EVENTS TO WATCH
Hedgeye Black Friday Consumer Survey: Focus on JCP. We'll be conducting a follow-up to our prior consumer survey (which helped us call a JCP beat and KSS miss) following Black Friday weekend and Cyber Monday. We'll have results next week, and will have an updated presentation accordingly. If you are interested in our results, please email email@example.com, or .
FIVE - Earnings Call: Thursday (12/5) 4:30 pm
ZUMZ - Earnings Call: Thursday (12/5) 5:00 pm
ULTA - Earnings Call: Thursday (12/5) 5:00 pm
Athletic Apparel Data
Takeaway: This week is meaningless due to the holiday being off by a week compared to last year's calendar. But market share data is still relevant. The big winner from our perspective is UnderArmour, which gained over 2 full points of market share for the week. Nike did well, but let's face it…it needs to gain 1-2 points pf share simply to hit its stated financial goals.
KSS - Kohl’s Stores Open Around the Clock for First Time Ever from December 20 through Christmas Eve
- "Kohl’s Department Stores today announced that for the first time ever, it will keep its doors open for more than 100 hours straight – beginning at 6 a.m. on Friday, Dec. 20 through 6 p.m. on Christmas Eve, Tuesday, Dec. 24."
Takeaway: Only one reason Kohl's opens 24/7 for 5 days. It's simply sitting on too much inventory. Good luck to them in having to pay 1.5-2x wages to the employees working in each of Kohl's 1,158 stores. KSS has been -- and remains -- one of our top shorts.
FNP - Kate Spade Saturday Opens in SoHo
- "The retailer’s first Manhattan store, a 1,500-square-foot unit at 152 Spring Street, stands out like a giant canary with its storefront painted the brand’s trademark bright yellow."
- "While the company is opening stores slowly and deliberately for now, Kyle Andrew, senior vice president and brand director, said Kate Spade Saturday could surpass the store count of its sister brand, Kate Spade New York, which boasts 80 units in the U.S. and 100 overseas."
- "...at John F. Kennedy International Airport, there’s a shock of yellow in the middle of Terminal 5, JetBlue’s hub...Both the store and airport pop-up play on Kate Spade Saturday’s tech-infused concept. The store has a semicircular bar with a charging station, iPads and a customization tool for personalizing Weekender bags."
- "The SoHo store is Kate Spade Saturday’s second in the U.S. after a Houston unit. There’s a pop-up on Gansevoort Street in the Meatpacking District and one in Los Angeles. The brand also has six units in Japan and a store in Singapore."
- "Products universally appeal to consumers across cultures and climates. 'Our bestsellers here are our bestsellers in Japan and Singapore,' Andrew said. 'The Weekender bag is a universal favorite. The slip-neck T is universally loved. Shoes and dresses have been great and anything in our black-and-white-striped logo pattern is popular.'”
Takeaway: KS Saturday has been in test mode for a while now, and is just starting to roll out permanent doors in the US. If the concept is able to capture some momentum we may take up our sq. ft. estimates, which are already the highest on the Street. The key thing we need to keep in mind is that sales productivity at KS Saturday (we can't call it KSS for obvious reasons) is not yet proven, and our sense is that it will max out about a third below KSNY. As store addition numbers go up, we may take aggregate productivity numbers down. Margins should still march higher from 12% today to 22% over 3-years.
- Here are the SIGMA charts for 2 companies that just printed 3Q earnings -- both of whom missed comp expectations, but beat the quarter by a few pennies.
DG - Q313 Earnings
DG: The Street likes what it sees in DG, and for the most part, so do we -- despite our bearish long-term view on the business. The SIGMA move is pointed toward the upper left, indicating that inventories are getting better on the margin. We don't see a lot of that these days.
GES - Q314 Earnings
GES: This company can't get out of its own way. Comping down 5%? U-G-L-Y. SIGMA showed slight erosion in inventory/sales. But the big factor is the 225bp erosion in margins. Most notable is the fact that the company has been over inventoried for 8-quarters now -- and still can't figure out the formula as to how to comp consistently and grow margins. It has issues…we'd avoid it.
DKS - Dick's Sporting Goods Opens NHL Super Shops
- "Dick's Sporting Goods and the National Hockey League have teamed up to open NHL Super Shops in three hockey-crazed cities around the country."
- "The shops, which measure about 400 square feet, were installed in Lombard, Ill., near Chicago; Cranberry, Pa., near Pittsburgh, and West Nyack, N.Y., in the suburbs of New York City, in time for Black Friday. If the shops are successful, the concept is expected to be rolled out further for next year."
Takeaway: We like hockey at Hedgeye, but we highly doubt this will help DKS comp. At least they picked three of the best hockey markets in the US -- though (sadly) that's not saying much. Our own biases aside, aren't there other sports the company could focus on that are more relevant to the US Consumer?
COST - Costco Wholesale Corporation Reports First Quarter Fiscal Year 2014 and November Sales Results
- "Costco Wholesale Corporation today reported net sales of $8.78 billion for the month of November, the four weeks ended December 1, 2013, an increase of five percent from $8.40 billion during the similar four-week period last year."
- "For the thirteen weeks ended December 1, 2013, the Company reported net sales of $26.80 billion, an increase of six percent from $25.40 billion during the similar period last year."
Takeaway: COST isn't really a 'Black Friday' play. But even still, it didn't exactly knock the cover off the ball last month. The saving grace is that Gas crushed the Int'l comp -- 1% including gas, and 6% excluding gas and fx. That doesn't change the total sales figure that the company reports at the end of the quarter. But it gives some explanation about why sales were so weak.
AMZN - Lush Cosmetics in Legal Tangle With Amazon
- "Lush Cosmetics has entered into a legal dispute with Amazon in the U.K. over trademark infringement. In a case that was heard in the U.K.’s high court last week, Lush argued that Amazon is buying advertising words related to Lush in order to drive traffic to Amazon’s site, which does not sell Lush products."
- "Lush also said that when customers search for Lush’s products on Amazon’s U.K. site, they’re shown competitors’ products."
- "The court is expected to release its verdict early next year. Amazon in the U.K. did not respond to requests for comment."
Takeaway: This shouldn't have any major implications, but we're interested to see how this plays out. We wonder why Luch isn't doing business with Amazon in the first place. The risk for AMZN is if Lush can prove that it has made its best good-faith effort to kick start the partnership, and yet AMZN went ahead and used its trade name to sell other cosmetics.
M - Macy's to Unveil Thalía Collection
- "At Macy’s, 16 percent of the traffic is Latino — and it’s been a major market miss. Acknowledging its 'white space,' or dearth of products, targeting Latinos, Macy’s today will unveil a Thalía Sodi collection for a spring 2015 launch."
- "Underscoring how much the retailer wants to better connect with Latinos, Gennette said Thalía dresses, tops, pants, shoes and jewelry will be rolled out to 300 stores and macys.com from the outset, and that additional categories are in the works. A multiyear agreement for the exclusive Thalía Sodi brand was signed, though no financial details were disclosed."
Takeaway: The fact that they refer to Latino's as a 'White Space' shows that perhaps they haven't really figured it out yet.
Weak Cotton Prices Continue in November
- "Cotton prices dropped by a penny in November, finishing the month at 75.6 cents per pound. Larger-than-expected global production and weakening demand in Asia continue to put downward pressure on prices."
- "Although commodities forecasters were expecting global production to fall in the coming year, particularly in the U.S., it now looks as if crops in key regions might be bigger than originally expected. India will have larger-than-expected crops due to an abundance of rain during monsoon season and clear weather during the harvest. U.S. cotton market experts are now predicting yields that top prior expectations."
- "China began to offer for sale some of the cotton reserves it had been stockpiling in support of local prices. However, the price at which it offered the stocks was higher than the market price for imports, so got few takers."
Takeaway: Good initially for HBI and GIL. But if lower cotton once again causes deflation in the industry, these guys are in trouble.