R3: WMT, COLM, Fast Fashion, Trade Relief for EU?

 

R3: REQUIRED RETAIL READING

April 19, 2011

 

 

 

OUR TAKE ON OVERNIGHT NEWS

 

Wal-Mart to Buy Kosmix - Wal-Mart Stores Inc.’s early awkward attempts to master social media failed, but the retail giant isn’t letting that stand in its way. The company on Tuesday said it has agreed to acquire Mountain View, Calif.-based Kosmix, the developer of a social media technology platform that filters and organizes content in social networks to connect people with real-time information that matters to them. The purchase price was not disclosed. Kosmix founders Venky Harinarayan and Anand Rajaraman will operate as part of the newly-formed @WalmartLabs, based in Silicon Valley. Wal-Mart plans to expand the @WalmartLabs team and expects the new group to create technologies and businesses around social and mobile commerce that will support Wal-Mart’s global multichannel strategy, blurring the line between bricks-and-mortar stores and e-commerce.  Early pioneers of online shopping, Kosmix’s Harinarayan and Rajaraman’s first company, Junglee, was acquired by Amazon.com in 1998. Kosmix has been working on a social genome platform that captures the connections between people, places, topics, products and events as expressed through social media, be it a feed, a tweet or a post. <WWD>

Hedgeye Retail’s Take: Finally something positive out of Wal-Mart. Kosmix is actually a very interesting model. If layered correctly over its existing frame, the synergies of sheer knowledge regarding what the consumer incrementally wants on the margin should be incredibly valuable to WMT – to the extent that they act on it. 

 

Columbia Sportswear Fall Collection - Portland, Ore.-based Columbia Sportswear’s fall ’11 collection is all about keeping feet comfortable in any weather and on all terrains. For fall, the brand will highlight two major technological stories: OutDry, the patented lamination process acquired by the brand last year that affixes a breathable waterproof membrane to shoe uppers; and Omni-Heat Thermal Electric, a battery-powered in-boot heat source. Prices range from $115 to $200 for most styles, with Omni-Heat Electric boots selling for $400 and more. <WWD>

Hedgeye Retail’s Take: Isn’t it sad to see a company like Columbia so consistently come out with such cool product, and yet it never really catches on and makes a meaningful impact to the P&L? That’s what happens when you start off as a premium brand, and then go too quickly downstream to Kohl’s.  Fortunately for COLM, they’ve actually changed their M.O. and reinvested in the top end of their product spectrum to redefine the brand. This takes time. Until then, Mountain Hardwear and Sorel continue to drive the authenticity part of the COLM model.

 

R3: WMT, COLM, Fast Fashion, Trade Relief for EU? - R3 4 19 11

 

Big Lots Looks at Bigger Stores - Big Lots boasts 1,400 stores around the United States and logged $1.5 billion in sales in the fourth quarter of 2010, but has never had a much of a presence in the Twin Cities market. That's about to change. The Columbus, Ohio-based deep discount chain in March up snapped 90,000 square feet of vacant or soon-to-be vacant "junior box" space in three top-flight suburban locales with plans to launch a big push into the Minneapolis-St. Paul area -- welcome news for a still-ailing local commercial real estate industry. The three stores will open later this year. Welsh Companies senior associate Bob Minks, who brokered the deals, said the company is looking to establish itself here after past efforts to do so were stymied by high rents and poor locations."Big Lots had a number of stores in this market in the past, but they were small stores and were in second- and third-rate locations," he said. "Those stores have pretty well all failed. They were not good real estate. "But with the downturn, they came back a year-and-a-half ago and said, 'We want to take another run at the Twin Cities market. What's going on with rents?'" The answer: They're lower. With 6.6 million square feet of vacant retail space in the market -- including a proliferation of empty "junior box" space due to the closings of such chains as Circuit City and CompUSA -- landlords are looking to cut deals, often with concessions.<StarTribune>

Hedgeye Retail’s Take: Big Lots sits right in the core of companies that should not be a) growing, and b) shifting into larger formats. Operational expertise will be key to running these stores at a healthy margin, but that’s something the company has lacked in the past.

 

American Apparel Seeking Financing - American Apparel Inc., the clothing manufacturer known for risqué advertising, is racing to seal a deal for up to $10 million in rescue financing to avoid a bankruptcy filing, said a person familiar with the matter.  The Los Angeles-based company has held talks with an individual investor in recent days who has expressed interest in providing money for the retailer, run by controversial Chief Executive Dov Charney. The money would come in the form of equity, this person said. The potential investor, whose identity couldn't be determined, isn't a well-known name, this person said. The company hopes to secure a deal as soon as this week. Talks with the investor faced some wrangling in recent days, the person said, and optimism about clinching a deal has faded. If the talks fall apart, American Apparel could be forced to file for Chapter 11 bankruptcy protection as it runs low on cash, the person said. Some close to the company said it can still avoid bankruptcy even if the talks fall apart. <WallstreetJournal>

Hedgeye Retail’s Take: I can’t imagine being a rational investor on one side of the table trying to bang out a deal with Dov Charney on the other. The best way to save this company is to get him out of there, and put a team in place that can preserve and grow the brand equity that fortunately still exists at American Apparel. 

 

Vera Wang Unveils Bridesmaids Line - Drafting off shoppers’ interest in her wedding dresses for David’s Bridal, Vera Wang has unveiled a bridesmaid dress collection under the White by Vera Wang label for the 300-plus unit chain. Last year Wang exited the bridesmaid business after deciding she didn’t have enough access to the collection and couldn’t run it in a way that was timely. In an interview, Wang said, the alliance with David’s Bridal has allowed her to develop bridesmaid dresses “in a much larger and more unusual way with a tremendous amount of support. They are up for anything I am interested in trying.” The seven-piece line of dresses in such shades as orchid, amethyst, charcoal and champagne will ship to 250 David Bridal’s stores in late June. But the designer noted “these dresses are not inexpensive,” with a few retailing for $200. (More cost-conscious brides will find a $158 opening price point.) A one-shoulder short dress with a bubble skirt adorned with oversize rosettes is geared for style-minded wedding parties. But there are also more traditional choices such as a short dress with horizontal pleats and a sleeveless chiffon column dress with swag skirt. <WWD>

Hedgeye Retail’s Take: This is a no-brainer for David’s Bridal, as well as Leonard Greene – who bought David’s from Federated Department Stores (Macy’s) upon Macy’s divestiture of David’s and After Hours Formalwear in the wake of the Federated/May deal. If anything, the risk here is for Vera Wang, particularly as it relates to getting into the business alongside a private equity company with such low price points. Her duration of ‘brand equity’ is certainly greater than theirs.   

 

Cheap Chic Lifts Fifth Avenue’s Fortunes - Foreign retailers of “cheap chic” are colonising New York’s Fifth Avenue as the shopping street that was once a symbol of luxury is transformed by the changing habits of money-conscious consumers. Spain’s Inditex will start work in the next few weeks on a flagship Zara store in a $324m property it bought last month, while Fast Retailing of Japan is planning to open a Uniqlo outlet in the autumn after signing a 15-year lease for more than $300m. The two companies will rub shoulders with high-end brands such as Tiffany, Bottega Veneta and Prada as the Fifth Avenue streetscape becomes a reflection of consumers’ desire to save money on basics so they can splash out on luxuries So-called “high-low” shopping emerged from the depths of Japan’s two-decade economic slump and became entrenched in Europe and the US during the downturn triggered by the financial crisis. But in many big cities luxury shopping zones still remain segregated. Joe Sitt, head of Thor Equities, a real estate group that paid $142m for a Fifth Avenue building last year, said many US retailers had been reluctant to go global at a time when Zara, Uniqlo and Hennes & Mauritz were becoming mass market global brands. <FinancialTimes>

Hedgeye Retail’s Take:  This is a sign of the times, and to stop it would be like trying to prevent water from finding its way from mountain peak to the river. The foreign brands are twice as fast as US companies, which allows them to a) make fashion calls closer to need, b) mitigate leaving money on the table due to obsolete inventory, c) maximize revenue curve, and ultimately d) pass these savings through to consumers while preserving their own margin. How can trendy US fashion brands compete with that?

 

Colombia-Peru-EU Trade Deal is Good news for Textile Industry - The European Commission has finalised the legal review of the Trade Agreement with Colombia and Peru that would open up markets on both sides and increase the stability of this trade relationship that was worth €16 billion in bilateral trade in goods in 2010, sources reported. The agreement includes far-reaching measures on the protection of human rights and the rule of law, as well as commitments to effectively implement international conventions on labour rights and environmental protection, including tariff elimination and improvement in market access in government procurement and services.  The Trade Agreement will also address specific concerns related to a number of EU key export industries. In textiles for example, the Agreement provides for new disciplines in labelling and marking that will limit the amount of information that can be required on a permanent label and thereby prevent overly burdensome and unnecessary labels that are not of strict relevance to consumers. <FashionNetAsia>

Hedgeye Retail’s Take:  Hey…any progress is good news for the apparel biz as it lessens the reliance on China – which has turned into a net exporter of inflation to the US apparel industry.

 

 

 


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