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March 3, 2011






  • Costco noted that while most retailers try to get margin when they can (i.e. in inflationary periods such as now), they are trying to hold margins a bit while they can.  In other words, Costco will look to hold prices a bit longer than the competition in an effort to maintain its value proposition.  They also use margin improvements in categories other than food to offset some the of the margin degradation they expect to occur in consumable categories.
  • BJ’s noted that there has not been enough inflation coming through the system yet to have a good read on how Wal-Mart and the traditional grocers are going to pass through cost increases at retail.  Management believes that the company’s overall value proposition remains strong in periods of rising prices as the appeal of the “club” may actually go up on a relative basis when the consumer is looking to save money.
  • In one of the more sober perspectives on product costs so far this year, CRI’s management highlighted that better visibility suggests an increase of +25% through the 2H of 2011. While the company expects to mitigate cost increases with higher prices, it’s no surprise that margin compression is clearly a reality here as indicated by the Q1 outlook calling for earnings 15%-25% below consensus.



Amazon Warns it will Leave California Over Tax Law - Amazon.com Inc. told California tax officials this week that it will cut ties with thousands of California affiliates if the state passes pending legislation requiring the online retailer to collect sales tax from California customers. Amazon, contending that four bills pending in the California Legislature appear to be unconstitutional or would “construct Trojan horses” leading to unconstitutional regulation, said passage of any of the bills into law would compel the world’s largest online retailer to end its advertising relationships with more than 10,000 California-based participants in Amazon’s affiliate program. Amazon, No. 1 in the Internet Retailer Top 500 Guide, compensates program participants when they refer consumers who make purchases on Amazon.com. <InternetRetailer>

Hedgeye Retail’s Take: Just weeks after threatening to pull out of Texas, Amazon is clearly ready to go to the mat here suggesting it will leave California as well if required to collect taxes. Given the state of California’s economy, the retailer’s stance on the issue has just strengthened materially.


RL Gang Back for Spring - Ralph Lauren’s favorite school class — dressed impeccably in his new childrens wear offerings — is back for spring. “The RL Gang: A Magically Magnificent School Adventure,” a shoppable online storybook, is launching Thursday at RalphLauren.com/RLGang and Bloomingdales.com/RLGang, and Uma Thurman served as narrator this time. The second edition also comes with a contest to find a child to appear in a future installment. Parents in the U.S. and U.K. can upload a photo of their child on Lauren’s Facebook page for people to vote on — adding interactive elements to the project — and the winning child will be flown to New York for the shoot. <WWD>

Hedgeye Retail’s Take: The latest from RL’s innovative online team, this site offers a fresh new take on the presentation of children’s clothing illustrating the product in motion as worn by children in the story. Take a look here: (ralphlauren.com)


Eva Mendez becomes Brand Ambassador for Reebok EasyTone - Hollywood actress Eva Mendes has become the latest ambassador of Reebok's EasyTone toning collection. Other endorsers include supermodel Helena Christensen and British actress Kelly Brook. "I feel better when I'm in good shape, and that's what I like about Reebok EasyTone - it gives me a little extra as I go about my daily activities," said Mendes in a statement. "Between long days on the set and travel, it's not always possible to get a full workout in, so I have to make the time I have count. As an actress, being fit is important, and EasyTone is my great secret!" Uli Becker, President of Reebok International, added: "Eva Mendes fits perfectly with Reebok and EasyTone - she's fun, inspirational, committed to fitness and a style icon to women around the world." <SportsOneSource>

Hedgeye Retail’s Take: The latest move to one up each other in the toning endorsement in the battle (recall Skechers just added Kim Kardashian), it appears the brands are looking to squeeze what remains of demand for the category.


Retailer Demand for Real Estate Rising - U.S. retailers are ramping up store expansion plans on the strength of a rebound in consumer spending, according to ChainLinks Retail Advisors, a retail real estate advisory services firm serving retailers, landlords, and investors in North America. The firm’s recently published National Retailer and Restaurant Expansion Guide reports retailer demand for real estate up across the board.  “As 2010 came to a close, growth plans were up 30% from the levels we recorded last year,” said ChainLinks Research Director, Garrick Brown. “Following the strong performance during this year’s holiday sales season, many chains further upped their growth plans.  <SportsOneSource>

Hedgeye Retail’s Take: Retailers have been increasingly more optimistic about store growth plans since the 2H of last year as sales results and visibility improved. The question now is how they’re looking at 2012 with top-line concerns secondary to tighter margins over the intermediate-term.


Advances in Technology Drive Activewear Market - Get me a doctor! That’s a cry activewear brands are making as they continue to push the technology envelope with products such as carbon fiber bicycle shorts, water-resistant running jackets and light-as-air skiwear. From medical doctors to engineers, companies are hiring experts outside the industry to develop new ways to protect athletes from both the elements and the rigors of sports — all while keeping comfort in mind.  For Under Armour, that translates into Charged Cotton, which is being billed as the first true performance cotton apparel, while at Asics, it’s battery-operated jackets that light up to make the wearer visible in the dark.  <WWD>

Hedgeye Retail’s Take: Still waiting on the next generation “wellness” apparel line that shrinks the waistline while stationary.


February e-commerce Spending Jumps 13.2% - Shoppers spent $13.8 billion online in February, a 13.2% year-over-year increase, according to an estimate released today by MasterCard Advisors, the credit card company’s consulting arm.  Consumers spent $13.1 billion online in January. February is the fourth consecutive month with double-digit online spending increases.  Plus, customers spent more money online in February this year than February last year in every category measured except department stores, MasterCard says, though the payment card network did not release figures for all categories. The SpendingPulse unit uses surveys and data from its credit and debit card network to estimate all retail transactions.<InternetRetailer>

Hedgeye Retail’s Take: Echoing improved sales we’re seeing in weekly athletic sales data, growth in online sales is a bit more modest as consumers were undoubtedly more anxious to get out of the house following an anomalous January.