R3: REQUIRED RETAIL READING
March 9, 2011
RESEARCH ANECDOTES
- In a rather unexpected callout, DKS management highlighted TaylorMade’s R11 and Burner drivers among the key products fueling Q1 sales in addition to more likely candidates such as running, baseball, and lacrosse product. In fact, part of the impetus was a concerted marketing effort initiated in the 4Q – after several lackluster years, early indications suggest golf may indeed be returning to a positive contribution for sporting goods retailers.
- After nearly tripling its media spend in each of the past two years, expect continued investment from Reebok in 2011 to be even more noticeable with new campaigns featuring the brands EasyTone and ZigTech footwear. In addition, given the success of marketing induced sales of late, expect to see the brands latest effort to be highly visible in the coming weeks in anticipation of Reebok’s new Flex platform launch stateside in April.
- According to the NRF, Americans planning to celebrate St. Patrick’s Day this year are expected to spend 20% more than they did in 2010. Total St. Patrick’s Day spending is expected to reach $4.14 billion this year with a record participation rate of 52% (up from 45% LY). Nearly 102 million people are expected to wear green to celebrate.
OUR TAKE ON OVERNIGHT NEWS
Skechers Sues Sears - The Manhattan Beach, Calif.-based footwear brand alleges that Sears is selling footwear that infringes on its popular product lines, which include Shape-ups, Twinkle Toes and Z-Strap. The suit, filed in the U.S. District Court for the Central District of California, asserts that Sears is selling products that look like Skechers’ own under the labels of TheraShoe, Melrose Avenue, Paris Blues and Athletech, all through Sears and Kmart retail stores and websites. Both Sears and K-Mart sell Skechers shoes. Skechers is seeking compensatory and punitive damages, as well as injunctive relief for alleged infringement on its patents, trademark and trade dress rights, for dilution and for unfair competition. In a statement, Philip Paccione, general counsel of Skechers, said Skechers has “obtained more than 150 patents and trademarks on these lines, and [has] built them into brand names universally recognized around the world as synonymous with Skechers.” <WWD>
Hedgeye Retail’s Take: Familiar territory for Skechers, but not as the prosecutor. With the company believing that it has now earned the right to be considered a real brand following the success of Shape-Ups, this case may in fact be more about perception than having solid legal merit.
Under Armour Secures First Premier League Presence With Tottenham - Under Armour has reached a sponsorship deal with the Tottenham Hotspur Football Club. The five-year collaboration is Under Armour's first kit supply agreement with a Barclays Premier League team and represents the Brand's largest European team sponsorship. Beginning with the 2012/2013 season, Under Armour will provide Tottenham Hotspur with performance apparel, including training wear and playing kit for the Club's First and Academy teams, together with replica product for the Club's supporters around the world. Daniel Levy, Chairman Tottenham Hotspur, said: "We are delighted that Under Armour will become our new technical partner from 2012 onwards. They are an extremely ambitious brand with global aspirations, making them ideal partners for Tottenham Hotspur." <SportsOneSource>
Hedgeye Retail’s Take: Replacing Puma in their own back yard is big win for UA. Terms of the deal haven’t been disclosed, but in looking at comparable sponsorships this deal could range from $4-$12mm a season. Our sense is that as the company looks to step up their presence in soccer and Europe, additional deals will be forthcoming.
Abercrombie & Fitch Sues Surf Style - Abercrombie & Fitch Co. has filed a lawsuit against Surf Style Retail Management Inc., alleging trademark infringement and unfair competition, among other claims. The suit, filed on March 1 in a federal court in Miami, named as defendants four individuals who are also executives of Surf Style: Avi Ovaknin, Doron Malinasky, Eliyahu Levy and Shaul Zislin. Court papers said a flying seagull logo on Surf Style’s apparel and beach accessories was “identical, or nearly identical, and confusingly similar to A&F’s seagull mark,” which A&F uses for its Hollister brand. <WWD>
Hedgeye Retail’s Take: ANF remains one of the most diligent trademark enforcers although blatant copying is not likely to hold up in any court.
Aeropostale Expands Into Asia - Aeropostale Inc. announced plans to expand into Asia with an agreement to open about 25 stores across Singapore, Malaysia and Indonesia over the next five years. The teen-apparel retailer said it had reached a licensing pact with Montreal PTE Ltd., a joint venture between Apparel Group LLC and Jay Gee Melwani Group, to open the stores. The first one is slated to open in Singapore later this year. Aeropostale currently operates 906 stores in 49 states and Puerto Rico, as well as 59 stores in Canada. It also operates 47 of its P.S.-branded stores for children across 13 states. Aeropostale has posted better results of late, helped by increasing sales. Last month, the company boosted its fiscal fourth-quarter earnings guidance while reporting surprise growth in January same-store sales. <WallstreetJournal>
Hedgeye Retail’s Take: Licensing remains the growth vehicle of choice for most domestic specialty retailers given the lower risk, lower cost nature of the partnership. However, we note that it will take a fair amount of time for these stores to become financially meaningful to the overall company so long as the store base remains small relative to the 900+ US locations.
Cabela's to Pay $10.4M in FDIC Settlement - Cabela's has agreed to pay nearly $10.4 million for "alleged unfair and deceptive practices" of its credit card operation as part of a settlement with federal regulators. It also agreed to reform its credit card practices. The Federal Deposit Insurance Corporation announced the agreement with Cabela on Tuesday. According to the settlement, World's Foremost Bank, Cabela's credit card operation, will pay $10.1 million in restitution and a $250,000 civil money penalty. The retailer did not admit wrongdoing. The FDIC said it determined that WFB did not operate its credit card programs "in an appropriate manner with regards to certain overlimit fees, credit line decreases, minimum payments due, late fees, penalty interest rates, notices to customers, and collection practices. The Consent Order, in part, requires WFB to correct the violations of law, develop appropriate policies and procedures to ensure future compliance, and effectively monitor third-party agreements and activities." <SportsOneSource>
Hedgeye Retail’s Take: While not great from a PR standpoint, we highly doubt this will impact the loyalty of the core, card holding Cabela customer. Similar settlements and fines have been levied on many credit card issuers as the FDIC looks to clean up industry practices.
Payment Card Fraud Falls 10% in U.K. - The amount of card-not-present payment card fraud in the U.K. fell by an estimated 10% last year, according to Retail Decisions, a fraud prevention and payment processing firm. The company estimates the value of the fraud that took place through online, mail order and telephone channels where a payment card is not directly swiped totaled 239 million pounds ($386 million), down from 266 million pounds ($430 million) in 2009. Such fraud in the U.K. fell 15% from 2008 to 2009, the company says, making 2010 the second year in row of reduced card fraud in direct sales channels. The firm estimates such fraud will decline 5% in 2011, but says it expects fraud to rebound in 2012, when London hosts the Olympic Games <InternetRetailer>
Hedgeye Retail’s Take: Good news for the issuers and retailers as technology advancements are the likely driver of reductions in fraud.
Mobile Marketing is on The Rise - Marketers are increasingly eager to reach consumers via their mobile devices, a new report from consultancy Forrester Research Inc. finds. More than 40% of 252 U.S. interactive marketing professionals in a recent poll by Forrester report using some form of mobile marketing. And an additional 35% plan to incorporate mobile into their marketing plans over the next year. Mobile marketing budgets, the research finds, also will climb, although mobile will still account for a small portion of total marketing spend. Forrester estimates that nearly 40% of active mobile marketers are still allocating only test budgets for mobile. Nearly 53% of marketers say they will increase their mobile budgets in 2011, and only 4% are planning on decreasing them. However, nearly 59% of marketers say they will spend less than $1 million on mobile this year. 23% plan to spend more than $1 million and the rest don’t know what they will spend, Forrester finds. <InternetRetailer>
Hedgeye Retail’s Take: The most significant callout from the study suggests that nearly 40% of active mobile marketers are still testing the medium. This provides a significant share that may indeed ramp spend in the coming years. It can also result in a transitory base as increased use could vary initial results.
