EVENTS TO WATCH OVER THE NEXT 24 HOURS
KORS - Earnings Call: Tuesday 11/5 8:00 am
CVS - Earnings Call: Tuesday 11/5 8:30 am
COMPANY NEWS
WMT - Walmart kicks off online holiday deals early
(http://www.chainstoreage.com/article/walmart-kicks-online-holiday-deals-early)
- "Walmart on Friday kicked off its online holiday deals, a month earlier than usual, and announced that it is offering free shipping on about 99% of its online items this year for orders over $50. (Last year, only about 15% of its assortment qualified for free shipping)."
- "The chain’s online sales event on November 1 features some 300 early-bird specials and includes items from JVC 42-inch LED televisions for $299 to Xelio 10.1-inch tablets for $49. According to the retailer, those are Walmart.com's lowest prices in those categories."
Takeaway: WMT and JCP are going to emerge as the two most heavily promotional retailers this holiday. The difference with JCP is that it can discount product heavily and still print a big margin improvement versus a disastrous 2012.
M - The World of Oscar de la Renta Comes to Bloomingdale's
- "The 'world of Oscar de la Renta' is located at 772 Madison Avenue, the designer’s flagship. Now a version of the breadth of offerings can be found in a new leased department at Bloomingdale’s 59th Street flagship."
- "The 1,000-square-foot space, which bowed Friday, is de la Renta’s first leased department in the U.S. and marks the first time in more than 20 years that the designer’s ready-to-wear is available at Bloomingdale’s."
Takeaway: The fact that de la Renta is moving into Bloomie's is hardly notable, but the fact that it is a leased space definitely is. We're a fan of this model for M (which it does to a large extent in Bloomingdale's). It leaves upside on the table, but it guarantees no downside. And let's face it, there's rarely much upside anyway.
WWW - Wolverine Appoints New VP and General Manager of Sebago
(http://www.sportsonesource.com/news/article_home.asp?Prod=1§ion=1&id=48590)
- "Wolverine Worldwide announced the appointment of Frank Annunziata to the position of vice president and General Manager of Sebago with responsibility for the further development of the brand's global growth platform of footwear, apparel and accessories. Annunziata most recently served as senior vice president – sales for the Clarks Footwear Company."
Takeaway: Sebago is a brand we almost never hear about, but it has a strong competitive positioning in its category. And with the addition of Sperry to the portfolio, it allows the WWW sales force and distribution network to sell complimentary brands into each other's customer base.
WWW - Wolverine Worldwide Names Ira P. Hernowitz President Of Stride Rite Children's Group
- "Wolverine Worldwide today announced the appointment of Ira P. Hernowitz as President of the Stride Rite Children's Group."
- "He most recently served as Executive Vice President of "R" Us Brands for Toys R Us, Inc."
Takeaway: This is the second executive appointment in two days for WWW’s brands – that’s not unusual. But what is unusual is that both executives are external hires. While the talent pool is certainly greater outside of WWW’s walls, we’re not crazy about what this tells the broader employee base about where it is looking to source its talent.
BBY - Fear of 'Showrooming' Fades
- "'A year ago, people said that showrooming would kill Best Buy,' Mr. Joly said in an interview. 'I think that Best Buy has killed showrooming.'"
- "Best Buy last year estimated that one in five of the nearly 600 million people who visited its stores did so with the intention of making the purchase online, though a spokesman for the company said its price-matching pledge has likely changed that math since then."
- "Promoting Best Buy as a showroom comes after the chain put in place a permanent price-matching plan to prevent online rivals from undercutting its prices. Analysts estimate that less than 10% of shoppers take advantage of Best Buy's price-match offer, but executives have said the pledge is enough to keep the company from losing customers to sticker shock."
Takeaway: Sounds like BBY is declaring victory before the battle has even begun. Perhaps what they're saying is that they overestimated the showrooming threat initially. But make no mistake, this is a huge problem that they'll have to face for a long time.
TCS - Container Store Cleans Up After IPO Party
(http://www.businessweek.com/articles/2013-11-01/container-store-cleans-up-after-ipo-party)
- "In the company’s first day trading on public markets this morning, its share price has already doubled. Container Store packaged its IPO late yesterday, selling 12.5 million shares for $18 each, the high-end of its expected range. The deal valued the retailer at $828 million, slightly more than its $707 million in sales last year."
Takeaway: While banker's always want strong demand for an IPO, this one is just embarrassing. We'd love to have heard how they explained to the company that its underestimation of interest by investors cost them 100%. In the meantime, investors were the big winners -- at least those who managed to get some stock.
BBG - Billabong Sells West 49 Chain to YM
- "...Australian surfwear manufacturer Billabong International Ltd said Monday that it has sold its Canadian retail chain West 49 to Toronto-based YM Inc for approximately 9 to 11 million Canadian dollars, or $8.63 to 11 million at current exchange."
- "Billabong said it has also signed an approximately 34 million Canadian dollar ($33 million) non-exclusive wholesale supply agreement with YM for the next two years. Billabong will retain six Billabong stores and two Element stores in Canada."
- "Billabong also said that it has already received $300 million of the $360 million loan Centerbridge Partners and Oaktree Capital Management are giving the Australian company. Billabong said it used the funds to repay the $294 million bridge loan it owes the Altamont Consortium."
Takeaway: Good strategy to buy an asset from a company whose equity has been cut by 99% over two years.
KORS - Michael Kors' Huge 'Likes' Tally Provides Flipside to Rocky Instagram Ads Debut
- "With Michael Kors taking the front-line lead as the first paid advertiser ever on the social-photos platform, Adweek earlier reported that the shrapnel was considerable as Instagram users were firing nasty complaints at the brand."
- "That still appears to be the case, although it's probably slowed down as people around the nation begin to attend to their weekend plans. Still, over the last few hours, conversely, Michael Kors' "likes" for the ad have exploded, exceeding 150,000 at press time."
- "Based on our editorial team's research, the retailer's "likes" high in recent weeks on the platform was 85,000, while averaging about 50,000 per post. So while whatever Michael Kors is paying the Facebook-owned app for the engagement, the fashion marketer looks to be getting all kinds of bang for its buck."
- "...coming soon are promos from adidas, Ben & Jerry's, Burberry, General Electric, Levi's, Lexus, Macy's, PayPal and Starwood."
VERSACE - Versace family stake goes to beauty parade
- "The Versace family has…[invited] private equity investors to make a second round of competitive bids at the end of this month."
- "The bidders for 20 to 30 per cent of Versace include former Gucci owner Investcorp, the Bahrain-based investment firm, as well as fund manager Blackstone and London-based Permira, the private equity group that owns Hugo Boss and sold Valentino last year, people with knowledge of the talks said. They also include the Italian strategic fund FSI and Paris-based group Ardian."
- "Offers for what is one of the last independent Italian luxury brands were expected to exceed €850m, or more than 12 times the level of earnings before interest, tax, depreciation and amortization."
Takeaway: 12x EBITDA actually isn't that big of a multiple for a brand with the allure of Versace.
DTLR - Retailer DTLR Holding (DTLR) Files for $75M IPO
(http://www.streetinsider.com/IPOs/Retailer+DTLR+Holding+(DTLR)+Files+for+$75M+IPO/8837115.html)
- "DTLR Holding, Inc. filed a registration with the U.S. Securities and Exchange commission for an Initial Public Offering of its Common Stock. The proposed maximum offering price is $75 million. The company plans to list on the Nasdaq Global Market under the ticker, DTLR."
- "Brief financial summary from the company: We have grown our store base from 68 at the end of fiscal 2009 to 95 stores currently. Our comparable store sales increased 4.3%, 7.3%, and 3.9% in fiscal 2010, fiscal 2011 and fiscal 2012, respectively. Our net sales increased from $135.0 million in fiscal 2009 to $181.5 million in fiscal 2012, representing a compound annual growth rate of 10.4%. Over the same period, our operating income increased from $7.5 million to $13.4 million, representing a compound annual growth rate of 21.4%."
- "DTLR Holding is a...lifestyle retailer of street-inspired footwear, apparel and accessories."
Takeaway: One of the smaller IPOs in recent memory. Primary concept is Down Town Locker Room (www.dtlr.com), which sells to urban youth. Products include Timberland, Reebok and Nike (in that order). For an urban retailer, there's a surprising lack of Air Force 1s and Jordan's.
ODP, OMX - Office Depot Merger With OfficeMax Wins U.S. Approval
(http://www.bloomberg.com/news/2013-11-01/office-depot-merger-with-officemax-wins-u-s-approval.html)
- "Office Depot Inc.’s purchase of OfficeMax Inc. won approval from U.S. antitrust regulators, clearing the way for the office-supply companies to create a single retailer to compete with Staples Inc."
- "The U.S. Federal Trade Commission voted to close its seven-month investigation into the merger, saying online retailing ensured competition in the retail market for office supplies, according to a statement today."
Takeaway: Perhaps with the exception of SHLD/KMRT, this might go down as the most defensive merger in retail history (we'd probably throw FD/May in there as well).
INDUSTRY NEWS
Global Retail Trends Show China Leading the Charge in Online, Mobile Shopping
- "Shoppers across the globe are increasingly comfortable purchasing through multiple channels, ranging from in-store to online or through a mobile device. IBM's annual survey of 26,000 consumers from 14 countries shows that shoppers in developing economies are beginning to favor the convenience and personalization provided by online and mobile shopping sites."
- "Chinese consumers, in particular, are showing a much higher inclination to shop online than their global counterparts. According to the survey, 31 percent of shoppers in China said that they made their last purchase online, compared to 14 percent worldwide."
Best of Kids': Holiday Hit List
- "As part of Footwear News’ comprehensive look at the children’s market, retailers across the country shared their predictions for the items that will fly off the shelves this holiday season, from party shoes to must-have gifts."
SPRONG CHILDREN'S SHOES, Atlanta
- Florsheim Kennett oxford
- Primigi Ginni ballet flat
- Hunter rainboots
LAURIE'S SHOES, St. Louis
- Naturino chukka boot
- Nina Kids Patches boot
- Toms crib shoes
HAWLEY LANE, Shelton, Conn.
- Merrell Jungle Moc
- Sam Edelman Fiona ballet flat
- Stride Rite Disney shoes
LITTLE FEET, Denver
- Kenneth Cole Reaction Driving Dime loafer
- Geox Piuma Ballerina
- Minnetonka moc slippers
U.S., EU Trade Talks Said 'Back on Track'
- "U.S.Trade Representative Michael Froman said Friday the transatlantic trade talks between the U.S. and European Union are “back on track” after the U.S. government shutdown stalled the negotiations and a widening imbroglio over reported U.S. spying on European political leaders raised questions about the deal’s prospects."
Dress Import Units Up, Dollars Down So Far This Year
(https://www.sourcingjournalonline.com/dress-import-units-dollars-year/)
- "After increasing 7% in 2012, total U.S. dress imports have declined by 1.9% so far in 2013."
- "Import data from the Office of Textiles and Apparel, or OTEXA, show that in the first eight months of 2013, imports of dresses dropped 1.9%, to a total value of $3.3 billion. Total units rose .6% to 455 million, causing the average cost per unit to drop 2.5% to $7.33."
- "China is by far the largest sources of U.S. dress imports, with over half the total dollar volume. So far this year, however, China has lost share of the dress market, primarily to Vietnam. Other rapidly growing trading partners in dresses are Cambodia, whose dresses are also the cheapest, and Italy, the most expensive. Dress imports from India have fallen by almost 14% so far this year."
