prev

Retail Callouts (2/13): JCP, RL, UA, WWW, SKX

Takeaway: UA GILTy as charged. JCP c-suite chg good - off by a letter. 1st glimpse of Polo women launch. WWW repo/Merrell apparel. Big print by..SKX?

EVENTS TO WATCH OVER THE NEXT 24 HOURS

 

  • CAB - Earnings Call: Thursday 2/13, 11:00am
  • VFC - Earnings Call: Friday 2/14, 8:30am

 

COMPANY NEWS

 

JCP - J. C. PENNEY COMPANY, INC. NAMES EDWARD RECORD CHIEF FINANCIAL OFFICER

(http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-newsCompanyArticle&ID=1899772&highlight=)

 

  • "J. C. Penney Company, Inc. today announced that Ed Record has been named executive vice president and chief financial officer, effective March 24, 2014.  He will succeed Ken Hannah, who will remain chief financial officer through that date to ensure a smooth transition."
  • "Record, 45, has nearly 25 years of experience managing the financial and operational performance of multiple retailers.  He spent over six years at Stage Stores...Before Stage, Record served as senior vice president of finance at Kohl's and as controller and senior vice president of finance at Belk."

 

Takeaway: Shaking up the C-Suite - definitely a good thing, but the position they chose was off by a letter.

 

UA - Under Armour gives Gilt Groupe a try

 

Retail Callouts (2/13): JCP, RL, UA, WWW, SKX - chart2 1 13

 

Takeaway: UA's premium product has virtually zero retail presence right now. It's not currently in Factory or Wholesale and rightly so. Through its two full-price retail doors (3 when NYC opens) and initiatives like this one with GILT, UA seems to be testing the market before going all in. This is particularly important for their push into Women's - under its current distribution there really isn't a place for the premium yoga line. As UA refines its channel strategy to more fully incorporate newer higher priced products it means more trouble for LULU.

 

SKX - SKX reports 4Q13 Earnings

 

Retail Callouts (2/13): JCP, RL, UA, WWW, SKX - chart1 2 13

 

Takeaway: The company crushed expectations -- at least at face value -- with EPS of $0.28 vs the Street at $0.17. Revenue was in-line, gross margins were up 200bp, and the tax rate was pretty much nonexistent (3% vs 40% last year). But inventories look good (note SIGMA in the right quadrant), and the company's outlook was better than most retail companies we see these days. The market's reaction says it all.

 

RL - Ralph Lauren Unveils Polo for Women

(http://www.wwd.com/fashion-news/designer-luxury/ralph-lauren-the-polo-ette-7448818)

 

  • "Today, the designer will kick off his fall runway show by unveiling about 25 looks from the new women’s Polo Ralph Lauren brand, which is making its debut for fall."
  • "The move is part of Ralph Lauren Corp.’s larger global push to capitalize on the recognition and strength of the Polo name amid the group’s brand portfolio."

 

Retail Callouts (2/13): JCP, RL, UA, WWW, SKX - chart3 2 13

Retail Callouts (2/13): JCP, RL, UA, WWW, SKX - chart4 2 12

 

Takeaway: Polo is RL's most underutilized asset. This massive push to make the brand a stand-alone profit driver instead of just an add-on line of collared men's shirts makes all the sense in the world. And it has global appeal. Combined with the recently consolidated Chaps (from PVH license), these two horses will be the main drivers of RL's growth over the next three years.

 

WWW - Wolverine Worldwide Declares Quarterly Dividend; Announces Authorization Of $200 Million Share Repurchase Program

(http://phx.corporate-ir.net/phoenix.zhtml?c=88408&p=irol-newsArticle&ID=1899489&highlight=)

 

  • "The Company's Board of Directors also approved a new share repurchase program authorizing up to $200 million in share repurchases, which replaces the Company's 2010 Share Repurchase Authorization that just expired.  The share repurchases are authorized to be made over a four-year period at times and amounts deemed appropriate by the Company, based on factors including price, market conditions, and restrictions contained within the Company's credit agreements."

 

Takeaway:  Share repo announcement is a positive, but keep in mind that last one was a 4-yr deal on Fed 12. It's time for another. WWW only repurchased ~$114mm on the last one because of PLG deal. Now they refresh to have facility in place to support stock on the bad days.

 

OTHER NEWS

 

PERY - Perry Ellis Names Michael Maccari Creative Director

(http://www.wwd.com/menswear-news/designer-luxury/maccari-joins-perry-ellis-as-new-creative-director-7448586)

 

  • "Michael Maccari has joined the label as creative director and will oversee design direction for all Perry Ellis product categories, including collection sportswear and licensed product." 
  • "Maccari, who was fashion director and senior vice president of design for Armani Exchange, has also worked with Polo Ralph Lauren, J. Crew, Calvin Klein and Donna Karan New York."

 

9983 - Uniqlo Confirms Southern California Store Openings

(http://www.wwd.com/fashion-news/fashion-scoops/uniqlo-confirms-southern-california-store-openings-7448859)

 

  • "Uniqlo has put an end to the speculation about its store openings in Southern California. The retailer confirmed late Wednesday that it is entering the region in the fall with units at South Coast Plaza in Costa Mesa, Calif., and Beverly Center in Los Angeles."

 

WWW - Merrell Appoints VP of Apparel & Accessories 

(http://www.sportsonesource.com/news/article_home.asp?Prod=1&section=1&id=49867)

 

  • "Merrell appointed Sylvie D’Azemar as vice president of Merrell apparel and accessories."
  • "Prior to her new position at Merrell, D’Azemar was the vice president for Head sportswear, and the head of global apparel & gear for Salomon. Her career has also included leadership roles with Nike, where she was General Manager France for Hurley, and Business Director for Nike Apparel France."

 

INDUSTRY NEWS

 

NPD: Fashion Footwear Sales on the Rise

(http://www.wwd.com/footwear-news/markets/npd-fashion-footwear-sales-on-the-rise-7447167)

 

  • "U.S. retail sales of fashion footwear, which includes all footwear except athletics, generated revenue of $41.52 billion in 2013, a 4 percent increase over the flat growth experienced in 2012, according to new data released from The NPD Group."
  • "...outdoor and casual footwear experienced the largest dollar sales growth at 10 percent and 7 percent, respectively. With sales topping $23.8 billion in 2013, a 2 percent increase over 2012, the women’s category maintained its position as the largest driver in the fashion footwear industry, representing 57 percent of the total market. The men’s and children’s segments experienced sales of $12.5 billion, an increase of 7 percent over 2012, and $5.22 billion, an increase of 2 percent, respectively."
  • "Total unit sales for these segments were up 4 percent, with men’s fashion footwear experiencing the largest gain in total units at 9 percent, followed by children’s fashion footwear at 3 percent and women’s fashion footwear at 2 percent."

 

 

 

 


[PODCAST] McCullough: Here's Where the Opportunities Are

In this morning's conference call, Hedgeye CEO Keith McCullough walks investors through what's working right now, what's not, and where the biggest market risks and opportunities exist.

 


MPEL 4Q CONFERENCE CALL NOTES

Hold adjusted in-line with us but nicely above the Street. Dividend policy a plus

 

 

CONF CALL

  • Premium mass will continue to be supported by infrastructure developments
  • 4Q luck-adjusted property EBITDA margin increased 400bps YoY to 28.6%
  • CoD Manila:  will open around mid-2014
  • New dividend policy: distribute 30% of net income
  • Macau still underpenetrated
  • Record CNY:  remarkable strength in mass market segment
  • 4Q luck-adjusted (2.85% hold) property EBITDA: $380MM (+36% YoY, +12% QoQ)
  • Mass EBITDA: 75% of luck-adjusted EBITDA at CoD and 70% on group-wide basis
  • 1Q guidance
    • D&A: 95-100MM
    • Corp expense: 24-26MM
    • Consolidated net interest epxense ; 31-33MM ($11MM CoD Manila, $17 Studio City, net of $18MM cap interest for CoD Manila/Studio City)

Q & A

  • Not surprised with January's slowness due to before CNY period
  • Need to look Jan and February together to get a sense of business trends
  • Tax situation in Phillippines:  working with PAGCOR
  • 2nd wk of CNY:  very strong; some VIPs customers coming this week and weekend; pattern repeating from last year
  • 4Q High mass hold: combination of service and floor strategy, putting more premium tables which is sustaining the high hold; high hold is sustainable
  • Will continue to move tables from Altira to CoD
  • Mass win per table:  is there a threshold?  No.
  • CoD:  creating a new high-end slot area on ground floor, new F&B experience on 2nd floor (also potentially more gaming machines) --projects may be completed in mid-2014
    • Total capex for both projects:  $30MM
  • Japan:  open-minded to opportunities
  • Altira EBITDA per table low compared with Starworld:  VIP EBITDA per table is on par with the market
  • CoD opex:  not concerned; bonus provision for 4Q was modestly higher than in previous quarters
  • CoD direct VIP:  did not hold well 
  • CoD 5th Tower:  PR event in 2Q will unveil budget and features
  • MSC:  will be the only stand-alone property to open on Cotai; on schedule, on budget

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On

Takeaway: Historic week within ETFs with record outflows in equities and record inflows into bonds...trends unchanged within mutual funds

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

In the most recent week, we saw a continuation of the tale of two tapes with equity inflow and fixed income outflow in mutual funds (retail) and a record reallocation within more institutionally based ETFs with record outflows in stock ETFs and record inflows into bond ETFs.

 

Total equity mutual funds experienced another week of inflow as the lagged effect of fund flow chasing performance from last year has been strong enough to offset near term worries about emerging markets. For the week ending February 5th, equity mutual funds had $1.8 billion of inflow, a deceleration from the $5.4 billion inflow the week prior but none-the-less a positive inflow in a tough macro news flow week. The $1.8 billion subscription for the week however was below the running year-to-date weekly average inflow of $4.3 billion for stock funds in 2014. 

 

Fixed income mutual funds conversely had net outflows during the most recent 5 day period, a continuation from the negative performance of 2013. In the week ending February 5th, total fixed income mutual funds experienced a $2.8 billion outflow, which broke out into a $3.0 billion redemption in taxable bonds and a $146 million inflow into tax-free bonds, the fourth straight week of inflow for munis. The 2014 weekly average for fixed income mutual funds now stands at a $75 million weekly outflow, an improvement from 2013's weekly average outflow of $1.5 billion but a far cry from the $5.8 billion weekly average inflow from 2012 (our view of the blow off top in the bond market).

 

ETFs, a more institutionally oriented product, reflected the nascent risks in emerging markets and weaker U.S. economic data with record outflows in stock ETFs and conversely record inflows in fixed income ETFs. Stock ETFs lost a weekly record $27.4 billion in the 5 day period ending February 5th, the biggest weekly outflow in our data set spanning 18 months of information. Bond ETFs conversely booked the biggest weekly inflow in our information from Bloomberg putting up a $14 billion subscription. The 2014 weekly averages considering this latest data are now a $7.9 billion weekly outflow for equity ETFs and a $2.8 billion weekly inflow for fixed income ETFs. 

 

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a negative $36.7 billion spread for the week (-$25.5 billion of total equity outflows versus the $11.1 billion inflow within fixed income; positive numbers imply inflows for stocks; negative numbers imply inflows for bonds). The 52 week moving average has been $6.5 billion (positive spread to equities), with a 52 week high of $30.9 billion (positive spread to equities) with this week setting the 52 week low of equity/debt weekly spread of -$36.7 billion (negative numbers imply a net inflow into bonds for the week). 

 

While the short term fund flow picture is showing drastic volatility with this week's historic outflow in ETFs, we highlight that the longer term picture within the mutual fund market continues to relay a rebound in stock funds to the detriment of fixed income funds. Looking at top line gross sales of all equity funds on a monthly basis, shows the continued trajectory higher to new record highs since 2007 through the end of last year. According to ICI data, all equity funds grossed $159 billion in sales in December 2013, a new high in all available data from 2007. Conversely, fixed income mutual funds continue to book lower highs in sales after peaking in early 2013. The most recent sales tallies in December (as January 2014 totals aren't available yet) amounted to $92 billion, well off the all-time high of $118 billion in fixed income monthly sales in January 2013. While net flows (what the industry normally focuses on) can be volatile on a short term basis, top line sales totals will eventually wash out short-term inflow or outflow and hence are a better indicator of which products have the most momentum. Thus these top-line sales trends still relay incrementally stronger demand for equities over fixed income in mutual funds for now.

 

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 15

 

 

 

Most Recent 12 Week Flow in Millions by Mutual Fund Product:

 

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 2

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 3

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 4

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 5

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 6

 

 

Most Recent 12 Week Flow Within Equity and Fixed Income Exchange Traded Funds:

  

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 7

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 8

 

 

Net Results:

 

 

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a negative $36.7 billion spread for the week (-$25.5 billion of total equity outflows versus the $11.1 billion inflow within fixed income; positive numbers imply inflows for stocks; negative numbers imply inflows for bonds). The 52 week moving average has been $6.5 billion (positive spread to equities), with a 52 week high of $30.9 billion (positive spread to equities) with this week setting the 52 week low of equity/debt weekly spread of -$36.7 billion (negative numbers imply a net inflow into bonds for the week). 

 

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 16

 

 

While the short term fund flow picture is showing drastic volatility with this week's historic outflow in ETFs, we highlight that the longer term picture within the mutual fund market continues to relay a rebound in stock funds to the detriment of fixed income funds. Looking at top line gross sales of all equity funds on a monthly basis, shows the continued trajectory higher to new record highs since 2007 through the end of last year. According to ICI data, all equity funds grossed $159 billion in sales in December 2013, a new high in all available data from 2007. Conversely, fixed income mutual funds continue to book lower highs in sales after peaking in early 2013. The most recent sales tallies in December (as January 2014 totals aren't available yet) amounted to $92 billion, well off the all-time high of $118 billion in fixed income monthly sales in January 2013. While net flows (what the industry normally focuses on) can be volatile on a short term basis, top line sales totals will eventually wash out short-term inflow or outflow and hence are a better indicator of which products have the most momentum. Thus these top-line sales trends still relay incrementally stronger demand for equities over fixed income in mutual funds for now.

 

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 14

 

ICI Fund Flow Survey - Record Divergence in ETFs...Mutual Funds Carry On - ICI chart 13

 

 

 

Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA

 


February 13, 2014

February 13, 2014 - Slide1 

BULLISH TRENDS

February 13, 2014 - Slide2

February 13, 2014 - Slide3

February 13, 2014 - Slide4

February 13, 2014 - Slide5

February 13, 2014 - Slide6

February 13, 2014 - Slide7

February 13, 2014 - Slide8

February 13, 2014 - Slide9 

BEARISH TRENDS

February 13, 2014 - Slide10

February 13, 2014 - Slide11
February 13, 2014 - Slide12

February 13, 2014 - Slide13


NCLH: DOUBLE TROUBLE?

Two markets could negatively impact the 1st half of 2014 according to our proprietary pricing survey

 

 

We’re not done with our current pricing survey but wanted to point out some somewhat disconcerting trends we’re seeing with NCLH.  With the Getaway celebration in the rear view, jubilation and excitement may not be the exuded emotions when NCLH reports earnings next Tuesday morning.  4Q should be fine but we’re concerned with first half 2014 demand trends.  Starting with the Caribbean, we may be seeing some pricing pressure, finally, with the double digit increase in capacity this year.  Based on our proprietary pricing tracker, Norweigan Caribbean pricing has not recovered since we reported on its weakness in mid-January.  In fact, the discounting accelerated in the past month for 1H 2014.   While 1Q close-in pricing took a steep fall in February, 2Q’s prices were also lower.

 

While the bulls may focus on Getaway’s premiums over its peers (Sun, Pearl, Epic) in the Miami market which remain quite robust in 2Q and 3Q, that also reflects much lower prices (-20-30% in some cases) for the older ships since Getaway’s pricing actually fell slightly sequentially in February.  As we look out to the late fall/winter itineraries, Getaway’s pricing is almost in-line with that of Epic – not exactly bullish.

 

While the Caribbean is the largest market, the bigger area of concern, in our opinion, is Alaska.  Compared with RCL and CCL, Norwegian has the greatest exposure to Alaska in 2014 with 10% of capacity in 2Q and 19% of capacity in 3Q.  We continued to see close to double digit pricing declines for Norwegian in the Alaska market in February.  The frigid cold weather may have influenced potential cruisers to look at warmer destinations.  

 

Not all is bad.  Europe is the lone bright spot.  Pricing was up nicely +15-20% YoY in February, continuing the strong pricing trend seen in January.  But Europe only accounts for 20% of 2014 capacity, down by 5% points compared with 2013’s.

 

We think FY 2014 yield growth expectations of 4.25-4.5% is an aggressive target.  To achieve this, NCLH will need some help.  The good news is that there are still a number of weeks left in wave season.  Cost savings could offset some of the expected revenue shortfall but top line will likely be the focus for investors.  The midpoint of the 2014 EPS guidance range could fall below Street consensus of $2.29; for Q1, we’re estimating $0.16 (Street: $0.23).  Revenues for 1H could be $10-20MM lower than what the Street is expecting.

 

NCLH looks promising over the long term but dicey here ahead of earnings and into 1H 2014.

 

The following chart illustrates the initial results of our cruise pricing survey:

 

NCLH: DOUBLE TROUBLE? - nclh


get free cartoon of the day!

Start receiving Hedgeye's Cartoon of the Day, an exclusive and humourous take on the market and the economy, delivered every morning to your inbox

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

next