R3: TGT, FINL, & Tweeting at London 2012



June 27, 2011





  • In addition to product margins coming in better than expected at FINL during the quarter, CEO Glen Lyon mentioned that the industry was the most “rational” he’s experienced in his 10-years with the company. This is consistent with what we’ve seen in industry ASPs lately and is positive indication for margin stability – at least over the near-term.
  • In what is likely to take social media to a whole new level from a retail/branding perspective, the International Olympic Committee (IOC) has approved the use of Twitter at the London 2012 games. We can only imagine the plugs brands will get not only from athletes they endorse, but also exposure from fellow Olympic athletes who weigh in and comment on the latest gear. As if mobile wasn’t already a key marketing initiative for brands in 2011, it just got bumped up a few notches on the list for the top global athletic brands.   



Wal-Mart to Lease Zellers Units From Target - Target Corp. has found a tenant for some of the Zellers Inc. stores in Canada it doesn’t want — Wal-Mart Stores Inc.  The companies’ Canadian units have inked a deal in which Wal-Mart will assume the leasehold interests of up to 39 sites currently operated by Zellers Inc.  Terms of the agreement were not disclosed. The two companies said Friday that specific locations will be identified later this fall.  The sites are among the 220 possible locations whose leasehold interests Target is acquiring from Zellers Inc., a $1.84 billion deal the Minneapolis-based Target announced in January. The transaction allows Target to open between 100 and 150 stores throughout Canada in 2013 and 2014. <WWD>

Hedgeye Retail’s Take:  This deal was lined up the day TGT took over the Zeller’s locations, but there are still 30-80 leases the company is looking to unload. At roughly 100k sq. ft., the suitors for stores of this size are limited, but KSS and JCP are among the names that make the most sense.  


Canadian Judge Rebuffs Target in Bid for Name - Target Corp. lost its first court bid to win the exclusive right to use its name in Canada, where the company plans to expand in the next several years. The Federal Court of Canada late Thursday denied Target's request for 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 The judge said he agreed that customers might be confused by the similar name, but he didn't believe that Minneapolis-based Target would suffer irreparable damage if Target Apparel stores continued to operate under that name pending a full trial on the matter, preliminarily set for November 2012. Target Corp. doesn't plan to open its first stores in Canada until 2013.  <WallstreetJournal>

Hedgeye Retail’s Take: As we originally suspected, Benitah is in-line to be the big winner here, which phase one of this process now suggests is closer to reality. Target is not about to change its name. So, the company essentially has two options at this point, 1) buy the rights from the Canadian merchant - win, or 2) sell alongside him under a very similar nameplate – win. As you can see from the images below, Target’s marketing machine in Canada would only help Benitah’s Target Apparel chain as marketing targets less familiar Canadian consumers who are likely to unassumingly stumble into wrong retailer.


R3: TGT, FINL, & Tweeting at London 2012 - R3 6 27 11


Hosa Pulls Hong Kong IPO Amid ‘Adverse' Market Conditions - Hosa International Ltd., a sportswear maker, said it won’t proceed with its planned Hong Kong initial public offering because of “adverse market conditions” and volatility. China Outfitters Holdings Ltd. is also likely to shelve its planned listing, Hong Kong’s South China Morning Post newspaper said today, citing an unidentified person. The company didn’t immediately respond to an e-mail after normal business hours, and has no phone number on its website or listed with Hong Kong directory inquiries. Xing Yuan Power Holdings Co. also said yesterday morning that it won’t proceed with an initial sale because of market conditions. The city’s benchmark Hang-Seng Index entered a so- called correction last week, dropping more than 10 percent from its April high. <Bloomberg>

Hedgeye Retail’s Take:  A rarity among a flurry of brands and companies coming public of late – this could be viewed as a sign of demand beginning to slow. Looked at from another angle, this could also reflect the current state of the Chinese athletic market and the highly competitive environment in which domestic and foreign brands are vying for share. In thinking about the domestic companies and brands likely to succeed in this effort, Hosa and China Outfitters aren’t exactly the first to come to mind.  


LVMH to Launch Sephora in India with Reliance Brands - LVMH is in talks with Indian company Reliance Brands over the opportunity of launching its beauty retailer Sephora in the country, sources reported. Reliance Brands wants to launch more international brands to target the country's emerging markets for fashion and personal grooming. Reliance Brands is reported to have already scouted locations for Sephora Stores, which offer cosmetics and accessories. <FashionNetAsia>

Hedgeye Retail’s Take:  While the company has over 700 Sephora locations worldwide, entry into India, particularly with a well-known domestic player who has done similar deals with other  top brands (Diesel, Zegna, Timberland, and Steve Madden) this would be a good win for LVMH.


Made in America Back in Vogue  - Staying close to home can be very appealing. Skyrocketing costs in Asia and always-increasing product lead times have spurred American companies to take another look at making products in the States — or at least nearby. Big companies such as Timberland and Wolverine World Wide Inc. have added capacity to their facilities in the Western Hemisphere. Established domestic player New Balance is drawing more attention to made-in-America with a new customization program that leverages its New England factories. And smaller brands are getting in on the action, too: Portland, Ore.-based Keen opened a factory last October in its hometown, and Vere, a fledgling sandal brand shipping its first line next month, set up operations in Geneva, N.Y., last year. <WWD>

Hedgeye Retail’s Take:  The price differential is contracting indeed, but the case for outsourcing manufacturing operations still strongly supports the need for a foreign supply chain. What’s likely to change on a larger scale is a shift back towards production in the Western Hemisphere, but primarily among the countries in both Central and South America.


Patent-Overhaul Bill Clears House - House lawmakers passed legislation Thursday to overhaul the U.S. patent system for the first time in nearly 60 years, despite disagreements over patent-office funding and a provision that could help large banks challenge some patents. The House passed the America Invents Act on a 304-117 vote, a bipartisan tally with more than two-thirds of lawmakers from each party supporting the bill. The bill would change how the U.S. grants patents and award them to the party which is "first to file" an invention instead of the "first to invent" it. The change would bring the U.S. in line with other countries who adopted first to file patent systems years ago, a move that will simplify the patent process for companies that file applications in multiple countries. <WallstreetJournal>

Hedgeye Retail’s Take:  Sounds simple enough, but like most things we’re sure the related enforcement will be anything but.



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.”

read more

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.

read more

Cartoon of the Day: Crash Test Bear

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

read more

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.

read more

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

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

read more

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.

read more

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."

read more

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.

read more

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."

read more

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.

read more

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.

read more

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.

read more