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CKR - MINCING WORDS

In the past, CKR management has been very clear about its menu strategy:

"While many of our competitors responded to the ongoing macroeconomic challenges by offering low priced margin impairing products, we continued to differentiate our brands by focusing on premium priced innovative products."

"So, while other places are hopping on the value bandwagon and, thus, promoting their smallest and lowest-quality menu items, we'll keep doing what we do best by giving our customers what they really crave: big, delicious, premium-quality burgers."

"I don't think the competitors can maintain this level of discounting and actual food giveaways for very long. So we're going to maintain our discipline and our profitability and try and address those issues in the short term."

"The two ways we will not deal with the issues are by trying to drive business through discounting our products, serving inferior products, or massively couponing."

CKR has stressed that it offers good "value" by selling premium $6 burgers that are comparable to the more expensive burgers found at casual dining restaurants. It has also said in recent past that it must also offer affordable items for its customers that have less money to spend, but that it would never risk hurting margins by selling items at a price lower than cost. Yet, today when discussing its more affordable items, management said that CKR has the best tasting burgers and chicken sandwiches for $0.99. This sounds a little like a dollar menu to me! And based on comments made by CKR CEO Andrew Puzder last year, the company is selling these items below cost.

"As long as we serve a burger that's as good or better, and I think better, particularly this Prime Rib burger, than the casual dining places serve, and as long as we approach it as a -- you know, we market value different than other companies. You've probably seen the fake restaurant ads but we're not saying come in and get a piece of gut fill for $0.99, when everybody knows you couldn't go to the grocery store and make something for $0.99 that was edible, and you're not paying labor and rent. Instead of doing that, we say look, here, you know, people are willing to pay $14 for this burger in a restaurant. You can get it at Carl's or Hardee's for $4, $5, or $6."

Last quarter, management acknowledged that it would be adding more affordable items to its menu but that it would not use media support to promote them. Today, the company said it would promote some of these lower priced items outside of its four walls to increase awareness of its value items. Specifically, the company will advertise its Teriyaki burger that will sell for $2.89 and its 2 for $4 Western Burgers. The company also said that it has begun testing a new snack menu to address its affordability issues. Using advertising dollars to promote these lower priced items for the first time and testing a new snack or lower priced menu sounded like a "value initiative" to me. However, when I asked management about these "value initiatives," the CEO seemed a bit confused as to what I was referring.

This company has spent so much time defending its position on keeping its focus on a premium menu strategy and maintaining industry-leading restaurant-level margins that the CEO seemed to question my use of the word "value," which in this industry, often goes hand in hand with discounting. Although he allocated a good portion of today's earnings call to a discussion around creating awareness of the value inherent in the company's $6 burgers and the affordability of some of CKR's products, such as the burger and chicken sandwich for $0.99, the company will most likely not go far enough with its promotion of these products to really drive traffic because management will not want to be accused of discounting.

After today's conference call, I was left questioning what direction CKR is headed? Will CKE only pursue premium products in an attempt to preserve the high margins to which investors have become accustomed while sacrificing traffic? Or will they begin to go after the bottom feeder customers with more advertising of its lower priced items? Management seems a little unsure as well, saying that it will manage for the long-term and not for short-term sales pops in one breath and that it will do what it can to adapt to the new consumer environment in another. Either way, margins are at risk, but CKR risks losing substantial market share at Carl's Jr. if it does not act fast with a coherent market strategy to drive traffic.

Making matters worse for CKR is the fact that McDonald's will likely roll out its Angus burger in August with significant couponing. This premium burger offering at McDonald's will only create more competition for Carl's Jr. in the coming months.

 

CKR - MINCING WORDS - ckrmargiins

 


Quick Call Out On Consumer Confidence

 

We put together the two charts below that outline consumer confidence levels at various income levels.  As might be expected, those that make more money generally have higher confidence based on this measure.  From mid-2006 to mid-2007, those that made more than $50,000 per annum had almost twice the confidence of those that made less than $15,000 per annum.  Beginning in mid-2007, this confidence gap began to narrow as the group that was making the most money saw a marked fall in their confidence level.

In Q4 of 2008 and Q1 2009, the confidence delta between the income groups narrowed to a point where confidence levels of the those making the least, or under $15,000, and those making the most, or over $50,000, was basically flat. That is, there was no difference in confidence levels  between these disparate income groups.  Since March we have seen confidence rebound sharply, albeit off of low levels, and have also seen the delta between high earners and low earners widen once again.  The most obvious interpretation is that those who make more money also have a large amount of their assets invested in the stock market, so as these market related investments decline, so too will their confidence, while the inverse is true, so as the stock market rebounds, as we have seen since March, the higher income earners should see a disproportionate rise in confidence.

For those that play the consumer stocks, being aware of this widening spread, as it sustains itself, will be a key driver of consumer spending patterns in the coming quarters.  As always, let us know if we can put you in touch with our consumer research teams (McGough, Penney, and Jordan) to take advantage of this trend on a stock specific basis.

Daryl G. Jones

Managing Director

Andrew Barber

Director

Quick Call Out On Consumer Confidence - MH1


BOBE - SOMETHING TO NOTE


Here is what BOBE had to say:

"There are a number of federal, state and local proposals and regulations to require restaurants to provide nutritional information on menus and/or require that restaurants label menus with the country of origin of meal ingredients. For example, our Mimi's Cafés located in California are subject to a state-wide menu labeling law that will become effective on July 1, 2009. We are concerned that the continued imposition of such regulations, especially at the state and local level with varying requirements, could have an adverse effect on our results of operations and financial position, as well as the restaurant industry in general. In particular, we are concerned about the increased operating costs we will incur to comply with these requirements, as well as the potential impact on our sales and profitability if the disclosures change guest preferences and menu mix. We support the uniform standards that would be implemented across the United States under the Labeling Education and Nutrition Act (LEAN Act), which is pending in Congress."

Here are some details of the new California Law, according to the Arnold and Porter LLP.

On September 30, 2008, Governor Arnold Schwarzenegger signed into law SB 1420, making California the first state in the nation to enact statewide legislation requiring restaurants to provide nutritional information on menus and menu boards. SB 1420 applies to restaurant systems with at least 20 locations in California. Over 17,000 restaurants will be affected.

Requirements

SB 1420's requirements are imposed in a two-stage process:

By July 1, 2009, covered restaurants must provide brochures that disclose calories, saturated fat, carbohydrates, and sodium. The brochures must be available at the point of sale, and drive-through areas must display a conspicuous notice stating that the disclosure of nutrition information is available upon request. Restaurants providing sit-down service may provide the information on a table brochure, table tent, menu, or menu insert.

By January 1, 2011, covered restaurants must additionally post calorie content information next to each menu item on their menus, indoor menu boards, or menu tags (for display case items). Restaurants offering "combination" menu items comprised of one or more other items must disclose both minimum and maximum calorie information for the combination on menus or menu boards, based upon all possible combinations. Furthermore, for menu items that are intended to serve more than one individual, menus and menu boards must state the number of individuals intended to be served as well as the calorie content information per individual serving.

From the CAKE 10K - No mention of the California law only the following comments:

"New information or attitudes regarding diet and health could result in changes in regulations and consumer eating habits that could adversely affect our revenues.

Regulations and consumer eating habits may change as a result of new information or attitudes regarding diet and health. These changes may include regulations that impact the ingredients and nutritional content of our menu items and bakery products. For example, a number of states, counties and cities are enacting menu labeling laws requiring multi-unit restaurant operators to make certain nutritional information available to guests or restrict the sales of certain types of ingredients in restaurants. The success of our restaurant operations is dependent, in part, upon our ability to effectively respond to changes in consumer health and disclosure regulations and to adapt our menu offerings to trends in eating habits. If consumer health regulations or consumer eating habits change significantly, we may be required to modify or delete certain menu items. To the extent we are unable to respond with appropriate changes to our menu offerings, it could materially affect customer demand and have an adverse impact on our revenues."

I asked CKR today on its quarterly earnings call about the potential impact of the law and management stated that a similar law has already gone into effect in parts of Washington St. and has not seemed to impact sales. Additionally, the company already makes the nutritional and caloric content of all of its menu items available on its website. Management does not think this information will change people's eating habits and recognizes the new law as a hassle; though, the company will, of course, comply. Interestingly, management seems to think the posting of such caloric content could help their sales as their young guy consumers tend to use the high fat content and high calories for what the company called "bragging rights."

 

 


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Domo Arigato Mr. Bernanke

The Fed's decision yesterday to continue the zero funds target rate "for an extended period" -as well as continuing with a program to spend hundreds of billions in additional dollars to prop up the long end of the curve sent a clear signal that, from their perspective, deflationary concerns have subsided while fears that inflationary pressure on the margin may expand are still far on the horizon.

For inflation hawks who have been watching oil and other components in the energy and industrial commodity complex, as potential canaries in the coal mine, the Fed's decision sets the stage for a potential nasty spike if any external catalyst develops. Based on my anecdotal research, traders old enough to remember the twin energy crises of 73 and 77-79 seem to be much less inclined to discount this risk.

On the rate front, the resilience of Chinese and Japanese lenders combined with Bernanke's blank check sets the stage for a sustained stay here at zero. Despite contracting by over 25 basis points since the first week of the June the spread between the 10s and the 2s continues to hang in above 250 providing the gang that could shoot straight -our government backed banking community, with more time to cash in on the free money spread feast. As long as this steepness continues we can presumably look forward to GMAC continuing to run those funny ads for their Ally subsidiary that take cheap shots at the surviving members of the banking community that haven't mugged the taxpayer yet.

Meanwhile, with absolute rates at absolute historical lows, it's an absolute sure thing that scores of supposed geniuses at funds and big banks are piling into the "reverse carry" trade -borrowing in dollars to buy higher yielding bonds issued by Brazil or other muscular developing economies. This will make them look absolutely brilliant when the dollar finally rolls over decisively.

With all that taken into account, our strategic thoughts remain relatively unchanged beyond some duration adjustments:

  • We still expect that inflationary pressure will start to return in earnest during Q4 -and furthermore that in the current "free money" vacuum it has the potential to expand at a rapid pace that will catch a lot of people unprepared.
  • We expect that treasury yields will start to rise on an absolute basis later this year DESPITE fed policy sentiment as investors factor concerns about ballooning debt and inflationary pressure into the equation. We think that this divergence between the target and the curve will be mirrored by expansion in the spread between treasuries and higher yielding corporate bonds.

As always, timing is everything, and we will be constantly looking for signals to test our thesis with. If the math doesn't support our thesis -or price action defies it, we WILL change our tactical risk management stance in response because that is the only way that we know how to invest -opportunistically.

Andrew Barber

Director


Notable Confidence Divergence

My colleague Andrew Barber just floated me the following consumer confidence chart. These are Conference Board numbers, so they are not proprietary to us, but note 2 things... 1) Not only has confidence in aggregate popped since the market rally, but 2) it has disproportionately impacted higher incomes.

Thanks for stating the obvious McGough... not many people making $15k per year on stocks never mind feel more confident in the face of a market move. But obvious or not, a fact is a fact. We can't ignore it.

 

Notable Confidence Divergence - 6 25 2009 9 19 22 AM


Retail First Look: 6/25/09

TODAY'S CALL OUT

How can we not call out the Dress Barn/Tween Brands deal this morning. I could care less about that combined entity right now, but you gotta take note that the deals we're seeing in retail have gotten bigger and bigger and bigger. This is at the same time that companies are successfully shoring up balance sheets even if it takes up their WACC meaningfully (Quiksilver and Liz), the number of licensing deals is accelerating (Gap/Stella McCartney), well-known brands are broadening distribution (OXM w Tommy Bahama) and weak brands (Eddie Bauer) are filing Ch 11, or flat-out shutting down.  So what's next? 

I have no doubt that this will continue, but my gut is that the rate of acceleration takes a breather for a quarter or two. Why? As the entire planet now knows, 2H is a time period where sales comps get quite easy, GM stabilizes due to lean-ish inventories, SG&A cuts kick in, and capex continues to come down meaningfully. By my math, this leads to a 100 point swing in the industry's FCF growth rate (from -80% to +20%). My point is that there will be more desperate companies that can keep their heads above water and can resist the need for sweeping strategic change (even if every banker on the Street is clamoring to up the deal flow in an effort to get paid this year).  

But as much as this rate of change may take a breather in 2H, I expect the M&A cycle to step up dramatically starting in 1Q10. This is when we separate the men from the boys. There are so many companies out there that are making numbers today via SG&A cuts. As I've been pretty vocal about - this is a finite strategy. Yes, optically it will boost - or buouy - margins near term. But does it leave in place any growth investment/infrastructure from which to proactively drive business in '10? That's when we're going to see a massive diversion between quality and junk. And that's when investors really get paid for doing the deep dive on company-specific stories.

 

LEVINE'S LOW DOWN

Some Notable Call Outs

  • On the real estate front, Rite Aid has contracted with a 3rd party to negotiate rent concessions for about 500 under performing locations. Several other retailers have engaged in similar arrangements, although none have reported back with updates on the success of such large scale real estate cost reduction efforts.
  • Just one day after Kroger reported solid and stable results, SuperValu pre-announced a weaker than expected quarter. While the release was brief, it pointed to cautious spending by its consumers as the culprit. The net result was both sales and margin pressure. The interesting callout here is that margins were worse than expected, especially given the general industry trend towards higher-margin private label products. I suspect that the bigger driver here was the competitive environment, although there was no mention of this in the press release.
  • A one-time designer denim promotion at Saks Fifth Avenue this week translates to weaker denim sales and ultimately tighter inventories.  This may indicate that denim sales were weak for the late spring season and/or Saks is attempting to bring inventories in line with sales following a Q1 sales drop of 27% (inventories only came down 7% in the same qtr).  The sales to inventory spread was the worst in the past ten years.  Discounts on the denim averaged 25% with price reductions reaching as high as 60%.  Three brands had more units on discount than the rest: VFC's 7 For All Mankind, Citizens of Humanity, and Joe's Jeans (JOEZ). 
  • A much needed improvement in footwear sales occurred last week.  Although sales were down 6%, the improvement from -26% the prior week is significant.  Footwear ASPs remained flat for the second week in a row, but remained down relative to the trend of high single digit increases that we have seen throughout most of 2009.
  • Under Armour, Converse and Nike are the positive call outs, while Reebok and Vans pick up the rear.
  • With orders down across the board by region, NKE confirmed that Western Europe will continue to be one of the most challenging markets both economically and from a consumer standpoint due excessive unemployment numbers.
  • Because of their favorable inventory position, NKE remarked that they will not be forced into heavy discounting.
  •  Last week US cotton production was down year over year and the condition of the cotton crop is tracking below last year's levels. These statistics are sequentially worse than the prior week.  Nationally, 20% of the cotton crop was budding by week's end, 5% behind last year and 13% behind the 5-year average. The crop's progress is behind the 5-year average in all states except Louisiana and North Carolina, where the weather has been slightly warmer than normal during most of the growing season. Overall, 44% of the cotton crop was rated in good to excellent condition, compared with 45% last week and 49% a year ago.  

 

MORNING NEWS 

Zach's overview of items you're unlikely to find in the general press.

  • China: 1st Quarter Import/Export Data encouraging for leather industry - As was to be expected both imports and exports of Chinese leather industry products declined by 8% in the wake of the slowdown in the global economy. Finished product imports all rose validating the point that consumer activity continues to be robust in the Chinese retail sector when compared to a lack of consumer confidence in Europe and the US. Experts are predicting an upturn in the Chinese leather sector by the third quarter of 2009. Overall consumer activity in China increased in April 2009 by 14.8% which is encouraging for western manufacturers and exporters of high end bags and footwear. Demand for travel ware, shoes, garments and gloves all increased. In contrast, the fall in raw material imports is not surprising after the collapse in hide and leather prices in the final quarter of 2008 when many contracts were not honored. Chinese factories received less outsourcing contracts as the recession in western countries started to bite, which caused many to shut down operations. <http://www.fashionnetasia.com/industryupdate/details.aspx?lang=0&sid=22&pid=2613>

Retail First Look: 6/25/09 - image1

  • H&M Profit Beats Estimates on Accelerated Store Openings, Stronger Euro - Hennes & Mauritz AB, Europe's second-largest clothing retailer, reported a 6% profit increase for the second quarter after store openings and the stronger euro offset slower consumer spending. Spring collections met with success, especially in countries where the world's third-largest fashion retailer has recently expanded.  But the Swedish fashion giant also reported flat sales in May, while comps declined 9% in the same month, in line with analysts' expectations.  For 1H 09 sales excluding value-added tax advanced 22.8%  and comps declined 2%. H&M said the recession has dampened consumer spending in all of its markets, especially Spain, the U.S. and Scandinavian countries.  However, sales in countries where H&M has recently expanded, such as Japan and Russia, have exceeded expectations. H&M reiterated future expansion plans, saying that it still expects to open 159 stores in the second half of the year, while closing 18. Most of the stores are planned to open in the U.S., U.K., Germany, France, Italy and Spain. Gross margin, a key indicator for retailers' profitability, declined to 190 bps due to  the strengthening U.S. dollar in the quarter, although the currency move was partly offset by lower raw material and transportation costs, H&M said. <http://www.wwd.com/business-news/hm-net-rises-64-percent-2188570?navSection=business-news>,  <http://www.bloomberg.com/news/industries/consumer.html>
  • The retail industry's two largest trade and lobbying groups have called off merger talks and will continue to operate as separate organizations with their own memberships and agendas. The Retail Industry Leaders Association and National Retail Federation said Wednesday they were ending merger discussions and declined to provide any further details. The initial talks in April were geared towards bringing together the memberships and financial clout of the industry's two powerful lobbying groups against a backdrop of a shrinking retail landscape struggling to survive the recession. The NRF's annual budget is $35 million and RILA's annual budget is an estimated $13 million. RILA represents 65 retailers and 200 members, including most major discounters and mass merchants such as Wal-Mart Stores Inc., Home Depot Inc., Best Buy Co. Inc., J.C. Penney Co. Inc. and Target Corp. Its membership also consists of product manufacturers. The NRF includes 2,500 members such as Macy's Inc., J.C. Penney, J. Crew Group, Levi Strauss & Co., Limited Brands Inc., Liz Claiborne Inc. and Neiman Marcus Inc. <http://www.wwd.com/business-news/hm-net-rises-64-percent-2188570?navSection=business-news>
  • U.S. textile groups concerned that the energy bill could lead to substantially higher operating costs, putting domestic producers at a disadvantage against global competitors. The bill is designed to obtain a clean energy transformation that will reduce our dependence on foreign oil and confront the carbon pollution that threatens our planet. But prominent textile trade groups, including the National Council of Textile Organizations, American Manufacturing Trade Action Coalition and National Textile Association, came out in opposition to the bill, in a letter to Congress on Wednesday. "As an industry that is heavily reliant on low-cost energy to produce more than $16 billion in exports, this bill would cause an undue financial strain through the increased costs of regulations with respect to the escalating demand (and therefore price) for natural gas, our main energy source, which has a carbon advantage over other main energy sources, as well as our coal-reliant energy utilities," the textile groups wrote. <http://www.wwd.com/business-news/hm-net-rises-64-percent-2188570?navSection=business-news>
  • Rents have dropped in several of the hottest retail corridors by an average of 11%, including the Meatpacking District and Madison Avenue, since spring 2008. The Real Estate Board of New York's spring 2009 report said a few areas, such as the West Village and the Financial District, have shown modest gains in the last year. However, since fall 2008, the average asking rent for available retail space has fallen 11 percent, to $115. "When the market tumbled in September, retailers wanted to hold out until the holidays to see what would happen," said Mike Slattery, senior vice president of REBNY. "Building owners had the same frame of mind during the winter. Owners have been more willing to negotiate free rents and provide allowances for tenants...a softer market provides an opportunity for people to get a foothold into a market." <http://www.wwd.com/business-news/hm-net-rises-64-percent-2188570?navSection=business-news>
  • A new breed of online retailer in Europe is seeking to fuel and meet demand by providing a service: part shop, part editorial. Among them are the U.K.'s Hanon.com, Oipolloi.com and Oki-ni.com; France's Studiohomme.com and Royalcheese.com; Italy's Thecorner.com, and  Sweden's Zoovillage.com, all of which combine news, interviews, events and exhibitions with retail to enrich the shopping experience. "Our job is to inform the public," says John Skelton, creative director for Oki-Ni. "Until now, retailers have second-guessed what the consumer wants and often given a skewed approach or story of what you are trying to sell. Our objective is to put across our take of what is going on, what we think is relative and hot and what we like in a humble way." Founded in 2001, Oki-Ni first began as a catalyst for collaboration projects and special edition lines, but relaunched in 2007 to sell coolerthan-thou styles and cult brands from across the globe. <http://www.wwd.com/business-news/hm-net-rises-64-percent-2188570?navSection=business-news>
  • Madewell offers affordable vintage pieces that complement Madewell jeans at the Brooklyn Flee Market - Madewell hopes The Flea's indie spirit will appeal to Madewell's consumers, and are spreading the word via e-mails, Madewell's Facebook page and word of mouth. "It operates as a real community," Guerra said of The Flea, which typically has 150 vendors in Fort Greene on Saturdays and 110 underneath the Brooklyn Bridge on Sundays. Straw hats, crocheted dresses, sunglasses, tops and bags will be among the vintage pieces sold in the Madewell stores. By and large, the flea market goods will retail for less than $100 and everything is meant to be mixed with the Madewell collection, especially its forthcoming more affordable 37s jeans. Due in stores next month, 37s - named for 1937, the year Madewell was founded as a family-owned workwear business - will retail for $59.50. In 2006, the J. Crew Group relaunched Madewell and opened the first Madewell store.  <http://www.wwd.com/retail-news/the-brooklyn-flea-finds-a-home-at-madewell-2187649?navSection=retail-news>
  • American Apparel has announced they plan to have their FIRST EVER flea market sale in NYC, with prices ranging from 2-25 dollars! Details: 185 Orchard St. (Between Houston and Stanton, next to the American Apparel store) Sat. Jun 27 12pm - 8pm; Sun. Jun 28 12pm - 8pm http://fashionindie.com/nyc-sales-first-ever-american-apparel-flea-market-sale-2-25/
  • Accessories buyers are shopping more judiciously, with a focus on immediates. Given today's economic downturn, buyers are shopping accessories trade shows more cautiously and judiciously, but according to show organizers, they are still shopping. Exhibitors have been "pleasantly surprised" with the first half of 2009. Buyer turnout has been strong and vendors have adjusted their turnaround times to meet the needs of buyers, many of whom are now shopping closer to season. The traffic density (the ratio of retailers to exhibit space) has increased by 20% this year. <http://www.wwd.com/retail-news/the-brooklyn-flea-finds-a-home-at-madewell-2187649?navSection=retail-news>
  • New York-based Brand Matter has entered into a licensing agreement with Anthony L&S LLC for men's and women's footwear under its Caribbean Joe brand. The license will also include footwear for Brand Matter's Jamaica Bay, Havana Jack's Café and the CJ Breeze brands. "We talked for a while about doing footwear in-house, but our strategy is to put the experts in the business in control," Rick Platt, president of Brand Matter told Footwear News. The footwear, which is debuting for resort '09, will include casual styles such as sandals and boat shoes and will feature prints consistent with the apparel collections. Department stores and specialty stores will be the target accounts. "Anthony L&S will focus on our largest Caribbean Joe apparel retailers, including Belk, Dillard's and Bon Ton," he added. Though price points have not yet been confirmed, Platt said the opening price point will fall somewhere above that of private-label product, but below the designer collections. <http://www.wwd.com/footwear-news/brand-matter-inks-deal-for-caribbean-joe-footwear-2187626?navSection=footwear-news>
  • Case Study: How Search Ads Helped Pier 1 Stay Afloat - The Challenege: The marketing team at Pier 1 Imports chose a challenging time to launch a new campaign and  panic-stricken consumers just weren't buying. The Plan: The "test" in question referred to a series of online search ads, developed in conjunction with Google, to drive store sales in select markets from Sept. 21 to Oct. 11. The Results: In markets where stores were operating on a "performing" basis, the retailer experienced a 2% sales lift and a 300% return on advertising spend. In areas where Pier 1's same store sales were declining, the retailer experienced a 5.3% lift. The Next Step: Incorporate both search and display at the same time by weighing the different channels to get an idea of their effectiveness in store. <http://www.brandweek.com/bw/content_display/news-and-features/retail-restaurants/e3i048f01beefa084a3837cbe15e128f4a5>
  • Abercrombie & Fitch is being sued by a woman who alleges the US retailer made her work in the stock room instead of on the shop floor because her prosthetic limb did not fit with the chain's image. <http://www.drapersonline.com/>
  • Web sales fall but not as far as other channels for Talbots in Q1 - E-commerce revenue declined by 11.7% in the first quarter as total sales and comparable-store sales decreased 26.2% and 26.9%, respectively. Direct sales, which include catalog and web, declined 28.6% <http://www.internetretailer.com/>
  • First quarter web sales drop at Coldwater Creek - For the first quarter ended May 2, web sales at Coldwater Creek decreased 27.2%. In comparison total sales and comparable-store sales dropped 15.8% and 18.6%, respectively. <http://www.internetretailer.com/>
  • Apparel and accessories merchants delivered the best response time in May to shoppers with a high broadband connection, says Gomez Inc. Shoppers with a high broadband connection could visit an apparel and accessories retailer's web site in an average time of 6.11 seconds compared with computers and electronics retailers (6.82 seconds), mass merchants (7.06), and specialty merchants (7.89).  <http://www.internetretailer.com/dailyNews.asp?id=30911>
  • Best Buy appoints Brian Dunn as its new CEO - Best Buy has named president and chief operating officer Brian Dunn the company's new CEO. Dunn takes over at a time when Best Buy is expanding its e-commerce business. <http://www.internetretailer.com/>
  • NBA draft pick shoe endorsement deals worth a lot less than last year - Shoe endorsement deals were worth more than $1 million a year ago and now is down to $750,000. All is quiet from Nike, who famously agreed to pay LeBron James and Carmelo Anthony a combined $108 million in 2003. Last year, Nike signed the kid who was once termed "The Next LeBron James," O.J. Mayo, for $400,000 a year. Adidas, which spent money on Derrick Rose and Michael Beasley last year, also has nothing to announce. Either does the new player in the game, Under Armour, which signed Brandon Jennings last year before he went off to Italy. <http://www.cnbc.com/id/31522493>
  • LIZ today announced it has completed its previously announced offering of $90 million principal amount of its 6% convertible senior notes due 2014 (the "notes"), which includes the exercise in full of the initial purchasers' option to purchase additional notes on the same terms and conditions. The Company received total net proceeds from the offering of approximately $86.6 million, after deducting fees and offering expenses payable by the Company. <http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=APPSEAR.story&STORY=/www/story/06-24-2009/0005049852&EDATE=WED+Jun+24+2009,+12:52+PM>
  • A group of 26 mostly Saudi women completed the first course of how to fit, stock and sell underwear from Victoria's Secret -- Training organizers hope to help boost a campaign to lift the ban on women selling underwear in the kingdom. The graduates held a small ceremony at a college in the western seaport of Jiddah on Tuesday, capping 40 hours of instruction during which they learned to overcome their embarrassment at doing bra fittings, deal with customer complaints and display the stock in an appealing manner. The 10-day course comes three months after a group of Saudi women launched a campaign to boycott lingerie stores until they employ women. Almost all the stores in the kingdom are staffed by men. The only exceptions are a few women-only boutiques, some of them inside popular shopping centers. The restrictions are ironic in a country that goes to great lengths to segregate the sexes. Men and women, for instance, who are not close relatives cannot stand in the same line at fast-food outlets or even be in the same car together. Conservative clerics have strong influence on government and society, and they ban anything they believe might lead to women's emancipation, such as driving or voting. http://finance.yahoo.com/news/Saudi-women-learning-how-to-apf-363130904.html?x=0&.v=1
  • Zudaas France, manufacturer and retailer of kids fashionwear and apparel, plans to have 250 outlets across India in this fiscal year and aims to become a Rs200-crore company by 2010-11. "This is the best time to expand our retail network as real estate prices are down and the estimated Rs12,000-crore Indian kidswear market is growing annually at 15%. We are scaling up our operation pan-India and plan to have 200 stores by March 2010 (in the kidswear segment)," Zudaas France MD Hitesh Mehta said. At present, the company has 57 stores in the country. It is diversifying into exclusive men's and women's wear and of their newly planned outlets 50 will be 'Zudaas Family´ stores, which would be launched soon. He said most of the outlets would be franchise-operated and the company is looking at both metros, and Tier I and II cities and the stores will be in the size of 250-800 sq ft. "Our first family store will open in July in Delhi and the target is to have 50 Zudaas Family stores by the end of this fiscal," Mehta added. http://www.livemint.com/2009/06/25123510/French-apparel-retailer-to-exp.html?h=B
  • Safilo Group SpA said it expects to breach its debt covenants and is negotiating with banks to postpone a loan payment due later this month, as talks continue with potential suitors. Safilo chief executive officer Roberto Vedovotto had hoped to secure a sale before the summer. "In this context, considering the possible misalignment of the results at 30th June 2009, compared to the financial covenants of the existing senior loan, the company has also begun negotiations with the financing banks in order to request a waiver with reference to such covenants, as well as the postponement of a payment due on 30th June 2009," Safilo stated late Tuesday. The Italian eyewear group's majority shareholder, Only 3T SpA, is in talks with at least two private equity bidders, believed to be Bain Capital and PAI, to ease Safilo's debts amid declining demand. As of March 31, Safilo had net debts of 617.7 million euros, or $861.2 million at current exchange. The Tabacchi family controls 39.9 percent of Safilo via Only 3T. <http://www.wwd.com/business-news/hm-net-rises-64-percent-2188570?navSection=business-news>
  • Textile group Devanlay SA, the manufacturer and distributor of sports brand Lacoste, has appointed José Luis Duran, former chief executive of French food retailer Carrefour, as president of its management committee. Duran's appointment will be effective July 1.  Duran, 44, will be appointed chief executive of the company in September and is expected to take the helm of Swiss-based Maus Frères, Devanlay's holding company, in 2010, succeeding Guy Latourrette. <http://www.wwd.com/business-news/hm-net-rises-64-percent-2188570?navSection=business-news>
  • Paramount Licensing plans to showcase several of its movie-based fashion T-shirts in August at MAGIC - The tee collection will feature: Top Gun by Changes for men and juniors (available now at Kohl's, Sears and JCPenney for $18), Up in Smoke by Fifth Sun for men (available now at Spencer's, specialty stores and online for $18.99), Footloose by Fifth Sun for juniors (available now at Wet Seal, Charlotte Russe and Delia's for $18.99), Flashdance by Fifth Sun for juniors (available now at Wet Seal, Charlotte Russe and Delia's for $18.99), Top Gun by Famous Forever for boys (available this summer in the U.K. at children's boutiques and specialty stores for £10.30, $16.99) <http://www.licensemag.com/licensemag/Fashion/Footloose-and-Other-Tees-Make-MAGIC/ArticleStandard/Article/detail/606193?contextCategoryId=47832>
  • Fashion programs for the upcoming release of The Twilight Saga: New Moon and recently premiered Transformers: Revenge of the Fallen have been secured with Jem Sportswear and its high-end women's division Awake. Summit Entertainment, producer of the Twilight movie franchise, is working with Awake to produce an exclusive New Moon-inspired women's apparel line for Nordstrom's BP. brand, as well as a window launch at Kitson on Oct. 15. The clothing line will include high-end tees, tanks, tunics, leggings, dresses, jackets and hoodies. DreamWorks' and Paramount's recent Transformers sequel, in association with Hasbro, teamed up with Jem Sportswear and Awake for a men's, women's, boys' and girls' apparel collection. Jem Sportswear and Awake also signed a licensing deal with Live Nation to design a "Summer of Love" promotion with Target.  <http://www.licensemag.com/licensemag/Fashion/Jem-Awake-Secure-Twilight-Transformers-Apparel-Dea/ArticleStandard/Article/detail/606191?contextCategoryId=47832>

 

INSIDER TRADING ACTIVITY:

PVH: Margaret Jenkins, Director, sold 1,240shs ($34,100) or ~28% of common holdings.

 

THIS WEEK'S COMPANY CALENDAR:

 Retail First Look: 6/25/09 - Calendar

 


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