What's New Today in Retail (1/3)

Takeaway: AMZN now taxing 50% of biz. NKE gears new NTC App for women. 10%+ labor cost boost. WMT Donkey-gate. Good COLM China deal. F21 FW ASP +100%.

COMPANY NEWS

AMZN - Amazon Now Charging Sales Tax in Indiana, Nevada, and Tennessee 

(http://www.sportsonesource.com/news/article_home.asp?Prod=1&section=9&id=49275)

  • "With the new year, Amazon is charging sales on purchases in three more states - Indiana, Nevada, and Tennessee. Amazon agreed to begin collecting sales tax in the three states in 2014, bringing to 19 the states in which it automatically adds tax to purchases."
  • "In 2016, South Carolina will join them, bringing the number up to an even 20. Amazon's warehouse expansions have given it a physical presence in more and more regions, speeding up deliveries but also opening it up to taxes. Some observers have estimated the retailer is now collecting sales taxes from half its customers."

Takeaway: No surprises here…We've had visibility into this issue for quite some time. The most surprising factor is that more states have not joined in. If the statement above that AMZN collects tax from half of its customers is true -- and it sounds right to us -- the most interesting fact is that AMZN's business remains on fire despite a narrowed competitive gap vs. brick and mortar retailers.

NKE - Nike Launches Updated N+TC App

(http://www.wwd.com/fashion-news/fashion-scoops/nike-launches-updated-ntc-app-7328275)

  • "Nike’s updated N+TC app, which launched Tuesday for Nike Training Club’s nearly 11 million members, comes just in time for annual New Year’s resolutions. The upgrade boasts new features such as more than 100 customizable workouts, four-week programs to meet specific goals, milestone rewards that will be shareable via social media and a library of regimens inspired by professional athletes…"

What's New Today in Retail (1/3) - chart1 1 3

Takeaway: This new NTC (which we've used already) has some notable enhancements. We can't call them 'improvements' because that would suggest that the previous iteration was lacking -- which it wasn’t. The biggest takeaway is that the workouts are almost entirely geared towards women. That's not to say that dudes can't do the workouts (that statement was an attempted face-saver for me), but almost all of the digital instructors are women.  Last time Nike led with Allyson Felix (Olympic Gold Medal sprinter) and Manny Pacquiao (Filipino Boxer/National Hero). This time, its Serena, Sharapova, and a host of (extremely fit) women we've never seen before. Our sense is that all the data Nike collected over the years from NTC users allowed it to fine-tune its app and focus on a more commercial audience -- women.  Separately, most people don't know this, but many Nike retail stores host NTC classes in the stores -- much like how LULU clears the floor to host yoga class, Nike does it for circuit training.

WMT - Wal-Mart Adds DNA Tests in China After Donkey-Meat Recall

(http://www.bloomberg.com/news/2014-01-02/wal-mart-adds-dna-tests-in-china-after-donkey-meat-recall.html)

  • "Wal-Mart Stores Inc. said it’s adding DNA tests of meat it sells in China after recalling donkey products from a local supplier that authorities said contained fox DNA."
  • "Wal-Mart withdrew all products from vendor Dezhou Fujude Food Company Ltd., after fox DNA was identified in samples, the retailer said yesterday in a statement. Yucheng, China authorities put Dezhou Fujude officials in “criminal detention,” and Wal-Mart is considering legal action, according to the statement."
  • "Wal-Mart said it’s offering compensation to customers and that the testing it’s adding goes beyond what is legally required in China."

Takeaway: We're usually good for a comment on just about any topic. This one, however, leaves us without words.

M, JCP, MSO - Macy’s and Martha Stewart Living Omnimedia Settle Legal Dispute

(http://phx.corporate-ir.net/phoenix.zhtml?c=84477&p=irol-newsArticle&cat=news&id=1887421)

  • "Macy’s, Inc. today issued the following statement: 'Macy's has resolved its breach-of-contract lawsuit against Martha Stewart Living Omnimedia. We are pleased to be able to put this matter behind us. The terms of our settlement are confidential, will not be disclosed, and are not deemed to be material to Macy’s. We can now return our focus to what we do best – bringing beautifully designed, high quality, affordable products to consumers nationwide. We look forward to a continued, successful partnership together. This settlement does not affect Macy's outstanding claim against J.C. Penney, which remains subject to the court's decision.'”

Takeaway: The big loser in this whole mess is Martha Stewart. Let's face it, her reputation isn't exactly stellar. And then the goes ahead and inks an exclusive agreement with JCP when she is already locked into one with Macy's? Perhaps blame it on Ackman and Johnson -- but Martha was central to the deal. If you ran a retailer, would you really want to do business with MSO again?

COLM - Columbia Sportswear Company and Swire Resources Announce Commencement of New Joint Venture in China

(http://investor.columbia.com/releasedetail.cfm?ReleaseID=816639)

  • "Columbia Sportswear Company said its joint venture with Swire Resources Ltd. commenced operation as planned on Jan. 1, 2014. Also, as previously planned and announced, 29-year Swire Resources veteran Samson Wong was appointed president of the joint venture - Columbia Sportswear Commercial (Shanghai) Company - headquartered in Shanghai."
  • "The joint venture inherits the broad distribution network established over the past nine years by Swire Resources, which has acted as Columbia's exclusive distributor in China since 2004. That network consists of 51 wholesale dealers that, at December 31, 2013, operated approximately 660 Columbia Sportswear retail locations and 47 Mountain Hardwear retail locations in 180 cities. In addition, the joint venture directly operates approximately 70 Columbia branded retail locations in 7 cities."
  • "Reflecting Columbia's 60 percent ownership stake, the joint venture will be fully consolidated in Columbia Sportswear's operating results and financial position beginning with the first quarter of 2014…"

Takeaway: This is a good deal. Much of the Outerwear market in China is counterfeit/knock off, or just poor quality unbranded product. While COLM already has a presence there, it will now be with a much stronger partner, and one with which it has greater financial interest.  Despite the brand's presence in China, the market remains wide-open.

Forever 21 - Forever 21 Expands Footwear Line

(http://www.wwd.com/footwear-news/retail/forever-21-expands-footwear-line-7327782?module=Footwear%20News-Retail-main)

  • "The Los Angeles-based retailer, which operates more than 630 stores in the U.S., is set to launch a premium leather shoe collection this week, featuring 10 styles."
  • "The leather collection, which will retail from $49 to $79, is a step up from the current selection, priced below $40. Some of the new styles feature cutouts, buckles, metallic hues and gold hardware."
  • "The line debuts online today and will roll out to L.A. stores on Jan. 3, eventually reaching nationwide shops by Jan. 10."

Takeaway: This is a big deal. Aside from the fact that whatever Forever 21 does it usually does right, it's noteworthy that price points vs existing products are going up by upwards of 100%. They better get the value proposition right, otherwise the consumer will vote very quickly.

Coupons.com - IPO Prospect Coupons.com to Buy Yub for $30 Million

(http://blogs.wsj.com/digits/2013/12/31/ipo-prospect-coupons-com-to-buy-yub-for-30-million/)

  • "On the way toward a possible initial public offering, digital-coupon company Coupons.com has agreed to acquire Yub, according to a person familiar with the agreement."
  • "Yub works with retailers to offer loyalty programs to lure shoppers into brick-and-mortar stores. Coupons.com could use the Mountain View, Calif., company’s technology and affiliate network to better track which online offers lead to in-store purchases."
  • "Coupons.com will pay about $30 million for Yub, according to a merger document reviewed by The Wall Street Journal."

Takeaway: Ordinarily, we'd dismiss something as minor as this. But the reality is that with the emergence of sites like eBates.com and Coupons.com (and possibly Groupon -- but that's a stretch), we're left with powerful discounting mechanisms online that are still in the early stages of proliferation.

NXT - Next Raises Forecast After Christmas Sales Exceed Hopes

(http://www.bloomberg.com/news/2014-01-03/next-raises-forecast-after-christmas-sales-exceed-hopes.html)

  • "Next Plc, the U.K.’s second-largest clothing retailer, raised its full-year profit forecast and plans to pay a special dividend to shareholders after holiday sales 'significantly' exceeded company expectations."
  • "The shares rose as much as 11 percent, the steepest gain in about five years, after Next said pretax profit for the year ending this month will be 684 million pounds ($1.1 billion) to 700 million pounds. That compares with October’s forecast of 650 million pounds to 680 million pounds."

Takeaway: There's a little trend for you…two retailers smoked sales expectations. 1) H&M, and 2) Next. US clothing retailers have got to have 'sales envy'.

BRK - Brooks Signs Nick Symmonds

(http://www.wwd.com/footwear-news/people/brooks-signs-nick-symmonds-7329292)

  • "The Seattle-based footwear firm, which celebrates 100 years in 2014, added Olympian Nick Symmonds to its roster on Thursday. The move, the company said, is an example of a deepened commitment to competitive running this year."

Takeaway: But can he sell shoes? We can think of a dozen slow runners that can sell more shoes than elite runners. We're not sure with this guy -- but it's a question that should be asked. (If he was really marketable, Nike would have grabbed him).

INDUSTRY NEWS

IBM Digital: Holiday Online Sales Rise 10.3 Percent 

(http://www.sportsonesource.com/news/article_home.asp?Prod=1&section=2&id=49277)

  • "According to the IBM Digital Analytics Benchmark, fourth quarter online sales were up 10.3 percent year over year."
  • "Department Stores: Fourth quarter online sales grew by 62.8 percent over 2012, with mobile sales growing by 49.6 percent year over year."
  • "Health and Beauty: Fourth quarter online sales grew by 14.7 percent over 2012, with mobile sales growing by 81.7 percent year over year."
  • "Home Goods:  Fourth quarter online sales grew by more than 46.4 percent over 2012, with mobile sales growing by 38 percent year over year."
  • "Apparel:  Fourth quarter online sales grew by 10.2 percent over 2012, with mobile sales growing by 54.5 percent year over year."

2014: Global Sourcing to be More Costly as Worldwide Minimum Wages Continue to Rise

(https://www.sourcingjournalonline.com/minimum-wages-steadily-rising-low-cost-sourcing-countries-td/)

What's New Today in Retail (1/3) - chart2 1 3

Cambodia Worker Protests Turn Deadly

(http://www.wwd.com/business-news/government-trade/cambodia-worker-protests-turn-deadly-7329920?module=hp-topstories)

  • "Security forces opened fire on protesting garment workers here on Friday, killing at least two or three people according to a local politician and a workers' union representative."
  • "The violence erupted during a demonstration at Canadia Industrial Park, coming after more than a week of peaceful protests and demonstrations by workers demanding high wages."