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While the US Retail mafia is drilling down how many pairs of cargo shorts Abercrombie sold last week, and whether 'skinny jeans' are 'trend right' as we look toward back-to-school, there are a few much bigger picture points worth kicking around - and both were supported by data releases out of Asia over the past 24 hours.

  • First, did anyone notice that passenger car sales in China were up 48% last month? We're not talking about a little piddly low ticket item here, folks. China is on track to pass the 11mm unit threshold this year. Importantly, domestic Chinese passenger automotive sales are outpacing commercial sales, and sales in total are outpacing production growth by a significant measure.This is the real deal.
  • Second, this morning China printed another sequential (month over month) improvement in exports alongside the 4th straight monthly gain in Chinese home prices.

What does this mean? Home prices heading higher alongside improving auto consumption trends clearly augers well for the state of the consumer. But the fact that this is happening in conjunction with an improvement in exports is noteworthy.  You've heard me talk about how the Chinese are exerting their inner capitalists by using changes in the VAT rebate structure to flex manufacturing capacity available for export. We started to see such activity (higher VAT rebates) three months ago, and we're ALREADY seeing factories reopen and exports tick up.



Some Notable Call Outs

  • By this morning, June same store sales results are old news. However, it's worth noting some trends from the month. From a product category perspective, dresses and footwear were the most often mentioned positive callouts (same as May). As expected, seasonal categories in both apparel and non-apparel were the weakest for the month. In the non-apparel categories, home, domestics, and housewares were mentioned as either having overall positive comps or were highlighted as categories that showed improving trends. Food and consumables also remained strong, despite deflation in meat and produce. Regional performance was mixed, with no prevailing trend.
  • Luxury retailers including Saks reported another challenging month with no underlying pick -up in demand. To further illustrate the weakness, Barney's just broke its third markdown of the spring/summer season for total savings up to 70% off original prices. While inventories are much tighter across the luxury channel, it appears that the level of discounting is approaching similar levels last seen over the holidays.
  • Retailers were quick to remind us that the back-to-school season will be later this year, which will negatively impact July results. Expect a calendar benefit in August as school start dates fall later this year vs. last. With consumers historically waiting later and later to make back to school purchases, this year's calendar set-up has the potential to stretch out the selling season even further.
  • Only three weeks after Michael Jackson's unfortunate death, retailers are preparing for a wave of products to hit the shelves. The speed to market is noteworthy given the expected breadth of items to be released. However, the timing is purely coincidental as the large merchandise program designed by Jackson was already in the works as he prepared for the London comeback tour.


Household Spending Remains Strong in China - Ikea, the world's largest home- furnishings retailer, is seeking a suitable site to open a second store in Beijing to meet rising demand as household spending increases in the world's most populous nation. The second Beijing store will likely be larger than the first, which covers about 42,000 square meters (452,084 square feet), she said.  "We typically build a store from the ground up, instead of leasing from an existing location," according to Xu. "We're now looking for a suitable location that will allow us to construct it this way." China is promoting local consumption to boost economic growth and counter a slump in exports after global demand worsened. Chinese retail sales rose 15 percent in May, the fastest pace in four months, government data showed. The new Beijing store, should Ikea decide to proceed with the investment, will be its tenth in the country, Xu said. The retailer has seven stores in China, and is building one in the northern city of Shenyang and another in Shanghai, she said.  <bloomberg.com>

Activewear Company Sues Nike Over MJ HOF Induction Related Apparel - Not everyone is excited about Michael Jordan's induction into the Basketball Hall of Fame this summer. SportsFuzion Inc., an activewear firm based in Massachusetts, has filed a suit in the Massachusetts Superior Court in Norfolk, accusing Nike Inc. of fraud, contract interference and other violations for the Hall of Fame collection its Jordan brand is planning to commemorate the induction. SportsFuzion contends that, in 2005, it created the concept and detailed marketing plan around a product line for Michael Jordan's induction to the Hall of Fame. "Having Nike and the Hall of Fame go behind our backs to cut us out of the deal has become my worst nightmare," Andrew Mirken, president and co-founder of SportsFuzion, said in a statement. The firm, which has held a license for Basketball Hall of Fame apparel since 2006, also names the Hall of Fame as a defendant in the suit.  <Women's Wear Daily>

Premium Denim for the Youngins - Cherokee Inc. wants to resurrect the spirit of the counterculture. The Van Nuys, Calif.-based licensor will reintroduce A. Smile, a young men's and juniors denim-based line that had its heyday in the Seventies. Cherokee has tapped Graj + Gustavsen, a branding firm, to help it in its efforts to reintroduce the brand and make it relevant to today's consumers. The brand spoke to the hippie generation with its styling and marketing, which included an ad of a donkey wearing a pair of jeans that read: "Put a smile on your ass." In similar news, Joes Jeans just entered a new license agreement with Kids Jeans to provide premium denim for infants, girls and boys.  <Women's Wear Daily>  & <DJ Newswires>

eBay Looks to Loosen EU Competition Laws - In a new bid to lift what it sees as unfair barriers to online trading, eBay on Thursday sent all its users in Europe a petition urging the European Commission to amend its competition laws. EBay hopes the support of its vast customer base will help persuade the commission as it considers whether to change legislation governing online retailing when regulations expire at the end of 2009. "We are asking all our eBay customers in Europe to sign our online petition against online trade barriers," a spokeswoman said. "This, in turn, asks European decision-makers to amend an European Union competition law in order to make it harder for certain brands and manufacturers to block the sale of products on eBay and other market places." Existing regulations allow for selective distribution - the right that brands have to choose where and how their products are sold. In its e-mail to customers, eBay argued some brands unfairly prevent the sale of their products by contending that the online world is fertile ground for counterfeit goods. EBay said only 0.15 percent of posts on its site have been detected or signaled as presenting a counterfeit risk.  <Women's Wear Daily>

Sports Equipment Update - Sales in athletic sports equipment, apparel and footwear were flat for 2008 after a 4 percent rise the year prior, according to a recent report.  The NPD Group's Global Sports Estimate 2009 report showed that 1 percent declines in sales in Europe and the Americas were offset by growth in Asia, where sales rose 4 percent (led by China, with a 15 percent jump), and in the Middle East and Africa, where sales were up 7 percent. Running, walking and hiking, swimming, cycling, the workout/fitness category and soccer all saw gains in market size, while golf, basketball and tennis shrank. Apparel decreased 1 percent globally, with footwear flat for the year worldwide, despite a 3 percent decline in the Americas. Looking ahead to 2009, the Port Washington, N.Y.-based research group's report forecasts sales declines driven by the economy in China, with the European market trending toward private-label expansion and manufacturer consolidation. <Women's Wear Daily>

Juicy Out of Madison Ave. - Juicy Couture is abandoning Madison Avenue, reflecting hard times and high rents along the posh Manhattan retail venue.  The division of Liz Claiborne Inc. has been paying $2 million in annual rent for its two-level, 3,300-square-foot store at Madison and 70th Street.  "It's been a lot to pay," said Edgar Huber, Juicy Couture's president. "The lease was signed at the height of commercial real estate in New York. Landlords will have to bring down prices. Nobody will be willing to pay them."   Rents on Madison remain high, though they have begun to decline. As of last spring, rents were down 8 percent to $979 per square foot from $1,066 in 2008, according to the Real Estate Board of New York.  In addition to the rent, Juicy Couture's business on Madison has been hurt by slower customer traffic as consumers pull back on apparel purchases. In addition, the brand, known for its upscale, girly, contemporary clothes, opened a glitzy flagship on Fifth Avenue and 52nd Street. "People prefer the big store on Fifth Avenue, which is doing extremely well," Huber said. "The Madison location became a neighborhood store, not a high-traffic store. It was never extremely strong for us. It's important to have a store on Madison. It's prestigious, but $2 million [in rent] is too high. Our average transaction is not as high as our neighbors."  Huber said the Madison Avenue closing is "an exception" to the company's strategy of opening stores. The location is being marketed by Juicy Couture and its brokers.  <Women's Wear Daily>

Christmas Comes Early to Sears and Kmart - The retailers owned by Sears Holdings Corp. decided they don't need snow, pine-scented trees, deeply discounted merchandise or any other harbingers of the holiday to sell Christmas products in July. Christmas Lane, a pre-holiday program, runs from July 5 to 25 on the Sears Web site and in 372 Sears and Kmart stores. With consumer spending down in the recession, Hoffman Estates, Ill.-based Sears Holdings is offering shoppers "a jump start" and several financing options, including layaway and zero percent financing," a spokeswoman said. "This enables them to spread out payments over a certain period of time. They may be able to buy more in the end."

 <Women's Wear Daily

M&S and Primark Spitting Match - Marks & Spencer executive chairman Sir Stuart Rose said at Wednesday's AGM that it was impossible to sell a t-shirt in the UK for £2 while covering business costs and paying a "fair and living wage to the person who made it". The comment was taken as a thinly veiled attack on low-price specialist Primark. But yesterday, when Primark-owner ABF updated on trading, group finance director John Bason said it shared some suppliers with M&S. "Sometimes people think Primark sources from people different to everyone else on the high street," Bason observed. He said 98 per cent of its top 250 suppliers also supply other high street names. Anti-poverty campaigners said M&S was being hypocritical. War on Want senior campaigns officer Simon McRae said: "This underlines the systemic problem that no British fashion retailer can guarantee a living wage and decent conditions for garment workers." <retail-week.com>

Blue Jeans Bandits Caught - Police arrested 11 suspected "blue jeans bandits" after they were discovered cutting tags off about $10,000 worth of stolen merchandise in the backyard of a southeast Atlanta home. Most of the merchandise, which included hundreds of pairs of jeans as well as shirts, still had labels and security tags, said Sgt. Lisa Keyes, a police spokeswoman.  The suspects - three adults and eight juveniles - are believed to have been involved in a series of robberies in the Atlanta metropolitan area that have resulted in the loss of premium denim and sportswear worth an estimated $1.5 million. More than 70 retailers, including Macy's at the Lenox Square mall, have been hit in the last two-and-a-half years. Police dubbed the gang the "Blue Jeans Bandits."  <Women's Wear Daily>

Scoop on the Ropes - Scoop NYC, the contemporary retailer created 13 years ago as "the ultimate closet," is under increasing financial pressure. Several factoring companies have stopped giving Scoop credit and approving orders. The chain, which was purchased about two years ago by billionaire Ron Burkle's Yucaipa Cos. LLC, is said to be undercapitalized and has been slow in paying its vendors, according to financial sources.  "Some designers will ship them regardless, but we have not approved them for quite some time - since September 2008," said Gary Wassner, president of Hilldun Corp.  "They're unresponsive in their accounts payable department," Wassner added. "They're not cooperative. They're not providing any financial information to make any kind of analysis of how they're doing. In today's market, it's important to be transparent." He said other factors in the market are not approving the retailer either, citing Rosenthal & Rosenthal, CIT Group, GMAC and Wells Fargo. <Women's Wear Daily>

RESEARCH EDGE PORTFOLIO: (Comments by Keith McCullough):


07/09/2009 11:07 AM


Re-shorting our view on US Consumer Discretionary, on an up day... Short green. The intermediate term TREND in this US Sector View remains broken. KM