What's New Today in Retail (10/22)

Takeaway: Sales finally pick up. Adi takes a swing at NKE w new sportswatch. Reebok sucking wind. KSS joins M/JCP on Thanksgiving. Labor costs rise.

EVENTS TO WATCH OVER THE NEXT 24 HOURS

 

TJX - Investor Meeting: Tuesday 10/22 1:30 pm

 

ECONOMIC DATA

 

ICSC - Chain Store Sales Index

 

Takeaway:  This is the first time in over a month we saw the growth in sales (per ICSC) come in ahead of last year. Not hugely so, but we'll take it.

 

What's New Today in Retail (10/22) - chart1 10 22

What's New Today in Retail (10/22) - chart2 10 22

 

COMPANY NEWS

 

JCP - Martha Stewart Revises J.C. Penney Deal

(http://www.wwd.com/business-news/legal/martha-stewart-revises-jc-penney-deal-7239883?module=hp-topstories)

 

  • "The new agreement essentially reverses the bulk of the Penney’s-MSLO deal. Now it features a more focused range of product categories over a shorter period of time, through June 30, 2017, versus the original deal, which would have expired in 2021."
  • "Neither MSLO nor Penney’s would provide further details of the financial terms of the deal, but they said Penney’s would sell through any unbranded product at issue in the Macy’s case and that it would not manufacture any more."
  • "Under the new deal, MSLO will continue to design Martha Stewart branded products for Penney’s in the following categories: window treatments and hardware, lighting, rugs, holiday and celebrations. These categories were not disputed in the Macy’s lawsuit."
  • "MSLO will receive design fees, guaranteed minimum royalties and the 11 million shares of MSLO Class A common stock that Penney’s currently owns. Additionally, Penney’s will no longer have representation on MSLO’s board. Penney’s paid $38.5 million for the MSLO shares."

 

Takeaway: This is a CYA move for MSLO. Judge Oing was going to squash the JCP arrangement if nobody got off their tail and proactively found a solution on their own. This solution is actually an upgrade for JCP, as we had previously assumed that its Martha product went to zero.

 

ADS - Adidas Creates New U.S. Model, Becker Exits Reebok

(http://www.wwd.com/footwear-news/business/adidas-creates-new-us-model-becker-exits-reebok-7239500?module=Footwear%20News-hero)

 

  • "Patrik Nilsson, currently head of Adidas North America, will head up a joint group that covers Adidas North America and Reebok. He also will take on global responsibility for the Reebok-CCM Hockey brand." 
  • "Uli Becker, president of Reebok North America, has decided to leave the company. The changes are effective immediately."

 

Takeaway: Translation = Reebok is still sucking wind, and it needs to be 're-German-engineered'.

 

ADS - Adidas Arms Up for Smartwatch Wars

(http://blogs.wsj.com/digits/2013/10/21/adidas-joins-smartwatch-fray-with-micoach/)

 

  • "The Adidas watch will retail for $399 when it becomes available on Nov. 1. It includes GPS tracking technology, wrist-based heart monitoring, a Bluetooth-enabled music player, and use of Adidas’ live coaching service, miCoach."
  • "Mr. Gaudio said the watch was developed for runners who don’t like the idea of bringing along their phone on runs, and who use that time to disconnect. Two key features of the watch are, in fact, components it doesn’t have: Unlike gadgets offered by Samsung and Nike which work in conjunction with smartphones, the miCoach Smart Run functions as a standalone product. Further, its heart rate monitoring is conducted on the wrist, eliminating the need for a traditional separate chest strap."

 

What's New Today in Retail (10/22) - chart3 10 22

 

Takeaway: Nike currently has its Nike+ Sportswatch that it built 2-years ago in conjunction with TomTom. It has GPS, tracks cadence, laps, splits and has a solid alarm. All of that said, this Adidas watch appears to blow it out of the water. That said, Nike's sells for $169, and Adidas is $399.  On a relative value basis, Nike still might come out ahead.  Either way, expect NKE to up the ante on its product to beat Adidas -- and it will likely do so at the same sub $200 price.

 

TJX - TJX to Boost Store Outlook

(http://www.wwd.com/business-news/financial/tjx-to-boost-store-outlook-7240194?module=hp-retail)

 

  • "The off-price giant boosted its earnings outlook and said it would raise its estimates for long-term store growth at an investor meeting Tuesday."
  • "TJX said its sales and profit margins so far this quarter were strong and raised its adjusted earnings estimates to 73 cents to 74 cents a diluted share — up from the 69 cents to 72 cents projected this summer. Comparable-store sales are slated to rise 4 percent."
  • "For the full year, TJX is now projecting adjusted earnings of $2.78 to $2.82 a diluted share, up from an adjusted $2.47 in 2012."

 

Takeaway: Nice, but nothing that people were not expecting ahead of the company's analyst meeting -- which is being held today.

 

KSS - Kohl’s to open 8 p.m. Thanksgiving; digital efforts include Santa photo op

(http://www.chainstoreage.com/article/kohl%E2%80%99s-open-8-pm-thanksgiving-digital-efforts-include-santa-photo-op)

 

  • "...Kohl’s Department Stores announced it will open its doors at 8 p.m. on Thanksgiving Day,  kicking off its Black Friday event earlier than ever."
  • "Stores will be open for 28 hours straight – from 8 p.m. Thursday, Nov. 28 through midnight Friday nationwide."
  • "The retailer is also offering a digital variation on the photos with Santa tradition.  Starting in November, shoppers can skip the long lines to visit Santa at the mall by taking a photo at Kohl’s Snapshots with Santa in-store photo opportunity in Kohl’s stores nationwide."

 

Takeaway: KSS matches store hours at Macy's -- a day after JC Penney did the same. We still think this is a risky move. The number of people that will shop on Thanksgiving is unknown, and the costs of manning the stores will be immense (late night and on a holiday equals double time at least).

 

KER - Kering ready to inject 300 mln eur in La Redoute

(http://www.reuters.com/article/2013/10/21/kering-laredoute-idUSWEB00C5Y20131021)

 

  • "...Kering is ready to inject at least 300 million euros ($411 million) into its La Redoute unit as part of efforts to find a buyer for the loss-making mail order business, two sources close to the matter said."
  • "Three potential purchasers have requested further information about La Redoute, though Kering has not yet received any firm offer, the sources told Reuters on condition of anonymity."
  • "La Redoute is the last of Kering's retail businesses, which it has been shedding to focus on luxury goods and sportswear. Its exit from the retail industry began with the disposal of department store Printemps in 2006."

 

INDUSTRY NEWS

 

Bangladesh Minimum Wage Dispute Finally Nears Resolution

(https://www.sourcingjournalonline.com/bangladesh-minimum-wage-dispute-finally-nears-resolution-ik/)

 

  • "After repeatedly halted negotiations, workers and factory owners in Bangladesh seem to be finally arriving at a negotiated compromise over wages. It looks like the minimum wage will be set at Tk 5,000 per month, significantly lower than the workers’ original demand for Tk 8,114 but much better than the owners’ first offer at Tk 3,600."

 

Takeaway: This is a win for labor, and a loss for everyone else. Someone's going to have to pay for the increased cost -- either manufacturers, brands, retailers, or consumers. Manufacturers will bear at least half. The remainder will be split by brands and retailers. Consumers won't see a penny.

 

Swiss Watch Exports Rise 8.5%

(http://www.wwd.com/accessories-news/watches/swiss-watch-exports-rise-85-7240975?module=hp-topstories)

 

  • "Swiss watch exports rose 8.5 percent in September, their highest monthly increase since January, helped by favorable calendar and base effects, the Federation of the Swiss Watch Industry reported."
  • "Foreign sales of Swiss timepieces totaled 1.9 billion Swiss francs, or $2.06 billion at average exchange rates for the period…"
  • "While China continued to lose ground with a decline of 3 percent, Hong Kong and the United States confirmed recent signs of recovery with increases of 10 percent and 17.4 percent respectively. Germany posted a rise of 8.7 percent and Japan was up 9.2 percent, but Italy recorded a 1.4 percent decrease."

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more