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May 2, 2011




  • At the company’s recent analyst day, management at LIZ highlighted that it’s star performer of late Kate Spade is seeing business in Japan return close to prior quake levels. This is the most bullish take we’ve heard yet regarding Japanese-based performance from domestic companies after nearly two months since the event.
  • Following last week’s devastating tornados in Alabama, a call with the management of Hibbett Sports revealed that approximately 12 stores had been directly damaged by the storms, or roughly 1.5% of the total store base. However, this doesn’t include stores that will be indirectly impacted from power outages, road damage, and a myriad of other disruptive factors that will weigh on sales at the end of April. In terms of magnitude, with pre Easter weeks already in the books, the last week of April will likely only account for 5-6% of the quarter's sales.



Retail Crippled in Wake of Tornadoes - Retailers in the South experienced serious damage to many stores and were still trying to communicate with some associates late Thursday in the wake of the killer tornadoes that swept through six states Wednesday, which, according to reports at press time, had left 250 to 300 people dead. Rescue crews were pulling people out of the rubble of devastated neighborhoods, with most of the destruction occurring in Alabama, particularly Tuscaloosa. One off-duty Belk Inc. associate was reported killed and the company was attempting to reach 20 to 30 others late Thursday afternoon, according to spokesman Ralph Pitts. Power outages and downed phone systems are making communications difficult.

Pasted from <WWD>

Hedgeye Retail’s Take: April will show some huge numbers when same-store sales are released this Thursday – with anywhere from 8-14%. But some retailers missing those numbers will point to weather. As it relates to cooler weather in the earlier part of April, it’s debatable. But last week, the tornadoes are clearly a massively identifiable event. Even those areas of the Southeast that were not directly impacted are still subject to that somber mood after being hit by such a devastating event. Retail will need a very solid 1st half of May, otherwise will see heavier promotions kick in to clear spring merchandise and stay clean. 


J.C. Penney Launches Big and Tall Concept - The gloves are coming off in the battle for the men’s big and tall customer. J.C. Penney Co. Inc. today will take the wraps off The Foundry Big & Tall Supply Co., a new retail concept targeted to this growing market segment — one that will pit it directly against the other major players in the men’s industry, all of whom have identified this niche as one ripe for expansion.  The biggest player is Casual Male Retail Group Inc., which operates nearly 500 stores including four Destination XL superstores, which combine all of the company’s concepts: the moderate Casual Male merchandise as well as the more-upscale Rochester Big & Tall, along with shoes. The company will add 10 to 14 additional DXL stores this year and, by 2015, expects to have between 75 and 100 units in operation.<WWD>

Hedgeye Retail’s Take: While this is a tough business, the fact is that it is one of the faster growing segments of retail. Men are not getting taller, but they are getting bigger. While we don’t have statistics to back it up, we’d suspect that JCP’s ‘Middle America’ customer is right in the sweet spot here. This is not enough to impact top line for JCP in any of the next 2-3 years. But if successful, it could at least add a glimmer of hope (and value) to JCP’s Enterprise Value. 


Target Goes to Canadian Court - Target Corp. heads to the Federal Court of Canada on Monday, hoping to win the exclusive right to use its name in Canada, just three months after the retailer unveiled a plan to expand into the country. Fairweather Ltd. owns 15 Target Apparel stores in Canada, including this one in Toronto. Target Corp. plans to open Canadian stores by 2013. The Minneapolis-based discount-store chain is asking the court to impose a preliminary injunction against Canadian merchant Isaac Benitah and his company, Fairweather Ltd., which owns 15 stores across Canada called Target Apparel and has a logo similar to that of Target Corp. "If the defendants are not restrained, the plaintiffs will lose the ability to control their reputation and goodwill in Canada," according to the filing by Target Corp. The court hearing is the latest volley in a battle that Target Corp. and Mr. Benitah have been waging for close to a decade over who owns the rights to the Target name in Canada. <Wallstreetjournal>

Hedgeye Retail’s Take: This is a very political case in Canada. Small time Canadian apparel brand called Target Apparel vs. US goliath Target. The local brand has a bigger presence today, but Target Corp wants to reserve the right to get big in Canada in the future. Interesting, though that Target Corp still plans only 15 stores by 2013. Target Corp claims that Target Apparel’s logo is too similar. That’s pretty much a joke from our perspective. Ask 10 people to design a logo for a company called target, and at least half will draw a bulls eye. Will the Canadian government stick up for the little guy, or will it risk the near term backlash from its citizenry about voting in favor of the Americans and the promise of jobs 3-5 years down the road? We don’t know. But given how important this is to TGT’s growth, we would not bet against it. They won’t be afraid to pay.


Borders Adviser-Fee Pay Bid Should Be Denied - Borders Group Inc. (BGP) hasn’t shown that it can pay the costs of its bankruptcy case and should be denied requests to pay lawyers and other professionals, the U.S. said. The U.S. Trustee, a bankruptcy watchdog for the Justice Department, today objected to monthly statements of compensation and expense reimbursements for 11 professionals working on the case. Andrew Glenn, a lawyer for Borders, said the company will file its financial report today and will pay fees owed to the U.S. Trustee, answering two of the concerns raised in papers filed in U.S. Bankruptcy Court in Manhattan. “There was an issue with a reconciliation of the bill we received,” Glenn, a lawyer with Kasowitz, Benson, Torres & Friedman LLP, said in an e-mail.  The operating report for the period of Feb. 16 to March 31 hasn’t been filed, acting U.S. Trustee Tracy Hope Davis said in the filing. Kasowitz, Borders’s main bankruptcy counsel, has requested $1.27 million in fees for Feb. 16 through March 31. Financial adviser Jefferies & Co. has requested $250,000. <Bloomberg>

Hedgeye Retail’s Take: These advisors had the pleasure of walking Border’s through the bleeding process, and are now being left holding the check. How fitting…


Li & Fung Exec Charged With Bribery - A senior merchandise manager at Li & Fung faced bribery charges on Wednesday, according to Hong Kong’s Independent Commission Against Corruption.  Hong Kong’s ICAC said that Doris Au Yeung Lai-hung, 44, was charged with “six counts of agent accepting an advantage.”  At the time of the alleged offenses, the defendant was responsible for placing purchase orders from Li & Fung with apparel suppliers for children’s wear. Also named as defendants were Guan Xiaoyi, 30, director at Sun Xinfa Arts Manufacture Ltd., and Yeung Wai-sing, 40, finance manager at Shun Fat Arts Manufacture Ltd.  The ICAC said both Guan and Yeung face a joint count of conspiracy to “offer advantages to an agent.” <WWD>

Hedgeye Retail’s Take: On one hand, this happens all the time, but for some reason the government simply chose to take action on this one. On the other hand, with such tight capacity, perhaps the ‘payoff game’ is getting more closely watched.


Online Retailers to Benefit more from Mothers Day This Year - When it comes to seeking that perfect gift for mothers this year, 21.5% of consumers will turn to online retail sites, up slightly from 19.7% last year, according to a survey released this week by the National Retail Federation. The trade group’s 2011 findings are based on surveys of 8,488 consumers conducted between April 4 and April 12. BIGresearch conducted the survey. “This Mother’s Day, the woman who often puts herself last is being put first,” says Matthew Shay, president and CEO of the National Retail Federation. “Americans are in a much better position to spend this year and will push the daily stresses of high gas and food costs aside for one day to celebrate the most important women in the world to them.” <InternetRetailer>

Hedgeye Retail’s Take:  Is it us, or do these numbers still seem low?