EVENTS TO WATCH OVER THE NEXT 24 HOURS
HBI - Earnings Call: Wednesday 1/29 4:30pm
HM.B - Earnings Call: Thursday 1/30 8:00am
UA - Earnings Call: Thursday 1/30 8:00 am
WMT - Walmart Begins Testing Online Grocery Shopping With Local Store Pickup Option In Denver
- "Walmart To Go, the retailer’s on-demand shopping service offering home delivery of general merchandise, including in some cases, groceries, is expanding its test in the Denver market today to also include a local pick-up option. Denver area customers will now be able to order their groceries online, then pick up at a nearby store – without having to set foot inside the store."
- "However, Walmart believes many customers will still park and come into the store, even after placing the order online. This is because, in surveys the retail giant has conducted, 55 percent of shoppers said the idea of grocery pick-up (as opposed to home delivery) appealed to them because it would give them a chance to grab the items they forgot when placing the original online order. While in store, they may also come across other things to buy that weren’t on their list, Walmart hopes."
- "For now, Walmart’s home delivery service is significantly cheaper than competitor Amazon Fresh, which is available in L.A., San Francisco, and Seattle, and costs customers $299 annually. Walmart charges only $5-$7 per order. Both services have minimum orders (Walmart’s is $30; Amazon is $35)."
Takeaway: For Walmart, food is a traffic driver. Allowing customers to pick-up curbside hurts traffic and with that other categories. It’s a no win situation - either lose share or lose traffic. Walmart has made it clear it will attempt to do what it takes to not lose share in their push to catch up to Amazon.
Alibaba - Alibaba Quarterly Profit Rises Ahead of Potential IPO
- "Alibaba Group Holding Ltd...posted its fourth straight quarterly profit gain on surging sales ahead of a potential initial public offering."
- "Net income attributable to ordinary shareholders was $792 million in the three months ended September, a 12 percent increase from the June quarter, according to a presentation from Yahoo! Inc., which owns a 24 percent stake in China's largest e-commerce company. Revenue rose 51 percent to $1.78 billion."
Takeaway: 51% revenue growth aside, Alibaba's Profit Margin is 65%. Revenue is collected through commissions and ad sales from users who use Alibaba's marketplace limiting cost and exposure. Because of its maturity and reach, it will be tough for anyone to compete with Alibaba in China, i.e. as e-commerce grows in China so does Alibaba's dominance.
HBI - HanesBrands Announces 50% Increase in Regular Quarterly Cash Dividend
- "HanesBrands...today announced that its Board of Directors is raising the company’s dividend by 50 percent, declaring a regular cash dividend of $0.30 per share to be paid March 11, 2014, for stockholders of record at the close of business Feb. 18, 2014."
- "Hanes has increased its payout ratio target for returning cash to shareholders via dividends to 25 percent to 30 percent of earnings per share."
Takeaway: Gotta hand it to HBI -- it continues to surprise on the upside with cash deployment. We thought that initiating a dividend in the wake of paying down debt and repurchasing stock was the final element of surprise for HBI investors. We were wrong. We're still bullish on the MFB acquisition and think that management is low-balling on accretion.
ANF - Engaged Capital Responds to Announcement from Abercrombie & Fitch Appointing New Directors and Elimination of Shareholder Rights Plan
- "Engaged Capital today responded to an announcement from Abercrombie that it has added three new directors to its board of directors, eliminated its shareholder rights plan, and separated the roles of Chairman and CEO."
- "Glenn W. Welling, CIO & Managing Member of Engaged Capital said: 'We are pleased to see the Board respond to our stated concerns at Abercrombie by enacting the earlier announced governance changes. While a good first step, we believe these reactive changes alone will not be sufficient to put the company back on a course towards creating shareholder value. It is imperative that the board, independent of management, objectively evaluate value-maximizing strategic and organizational changes at all times, and not just when convenient to placate shareholders.'"
Takeaway: Translation = Thanks for the token governance moves, but please Fire Jeffries.
GOOG, AMZN, EBAY, WMT - Google expands test of its same-day delivery service to Southland
- "Google Inc. is wading into the morass of same-day delivery pilots and programs rapidly collecting in the Southland, competing with e-commerce giants such as Amazon.com Inc."
- "In the first expansion of a test it launched in the Bay Area in the spring, Google is inviting its employees in the Santa Monica area to try out its Google Shopping Express service."
- "More than 15 retailers are involved in the Bay Area test, including Office Depot, Target, Toys R Us, Walgreens, L'Occitane and Whole Foods Market. Google did not disclose which merchants are on board for the Southern California test."
- "On the Google Shopping Express website, shoppers can compare products from participating brands before placing items into a single online 'basket.' Users can pay shipping costs of $4.95 for each retailer from which they make a purchase. Or they can sign up for a membership that offers unlimited same-day deliveries."
- "For now, Google is offering six months of free membership. The company has yet to determine how to price the membership once the trial run concludes."
Takeaway: For brands that are too big for eBay but are looking to control their e-commerce operation - Google Shopping Express is the only alternative for same day delivery. It is far too costly for retailers to establish the infrastructure to compete with Amazon, but by pooling resources with Google it could gain some footing.
LVMH - Marc Jacobs pop-up will accept social media, but not cash
- "The fragrance division of Marc Jacobs will open a pop-up in New York City’s SoHo neighborhood that will trade in social currency instead of money. The Daisy Marc Jacobs Tweet Shop will be open during New York Fashion Week, from Feb. 7 to 9."
- "According to reports, all transactions at the pop-up will be carried out based on customers’ use of the hashtag #MJDaisyChain across Twitter and other social media platforms. Shoppers will be able to exchange each tweet, Instagram post, or Facebook update for a single item."
Takeaway: Trading sales for advertising isn't a bad idea - especially for a brand who is trying to gain exposure as it heads towards an IPO. But quite frankly, we'd rather see them accept BitCoin.
WMT - Wal-Mart Upgrades Compliance in China
- "...Wal-Mart Stores Inc. is upgrading its compliance systems and requirements for vendors in China, the company said Wednesday."
- "In a follow-up statement to its initial response about a critical report on state-run television last week, Wal-Mart said it intends to make better use of existing systems and implement new programs to help vendors through the product compliance process."
Takeaway: Looks like WMT realized that fighting the Chinese government is a bad idea, and is now going on a global PR blitz.
FNP - Arthur Martinez steps down from FNP's BoD to join ANF's BoD (8K)
- "Arthur Martinez has advised the Registrant that he will not seek re-election to the Board of Directors of the Registrant upon conclusion of his current term, which term expires at the Registrant’s 2014 Annual Meeting. Mr. Martinez’ decision is not due to any disagreement with the Registrant."
Luxe Spending to Grow to $1.2 Trillion
"The luxury sector will mainly grow organically in the next decade, boosted by 440 million consumers that will spend a total of 880 billion euros, or $1.2 trillion, in 2020, according to the first True Luxury Global Consumer Insight study presented here Tuesday by Fondazione Altagamma and Boston Consulting Group. Today, 380 million consumers of luxury goods spend around 730 billion euros, or $998.5 billion, on personal luxury goods."
"The study focuses on a target of around 380 million consumers and an elite of 32 million core luxury consumers, with average yearly spending of 300,000 euros, or $410,352."