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What's New Today in Retail (12/6)

Takeaway: More JCP drama. ESL seeing redemptions? JWN tops shopper poll. LeBron spanks NKE. GPS shines with a scant 2% comp. SHLD selling Land’s End.



Hedgeye Black Friday Consumer Survey: Focus on JCP.  We'll be conducting Round 2 of our JCP/Department Store consumer survey on Monday December 9th at 1pm.  If you are interested in our results, please email , or .




J.C. Penney Slides for Second Day as Bass Says Sold Stake



Takeaway: It's more than just a stock sale… 1) Bass, 2) SEC Inquiry, 3) Board backing Ullman 'until turnaround is done'. We delve into all of them. See our note "JCP: Fundamentals vs Newsflow vs The Stock"


ULTA - Q3 Earnings


What's New Today in Retail (12/6) - chart2 12 6


Takeaway: The amazing thing is that the quarter wasn't a complete disaster, and the SIGMA trajectory is better than bad. But when a hyper-momentum stock that everyone is afraid to short misses a quarter….watch out below. We turned bearish on this name in early Oct and shorted it at $124.56 while we continued our deep dive research on the name. One rule of thumb that we've picked up over the past 20 years is that the first miss is rarely the last.


SHLD - Sears Holdings Corporation Announces Filing Of Registration Statement For Spin-Off Of Lands' End Business



  • "Sears Holdings Corporation announced that, in connection with its previously announced consideration of a separation of its Lands' End business, Lands' End, Inc. filed today a registration statement on Form 10 with the Securities and Exchange Commission. Sears Holdings intends to spin off its Lands' End business through the pro rata distribution of all of the shares of common stock of Lands' End, Inc...The spin-off is subject to the approval of the Board of Directors of Sears Holdings and the satisfaction of certain other conditions."


Takeaway: Land's End is a good brand, but one that SHLD should never have acquired in the first place. It was targeted to spearhead the 'softer side of Sears' initiative. But needless to say, it failed.


SHLD - Lampert Sees Fund Investors Check Out



  • "Edward S. Lampert, struggling to stem heavy losses at Sears Holdings Corp., is facing an exodus of money from his hedge fund. Mr. Lampert's hedge fund is returning billions to clients of Goldman Sachs Group Inc. who had invested with ESL Investments Inc. in 2007, according to people with knowledge of the matter. Under that deal, Goldman's clients, such as corporate pension plans, put roughly $3.5 billion with Mr. Lampert, and they have asked for it back."
  • "The investors are receiving part of their funds in stock rather than all-cash, a redemption technique Mr. Lampert has used before."


Takeaway: This one speaks for itself. Let's hope Mr Lampert is not forced to sell any of his core positions -- SHLD, AN, and GPS.


NKE - LeBron Can't Let His Old Shoes Go



  • "In the 18 games played since the season opened, the four-time league MVP has worn the 11s for only two full games, spending most of his time on court wearing last year's LeBron X model."
  • "Mr. James's manager, Maverick Carter, said it isn't that the star doesn't like the latest edition of his shoes. Instead, he has been making tweaks to the shoe and expects to return to wearing the 11s full time in a matter of weeks, Mr. Carter said."


Takeaway: Nike doesn't get spanked by its athletes too often. This one is a rarity. That said, you can bet that the LeBron 11 will set new sales records.


GPS - Gap Inc. Reports November Sales



  • "Gap Inc. today reported that November 2013 net sales increased 8 percent compared with last year. Net sales for the four-week period ended November 30, 2013 were $1.63 billion compared with net sales of $1.52 billion for the four-week period ended November 24, 2012."
  • "Gap Inc.’s comparable sales for November 2013 were up 2 percent versus a 3 percent increase for November 2012. Due to the 53rd week in fiscal year 2012, comparable sales for November 2013 are compared to the four-week period ended December 1, 2012."


November Comparable Sales Results

  • Gap Global: positive 2 percent versus positive 4 percent last year
  • Banana Republic Global: negative 1 percent versus positive 3 percent last year
  • Old Navy Global: positive 3 percent versus positive 1 percent last year


Takeaway: Sadly, a mere 2% comp out of GPS actually puts it in the top quartile of retailers for the month of November.


JWN, KSS, DSW, DKS, M, JCP - Study: Nordstrom is consumers’ favorite fashion retailer



  • "Nordstrom is North America’s overall favorite fashion retailer for the second consecutive time, according to a new study of more than 6,800 consumers conducted by Market Force Information (Market Force), a provider of customer intelligence solutions."
  • "Kohl’s is the most visited for casual clothing, business attire and children’s clothing, while Dick’s Sporting Goods won out for sports apparel and DSW for footwear."
  • "When Market Force asked consumers to name their overall favorite retailer, Nordstrom ranked No. 1, earning significantly more votes than all of the other chains. Kohl’s ranked second, Macy’s was third, J.C. Penney was fourth and T.J.Maxx was fifth."


Takeaway: Not a shocker about JWN, with the exception of Bloomies, no one can really touch it.  What would be interesting to know is the difference between people that said JWN is their favorite place to shop vs those that said it is the place where they actually spend money (ie can afford to shop). No surprise that JCP remains in the toilet. At $100/square foot, it's running half the rate of its relevant peer group.


CFR - Cartier Exhibition Opens in Paris



  • "Kate Middleton’s wedding tiara and Grace Kelly’s engagement ring are among the star pieces of an exhibition on Cartier opening in Paris today."
  • "Billed as the most extensive show to date dedicated to the French jeweler, famed for its panther-themed jewelry and Tank watches, 'Cartier — Style and History' is set to run at the Grand Palais until Feb. 16. It showcases more than 600 items ranging from fine jewelry and watches to decorative objects, many reflecting the influence of exotic locations like China and India. Most are drawn from Cartier’s extensive archives, but about 100 items are on loan from private collections."


[video] Keith's Macro Notebook 12/6: USD UST10YR UK


As we expected, the detail behind what was already a very strong month, was even better.  As you know, Macau gross gaming revenues (GGR) grew 21% YoY in November to HK$29.3 billion.  What you may not know is that VIP hold percentage was approximately 34bps below the year to date average.  We estimate that GGR would have grown 30% YoY with normal hold % in November 2013 and 28% with equal hold % in both periods.  This truly was another outstanding month in Macau.


Two company themes we’ve been focused on clearly played out during November and should continue:  LVS is crushing it across the board and WYNN’s aggressive Mass push is beginning to pay off.  These are our favorite Macau names.


Here are our initial takeaways:



  • Mass revenues increased 39%
  • VIP revenues climbed 15% despite the low hold percentage
  • Estimated VIP hold percentage was only 2.66%, below the normal of 3.00% and last year of 2.88%
  • VIP hold percentage was the lowest since March of 2011
  • Rolling Chip (junket) volume increased 24%, the highest growth rate in almost 2 years
  • Slots were the only disappointment, growing only 2% YoY


  • While 160bps better than October, market share was just in line with its 3 month average
  • However, VIP hold percentage was almost 60bps below normal – market share would’ve increased sequentially with normal hold
  • GGR outgrew the market (27% vs 21%) but assuming normal hold, LVS’s GGR would’ve grown 40% (vs the market at 30%)


  • WYNN’s market share grew 30bps over its 3 month trailing average
  • Hold percentage was 10bps below normal but significantly below last November’s high hold
  • Wynn Macau grew its Mass share 130bps above its trailing average
  • Most importantly, Mass revenue grew over 53% YoY, the highest growth rate since June of 2011, and led the market
  • This was a great month for Wynn Macau


  • MPEL was one of the few operators to hold above normal
  • VIP volume and Mass share both fell below recent trend
  • Total revenue growth was in-line with the market despite the relatively high hold
  • We think MPEL could be a share loser over the next year


  • MGM held well above normal and higher than last November’s low hold
  • High hold contributed to 39% YoY GGR growth, 2nd highest in the market
  • Mass market share was only 6.4%, the 3rd lowest of its history
  • We think MGM has the most to lose by WYNN’s recent Mass push and that indeed played out in November


  • Galaxy led the market in GGR growth for the 2nd straight month
  • Hold was well below normal
  • Mass and Rolling Chip volume share was above recent trend
  • Solid month from Galaxy

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December 6, 2013

December 6, 2013 - ja dtr

Looking In The Rear-View Mirroe

Client Talking Points


Alas, GDP is a lagging indicator. So... as the 10-year yield makes a lower-high versus the Q313 top, look at what Mr. Market is telling you via the leading indicator in our model: The US Dollar. The greenback is down for four consecutive weeks now after being down -0.41% yesterday. #broken


Levels matter versus the prior high. If the 10-year yield can’t make a higher high versus the pre-Fed-no-taper September closing high (and we get anything average in an employment report), no-taper can knock 20-30 basis points out of this rate rally. Fast.


Just awesome. Both home prices (+7.7% year-over-year in November versus 6.9% in October) and autos (+7% November versus +4% October) are loving what Americans loved in Q2-Q3 of 2013. What's that? Strengthening purchasing power via a #StrongCurrency. Go Pound.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged.  If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.


WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.


Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road


3.6% GDP and +200k handles on jobs and these morons are going to try no-taper again @federalreserve


"I knew if I didn't leave my bitterness and hatred behind, I'd still be in prison." - Nelson Mandela


Most British workers under 50 will have to work longer than expected after the government unveiled plans to introduce the highest retirement age in the developed world. Under the reforms, the pension age will be linked to rising life expectancy and reflect the U.K. government's belief that workers should spend no more than a third of their adult life in retirement. The state pension age of 68 will now be enforced in the mid 2030s, about 10 years earlier than planned. And by the late 2040s it will rise to 69.






The review of a proposed casino act was placed on hold yesterday as lawmakers opposed to the legislation demanded more time to study all the relevant information.  Legislators from the transportation, economic and judiciary committees were yesterday scheduled to review the act governing the management of casino resorts bill proposed by the Executive Yuan.  They were also to consider two similar drafts proposed by Independent Legislator Chen Hsuen-sheng and Chinese Nationalist Party (KMT) Legislator Alex Tsai.  They were also supposed to review an amendment to the International Airport Park Development Act proposed by several legislators including KMT Legislator Chen Ken-te, which would allow casinos to be built within the boundaries of the Taoyuan Aerotropolis project.  According to the proposed amendment, casinos would be located in the airport’s free trade zone, and people entering them must hold passports and may be exempt from paying customs tax.

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