivals in China. Chinese tanners are reported to have been paying as much as $8 per raw skin, while local tanners pay only $5 and feel it would be impossible for them to pay more. <FashionNetAsia>

Hedgeye Retail’s Take: With slaughter figures in Argentina down 25% in 2010 and largely expected to experience another decline in 2011, short supply coupled with greater demand out of China is creating yet another inflationary dynamic in retail.

Chinese New Year Spending up 19 Percent - The Chinese didn’t just set off thousands of fireworks and feast on banquets of dumplings during the recent Lunar New Year holiday, which ran Feb. 2 through Feb. 8. They did plenty of shopping as well. According to the Ministry of Commerce, Chinese consumers spent 404.5 billion renminbi, or about $61 billion, over the seven-day holiday period, also known as Golden Week. That’s a 19 percent increase from the year before. Retail spending spiked even higher outside of first tier cities like Beijing and Shanghai. In Shanxi Province, for example, sales were up 23 percent while Sichuan Province saw a 21.5 percent gain and Tianjin, a city about an hour away from Beijing, had a 20 percent increase, according to the commerce ministry. <WWD>

Hedgeye Retail’s Take: Certainly a bullish indicator of Chinese consumer sentiment – 20%+ growth is worth noting. In addition, strength in second tier cities supports interest noted by several retailers (e.g. RL) that are looking to grow more aggressively beyond China’s first tier locations.


China Near Half of Luxury Market by 2020 - Fast-growing China is poised to account for 44 percent of the global luxury market by the year 2020, according to a new report from CLSA Asia-Pacific Markets. CLSA, which is a bookrunner on Prada SpA’s planned initial public offering in Hong Kong, forecasts the Chinese luxury market will grow at a rate of 25 percent a year for the next five years, and then at a rate of 22 percent a year afterward. This implies a market size of 74 billion euros, or $101.4 billion, by 2020. Consulting firm Bain & Co. estimates China’s domestic market in 2009 was 68 billion yuan, or $10.32 billion.<WWD>

Hedgeye Retail’s Take: We agree that China remains a sizeable opportunity for most categories in retail, but assuming that  a country that currently accounts for just shy of 20% of the world’s population will be accounting for nearly half of the luxury goods market in 10-years sounds like a stretch by most measures. It’s currently the world’s 3rd largest market for luxury goods and accelerated growth is more likely to come from further infrastructure development, but these figures look optimistic to say the least – perhaps not surprisingly given the firm has an IPO in the pipeline to sell.



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.”

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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.

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Cartoon of the Day: Crash Test Bear

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

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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.

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

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

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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.

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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."

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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.

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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."

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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.

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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.

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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.

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