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March 18, 2011






  • Nike has historically taken up price to offset input costs, so it was not a surprise to hear them talk about this on last night’s call.  That said, in the past it has largely been more focused on ‘launch product’, special edition footwear and their ‘Dunk’ business.  This time around, look for more broad pricing initiatives. This is the first time we’ve ever heard them talk about pricing in apparel. We’re naturally more guarded there given the fragmentation of the market. But on the flipside, the ramp in product quality over the past 2 quarters has been impressive.  The line between mix shift and price is fine, indeed.
  • In the spirit of better late than never, SCVL’s management highlighted the upcoming launch of its e-commerce platform in the 2H of the year joining the rest of its public peers in the family channel online. With DSW recently highlighting the e-commerce channel as its fastest growing again this quarter, the launch will provide a timely contribution to the top-line in the back half.
  • Logging some of the most productive store metrics in all of retail, Lululemon achieved over $1,700/sq. ft. in 2010 with the most productive stores exceeding $4,000 a foot. While the natural gravitation of brand proliferation will eventually temper these levels, with only 122 stores in the North America and 78 in the U.S., it may be a while until we see it become a reality. 



Harbor to Produce Izod Footwear - Harbor Wholesale Ltd. is getting into alligator footwear. Phillips-Van Heusen Corp. announced on Thursday it had inked a licensing deal with Harbor to produce Izod branded footwear in the U.S. and Canada. Under the license, which has an initial term through 2015, Harbor will produce and market men’s, women's and children's casual and dress casual footwear, leisure athletic shoes and non-beach sandals. The new footwear will begin shipping this summer. Harbor is also the global licensee for wholesale footwear for PVH’s Bass and G.H. Bass brands. <WWD>

Hedgeye Retail’s Take: Despite the absence of growth in the Bass business over the last 4-years, leveraging a reliable licensee to expand the Izod brand into footwear makes sense, particularly given the continued demand for vintage Americana style. For PVH, this won’t be noticeable until the back half of 2012 – and with a 7% (est) royalty on what will likely be a $100mm business overall, might not move the needle.


HauteLook Launches Shoe Web SiteHauteLook Inc. is putting a focus on footwear.  The flash-sale Web company, which was purchased last month by Nordstrom Inc., hosted a preview of its new membership site, Solesociety.com, in New York on Wednesday. The shoe website soft launched earlier this month. Registration for Sole Society is free, and members are asked to complete a style quiz upon joining. Each month, they will be offered six to 12 footwear looks under the Marco Santi name, an exclusive line produced by the Camuto Group. The styles, including low heels, pumps, wedges and booties, will retail for $50 each, and users can pick as many items as they want. Nina Tooley, director of marketing for Solesociety.com, said footwear is a strong category on HauteLook, prompting the company to branch out. And since the soft launch, Sole Society already has more than 100,000 members. <WWD>

Hedgeye Retail’s Take: As fast-flash discount luxury sites continue to pop up in increasing numbers and most with a core apparel/home goods focus, we like this move into an underpenetrated category. As we’ve noted in the past, there’s a limit to how many daily offers a consumer is willing to receive, as such first movers have distinct competitive advantage.


Burberry Brit Heads Downtown - Bleecker Street’s combination of quaint antique shops and expensive designer brands has become a magnet for tourists and younger shoppers alike. Seeking to tap into the street’s mix, Burberry Brit on Thursday unveiled a two-level, 4,150-square-foot store at 367-369 Bleecker Street. In mid-April, a Brit unit will bow in London’s Covent Garden. The company has not finalized the size of the Covent Garden store. If the two units, opening months apart on opposite sites of the Atlantic, have anything in common, it’s locations that appeal to young people.  “They both speak to a real youth culture,” a Burberry spokesman said. “Both areas have young stores and are vibrant. Covent Garden has skateboard shops and a market.” <WWD>

Hedgeye Retail’s Take: Expanding the company’s sports collection inspired concept not only broadens the presentation of the luxury brand’s line, but will also likely attract a younger customer – a positive for Burberry.


Retailers Scale Back Price Hikes - Consumers coping with higher fuel and food prices were in no mood to deal with higher apparel prices in February. Economists and analysts said retailers may have tested the waters with apparel price hikes in January to offset soaring raw materials prices, but met resistance from consumers and pulled back, as evidenced by an unexpected drop in apparel prices in February, according to a closely watched government index released Thursday. This preliminary sign of shoppers’ refusal to accept higher prices currently working their way through the supply chain only adds to the already high pressures on gross margins confronting retailers and wholesalers. Retail apparel prices fell in February in the men’s and women’s apparel categories compared with a month ago, despite inflationary pressure further down the supply chain from historically high cotton prices, the Labor Department said in its Consumer Price Index. <WWD>

Hedgeye Retail’s Take: If retailers are backing off now, can you imagine what they are going to do when they start to sell product that is actually made with more expensive raw materials?


eMarketer predicts E-commerce will Grow 13.7% - While e-commerce sales will continue to grow over the next four years, its rate of growth will steadily drop as the online retailing market matures, according to a report today from eMarketer. E-commerce sales will grow 8.1% in 2015, down from 14.8% in 2010, the market research firm predicts.  EMarketer estimates that total U.S. e-commerce sales in 2015 will reach $269.8 billion. EMarketer used available e-commerce estimates for 2009 and 2010 from the U.S. Department of Commerce as a starting point for its projections. The Commerce Department estimates e-commerce sales increased 14.8% to $165.4 billion in 2010 from $144.1 billion in 2009. EMarketer estimates e-commerce sales will increase 13.7% this year, with sales—excluding travel, digital downloads and event tickets—totaling $188.1 billion. <InternetRetailer>

Hedgeye Retail’s Take: We don’t think anyone expects the channel to grow double-digits in perpetuity, however, there is still significant growth ahead for many retailers that have only just started to get started with online efforts. Footwear retailers and brands in particular lag many top branded apparel companies in terms of e-commerce contribution – a factor that will continue to provide a tailwind over the intermediate term. More importantly, we need to look at ecommerce as it relates to consumers shopping direct (to the brand), or at retailer’s own e-commerce sites. Big difference.


Brands Move Workers Out of Tokyo - Fashion companies began to leave Tokyo Thursday, moving westward to Osaka amid the threat of radioactive fallout, widening blackouts and diminishing food supplies. Six days after a massive earthquake and tsunami hit Japan, damaging the Fukushima nuclear plant 124 miles northeast of the capital city, Chanel was handing out iodine tablets to workers and Hennes & Mauritz and PPR temporarily relocated offices. And some brands stopped giving updates on their operations in the country. Ordinarily accessible, Polo Ralph Lauren Corp., Burberry and Paul Smith, as well as several other firms, did not respond to requests for comment Thursday. Procter & Gamble Co. issued a statement saying all its employees were safe, but a spokeswoman declined to say whether they had been instructed to leave Tokyo. <WWD>

Hedgeye Retail’s Take: H&M may have been one of the first to report relocations, but they certainly weren’t expected to be alone in the process of ensuring the safety of their employees. There are times when the bottom-line is that personal priorities trump the corporate bottom-line, unfortunately – this is one of them.