In preparation for BYD’s Q1 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from BYD’s Q4 earnings call.




  • “While we expect to return to year-over-year growth in the second quarter, we also expect that the first quarter of the year may reflect a slight decline versus last year. This is due in large part to tough comparisons, not a fundamental shift in our business. Recall that the first quarter of 2010 was one of the strongest quarters in the Las Vegas Locals region we had experienced in several years as the economy appeared to be picking up steam, consumers were spending, and it appeared a full recovery was underway. Unfortunately, the recovery slowed dramatically in the second quarter, most notably due to the flash crash in May of 2010.”
  • “Our first quarter has been impacted by severe weather in the Midwest and South regions. Nevertheless, we do expect to see strong sequential growth in revenue and EBITDA between the fourth quarter of 2010 and the first quarter of this year.”
  • [re: convention business pickup] “During the first two quarters of 2011, we have also seen evidence of this at our own properties. We are projecting that our group business at our Las Vegas properties will be up 15% year-over-year.”
  • “We’re also encouraged by early signs of a broader recovery in the Las Vegas market. For example, taxable sales were up nearly 3% in southern Nevada in December. This was the third straight month of improvement with five of the last six months showing year-over-year growth, signaling that consumers are starting to spend a little bit more.”
  • “A $5 increase in spend per visit would result in growth of $20 million to $25 million annually in EBITDA in the Las Vegas Locals region alone.”
  • “We’re increasingly encouraged by the outlook for the locals market. Although we should note that the promotional environment continues to be highly competitive. In fact, our largest locals competitor unveiled an unusually aggressive advertising and promotional campaign in February… they have not had an effect on our Las Vegas Locals operations. Despite this promotional activity, our coin-in and customer traffic have grown since they launched their campaign.”
  • “Higher expenses at our Hawaiian charter operation impacted regional results in the fourth quarter. Fuel costs have been rising sharply in recent months, so we expect higher charter expenses to remain a factor in upcoming quarters. Despite this, we are encouraged by strength in our business volumes. Rated play from our Hawaiian customer segment rose in the fourth quarter and it was up again in January and February.”
  • “We project that winter weather has cost the MSR [Midwest and South] nearly $3 million in EBITDA during the first 60 days of the year, though when weather’s not a factor, business levels are meeting our expectations throughout the region.”
  • “We’re still going to see significant growth between Q4 and Q1 as we did last year. It’s just we will probably fall short of last year’s Q1 for those reasons. Part of it was weather once again, and part of it is just a strong Q1 last year.”
  • “And despite horrible weather, Borgata maintained slot win at prior year levels in January and captured a record 21% share of the Atlantic City slot market. This marked the second straight month we set a new record in slot share.”
  • “Corporate expense is projected for 2011 to be approximately $40 million to $42 million, and that amount should be spread relatively evenly throughout the year.”
  • “For 2011 we expect consolidated depreciation expense to be approximately $195 million to $200 million, about $130 million to $135 million attributable to Boyd and the remaining to Borgata.”
  • “We expect share-based comp to be approximately $12 million for 2011.”
  • “Assuming three-month LIBOR stays in the 50 to 75 basis points range throughout this year, we expect Boyd’s interest expense to range from $145 million to $150 million in 2011, Borgata’s interest expense to be approximately $85 million to $87 million. Therefore consolidated interest expense should be reported between $230 million and $237 million for 2011.”
  • “We expect the tax rate to be approximately 35% for 2011.”
  • “Most of the upward trajectory on the revenue line is related to the frequency number as opposed to the spend per visit at this point.”
  • “Borgata’s maintenance capital run rate is about $15 million and then they had the $50 million room remodel project of which about half of that will be spent in 2011. So for Borgata, it’s the $15 million maintenance plus the approximate $25 million room remodel to get to about $40 million for Borgata for 2011 and probably a similar amount in 2012. For Boyd, our maintenance capital run rate right now is about $50 million.”
  • “Cash rooms in the Las Vegas market overall accounts for roughly, let’s call it 25% to 30% of our overall business mix and that would exclude things like wholesalers and other things, more FIT and convention business, more I’ll call them oriented customers. As far as the trending is concerned, the trends are actually continuing to strengthen in the second quarter.”
  • “ On flat net revenues, you will have a positive impact on the EBITDA line.”

VFC: Hurry Up and Wait


Conclusion: The Punchline on the stock is that if you’re a longer-term holder and don’t mind seeing the recent weakness continue, then hang in there. If you like buying good quality companies at great prices, then wait. We think you’ll still get your chance.



VFC is always a tough company to bet against. It has a portfolio of better-than-average brands, managed by far-better-than-average-individuals who have an exceptional track record of managing the street. It’s got the size and scope of touch points in its supply chain that make it a great partner, a tough competitor, and dangerous target for vendors or retailers to go to looking to improve their respective cash cycles at the expense of VFC.  It has a healthy balance sheet, and is one of the few apparel companies that is successfully growing outside the U.S..  The bottom line is that If you believe VFC’s plan that it can add $5Bn in sales and $5 in EPS – organically – over 5-years, then this stock is flat out cheap.


But 5-years is a long time. And we think most would agree with us in saying that  making an investment decision in today’s market based on valuation would be both foolish and costly.  Also, let’s not forget that VFC has a portfolio of brands, and it’s going to be very difficult for a company with a portfolio – even an above average one – to outgrow the industry – in a profitable way – 2-3x in this environment. Ralph Lauren? Yes. Calvin Klein? Yes. Nike? Yes. VFC? I dunno. And we think that the realization of margin outlook in this space will get worse before it gets better. VFC can’t sit that one out.


The Punchline on the stock is that if you’re a longer-term holder and don’t mind seeing the recent weakness continue, then hang in there. If you like buying good quality companies at great prices, then wait. We think you’ll still get your chance.




Bull Case:

  • Revenues were strong in the quarter up +12% coming in 2-3 points ahead of expectations. While both Outdoor & Action Sports and Jeanswear continue to drive sales and fall bookings remain strong, the three smaller coalitions (Contemporary, Sportswear, and Imagewear) all came in significantly above expectations. Combined, these ‘little three’ account for ~70% of Jeanswear revenues and have contributed little in terms of growth over the last several years. Further improvement here would take pressure off the two biggest segments and drivers of growth.
  • One of the more bullish takeaways from the call is that initial price increases in Jeanswear have been taken by consumers better than anticipated and has impacted unit volume less than expected. While a select few in retail are planning for a 1-for-1 relationship between higher prices and unit volume impact, management noted during the March analyst day that they were planning for a 2-to-1 scenario whereby for every 10% increase in prices they expect a 5% decline in units. So far, this has proven conservative. To say we are in the early innings of this game is a massive understatement, but undoubtedly a positive change on the margin.
  • Operating profit came strong against the toughest compare for the year. Now, there was a 40bps contribution from an accounting change (we’ll hit on below), but excluding that profitability was better than expected driven largely by better than expected Jeanswear margins. Importantly, it’s not just that domestic margins were down less than expected (still down -130bps), but that higher margin international sales were up 50%. VF’s international Jeanswear business is the company’s most profitable – to see sales up over 50% here in the quarter is very bullish as it relates to VF’s ability to offset domestic margin pressure. It also suggests that full-year expectations for margins to be down -100bps in Jeanswear could ultimately prove conservative.
  • In the first quarter out of the gate since the company’s 5-year strategic growth plan was laid out, coalition performance is coming in on-track if not slightly above as noted above. Yes, 5% of the way into the plan is early indeed, but the precedent is important and positive.
  • While definitely not a long term positive for anyone affiliated with the US Consumer, the fact of the matter is that 30% of VFC’s revenue comes from consumers outside of US borders, a crashing US dollar will continue to give VFC tailwind to offset commodity costs.

Bear Case:

  • Management’s revised year-end guidance implies they’re taking down the back half. Despite beating the quarter by $0.23 and adding $0.10 of Fx contribution, guidance was only taken up by $0.15.
  • Q1 was a lower quality beat. Half of which came from one-time items including $0.08 from more favorable tax adjustment. The other item embedded in the beat came from a change in inventory accounting to FIFO from LIFO ($0.04 in EPS) that will bring remaining coalitions into a consistent reporting structure. We can appreciate the need for establishing a consistent reporting standard across all businesses, but the timing of this change really bugs us. The net effect of it makes it such that VFC’s sales are booked at product cost that was set 3-6 months ago instead of 1-2 months (our estimate). In a rising raw materials environment, this FIFO is your friend. Again, we’re not beating VFC up for complying with this standard, but why not years ago when the businesses in question were acquired?
  • Management cautioned that Q2 results would be the most challenging of the year. Pressures both on gross margin as well as SG&A are likely to lead to operating margin compression for the quarter. In addition to timing pressures between price increases and higher costs, the company also highlighted that it suffered the complete destruction of one of its Jeanswear DCs in Tuscaloosa, AL creating inventory disruption concerns. On the SG&A line, higher spend on both advertising and technology are going to make it challenging to leverage investments in the quarter. As a result, management is relying increasingly on 2H execution to meet year-end targets not something we like to see given the setup we have going into the 2H in retail. These guys will make it happen, and can execute through a tragedy like this better than almost anyone. But we still need to count the cost.
  • Near-term, the top-line comp setup gets increasingly more difficult. The company has posted some impressive growth numbers recently on top of considerably easier compares (nothing more than +2%), but that shifts significantly as we look out over the next three quarters with a +7%, +7%, and +11% coming down the pipe. Is this insurmountable? No – especially with all the inventory on hand. But it certainly ups the ante for the core growth engines and requires the ancillary coalitions to also start picking up the slack.
  • While not a major risk, let’s watch Levi’s even closer as a competitor as they’ll be introducing its Denizen brand to Target this summer. Originally launched last year specifically for the Chinese market, the brand will be priced at the lower end of its signature Levi line at $20-$30 adding more competition to the low-end denim market. VFC’s Wrangler line is currently the price leader at Target with opening price points at $12.99.
  • Last, but certainly not least, is the a substantial negative change in the cash conversion cycle (see chart below), as a meaningful uptick in inventory more than offset nice improvement in payables. In addition, this is the third quarter of sequentially higher inventory growth. While this might give the company a cost advantage heading into the 2H, it also increases fashion risk as they need to ‘make the call’ on fashion that much earlier. It’s also worth highlighting that the last time we saw a deterioration in yy change in the cash conversion cycle of this magnitude back in Q3 of 2007, shares fell -17% over the following 3-months.
  • This SIGMA Chart is NOT VFC’s Friend. It was heading towards the lower left quadrant, and took an uncharacteristic swing to the right. Usually we see companies of VFC’s caliber swing to the upper left, which get’s them into “manage the balance sheet” mode. VFC is clearly in investing mode by building working capital ahead of 2H. That’s cool, in fact most companies in this space HAVE TO do this given how low inventories have been drawn down over the past two years.  But the only companies it will work for are those that have the process to a) ensure that they are ‘on trend’ with their designs, and b) are putting the appropriate marketing dollars to work in order to connect with their consumer.

All in, we’re pretty much in-line, shaking out at $1.05 for Q2 and $7.16 for the year, which has us a penny above and $0.04 below the Street’s revised numbers, respectively. In the end, we’ve got a name trading at 14.0x earnings, and 9.2x EBITDA, which we don’t find particularly compelling.



SIGMA: Not the move you want to see

VFC: Hurry Up and Wait - VFC S 4 11


EPS Sandbag History:

VFC: Hurry Up and Wait - VFC EPS Mgmt 4 11

 (Note: Original Expectations reflect consensus estimates 4-months prior to earnings; Company Led Expectations reflect consensus estimates 1-month prior to earnings)




Chinese PMI Slows – And We Like It

Conclusion: We continue to see signs that inflation setup to moderate in China, whilst Chinese GDP growth looks to accelerate relative to the world and the US in particular. We remain bullish on Chinese equities as a result of these factors.


Position: Long Chinese equities (CAF); Long the Chinese yuan (CYB).


After ticking up to 53.4 in March, China’s Manufacturing PMI inflected once again, falling to 52.9 in April. Breaking down the subcomponents of the index, we see broad-based weakness across the board: 

  • New Export Orders ticked down: 51.3 vs. 52.5
  • Backlogs of Orders ticked down: 50.7 vs. 51.4
  • Output ticked down: 55.3 vs. 55.7
  • Imports ticked down: 50.6 vs. 52
  • Employment came in flat at 51.8; the relative “strength” here is confirmed by a recent Hudson Highland Group survey that showed 77% of Chinese firms intend to increase their staff in 2Q, up from 72% in 1Q. 

While we’d generally greet a soft PMI reading like this with negative sentiment – particularly as it relates to investor’s appetites for equities, we actually receive this report in a positive fashion due to the Input Prices subcomponent falling (-2.1) percentage points MoM to 66.2. Late last week, HSBC’s unofficial PMI gauge confirmed this official deceleration, with its Input Prices subcomponent falling to 62.4 in April vs. 69.5 in March.


While still elevated on an absolute level, the slopes of these series continue to trend positively on a six-month basis, which augments our call for slower reported CPI in the back half of this year. As such, we remain bullish on Chinese equities as the PBOC reins in the pace and magnitude of tightening measures.


Chinese PMI Slows – And We Like It - 1


Shifting gears back to the growth side of the equation, there’s no confusing this weekend’s PMI report for something other than what it is: Slowing Growth. While generally, we want to be short equities/equity markets where growth is slowing, we think we are in a very unique and interesting situation with regard to our Chinese equity exposure.


On a relative basis to the US and the rest of the world, Chinese growth is decelerating at a slower pace, which increases the likelihood that international investors once again look to China as a place to buy growth. We maintain that China’s +9.7% 1Q11 GDP growth looks significantly more attractive when US GDP growth has a 1-handle on it. In addition, bearish sentiment around a confluence of known-knowns supports the mean reversion case – both from an absolute price perspective, as well as on a P/E basis. Relative to its historic valuations, China is quite “cheap”. We like it when our catalysts are supported by valuation.


This confluence of factors has us leaning more positive on Chinese equities than PIMCO, who was out this morning reminding the world that Chinese growth is slowing (known) and inflation is accelerating (also known). If their call for “higher than expected” inflation rates in China is predicated on an increase in the velocity of US dollar debasement/commodity inflation, then we’d just as soon be defensive towards any risk assets. A US Currency Crash is not structurally bullish for any of our long positions (except Gold) – particularly when the dust has settled.


Darius Dale


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

European Risk Monitor: Currency Strength Ahead of ECB and BoE Decisions

Position: Long British Pound (FXB)


As is typical for Mondays, we release our weekly European Risk Monitor. While risk continues to trend higher across Europe’s periphery, Greece experienced a noticeable inflection in sovereign cds late last week (see chart below). Despite the turn, we continue to stress that a restructuring of Greek public debt is a question of when, and not if, and therefore we expect cds and government bond yield charts to trend up and to the right for peripheral countries.


European Risk Monitor: Currency Strength Ahead of ECB and BoE Decisions - bankaa


Our European Financial CDS Monitor (below) shows that bank swaps across Europe were mostly tighter week-over-week, tightening for 31 of the 39 referenced entities and widening for 8.


This week we expect both the EUR and GBP to perform well against the USD as both the ECB and BoE continue to signal a hawkish stance on inflation going into interest rate decisions this Thursday. Meanwhile the USD continues to burn, with the US Dollar Index down another -1.4% week-over-week and down for the 14th week out of the last 18 as a credible plan to reduce US debt and deficits remains uncertain.


For more on our positioning on the GBP-USD, see Friday’s Early Look titled “Royal Awareness”.


Matthew Hedrick



European Risk Monitor: Currency Strength Ahead of ECB and BoE Decisions - bank1

European Risk Monitor: Currency Strength Ahead of ECB and BoE Decisions - bank2

Canada: Leaning Left Large

Conclusion: The left wing New Democratic Party of Canada is making serious inroads in the last few weeks, which leaves the outcome of today’s federal election in Canada highly uncertain.  A victory by the NDPs could negatively impact Canadian equity and currency markets due to their mandate to both increase government spending and raise taxes.


Position: Sold our long position in the Loonie, via FXC, this morning


Canada is not known for its stimulating politicians or interesting elections.  The nature of the parliamentary system is that the leader of a political party, who would potentially go on to become Prime Minister, needs as his or her primary skill the ability to manage the political system.  Current Prime Minister Stephen Harper in many ways embodies this. 


Prime Minister Harper grossly lacks the charisma that is considered a prerequisite for a successful politician in the United States.  A recent article in Maclean’s magazine described Harper as a hologram on the campaign trail.  Each appearance has been managed closely, included limited impromptu interaction with constituents, and is scripted so tightly that he even takes a break at the exact same time in each stump speech to drink water.   In part, this is Prime Minister Harper’s nature and in part this is due to the Conservatives not wanting to make any mistakes as they attempt to attain a majority government for the first time in a generation.


We were in Canada this weekend doing some final due diligence ahead of the Canadian Federal election this Monday and all is not well for the Conservatives.  In fact, we were told by some Canadian political insiders that internal polls heading into the final weekend show the PCs losing substantial ground nationally.  Interestingly,  it is not their arch rival the Liberal Party that is taking share, but the left wing New Democratic Party (“NDP”) led by long time leftist Canadian iconoclast, Jack Layton.  In many ways, this is the worst nightmare for the PCs.


In Canada’s last federal election in 2008, the Conservatives won 143 seats in parliament, the Liberals won 77 seats in parliament, the Bloc Quebecois won 47 seats, and the NDPs won 36 seats.   The Conservatives formed a minority government after that election.  Earlier this year, the House of Commons passed a motion of non-confidence initiated by the Leader of the Opposition, Liberal Michael Ignatieff.  The passing of this motion forced the Conservatives to call an election for May 2nd and end the longest minority government in Canadian history. 


Initial polls at the beginning of the campaign in late March showed that the results of this election would likely be similar to the results of the 2008 election with some potential of the Conservatives to gain more seats, and potentially attain a majority government, due to high unlikable ratings of Liberal Party Leader Michael Ignatieff.  In fact, according to a poll a week before the first major debate, the NDPs were expected to win 13.2% of the popular vote, which was roughly 5% less than in 2008.  Surprisingly, after the first debate, the PCs remained well ahead, but the Liberals and NDPs were deadlocked at close to 25% each.  This dramatic move by the NDPs is attributed to a shift away from the Bloc Quebecois in Quebec and the underperformance of Liberal Leader Igantieff.


In a more recent federal poll in Canada from Nanos Research, the resurgence of the NDP party has continued.  According to this poll, taken over the last three days, the Conservatives have 37% support in Canada, the NDP have 31% support, the Liberals have 22.7% support, and the Bloc Quebecois, which runs candidates only in the province of Quebec, are a distant fourth with 5.5% of the theoretical popular vote.  A more recent poll from Forum Research, which includes decided and leaning voters, gave the Conservatives 35%, the NDPs 33% and the Liberals 19%.


Historically, to obtain a majority of the 308 seats in Canadian parliament, a Party needs to win 40% of the popular vote.   Given this, and the results from recent polls, it is very unlikely that the Conservatives win a majority.   The long shot scenario is that the NDP and Liberals effectively split votes, which potentially allow the Conservatives to gain a majority without 40% of the popular vote.  This scenario is highly unlikely.


The more likely scenario is that either the Conservatives or NDPs win a minority government.  While a minority government is positive in the sense that it creates some limitations on power, the reality is that a NDP Prime Minister and minority government would look dramatically different than a Conservative Prime Minister and government.  (Incidentally, the NDPs have never formed a government in Canada.)


From an economic perspective, it is difficult to argue with the performance of the Conservatives over the past couple of years, especially as this performance has outpaced, and really decoupled from Canada’s largest trading partner, the United States.  As we highlight in the chart below, the Harper-led government has been effective at creating employment with an unemployment rate of 7.7% (versus 8.8% in the United States), the Canadian government has shrunk the deficit by 1/3 over the last 11 months, and Canadian economic growth continues to be strong, expected to come in at north of 4% in Q1 (versus 1.8% in the United States).


At a risk of oversimplifying their mandates, it is fair to say that NDPs and Conservatives have economic policies from two ends of the economic spectrum.  The key “attributes” of the NDP economic platform are an intention to raise corporate tax rates to 19.5% (the Conservatives intend to cut to 15%), the NDPs intend to gradually double the benefits of the Canadian Pension Plan, they propose a budget that contains $30BN in additional spending, and it is likely that the NDPs implement a tougher energy policy, which would be negative for Canada’s energy producing regions and energy producing companies.


The Conservatives have done an admirable job stewarding the economy of Canada over the last couple years.  This has been reflected in the strength of the Loonie, which is near an all-time high versus the U.S. dollar, the economic statistics outlined above, and the performance of Canadian equity markets. The NDP’s economic strategy is widely divergent from the Conservatives and the risk of a NDP-led Canada is that these economic policies are reversed and a reversal of the performance of the Canadian economy and its currency will follow suit.


We sold our long Loonie position via the etf FXC this morning in the Hedgeye Virtual Portfolio with FXC trading immediate term overbought.  We’ll look to buy back the position at a lower price. Our support levels on the FXC for the immediate term TRADE = $103.65 and intermediate term TREND = $102.11.


Daryl G. Jones

Managing Director


Canada: Leaning Left Large - canada unemploy


Canada: Leaning Left Large - 1

R3: Sales, JCP, TGT vs. Target, Li&Fung



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?



real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.