What's New Today in Retail (10/23)

Takeaway: Athletic sales still in good shape. AMZN takes up free-shipping minimum – risky bet. UA mgmt shuffle. MW buying Allen Edmonds = slam dunk.



SKX - Earnings Call: Wednesday 10/23 4:30 pm

CRI - Earnings Call: Thursday 10/24 8:30 am

UA - Earnings Call: Thursday 10/24 8:30 am




Takeaway: While not the gangbusters rebound we saw last week, we're looking at a still-respectable 4.2% growth rate in top line for the athletic footwear space last week. This syncs with the rebound we saw in the ICSC numbers yesterday. Still the Nike, Jordan and UnderArmour show.


What's New Today in Retail (10/23) - chart1 10 23

What's New Today in Retail (10/23) - chart2 10 23

What's New Today in Retail (10/23) - chart3 10 23

What's New Today in Retail (10/23) - chart4 10 23

What's New Today in Retail (10/23) - chart5 10 23




MW - Men's Wearhouse Interested in Allen Edmonds



  • "…[MW] is pursuing a possible purchase of dress-shoe maker Allen Edmonds Corp., according to people familiar with the matter…"
  • "It is unclear who else, if anyone, may be bidding for closely held Allen Edmonds, which could fetch a price in the low hundreds of millions of dollars, according to the people. A deal for the company, with Men's Wearhouse or someone else, could be reached next month, one of the people said."


Takeaway: This is absolutely perfectly in line with MW's push to elevate itself to become a house of higher-end men's brands. It also should add important context to why it thwarted JOSB's effort to acquire it -- simply put, MW thinks that it's worth more as a stand-alone company.


AMZN, EBAY - Amazon Raises Free-Shipping Minimum to $35; eBay to Expand Same-Day Delivery



  • "EBay...ramped up its rivalry with same-day delivery with an acquisition and plans to reach 25 markets by next year. Meanwhile, Amazon raised the minimum order size required for most U.S. customers to qualify for free shipping."
  • "Amazon's increase in the minimum purchase for free delivery seemed tied to an effort to push users to sign up for Amazon Prime, which offers two-day delivery for $79 a year. It raised the minimum to $35, from $25; Amazon said it was the first such change in over a decade. An Amazon spokesman declined additional comment."
  • "Even at $35, Amazon's threshold for free shipping is lower than several important rivals. Wal-Mart last week announced free shipping on online orders of $50 or more. Previously Wal-Mart had offered free shipping on select items or for individual promotions."
  • "Target...offers free shipping for orders of any size placed on that are paid for using the retailers store-branded credit or debit card. Otherwise, shoppers need to spend $50 on eligible items for free shipping."
  • "…Barnes & Noble...offers free shipping to customers who spend $25 or more. A spokesman declined to comment."


Takeaway: This is a bold move by AMZN -- one that needs to pay off. Simply put, AMZN needs to meaningfully boost its Prime customer base to offset the risk of being less competitive from a shipping perspective. Keep in mind that it's not just the fee associated with Prime, but rather Prime customers have an extremely high purchase rate because of 1) the ease of shopping via '1-click', and 2) the perception that shipping is free.


UA - Under Armour Names Kip Fulks President of Product and Henry Stafford President of North America 



  • "Kip Fulks has added president of product to his current responsibilities as chief operating officer, while Henry Stafford is now serving as president of North America."
  • "Further enhancing its senior executive team, Under Armour also announced the addition of Susie McCabe as senior vice president, global retail and Jason LaRose as senior vice president, global e-commerce."
  • "McCabe's extensive management experience includes over 16 years with Ralph Lauren Corporation... In her new role,  McCabe will be responsible for Under Armour's brand house and factory house stores across the US and for the company's global retail strategy."
  • "LaRose joins Under Armour from Express, where he served as senior vice president of e-commerce….LaRose will oversee the global standard for all online consumer experiences and will be responsible for driving web business and strategies to further connect with the brand's core consumer."


Takeaway: Interesting how soon this comes so soon after Nike's realignment. Nonetheless, Fulks has proved to be competent on many levels -- though we hope he's not being spread thin as COO and President of Product. Each of them is a full time job.


NKE - Nike unveils hyper elite basketball crew socks



  • "Featuring specialized cushioning that responds to on-court movements, the Nike Hyper Elite Basketball Crew Socks deliver excellent impact protection. Dri-FIT fabric wicks sweat away and moves it to the fabric surface helping to keep feet dry and maintain a snug fit during play."


What's New Today in Retail (10/23) - chart6 10 23


Takeaway: Seemingly a rounding error -- but keep in mind that Nike used to sell plain white socks that topped out at around $10 per pair. Now they're selling them at $20 and higher.


WMT, GPS - Wal-Mart, Gap Press for Safety in Bangladesh



  • "A group representing two dozen North American retailers including [WMT] and [GPS] released a list of more than 620 factories that they use in Bangladesh, a move geared toward making its supply chain more transparent and improving working conditions in the South Asian country's garment industry."
  • "Those factories employ about 1.1 million workers, or about a quarter of the country's garment workers, according to the Alliance for Bangladesh Worker Safety, the retail group."
  • "Ellen Tauscher, a former California congresswoman who chairs the group's board of directors, said the group wants to send a message to Bangladesh factories that they won't get business from the U.S. if they 'remain in the shadows and don't adhere to the kinds of standards that are going to create a safe workplace.'"


Takeaway: Don't shoot the messenger here, but the reality is that this is mostly PR posturing for both GPS and WMT. The reality is that when push comes to shove, they won't foot the bill for the changes that they demand. They want safer conditions, but they want the factory to pay for it. If the factory owners don't write the check, then workers will continue to function in extremely unsafe facilities.



Deloitte predicts bright holiday shopping season for retailers



  • "Deloitte's 28th annual survey of holiday spending intentions and trends indicates shoppers surveyed plan to spend an average of $421 on holiday gifts this year, up from $386 last year. They also expect to buy an average of 12.9 gifts, ending a five-year decline in the number of gifts they plan to purchase."
  • "Nearly half (47%) of consumers plan to purchase items online, followed by 44% at discount/value stores. More than three-quarters (76%) of consumers cite convenience as a reason for shopping online, followed by price (63%)."

Takeaway: Maybe this survey has been directionally accurate in the past, but a 9% boost in per capita spending? Not gonna happen.

Getting Embarrassed

This note was originally published at 8am on October 09, 2013 for Hedgeye subscribers.

“You get embarrassed as a professional athlete.  There has to be accountability in our room.  That’s not acceptable.  Not even close.”

- Shane Doan


Last night I trekked out to the dilapidated Nassau Coliseum with a few colleagues to watch a National Hockey League game between the New York Islanders and the Phoenix Coyotes.  We worked to put a group together to buy the Coyotes and now own a piece of the team, so we had a bit of an emotional investment in the game.


The end result was a 6 – 1 trouncing of the Coyotes by the Islanders.   For those that play sports or are fans of sports teams, you will be, on some level, accustomed to losing.  It happens. It is part of the game.  But Coyotes’ Captain Shane Doan’s point from above is adroit  - if you lose you also have to be accountable.   No doubt old school Coyotes Coach Dave Tippet made sure of that in the locker room last night after the game.


Given the current dysfunction in Washington, the one thing that we can all smile about this morning is that the Founding Fathers actually built a high level of accountability into the system.  This is particularly true in the House of Representatives where elections occur every two years.  But how does this all end? Who gets held accountable? And when can we go back to focusing on research and not the soap opera of Washington D.C.?


In terms of the first question, this probably all ends with a whimper, rather than a bang, despite the manic intimations of the media or fear mongering politicians. Keith and I did a short clip on HedgeyeTV (yes, the crazy lads at Hedgeye built their own T.V. studio!) and if the credit default swaps of U.S. government debt are telling us anything, it is that there is no imminent risk of a credit default.


In the Chart of the Day, we highlight a more interesting trend related to U.S. creditworthiness, which is the long-term federal deficit-to-GDP chart.  The key takeaway from this chart is that the creditworthiness of the U.S. has actually been improving over the last three years based on this key metric.  (Incidentally, it shouldn’t surprise anyone that the lagging indicators called rating agencies downgraded U.S. debt basically at the bottom.)


Last week, we brought in former Speaker of the House Newt Gingrich to discuss how the government shutdown is likely to play out.  To summarize his view; it was that the Republicans push through some small reforms on the Affordable Care Act and likely come to some agreement on future tax reform or discretionary spending cuts with the White House.  Speaker Boehner’s rhetoric has shifted from focusing on Obamacare, to focusing on the idea of a negotiation, which certainly underscores this point.


Our Healthcare team is currently doing a poll that is asking people the simple question: “How will the government shutdown end?”  So far the results are as following:


- 2% - Shutdown ends, debt ceiling raised, Democrats make massive concessions

- 48% - Shutdown ends, debt ceiling raised, Republicans get very little in return

- 18% - Shutdown ends, debt ceiling raised, on concessions either side

- 18% - Shutdown continues, debt ceiling raised, on concessions either side

- 15% - Shutdown continues, debt ceiling raised, and the World Ends


So, there you have it.  Almost half of those polled agree that the likely outcome is that the shutdown is ended and debt ceiling is raised, but the Republicans get very little for their actions. 


The more interesting point is that almost 15% believe that the world could end (i.e. the U.S. has some form of a default).  So, if you are wondering why there is volatility in the markets currently, it is because of this not so small minority that are pricing in the end of the proverbial world trade.  In all likelihood, though, there is some form of resolution before the Oct. 17th deadline.


Incidentally, if you’d like to take the poll it can be found here:


Shifting from policy makers to monetary policy, the writing appears to be on the wall this morning that President Obama intends to nominate Janet Yellen as the next chair of the Federal Reserve.  In the coming days, there will be many assessments of Yellen, but I thought this one from Justin Wolfers, an economist at the University of Maryland and friend of Yellen’s, was particularly interesting:


“If Yellen had been in charge of the Fed over the past few years, millions fewer would be jobless, and we would be less concerned about the danger of deflation. The point is that Yellen’s pragmatic reading of the macroeconomic tea leaves has led her to avoid the errors of her theory-bound colleagues who have seen the threat of inflation around every corner. Both hawks and doves should applaud this appointment.”


Translation: according to Wolfers, Yellen is a miracle worker.


The reality is that is not really her broad reputation among stock market operators.  Or those of us that operate in the real economy.  The great Julian Robertson of Tiger Management fame, and likely a proxy for what many astute money managers think, said on CNBC earlier this week that Yellen is, “way too easy money.” 


The broader implication of more easy money is a weaker dollar and a deceleration of economic growth.  Whether it be the yield spread compressing, short term treasuries nearing the zero bound, or oil breaking out to the upside, the implications of more, and perhaps accelerated easy money, is ultimately slower growth.  If that is the path our policy makers go down, it will be more embarrassing than just losing some hockey game.


Our immediate-term Risk Ranges are now as follows:


UST 10yr Yield 2.60-2.67%

SPX 1651-1663

VIX 18.98-20.64

USD 79.74-80.61

Brent 109.02-110.46

Gold 1291-1333


Keep your head up and stick on the ice,


Daryl G. Jones

Director of Research


Getting Embarrassed  - Deficit COD


Getting Embarrassed  - vp10 9

October 23, 2013

October 23, 2013 - Slide1



October 23, 2013 - Slide2

October 23, 2013 - Slide3

October 23, 2013 - Slide4

October 23, 2013 - Slide5



October 23, 2013 - Slide6

October 23, 2013 - Slide7

October 23, 2013 - Slide8

October 23, 2013 - Slide9

October 23, 2013 - Slide10

October 23, 2013 - Slide11

October 23, 2013 - Slide12


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Breaking Bad

“Someone has to protect this family from the man who protects his family.”

-Skyler White


Who is Bernanke’s family? Who is Ben Bernanke? Who is John Galt? The People getting jammed with a trashed currency and 0% rate of return on their savings accounts want to know, “yo.” And they want to know now.


Yesterday’s all-time highs in the US stock market put a bloody pit in my stomach. I will not mince words about that and why this morning. Standing up to the tyranny of an un-elected-anti-dog-eat-dog-government-man is my Canadian-American patriotic duty.


Ben, seriously. If you aren’t going to taper, ever, why? Who do you represent? Is it the people in the business of being long bonds? Or is it the government that appointed you to lead this ongoing fear-mongering campaign? Both of our leading indicators on US #GrowthAccelerating (#StrongDollar + #RatesRising) are breaking bad, again. This one is all on you.


Back to the Global Macro Grind


“You clearly don’t know who you are talking to, so let me clue you in. I am not in danger, Skyler. I am the danger. A guy opens his door and gets shot, and you think that of me? No! I am the one who knocks!” –Walter White


That’s right Bernanke, I’m the one knocking. And it’s going to get louder if you keep this up. You can cart out everyone from PIMCO to Zervos at Jefferies to parrot whatever you think you are accomplishing here. I don’t buy it. You’re suspect.


I respect David Zervos’ penmanship and market views, so let’s break down why I think this could break bad versus what he thinks. We are two of the only consistent US stock market bulls of 2013 who have been bullish for completely different reasons:

  1. ZERVOS  - he thinks US stocks up in 2013 is all about QE and that we cannot afford to taper as that would end it all
  2. MUCKER – I think the most important part of the 2013 rally was on expectations of ending QE; not tapering is a disaster

Bernanke and the entire levered long bond bull lobby agree with Zervos. And I actually have no idea who agrees with me, which is probably why our call on US #GrowthAccelerating from 0.38% in Q412 to 2.5% now was the only one of its ilk. Our growth model called US #GrowthSlowing in October 2007 too. US Dollar Devaluation back then was my leading indicator.


So which one is it?


Oh, by the way, all of US economic and market history agrees with my view that:


1.       Strengthening currency + Rising Interest Rates = Pro-Growth Signals

2.       Devalued currency + Falling Interest Rates = #GrowthSlowing signals


In buckets of time, you only have to look past your nose and go beyond the #EOW (end of the world) stuff (2008) and look at the last 40 years of US economic history to understand my point. Both Reagan and Clinton understood this. Nixon/Carter (1970s) and Bush/Obama (last decade) did not. Markets can go up when growth slows; especially slow-growth styles like Gold and Bonds.


For those of you who think “the stock market going up reflects the economy, so Bernanke is nailing it”, I’ll remind you that’s a crock. Venezuela devalued its currency by 32% this year; its stock market is +312%; and its economy sucks – a Policy to Inflate via currency debauchery is not growth. It’s called inflation.


From Nero (50 AD) to 1920s Germany to whatever Chavez left in Venezuela, do not get me wrong, Zervos is quite right that keeping your government stimulated with a meth market can take you for quite a ride, yo! But, again, do not confuse the kind of move we saw yesterday with the one we saw before Bernanke decided not to taper on September 18th.


Rewinding the tapes, here’s what happened yesterday:

  1. US monthly payroll number missed by enough to validate Bernanke’s bs storytelling that we don’t need to taper
  2. US Dollar got smoked to a fresh YTD low
  3. US Treasury Yields snapped my 2.58% TREND line on the 10yr
  4. Gold ripped
  5. Slow growth sectors like Utilities (XLU) had triple the intraday move of the SP500

Is that what you want, yo? Another epic 2007 style US stock market bubble? If you do, we can go right back to reflating the Housing, Gold, Bond, Utility, Foreign Currency, etc. Bubbles. Kinder Morgan can trade at 85x earnings on that too. Rock on, yo.


So what do you want? As my man Walter White would say, “you all know exactly who I am. Say my name.” That’s right. I’m the guy who believes in fiscal conservatism, monetary tapering, a strong currency, and rising interest rates. “Now say my name.”


I’m the guy who went to net short yesterday (6 LONGS, 9 SHORTS in #RealTimeAlerts) and 54% Cash. Timestamped, yo. He’s Heisenberg. I’m going to roll with him, book gains, and protect my family and firm’s hard earned savings.


UST 10yr Yield 2.47-2.58%


VIX 11.55-14.96

USD 79.02-80.12

Euro 1.36-1.38

Gold 1


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Breaking Bad - Chart of the Day


Breaking Bad - Virtual Portfolio






Hollywood Roosevelt from Los Angeles is making Macau its Asian debut with an investment of two billion patacas to build a 373-room 1950s Hollywood-themed hotel next to the Macau Jockey Club in Taipa.  The hotel is slated to be operational between the middle and the end of 2015.  The CEO of the hotel’s management company GCP Hospitality, Christophe Vielle, said that the developer, Yoho Group would like to have a casino in the hotel.  The Gaming Inspection and Coordination Bureau has received no application to run a casino there.



The construction for “Paradise City,’’ which will be a 15-minute walk away from Incheon Airport, will begin in April 2014, according to Choi Jong-hwan, CEO of Paradise Sega Sammy.  “We expect the main customers of the casino to be from China.  The hotel at Paradise City will accommodate 700 rooms and will be equipped with state-of-the-art business facilities and large-scale convention venues. The resort will also cater to leisure travelers, with theaters, shopping centers, spas and other facilities.

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.