- Based on my math, there are 917 styles on sale in the 'clearance' section. That's not unusual. But the fact that I had to count past 304 dress shoes to even get to the first sneaker was noteworthy.
- In fact, Famous' traditional product mix is 43% athletic, but less than 20% of its online 'clearance' inventory appears to be athletic. That's music to my ears if I am long anything in the Athletic arena.
- Yes, I know that these little anecdotes are dangerous given sample size, and lack of depth into number of pairs backing each advertized style. But when anything 'fashion' or 'style'-related hits my fairly unsophisticated eyes, I think it's usually worth calling out.
Quite frankly, out of any footwear company in the industry, I'm least concerned about Crocs' cost pressures given that a stabilization of revenue will do more than any input cost increase. Also, I'm in the camp that the juice on the SG&A and capital intensity side of this model can more than offset any resin pressure.
No, I'm not making a bull call here. Not yet at least. But with the stock near $10 it's on my list.
More U.S. store closures on the horizon? - Starbucks said back on January 7, 2008 that it would close a number of underperforming U.S. stores as part of its turnaround strategy. The company quantified that number on January 30, 2008, saying it would close around 100 underperforming stores. Today, the company gave its first hint that the 100 number could be going higher when the CFO said he has a watch list for potential stores that may be on the bubble to close. Closing additional stores (beyond the already stated 100 stores) will only accelerate the company's ability to improve store-level operations and U.S. operating margins and will, more immediately, benefit same-store sales.
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Today, Don Thomson President of McDonald's US said As you have heard before, we estimate that the sales potential for the entire new beverage lineup, from premium drip, specialty coffee, smoothies, frappes, bottle beverages and optimized travel drinks, that total is about $125K per restaurant, as you have heard us say before again.
We have not confirmed this with the MCD yet, but Don's comment represents a shift in the outlook for the new beverage line up.
On one hand, I give credit to any brand that acts in a way that compresses the lead time to get design closer to the point of consumer purchase. LIZ is an extremely bureaucratic organization with layers of approvals needed to push product through the system. This change might have some positive flow through as it relates to product relevancy from a trend perspective as well as inventory carrying costs.
On the flip side, given the immense cost pressures emerging - which I think is a paradigm shift for the industry - I wonder why anyone would choose to give up any form of size/leverage over key suppliers. In putting the cost inputs back in the hand of the individual brands - and potentially adding a 3rd party sourcing agent, this does anything but de-risk the cost model.
So how does this change my view on LIZ? It really does not. As I mentioned on 5/13, Bill McComb has been reinvesting cost cuts back into the organization over the past year. As such, he's sitting there with the highest SG&A ratio in the industry by a long shot, and LIZ has instituted a cliff-vesting schedule to incentivize 2009 performance based on EPS and ROIC hurdles. With nearly 500,000 options struck in the high $30s, he has one of three choices in '09; 1) watch his investments pay off in greater revenue and EBIT, 2) watch his efforts fail and subsequently cut (and print) several hundred million in costs, or 3) fail across the board, and risk both his current employment and the company's structure as we know it today. For a stock that has stopped going down on bad news, I don't see how any of these options won't be a positive.
As it relates to the restaurant industry, if SAFM's profitability is going to improve despite higher feed costs, they need to be seeing better pricing. Obviously, this is not good for anybody buying chicken.
I found about an interesting leading indicator of chicken prices - chicken egg sets. Chicken eggs are set roughly 10 weeks before being sent to slaughter, so this statistic is a good indicator of future chicken production levels. As you can see from the chart below, the 6 week moving average has fallen significantly below year ago levels for the first time in nearly two years.
If we take the trend in chicken in egg sets, along with Pilgrim's Pride Corp's (PPC - the largest U.S. chicken producer) announcement that it was closing a processing facility and some distribution centers, we have a more rational industry as the producers adjust to higher feed costs and an oversupply of chicken.
Naturally, this means that the restaurant industry will be seeing higher chicken prices in 2H08 and 2009. The chains that appear to have more exposure to chicken are BWLD, PFCB, CAKE and those that have chicken as a part of their name!
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