R3: Pent-up demand, KSS, TGT, Topshop, Vente Privee



May 12, 2011






  • Kohls was the second department store retailer to set strong expectations for May sales due to ‘pent up’ demand in as many days following similar comments out of Macy’s yesterday. While we never like to highlight weather, the reality is that it April was the wettest in 20-years nationwide. Sure, we could see a rebound to some extent in May, but this only adds to our concern that consumer demand will turn sharply downward in the 2H. The bottom line is that consumer behavior is utterly unpredictable. Banking on ‘pent up’ demand is poor risk management.
  • e-Commerce sales were up +47% at KSS in the quarter. A strong start for the year in which the company expects to grow nearly 40% and achieve sales in excess of $1Bn in the channel. If e-commerce sales continue at this pace it would add another 50bps on top of consensus expectations for 5% sales growth this year.
  • With average selling prices increases for a t-shirt up +26% since last July, management at Gildan commented that increases to date are expected to pass through higher cotton costs up to $1.50/lb. including $0.25 of added basis cost, which is actually lower than the $1.60 projected at the end of 2010.



Target to Launch New Fashion and Homeware Collections - Target is working with Missoni for its next designer collaboration, which will be launched this fall, sources reported. The partnership is Target’s biggest to date and will not only include clothes but also homeware products, ranging from women’s, kids’ to bed sheets, to dinnerware. It was reported that a total of 400 items are in the works.. <FashionNetAsia>

Hedgeye Retail’s Take: Best known for their vibrantly colored fabrics and home collection line, Missoni is the next in what has been a line of recent multi-category collaborations. The highly publicized Liberty of London pairing last year and again last week with Calypso, Missoni is likely to be the latest line to get Target back on track with designer collaborations.


J.C. Penney Leads Internet Explorer Availability Ratings in April - JCPenney.com and Williams-Sonoma.com placed first among large retailers in April availability tests, says Compuware Gomez. Last month, online shoppers using Internet Explorer could access JCPenney.com 100% of the time. The site posted a 99.89% score in Firefox availability. Williams-Sonoma.com averaged 99.98% availability in Firefox testing last month and 99.75% in Internet Explorer tests. Six other retail sites (Amazon.com, LLBean.com, Newegg.com, OfficeMax.com, Target.com and Walmart.com) tied with the second-highest Internet Explorer availability score (99.98%). <InternetRetailer>

Hedgeye Retail’s Take: Given Kohl’s focus on driving e-commerce sales over $1bn this year, the call out here is their absence from the list.  Cynically, we can question whether such wide open ‘availability’ suggests lack of utilization. We’ll give them a pass for now.


Louis Vuitton Files Trademark Suit Against 182 Website Operators - Luxury retailer Louis Vuitton is suing the operators of 182 websites, charging they’re selling counterfeit goods and infringing on Louis Vuitton trademarks. Attorneys for Paris-based Louis Vuitton Malletier S.A. filed suit Monday in U.S. District Court for Nevada in Las Vegas, charging the defendants "directly target business activities towards consumers in Nevada and cause harm to Louis Vuitton’s business" in Nevada. One of the attorneys, Stephen Gaffigan of Fort Lauderdale, Fla., is involved in a similar suit filed April 18 in the same court against 223 defendants by luxury goods company Tiffany. In the Louis Vuitton suit, the lawsuit alleges the defendants are likely from China or other foreign jurisdictions with lax trademark enforcement systems and use their websites to sell counterfeit goods of inferior quality including handbags, wallets, luggage, shoes, belts, scarves, sunglasses, watches and jewelry "bearing trademarks which are exact copies of the Louis Vuitton marks." <VegasInc>

Hedgeye Retail’s Take: While U.S. customs and regional associations including several in China are stepping up anti-counterfeiting efforts, stronger brands like Tiffany’s, RL, and now LVMH continue to step up and take matters into their own hands to ensure trademarks are protected. A near-term cost, this will pay off in the long run as brands recapture a greater percentage of real consumer spend.


Vente Privée to Unveil U.S. Partner - The competitive landscape for the flash sale concept is getting more crowded every day. Paris-based Vente-Privée.com, the largest flash sale company in the world, is expected on Thursday to unveil a partnership with a U.S.-based firm, likely serving as its entrée into the American market. Officials at Vente- Privée declined to provide details, but Jacques-Antoine Granjon, the site’s chief executive officer and co-founder, will be in New York Thursday for the unveiling of its U.S. partner, according to U.S. and overseas sources. Summit Partners, which has offices in Boston, Palo Alto, Calif., and London, has held a 20 percent stake in Vente-Privée since 2007. <WWD>

Hedgeye Retail’s Take: The originator of online private/flash sales back in 2001, Vente announced it will enter a 50/50 JV with American Express in the domestic market. This deal makes a lot of sense for a site that’s well known globally (it has 13 million members), but is entering a much more competitive market here domestically. Instead of having to fight tooth-and-nail to build its member base,  American Express members are in the right demographic and are far more likely to opt-in for the service. Expect to see some creative tactics from incumbents like Gilt Groupe and Ruelala to maintain share ahead of the Vente launch.


Prada Plans To Seek Listing Approval May 19th For Planned HK IPO - Italian fashion house Prada SpA plans to seek listing approval from the Hong Kong stock exchange May 19 for its planned initial public offering that could raise as much as US$2 billion, a person familiar with the situation said Thursday.  The company aims to list on the exchange in late June, the person said. Prada is planning to sell a 20% stake in the family-run company during the IPO, which Prada hopes will raise between US$1.5 billion and US$2 billion, another person familiar with the matter said earlier. Once the application is approved, the next steps typically involve informal meetings to gauge potential interest, followed by formal pitches to investors and a listing, all of which is usually completed within a six-week period. Prada said in January its board hired Goldman Sachs Group Inc., Intesa Sanpaolo unit Banca Imi, Unicredit SpA and Credit Agricole SA to handle the deal. <WallStreetJournal>

Hedgeye Retail’s Take: Recall that Prada has gone through this process on three seperate occasions over the last 10-years only to have it put off so it would be wise to see the company list in June before getting too worked up over adding another luxury brand to the mix in public markets.


Men's Stores Anticipate Strong Father's Day - There’s been no hiccup in the men’s wear business. After a strong holiday season in 2010, men’s wear sales have continued to gain steam this year, outpacing women’s. According to MasterCard Advisors SpendingPulse, men’s apparel sales rose 12.4 percent in April, more than the 7.4 percent gain posted by women’s wear and the strongest growth in the category since May 2007. The NPD Group Inc. reported men’s sales rose 12 percent for the three months ending Feb. 28, on top of a 3.3 percent gain for 2010. “This is a very healthy growth rate and a clear sign men are looking to rebuild their wardrobes,” said Marshal Cohen, chief industry analyst for NPD. “Based on what we are seeing in the recent market data, the categories that are going to prosper are those that are a combination of basics and replenishment as well as some impulse and fashion categories.” <WWD>

Hedgeye Retail’s Take: Men’s apparel sales have been strong for the better part of a year now, but the catch with a direct read-through for Father’s Day is that sales are driven primarily by wives and kids, not men.


Topshop to Open Chicago Unit - Topshop is getting ready to open its second American store at last. After opening a flagship in New York’s SoHo in March 2009, the London retailer is poised to unveil its second and largest U.S. store along Michigan Avenue Sept. 7. The 49,000-square-foot location, with just less than 35,000 square feet of selling space, is slightly larger than the unit on Broadway, which has 28,000 square feet. The newest high-profile corner location at 830 North Michigan Avenue represents a $10 million to $12 million investment, confirmed Sir Philip Green, the owner of Arcadia Group, parent company of Topshop and its men’s sibling, Topman. The Windy City opening will coincide with ongoing international expansion for the British fast-fashion retailer, which plans to launch a 12,000-square-foot store in Toronto later in September, and a São Paulo location in February 2012. All Topshops outside of the U.K. are franchised except for the U.S. stores. <WWD>

Hedgeye Retail’s Take: The battle between British rivals H&M and Topshop on domestic soil will be intriguing to watch unfold. With only its second store in the U.S., Topshop would need to drastically accelerate its efforts to keep up with H&M expansion – perhaps this is just the beginning? US retailers have a lot to learn.



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Todd Jordan on Las Vegas Sands Earnings

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