R3: Get High




June 23, 2011








There’s No Such Thing As Bad Publicity? Maybe Not...


I wonder if Boston Mayor Thomas Menino realizes that he’s really elevating Nike’s marketing message rather than dousing the flame by his recent demand that Nike removes its ‘Get High’ and ‘F#%@ Gravity’-shirts from the store window at the Back Bay Niketown. This smells a bit like the launch of Nike’s ‘Just Do It’ campaign.  Most notably, the campaign focuses on the action sports consumer – surf, skate, and xtreme sports. Expect to hear a LOT about that at Nike’s analyst day on Tuesday.


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Just as soon as we think that there’s no such thing as bad publicity, we see the picture below from our pals in the Great White North.  Probably not how LULU wants its brand advertised.


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Li & Fung Buys Loyaltex Apparel, British Beauty Co. - Hong Kong-based sourcing giant Li & Fung Limited said Wednesday it has made a series of acquisitions including Loyaltex Apparel and British beauty company Collection 2000. Li & Fung, which has been embarking on a shopping spree over the past couple years, also said it has bought Thailand-based furniture company Exim Designs and TVMania, a European supplier of character-braded apparel with a license portfolio including Hello Kitty, Mickey Mouse, Barbie and Sponge Bob. Li & Fung reiterated that it has acquired Hampshire Designers, the women's division of Hampshire Group Limited in the United States. That deal was originally announced last month. Li & Fung said the turnover and pre-tax profit of the five acquired companies were about $660 million and $80 million respectively for the last year. <WWD>

Hedgeye Retail’s Take:  Think about it…this company has sales of about US$12bn. That’s predominantly at what we know as the COGS line over here.  You want to know what the boggest apparel company in the world is? Look no further.


Skechers Forms Branded Virtual Goods Partnership - Virtual Greats announced they will partner with Skechers to produce and distribute branded virtual goods in various online social media destinations. As one of the leading virtual goods sales and distribution agency, Virtual Greats has already secured distribution for Skechers' branded virtual goods with Meez.com and WeeWorld, two top social media sites for teens and women.A range of both Skechers Women's and Men's shoes from the 2011 collection, currently available in stores, will be offered in the online branded boutiques. While this first set of branded virtual goods will be fashion-based, plans for future Skechers-branded releases include enhanced avatar performance and fitness levels within the social gaming world, based on Skechers' fitness products. WeeWorld launched select Skechers assets at the end of May 2011, while Skechers-branded products premiered in Meez.com boutiques this month. <SportsOneSource>

Hedgeye Retail’s Take:  Tread lightly here. First fix the core problems, then worry about doing high-end limited distribution (and unprofitable) product. There will be a time to buy SKX. But simply not now.


New Fashion Push in Kmart Campaign - Kmart’s new soft goods advertising campaign has a tall order to fulfill: give the beleaguered retailer’s fashion and home businesses a new image that’s at once authentic and aspirational. Minneapolis-based ad agency Peterson Milla Hooks created a campaign that gives Kmart a new logo, new message and new vibe. “We felt [PMH] understood style and fashion and were creative out-of-the-box thinkers,” said Tara Poseley, senior vice president and president of Kmart apparel at Sears Holdings Corp. “We want to get out the message that we have amazing fashion.” PMH helped Target put the aspirational into its apparel, but Poseley claimed she wasn’t aware of the connection until after PMH was selected by Kmart. Clearly, Kmart is after the same effect. “We do want this be aspirational,” Poseley said. “That’s part of getting people to come into Kmart.”  <WWD>

Hedgeye Retail’s Take:  This is going to sound like a very arrogant statement, so excuse me. But Can you think of a more challenging job than being the head of apparel at K-Mart? “…we have amazing fashion…We want to be aspirational.” Yeah, and I (McGough) want to be in the starting lineup for the Miami Heat, but it’s not gonna happen.”


Retailers Upbeat on Fall Sales Outlook - It’s shaping up to be a good fall for men’s wear. After a strong holiday and spring, where men’s apparel sales outpaced other categories, Father’s Day provided another solid boost to business, buoying the spirits of retailers as they approach the start of the all-important fall and holiday selling period. Many merchants posted double-digit gains for the period, with casual sportswear items such as knit shirts, lightweight sweaters and shorts leading the way. Interestingly, many stores also saw strong sales of tailored clothing — proof that men are out there shopping for themselves. According to the National Retail Federation’s Consumer Intentions and Actions Father’s Day survey, conducted by BIGresearch, Americans were expected to spend an average of $106.49 on Dad, up from $94.32 last year and the most in the survey’s eight-year history. Total Father’s Day spending was expected to reach $11.1 billion. “Shoppers seem to be more excited when it comes to gift giving, an encouraging sign for retailers — and dads – everywhere,” said Matthew Shay, president and chief executive officer of the NRF. <WWD>

Hedgeye Retail’s Take:  Can’t really explain this one, other than to say that as punitive as we be about the spending habits of the American Consumer, they rarely sacrifice much in the gift-giving arena. It’s the incremental ‘purchase for me’ that is the make-or-break. Also, how in the world retailers could be upbeat on Fall sales outlook based on Father’s day is beyond me.


Zegna Adds Dimension to Shopping Experience - Why should e-boutiques offer a flat perspective on shopping?Virtually replicating in 3-D a two-story brick-and-mortar Ermenegildo Zegna store, with rooms to wander through and steps to mount, the Zegna in_STORE 3-D digital portal — which goes live tonight — is anything but. Developed with Hollywood-based visual-effects specialist James Lima, who consulted on the 3-D blockbuster “Avatar,” the Zegna e-store offers visitors a real-life spatial, visual and experiential shopping experience using immersive 3-D technology. Computer graphics in three dimensions were used to make the store look photo-real, with the same furnishings as in the brick-and-mortar Ermenegildo Zegna stores. The free Zegna in_STORE application will launch on iTunes and on Zegna’s Web site and Facebook page. It’s geared to iPads and iPhones, and other versions are due to be added in the coming months. <WWD>

Hedgeye Retail’s Take:  This is similar to Ralph Lauren’s ‘4-D’ reopening of the NY Flagship (with the fourth dimension being smell). Zegna sounds like it’s going even more Hollywood.




Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

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7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

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Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

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GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

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Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

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Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

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Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

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People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

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UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

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Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

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