Heeeere Tiger Tiger Tiger...

They say that half of all marketing dollars are wasted -- you just don't know which half. Yes, Nike's $2+bn in Demand Creation leaves a lot to play with, but you gotta hand it to 'em, they always seem to come out on top.


Check this out... Go to Then click 'Sports', which will have, of course the leading story of the day -- Tiger's raging comeback on the final da of The Masters. Then click on the story, and you get the image below. Why is it that the two names up top -- the two that are sprinting into the final stretch -- each have Swooshes next to their names?


No, it's not because Nike has a crystal ball to only select the best athletes. But it DOES have the organizational process to capitalize on those sports assets whenever the opportunity presents itself. My point here is that Tiger might very well end up losing this one. I don't know and I don't particularly care.


What I do care about is that seeing continued evidence that the strategy is in place to monetize some pretty expensive players. Oh, and by the way, keep in mind that sales of Tiger merchandise never fell off anywhere near as much as his public perception since events from 2-Thanksgivings ago. In fact, at times they were up. The installed base of sales and distribution points remains huge, is likely headed higher.


Does this make me anymore inclined to own the stock today? Nope.

But is the long-term story intact? Absolutely.


Heeeere Tiger Tiger Tiger... - 2121212


On a fundamental basis, the LVS Q1 might be ho hum. Nothing about this company is ever just ho hum.



We still think LVS will beat formal consensus estimates but it may not be the blowout quarter that people have become accustomed.  The stock reaction may hinge on whether any information emerges regarding the Jacobs situation.  Otherwise, we’re not so sure there will be enough in the fundamentals to drive the stock significantly higher.


We estimate that LVS will report $2.2BN of revenue and $749MM (3% ahead of consensus) of EBITDA in 1Q2011.




We project that LVS’s Macau properties report EBITDA of $348MM and net revenue of $1,152MM, 1% below and 5% above Street estimates, respectively.  Specifically, our EBITDA estimate is in-line with the Street for Sands, 5% below the Street for Venetian, and 21% above the Street for Four Seasons.



We estimate that Sands Macau to report $88MM of EBITDA and $332MM of net gaming revenue  

  • Project gross gaming revenues of $400MM and net gaming revenues of $325MM
    • $236MM of gross and $161MM of net VIP table win
      • $8.8BN RC, up 37% YoY, assuming 15% direct play
      • 2.7% hold
      • 86bps rebate rate
    • Mass table win of $138MM
      • $684MM drop (up 16% YoY)
      • 20.3% hold
    • Slot win of $26MM
      • $417MM handle (up 15% YoY)
      • 6.2% hold
  • $7MM of non-gaming revenues, net of promotional allowances
  • Variable expenses of $198MM ($156MM of gaming taxes and $32MM of incremental junket commissions over the rebate rate)
  • $4MM of non-gaming expenses
  • $48MM of fixed expenses


We estimate that Venetian will report $652MM of net revenues and $210MM of EBITDA

  • Gross gaming revenues of $660MM and net gaming revenues of $559MM
    • $338MM of gross and $237MM of net VIP table win
      • $12.4BN RC, up 24% YoY, assuming 19% direct play
      • 2.7% hold
      • 82bps rebate rate
    • Mass table win of $269MM
      • $1,120MM drop (up 21.5% YoY)
      • 24% hold
    • Slot win of $53MM
      • $737MM handle (up 10% YoY)
      • 7.2% hold
  • $93MM of non-gaming revenues, net of promotional allowances
  • Variable expenses of $318MM ($257MM of gaming taxes and $43MM of incremental junket commissions over the rebate rate)
  • $24MM of non-gaming expenses
  • $101MM of fixed expenses


We estimate that Four Seasons will report $168MM of net revenue and $50MM of EBITDA

  • Gross gaming revenues of $198MM and net gaming revenues of $147MM
    • $153MM of gross and $103MM of net VIP table win
      • $4.8BN RC, up 30% YoY, assuming 51% direct play
      • 3.17% hold
      • 105bps rebate rate
    • Mass table win of $33MM
      • $129MM drop (up 30% YoY)
      • 26% hold
    • Slot win of $11MM
      • $186MM handle (up 25% YoY)
      • 6.0% hold
  • $21MM of non-gaming revenues, net of promotional allowances
  • Variable expenses of $86MM ($77MM of gaming taxes and $4MM of incremental junket commissions over the rebate rate)
  • $8MM of non-gaming expenses
  • $25MM of fixed expenses


We estimate that Marina Bay Sands will report net revenue of $586MM and EBITDA of $321MM, 3% and 4% below consensus estimates, respectively.

  • Gross gaming revenue of $592MM and net gaming revenue of $471MM
    • Slot win of $111MM
      • $2,019MM slot handle and 5.5% hold
    • Mass table win of $230MM
      • Hold of 22.2% and drop of $1,036MM
    • Net VIP table win of $130MM
      • $9BN of RC volume, 2.8% hold, and a 1.35% rebate rate
  • Non-gaming revenue, net of promotional allowances of $116MM
  • Variable expenses of $109MM – primarily consisting of $103MM of gaming taxes
  • Estimated fixed expenses of $157MM


Las Vegas

We estimate that Venetian and Palazzo will report $360MM of net revenue and $117MM of EBITDA, 7% and 18% ahead of the Street, respectively.

  • We estimate that Venetian and Palazzo will report net casino revenues of $141MM
    • $53MM of slot win
      • 5% YoY increase in slot handle to $670MM
    • $110MM of table win
      • 7% YoY growth in table drop and 18.8% hold
    • Rebates and discounts of $22MM of 3.7% of gross casino revenues
  • Rooms revenue of $129MM (assuming mid-high, single digit RevPAR growth)
  • $90MM of other non-gaming revenues, after promotional allowances
  • $244MM of total operating expenses



We estimate that Sands Bethlehem will report $91MM of revenues and $22MM of EBITDA, 2% and 8% ahead of Street estimates.

  • We estimate $85MM of gaming revenues
    • $65MM of slot revenue and $20MM of table revenue
    • $7MM of other revenue
  • $39MM of gaming taxes
  • $30MM of fixed expenses


Other Stuff:

  • Corporate expense: $40MM
  • Rental expense: $11MM
  • Net interest expense: $79MM
  • D&A: $185MM

The Week Ahead

The Economic Data calendar for the week of the 11th of April through the 15th is full of critical releases and events.  Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.


The Week Ahead - calm1

The Week Ahead - calm2

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R3: GPS, Reebok, J Crew, Bulled-up NRF



April 8, 2011




  • After stepping back and evaluating reality after yesterday’s retail sales results, we remain convinced that numbers are headed lower this year, and that the timing will start in June. See our note (Retail: Sell the Strength).
  • If one more person asks me about PLCE, I might scream. It’s definitely the consensus ‘I’m doing work on this name’ buzz ticker for the week.
  • Target’s relative weakness definitely confirmed our negative view (Keith is short TGT in the Hedgeye portfolio). I remain convinced that given their levels of investment in the business (or lack thereof), they can get sales growth, or margin improvement – but not both.  Are we the only ones who wish that the retailer that accounts for 7.1% of all consumer retail sales put some numbers out there? The comparison would be so telling.
  • At a time when many retailers are testing smaller footprint concepts, Forever 21 is planning to open a behemoth, Miami Beach’s largest specialty store at 39,000 sq. ft., in 2012. While significantly larger than the company’s average 10,000 sq. ft. footprint, it pales in comparison to the 110,000 sq. ft. store that just opened last February in Louisville Kentucky. In addition to another handful of 80,000+ sq. ft. locations opened over the last 12-months, it looks like the retailer is clearly on the path of becoming one of the largest mono-brand retail footprints.
  • According to a recent study by Harris Interactive, consumers are employing various saving strategies in light of rising food costs. Not surprisingly, using coupons was the most frequently used tactic by 72% of participants with comparing unit prices of package sizes a close second at 71%. Interestingly, adults with household incomes in the $75k-$100k range were more likely to use coupons (81%) compared to households that make less than $35k (63%).



Gap Sells Bonds to Buy Back Shares - Gap Inc. is taking on debt to buy back shares, jumping into hot bond markets Thursday just as its operations showed the pressure of a 10 percent drop in comparable-store sales for March. The San Francisco-based retailer said the proceeds of its bond offering — which was said by financial sources to have raised $1.25 billion through the sale of 10-year notes — would go toward “general corporate purposes including share repurchases.” The company also secured a $400 million five-year term loan and inked a new $500 million revolving credit facility with Bank of America Merrill Lynch, J.P. Morgan and Citigroup Global markets.  The share buyback might be an effort to assuage shareholders in what could be a tough year. One shareholder in particular — Sears Holding Corp. chairman Edward S. Lampert, who recently scooped up 35 million shares of Gap, or 5.8 percent of those outstanding — is known to favor share repurchases. <WWD>

Hedgeye Retail’s Take: After taking a ~6% position in the company back in February, Lampert can be credit for the retailer for stepping up repurchases. On February 24, GPS announced a new $2Bn authorization (with no expiration date), which would account for nearly 20% of outstanding shares at the current price. Between the company’s net cash position and new credit lines, it has plenty of powder to execute the familiar Lampert repurchase plan. AutoZone redux?


NHLPA, Reebok Ink Apparel Deal - The National Hockey League Players’ Association (NHLPA) announced new five-year apparel agreements, highlighted by the continuation of its partnership with Reebok.  In addition, the NHLPA said it is expanding its roster of apparel licensees to include Old Time Hockey, Knights Apparel, and Elmau & Associates.   “We are very excited to continue our partnership with Reebok while bringing on board new NHLPA licensees Old Time Hockey, Knights Apparel, and Elmau & Associates, all of which will enhance player licensed product offerings for hockey fans,” said Adam Larry, NHLPA Director of Licensing and Associate Counsel. “Reebok has done a great job supporting our player apparel program over the years and we’re pleased they will continue to produce quality apparel featuring NHL players. Our new partners will enhance the NHL player apparel offerings in strategic areas, thus enabling the NHLPA to meet the growing demand for player apparel.”<SportsOneSource

Hedgeye Retail’s Take: After losing its NFL license last year, the renewal with the NHLPA is more important than perhaps it should be for Reebok. The fact that several other providers were added to the apparel mix dilutes Reebok’s exclusivity in some respects, but the reality is that one of the sports’ top equipment providers couldn’t afford to lose out entirely – especially with Bauer having gone public.


Spending on Food, Gifts and Apparel Expected to Increase This Easter, According to NRF - Not since 1943 have Americans seen an Easter fall this late in the calendar, but it seems the delayed holiday won’t impact consumers’ eagerness to spend on décor, food and even new spring apparel. According to NRF’s 2011 Easter Consumer Intentions and Actions survey, conducted by BIGresearch, the average consumer is expected to spend $131.04 on everything from candy to clothes – up from last year’s $118.60 but not quite to pre-recession levels. Total spending on Easter related merchandise is expected to reach $14.6 billion.* “Due to such a late holiday, Easter promotions will last all spring long,” said NRF President and CEO Matthew Shay. “Though lingering concerns over food and energy prices may keep shoppers from splurging, retailers are expecting consumers to stock up on apparel, home décor and of course food and candy, a good sign leading into the much busier and important months to come.” Food and candy will account for most of a consumer’s budget, bringing in $2.1 billion in candy sales and $4.5 billion in food sales alone. <NRF>

Hedgeye Retail’s Take:  We’re not going to do battle with the NRF’s interpretation of these surveys. They’re useful to an extent, no doubt. But we remain concerned about May and June. In fact, with dollars going out the door so late in April it might very well temporarily empty consumers’ wallets as 2Q begins.


J. Crew Goes Bigger on Fifth Avenue - J. Crew’s newly expanded and remodeled flagship at 91 Fifth Avenue here is described by a long list of superlatives. It’s the largest store in the chain, having grown to 20,800 square feet from 15,000 square feet. According to sources, sales are expected to exceed $1,100 to $1,200 a square foot.  The location, near 17th Street, is also J. Crew’s first three-level store and the first to house men’s, women’s and Crewcuts, its children’s brand, under the same roof. (A unit at Garden State Plaza in Paramus, N.J., offers the three businesses, but in adjoining stores with separate entrances.) The flagship boasts the chain’s first proper shoe and handbag departments, and the first men’s and women’s suit areas. It also has the first dedicated area for personal shopping, a lounge with private dressing rooms off the main floor. Home delivery and complementary “house calls” will be coordinated from the store.  With a lighter and more open design, the store’s decor is a nod to a midcentury modern sensibility with art and objects from the Thirties to the Sixties, such as Bradley Hughes’ “Lucille” lighting fixtures and a curated art collection. <WWD>

Hedgeye Retail’s Take: 5th avenue retail space is funky, to say the least. The 49th Street to 59st corridor runs an average of $1,500 per square foot in rent (prime spots are well above $2,000). There’s a big notch down from Grand Central (42nd) and 49th Street – by about $1,000, actually. Then as we head downtown the rates start to creep higher. Our sense is that the 17th Street location is pushing $800-$900/ft.  The point here is that the reports of sales being ‘expected to exceed $1,100/ft’ BETTER be true, otherwise the math simply doesn’t work.


Uniqlo to open third New York City store - Japanese apparel retailer Uniqlo said Thursday it will open its third New York City location.  The new store, on 34th Street, set to open this fall, following the opening of the chain’s largest flagship location on Fifth Avenue earlier in the fall. Both stores will join the current Uniqlo location in Manhattan’s Soho district.  Parent company Fast Retailing said it is targeting about $59.5 billion in sales and approximately $11.9 billion in profits by 2020. To meet these targets Fast Retailing said it plans to continue to open Uniqlo stores in major U.S. cities. <Chainstoreage>

Hedgeye Retail’s Take: I wish I could run my business based on 2020 goals. Nonetheless, the Uniqlo concept works, and the Japanese need so desperately to expand beyond their stale shores. Their cost of borrowing is nil, real estate is cheap and getting cheaper, and the weak dollar makes it increasingly easy to deploy capital in the US profitably. We’re probably giving them too much credit there as it relates to reasons for growing. But Uniqlo is faster, smarter, the consumer loves it, and its growing.


Japanese Tanners avoid earthquake disaster - Japan’s tanning industry has not been directly affected by the recent earthquake, according to the Tanners’ Council of Japan.  About 85% of Japanese tanneries are concentrated in Hyogo and Wakayama areas and 15% are located in eastern Japan which main areas are Tokyo and Saitama regions, said the Association. The main production areas of the Hyogo region are Himeji and Tatsuno districts. Western Japan which includes Hyogo and Wakayama was unaffected by this earthquake and tsunami.  <FashionNetAsia>

Hedgeye Retail’s Take: Let’s not over think this. Japan accounts for less than 2% of global leather production. As a sidenote (for all you leather enthusiasts), the mix of uses for leather is as follows; a) Footwear = 52%, b) Garments = 10%, c) Auto = 10%, d) Furniture = 14%, e) Gloves 4%, with the remainder spread across a multitude of categories.


Target calls for Canada Stores to generate 6-Billion per Year - No. 2 U.S. discount retailer Target Corp expects to generate sales of $6-billion a year in Canada in six to seven years, Chief Financial Officer Douglas Scovanner said in an interview with Reuters on Wednesday. It plans to open more than 200 stores in Canada, its first foray into a foreign market, with the first stores opening in 2013. Scovanner said Target plans to invest "many billions" of dollars in Canada, where it sees annual pretax profits of "hundreds of millions" of dollars over the six- to seven-year period. The company announced plans in January to take over leases of up to 220 Zellers discount stores owned by Hudson's Bay Co for $1.83- billion. It said at the time it planned to open 100 to 150 stores in the country in 2013 and 2014. <Financial Post>

Hedgeye Retail’s Take: In looking at the simple math here, $6Bn should seems to be a reasonable hurdle, but may be viewed as a disappointment if that’s all the discounter can generate up north in 6-7 years time. With the average U.S. store generating about $40mm annually, 100-150 stores operating for more than 3-years should be able to approach similar productivity, or $4Bn-$6Bn in sales. Assuming additional new store growth and the underpenetrated nature of the Canadian market, this continues to be a solid longer-term growth opportunity for the discounter struggling to grow the top-line here in the near-term.


Moncler Targets June for IPO - IPOs seem to be the latest Italian fashion. Moncler SpA on Tuesday filed documents to list on the Italian Stock Exchange, heading for a float by June. The hot outerwear brand’s initial public offering will come shortly before the equally anticipated one from Prada Group, which is expected to list its shares on the Hong Kong Stock Exchange by late June. Moncler’s filing did not disclose the amount of shares it plans to list, although sources have said it was looking at floating up to 50 percent of the company. They estimated the float would value the group at about 1.1 billion euros, or $1.5 billion at current exchange. In addition to the Moncler brand, the Moncler Group includes high-end sportswear labels Henry Cotton’s, Marina Yachting and Coast + Weber + Ahaus, and it holds the license for Cerruti. The private equity fund Carlyle Group owns 48 percent of Moncler. <WWD>

Hedgeye Retail’s Take: After acquiring the brand in 2008 and growing its store base from four to more than thirty, Carlyle has significantly increased the high-end fashion outdoor outerwear brand’s reach. After looking to add another brand to Moncler over the last year, the public markets may make it considerably easier for the company to do just that. The high end is the one area that seems to be defying gravity.




Chart of the Day: Exposing the Keynesian Kingdom

With crude oil at $125/bbl., Bernanke, Dudley, and Evans are getting exactly what they wanted...


Chart of the Day: Exposing the Keynesian Kingdom - 1


Have a great weekend,


The Hedgeye Macro Team


Notable news items and price action from the last twenty four hours.

  • PFCB was initiated with a “New Outperform” rating at Wells Fargo.
  • PFCB announted a long-term licensing agreement with Interaction Asian Restaurants L.P. to develop and operate P.F. Chang’s China Bistro in the Canadian provinces of Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland.  The first location is scheduled to open in 2012.
  • MCD Japan sales fell 7% in March due to the closure of restaurants damaged in the March 11 earthquake.  Rolling blackouts implemented following the quake also reduced operating hours.
  • Tilman J. Fertitta and his Landry’s Restaurants Inc. subsidiary on Thursday officially placed a bid of $137.3 million for McCormick & Schmick’s Seafood Restaurants Inc.
  • Nestlé is looking to develop its food supply service to restaurants (Nestle Professional.
  • USDA inspectors are exempted from the government shutdown, if it comes to pass.
  • YUM traded down 1.4% on accelerating volume after a strong session the day prior.
  • PNRA also declined 1.4% on accelerating volume.
  • Casual dining took it on the chin following the RT earnings Wednesday after the close.  I remain positive on EAT, PFCB, and RUTH while maintaining a cautious view on TXRH and CAKE.
  • Praesidian Capital Opportunity Fund III-A LP offered $9.5 million for the 20 Charlie Brown’s restaurants, including 17 in New Jersey.




Howard Penney

Managing Director


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