R3: HIBB, ANN, Russell, PERY

 

R3: REQUIRED RETAIL READING

March 14, 2011

 

 

 

 

RESEARCH ANECDOTES

  • Hibbett Sports noted that the shift in “rapid refund checks” or RAL’s had a negative impact on the company’s sales of urban lifestyle products during 4Q.  Overall, this contributed to the company’s low single digit decrease in footwear comps.  However, the trend has changed notably since 4Q closed, with comps-to-date increasing 8% against a difficult 17% comparison.
  • Ann Taylor reported one of the most substantial increases in e-commerce revenues in all of retail during 4Q.  Ann Taylor increased by 74% while LOFT increased by 77%.  As a result of the recent success, ANN will be investing in the re-platforming of both sites to offer international commerce, improve checkout, personalization, and add mobile commerce.
  • In an embarrassing corporate moment, Russell Corp – makers of Russell Athletic, recently lost a copyright infringement lawsuit against actor Russell Brand. In 2008, the actor registered his name as a trademark for apparel and footwear products in the UK – a move that will enable him to sell his collection under his entire name while Russell Corp. can only use the “Russell” label.

OUR TAKE ON OVERNIGHT NEWS

 

Perry Ellis Purchases Anchor Blue IP - Perry Ellis International Inc. said Friday it has closed on its $500,000 purchase of all intellectual property assets of Anchor Blue Inc. The assets were purchased in a Delaware bankruptcy court proceeding, due to Anchor Blue’s voluntary Chapter 11 petition for bankruptcy court protection on Jan. 11. Anchor Blue, a Corona, Calif.-based teen specialty retailer operating primarily on the West Coast with 115 stores, is undergoing an orderly liquidation of its operations. Included in the IP assets Perry Ellis purchased are the Anchor Blue and Miller’s Outpost trademarks. A Delaware bankruptcy court approved the purchase on March 11. <WWD>

Hedgeye Retail’s Take:   With the purchase of Anchor Blue’s IP secured,  it’s likely we’ll see a wholesale line emerge in the not so distant future.

 

VF Corp.'s Growth Plan - VF Corp. is aiming to add $5 billion in revenue to its topline and $5 in earnings per share over the next five years. The Greensboro, N.C.-based company will focus its efforts on the outdoor and actions sports categories, expanding its direct-to-consumer channels and increasing sales in international markets. If successful, VF’s sales will reach $12.7 billion by 2015 and EPS will hit $11.50. The company expects to generate $6 billion in cash over the next five years and will direct that arsenal toward acquisitions, particularly in the outdoor and action sports arena, as well as dividends and potential stock buybacks. <WWD>

Hedgeye Retail’s Take:  Despite nearer-term cost pressures, management remains confident that the outdoor/lifestyle group can continue to be the company’s growth engine over the next five years growing to greater than 50% of total sales in the process.

 

Borders Scrambles to Be Lean - Borders Group Inc. hopes to exit bankruptcy-court protection by summer's end after getting a head-start on its restructuring by targeting 200 superstores for closure, Borders President Mike Edwards said in his first interview since the bookstore chain filed for Chapter 11 protection. Borders president Mike Edwards said the bookseller is receiving new titles from major publishers on a cash basis, thanks to its recent financing. Borders is exploring closing as many as 75 additional stores and hopes to present a formal business plan to publishers and other creditors in early April. The ultimate goal: exit bankruptcy in August or September, ready to ramp up business for the key holiday selling season, Mr. Edwards said. "You've got a window, and you have to move decisively," he said. The companies that have failed in Chapter 11, he added, held onto their money-losing stores too long. <WallstreetJournal>

Hedgeye Retail’s Take:  While emerging from Bankruptcy is a step in the right direction for restoring confidence with suppliers, we believe this just the beginning of the end for the struggling specialty retailer. 

 

Neiman’s Sees Ready-to-Wear Rebound - Shoes and handbags have led the luxury rebound, but ready-to-wear is showing signs of life, according to Neiman Marcus Group president and chief executive officer Karen Katz. “The big change between fall and resort was that the ready-to-wear business picked up pretty significantly. Trends for spring are selling very, very well,” Katz said, citing bohemian influences, corals, flat sandals and floral prints. A lack of color and fabrics that were too heavy dragged down the fall rtw season. “The minute we started receiving early spring and resort, the business in ready-to-wear started lifting,” Katz said. <WWD>

Hedgeye Retail’s Take: While non-apparel has largely been the reason behind luxury’s strength, these comments are notable coming from THE country’s leading luxury department store.

 

Gilt Groupe Sells Big Ticket Item on iPad - Score a big one for iPad commerce: The most expensive item sold on Gilt Groupe so far, a $24,000 vintage watch, was purchased by a shopper using the less than year-old tablet computer from Apple Inc., according to Chris Maliwat, vice president of product development for the private-sale e-retailer. He was speaking this week about iPad shopping trends at the Innovate 2011 conference in San Francisco. The conference was organized by the National Retail Federation, a trade group. Gilt Groupe, one of the leading companies in the growing online private-sale industry, launched its iPad app in April. The retailer, which has some 4 million members and sells products from more than 1,000 brands, says 177,000 consumers have downloaded its iPad app. As of January, about 100,000 consumers a month actively use the iPad app, he says, compared with about 300,000 a month for the flash-sale site’s iPhone app. <InternetRetailer>

Hedgeye Retail’s Take:  Not sure why this is newsworthy given the 14+ million consumers that have embraced the iPad as a new way access the internet.  Big ticket selling online is nothing new although flash sales selling $24,000 watches certainly is.

 

Cost Crisis Impacts Shoe Firms - For months, footwear manufacturers worried about the prospect of rising expenses for producing shoes. Now, thanks to big bumps in raw materials and labor costs, those fears are the new economic reality for the fall season. “Everything is going up like crazy,” said designer Stuart Weitzman. “It’s really the biggest story of the season, more so than whether a platform [heel] is important or not.” As previously reported in Footwear News, sourcing costs across the board, for labor, raw materials and shipping are slated to rise sharply in 2011. “The material costs are up and the labor cost also is significantly up this season, at least 10 percent, and some are higher than that,” said Maxwell Harrel, president of Corso Como. <WWD>

Hedgeye Retail’s Take:  Perhaps this shouldn’t be so surprising given the sharp increases we’ve seen in raw material, labor, and freight across the board in the apparel sector.  Leather remains a key culprit in y/y increases.

 

Quake Disrupts Key Supply Chains - The earthquake that struck northeast Japan Friday forced shutdowns across a broad spectrum of the country's industries, but the bigger impact for companies could come in the weeks ahead as the disruptions make their way through the global supply chain. The 8.9-magnitude earth quake, one of the largest on record, has crippled activity for now in a country that is a critical source of parts for consumer electronics, as well as a key producer of automobiles, auto parts, steel and other goods.  Plants don't appear to have suffered widespread, catastrophic damage, but production delays could be enough to affect some tightly calibrated industries. The earthquake affected operations at dozens of semiconductor factories, raising fears of shortages or price increases for a number of widely used components—particularly the chips known as flash memory that store data in hit products like smartphones and tablet PCs. <WallstreetJournal>

Hedgeye Retail’s Take:  This is likely to become a bigger story as time passes and existing inventories in key categories begin to diminish.

 

Pakistan: Tanners Association Urges for Reliable Supply of Utility - The leather industry in Pakistan is facing a decline in exports of up to 30%, partly due to a lack of basic facilities such as gas and electricity, said Khurshid Alam, chairman of the Pakistan Tanners Association (PTA). The Association has recently demanded the government to ensure uninterrupted supply of gas and electricity to tanners in the province of Punjab. He stressed that despite previous efforts to bring these issues to the attention of ministers, there has been no change. <FashionNetAsia>

Hedgeye Retail’s Take: With reliability of the country’s supply chain clearly in question, it seems highly unlikely that Pakistan will ever emerge as a leading global leather supplier.

 

 

 


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