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R3: Required Retail Reading

The big story today is that Luen Thai (sports apparel) and Yue Yuen (athletic fw) are teaming up with the intent to make US and European brands lives miserable.

 Research Anecdotes

  • In a sign that mobile commerce is not entirely initiated by the consumer, management at Nordstrom highlighted that less than 6-months after installing WiFi throughout its stores, the company is now in the process of rolling out handheld devices to sales personnel with mobile checkout functionality. While mobile checkout has been a staple (and differentiator) at Apple retail stores for a while now, we aren’t surprised to see JWN lead the charge as one of the retailers most focused on customer service.

    ·         With store expansion a key driver of revenue growth, Management at BODY highlighted that 30% top-line growth in the quarter was driven in equal part to same store sales and unit growth. Interestingly, management sized the benefit of Easter noting that Easter added 2% to the quarter.         


     Yue Yuen and Luen Thai Form Alliance - Two industry giants, Yue Yuen Industrial Limited and Luen Thai Holdings Limited have formed a strategic alliance with the objective of tapping the global sports apparel market. Their 50/50 joint venture Yuen Thai Industrial Co. Ltd will focus on the development of sports apparel in the global market.  While Yue Yuen, the world's largest branded athletic footwear manufacturer, will leverage its close contacts with international sports brands to expand its brand services to the apparel category. Luen Thai, a supply chain services provider for the apparel sector, will leverage its manufacturing and supply chain platform to sports apparel market. Its client base includes Polo Ralph Lauren, Liz Claiborne, Limited, Express, Victoria's Secret, Fast Retailing, Dillard's and Debenhams.  At the commencement of the joint venture, Yuen Thai will serve the apparel supply chain for the international sports brands. The company will engage in design, product development, manufacturing as well as information technology and logistics management. Yuen Thai aims to become one of the largest apparel suppliers in this sector within the next few years. <SportsOneSource>

    Hedgeye Retail’s Take: not only does this deal strenthen Yue Yuen's position against domestic competition, but more importantly it adds an apparel component to the brand. Regardless of how it is pitched, this is not good for US domestic brands – including Nike. It’s hard to stretch out your payables when your primary supplier doubles in strength.  

    Retailers Turn To Facebook To Sell Their Goods - More of the world's biggest marketers are selling their stuff at the place where consumers hanker to hang out: Facebook.  Think of it as the ultimate convenience for a mobile generation that considers it seriously inconvenient to leave Facebook even for a moment in order to go to a retailer's Web site. Now, marketers from Express to J.C. Penney to Delta Air Lines are steering those purchases to their Facebook pages.  Within a few years, social media gurus say, the very notion of shopping on a retailer's Web site will become dated. "Expecting people to come to your Web site is expecting them to make an extra effort," explains Janet Fouts, a social media coach. "They're already on Facebook." The numbers are dazzling. Facebook has roughly 500 million users, 250 million of whom are on the site every day. The average user has 130 friends. Each month, people spend a total 700 billion minutes on Facebook.  <NewsFactor>

    Hedgeye Retail’s Take: To think it took most retailers several years just to build an online presence, adding a facebook component should be considerably easier not to mention more profitable. But building a platform on Facebook is not the real issue here, it’s the ability to evolve alongside the consumers that traffic the site. If you’re not connecting with the consumer in the mall, then you probably won’t connect on-line, either.     


    US Apparel Firms Back Rogue Websites Bill - The introduction of a bill that would help US authorities crack down on rogue websites selling fake and counterfeit goods has been welcomed by US apparel and footwear firms. The 'Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011' (PROTECT IP Act) "provides us with a full arsenal of tools that will be helpful in fighting these rogue websites," notes Kevin Burke, president and CEO of the American Apparel & Footwear Association (AAFA). He adds: "Footwear, apparel, and fashion accessories are some of the most counterfeited goods in the world. As US consumers continue to embrace e-commerce as a key shopping method, rogue websites have emerged as a popular way for counterfeiters to get fake goods into the United States."<JustStyle>

    Hedgeye Retail’s Take: We highlighted the fact that several strong brands are tackling this issue head on privately, but a federal bill would certainly help government associations address the issue as well adding further pressure to site offenders and the counterfeit industry. Basically, it would make counterfeiting really really really tough to stop – instead of impossible.


    Retail CFOs Cautiously Optimistic on 2011-Survey - Retail executives expect only a modest recovery in financial performance in the sector this year as consumers remain cautious and costs rise, according to new survey released on Wednesday. Only 24 percent of retailers around the world expect significant improvement in their financial performance over 2010, according to a KPMG survey of 152 chief financial officers and other financial executives. Fifty-one percent predicted some improvement in financial performance, and 9 percent forecast a decline. The findings come as major retailers from Wal-Mart Stores Inc (WMT.N) to Home Depot Inc (HD.N) prepare to report quarterly results and place their bets on consumer demand leading up to the winter holiday season, when most chains ring up the bulk of their sales. "There is a feeling that there's going to be growth, but that growth will be muted," Mark Larson, KPMG's global head of retail, said in an interview.<Reuters>

    Hedgeye Retail’s Take: only 9% of executives forecasting a decline is down right scary.  This sample must have left out apparel, footwear, and accessories. Expectations heading into the 2H are still too high - see our latest thoughts on this in yesterdays post as to how we quantify the risk.

    PPR Said Eyeing Stake in Pomellato - PPR seems to have a growing appetite for acquisitions. The luxury-to-retail group, which on Thursday launched a cash tender offer for sports firm Volcom Inc., also has its sights on the 18 percent stake in Italian fine jewelry company Pomellato owned by the Damiani family, according to market sources.  A PPR spokeswoman had no comment Thursday. It is understood several companies have expressed interest in Damiani’s minority stake since Pomellato is one of the few global independent companies left on the jewelry scene. Pomellato’s chief executive officer, Andrea Morante, a high-profile entrepreneur-cum-investment banker, is plotting an initial public offering by 2013.<WWD>

    Hedgeye Retail’s Take: We have zero opinion on this transaction – if it comes to fruition. But it supports the fact that Luxury companies that have survived the storm remain acquisitive. Spend it while you got it!