ECONOMIC DATA
Weekly Athletic Footwear Data
Takeaway: An gnarly looking week for athletic footwear, which was down 4.9% for the week. Units were relatively unchanged, but ASP – which had been the big saving grace for the past three months, took a complete nosedive. Standout brands for the week were UndeArmour and Timberland. If you want to see some polar opposite results, check out the apparel data. The industry is crushing it. And by ‘the industry’ we mean The Nike.
Weekly Athletic Apparel Data
ICSC Same Store Sales
Takeaway: Third week in a row where sales growth is trending below year ago levels. Ouch.
COMPANY NEWS
JCP - Retail Industry Leader Stephen Sadove to Join JCPenney Board of Directors
(http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-newsCompanyArticle&ID=1862873&highlight=)
- "[JCP] today announced that Stephen I. Sadove...has been elected to its Board of Directors. Sadove is currently chairman and chief executive officer of Saks Incorporated and will be leaving Saks upon completion of its previously announced merger with Hudson's Bay Company. His election to the JCPenney Board of Directors is effective upon his leaving Saks. Additionally, Geraldine B. Laybourne is stepping down from the JCPenney Board of Directors. Her departure will enable her to focus more time as chairman of KANDU, a startup consumer technology company for kids."
Takeaway: This is big. A few people have told us that this is bad because the last thing JCP needs is management with a luxury bent. We could care less about what KIND of product he sold throughout his career, the reality is that Sandove gets retailing, and that’s a positive.
JCP - Dockers, Haggar Come Together at J.C. Penney
(http://www.wwd.com/retail-news/department-stores/dockers-haggar-come-together-at-jc-penney-7215298)
- "Dockers, Haggar and J.C. Penney Co. Inc. have joined forces to build lifestyle shops in 297 of the chain’s top doors with an eye on ramping up sales, especially of shirts and sweaters."
- "The adjoined Haggar and Dockers shops were codesigned by the brands and the retailer with custom fixtures to display complete looks on mannequins and posters, the better to encourage men to buy coordinating pieces instead of only pants. Installation should be complete by Friday, according to John Tighe, Penney’s senior vice president and general merchandise manager."
- "Dockers and Haggar have about the same or slightly more space as before — an average of 1,000 square feet combined — but the shops pack in more merchandise via back-wall shelves and more efficient fixtures, Tighe noted. The retailer rarely carried Haggar shirts before and has increased its stock of Dockers’ shirts and sweaters."
- "About 30 percent of Haggar styles are exclusive to Penney’s, including plaid shirts and some tailored clothing."
Takeaway: More merchandise in the same sized space. Minor positive for JCP. But…you guessed it…no one will care.
AMZN - Amazon Launches Prestige Beauty Site
- "Amazon is finally launching its much anticipated foray into prestige cosmetics this morning with the Luxury Beauty Store."
- “'We have luxury shoppers,' said Chance Wales, director of beauty and health & personal care for the e-commerce giant. 'What we have been lacking is luxury brands, and we hope this is the first step to marry our customer’s needs with what brands expect in terms of displaying and selling their luxury [products].'”
Takeaway: How in the world could this be good for ULTA?
SHLD - Sears Cashes Out of Prime Stores
- "[SHLD] has been selling off some of its best stores to raise cash...The discounter has sold nearly a dozen profitable Sears stores in the U.S. and Canada over the past 18 months, including two separate deals that were signed this summer for four stores plus an option to sell a fifth, according to former employees and analysts who have tracked the deals.
- "In July, Sears agreed to sell two locations, one in the Fayette Mall in Lexington, Ky., and another in CoolSprings Galleria in Nashville, Tenn., to mall owner CBL & Associates Properties Inc. for an undisclosed price."
- "The July deal followed an agreement Sears Canada reached in June to sell the leases of two stores to Oxford Properties Group and Alberta Investment Management Corp. for $191 million. The buyers also have the right to exercise an option to buy a third lease."
Takeaway: The fact that this company is still alive 8-years after one of the worst mergers in history is simply astounding. It should give pause to those who think JCP is a zero.
MW - Men's Wearhouse Adopts Limited Duration Shareholder Rights Plan
(http://phx.corporate-ir.net/phoenix.zhtml?c=109554&p=irol-newsArticle_Print&ID=1863201&highlight=)
- "[MW] today announced that its Board of Directors has adopted a limited duration shareholder rights plan (the "Rights Plan") and declared a dividend of one right on each share of the Company's common stock outstanding at 5:00 p.m., Eastern time, on October 21, 2013. The Rights Plan was adopted following the Company's rejection of the unsolicited proposal by Jos. A. Bank to acquire Men's Wearhouse for $48.00 per share as it significantly undervalues Men's Wearhouse, is inadequate and not in the best interests of the Company or its shareholders. The Rights Plan is not intended to prevent an acquisition of the Company on terms that the Board of Directors considers favorable and fair to, and in the best interests of, all shareholders, and will not do so."
JOSB - Jos. A. Bank Will Continue to Pursue Its $48 Per Share Cash Acquisition Proposal
(http://phx.corporate-ir.net/phoenix.zhtml?c=113815&p=irol-newsArticle&ID=1863208&highlight=)
- "We find the response by Men's Wearhouse to our all-cash $48 per share proposal inexplicable. Our proposal provides substantial, immediate, and certain value for Men's Wearhouse shareholders. We are proposing a 42% premium to the closing price of Men's Wearhouse's common stock on the day before we made our acquisition proposal. Our price is significantly greater than the highest price at which Men's Wearhouse's stock has traded over the last five years."
- "The formulaic, knee-jerk rejection by Men's Wearhouse, and their refusal to even discuss our proposal, do not serve the interests of their shareholders or their customers."
Takeaway: We were floored that the MW Board turned down this offer. The combined company would be formidable. On the flip side, MW is in the process of transforming into a house of brands. The real question we should be asking is what the REAL earnings power is at MW and how much higher than $48 MW thinks it’s worth.
WMT - Bharti, Walmart call off India JV; to independently pursue retail business
- "Ending speculations over future of their partnership, Bharti Enterprises and Wal-Mart Stores, Inc. said today they are going separate ways for operations in the Indian retail sector. Subsequently, the US retail major will buy out the Indian partner from their 50:50 wholesale cash and carry joint venture -- Bharti Walmart, for an undisclosed sum."
- "Walmart on the other hand plans to continue to grow this business while working with the government and interested stakeholders to create conditions that enable foreign direct investment in multi-brand retail. 'Given the circumstances, our decision to operate independently will be beneficial to both parties,' Walmart Asia President and CEO Scott Price said."
Takeaway: This is a seismic shift in WMT’s India strategy. Definitely a near-term negative.
JCP - JCPenney Switches Creative Agencies Yet Again
(http://www.adweek.com/news/advertising-branding/jcpenney-switches-creative-agencies-yet-again-152995)
- "That was fast. Six months after hiring Young & Rubicam to lead its creative efforts, JCPenney has replaced Y&R with a trio of agencies: Doner, EVB and Victors & Spoils."
"The change came after a pitch and as the struggling retailer prepared for its crucial holiday shopping season. Indeed, the honeymoon for the new shops will be short, as the first campaign may break as early as next month." - "JCP spent more than $435 million in media last year and about $170 million in the first half of 2013, according to Nielsen. Those figures don't include online spending, however."
Takeaway: It always scares us when a company switches Ad agencies. It never happens ‘bc business is just so darn good’. That said, three is better than one. We welcome the competition. Separately, if you don’t follow JCP on Facebook, we suggest you do so. Interestingly enough, JCP has emerged as one of the more progressive social networking retailers.
9983 - Fast Retailing FY Profit Grows 26.1%
(http://www.wwd.com/business-news/financial/fast-retailing-fy-profit-grows-978?module=hp-topstories)
- "Fast Retailing Co. Ltd., Asia's largest retailer, saw higher full-year profits and revenue but warned that sales growth is slowing for the current fiscal year. The company, which owns Uniqlo, Theory and Helmut Lang, saw its net profit for the year ended Aug. 31 jump 26.1 percent to 90.38 billion yen, or $1 billion at average exchange rates for the period."
- "Net sales for the year rose 23.1 percent to 1.14 trillion yen, or $12.65 billion."
- "For the current fiscal year, Fast Retailing forecast that net profit will advance 1.8 percent to 92 billion yen, or $936.70 million, while operating profit will increase 17.4 percent to 156 billion yen, or $1.59 billion. Fast Retailing predicted that full-year sales this year will grow 16.4 percent to 1.33 trillion yen, or $13.54 billion."
Takeaway: Another sign that Japan is in the tank – perennially.
DECK - UGG® Australia Launches 'UGG By You'
(http://www.deckers.com/investors/press-releases/press-detail?releaseid=1863196)
- "On October 9th, UGG Australia will launch UGG by You, an online customization tool putting customers in control of the design process...The customization tool allows consumers to mix and match an array of color schemes on two classic styles, the UGG Classic Short sheepskin boot and the Fluff Flip Flop, through a user-friendly design tool. There are over 11,000 color, outsole and trim combinations possible through the footwear personalization tool."
Takeaway: This is inevitable. Everyone is ultimately going the customization route. Unfortunately, Nike just upped the ante with location-based customization. In other words, you order your shoes, and get them in 3 hours instead of six weeks.
Zulily - Zulily May Make IPO Paperwork Public This Week
(http://online.wsj.com/article/SB10001424052702304626104579121991440006828.html)
- "E-commerce site Zulily Inc. is planning to make public its plans for an initial public offering this week, people familiar with the matter said…"
- "The company, founded in 2009, sells children's and women's clothing and counts at least 10 million customers, the company has said previously. It closed an $85 million funding round in November of last year, which gave it a valuation of $1 billion, up from $700 million about a year earlier."
- "At the time of the last fundraising last year, Zulily Chief Executive Darrell Cavens said the company was nearing $500 million in annual revenue, though he declined to say if it was profitable. The company may be on a pace now for $650 million in annual sales, one of the people said."
- "Zulily specializes in so-called flash sales, which are products for sale for a short period, often at a deep discount. It competes with other flash sales sites like Gilt Groupe…"
CFR, YOOX - Net-a-porter Group Said to Be on the Block
- "Could Net-a-porter Group be on the block once again, a little more than three years after Compagnie Financière Richemont purchased it?"
- "On Wednesday, Yoox.com denied it was in talks with Richemont about a merger with, or acquisition of, Net-a-porter. It was seeking to quash reports in the Italian press that a deal was in the works."
- "Federico Marchetti, the founder and chief executive officer of Yoox...told WWD on Wednesday: 'Yoox is a global brand and as such it obviously grows not only through internal lines, but it often examines dossiers about possible acquisitions. As I have already said, at the moment there are no negotiations taking place with Richemont.'"
INDUSTRY NEWS
Mobile Advertising Begins to Take Off
(http://online.wsj.com/news/articles/SB10001424052702304066404579125292312208918?mod=ITP_pageone_0)
- "...Spending on mobile advertising more than doubled in the first half of the year. Mobile-ad spending in the U.S. totaled $3 billion in the first half, up from $1.2 billion a year earlier, the Interactive Advertising Bureau estimates."
Bangladesh garment exports swell 24% in Q1 FY’14
(http://www.fibre2fashion.com/news/apparel-news/newsdetails.aspx?news_id=153707)
- "From July to September 2013, knitwear exports earned US$ 3.160 billion for Bangladesh, showing an increase of 24.43 percent over exports of US$ 2.539 billion made during the corresponding period of 2012-13, the data showed."
- "Bangladesh’s woven garment exports stood at US$ 3.043 billion during the first quarter, registering a rise of 23.89 percent compared to exports worth US$ 2.456 billion made during the same period last fiscal."
Burned down Aswad garment factory slipped through new safety net
(http://www.theguardian.com/world/2013/oct/09/bangladesh-aswad-factory-safety-net)
- "A Bangladeshi garment factory, where at least seven workers died and more than 50 were injured in a fire on Tuesday, slipped through the net of international safety deals despite making fabric used by brands such as H&M, George at Asda, Primark, Next and Morrisons."
- "The Aswad Composite Mills factory, in Gazipur, outside Dhaka, was not one of almost 1,600 sites due to be inspected under the accord on fire and building safety because it was not a garment factory dealing directly with brands."
Bangladesh Garment Unit Fire Kills 9 Renewing Safety Fears
- "A fire at a garment factory on the outskirts of Bangladesh’s capital Dhaka killed at least nine people...Three out of five units housed at the Aswad Composite Mills Ltd. in Gazipur were damaged by the fire that broke out yesterday, police inspector Amir Hossain said in a telephone interview from the scene. Aswad has supplied goods to two Canadian companies, Loblaws Inc. that owns the Joe Fresh brand, and [HBC], according to shipping data provider ImportGenius.com."
China Golden Week Retail Sales Grow
- "The weeklong public holiday, which celebrates the anniversary of the foundation of the People’s Republic of China on Oct. 1, saw national retail spending rise 13.6 percent on the year to 870 billion yuan, or $142 billion at current exchange. That figure represents a slowdown from the 15 percent growth posted last year, but last year’s holiday period was a day longer than usual due to Golden Week coinciding with the Mid-Autumn Festival."
- "According to a report released Monday evening by China’s Ministry of Commerce, heavy discounting was largely responsible for the increase in holiday retail spending."
- "Ministry figures show clothing, shoes, jewelry, electronics and home appliances among the most popular items with local consumers."
Colliers: Fifth Avenue has highest retail rent, at $3,052 per square foot
(http://www.chainstoreage.com/article/colliers-fifth-avenue-has-highest-retail-rent-3052-square-foot)
- "…according to a new report from Colliers International. Fifth Avenue in Manhattan claimed the highest rent, at $3,052 per square foot, followed by Hong Kong’s Queen's Road Central ($2,086) and Canton Road, Tsim Sha Tsui ($1,993), London’s Old Bond Street ($1,520) and Manhattan’s Madison Avenue ($1,325)."
- "According to Collier’s 2013 Global Retail Highlights Report, popular retail destinations in major U.S. metro areas are seeing big increases in rents. In New York, rents on Fifth Avenue increased by 11% from the previous year. In Las Vegas, rents on the Boulevard increased by 25%. Philadelphia's Walnut Street had the fastest-rising rent, growing nearly 34% in the past year."
Vietnam Continues to Dominate TPP Debate; Footwear Tariffs Now the Issue
- "US tariffs on footwear imported from Vietnam have been in place since the 1960’s, in response to a seismic shift in sneaker production to Asia, a movement incentivized by low labor costs. The rationale behind the tariffs was that minimum wages and strict labor laws unduly disadvantaged US manufacturers, diminishing its competitiveness in relation to Vietnam."
- "...Vietnam is no longer an emerging economy with respect to footwear, now the number two manufacturer behind mammoth-maker China. Those tariffs still remain, though, and average about 10 percent, though in some circumstances they can hit much higher."
- "Nike...has forcefully argued during TPP discussions that the tariffs are thoroughly obsolete. According to Greg Rossiter, a spokesman for Nike, the exaggeratedly high tariffs punish US consumers who ultimately bear the brunt of inflated prices. 'The question is why high duties should be maintained at a high cost to U.S. consumers and businesses,' he said."
- "New Balance, a Boston-based footwear and apparel company, argues that the tariffs protect US manufacturers that would otherwise be unfairly hamstrung by the starkly different labor regulations in Vietnam. Matt LaBretton, a spokesman for New Balance, stressed that the tariffs were indispensable instruments in allowing their sizable operations in Vietnam to continue there."