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In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance




  • MIXED:  2014 is a mixed picture for RCL as suggested by our cruise survey:  stronger Europe, weaker Caribbean.  2014 net yield guidance was solid but not surprising.  We see CCL as the better bet as pricing particularly in the Caribbean looks more robust than RCL in early Wave 2014.







  • BETTER:  Surge in close-in bookings for Q4 pushed net yields higher than expected.  Mgmt more optimistic on Europe.  Strong NA sourced demand continues to lead the way for the European cruise market. For European-sourced European demand, they're generally meeting expectations.
    • PREVIOUSLY:   
      • Early bookings for the overall Europe portfolio had been very encouraging, with our load factors trending ahead of last year in the mid single-digit range and higher ticket per diem for every month of the season.
      • We're seeing a little bit of a comeback in Southern Europe and Germany.


  • WORSE:  2014 net yields are forecasted down low single digits, lower than the previous forecast of flat to slightly down.  Higher capacity playing a role.  Longer-dated itineraries performing better than shorter-dated ones. 
    • We've acknowledged as the Caribbean is of particular concern.  Despite this, our more premium Caribbean products, including the Oasis-Class ships and the Solstice Class ships continue to enjoy superior pricing and are delivering good returns. As a result, based on our early bookings, we expect our core Caribbean yields to be roughly flat to down slightly in 2014.
    • We look forward to the Caribbean returning to better pricing.
    • our Caribbean yield change this year over last year and our preliminary Caribbean yield change outlook for 2014 are roughly equal.
    • While we expect to maintain a high level of focus on driving revenue on all of our Caribbean products, in general, we see more competitive pressure in the near term in South Florida than in other Caribbean homeports.


  • BETTER:  Territorial dispute between China and Japan remains a wild card.  However, Asian/Australian bookings are up considerably in 2014.
    • For 2014, we have opened up our sailings for booking, once again, based on itineraries offering exclusively Korean destinations. This is, of course, frustrating, particularly since we do not see any signs of positive geopolitical change in the dynamic between China and Japan.
    • Our capacity increase in Asia in 2014 will be just over 20%, which primarily reflects a full-year capacity upgrade from Legend of the Seas to Mariner of the Seas, that occurred in May of this year.


  • SAME:  Mgmt recognized the weakness in the brand but sees a brighter future ahead.  2014 will be a transitional year.  Mgmt expects the biggest benefits of Pullmantur's changes to occur in 2015 and beyond.
  • PREVIOUSLY:  Pullmantur has faced the toughest operating environment of any of our brands, and they've worked hard to overcome the huge obstacle that they have faced.


  • SAME:  Discounting remains prevalent and very competitive during Wave Season.
  • PREVIOUSLY:  Heighted promotional activity is centered mostly around short excursions in the Caribbean.  Pricing in the Caribbean remains very competitive. 


  • SAME:  Bookings are 5% higher than same time last year.  APDs up in all four quarters.  Loaded factor flat in 1Q but up in 2Q, 3Q, and 4Q.
    • We are currently booked ahead of same time last year in both APD and load factor.
    • Our comparables become a little bit easier going forward.
    • New booking volumes since our last call have averaged about 5% higher than during the same period last year, and our average booking window has extended slightly.
    • Caribbean yields are expected to be flat to slightly down year-over-year.
    • Europe is expected to have a second year of strong yield improvement.
    • Healthy yield growth is expected in Asia
    • Expect moderate growth from the already high-yielding Alaska program.


  • SAME:  2014 guidance issued for 'flat to slightly down'.
  • PREVIOUSLY:   Just to reiterate on the cost side, our expectations on costs are for them to be better than flat in 2014,


  • BETTER:  Onboard again outperformed -across all categories and markets.  Onboard yields were up 8% in 4Q.  Mgmt expects +2-3% onboard yields for 2014. 
    • We benefited from new onboard venues introduced as a result of our revitalizations. And we saw further strength in spending from our U.S. customers, which helped generate improvement in gaming, beverage, specialty dining and shore excursions.
    • Onboard is obviously expected to go up but tempered relative to 2013


  • WORSE:  While still optimistic on Alaska, mgmt commentary was more guarded.
    • Demand for European itineraries has been very strong from all of our core markets, including the United States and the United Kingdom and Ireland. And we are well positioned for another year of yield growth.
    • Alaska has been a solid performer for us over the past couple of years, and we've been maintaining similar yields to those achieved during our record 2011 season.  Bookings and pricing for 2014 Alaska sailings have been trending ahead of last year, and we are anticipating further yield growth for the season. Both Alaska and Europe products operate during our crucial Q2 and Q3 peak seasons and early indications for 2014, as their performance is shaping up very nicely.


A mixed picture for RCL as suggested by our cruise survey: stronger Europe, weaker Caribbean.  We see CCL as the better bet as pricing particularly in the Caribbean looks more robust than RCL in early Wave 2014.




  • Impact of the 2013 challenges is holding back the kind of yield increases they would otherwise be enjoying for 2014
  • The Caribbean weaker due to two factors: firstly, it's the areas hardest hit by the media storm of 2013; and secondly, large capacity increase here for both the company and the industry of 13%. 
  • RC brand:  greatest investments and greatest opportunity for improvements
  • Celebrity:  expect improvement in ROI in 2014
  • Azamara:  looks to achieve some of the highest yield improvements in a year
  • Pullmantur:  expect the greatest relative benefit
    • Spanish market remains key to Pullmantur's long-term success, but the immediate growth in Latin America should be significant. 
    • Expect this transformation to take some time and for 2014, the year will be a transitional year.
    • Expect the biggest benefits of Pullmantur's changes to occur in 2015 and beyond
  • Seeing improvement coming in the results of underperforming assets e.g. Pullmantur
  • 4Q 2013
    • Europe/Asia drove the 3.8% yield increase, offset by slight decline in Caribbean
  • 2013 
    • Flat yields in Caribbean
    • +8% yields in Europe
  • Compared to same time last year, 2014 has 5% more revenues on the books
  • The first week of WAVE was somewhat softer than last year, as much of North America was weathering the polar vortex.  While cold winter typically means increased demand for Caribbean sailing, the severity of the weather kept people indoors and clearly resulted in lower bookings for several days.  Demand was softest out of the Northeast and Midwest but stronger in the warmer market.  Excluding the first week, demand has been more typical at WAVE level. 
  • Caribbean: 46% capacity in 2014
    • Currently, booked load factors and rates for the Caribbean are lower than the same time last year
    • Longer-dated itinerary pricing doing better than shorter-dated ones
  • Europe:  22% capacity in 2014
    • Booked load factors and APDs are significantly higher than the same time last year and are expecting another year of significant yield improvement in Europe and expect yields to surpass pre-recessionary levels.
  • Asia-Pacific:  12% capacity in 2014
    • Those of booked load factors and APDs remain ahead of the same time last year, in spite of a 12% increase in capacity.
    • Expect nicely higher yields
  • Other:  20% capacity in 2014
    •  An aggregate of these itineraries are booked ahead same time last year on both grade and volume 
  • 2014 guidance
    • APDs up in all 4 quarters
    • Load factors flat in 1Q but up in 2Q, 3Q, and 4Q
    • Capacity growth:  1.7%
    • Inflationary pressures
    • Hedges, swaps are $57MM lower YoY
  • Quantum delivery: Oct 2014


Q & A

  • Last year's WAVE bookings were up 20% in January.  WAVE Jan 2014 not as strong as Jan WAVE 2013.  Comparisons get easier particularly in 2Q.
  • Continue to root for cold weather; adversely affected 1st wk of WAVE since it was so cold
  • Cost savings not in early innings but as a journey process
  • Target leverage ratio:  3.75x  and investment grade target
  • Share repurchase? Board has had discussions
  • European strength:  strong demand from NA market (stability with air costs, allows customers to purchase air package at an earlier date); strength from all source markets; capacity is lower
  • 10K - will outline each 2013 Q excluding Pullmantur non-core assets
  • Asia/Australia:  pleased with outlook; Mariner of Seas in China doing well; robust market in Australia; Japan/China dispute still a wild card 
  • Strong late bookings in European/Asian products in 4Q 2013
  • 2014 Onboard yields: similar to 2013 growth (+2%-3%)
  • Cost efficiencies:  global restructuring, back office integration
  • Promotional environment:  discounting is a part of the WAVE equation right now (very competitive)
  • Alaska: 'mini-Europe in terms of importance'; feel pretty good about bookings (capacity unch YoY); fairly confident with how Alaska is shaping up
  • Onboard:  strength across every revenue stream and market 
  • 2015 EICA impact:  pretty modest (will be quantified in 10K)
  • Lower interest expense for 2014:  $2 billion of refi; weighted cost of debt dropped by 55bps; $500MM lower YoY in debt
  • Historically, newer ships premiums have been 25%
  • Europe:  Strong NA sourced demand for European market; for European-sourced European markets, they're generally meeting expectations
  • Caribbean environment:  promotions continuing into 2Q and 3Q but expectations are baked in their guidance
  • Explorer of the Seas norovirus outbreak:  initial spike in illness on Jan 23; now far less guests becoming ill; compensation given out; don't expect a significant impact to financials

Keith's Macro Notebook 1/27: JAPAN COMMODITIES UST10YR

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What's New Today in Retail (1/27)

Takeaway: Data breach #3. Why aren’t more security companies on this? Puma v. NKE. TNF v. Canada. Scovanner lands. WWW PVH URBN WMT Fast Retailing



MIK - Michaels Says It’s Found Possible Customer-Accounts Breach



  • "Michaels Stores Inc...said some of its customer payment-card data may have been used fraudulently, making it the third U.S. retailer to report such a breach since December."
  • "Michael Fox, a spokesman for Michaels, declined to say when the data-security attack may have occurred, when the company learned of it or how many customer accounts may be affected. He said the matter is being investigated and any new information will be posted on the company’s website."


Takeaway: Bad publicity at a bad time. This shouldn't affect its IPO plans, but it can't help valuation.  We're surprised that more data security firms aren't licking their chops and pouncing on the opportunity of a lifetime.


KER - Puma to Outfit Arsenal Football Club



  • "Puma AG said it would supply the uniforms and merchandise for English Premier League team Arsenal Football Club..."
  • "He wouldn't comment on the value of the deal beyond saying it represents the 'biggest deal in Puma and Arsenal's history.' British press reports suggest Arsenal will receive £30 million ($49.7 million) a year for the five years of the deal."


Takeaway: Puma beat out Nike for the right to spend $50mm to put their logo on Arsenal's jersey. Nike is in the midst of negotiations with Manchester United and most likely bowed out of the Arsenal talks after Puma inflated the price. Either that, or in typical Nike fashion it knew how badly its competitor wanted the deal, so it bid up the price knowing it would ultimately walk away.


9983 - Fast Retailing to List in Hong Kong



  • "Fast Retailing Co. Ltd. said Monday it has decided to pursue a secondary listing of its shares on the Hong Kong stock exchange to boost its profile in Asia and appeal to more international investors."
  • "The corporate parent of Uniqlo said it is not issuing new shares so it is not raising any capital in the operation. The company said it plans to list its Hong Kong depository receipts March 5 but it may decide to postpone the listing if business and market conditions change."


Takeaway: The really big move would have been to dual list in Hong Kong and New York. Hey, the NY/Hong Kong thing worked for COH.


VFC - Canadian Olympic Committee threatens North Face with trademark suit



  • "The Canadian Olympic Committee is threatening legal action against The North Face, claiming the outerwear brand associated itself with the upcoming Games in Sochi, Russia, without paying for an official sponsorship."
  • "The current dispute is over a line of clothing North Face launched in November called the 'International Collection.' Some of the clothing, labeled 'village' wear, is decorated with the Canadian flag (or other team colors in other countries), and sometimes featured a patch with the symbol 'RU 14' – a reference to the Winter Games in Sochi. Other merchandise showed a world map with a red star where Sochi is located. A T-shirt featured the date of the opening ceremonies: '07.02.2014.'"


What's New Today in Retail (1/27) - chart2 1 27


Takeaway: The amusing part of this whole story is that the COC is warning consumers that their North Face purchase won't help 'support' the Canadian Olympic Team. What probably happened is that Adidas threw a fit when it saw product that threatened its place in the market without paying one dime in endorsement money.


URBN - Wendy Wurtzburger Exits Anthropologie



  • "Wendy Wurtzburger, a 15-year veteran of Urban Outfitters, has left the company. Sources said the chief merchandising and design officer of Anthropologie North America’s last day was Thursday. Wurtzburger and executives of Urban Outfitters Inc. could not be reached for comment."


Takeaway: Anthropologie is the crown jewel in the URBN portfolio with the namesake brand comping down. We have to believe that Wurtzburger had a lot to do with the success of the brand. Her departure, regardless of circumstances, will be felt.


HBC - Hudson's Bay Company Taps Douglas Scovanner for Interim Finance Lead



  • "Hudson's Bay Company  has appointed Douglas Scovanner as Executive Vice President of Finance and Accounting, on an interim basis. This appointment gives Scovanner day-to-day responsibilities for the company's Financial Planning, Asset Protection, and Accounting functions. Prior to this appointment, Scovanner spent nearly two decades at Target Corporation, most recently as Executive Vice President and Chief Financial Officer."


Takeaway: Great move by HBC. Scovanner was money at Target, and we'd argue he is currently being sorely missed. If HBC could hang on to him it'll be a big win.


WMT - Wal-Mart to lay off 2,300 at Sam's Club



  • "Wal-Mart Stores Inc. plans to lay off 2,300 employees at Sam's Club, or about 2% of the warehouse club's workforce, according to published reports Friday. The move reportedly aims to reduce the ranks of the subsidiary's middle management. It is the biggest round of layoffs at Sam's Club in four years."


PVH - Zooey Deschanel Teams With Tommy Hilfiger



  • "To Tommy, From Zooey...the name of a new capsule collection designed by Tommy Hilfiger and Zooey Deschanel... which will mainly consist of flirty dresses, will make its debut at Macy’s this spring."
  • "The dresses will be priced at retail for between $98 and $199, and 14 of the 16 styles will launch at 200 Macy’s stores beginning April 14."




Russia customs rules hit online retailers



  • "Western online retailers are hitting a fresh roadblock in their push into Russia, one of the world’s fastest-growing ecommerce markets, as new customs regulations hinder courier deliveries to private customers in the country."
  • "DHL and FedEx said they had suspended express deliveries from abroad to individuals in Russia because of stricter customs procedures that require lots of extra paperwork on all parcels for personal use except for documents, regardless of the shipment value."
  • “'This impacts mostly shipments for business-to-consumer ecommerce for customers such as Amazon and Net-A-Porter,' said Daniel McGrath, spokesman for DHL Express. 'That is a minor part of our business, but it is a fast-growing market.'”
  • "UPS has not suspended services yet but said: 'We have told our customers that we’ve experienced significant delays in clearance and deliveries as a result of the change in customs procedures.'”


European Banking Monitor: Is It Time to Panic?

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .




European Financial CDS - Swaps were sharply higher across Europe's banks last week. UK banks fared equally poorly alongside their French, German, Spanish and Italian counterparts.


European Banking Monitor: Is It Time to Panic? - vv.banks


Sovereign CDS – Sovereign swaps widened almost across the board last week with the biggest moves occurring in Portugal and Italy (+25 and +19 bps). Meanwhile, the US and Germany were unchanged at 28 and 23 bps, respectively. 


European Banking Monitor: Is It Time to Panic? - vv.sov1


European Banking Monitor: Is It Time to Panic? - vv.sov2


European Banking Monitor: Is It Time to Panic? - vv. sov3


Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 11 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 


European Banking Monitor: Is It Time to Panic? - vv.euribor


Matthew Hedrick


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.51%
  • SHORT SIGNALS 78.32%