Understanding Why

"Because things are the way they are, things will not stay the way they are."
  -Bertolt Brecht
Arbitrarily we titled two posts yesterday "In search of...."  I know I'm in search of why the S&P is levitating at 931.  Don't get me wrong I'm happy the S&P is at 931, I just want to understand why.
Yesterday, there was some bearish manufacturing numbers and a warning from Federal Reserve Chairman Ben Bernanke that U.S. deficit spending is contributing to higher long-term interest rates.
On top of that the there are also similar indications from senior officials in Germany and Australia that interest rates are going higher!  Guess what, interest rates can only go one way - UP!  
And the reality is they are! Interest rates on 30-year fixed-rate mortgages averaged 5.25% this week, up from 4.81% last week.  The biggest sequential jump since October!  As mortgage rates rise, this leads to a decline in mortgage applications, which suggests the good news on housing has peaked too.
On top of that you can only conclude that there are a number of factors that are likely to continue to weigh on consumer spending; a weak labor market, a decline in consumer assets, increased savings rates and tight credit.  All of this should cast a bearish cloud over stocks, yet it has not.  
On this news, the S&P 500 was ONLY down 1.3% yesterday.   Amazing resilience to unsettling trends!
I can't find a company that is going to tell me that they are going to provide guidance to the investment community that will include positive trends for the balance of 2009; and when I ask them about 2010 they just laugh.  How many times have you heard there is no visibility into our current trends!   
As I sit here this morning the futures are looking higher, despite the fact that most retailers will communicate a mixed bag of May sales trends.  As we look at the numbers today we will be "in search of" signs of a second-half economic recovery.  Clearly things are less volatile and bottoming, but it's still not "good."  I guess I'm jaded because I spend every waking moment talking to consumer centric companies that continue to express to me the reality that things are not really getting better for the consumer.    
Coming into Friday's jobs report, we have zero exposure to US equities.  As we said yesterday, Friday's employment report should be less constructive than the last two - which were bullish catalysts for us as we looked for signals that the rate of job losses was compressing.  Now our thesis has become consensus- as is optimism.
Anything less than a relatively strong payroll number can give the bulls something to think about, but who is bullish?  

The Early Look is brief today, because I'm in "search of" good news and I can't find it. If I do find any you'll be the first to know!
Function in disaster; finish in style
Howard Penney
Managing Director

CAF - Morgan Stanley China Fund- A closed-end fund providing exposure to the Shanghai A share market, we use CAF tactically to ride the wave of returning confidence among domestic Chinese investors fed by the stimulus package.  To date the Chinese have shown leadership and a proactive response to the global recession, and now their number one priority is to offset contracting external demand with domestic growth.

TIP- iShares TIPS - The iShares etf, TIP, which is 90% invested in the inflation protected sector of the US Treasury Market currently offers a compelling yield on TTM basis of 5.89%. We believe that future inflation expectations are currently mispriced and that TIPS are a compelling way to own yield on an inflation protected basis, especially in the context of our re-flation thesis.

GLD - SPDR GOLD -We bought more gold on 5/5. The inflation protection is what we're long here looking ahead 6-9 months. In the intermediate term, we like the safety trade too.

XLU - SPDR Utilities - As long term bond yields breakout to the upside, Utility investments are the relative yield loser. Utilities underperformed the market yesterday, closing down 1.7%.

EWW - iShares Mexico- We're short Mexico due in part to the repercussions of the media's manic Swine flu fear.  The country's dependence on export revenues is decidedly bearish due to volatility of crude prices and when considering that the country's main oil producer, PEMEX, has substantial debt to pay down and its production capacity has declined since 2004. Additionally, the potential geo-political risks associated with the burgeoning power of regional drug lords signals that the country's economy is under serious duress.



If you have read our work for a while you probably know that we have a pronounced bullish bias towards Australia. With significant geographical hurdles and commodity export dependence to deal with, the land down under has consistently shown resilience through the level headed policy of central bankers there through the good times and swift government stimulus actions during the bad.


Today's GDP release for Q1, 0.4%, looks positively robust in the current global environment as order flow from "the client" and government spending have kept unemployment relatively stable, combined with stimulus checks, which have encouraged consumer spending to stabilize.


The numbers also reveals some real pain however, with private investment declining by 1.6% and imports off by over 10% the expectation that the positive overall trend can continue hinges in large part on recovery in the sectors not directly linked to energy, agricultural and industrial commodities to provide confirmation.  While plenty of worrying factors remain (the financial sector continues to be a concern for us with the recent increase in bad loan provisions by major financials, and commercial real estate remains a minefield) the improving housing market and a comparatively robust equity syndicate calendar seem to bode well for the broad equity market.


We continue to like Australia and will be looking to go long the equity market there via the EWA ETF if presented with a favorable entry point. As always our trading will be informed by price action as well as fundamentals.


All props to Mr. Seamus Quick, our man in Sydney.


Andrew Barber






Lately everyone has been sharing their thoughts on the yield curve with me.  Unsolicited.  PMs, academics, floor traders  -even some of my nefarious journalist contacts.


The general breakdown of these opinions seems to suggest that the more sophisticated your understanding of finance or impressive your credentials, the more likely you are to arrive at a thesis (with complex academic underpinnings naturally) that could support a sustained period at a range close to present levels. Mere mortals tend to expect the curve to moderate sooner and faster, and tend to expect absolute yield to rise more significantly. 


As Keith noted in his morning note today, the Treasury Department sponsored limbo contest on the short end of the curve has literally left depositors bending over backwards to help  fatten margins for lending institutions with the spread between the 2 year and the 10 year above 270 basis points the curve is at its steepest point in living memory.  I drew the chart below to illustrate the current spread in context. The outlying points since 1976 focused on are the spikes in 1992 and 2003 as the flow of cheap money that Chairman Greenspan let loose to combat recession drove spreads north of 250 basis points; while the monster backwardation in early 1980 marks the height of Paul Volcker's assault on double digit inflation.


The obvious initial conclusion that anyone would draw from this picture visually is that mean reversion should have a moderating impact on the slope of the curve. Additionally, any casual observer could reasonably surmise that with nowhere for short term yields to go but up and with the debt to GDP ratio of the US balance sheet continuing to balloon, the fundamental catalyst for this reversion is both clear and present.  The spread between short term treasuries and the target rate has diverged for sustained periods in the past (as well as jumping wildly in the volatile 1982-83 market) so indications from the Fed that rate policy will not change in the near term do not negate these presumptions.


As always, the moment of confirmation for the peak will arrive well after it has passed.  Until then you can continue to feel free to share your view with me.


Andrew Barber



IN SEARCH OF A TOP - spreads

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Is the hotel fee business the greatest thing since sliced bread?  It may appear to be in the middle of a strong cycle.  However, when times are tough (now) or even in a recovery period, the fee business doesn't look as invincible. 


Let's take a look at Starwood since Marriott generates significantly more franchise fees as a percent of total.  As shown in the following chart, 51% of Starwood's fee revenue came from base management and some franchisee fees, 20% from incentive fees, 18% from Bliss & "Miscellaneous", and 11% came from amortization of deferred gains on asset sales and termination fees in 2008.  The base management and franchisee fee are high quality revenues that deserve a high multiple, but what about the rest?  Incentive fees will be lower in 2009 and again in 2010 and will take a very long time to recover.  The Spa business is highly cyclical could be permanently impaired in the economic reality.  We're not sure how to value "miscellaneous" but "amortization of gains" deserves close to a zero multiple since it is non-cash and proceeds have already been received.




In the next chart we attempt to break down fee revenue between same store (organic) and non-organic growth.  Same store growth includes contribution from new management contracts except those obtained through asset sales encumbered with management contracts.  We estimate it took 6 years for HOT to regain the prior peak level of core fee revenue generated in 2000.  Obviously, new management contracts this time around could expedite the recovery but beyond 2010 there are some serious hurdles to growth.




While limited new supply is good for hotel owners, the challenging financing environment will make it difficult to grow the hotel fee business.  Non-recourse financing, which the vast majority of hotel owners have used, is a thing of the past.  Most investors will think twice about constructing a hotel if their personal assets are on the hook.  For existing assets, banks are simply looking to reduce exposure. When loans come due or if any technical breach occurs, banks are using it as an opportunity to call part of the loan, regardless of the rate opportunity.  We have seen this on the institutional side, with almost every amendment coming with a mandatory reduction in credit facility size.



Friday's Jobs number looms as delinquency data shows that the pain continues


As it stands today, we have zero exposure to US equities in our asset allocation model.  In particular we have aggressively sold off our exposure to consumer discretionary in the vortex of the recent MEGA squeeze. 


After a good, solid start to June and with the S&P at 930, we have been harping on the theme that "less bad" is different from "good."  We are data driven and, as such, need to see the "good" in the dominant story to cement a bullish conviction. We are not seeing "good" yet.   


Today's, payroll report estimates that another 532,000 workers lost jobs in May.  More than consensus thinking!  This continues to cause trouble for the consumer lending markets, from mortgages to credit cards and everything in between.


About 12% of mortgage loans were delinquent or in the foreclosure process during 1Q09, according to data released by MBA last week, while Federal Reserve estimates put the number at almost 9% on a broader measure of residential real estate loans.   These levels represent the highest recorded, exceeding the levels reached in the early 1970's and follow broad trends in consumer credit, with rising delinquencies in categories like credit cards and car loans showing no clear signs of abating.


 The majority of the foreclosure problems remain concentrated in four states: California, Nevada, Arizona and Florida, where home prices spiked the highest and are now in freefall. According to MBA, these four states alone accounted for 56% of the increase in foreclosure starts.  Anecdotal reports from brokers in those markets report that sales trends appear to have bottomed but are not getting measurably better.


Clearly the housing picture is better than it was in January, but with seasonal inflections, the Obama taxpayer credit for first time home buyers and historically low interest rates any resilience here should be no surprise.


Our zero exposure to US equities is a big statement!  Friday's employment report should be less constructive than the last two - which were bullish catalysts for us as we looked for signals that the rate of job losses was compressing. Now that our 1H thesis has become consensus and the seeds of optimism have begun to nurture loftier expectations, a signal of anything less than a strong signal of leveling in payroll declines seems poised to strike fear into the hearts of hopeful bulls.


Howard Penney

Managing Director


Andrew Barber






Retail First Look 6/3/09: False Security


I commented yesterday about the evolution in the M&A cycle. In the land of retail, this comes hand in hand with licensing.  If my own brand stinks, I probably want to buy the rights to profit on the heels of another - at least that's been the industry standard mindset.  To say that we're seeing more activity in licenses would be a severe understatement. Check out Zach's overview below. We had PVH sign a deal to grow IZOD into the 'home' category, Brown Shoe align itself with Marvel, the new Miley Cyrus/Max Azria/Wal*Mart deal, Converse selling shoes ACDC and Metallica shoes (in addition to Floyd, The Who and others - yes, the aging hipster in me thinks this is cool), and the London Olympic Organizing Committee sending RFPs for sponsorship for the 2012 games. At the same time, there's a notable industry study showing how licensing royalties are coming down at the same time many traditional licensees are cutting capital from their business models. Mark my words...this is no accident.


Think about it like this... Let's say you are a mid-size company whose EBIT is derived evenly between your own content and content you license from other companies. For the past 7 years, the industry has had every bit of wind at its back (import quota changes, FX, input cost deflation, strong consumer) such that everyone made money - even the marginal players. Now we're in a multi-year period where the opposite is a reality, and many mid-tier brands will go away. So now your top line is under pressure, you've underinvested in your brands, flowed through too much FX and sourcing benefit to your bottom line instead of plowing back into your model. So now what? You're probably cutting costs reactively and irresponsibly to keep your head above water. Do you cut costs out of your own content? Or from what you were allocating toward another company's content that you licensed and ultimately will return to them? I'd challenge anyone to find me a company that would opt to damage its own content over another's.


My point here is that we know that the bankruptcy cycle will continue, and it will take the M&A cycle along for the ride. But don't ignore the licensing angle either. These are easily won and lost streams of business that can meaningfully change a company's cash flow.



Some Notable Call Outs

  • More mixed signs for May. Some retailers have noted a roll-over in May, but Dollar General did not. DG reported 1Q comps of +13.4% with 193bps of gross margin expansion, and 150bps of SG&A leverage. Sales were driven with by consumables along with strength in seasonal, home, and apparel. May trends were hinted to be at least as strong as 1Q. Promotional activity, primarily on consumables, remains "as intense as the CEO has ever seen". Consistent with the most of the industry, DG is also seeing real estate costs come down on both new and renewal properties. Dollar General's results reinforce 1) the importance of value to low-income consumers, 2) the continuation of "trading down" and 3) how retailers with deep-value focused consumable strategies continue to substantially outperform all other sub-sectors of retail.


  • Brief updates from CAB and HIBB from the Stephens conference:


  • CAB comps have been impacted primarily by weak traffic, which has been largely driven by two factors, politics and fear. Consumers have been buying guns and ammunition ahead of the common belief that onerous tax hikes will be levied on these items in the near-term. This has not only increased buying from repeat buyers, but has also driven demand from new buyers. The balance of recent demand is thought to come from those seeking protection in these uncertain times. Management indicated that the demand we saw through Q1 that lead to ammunition shortages appears to remain strong. [McGough's Note: If I hear one more person talk about trying to time 'the gun/ammo trade' with CAB and GMTN, I'm going to lose it...].


  • HIBB announced that it will begin implementing a new labor management this fall that will likely result in lower payroll expense and better merchandise management. This is yet another sign that the company is gearing up towards its next growth phase beyond 750 stores towards 1 stores and sustainable double digit margins. [McGough's Note: this is big...HIBB's major weakness in years past has been inability to control and leverage labor costs].


  • Cliff Notes from the TJX annual meeting Tuesday. The key takeaway is how the company plans to expand its reach, continue growth and yet cut expenses at the same time. Opening 15-20 more stores than initially expected (they noted this a few weeks ago). Reduce capex by 23% and cut $150mm in opex. Looking to grow internationally - specifically Germany. TJX inked deals with "hundreds" of new vendors in the first quarter alone.


  • PVH continues to expand the reach of its brands into the home furnishing space with the announcement of IZOD bed, bath and kitchen products. Last fall, the company entered the furniture realm with its own CK furniture line. While not expected to move the needle near-term, these initiatives could generate substantial revenue down the road in addition to enhancing brand image. It also plays into the housing improvement cycle that we called throughout Q1.



MORNING NEWS (full detail including sources at end of this note)
Zach's overview of items you're unlikely to find in the general press.

  • The commercial court in Paris placed Christian Lacroix into administration for a period of six months yesterday
  • Teens Outline Brand Preferences in New Research Report. Under Armour is a positive call out.
  • Abrams Research firm released a study today on the luxury industry, after speaking with more than 100 carefully selected industry experts
  • Fashion brands couldn't escape an erosion in their royalties last year
  • The TJX Cos. Inc. told shareholders at the company's annual meeting Tuesday that it plans to expand its reach and keep a lid on expenses
  • Golf Shoe Cos. Sued for Patent Infringement
  • Puma N.A. Secures U.S. Swimwear, Beachwear Licensee
  • The Finish Line Partners with Soles4Souls for B-T-S Promotion
  • Used SG Purchases Fell Below $1 Billion in CY08
  • Brown Shoe Co. strikes a licensing deal with Marvel Entertainment that will allow the Famous Footwear parent to add characters from Marvel's upcoming feature films
  • Converse is rolling out Fall collections of the iconic Chuck Taylor All Star in collaboration with rock and metal artists AC/DC and Metallica
  • Cranston Print Works, of Webster, MA, which printed millions of yards of cloth, is shifting all textile printing to China, Korea, Pakistan and Taiwan
  • Donald Craig Wood, the principal of the Temecula, CA business known as Golden State Golf, filed for Chap. 7 bankruptcy protection on May 29
  • Neiman Marcus Inc. has centralized its fashion office
  • Miley Cyrus and Max Azria are heading to Wal-Mart to launch a trend-right collection. [McGough Note: I'm the first to admit that Miley is huge (as will my 8-year old daughter) but when is the last time you heard a CEO stand up and say "we're going to launch a new 'trend-wrong' collection. C'mon...].
  • Gucci, Richemont Seek Sanctions Against Bank of China in Counterfeit Case
  • U.K. online retail sales will grow 13.3% this year, research firm predicts
  • The London Organizing Committee of the Olympic Games and Paralympics Games has started sourcing licensees for the design, manufacture and U.K. retail distribution of London 2012-branded product across categories
  • With AIG not extending its jersey sponsorship deal with Manchester United, Aon Corporation, a $10 billion company who specializes in risk management, insurance and consulting, is expected to take over
  • Hi-Tec footwear company is putting a premium on technology for its fall '09 line


RESEARCH EDGE PORTFOLIO: (Comments by Keith McCullough):


06/02/2009 2:42 PM


McGough remains negative on the fundamentals here (see his recent note). From a quantitative perspective this stock is overbought today. KM



HBI: Thomas Weisel Partners came out overweight on HBI

GIL: Thomas Weisel Partners came out underweight on GIL

This guy has got the right call going here.



VFC: Frank Pickard III, VP & Treasurer, disposed of 7,100shs ($423,870) representing ~50% of his total holdings.

GPS: Marka Hansen, President, Gap Brand, disposed of ~31kshs (~$57,500) representing ~30% of his total holdings.

COH: 5 different executive level employees bought modest amounts of stock (<$20k) via the company's employee stock purchase plan.



Retail First Look 6/3/09: False Security  - 6 3 2009 9 57 19 AM



  • The MVRX continues to outperform up +96bps vs. the S&P +20bps yesterday.
  • TLB +19.7% was the greatest outlier to the upside on nearly 3x avg. daily volume and the only double digit gainer vs. 9 on Friday.
  • ZQK +2.4% continuing a 6-day run ahead of earnings Thursday (AMC) on nearly 3x avg. daily volume.
  • ZUMZ +7.6% on 2x avg. daily volume - the most significant upward move since issuing weaker than expected guidance on 5/21.
  • JCG -4.5% returned the prior day gains after a monster run into earnings and 26% jump on Friday.
  • NKE -2.4% took its first breather after a 7-day Dollar trade inflated run.



 Retail First Look 6/3/09: False Security  - 6 3 2009 9 54 30 AM



The commercial court in Paris placed Christian Lacroix into administration for a period of six months yesterday. It remains unclear whether the couture house will show at the next Haute Couture fashion week in Paris which takes place July 6-9. Last week Christian Lacroix said it planned to file for bankruptcy protection after it was hit by falling sales. Christian Lacroix himself, who set up the label in 1987, is reported to have said he will give "200%" to keep the fashion house running. Reports suggest that the designer is owed around €1.2 million (£1m) by the company. Christian Lacroix is owned by Falic Group, which bought the label from LVMH in 2005.

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Teens Outline Brand Preferences in New Research Report - It would come as no surprise that teenagers rate the Nike and Adidas brands highest in many categories of brand strength, given the brands' global appeal and marketing budgets, but consumers aged 12 to 17 years old were dramatically more likely to be aware of and purchase the Under Armour, Speedo and Puma brands than the U.S. population as a whole. That conclusion is based on the latest Brand Strength Report - Teen Edition produced by The SportsOneSource Group

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Abrams Research firm released a study today on the luxury industry, after speaking with more than 100 carefully selected industry experts. "There's definitely a cautious optimism among the experts in the luxury market right now," Abrams, who is also chief legal analyst for NBC and MSNBC, told WWD in an exclusive interview. "The luxury goods market is one that is preparing for change as a result of recession and the expansion of the online market." Below, additional results and data from the study are available exclusively on Abrams Research Luxury Brands Survey, 2009:

  • When asked how best a luxury brand could adapt to and survive the recession, 34.9 percent of respondents suggested cutting back on everything but essentials, and making "quality essentials the core of the brand." (Only 2.8 percent suggested cutting back on luxury materials.) Meanwhile, 33 percent suggested launching an offshoot, down-market brand instead. Just 9.4 percent suggested cutting back on advertising.
  • Destination markets: Our experts tapped China as the next big luxury market to break into by a decisive margin, 42.5 percent. The next-closest potential market was India (17 percent) followed by the Gulf States (14.2 percent).

Brands Most Likely to Make the Most of the Recession

   Topshop - 34.1%

   Chanel - 28%

   Louis Vuitton - 21.9%

   Forever 21 - 13.4%

   H&M - 13.4%

   Marc Jacobs - 13.4%

   Hermès - 7.3%

   J. Crew - 6.1%


Best Shopping Brands Online - 33.7%

   Gilt Groupe - 15.7% - 8.9% - 6.7% - 6.7% - 5.6% - 5.6% - 5.6%

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Fashion brands couldn't escape an erosion in their royalties last year, but their decline was smaller than most other classifications of intellectual property and the universe of North American brands. Fashion brands took in $775 million in royalties last year, down 4.3 percent from $810 million in 2007, according to the annual Licensing Industry Survey conducted by the Licensing International Merchandisers' Association, released on Tuesday. Overall, royalties declined 5.6 percent in North America to $5.66 billion from $5.99 billion in the prior year. The figures refer to the origin of the brands and not to the categories of merchandise for which they're licensed. For instance, character licenses, by far the largest category in the LIMA survey, logged royalties of $2.61 billion, down 3.9 percent, but much of the merchandise sold under those licenses was in apparel and accessories. Following characters in royalty revenue, but a distant second, were corporate trademarks and brands, down 8 percent to $975 million, followed by fashion and then sports, down 9.2 percent to $740 million. The only category to escape a decline in royalties last year was collegiate brands, which grew 3.5 percent in royalty revenue to $208 million. The largest decline, outside of the catchall "other" category, was art, where royalties sagged 12 percent to $154 million. "Given the economic climate, the revenue declines are not unexpected," said Charles Riotto, president of LIMA. "However, a strategic, thoughtfully implemented licensing program remains a very effective way for businesses to build their brands, drive incremental revenue and position themselves to thrive in a rebounding economy. "It's more important than ever for brand owners to identify brand extensions that will support and enhance their core businesses, while retaining flexibility to be there when consumers are ready to buy," he concluded. The results were culled from companies in the licensing business, examination of public financial documents and interviews with licensing industry executives.

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Golf Shoe Cos. Sued for Patent Infringement - Adidas, Adi subsidiary TaylorMade Golf, Callaway and ECCO USA are the named defendants in a patent infringement suit filed last week in Philadelphia by plaintiffs Greenkeepers, Inc. of Philadelphia and Greenkeepers of Delaware.


Puma N.A. Secures U.S. Swimwear, Beachwear Licensee - Blue Water Design Group, the former Waterfront Design Group which was acquired by Apparel Ventures Inc. in 2004, has been named the Cat's official licensee for women's swimwear and beachwear in the U.S. market. Blue Water will be responsible for design, merchandising, sales and marketing of the collection that will be marketed to key department.


The Finish Line Partners with Soles4Souls for B-T-S Promotion - The athletic specialty retailer is teaming with the Nashville-based organization, which distributes footwear to needy people worldwide, on a used shoe collection program for the next three months. Starting yesterday and ending Sep. 7, FINL will encourage its customers to bring in a pair of new or 'gently worn' shoes at any of its 690 doors.


Used SG Purchases Fell Below $1 Billion in CY08 - U.S. consumers bought $969 million worth of used sporting goods last year, falling below the $1 billion threshold for the first time in three years. In CY07, sales of used sporting goods hit $1.08 billion. A year earlier, they totaled $1.01 billion, according to research conducted for the National Sporting Goods Association (NSGA).


Brown Shoe Co. strikes a licensing deal with Marvel Entertainment that will allow the Famous Footwear parent to add characters from Marvel's upcoming feature films to several footwear collections. The partnership will begin with an Iron Man 2 shoe for the toddler, youth and young adult market in Spring 2010 and will be followed by styles adorned by other Marvel superheroes such as Thor and Captain America

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Converse is rolling out Fall collections of the iconic Chuck Taylor All Star in collaboration with rock and metal artists AC/DC and Metallica

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Cranston Print Works, of Webster, MA, which printed millions of yards of cloth, is shifting all textile printing to China, Korea, Pakistan and Taiwan.

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Donald Craig Wood, the principal of the Temecula, CA business known as Golden State Golf, filed for Chap. 7 bankruptcy protection on May 29. Petition lists $276,145 in total liabilities, including $247,997 owed to unsecured creditors. Top five trade unsecured creditors are: TaylorMade ($8,712), Ping ($7,920), Callaway ($7,077) and Mizuno USA ($6,803). First meeting of creditors is scheduled for June 30 in Riverside, CA.

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Neiman Marcus Inc. has centralized its fashion office, giving three seasoned fashion executives responsibilities for the Neiman Marcus, Neiman Marcus Direct and Bergdorf Goodman divisions. Under the reorganization, Kareen Mallet becomes women's ready-to-wear senior market editor. Mallet, who had the same title at Neiman's, will be responsible for covering contemporary, bridge, dress collections, evening, lingerie and coats. Roopal Patel, women's fashion accessory senior market editor, will cover handbags, shoes, fashion accessories, fashion jewelry and designer jewelry. She previously was senior fashion director at Bergdorf's covering various women's areas. Tommy Fazio, men's fashion director and senior market editor, will be responsible for covering men's designer, sportswear, tailored clothing, contemporary, furnishings, men's accessories and shoes. He previously was men's fashion director at Bergdorf's. Officials said the three fashion executives were given broader roles to leverage their skills and to take over the responsibilities for two individuals who retired from Neiman's in the past two months: Sandra Wilson, who covered accessories, and Colby McWilliams, who was the men's fashion director. They were not replaced. The company also said no layoffs resulted from the centralization. The new fashion office will report to Ken Downing, who serves as senior vice president and fashion director at Neiman Marcus stores and simultaneously covers the women's couture and designer markets for Neiman's. He now also oversees the administrative matters concerning the staff at the central fashion office, located at 1450 Broadway in Manhattan. With the reorganization, said Neiman's president and chief executive officer Karen Katz, "we are now able to fully utilize the talents and strengths of Roopal, Tommy and Kareen across all brands and channels while providing each of them with new areas of growth and responsibility." Jim Gold, president and CEO of Bergdorf Goodman, explained why NMG decided to centralize the fashion office. "We had an opportunity to leverage two extremely talented individuals for the corporation, Roopal and Tommy," he said. "These two individuals know Bergdorf's so well and have unique fashion skills so the Neiman Marcus Inc. felt that we could [more fully] utilize their talents. As they cover the markets, they will look through the lens of both brands."

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Miley Cyrus and Max Azria are heading to Wal-Mart. Miley Cyrus, the teen sensation whose alter ego, Hannah Montana, stars in her own TV show and concerts, is teaming up with Max Azria, chairman, designer and chief executive officer of BCBG Max Azria Group, to create a junior line for Wal-Mart called Miley Cyrus and Max Azria, sources said. The trend-right collection will bow in all Wal-Mart stores and on in early August, the sources said, adding the line will include tops, pants, graphic T-shirts and shoes, priced under $20. A Wal-Mart Stores Inc. spokeswoman could not be reached for comment, while a spokesman for Max Azria declined comment. Cyrus has been a fan of Azria's designs for some time. She wore a short Hervé Léger by Max Azria dress in April to the U.K. premiere of "Hannah Montana: The Movie," and for the 2009 Grammy Awards, Cyrus donned a custom Hervé Léger by Max Azria black gown.  Azria is said to have developed a rapport with Cyrus in the course of dressing her for events and eventually became acquainted with her parents - her father, country star Billy Ray Cyrus, who appears on the "Hannah Montana" series, and mother, Tish. The Miley Cyrus line is the second major teen country star Wal-Mart has linked with in the last few months. The retailer already carries a line of cami dresses by country sensation Taylor Swift under the label L.E.I. by Taylor Swift, which is exclusive to Wal-Mart. Other junior collections offered at the store include "America's Next Top Model" T-shirts and sweatpants; No Boundaries athletic shorts and tank tops, and Op smocked jersey dresses and tube dresses. In the past, Wal-Mart has offered Mary-Kate and Ashley Olsen's tween fashion line and Stuff by Hilary Duff. The Wal-Mart deal marks Max Azria's second foray into mass market territory and gives him agreements with the world's two largest retailers - Wal-Mart and Carrefour. In 2006, Azria signed a deal to design a women's ready-to-wear collection for the French retailer, which operates hypermarkets in France, Greece, Spain, Belgium, Italy and Portugal. The collection Tex by Max Azria launched for the fall-winter 2007 season. At the time, industry sources familiar with the arrangement said the deal, which ends Dec. 31, 2011, has a minimum guaranteed volume of 1 billion Euros, or about $1.3 billion, over the course of the contract, plus escalations per season. The BCBG Max Azria Group is a diversified organization. Its portfolio of 22 brands includes BCBGeneration, Max and Cleo and Manoukian, among others, with price points from less than $20 for Miley Cyrus and Max Azria at Wal-Mart, to $3,000 for a Hervé Léger dress at Bergdorf Goodman.

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Gucci, Richemont Seek Sanctions Against Bank of China in Counterfeit Case - Gucci America Inc., the luxury company that is owned by Paris-based PPR SA, asked a U.S. judge to hold Bank of China Ltd. in contempt for failing to turn over documents and to order it to pay $4 million.

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U.K. online retail sales will grow 13.3% this year, research firm predicts - Verdict Research estimates online retail sales in the United Kingdom this year will exceed $34 billion. By 2013, the research firm says, online retail sales will surpass $51 billion and represent 10% of all retail sales in the U.K.

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The London Organizing Committee of the Olympic Games and Paralympics Games has started sourcing licensees for the design, manufacture and U.K. retail distribution of London 2012-branded product across categories. The IP covered includes the core London 2012 branding, the official mascots, sporting pictograms, Team GB and Paralympics GB. The initial categories, which will be awarded after a tender process, are home textiles, stationery and print, ceramics and glassware, souvenirs and jewelry. "The London 2012 licensing program is progressing well and there are significant opportunities for companies to get involved with the Games," says Simon Lilley, senior manager of licensing and retail for LOCOG. "We're looking for innovative responses from companies which can offer expertise and creativity in these sectors." The first stage of the process is to register on the Compete For Web site, which is the online service for matching potential suppliers with Games-related business opportunities. Closing dates for expressions of interest across the different categories are home textiles-June 12; stationery and print-June 19; souvenirs-July 3; ceramics and glassware-July 10 and jewelry-July 24. Partners signed for London 2012 are Tier One Partners - adidas, BP, British Airways, BT, EDF Energy, Lloyds TSB and Nortel. Tier Two Supporters - Adecco, Cadbury and Deloitte. Tier Three Suppliers and Providers - Airwave, Atkins, Boston Consulting Group, Crystal CG, Freshfields Bruckhaus Deringer LLP, McCann Worldgroup, Populous and Trident. The Worldwide Olympic partners signed up for 2012 are Coca-Cola, Acer, Atos Origin, GE, McDonald's, Omega, Panasonic, Samsung and Visa.

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With AIG not extending its jersey sponsorship deal with Manchester United, Aon Corporation, a $10 billion company who specializes in risk management, insurance and consulting, is expected to take over.

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Hi-Tec footwear company is putting a premium on technology for its fall '09 line, which uses Vibram rubber, Thinsulate insulation and the company's Ion Mask waterproofing system to keep customers warm, dry and stable in winter weather. The $50 to $110 collection will begin delivering this month (continuing through September) to outdoor specialty shops, family footwear chains and sporting goods accounts.

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Retail First Look 6/3/09: False Security  - 6 3 2009 9 53 39 AM




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