February 18, 2010






  • Nordstrom indicated that the company’s sell-throughs of full priced merchandise are at all time highs.  Average price points are also above prior peak levels (’04-’07) although management was quick to point out that this is a function of consumer preference for fashion rather than a calculated effort to raise prices.
  • After a string of rumors, it now appears likely that Apple will open its largest store in the world in one of the busiest places on earth.  Grand Central Terminal.  The site expected to be over 40,000 square feet.  Details are still scant but speculation suggests the store could open as early as next fall.  Grand Central sees 700,000 people pass through its building each day.
  • With a turn in profitability pushed out again at LIZ, management’s tone suggests they will be more receptive to the prospect of selling brands within the portfolio over the near-to-intermediate term. While a sale would most likely involve one of the smaller labels in Partnered Brands near-term, the pressure on Juicy and Lucky over the next 12-months is now more present than ever.



Brown Shoe Acquires American Sporting Goods - After weeks of rumors, Brown Shoe Co. announced on Thursday it had acquired American Sporting Goods. Brown reportedly purchased the Aliso Viejo, Calif.-based company for $145 million in cash plus assumed net debt. In a released statement, Brown said ASG in 2010 accrued $232 million in sales with earnings of $29.6 million. The acquisition is fully funded through borrowing under Brown’s revolving credit agreement. ASG’s brand portfolio includes Avia, Ryka and And 1. The privately held firm has been on the market since 2005. "Acquiring ASG adds the critical element of performance athletic footwear to our comfort and fitness offerings, better positioning Brown Shoe to meet consumer demand for products that support active and healthy lifestyles,” Brown President and COO Diane Sullivan said in a statement <WWD>

Hedgeye Retail’s Take:   Crossing into athletic is one thing but acquiring assets tied largely to toning is another.  Recall that Avia and Ryka both entered the toning scene in the past year at mid-tier prices.


Nordstrom Buys HauteLook - Nordstrom Inc. is acquiring HauteLook Inc., a leading Web site staging private, time-sensitive “flash” sales, in a stock deal valued at up to $270 million. The purchase marks the beginning of what is likely to be a pivotal year ahead for Nordstrom as it ventures deeper into cyberspace and advances its “multi-channel customer-centric model.” The retailer will also be testing mobile checkout, equipping sales people with other advanced point-of-sale tools, as it accelerates its mobile and social networking strategies. YiFi has already been added to the stores.  According to Blake Nordstrom, president of Nordstrom Inc., in two years as many people will be accessing the Internet via mobile devices as with computers. <WWD>

Hedgeye Retail’s Take:   While the price may appear steep for business with very few financial details publicly available, it is clear that JWN is very focused on being ahead of the curve with technology and the changing retail distribution landscape.  Interestingly, HauteLook carries very little inventory instead relying on a “flow through” model. 


Reebok Links with Swiss Beatz - It’s been a good week for Swizz Beatz. Fresh off his Grammy win with Jay-Z for "On to the Next One" on Sunday night, the artist-producer unveiled a collaboration with Reebok designed to breathe new life into the company’s Reebok Classics brand.  During a press conference at its Project show booth here late Tuesday, Reebok said Beatz, who is married to singer Alicia Keys, will help develop sneakers and apparel for holiday and will lend his street cred to the brand beginning immediately. <WWD>

Hedgeye Retail’s Take:  Remember Pharell’s Ice Cream shoes?  Or what about Jay-Z’s S. Carter line?


Dolce, Gabbana Hearing Ends in Postponement - The first preliminary court hearing to determine whether Domenico Dolce and Stefano Gabbana will have to stand trial for alleged tax evasion was held here Thursday. Judge Simone Luerti presided over the hearing, which was not conclusive and was postponed to March 25. A source said the hearing was deferred because “the defendants’ lawyers asked for more time to draw their conclusions.” Luerti will evaluate the evidence provided by Milan-based prosecutor Laura Pedio and has the option to dismiss the case if the evidence doesn’t justify moving forward. <WWD>

Hedgeye Retail’s Take: With over a billion dollars in question here, this story is likely a close tie with the Berlusconi scandal in Italy. 


NRF Forecasts 4% Retail Sales Growth for 2011  - The National Retail Federation projected retail industry sales, -excluding automobiles, gas stations, and restaurants - will increase 4.0% from 2010. The cautiously optimistic outlook comes on the heels of seven consecutive months of retail sales growth and better than expected holiday sales. With retailers ending last year on a strong note, thanks to robust holiday spending figures, the prospects for economic growth are starting to look better. However, with small businesses continuing to hold back on hiring and expansion plans and consumers facing higher energy costs, questions remain about the speed and strength of the retail spending momentum.  <SportsOneSource>

Hedgeye Retail’s Take:  A 4% growth rate would actually be pretty good if achieved.  Expect the NRF to also offer numerous other bullish forecasts as the voice of the retail industry often does.


U.K. Retail Sales Surge - U.K. retail sales rose almost four times as much as economists forecast in January as consumer spending rebounded after the coldest December in a century.  Sales gained 1.9 percent from the previous month, when they fell a revised 1.4 percent as snow and freezing temperatures kept Britons from shopping, the Office for National Statistics said today in London. The gain was the biggest since February 2010 and exceeded the 0.5 percent median forecast of 22 economists in a Bloomberg News survey. From a year earlier, sales increased 5.3 percent. Services and construction industries also rebounded last month after weather-related slumps, and today’s data add to evidence that the economy’s 0.5 percent contraction in the fourth quarter may have been a temporary setback to the recovery. <Bloomberg>

Hedgeye Retail’s Take: A positive proxy after one of the snowiest January’s in recent history and consistent with what we are seeing thus far in terms of a February sales reacceleration across much of the country with a notable exception on the west coast.


Cotton Hits $2 - Cotton topped $2 a pound for the first time ever as accelerating global growth boosted demand for garments manufactured in China, the world’s biggest fiber consumer and importer, amid shrinking supplies. China’s apparel exports in January surged 34 percent to $13.38 billion from a year earlier, the Customs Bureau said this week. Cotton stockpiles monitored by ICE Futures U.S. have plunged 84 percent since June 1, and flooding in Australia and Pakistan reduced output. “The bulls have gone berserk, and it looks like they want prices to go higher,” said Sid Love, the president of Joe Kropf & Sid Love Consulting Services LLC in Overland Park, Kansas. “China’s demand still remains strong.” <Bloomberg>

Hedgeye Retail’s Take: As prices continue to surge higher, expect the shake out of marginal players in the basics business to begin.  




Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more