Retail Callouts (2/24): VFC, PVH, MW, BKS, JILL, WWW

Takeaway: 4,500 shoe factories close. VFC warms up TNF. Street too positive on PVH? BKS finds buyer, JJill doesn’t. WWW/Hush Pups prices go parabolic.

EVENTS TO WATCH -- BIG EARNINGS WEEK

 

TUESDAY

  • SHOO - Earnings Call: Tuesday 2/25, 8:30am
  • HD - Earnings Call: Tuesday 2/25, 9:00am
  • FNP - Earnings Call: Tuesday 2/25, 10:00am
  • M - Earnings Call: Tuesday 2/25, 10:30am

 

WEDNESDAY

  • ANF - Earnings Call: Wednesday 2/26, 8:30am
  • LOW - Earnings Call: Wednesday 2/26, 9:00am
  • TGT - Earnings Call: Wednesday 2/26, 10:30am
  • TJX - Earnings Call: Wednesday 2/26, 11:00am
  • JCP - Earnings Call: Wednesday 2/26, 4:30pm

 

THURSDAY

  • BBY - Earnings Call: Thursday 2/27, 8:00am
  • KSS - Earnings Call: Thursday 2/27, 8:30am
  • DECK - Earnings Call: Thursday 2/27, 4:30pm
  • GPS - Earnings Call: Thursday 2/27, 5:00pm

 

COMPANY NEWS

 

MW, JOSB - Men's Wearhouse Increases Cash Offer for Jos. A. Bank to $63.50 Per Share

(http://ir.menswearhouse.com/press-releases/detail/1264)

 

  • "The Men's Wearhouse today announced that it has increased its cash tender offer for all outstanding shares of Jos. A. Bank Clothiers, Inc. to $63.50 per share from $57.50 per share.  Expiration of the amended tender offer has been moved up to 5:00 p.m., New York City time on Wednesday, March 12, 2014, unless the offer is extended."
  • "Men's Wearhouse could potentially increase its offer price to $65.00 per share if it is able to conduct limited due diligence (subject to an appropriate confidentiality agreement), with access to Jos. A. Bank's management team.  In addition, the amended offer is conditioned on termination of Jos. A. Bank's recently announced agreement to acquire Eddie Bauer, and Men's Wearhouse will increase the aggregate consideration to be paid to the Jos. A. Bank stockholders dollar-for-dollar to the extent Jos. A. Bank is able to terminate the Eddie Bauer purchase agreement for less than $48 million in termination fees (less any other expense or fee reimbursement paid by Jos. A. Bank in connection with such termination)."

Takeaway: We know what a rational management team and Board would do here -- take the deal. But we don't have a clue as to what JOSB will do given that they're pretty much the worst Board we've ever seen. Then again, could it be that we're the ones in the wrong, and that they've patiently executed a simply tremendous deal for JOSB shareholders -- starting with its own bid for MW? After all, JOSB is currently is sitting at an all-time high, and will make a new one by the end of business today.

 

VFC - North Face Introduces Workout Gear to Shake Its Wintry Image

(http://www.businessweek.com/articles/2014-02-20/why-north-face-needs-new-workout-gear-to-shake-its-wintry-image)

 

  • "...North Face is making a big push into spring and summer gear—a strategic shift that will increasingly put it toe-to-toe with Nike, Adidas, and the rest of the world’s biggest sportswear brands."
  • "Next week, North Face will begin selling a line of lightweight apparel called Mountain Athletics, for training in warming temperatures. The offering will include only 16 styles, but the new line will anchor the biggest marketing campaign the company has ever produced in the first half of a year, according to North Face President Todd Spaletto."

 

Takeaway: At face value, it doesn't make much sense for a brand called 'The North Face' to make apparel that will be worn when it's 80 degrees. If 99 out of 100 companies tried this, we'd shrug it off. But if there is one company that we would not count out of being able to make this work, it's VF Corp. This is definitely an initiative we'll be watching.

 

PVH - PVH Corp. Announces Intention to Amend Its Senior Credit Facilities and Call Its 7.375% Senior Notes Due 2020 and Reaffirms Guidance for Fourth Quarter and Full Year 2013

(http://www.pvh.com/investor_relations_press_release_article.aspx?reqid=1902242)

 

  • “The Company also announced in connection with the discussions regarding the credit facility amendment that it is reaffirming its revenue and earnings per share guidance for the fourth quarter 2013 and full year 2013 previously announced on January 10, 2014. Additionally, PVH announced that during fiscal 2013, it repaid approximately $500 million of term loans under the credit facility, above its initial expectation of approximately $400 million announced in March 2013.”

 

Takeaway: Overall, a good announcement from PVH. But keep one major factor in mind -- the company anniversaried the Warnaco acquisition on Feb 14th. Instead of printing 30%+ top line growth, it will be struggling to grow in the mid-single digits. The opacity of the acquisition is gone. Now we get to see what this company is really capable of. Not a single analyst out of the 19 covering the stock has a Sell rating (17 Buys). We're not nearly as bullish.

 

BKS - Barnes & Noble Gets Takeover Proposal From Firm Seeking Breakup

(http://www.bloomberg.com/news/2014-02-21/barnes-noble-gets-takeover-proposal-from-g-asset-management.html)

 

  • "Barnes & Noble Inc., the struggling bookseller, received a proposal from G Asset Management LLC to acquire 51 percent of the company at $22 a share, valuing the total business at $1.32 billion."
  • "G Asset also proposed buying 51 percent of Barnes & Noble’s Nook e-book division at $5 a share as an alternative deal, according to a statement yesterday from the investment firm. It said it was confident that separating the business would unlock 'substantial' shareholder value."
  • "The move represents an increased bid over G Asset’s $20-a-share offer in November of last year, also for 51 percent of the business." 

 

Takeaway: This does not sound as outrageous to us as the headline suggests. Yes, the concept is in a secular decline. But it has had some miserable initiatives over the past few years (Nook) that destroyed the P&L. There's still value at this company. We're not sure how much -- otherwise we'd be more vocal on the name. But we're not surprised to see someone drawing a line in the sand.

 

JJill - Women's Clothing Retailer J. Jill Considering A Sale

(http://online.wsj.com/news/articles/SB10001424052702303636404579395410122848796)

 

  • "Women's retailer J. Jill...is in the process of hiring bankers to run a sales process, the people said."
  • "J. Jill is owned by private-equity firms Arcapita Bank and Golden Gate Capital. Arcapita owns the majority of the retailer while Golden Gate owns about 30%."
  • "San Francisco-based Golden Gate bought J. Jill in 2009 for just $63 million when the company was struggling, according to a person familiar with the matter. Today, the retailer has about $60 million in...Ebitda…"

 

Takeaway: We think there's value in Barnes & Noble…but JJill, we're not so sure.

 

WWW - Buzz: Hush Puppies, Jambu & More

(http://www.wwd.com/footwear-news/markets/buzz-hush-puppies-jambu-more-7502673)

 

  • "Hush Puppies...fall ’14...collection of premium looks for men and women [is] designed to attract a younger, more trend-savvy consumer. The series of contemporary styles includes harness boots and tailored pumps for women, and chukkas and double monk straps for men."
  • "Retailing from $99 to $240 for women’s and $189 to $220 for men’s, the line is aimed at new distribution channels including better independents, specialty and department stores, and e-tailers."

 

Retail Callouts (2/24): VFC, PVH, MW, BKS, JILL, WWW - chart2 2 24

 

Takeaway: SO many people think of Hush Puppies as an old, stodgy, geriatric brand. The reality is that WWW has transformed it over the years to be much younger, trend-right and relevant. For what it's worth, the price points on the Hush Puppies boots are comparable to UGG.

 

LVMH - LVMH Said Investing in Marco de Vincenzo

(http://www.wwd.com/business-news/mergers-acquisitions/lvmh-said-investing-in-marco-de-vincenzo-7501401)

 

  • "LVMH Moët Hennessy Louis Vuitton is to reveal today that it has struck a joint venture with the Rome-based designer to develop his fledgling ready-to-wear brand."
  • "De Vincenzo showed his fall collection here Sunday."
  • "According to sources, the agreement gives LVMH a 'significant' minority holding in de Vincenzo’s company, with options to tighten the partnership and increase its stake down the road."

 

INDUSTRY NEWS

 

Shoe Factories Close on Safety Scare

(http://www.wwd.com/business-news/government-trade/thousands-of-shoe-factories-close-in-china-7504160)

 

  • "More than 4,500 shoe factories in the eastern Chinese city of Wenling have been closed for safety violations after a fire at a local manufacturer killed 16 people in January, state-run media outlets reported."
  • "The January 14th blaze at the Taizhou Dadong factory killed six men and ten women and was probably caused by faulty wiring, according to local media. Wenling produces more than a billion pair of shoes a year, many of which of which are for export."
  • "The Taizhou Dadong factory owners were arrested and the local government vowed to crackdown on shoddy safety practices to prevent a similar incident."