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Summary: The softness in New Durable & Capital Goods Orders extends itself in January. The labor market continues to improve but at a slowing rate. Bloomberg’s high frequency read on Consumer Confidence printed its best reading in 6 wks but the current trend remains equivocal.
Meanwhile, the preponderance of domestic, fundamental macro data continues to suggest slowing growth – a trend the market continues to discount as utilities, bonds, and gold/commodities continue to outperform pro-growth leverage.
DURABLE GOODS: Unsurprising softness following January ISM and Retail Sales
Headline New Orders: Durable Goods declined for two consecutive months for the first time since October 2011 as January New Orders declined -1.0% MoM, unable to comp Decembers -5.3% MoM decline. The 23% MoM increase in Defense Orders in January helped buttress the headline reading against broader private sector softness
New Durable Goods Orders Ex-Defense & non-defense Aircraft: Orders ex-Defense and Aircraft - perhaps the best of the sub-aggregates in gauging household consumerism - remained negative on a MoM basis and decelerated on a YoY basis.
Capital Goods Orders: The great 2014 capex resurgence narrative remains in a holding pattern as Core Capex Orders growth retraced Decembers MoM decline but posted its first YoY decline in 10 months.
INITIAL CLAIMS: SLOWING IMPROVEMENT
After last week’s counter-trend move to 4-weeks of steadily deteriorating improvement in the initial claims data, this morning’s data again reflects a deceleration in the rate of improvement in the domestic labor market.
The year-over-year rate of improvement in rolling NSA initial jobless claims decelerated to -4.4% from -5.4% WoW as the YoY rate of change worsened to +0.13% YoY vs. -8.4% the week prior.
On a seasonally-adjusted basis, initial jobless claims rose 14k to 348k from 334k WoW, as the prior week's number was unrevised lower by 2K. Meanwhile, the 4-week rolling average of seasonally-adjusted claims was flat WoW at 338K.
To be clear, the trend in the labor market is still one of improvement but, in contrast to last year which was largely characterized by accelerating improvement, the prevailing trend YTD has been one of deceleration.
CONFIDENCE: Bloomberg’s weekly survey of Consumer Comfort printed its best reading in 6 weeks but, across the primary confidence surveys, the data remains mixed and the current trend largely equivocal with the University of Michigan and Conference Board surveys flat and modestly lower sequentially in February, respectively.
Christian B. Drake
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Still have time to blame the weather but cost cutting is a positive step
Q & A
Takeaway: NOT YOUR FATHER'S HILTON:
Not your Father's Hilton - A really solid quarter operationally. Don't fret about guidance, Q1 should be another beat.
Q & A
Takeaway: 4Q Comparative Analysis of JCP, KSS, M, DDS, JWN. Why we’re still negative on KSS. Nike shoots itself in Manu’s foot. BBY BBBY MW DLIA SHLD
EVENTS TO WATCH
NKE - Manu Ginobili Rips Through His Shoe While Playing Defense
Takeaway: Seriously, is that even possible? Nike is going to have a PR field day with this one. No doubt that Manu will want some special mock-up of a shoe design to ensure that this never happens again. UnderArmour and AdiBok must be pumped.
JCP - 4Q Earnings
JCP bulls were definitely due for a win, and they definitely got one today. The quarter itself was nothing to write home about, but the reality is that several key line items improved on the margin -- and for a company like JCP, that's all that matters. We were less thrilled with elements of the company's cash flow, but net/net still think this was a positive event -- especially given the carnage in the retail space. *Link to our note on JCP (JCP: The Scoreboard Doesn't Lie)
DEPARTMENT STORE 4Q COMPARATIVE ANALYSIS
SHLD - 4Q Earnings
SHLD's print was a little like JCP's but with far less emotion on the short side. It bear revenue estimates, which is the first time we've seen that in a while from SHLD, though it was in the context of a -6.4% comp -- by far the worst out of the department store group. EBITDA was $12mm vs $429mm last year -- no that's not a typo. They printed a loss of $0.96, which is far better than the Street at -$1.60. But in fairness, the Street was only 2 estimates.
KSS - 4Q Earnings
KSS' 4Q was the most in-line out of its peer group. One standout is that comps were -2%, but every other department store (sans SHLD) was within 40bps of +2%. KSS definitely broke that trend. We're most concerned with guidance, which stands at 0.5%-2.5% comp growth for the year. Please, timestamp us on this one…there's no way that comps are positive in 2014. The only way we get there is if there is a meaningful decline in Gross Margin, which KSS didn't exactly forecast either. The crux of our argument rests in our work that shows that KSS took upwards of $800mm in share away from JCP over the past two years. JCP wants it back. It will either a) succeed, or b) drive down KSS' gross margins while it tries. Either way, it's not a pretty ending.
MW, JOSB - Financing for Eddie Bauer Buyout Gets Delayed
Takeaway: Financing gets delayed because the deal should never have happened -- and it won't happen -- either because of Men's Wearhouse, or the courts.
BBY - Best Buy cutting 2,000 managers
BBBY - Bed Bath & Beyond Inc. Names Eugene A. Castagna - Chief Operating Officer, Susan E. Lattmann - Chief Financial Officer, Renews Employment Agreements With Co-Chairmen
Versace - Blackstone nears deal to buy into Versace
DLIA - Valinor Management Takes Stake in Delia's