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June 8, 2011






  • In a move counter to most its peers, OXM not only increased its full-year EPS outlook, but also expects gross margin expansion. It’s important to note several company specific drivers behind a decidedly more bullish outlook – namely lower interest expense due to the repurchase of senior notes and shift in product mix since the company sold its apparel group to Li & Fung and acquired Lilly Pulitzer all within the past six months. While the company continues to increase its direct-to-consumer business, wholesale accounts for less than half of total sales, but is where most of the cost pressure is realized with the company noting that passing price increases through has been more challenging.
  • Sport Chalet’s noted in its annual report that it doesn’t plan to open any stores during fiscal 2012 for the third consecutive year. With 55 stores located primarily located in California, the retailer is losing share as east-coast based SG retailers continue to expand into both CA and neighboring states. Meanwhile, DKS just announced that they’ve opened their second store in CA in the past month alone bringing their count to 18 in the state. With both TSA and now Academy backed by private equity and DKS clearly focused on geographic expansion, demand for limited retail space is increasing on the margin suggesting that favorable rent rates may be nearing an end in this sub-segment of the market for boxes of this size (~50k sq. ft.).



Lucky Brand Looks to Get Back on Track - Steering away from a lifestyle-centric image, Lucky Brand is moving toward a more real and relevant look with the introduction of new denim fits and an advertising campaign shot by Carter Smith. Seventeen months after chief executive officer David DeMattei joined the Liz Claiborne Inc.-owned unit, Lucky is tweaking what it realizes works best for the brand — and for sales. “It’s about returning us to a best-in-denim company,” DeMattei said. “We focused [in the past] on the lifestyle aspects of the brand, starting with the bottom. Now we’re really focusing on denim.” In other words, Michael Griffin, executive vice president and product director at Lucky, said, “We’re a denim brand that sells amazing fashion, not a fashion brand that sells amazing denim. The denim sells the fashion.” <WWD>

Hedgeye Retail’s Take: Commonsensical, but valid in every way. We’re not sold on Lucky’s plan yet, but Demattei definitely gets it.


Amazon adds Wag.com to its List of Specialty E-retail Sites - Quidsi Inc., the operator of Diapers.com, Soap.com and BeautyBar.com, will add Wag.com, an e-retail site for pet products, to its portfolio of e-commerce sites that focus on packaged goods. Quidsi co-founder Marc Lore sent an e-mail to Diapers.com customers Monday announcing the venture, noting that Wag.com will debut in a few weeks. Amazon.com, the No. 1 e-retailer according to the Internet Retailer Top 500 Guide, completed its acquisition of Quidsi in a deal valued at $500 million April 1. Diapers.com is No. 72 in latest edition of the Top 500 Guide. According to Lore’s message, the site will carry thousands of products for dogs, cats, birds, fish, reptiles and small animals, including food and toys. The site will share Quidsi’s universal shopping cart, which allows consumers to shop across Diapers.com, Soap.com and Wag.com properties, and check out once. Wag.com will offer free two-day shipping on orders of $49 or more. <InternetRetailer>

Hedgeye Retail’s Take: With the exception of milk.com, eggs.com, and icecream.com, there’s virtually no limit to the categories this applies to. AMZN can literally grow into a blue sky opportunity.


Walmart Expanding Test Of In-Store Wireless Shops - Walmart is planning to expand its test of in-store mobile specialty shops to a total of 350 supercenters this year.  The in-house pilot was launched in 200 stores last fall and will be extended to an additional 150 locations this year.  Located at the front of the discounter’s big-box flagships, the Walmart Wireless stores are about 2,000 square feet in size and offer a select assortment of smartphones, cellphones and pre-, post-paid and hybrid service plans, including Walmart’s exclusive Common Cents and Family Mobile pay-as-you-go products. Tablet computers are not yet part of the mix. Gary Severson, home entertainment senior VP for Walmart U.S., said the specialty stores provide customers with greater plan and product assistance, more privacy, and a better overall shopping experience. He said initial results have been “very positive.”  Severson noted that unlike other freestanding mobile spin-offs in the marketplace, the Walmart Wireless shops are located within the parent chain, alongside eyeglass, banking and other front-of-the-store services, due to the high volume of traffic that its supercenters draw, Severson said. “The reason that some companies have created standalone stores is a lack of traffic,” he noted. “We have a lot of good traffic. So this is our version of a standalone store – within our own stores.” <Twice>

Hedgeye Retail’s Take: WMT is doing this because it has to. Not necessarily because it wants to. Wireless in not a high margin business – especially as it increasingly becomes a commodity. 


Wool Price Surge to Hit Suit Buyers - Suits, jumpers and socks are set to become more expensive after a surge in the price of wool driven by Australian floods and demand from emerging markets. The cost of fine wool on the Sydney Futures Exchange has risen 74% to 15,500 US dollars (£9,400) a tonne in the past year, according to commodity analysts at Mintec. This could cause the price of a suit to rise by as much as 10% as tailors and retailers pass on the hikes to customers, reports said. A wide variety of other clothing, such as cardigans and coats made from wool, may also be affected. The price of wool has been driven higher after global output hit an 85 year low, exacerbated by flooding and drought which disrupted farming in Australia, the world's biggest wool producer. Many farmers have moved away from rearing sheep for wool because low prices have made it hard to make a profit in recent years, said Stephen Oldfield, a partner specialising in agribusiness at accountancy firm PricewaterhouseCoopers. <TheIndependent>

Hedgeye Retail’s Take:  “…rise 10% as tailors and retailers pass on the hikes to consumers.” Isnt it funny how the common theory is that the consumer will pay more?


Chinese Apparel Brands Target Fashion Conscious Consumers - Amid the blond wood, the softly draped fabrics and the dramatic display racks, not even the name of the JNBY clothing store – aimed at China’s upwardly mobile middle class – gives away its homegrown origins. The retailer says the initials stand for Just Naturally Be Yourself, though more likely they’re drawn from the parent company’s original name, Jiangnan Buyi Garment Co.  The women’s fashion chain is one of a small but growing number of brands that are not only made in China but designed here as well, in an attempt to take on the Western labels that are popular with China’s up-and-coming teens and twentysomethings. “There’s certainly some [Chinese fashion retailers] having a go at it. That sector of the market is among the fastest growing,” noted Paul French, chief China analyst at retail consultancy Access Asia. “We’re just waiting to see who emerges as China’s Zara,” he added, referring to the Spanish-based global fashion giant. Last month alone, China’s retail sales grew 17.1 per cent from the previous year, to 1.36 trillion yuan ($209-billion). <TheGlobeAndMail>

Hedgeye Retail’s Take:  We still think that China exporting its content to the US is one of the bigger risk for US retailers – though moreso on the footwear side. European apparel brands – who have structurally higher turn times – are a perennial threat to US fashion as well.


Organized Retail Crime on the Rise - The number of retailers victimized by organized retail crime rose 6 percent in the past year, as merchants cut back on staffing levels and online avenues trafficking the stolen merchandise continued to expand, a National Retail Federation survey said. The top five cities targeted by criminal gangs were Los Angeles, Miami, New York, Chicago and Houston, according to Joe LaRocca, senior asset protection adviser at the NRF. The survey also noted that the current economic environment, which is “ripe with consumers looking for low prices,” contributed to the increase.  “Highly targeted items” included denim jeans, notably Levi’s brand products; North Face jackets; Victoria’s Secret “Pink” lingerie; Oil of Olay and Cover Girl cosmetics, and a broad range of pharmaceuticals and electronics. <WWD>

Hedgeye Retail’s Take:  Stealing product ahead of price increases? Perhaps organized crime is smarter than some management teams in forecasting supply/demand on this business.