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Takeaway: Athletic data update. RL management changes, and why we don't think DKS' targets are realistic.

What’s New in Retail (9/19)

As part of our morning routine, we scour the tape and trade rags for stories that we think might be relevant to our investment process. 


Athletic footwear sales continue to teeter on the zero growth mark in the US, though Athletic Apparel once again saves the day with growth in the low double digits. From a brand perspective, it’s the Nike and UnderArmour show. The only other brand that’s showing up to play is Skechers.  

What’s New in Retail (9/19) - Footwear ApparelChart1

What’s New in Retail (9/19) - Footwear2

What’s New in Retail (9/19) - Apparel3


NKE - Annual General Meeting, Thursday 9/19/13 1:00pm


UK retail sales in unexpected fall

"Data from the Office for National Statistics showed that the volume of retail sales dropped by 0.9% in August – mainly as the result of weaker demand for food.

Food sales dropped 2.7% in August, and there was little evidence of the recent pickup in housing activity helping sales of household goods, which fell by 1.6%. Over the three months to August – considered a better guide to the trend than one month's figures – retail sales were up by 1.7%. Annual growth – comparing the latest quarter with the same three months in 2012 – stood at 2.3%, the ONS said."

Our Take: This is in contrast to strong results recently posted by Sports Direct and Foot Locker in the UK. Either the athletic sector is holding up extremely well, or the Food retail space is under severe pressure.



DKS – Outlines Growth Strategy – We Don’t Believe It

During its Analyst Day, DKS outlined its growth strategy through the end of Fiscal 2017. Here are some of the highlights:

  • Revenues to reach $10 billion assuming a 11% CAGR from FY12 revenues of $5.8 billion
  • 10.5% Operating Margin, a 150 bps increase from FY12's 9.0%, through expansion of Gross Margin and SG&A leverage
  • E-Commerce revenues expect to grow to $1.1 billion, up from about $325mm today.
  • 800 Dick's Sporting good stores from 518 at the end of FY12
  • Growing Field and Stream stores from its 1 current location to 55 doors generating $750 million in revenue
  • $1.8 billion in CapEx

Our Take: There are companies that grow because they should, and others because they could. Dick’s in our opinion, is the latter. Reaching its lofty store growth goals while tripling e-commerce sales over three years and hitting new peak 10.5% margin levels seems incredibly aggressively to us – particularly given increased competition from the brands it sells as well as the Amazon’s of the world in hardgoods. We still scratch our heads as to why its such a consistent love-fest with this company.  We think DKS is a value trap.


RL - Ralph Lauren Announces That Roger Farrah Is Stepping Back

  • "Ralph Lauren Corporation... today announced plans to introduce changes to its leadership team and to create an Office of the Chairman, led by Ralph Lauren, Chairman and Chief Executive Officer (CEO) of the Company, and including Roger Farah, Jackwyn Nemerov and Christopher Peterson. Roger Farah, currently President and Chief Operating Officer (COO), will become Executive Vice Chairman. Jackwyn Nemerov, currently Executive Vice President (EVP), will become President and COO. Christopher Peterson, currently Senior Vice President (SVP) and Chief Financial Officer (CFO), will become Executive Vice President and Chief Administrative Officer (CAO) in addition to his role as CFO. The Office of the Chairman is being created to enhance the Company’s ability to support the growth of the business in an increasingly complex global environment and capitalize on new business opportunities. Mr. Farah, Ms. Nemerov and Mr. Peterson will report directly to Mr. Lauren. The changes will be effective as of November 1, 2013, allowing for a smooth transition period."
  • "In his new role, which reduces his time commitment to the business, Mr. Farah will be responsible for engaging in strategic projects and business development, as well as advising the Chairman and mentoring and counseling the management team."
  • "Jackwyn Nemerov, in her new capacity as President and COO, will be responsible for global merchandising, manufacturing and supply chain operations as well as the Company’s retail, wholesale and licensing businesses worldwide."
  • "Christopher Peterson, in his new capacity as EVP and CAO, will oversee legal, corporate facilities, global real estate, and corporate services and will also continue in his role as CFO to lead the global finance and information technology organizations, including financial planning and analysis, accounting, tax, treasury and investor relations."

Our Take: In effect, Roger will be spending 50% of his time on the business,  and the rest with his family. Nemerov and Peterson will pick up the slack on his day job. We have a particularly favorable opinion of Peterson, so we welcome him getting more involved. The negative part of this is that Roger is clearly one of the most highly regarded executives in all of retail. We like him being involved as much as possible at RL. On the flip side, there was a lot of speculation that Roger was going to leave the company outright – and now we know that this won’t happen.

ADS - Reebok Turns to ‘Race From Hell’ to Revive Former Glory

  • "This year for the first time, Reebok’s name will be on Spartan’s championship, the culmination of a race series that will attract some 500,000 athletes in 2013. The sporting-goods company, a unit of Adidas AG (ADS), signed a multi-year partnership with Spartan in January. Last month, Reebok signed a similar deal with Les Mills, a New Zealand company that sells branded fitness routine classes. And since 2010, it has sponsored CrossFit, a rival program."
  • "Reebok will start selling products developed for Spartan next year, prominently featuring the race circuit’s brand in addition to Reebok’s. Details remain under wraps."
  • "Reebok will produce and distribute products bearing both the Reebok and Les Mills brands and offer 100,000 instructors a 25 percent discount on clothes and shoes.

 Our Take: Reebok needs all the help it can get. Its market share in the US is 1/4 today of where it was when it merged with Adidas.

AMZN , SPLS, RSH - Staples, RadioShack Yank Amazon Lockers From Stores

  • "Staples Inc. (SPLS) and RadioShack Corp. (RSH) have removed Amazon.com Inc. (AMZN)lockers from their stores about a year after starting the program as competition stiffens with the online retailer. The chains began testing a system last year in which Amazon shoppers could have a Web order delivered to a store and then pick it up for no extra cost."
  • "Staples ended the test with Amazon after it 'didn’t meet the criteria we set up together,' Demos Parneros, president of North American stores and online for Staples, said in an e-mail."
  • "RadioShack stopped the program because it didn’t fit with its strategy, Merianne Roth, spokeswoman for the Fort Worth, Texas-based retailer, said today in an e-mail."

 BBG - Billabong Links With Centerbridge and Oaktree

  • "Surfwear company Billabong said Thursday that it has entered binding agreements with the hedge funds Centerbridge Partners and Oaktree Capital Management for a longterm refinancing package and ditched its previously announced refinancing deal with Altamont Consortium."
  • "The new Centerbridge/Oaktree deal includes a six year senior secured loan of $360 million; a 135 million Australian dollar ($127 million at current exchange) equity placement to the Centerbridge/Oaktree Consortium and, following the placement, a 50 million Australian dollar ($47 million) non-underwritten, renounceable rights issue available only to shareholders other than the Centerbridge/Oaktree Consortium. According to the statement, after the financial operations, Centerbridge/Oaktree will own between 33.9 and 40.8 percent of Billabong’s fully-diluted share capital."
  • "Centerbridge and Oaktree have tapped Neil Fiske, a former head of adventure-wear company Eddie Bauer Holdings Inc., to become Billabong's new chief executive and revive a suite of brands that also includes Tigerlily and Von Zipper. Mr. Fiske displaces the Altamont consortium's choice, former Oakley Inc. boss Scott Olivet."

SKS, HBC - Saks Incorporated Announces Plans for Seven New Saks Fifth Avenue OFF 5TH Stores in 2014

  • "Saks Incorporated...today announced its plans to open seven new Saks Fifth Avenue OFF 5TH stores in 2014: The Outlets at Bloomfield in Pearl, MS; Potomac Mills in Woodbridge, VA; Palm Beach Outlets in West Palm Beach, FL; Outlet Shoppes at Louisville/Lexington, KY; Twin Cities of Eagan in Minneapolis, MN; The Mayfair Collection in Mayfair, WI; and Easton Gateway in Columbus, OH."
  • "The stores will range from 25,000 to 28,000 square feet and will be modeled in Saks Fifth Avenue OFF 5TH's luxury-in-a-loft store design."

LVMH - Fendi Celebrates New Milan Palazzo

"The luxury company will unveil its new flagship here on Thursday, the day of its show, and stage an exhibition titled 'Making Dreams: Fendi and the Cinema' to mark its enduring relationship with Cinecittà and Hollywood."

"Relocated from Via Sant’Andrea onto the prestigious Via Montenapoleone, the boutique is housed in the 16th-century Casa Carcassola-Grandi, with a neoclassical-style facade. Covering two floors and about 5,400 square feet... The opening comes on the heels of the new Avenue Montaigne store in Paris in July; both stores were designed by Tokyo-based French architect Gwenael Nicolas."

JWN - Nordstrom's New Americana Home

  • "Nordstrom held a gala Tuesday night to unveil what is increasingly a rarity in its portfolio: a new full-line store in the U.S.  Officially opening Friday, the 135,000-square-foot store at Caruso Affiliated’s shopping center The Americana at Brand in Glendale, Calf., is the first and only full-line Nordstrom completed this year as the retailer has focused expansion elsewhere. The store was relocated from the neighboring Glendale Galleria, where it had been since 1983."
  • "Another full-line U.S. store won’t open until September a year from now at The Woodlands Mall in The Woodlands, Tex., followed by an October opening at St. Johns Town Center in Jacksonville, Fla., before three full-line stores bow in 2015 at Ridgedale Center in Minnetonka, Minn., Mayfair Mall in Wauwatosa, Wis., and Del Amo Fashion Center in Torrance, Calif., a relocation destination. "
  • "When it comes to opening full-line Nordstrom stores in 2014 and 2015, a lot of the attention will shift north of the border prior to turning on Manhattan. Nordstrom has revealed that it will premiere full-line retail in Canada in September 2014 at Calgary’s Chinook Centre and subsequently in 2015 add four full-line stores in Calgary."
  • In Manhattan, Nordstrom will build a seven-floor, 280,000-square-foot full-line store…'It doesn’t open until 2018 and it’s a big, complicated project, but we are excited about that location and now the ball is in our court for the next couple of years to execute something that hopefully the people in Manhattan are excited about.'"

Patagonia - Patagonia Adds Worn Wear Sections to Four Stores

  • "Patagonia Inc. has expanded its sale of used Patagonia clothing from a trial in its Porland, OR store to full blown Worn Wear sections within its stores in Portland, Seattle; Palo Alto and Chicago (Lincoln Park). Customers can now purchase used Patagonia items from any of the four locations and continue to receive credit for bringing in their clothing for resale. Items accepted for trade-in include Patagonia shells, fleece, down and synthetic insulation, and ski and alpine pants. Clothing must be clean and in good condition, and customers can earn trade-in credit valued at 50 percent of the price of the item which will then be sold through the store's Common Threads Worn Wear section. Credit can be redeemed for purchases in store or online at patagonia.com."


  • FIVE's 7 million secondary share offering was priced at approximately $47 through Credit Suisse.

DLTR - Dollar Tree Adopts $2 Billion Share Repurchase Program

  • "Dollar Tree Inc. (DLTR) said its board of directors has authorized the repurchase of up to $2 billion in shares, including a $1 billion variable maturity accelerated share repurchase."