FNP: Impact of CEO Hire at Juicy

Takeaway: We have a mixed read on this morning’s new CEO hire at Juicy Coture. Net positive, but the timing of the catalyst calendar has been extended

We have a mixed read on this morning’s announcement of the new CEO at Juicy Coture (Paul Blum – from Kenneth Cole and David Yurman). On one hand, McComb has been looking to fill the co-president role alongside Chief Creative Officer LeAnn Nealz for the past year. As such, this announcement caps a very long recruitment process. That’s a positive. On the flip side, we’ve gotta think that before Blum accepted the job he looked McComb in the eye and asked for a certain commitment in time and resources to get this company back on track. We previously thought that another miss at Juicy would come alongside an announcement of a sale. Now we think that process will be longer dated. They’ll give the new CEO time. That’s a negative. We still think that the brand will be either fixed or sold, and we’re still at $0.95 in F14 – which is nearly 2x the consensus. But the timing of the catalyst calendar has been extended.


Here are our thoughts on the move:

  1. Decision Tree re Juicy: We see three potential outcomes for Juicy, #1: business improves – FNP keeps it, #2: business erodes – FNP sells it, or #3: business sputters along – FNP keeps it. As we highlighted in our note on 10/2 “FNP: Take 2,” we think the odds are likely that FNP sells Juicy. What has changed by this announcement is timing. Our original view of a sale by next summer is more likely now by the end of 2013. If fundamentals erode further over the near-term, the company now has an excuse to see its strategy through for another quarter or two more than it may have previously. But it does beg the question on timing – why spend money now if they are planning to sell?
  2. Setup into ICR: As it relates to our view on the setup headed into ICR (mid January) where we expect the  company to provide an updated brand outlook, the likelihood of an early divestiture announcement (i.e. at ICR) has been greatly reduced. This was simply a call option on the stock near-term, not the driver behind the run since 3Q results. Driving performance over the past month is confirmation that FNP is taking square footage growth materially higher at Kate and Lucky (see our note “FNP: Juicing Kate” on 10/25).
  3. Productivity: Both CEO Bill McComb and CFO George Carrera have been spending a disproportionate amount of time on Juicy focusing on stemming losses versus higher growth aspects of the business. The hire of Blum enables senior management to recalibrate their focus at the same time they just announced significantly more aggressive square footage growth plans at Kate and Lucky.
  4. Fit/Background: Blum is no stranger to designer driven companies having served in the CEO role at both David Yurman (2005-2010) and most recently at Kenneth Cole after a 15-year stint at KCP prior to Yurman. Importantly, like FNP’s other two brands Kate Spade and Lucky, the co-president structure is the norm rather than the exception at FNP.

 

All in, this moves doesn’t change our view that Juicy will be sold. However, we do think it will buy management some time from having to make a more definitive comment on the brand’s future over the near-term at ICR. In the meantime, senior management can focus on higher ROI initiatives i.e. growing Lucky and Kate Spade. FNP continues to be one of our top long ideas.


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

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more