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February 17, 2010



  • Iconix management reminded investors that the company doesn’t really get into the weeds on issues surrounding cost pressures and pricing increases at retail.  Given the company’s focus exclusively on licensing, they went on to say they expect every store to have a different strategy with some holding price and working on tighter margins while others will raise prices.  Very insightful for a company with licenses representing $12 billion in retail sales worldwide.
  • Only several months after the Japanese press reported Abercrombie’s flagship Tokyo store wasn’t necessarily a huge hit, the company confirmed that the stores sales growth has turned negative.   As a result there are no plans currently underway to expand further into the Japanese market.  Management is also not entirely sure why the brand and store are not meeting expectations.
  • Say goodbye to Old Navy’s two year old Supermodelquins ad campaign.  Today the brand introduces its first major marketing push under new leadership (founding CMO of JetBlue) called, “Old Navy Records: Original Hits. Original Styles”.  The campaign slated to last throughout 2011 will include a half dozen original tracks as well as a tie-in with popular mobile app Shazam.  When consumers Shazam one of the original songs, the app will connect the music with key looks, product, and styling tips associated with that track’s music video.


TPG taking J. Crew Private - After 85 days, overtures to 59 companies and four semiserious suitors, J. Crew Group Inc. is moving forward with its $3 billion deal to be taken private by TPG Capital and Leonard Green & Partners.  The firm said Thursday its “go-shop” period had passed without any alternative offers. Shareholders will vote on the deal March 1. J. Crew solicited 59 potentially interested parties, and four ultimately signed confidentiality agreements and were granted access to additional details on the company. One of the parties with a confidentiality agreement had a meeting with the management, including chairman and chief executive officer Millard “Mickey” Drexler.  <WWD>

Hedgeye Retail’s Take:   With an abnormally long “go shop” period which yielded no incremental offers, it may finally time to put the belief that the board didn’t fully perform its fiduciary duties to rest.


CityTarget Unit Planned for Chicago - Target Stores on Wednesday gave a name to the small-format concept it unveiled in September — CityTarget. The stores will measure 60,000 to 100,000 square feet, about half the size of typical Targets, which are 125,000 to 180,000 square feet.  The first CityTarget unit will open next year on South State Street and Madison Street E. in Chicago in a U.S. historic landmark building formerly occupied by Carson Pirie Scott and now known as Sullivan Center. Target said it will preserve Sullivan Center, referring to it as a “Chicago treasure,” and added that the CityTarget will blend in with the building’s aesthetic. <WWD>

Hedgeye Retail’s Take:   We suspect that Target’s marketing focus which historically has been rooted in urban centers will give the brand a huge edge with customers clammering for Target’s hipness without heading out of town to a strip center.  While still just a test, this strategy is one to watch.


Phillips-Van Heusen Licenses Izod in India, Middle East - Phillips-Van Heusen Corporation has licensed Arvind Mills Ltd. to manufacture and market men's, women's and boys' apparel and accessories under the Izod  brand in India, as well as in the United Arab Emirates, Kuwait, Bahrain, Qatar, Saudi Arabia, Bhutan, Madagascar, Seychelles, Oman, Yemen, Bangladesh, Nepal, Sri Lanka and Maldives. Under the agreement, Arvind, based in Bangalore, India, will have the right to produce and market a wide range of products, including tops, casual pants and shorts, jeans, sweaters and unconstructed blazers, outerwear, and accessories, such as women's handbags and men's and boys' small leather goods. The initial term of the license agreement is through 2019, with renewal options that would extend the term through 2029. <SportsOneSource>

Hedgeye Retail’s Take:   While this deal is clearly aimed at longer term prospects, we do wonder how well a truly American (preppy) brand will perform in one of the most politically unstable regions of the world at the current time.


Guess Opens Fifth Avenue Flagship - Guess Inc. is hoping to devour a $10 million piece of Manhattan’s retail pie with its new Fifth Avenue flagship. Described with superlatives such as first, biggest and premium, the 13,000-square-foot, two-level unit at 575 Fifth Avenue and 47th Street is primed to do hefty sales volume. For starters, it’s the largest Guess store in the world. “This is a big step for us,” said Paul Marciano, vice chairman and chief executive officer of Guess Inc. “We’ve never had a major location on Fifth Avenue. We found a store that’s a little bit big, but it will cover every avenue of our business. We have collection of lingerie and underwear, but because of space issues, we’ve kept it in Europe and Asia. I will [now] have the space.” <WWD>

Hedgeye Retail’s Take:   Long in the works, the company’s showpiece location finally opens. If the fanfare at ICR was any indication, this is one location that warrants a visit for anyone passing by 47th and Fifth.


Daphne to enter into Japan and Singapore - Chinese footwear brand Daphne plans to open 1,500 new stores in Mainland China this year and will also further expand into new markets including Japan and Singapore.  With its sales growth maintaining at a double digit over the last few years, Daphne’s revenue reaches HK$7 billion in 2010 and is ready to expand into new markets in Southeast Asia and Northeast Asia, starting from Singapore and Japan, and then Malaysia and Indonesia. The company has opened ten retail stores in Japan by working with retail giant Aeon.  <FashionNetAsia>

Hedgeye Retail’s Take:  With a base of 4,000 stores in the region (including licensed Adidas and Nike outlets) the growth of an additional 1,500 units is notable.  The company’s namesake brand remains the single largest banner within the portfolio.


U.S-made Yarn Prices Jump in January - U.S.-made yarn prices soared in January, as the inflationary price pressure from historically high raw cotton prices that is gripping the industry throughout the supply chain broke through at the core of America’s diminished manufacturing base. The Labor Department’s Producer Price Index, released Wednesday, showed wholesale prices for domestically produced yarns rose 12.3 percent in January compared with December and spiked 20.2 percent against a year earlier. Wholesale price inflation also began to creep into U.S.-made apparel, although at a significantly lower rate. Those prices rose 0.5 percent last month compared with December and increased 0.9 percent compared with a year earlier. <WWD>

Hedgeye Retail’s Take:  Notable although largely irrelevant given the “niche” manufacturing that still resides stateside for "Made in USA" apparel.

Denim Market Hits Headwinds - The denim market is going to require a healthy, sustained dose of fashion innovation if it’s to reverse the stagnation that stalled the business in 2010. That is among the conclusions drawn from data released Tuesday by The NPD Group Inc., the Port Washington, N.Y.-based research firm. While overall sales of jeans for adults last year rose 0.4 percent to $13.82 billion from $13.77 billion in 2009, men’s jeans sales suffered their first decline in six years, falling 3.1 percent to $5.18 billion.  The larger women’s jeans category fared better, with sales rising 2.6 percent to $8.64 billion from $8.42 billion. But the women’s category benefited from the triple-digit growth of jeggings sales, much of it in the first half of the year. <WWD>

Hedgeye Retail’s Take:   Interesting divergence between men’s denim results and an overall pick-up in menswear that has been building over the past few months.  Nonetheless, it shouldn't be surprising that the overall denim industry is not a growth category.  If any apparel item should receive “staple” status, denim is certainly at the top of the list.