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Takeaway: LULU fixes another miss. GPS wages going up. AMZN gets the Anti-Amazonians (RL). UA vindicated. Puma taking wrong path. JWN – U G L Y. ANF


JWN - Nordstrom's reports 4Q13 Earnings


Takeaway: A $0.03 beat doesn’t matter much when you take down 1Q guidance from $0.79 to $0.60-$0.70. This puts the two store closures announced earlier this month into context. By our math, closing the Portland, OR and Vancouver WA stores conservatively saves JWN $0.05-$0.06 per share -- and potentially as much as a dime. They need every penny they can get.  This SIGMA chart looks absolutely brutal.


Retail Callouts (2/21): GPS, AMZN, RL, UA, JWN, ANF, PUMA, - chart1 2 21

AMZN, JCrew, RL, HBC - Amazon Tempts the Anti-Amazons


  • "Amazon.com Inc. is in talks to bring listings for J. Crew khakis, Ralph Lauren polo shirts and Lord & Taylor suits to its site, according to people familiar with the talks."
  • "The discussions, which seek to win over retailers that have largely shunned the online marketplace, involve about 10 well-known retailers, these people said, including Abercrombie & Fitch Co. and Neiman Marcus Group Inc."
  • "Amazon wouldn't sell the goods directly; the listings would be links to the retailers' own sites. The arrangement would generate traffic for the retailers, while providing Amazon with more customer data and a new enticement for its Prime shipping program as it plans to raise rates."
  • "The initiative could launch as soon as this summer, the people familiar with the matter said. Under one scenario it has discussed, Amazon would offer the goods with free shipping to its Prime customers, who pay $79 a year for membership, though the retailers would be responsible for arranging and paying for the deliveries, these people said."

Takeaway: This is a win/win. Never in a million years would someone like Ralph Lauren ever list directly with AMZN.  But now RL can benefit from Amazon's breadth, but maintain control of the customer transaction 100%. For AMZN, all it cares about is a) being legitimized by higher end brands, and b) Prime.

UA - US Speedskating to Renew Under Armour Deal


  • "US Speedskating and Under Armour Inc. will announce that they have renewed their partnership through the 2022 Olympic Games, the company confirmed, a deal that comes on the heels of a public flap over new Under Armour skinsuits that divided the team in Sochi."
  • "Under Armour Chief Executive Kevin Plank 'is a proud American and they will not retreat from supporting USS despite the challenges we've gone through together,' US Speedskating executive director Ted Morris said in an email to athletes, reviewed by The Wall Street Journal."
  • "A spokeswoman for Under Armour confirmed the deal, but the terms of the deal weren't immediately known Friday."

Takeaway: Everyone has an opinion on this issue. So here's ours. Simply put, this whole thing is ridiculous. If you were going to 'go for gold' in the Olympics, do you think that just maybe you'd have tested out your suit before the games? We have to think that these athletes did (in fact, they did at the Olympic trials -- and did not complain when they were beating athletes wearing Nike suits).   A few of the classier athletes -- like Shani Davis -- stood up and said something like "I'm not blaming the suit. I went out there and gave it my all, and other skaters were simply faster". #respect, Shani. We give the USS credit for sticking to its guns with UnderArmour despite this PR mess. If they really thought that it was the equipment that kept us off the podium, we can't imagine that they'd stay married to UA.



  • "Abercrombie & Fitch Co. today confirmed that Engaged Capital, which owns approximately 0.58% of the outstanding shares of Abercrombie & Fitch, has submitted notice to nominate five candidates to stand for election to the Abercrombie & Fitch Board of Directors at the Company's 2014 Annual Meeting of Shareholders."
  • "Arthur Martinez, the newly appointed Non-Executive Chairman of the Board, said, 'Abercrombie & Fitch is committed to continued engagement with its shareholders, including regarding corporate governance matters. This commitment has already resulted in the appointment of three new, highly experienced independent directors and the separation of the positions of CEO and Chairman. As we have communicated during numerous discussions with Engaged Capital, I am committed, and the entire Abercrombie & Fitch Board is committed, to continue taking significant steps to strengthen and enhance corporate governance as the company moves into the next phase of growth.'"

Takeaway: The only downside is that Engaged Capital owns less than a percent of the outstanding shares. As much as we'd like to see it succeed, the reality is that it does not have the kind of clout to make the kind of changes it's proposing. It's probably hoping (as are we) that other holders will step up and support the case -- which is ultimately to impeach Jeffries. 

KER, FL - Jay Piccola Talks Puma Lab Concept


  • Puma Lab, a collaboration...Puma...and...Foot Locker, will bring styles from the breadth of Puma’s offering to stores under a periodic table-like framework that highlights design, luxury, creativity and multiple sport categories." 
  • "The stores — much like the House of Hoops concept Foot Locker created with Nike, and the Flight 23 Jordan-brand store that opened with Footaction — will be run and operated by Foot Locker and stocked with Puma merchandise."
  • "When it comes to the rollout of the new concept, Puma and Foot Locker are thinking big. The concept is expected to expand to 125 Foot Locker doors as either components or shop-in-shops." 

Retail Callouts (2/21): GPS, AMZN, RL, UA, JWN, ANF, PUMA, - chart2 2 21

Takeaway: In fairness, we have not been inside one of these Labs, yet. But Puma's problem is not distribution, and it's not branding, it's product. The brand does not know what it wants to be. Is it fashion, is it performance?  It's probably more the former (especially in light of having Kering/Gucci as its parent company). But it needs to up the R&D to keep up with the likes of Nike, UnderArmour, and even AdiBok -- who are all crushing it with new technology and product introductions. Without great product, cool looking stores are meaningless.

WWW - Keds® Unveils New Global Multimedia Campaign; Debuts New Grant Giving Program And Microsite


  • "Keds®, the iconic lifestyle brand established in 1916, announces today the largest multimedia campaign in its history. Titled Million Brave Acts, the campaign introduces several new initiatives that will help build a generation of stronger, more confident young women."

Retail Callouts (2/21): GPS, AMZN, RL, UA, JWN, ANF, PUMA, - chart3 2 21

Takeaway: We fear the day that Taylor Swift stops wearing sneakers.


LULU - Lululemon Will No Longer Ban Online Shoppers Who Resell Items


  • "Lululemon Athletica Inc...came under fire after shoppers complained that the company would no longer ship online orders to some customers who had resold used items on sites such as EBay Inc. Lululemon’s online customers only have 14 days after the delivery date to return items, which also must be unworn and have the tags still attached."
  • "Lululemon’s policy was intended to block large amounts of inventory from being bought and resold at higher prices, Therese Hayes, senior vice president of communications and sustainability, wrote in an e-mailed statement today. The company heard last week from unhappy shoppers who were blocked from buying online."
  • “'We looked into it and realized that we had indeed gone too far and have taken steps to fix it as quickly as possible,' Hayes said. 'Our approach is simply intended to limit major reselling which results in assortments not being available to all of our guests.'”

Takeaway: LULU's original intentions were genuine. But yes, they went too far. The second they added to the angst that already exists with such a big part of its former customer base, they should have backed off. As much as we're critics of LULU, we give it credit for fixing its mistake. Only thing worse than making a mistake is not fixing it. As for the stock, we still think expectations are too high, and that there's another shoe to drop. BUT, we would not be short the stock ahead of the company's analyst meeting in April. After that (presuming the company does not radically change our mind) it's fair game.

GPS - Gap Readies Minimum Wage Increase


  • "On Wednesday, chairman and chief executive officer Glenn Murphy said in a letter on Gap’sWeb site that the company will make a strategic investment to increase the minimum hourly rate for employees to $9 in 2014 and $10 in 2015."

Takeaway: GPS was able to pull off $9 for only so long…now it's into the double digits. Our Commander in Chief will be proud. The bigger point for us is that GPS is so expansive, that an 11% increase in its' minimum wage will definitely impact competing retailers. The question in our mind is whether this will actually put pressure on GPS' employee count, or average hours worked in each store. That's the natural offset for a retailer who takes up minimum comp and wants to prevent it being dilutive to margins.


APP - American Apparel Taps Skadden for Restructuring Advice


  • "Retailer and clothing manufacturer American Apparel Inc. tapped restructuring advisers as it battles weakening sales and a hefty debt load, people familiar with the matter said."
  • "Los Angeles-based American Apparel...recently enlisted lawyers at Skadden, Arps, Slate, Meagher & Flom LLP to work on restructuring options, though it is unclear exactly what the strategy will be, these people said. Skadden also has served as the company's outside corporate counsel."
  • "Some of the company's bondholders are starting to organize and are reaching out to restructuring advisers, these people said."

JD.com - Tencent, JD.com Said in Talks to Combine E-Commerce Business


  • "Tencent Holdings Ltd., Asia’s largest Internet company, is in talks to combine its e-commerce operations with Chinese online retailer JD.com Inc., according to two people familiar with the matter.
  • The companies are considering options that may involve Tencent injecting its online shopping operations in return for a 6 percent stake in Beijing-based JD.com, one person said, asking not to be identified because the discussions are confidential."
  • "A combination would marry JD.com’s established market selling everything from electronics to fashion with Tencent’s less-popular e-commerce platform. For JD.com, which is planning a U.S. initial public offering, the 272 million active users on Tencent’s WeChat messaging service could bring increased traffic to its online store."

L - Joe Fresh Launches International Expansion in 23 Countries with Signing of 3 Partnership Agreements


  • "Loblaw Companies Limited and its affiliates, the owners of Joe Fresh, today announced the signing of three separate partnership agreements that bring the brand into 23 new countries. The agreements cover key growth markets in the Middle East, North Africa, Europe and South Korea. The partnerships represent the first expansion for Joe Fresh beyond North America."
  • "Fawaz A. Alhokair & Co. to open at least 96 stores in 17 countries by 2018; Retail Arabia International to open at least 15 stores in 5 countries by 2018; Origin & Co., Ltd. to open up to 30 stores in South Korea over the next 5 years"
  • "Today, Joe Fresh is available online, in more than 340 retail locations across Canada, in six freestanding stores in New York, including a flagship location on Fifth Avenue, and in over 650 J.C. Penney stores across the United States."


Footwear Sales Grow Online


  • "According to Goldstein [ fashion footwear industry analyst at The NPD Group Inc.], for the 12 months ended Dec. 13, e-commerce represented 19 percent of all footwear sales, up from 17 percent the year prior. Online sales, which totaled $10.5 billion, even outpaced brick-and-mortar sales, driving growth in the industry, she said. And the average price per pair of shoes bought online was higher than in stores.  However, she added, this trend has started to change as more lower-income households (those under $75,000) have been buying more online. The digital realm also attracts a more mature customer, with baby boomers representing a significant part of that audience, according to Goldstein."
  • "Although online shoe shopping is on the rise, returns continue to be a major concern for e-tailers, as roughly 30 percent of product gets sent back…"