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R3: REQUIRED RETAIL READING

February 15, 2010

 

 

 

 

RESEARCH ANECDOTES

  • With Steve Madden stepping up late last year to rescue debt laden Betsey Johnson, it didn’t take long for the two brands launch a new line.  Shown for the first time at Fashion Week, Johnson debuted a lower priced line called “Pink Patch”.  All items will be priced below $100.  Not surprisingly the runway models wore a new line of Madden shoes which are available for a short time only on the company’s website.
  • According to Nielsen, grandparents are growing into a major consumer segment.  There are currently 69.6 million grandparents in the US with the number expected to grow 11% by 2015.  Grandparent households spend 4.4% more per year than all other households, which equates to extra spend of about $300 per year.  Oddly, grandparents with just one grandkid spend two times more than those with two to 10.  Note to parents looking to have their kid(s) spoiled. 
  • In a report out of the Financial Times Deutschland, VF Corp. is said to be vetting German outdoor company Jack Wolfskin along with two other parties. As one of Europe’s largest outdoor wear manufacturers and sales north of $400mm, the company fits several of VF’s stated acquisition criteria. However, with double-digit sales growth in each of the past seven years, we’re not sure it matches the profile of an underperforming/broken brand. 

OUR TAKE ON OVERNIGHT NEWS

  

Under Armour wins MLB Footwear License - Under Armour was named the official performance footwear supplier of Major League Baseball, effective for the upcoming 2011 season. Under Armour replaces Reebok. The multi-year agreement gives Under Armour the worldwide rights to produce and distribute the official "silhouetted batter" MLB logo on its MLB Authentic Collection baseball cleats. As part of this new licensing agreement, Under Armour will have the rights to include the MLB logo and MLB Club marks on the brand's in-store, digital, and print advertising for baseball footwear and will have a feature attraction at MLB All-Star FanFest beginning this summer in Phoenix and throughout the term of the contract. <SportsOneSource>

Hedgeye Retail’s Take: Coming on the heels of the rumored Cam Newton endorsement, UA is clearly focused on gaining more exposure “on field”.  On the other hand, it looks like Reebok remains solely focused on its women’s/toning image having let the NFL and now MLB footwear license fall into new hands.

 

Converse Invests in London's The 100 Club - Converse has provided a cash injection to The 100 Club, London's legendary live venue that had been facing financial difficulties and threatening to close. In a statement posted by xfm.com, Converse said, "We at Converse are very excited about our new partnership with the legendary 100 Club in London. Converse's commitment to being a catalyst for creativity is at the heart of the brand and we are dedicated to championing and supporting artists, fans, the music scene, venues and the experience. <SportsOneSource>

Hedgeye Retail’s Take:  Interesting marketing opportunity which immerses Converse into the art/music scene and takes the brand far from any athletic association. 

Apparel Prices Set to Rise -Fashion’s sticker shock has only just begun. If designers think the worst of their problems with spiraling fabric prices is over, they should brace themselves for even higher costs in the next few months — just in time for spring 2012. And while rising raw materials costs are on the verge of bursting through at the retail level, there’s no sign consumers are willing to absorb all the increases that designers have had to bear. Over the last year, cotton prices have jumped 160 percent and wool prices have risen 44 percent. While the pace has slowed, prices continue to climb. The cost pressure on designers and manufacturers comes as there are signs consumers are willing to spend again — creating a delicate balance between how much firms can boost wholesale and retail prices without spooking shoppers who remain focused on value. <WWD>

Hedgeye Retail’s Take: At this point nothing related to cost pressure should be a surprise.  However, the consumer reaction and how long this will last still remains the big unknowns.  

 

Shoe Execs Discuss Market Drivers - Footwear executives kicked off FN Platform Monday with a discussion highlighting widespread market trends, from boots and sandals to toning and barefoot running. "In terms of fashion right now, there are so many trends colliding," said Scott Prentice, VP of sales at Calvin Klein Footwear, who spoke on the Sterne Agee-sponsored panel moderated by company analyst Sam Poser. Other speakers included Rick Ausick, president of Famous Footwear; Cliff Sifford, EVP of Shoe Carnival; Steve Silver, owner of the Next chain; Isack Fadlon, owner of Sportie LA; and Ilse Metchek, president of the California Fashion Association. Major trends for fall, the panel noted, include the enduring Americana look in the men's category, preppy boat shoes, tall boots and toning and minimal running styles. <WWD>

Hedgeye Retail’s Take: The key to a sustainable footwear trend is stated clearly above in the statement, “there are so many trends colliding”.  This is about the healthiest set up a retailer could envision given that multiple categories are working at the same time. 

NRF Forecast 6% Growth in 1H Container Imports - Import cargo volume at the nation’s major retail container ports is expected to be up 11% in February over the same month last year and the first half of 2011 should be up 6% over the same period in 2010, according to the monthly Global Port Tracker report released today by the National Retail Federation and Hackett Associates. “Strong growth in 2010 has retailers cautiously optimistic that the economic recovery is finally taking hold,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “While high unemployment and rising commodity prices are cause for concern, retailers are encouraged by six consecutive months of retail sales gains and improved consumer confidence.” U.S. ports handled 1.14 million Twenty-foot Equivalent Units in December, the latest month for which actual numbers are available. That was down 7% from November as the holiday season wound down, but up 5% from December 2009. It was the 13th month in a row to show a year-over-year improvement after December 2009 broke a 28-month streak of year-over-year declines. One TEU is one 20-foot cargo container or its equivalent. January remained steady at 1.14 million TEU, a 6% increase over January 2010. February is forecast at 1.11 million TEU, up 11% over last year, with March at 1.16, up 8%; April at 1.22 million TEU, up 7%; May at 1.3 million TEU, up 3%, and June at 1.37 million TEU, up 4%. <SportsOneSource>

Hedgeye Retail’s Take: Given the volume ramp in the 2H of 2010 as retailers looked to ‘front-run’ escalating costs, 2H growth is likely to decelerate from 6% in the 1H. Interestingly, compared to the 7-8% growth forecast for next year from the Transpacific Stabilization Agreement (TSA) representing Asian-U.S. trade, it would appear that volume through Asia is growing at a modestly faster pace.

Brazil December Retail Sales Slow  -  Brazil’s retail sales stalled in December for the first time since April after the central bank took steps to curb credit growth. Retail sales were flat in December from the previous month, the national statistics agency said in Rio de Janeiro. Analysts had been forecasting sales to grow on a seasonally-adjusted basis by 0.4 percent, according to the median forecast in a Bloomberg survey. Sales increased by 10.1 percent from a year ago and 10.9 percent in 2010, the biggest jump since the series began in 2001. Supermarket, food and beverage sales fell 0.3 percent in the month, while six of the remaining seven categories posted growth. It was the first time since April 2010, when sales declined 3.1 percent, that merchants didn’t sell more items than the previous month. <Bloomberg>

Hedgeye Retail’s Take: With food accounting for close to 20% of household income in Brazil the heightened sensitivity to food inflation relative to domestic trends are evident in December sales results.

Social Network Use in China - Marketers planning to expand into Asia-Pacific cannot ignore China. Its GDP continues to climb at more than 10% year over year, and the number of internet users in the country is increasing every day. “As penetration approaches saturation, users are adopting activities that mirror the West but remain distinctly Chinese,” said Mike Froggatt, eMarketer research analyst and author of the new report “China Social Media Marketing.” They show a particular taste for social networks. eMarketer estimates that 265 million internet users in China will use social networks at least monthly this year, a 28% increase over 2010. By 2015 China will boast 488 million social network users. <emarketer>

Hedgeye Retail’s Take: No comment on the “Pimp up my avatar” interest, but the fact that following brands is the second most common activity by Chinese consumers is worth noting for retailers that are still cutting their teeth on this new channel domestically.

R3: VFC, SHOO, UA, Avatar - R3 2 15 11