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Takeaway: Retail sales dive again. JCP and Jones strike a good deal - RL won’t like it. Adidas kicks sand at Nike Retail. Bad break for Overstock.

EVENTS TO WATCH - Big Earnings Week



  • 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


  • 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


ICSC - Chain Store Sales Index


The upbeat reading we reported last week was nice while it lasted. Sales for the week ending Feb 22, dipped back down to 1.4% y/y vs +2.1% in the prior week. We had some snow here and there, but nothing out of the ordinary (and by now we think people are getting rather numb to the cold and snow -- no pun intended). By and large, weather was not a major factor last week.

Retail Callouts (2/25): ICSC, JCP, RL, NKE, OSTK, WMT, PVH, MW, JOSB - chart2 2 25



ADDYY - Adidas Opens New Concept Store in China


  • "Adidas this week debuted a futuristic new concept store in Beijing. The next-generation retail store is a full revamp of the brand's massive flagship in Beijing's Sanlitun Village mall complex, the largest Adidas outlet in the world opened just before the Beijing Summer Olympics in 2008."
  • "The HomeCourt store, which revamps the Adidas retail outlet that opened just before the Beijing Summer Olympics in 2008, features a sports-tunnel entry where shoppers approach the floor like a field, complete with the sounds of cheering fans. Shoppers can try on products in the team room, and explore choice in a fully interactive shoe bar."
  • "The HomeCourt Adidas concept store will eventually be opened in 25 locations around the world, with Rio de Janeiro and London next on the list, according to the German company."

Retail Callouts (2/25): ICSC, JCP, RL, NKE, OSTK, WMT, PVH, MW, JOSB - chart3 2 25

Takeaway: Nike has got to be fuming about the layout of the concept. The whole 'enter through a tunnel that opens up into a stadium/retail store' is something Nike pioneered about four years ago. But, unfortunately for Nike, there's no such thing as a patent on a retail layout. Smart of Adidas to have chosen a basketball theme, as it's easily the #1, #2, and maybe #3 (tie with soccer) most popular sport throughout all of China. The only downside is that they don't endorse many basketball players that resonate with Chinese consumers.

JCP - J.C. Penney Unveils Evan-Picone Line


  • "Black Label by Evan-Picone will be exclusive to Penney’s through a licensing agreement with the Jones Apparel Group. The collection, including dresses and related separates — more than 100 styles — officially launches March 7, though some styles have begun trickling into stores. Prices range from $35 for a blouse to $120 for a jacket, and the line will be frequently promoted at 25 percent off."
  • "Evan-Picone is a well-known label, sold at Macy’s, Belk, Carson’s and Amazon, among other retailers."
  • "Penney’s will go big with the new brand at the outset by launching it at 570 stores."

Takeaway: This is a win for JCP, as the Evan Picone Line has been around for decades and has a lot of brand equity with middle America. Also interesting that they're calling it 'Black Label' which is something used, of course, by none other than Ralph Lauren. While not RL's highest price point by any means, you can still find Black Label dresses and suits for up to $2,000.  We can't imagine that consumers mistake the two, but definitely a smart marketing angle by Jones and JCP.

PVH - Moody's Upgrades PVH to 'Positive'


  • "Moody’s Investors Service has revised PVH Corp.’s rating outlook to 'positive' from 'stable' based on the accelerated reduction of the company’s debt since its acquisition of The Warnaco Group Inc. and progress in the integration of Warnaco’s operations."
  • "In lifting PVH’s outlook, Scott Tuhy, vice president and senior credit officer, stuck with the 'Ba2' corporate family rating and the 'Ba1' rating on the company’s nearly $4 billion senior credit facilities." 

Takeaway: This was all in the plan, and is in response to PVH's announcement to call its 7.375% 2020 notes on February 21.

WMT - Wal-Mart’s Mexico Division to Spend $1.1 Billion to Expand Chain


  • "Wal-Mart Stores Inc.’s Mexican and Central American unit plans to spend 15 billion pesos ($1.1 billion) to open stores and improve its e-commerce technology, aiming to spur growth in the region as U.S. sales slow."
  • "The company expects to spend 8.4 billion pesos opening stores, adding 3.7 million square feet of space, according to a statement yesterday. Mexican floor space will grow 5 percent, with Central American stores expanding 7.6 percent."
  • "Wal-Mart’s Mexican business, known as Walmex, will spend 3.5 billion pesos of its expansion budget on remodeling and maintenance. It will devote 1.2 billion pesos to logistics and 1.9 billion to e-commerce and other technology."
  • "The company faces headwinds both at home and abroad. David Cheesewright, who became head of Wal-Mart’s international unit this month, said consumers around the world are stressed, with 'significant slowdowns' in numerous markets, including the faster-growing developing countries."

Takeaway: While only about 8% of Wal-Mart's total capex budget, the irony here is that WMT is spending more in Latin America than many US retailers spend in a decade in the US.


OSTK - Overstock fined $6.8 million for false advertising


  • "The major issue at stake was Overstock’s apparent overstatement of customer savings. Alameda County Superior Court Wynne S. Carvill hit the web retailer with $6,828,000 in civil penalties. Overstock may also have to ante up for the costs of the suit."
  • "On the site, buyers can see an item’s actual price, as well as the amount a shopper saves compared to the “MSRP,” or “suggested” retail price...the court found that the those reference prices were often created by the use of formulas not rooted in the cost of the actual product for sale, but, on similar products. Sometimes reference prices were also based on the highest possible price that could be found in the market. All this, the court said, was without adequate disclosure to consumers."


Takeaway: This is going to cost OSTK far more than $6.8mm. The company will need to revamp how it presents product and prices on its site, which could ding the perceived value proposition for consumers. The shorts are (justifiably) going to have a field day on this perennially hated stock.

JOSB, MW - Jos. A. Bank Statement on Men's Wearhouse Revised Tender Offer


  • "Jos. A. Bank Clothiers, Inc. today said that its Board of Directors will review all aspects of the revised, unsolicited tender offer for the Company announced today by The Men's Wearhouse, Inc. and will make a recommendation to stockholders in due course."
  • "The Company's stockholders are advised to take no action on the tender offer until the Company's Board of Directors has announced its recommendation."

JOSB , MW - Eminence Capital Enters Standstill Agreement with Men's Wearhouse (MW)


  • "On February 24, 2014, Eminence Capital and certain of its affiliates entered into an agreement with the Issuer and Java Corp., a Delaware corporation wholly owned by the Issuer. Pursuant to the Agreement, the Eminence Parties agreed to, among other things, (i) cease all efforts in furtherance of the preliminary solicitation statement filed by the Eminence Parties with the SEC on November 15, 2013 and any related solicitation of the Issuer's stockholders in connection therewith, (ii) withdraw its demand to inspect the stockholder list and books and records of the Issuer and (iii) a customary standstill provision, which is described in more detail below."


Bangladesh factory collapse: big brands urged to pay into help fund


  • "Only five of the 27 global clothing brands linked to the Bangladesh factory that collapsed last year with the loss of 1,138 lives have committed to paying into a compensation fund for the victims."
  • "The Clean Clothes Campaign, which wants improved conditions in the industry, said only Zara-owner Inditex, Mango, Canada's Loblaw, Denmark's Mascot and El Corte of Spain had committed to the fund, which is trying to raise $40m in time for the anniversary of the Rana Plaza factory disaster in April."
  • "Several big British brands, including Primark and Matalan, are among the companies that have not paid into the fund...Other big brands connected to the factory include Walmart, Benetton and JC Penney. The collapse, the deadliest disaster in the history of the clothes industry, also left more than 2,000 injured."

Takeaway: There is a legal issue, and a moral one. Legally, it is our understanding that the brands have zero obligation to compensate the victims of the collapse. That falls upon the factory owners -- many of whom are members of Parliament and have been using their political influence to shirk safety obligations. But then there's the moral issue. Our opinion on it is irrelevant. It's one that we're hearing the companies address today -- either with action or inaction.