EVENTS TO WATCH OVER THE NEXT 24 HOURS
WWW - Earnings Call: Tuesday 10/8 8:30 am
FNP – FNP agrees to sell Juicy to Authentic Brands Group
- “[FNP] today announced that it has entered into a definitive agreement to sell the intellectual property of the Juicy Couture brand. Consummation of this transaction is subject to customary closing conditions and is expected to occur in November.”
- “William L. McComb, Chief Executive Officer of Fifth & Pacific Companies, Inc., said: ‘We announced that we have signed an agreement to sell the intellectual property of the Juicy Couture brand to Authentic Brands Group (ABG) for $195 million, payable in cash. With this sale, we have also entered into a short-term licensing agreement with Authentic Brands Group that allows us to transition the business in an orderly fashion through the first half of 2014, with a $10 million guaranteed minimum royalty payable to Authentic Brands Group. In the coming weeks and months, we anticipate that Authentic Brands Group will announce licensees and affiliates that will work to take over elements of the operating business, including many of the company's talented associates, retail stores, wholesale, international, and certain components of the ecommerce site. We plan to work closely with these entities to ensure a smooth and orderly transition that is seamless to consumers and our business partners.’”
Takeaway: What’s interesting is that the sale is for ‘intellectual property’. This sticks FNP with the leases – which it would have to terminate as a cost – as well as the employees (who are likely out of a job). Our model originally called for $250mm in proceeds. But after the deal fell through three weeks ago (for Juicy, Lucky, and the JOEZ deal – all in the same week), our expectations came down to a degree.
Assuming that – worst case – they net $150mm, it still allows them to pay off a third of their debt – and that’s before they sell Lucky, which should net $400mm or better.
TWTRQ - Tweeter shares rocket 1,800% after news of Twitter's IPO
- "Shares in failed electronics retail chain Tweeter Home Entertainment Group soared after Twitter announced it was intending a share sale. Tweeter, which specialised in high-end electronics, filed for bankruptcy in November 2008 and closed its stores soon after. But its shares surged 1,800% to 13¢ after the social media firm set out its plans for an initial public offering."
- "The Financial Industry Regulatory Authority ordered the suspension of shares in Tweeter at 12.42pm ET, determining that an extraordinary event has occurred or is ongoing that has had a material effect on the market' for Tweeter shares."
- "Tweeter trades under the stock symbol TWTRQ, just one letter different from Twitter's intended 'ticker' symbol, TWTR."
Takeaway: This is simply hysterical.
WMT - Wal-Mart says retail plans with India's Bharti "not tenable"
- "Wal-Mart Stores Inc's retail plans with India partner Bharti Enterprises are 'not tenable' and both sides are looking for the best way to move forward, an executive with the U.S. retailer told Reuters."
- '"We created a franchise in retail with Bharti in the hopes that there could be a potential freeing up (of foreign direct investment) that would allow it to potentially be the base of the business. But frankly, the FDI has passed,' said Wal-Mart Asia Chief Executive Scott Price on the sidelines of the APEC conference in Bali, Indonesia. That means the existing franchise to Bharti is not tenable as the base. What we are talking about with Bharti is what we do with that business.'"
- "Despite the uncertainty over the retail business, Price said the world's largest retailer was not planning on leaving India and was actually hoping to expand its wholesale business. 'We are committed to India and we are not thinking of leaving India anytime soon,' he said."
Takeaway: WMT has been courting the Indian market for the better part of – well…forever. It still has made very little progress relative to what is needed for a revaluation in the stock.
RL - Denim & Supply to Transform NYC Store Facade Into Art
- "The Denim & Supply Ralph Lauren store in Greenwich Village will be undergoing a transformation, literally. Ralph Lauren Corp. said Friday that it will launch The Art Wall Project, an installation of large-scale outdoor artwork."
- "The company will work with various emerging artists to transform the store’s facade into a work of art that celebrates the contemporary brand. The 4,000-square-foot store, the site of the former Rugby unit, is located at 99 University Place."
Takeaway: Not sure I get this. But hey… Having a store selling Denim and Supply with artwork on the exterior walls is better than having 4,000 feet dedicated to selling Rugby apparel that no one wants.
LS&CO - Levi Strauss Profit Doubles on Higher Jeans Sales
- "Levi Strauss & Co.'s fiscal third-quarter profit more than doubled on the jeans maker's higher sales in the Americas and Europe, as well as a $14 million tax benefit recorded in the latest period."
- "For the quarter ended Aug. 25, Levi reported a profit of $57.1 million, up from $28.4 million a year earlier. The latest results also included a $14 million tax benefit. Revenue climbed 3.7% to $1.14 billion. In the Americas, where Levi Strauss does most of its business, sales grew 5%. Sales climbed 3% in Europe but were flat in the Asia Pacific."
Takeaway: Good read-through for VFC, as its Jeanswear division is 26% of the company. VFC just announced its 3Q earnings report date – Monday October 21.
WMT - Wal-Mart Looks to Gain Ground in Asia
- "[WMT's] top executive for Asia said the company has revamped its practices and legal compliance in the region and is considering acquisitions in China, as the retailer faces headwinds in a cornerstone of its global expansion plans."
- "...Wal-Mart is considering acquisitions in China, aiming to build its market share in cities where Wal-Mart isn't already the No. 1 or No. 2 player, Mr. Price said."
Takeaway: While growth in China is an obvious part of WMT’s international strategy, it’s worth noting that the company has gotten louder on China since it started stumbling in India.
Alibaba - Alibaba IPO won’t happen until next year
- "Alibaba Group Holding Ltd. will not commence its initial public offering until next year, according to two people familiar with the company’s plans...The fast-growing Chinese e-commerce and auction firm has yet to make a final decision, between New York and Shanghai, on where it will list its shares, said the source, while adding that the company expects to do so soon."
Takeaway: We’ve said this before, but any US retail investors that don’t watch Alibaba closely are missing out. It is, and will increasingly be, the ultimate force in building an online business in China for US companies. It puts Amazon to shame from a branding standpoint.
New Balance - New Balance Launches Made in USA 990 Apparel Line
- "Three months after it ran a full-page ad plugging American manufacturing, New Balance is furthering that commitment with the introduction of its Made in the USA 990 apparel collection."
- "Inspired by the sneaker label’s 990 style, the women’s and men’s items will be available starting Nov. 1 in New Balance boutiques and via the company’s Web site."
- "Products with the Made in the USA label will retail from $30 to $200."
Takeaway: Brilliant move by New Balance, as its ‘Made in the USA’ label is its biggest asset.
JWN - Kate Moss, Topshop Set New Collection
- "Topshop and Kate Moss will resume their design partnership with a new collection that will launch in April...The range will be made up of about 40 styles, including ready-to-wear, accessories and footwear. It will be sold in the retailer’s stores in 40 countries; via Topshop.com and through wholesale partnerships including 41 Nordstrom stores…"
Takeaway: If Topshop expands aggressively in the US, the current competitive set should be very very afraid.
House of Fraser moves ahead with flotation plans
- "Department store chain House of Fraser is pushing ahead with plans for a stock market flotation, as several UK firms rush to go public."
- "The group, which has 61 sites across Britain and Ireland, is expected to appoint investment bankers to advise on a listing in the next few weeks, the Sunday Times reports. It is thought the group may look to launch its initial public offering early next year and could be valued at between £300m and £400m."
McKinsey Survey: Sourcing Costs to Rise
- "According to a new report issued by the McKinsey & Co., booming wages will be the principal mover of rapidly accelerating costs all along the supply chain. McKinsey & Co. conducted a survey, entitled 'Outlook on Expected Cost Development in Apparel Sourcing,' of twenty-nine chief purchasing officers who collectively oversee more than $39 billion in sourcing business, employed by companies in both the U.S. and Europe."
- "Of these, 76 percent anticipate that the general costs of sourcing will rise an average of 1.7% and 14 percent think there will be increases that exceed 4 percent."
- "The primary culprit behind the rising costs is labor. Once a reliable source of heavily discounted work, China’s expanding middle class, and the wages they increasingly demand, has transformed it into an expensive and sophisticated manufacturer. And especially with the newfound emphasis on social compliance following the Rana Plaza factory collapse, the costs of sourcing to bargain basement destinations like Bangladesh, Vietnam and Cambodia are widely forecast to go up."
- "Also contributing to the upward swing in price will be the increased cost of raw materials. Cotton prices have been aggressively climbing and no abatement of that trend is on the far horizon. Both polyester staple and polyester filament continue to become more expensive as well."
LeBron James tops U.S. NBA jersey sales, but not in China, Europe
- "For the first time, the U.S. basketball league released its worldwide rankings of top selling basketball jerseys for the 2012 to 2013 season, based on global sales of Adidas, which has the licensing rights to make the jerseys."
No festive cheer for shipping industry, Maersk boss David Skov says
- "The world's biggest shipping group, Maersk Line, says the Christmas season is unlikely to boost sluggish shipping business this year because of slow global demand and an 'unsustainably low freight rate.'"
- "David Skov, the Danish shipping company's head of South China operations, made the comments in Hong Kong yesterday, echoing the concerns of local exporters who said they had seen big US retail chain Walmart and sportswear brand Nike cut orders for the festive season."
Global Union Wants $71 Million for Rana Plaza Victims
- "IndustriALL Global Union, an organization that represents 50 million workers in 140 countries held a meeting Tuesday to discuss proper compensation for victims and survivors [of the Rana Plaza collapse] and according their demands, proper compensation equals $71 million USD. They also urged brands and retailers to participate in a compensation program for victims.]
- "Of the $71 million total, 45 percent should be paid by retailers, 28 percent by owners, 18 percent by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the balance by the government…"