TODAY'S CALL OUT
Ok, it's been raining... I get it.
Either the market does too, or it simply doesn't care. It doesn't take an intuitive genius to figure out that nearly every retailer will mention weather as a culprit this Thursday when sales are released. Even those that put up decent numbers will mention it, simply because the market is allowing them to do so. I won't argue that Retail stocks are cheap here - because they're not. But combine the 'Mother Nature Free Pass' with what we think is more important - the topping process of unemployment (a lagging economic indicator) in the rear view and it's tough to be short US Consumer stocks right now. Check out Keith's comments on that front in his Research Edge Early Look this morning. I'll point you toward an interesting call out on the earnings front.
Check out the earnings revision charts below (earnings revisions vs stock performance); one on a shorter-term basis, and the other back to 2001. I'm often asked why I look at chart #1 given the seemingly low correlation. My answer lies in chart #2. Over time, revisions synch lock-step with the stocks. I know, not exactly a revolutionary thought there, either. But the interpretation is probably what matters most. Right now we're sitting at flattish 90-day stock performance, and revisions that are still positive. Have they stalled? Yes. Could they ease on the margin as weather is baked in to numbers? Yes. But we've got a mid-teens pe on a group where the consensus thinks it will grow only 8% over the next 12 months. That will be a tough number for many starting in holiday. But that's a long ways off for a short who is just starting to enjoy summer.
- More issues in Honduras - More global sanctions have been called to be imposed on Honduras unless democracy is restored following the military coup which has ousted Honduran President Manuel Zelaya reported in the international press. The global union for workers in the textile, garment and footwear industries has added to condemnation of the coup, and is calling for an urgent review of trade with the country. "It is particularly regrettable that some elements of the Honduran business community, including the export sector, appear to support the overthrow of democracy," said Neil Kearney, general secretary of the International Textile, Garment and Leather Workers' Federation. <fashionnetasia.com/industryupdate>
- Russian fashion and footwear - Despite clothing sales slump due to the economic downturn, Russia's fashion and footwear market has created opportunities to allow retailers to further expand and diversify their portfolios. Melon Fashion Group has acquired the Taxi clothing retail chain consisting of 14 stores and launched a new retail project under the Love Republic banner. Earlier this year, Sun Investment Partners bought a 33% stake in the CentrObuv footwear retail chain, and maternity wear specialist Budu Mamoi said it expects to double its store count this year. Foreign clothing and footwear retailers tend to continue their expansion and increase the level of market penetration. For instance, H&M entered the country in March 2009 with two stores in Moscow and plans to open its stores beyond the capital city. The Japan-basedUniqlo and the US firm GAP are also said to be considering expansion into the Russian. <fashionnetasia.com/industryupdate>
- Indian retail industry may see benefits in the nation's budget - The Indian retail industry is all geared to look at what the Finance Minister has to offer to the different industry segments in this year's budget. Organized retail accounts for approximately 5% of the total retail business in India, Chadha reminds. "Thus, there is a tremendous scope for the retail sector to contribute to the Government in terms of taxes and serving the economy by generating employment opportunities, improving supply chain management, reducing wastage, and offering goods to consumers at discounted prices." <hindu.com>
- DHL to serve more Indian locations in India - Logistic firm DHL is planning to have around 1,000 outlets in the country in next two years time, as part of its retail expansion move. "We are planning to have around 1,000 outlets in the next two years as there is a need to be present in lot new locations in the country," DHL Express head of marketing - South Asia, Chandrashekhar Pitre said. After the DHL-Blue Dart mega co-branding spree, there are 350 retail outlets and we plan to take the number to 1,000 through various formats such as tie ups, alliances and partnerships, he said. Pitre further said: "At present our retail segment contributes 8-10 per cent of our total business and in next 3-5 years we expect out retail segment to contribute as much as 20 per cent". <indiaretailing.com>
- Sourcing at risk in Bangladesh - After four days of angry protests over pay and conditions during which several factories were forced to close, the Bangladesh government had reached an agreement with unions over increased pay and better working conditions as Drapers went to press. However, supply chain and sourcing experts said further riots in the area were inevitable as demand for garment manufacturing in Dhaka rises. Dhaka is one of the cheapest sourcing bases for high street retailers, partly because of low wage costs. However, if riots gain momentum, manufacturing could be threatened and the supply chain of UK retailers disrupted. Chains such as Primark and New Look source out of Bangladesh. <drapersonline.com/news>
- Violence in Chinese factory - Violence broke out Sunday in the capital of China's mainly Muslim northwest region of Xinjiang where an unknown number of people attacked passers-by and torched vehicles, state media reported. Thousands of protesters from the Turkish ethnic group Uighur clashed with police and two people died. At least 300 people had been arrested. He said the confrontation involved about 3,000 Uighur and 1,000 police who used electric cattle prods and fired gunshots into the air to try to disband the demonstration. He said it was sparked by a recent dispute at a toy factory between Chinese and Uighurs over a rumour that Uighurs had abused a Chinese woman. <google.com/hostednews>
- Vogue dips into the discount realm - When a magazine features items like a $40 Gap hat, a $50 pair of J. Crew shorts and a $48 Tommy Hilfiger scarf, one might assume that the magazine is Cosmopolitan or Lucky, proudly midrange publications. But in fact, the magazine is the high-fashion bible Vogue, which has gone budget-conscious in its July issue, promising a "Steal of the Month," and a section with all items under $500. Vogue included a gift guide in December in which all the products were under $500, a 100-under-$100 article in March, and a "Steal of the Month" in June as well as July. Part of the shift was because of the economy, Ms. Singer said, and part of it was that popular designers like Phillip Lim and Alexander Wang were selling clothes at reasonable prices. Chain stores, as well, have stocked increasingly sophisticated designs, she said. Despite the proliferation of Gap and Nine West items in its pages, Ms. Singer said she was not worried that Vogue would be confused with its price-conscious sisters. <nytimes.com>
- California and Hawaii think better of imposing sales taxes on e-retailers - Threats by retailers to end affiliate marketing relationships in states trying to tax sales generated by affiliates have had an effect. The governors of California and Hawaii have vetoed legislation that would have imposed such taxes in those states. <internetretailer.com>
- Tough Times in California - The California economy keeps sinking and retailers and manufacturers are bracing for the worst. The state, which has the world's eighth largest economy, can't pay its bills because lawmakers have been unable meet a deadline to close a budget deficit that has swelled to more than $26 billion. The sales tax increase to 9.75% in Los Angeles County last week and unemployment at a 30 year high at 11.5% are bad indicators. Merchants said the state's decision to begin issuing IOUs on Thursday will undermine already weakened consumer confidence and spending. <wwd.com/retail-news>
- Prada plans to expand retail space - After opening 34 stores in 2008 and with plans to continue at a similar pace over the next three years, a Prada spokeswoman confirmed Thursday the Italian luxury firm was set to unveil at least two boutiques this month - in Paris and Prague - and remodel and expand others. Prada aims to generate more than 70% of consolidated turnover from directly operated stores by 2011, from around 53% currently, a company spokesman said last month. At the close of 2008, Prada's directly operated store network totaled 238 boutiques worldwide. <wwd.com/retail-news>
- British retailer and brand realigning business - Joseph, the fashion retailer that's been selling designer labels to Londoners since 1972, is getting a long-awaited facelift, and building its wholesale and retail businesses under new chief executive officer Sara Ferrero. Ferrero, formerly ceo at Furla, who joined the company last year, has begun revamping stores, introducing edgy new designers and giving the Joseph private label collection --which counts Selfridges, Harvey Nichols and Le Bon Marché among its stockists - a new lease on life. Alain Snege, a former buyer at Colette, has also joined as artistic director and head of buying, with the job of giving a new direction to the company's 28 freestanding stores worldwide. Ferrero said the brand's wholesale line's prices are designed to be about 30% to 40% less expensive than the designer brands the Joseph stores carry. Management is working on building the label in the U.S. <wwd.com/retail-news>
- K-Swiss taps pro skater to represent new skate line - K-Swiss signed pro skater Greg Lutzka as creative director of the line, part of its recently created California Sports division. Lutzka, 24, will be charged with building a skate team with both professional and amateur riders. He also will serve as the face of the brand and offer input on new product. Lutzka, who was previously part of El Segundo, Calif.-based Globe International's skate team, is a seven-year pro and an X-Games medalist who swept the 2009 Tampa Pro. Nichols characterized Lutzka's commitment to K-Swiss as "multiyear" and said the skater will have offices at K-Swiss' headquarters. The brand said it would announce a skate brand manager and dedicated skate team shortly. Skate is a new category for the athletic firm, part of a broader brand revamp that focuses on its California roots. The company will debut a small series of men's-only lifestyle looks and performance skate shoes (including a Lutzka signature shoe) priced from $70 to $90 for spring '10. <wwd.com/footwear-news>
- Former Crocs CEO Leaves Board - Crocs Inc.'s former CEO has resigned from the company's board of directors, according to a filing with the Securities & Exchange Commission. Snyder left the board for personal reasons and not because of any disagreement with the company. Snyder announced his retirement in February, effective March 16, from his role as president and CEO. He remained on the board to offer any help to his replacement, John Duerden. Snyder had served as Crocs' CEO from January 2005. <sportsonesource.com/news>
- VF Imagewear officially introduced the VF Licensed Sports Group - VF Licensed Sports Group is a division focused on the development of both on-field and licensed sports apparel. Previously known as VF Activewear, the VF Licensed Sports Group's growth accelerated with the 2007 addition of Majestic Athletic and this year's opening of a new manufacturing and distribution facility in Easton, PA. The new location enables faster speed to market by aggregating eight smaller facilities. "This is much more than a division name change, but really a statement about who we are and where we are going. Our mission is to take the strategic goals of leagues and retailers and create winning licensed apparel programs," said Jim Pisani, President, VF Licensed Sports Group. <sportsonesource.com/news>
- Drop in Ralph Lauren's Compensation - Ralph Lauren's official compensation as chairman and chief executive officer of Polo Ralph Lauren Corp. dropped more than 40 percent during the 2009 fiscal year, despite a 25 percent raise in his base pay. <wwd.com/business-news>
- Safilo Group SpA postpones loan payment - Safilo Group SpA said Thursday its lending banks had agreed to postpone to the end of the year a loan payment due June 30 and waiver the respective debt covenants, while sale talks continue with potential suitors. The Italian eyewear firm's majority shareholder, Only 3T SpA, is in talks with at least two private equity funds about selling a stake to ease Safilo's debts amid declining demand. <wwd.com/business-news>
- Nine West Flashes Back - The 1980s (similar to the 2000s) was a decade of high gas prices, recessionary times and larger-than-life fashion and entertainment... And Nine West is betting that consumers see the similarities, too. For its fall advertising campaign, the New York-based accessories brand is harking back to the Reagan Era, with glossy images inspired by the '80s. The campaign sets the brand's high-glamour products against the bare landscape of Joshua Tree National Park in California to play up the dramatic details. The campaign will hit in select September fashion magazines, as well as in stores and on the Nine West Website. <wwd.com/footwear-news>
- JJB Sports looks for more cash - JJB Sports, the U.K. sports retailer, is considering selling new shares as one of "a range of possible options" to provide more cash for the group. The company confirmed "it is reviewing a range of possible options to provide additional capital for the group. <sportsonesource.com>
- Bebe signs new chief merchandiser officer - Kathy Lee, most recently senior vice president of merchandising at Forever 21 Inc., has rejoined Bebe Stores Inc. as chief merchandising officer of the Bebe retail division. <wwd.com/business-news>
- Former Adidas CEO passes away - Robert Louis-Dreyfus, the former adidas-Salomon AG chairman & CEO and current owner of the Le Coq Sportif brand and the Marseilles, France soccer club, lost his battle with leukemia on Saturday. He was 63 years old. Dreyfus assumed the chairmanship of adidas AG in 1996. He served in the leadership role until 2001. <sportsonesource.com>
INSIDER TRADING ACTIVITY:
BBBY: Arthur Stark, President & CMO, sold 60,000shs ($1.8mm) nearly 30% of common holdings.
CHRS: Jeannine Strandjord, Director, purchased 5,000shs ($19k) on a base of roughly 95,000 shares.
- Michael Devine, SVP, CFO, sold 2,865shs ($77k) after converting 7,642shs of restricted stock units to common shares.
- Michael Tucci, President, NA Retail, sold 5,509shs (~$150k) after converting 14,696shs of restricted stock units to common shares.
CROX: Thomas Smach, Director, sold 28,000shs ($96k) roughly 50% of common holdings pursuant to 10b5-1 plan.