prev

HOT MONEY

Research Edge Portfolio Position: Long CAF

The staggering 28.4 % year over year increase in June M2 data released by the PBOC today took a back seat  in the media to the news that foreign currency reserves have topped $2 trillion (see charts below).  For the US, this data means that China will continue to buy treasuries. For China this data may mean that more speculative money is flowing into already extended markets.

HOT MONEY - barb1

HOT MONEY - barb2

By all measures the liquidity sloshing through the system is having a pronounced effect, and concerns over the negative impact of these easy money policies are beginning to loom ever larger. With no clear indication that regulators are moving rapidly enough to fully reign in speculative asset bubbles or that any capital injections are being planned for AMCs in order to handle fresh "special mention" loans there is real concern among observers on the ground that there is not enough being done by authorities to prepare for the pain in the pipeline.

From our perspective, the issue is fundamental: China's stimulus program was and is an attempt to buy growth -and growth is always very expensive to purchase. If data shows that internal demand is broadening -in other words that that consumers are buying more than just replacement trucks and vans with government tax rebates and factories are turning out more than just girders and beams for state infrastructure projects, then these measures will likely prove worthwhile despite the negative impact of the inevitable defaults and popping bubbles.

Bullish for the economy in the longer term, but underscoring the risk of correction in the equity and real estate markets in the near term, today's data leaves us with many unanswered questions. In the coming days we will receive Q2 GDP and Industrial Output data that will provide us with more solid answers.

Andrew Barber

Director


READING THE PATIENT’S VITAL SIGNS

When looking at Europe we've cautioned against reading too much into aggregate EU/Eurozone data as we believe markets there are often uncorrelated and influenced by varied underlying fundamentals.  Today's report from EuroStat estimated that June inflation in the Eurozone fell 0.1% from a year earlier will give investors a general metric of guidance for Europe, yet the averaged number misses the mark for further understanding the divergence between economies.

One important take-away from today's report is that, as with the US, energy was a major driver -down by 11.8% Y/Y in this latest reading. The deflationary pull from energy should come as no great surprise based on last year's spiking oil price. Core inflation, which excludes energy and food prices, slipped to 1.4% on an annual basis, from 1.5% in May. Conversely, total CPI rose on a monthly basis 0.2%.

This year we've held the position that countries with economic leverage will outperform those with financial leverage. Sticking to inflation, we're seeing countries with financial leverage (think loan leverage combined with a real estate bust in Ireland and Spain) see measured deflationary pressure on an annual basis (Ireland -2.2% and Spain -1.0), whereas Germany, a country we've been bullish on due in part to its fiscal conservatism, posted annual inflation at 0.0%, a level we believe is healthy on a relative basis as the country works through the constraints of reduced export demand.  In contrast we see disinflationary pressure in the UK (outside the Eurozone) on an annual basis, with CPI at 1.8%, from 2.2% in May.

In an environment in which output and wages have decline greatly, with soaring unemployment rates and credit tightening, we're likely to see deflationary pressure continue in the immediate term through much of the Eurozone. June's retail sales number declined for the 13th consecutive month; it's clear that retailers are lowering price to move inventory while consumers have tightened spending and are anticipating lower prices going forward. 

We'll continue to monitor the patient on an individual country basis, while recognizing the importance of the collective health of the EU for individual countries.

Matthew Hedrick
Analyst

READING THE PATIENT’S VITAL SIGNS - Eurocpi2


PLAYING POLITICS WITH THE CPI

June CPI was released today, with the index registering at an increase of 0.7% for the month versus 0.1% in May with a 17% increase in gasoline costs as the primary driver of the broad sequential increase.  Make no mistake; this is having an impact on the consumer: gas prices and interest rates are up, confidence is down and that is the reality of our current situation.

Regardless of reality, year-over-year numbers are where we need to remain focused because that is where it becomes a "political" football and will ultimately impact the market.  The CPI was reported down 1.4% Y/Y today -a modest sequential rise from last month when we saw the worst number since 1955. Reality vs. politics:  what would be an increasing inflationary measure on an absolute or monthly basis becomes a deflationary figure when measured year-over-year basis and that means that rates will stay at zero for the foreseeable future as Bernanke & Co. keep the free money train rolling. 

We have been making the call that the CPI numbers will go positive in Q4, and that that will represent a return of true inflation which it looks increasingly likely that the Fed will not be prepared for. Right now we are experiencing REFLATION which is just taking us from one point to the next.  As I look at my screen right now the REFLATION trade is alive and well; the Dollar is down and the best performing sectors are Financials (XLF), Energy (XLE) and Materials (XLB). 

We are still looking at a "politicized" short end of the yield curve.  The FED right now has no choice but to be the "deflation fighter."  Next week, when Chairman Bernanke is in front of the politicians, he can't very well tell them that he sees inflation coming in Q4.  

What does all of this mean?

  • (1) We will have an inspirational yield curve - the FED will keep rates at ZERO longer!
  • (2) Rates are not going to stay there forever!

Howard Penney

Managing Director

PLAYING POLITICS WITH THE CPI - hpcpi


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

YUM - Not Making Any Real Changes, Despite Slower Sales

Earlier today, I highlighted the fact that YUM was trading down despite it having beat 2Q EPS expectations and how this marked a change in pattern to how the restaurant names have been trading following quarterly earnings. For the most part, restaurant companies have been posting better than expected bottom line numbers by cutting costs to offset soft revenue trends, and their stocks have been rewarded. I think a couple of things are at play here:

1.) Investors have become accustomed to revenue misses from the casual dining operators and other restaurants in this more challenging environment, but this was the first significant same-store sales miss for YUM's China and YRI businesses, forcing YUM to take down FY comparable sales guidance.

2.) Financial engineering helped YUM to offset its weaker than expected top-line results (a lower tax rate and lower share count).

Relative to how other restaurant names have traded, I think the second point is the more important one as we have seen a lot of companies offset soft sales trends with significant cost cutting. These reduced cost structures, however, have created more operating leverage and stemmed from increased labor efficiencies and G&A savings. These companies have made real changes to how they operate their businesses and the benefit of the savings will continue to be realized going forward. A significant portion of the cost reductions have resulted from slowing new unit growth.

YUM, on the other hand, is maintaining its full-year 10% EPS growth guidance despite lowering its same-store targets as a result of a lower tax rate, a less negative foreign currency impact and improved restaurant margins in China and the U.S., largely as a result of more commodity deflation than initially anticipated. None of these earnings drivers is sustainable. YUM is not offsetting its top-line weakness by making significant changes to its operating model.

YUM is targeting $60 million in G&A savings in the U.S. but even with these cost savings, YUM had to take down its U.S. operating profit growth target to up high single digits from about 15%. In the U.S., YUM is taking real costs out of the business, primarily as a result of its refranchising strategy, but these cost reductions are not enough to offset the same-store sales shortfall. This is a big difference relative to what we have been hearing from other restaurant companies.

I have been saying for a couple of quarters now that YUM is growing too fast, particularly in China and YRI. This rapid growth will make it difficult for YUM to reduce costs and could prove a challenge to margins should sales deteriorate further.

YUM's CEO David Novak closed the call by saying that he is fixated on 3 shareholder value drivers: first, driving new unit growth; second, improving same-store sales and third, being the industry leader in return on invested capital. He highlighted the fact that the company has the most work to do around growing same-store sales. I would argue that YUM's sustainability and returns would improve dramatically if the company focused on fixing same-store sales first and growing new units second.

YUM - Not Making Any Real Changes, Despite Slower Sales - YUM 2Q09 EBIT

YUM - Not Making Any Real Changes, Despite Slower Sales - YUM 2Q09 CFFO

 

 


MARRIOTT 2Q09 EARNINGS PREVIEW

In addition to discussing current trends, Marriott will likely highlight the strength of its balance and cost cutting efforts.  The company will likely discuss its debt reduction plans ($600 to $650MM), upcoming notes sale, reduced investment spending, SG&A and property level cost cuts.

2Q09 overview

When MAR reported its 1Q09 results on April 23, 2009, they guided to North American comparable systemwide RevPAR to be down 20 to 25% in 2Q09 and RevPAR outside North America to decline roughly 17 to 20%.  We estimate that total RevPAR will decline 22% in 2Q09.

  • Since April 23rd the Euro has been roughly 3% stronger, benefitting USD international ADR's
  • Lower end brands have had less severe RevPAR declines than Luxury and Upper Upscale, and limited service rooms make up 52% of Marriott's system-wide rooms.

We're at $0.23 cents and $210MM of EBITDA for Q2.  Despite our assumption of a 60% decline in incentive fees, we still think that fee revenues will come in a little better than management guidance, given our projected room count growth of 5%.  We have owned, leased, corporate housing and other revenue at $10MM, at the lower end of company guidance.  As MAR alluded to on June 2nd at the Goldman conference, margin declines will become worse throughout the year as they begin to annualize the cost savings initiatives that were put in place starting 2Q08.  Our timeshare estimates are in line with management guidance.

Full year 2009

We expect the company to keep its RevPAR guidance flat for full year 2009 and suspect that full year may come in a touch better given the depreciation in the dollar since initial guidance. For the balance of the year, occupancy will be stable to improving from its lows; however we believe that ADR will continue to be weak.  Since MAR doesn't own many hotels the flow-through issue is less of a concern for them than REITs and operators.  For this reason we think that MAR's EPS will likely trough in 2009, while most other c-corp and REIT operators will face further declines as occupancy and therefore directs costs increase, while rate is likely to still remain weak. For 2009, our EPS estimate is $0.95 and our Adjusted EBITDA estimate is $855MM.

  • Total fee revenues: we're in line with management guidance of $1,050 -$1,100MM
  • Gross margin from owned, leased, corporate housing & other: We're below management's guidance $55-$65MM
  • We're in line with timeshare guidance

 

YouTube from 1Q09 call

General Market Trends:

"As we've discussed before, our industry typically lags heading into a downturn and to recover, so we're obviously far from being out of the woods. However, there are some initial signs of demand stabilization even if at today is very low levels."

"We've seen gross booking trends for transient travelers flatten during the first quarter, and new group bookings, while still declining, are doing so at a lower rate. Of course, while demand may have bottomed, there is still risk in pricing and therefore RevPAR."

"To buttress transient occupancy, we added business from the federal government, travelers using AAA and senior citizen discounts and other contract customers. Despite this, we continue to see occupancy declines reflecting weakness across most corporate rated business."

"Nevertheless we are already seeing significant competitor discounting of room rates for corporate business in many markets. As we discussed last quarter Marriott will not lead the market down on rate but we also do not intend to lose share by failing to respond. Room rates are likely to remain weak until the economy shows meaningful improvement."

 

Group Business:

"recent cancellations are running at more normal levels."

"meeting planners are showing a greater preference for urban and suburban hotels rather than luxury and resort locations for new business. Another lingering impact of both the rhetoric and the economy is the continued hesitancy on the part of meeting planners to book new meeting though we note that the rate of year-over-year decline has been improving for the past 16 weeks."

"Attrition in meeting attendance remains a significant problem, but it too appears to be stabilizing."

 

Lease/ Owned business:

"While we own or lease 41 hotels, seasonally softer performance, combined with the weak economy, should continue to constrain profits. Results will also likely be affected by tougher comparables since contingency cost cutting for North American hotels began in the second quarter of 2008."

 

Timeshare:

"In our time share business new sales in the first quarter were consistent with our expectations and we were pleased with the relative strength all be it within small volume of our fractional sales."

"We've seen some stabilization [in delinquency rates] in early April which gives us some cautious optimism in this area."

 

Costs:

"On the cost side, we revived purchasing specs, shortened restaurant menus and hours, and reduced food waste. At some hotels we've temporarily shut down floors, reduced the number of restaurants and shortened retail outlet hours. Many associates were working in multiple departments and often at multiple hotels as we work hard to give associates as many hours as possible."

"Since cost reductions began in the second quarter of 2008 margin comparisons will become more difficult for the rest of the year."

 

Balance sheet/ Cash flow related:

"We continue to aggressively manage our balance sheet and our cost structure to meet whatever challenges may present themselves. During the quarter we reduced our debt by about $150 million and expect to reduce debt by $600 million to $650 million in full year 2009."

 

Other:

"We're also relaxing some brand standards for hotels and capital expenditure guidelines for new initiatives and renovations."


Retail First Look: Europe/Asia Retail Call Outs

RETAIL FIRST LOOK: EUROPE/ASIA RETAIL CALL OUTS

15 JULY 2009

TODAY'S CALL OUT

Anyone watching Levi Strauss?  The lack of public equity makes it so easy for some to forget that this company generates $4,270bn in sales, and is larger than VFC's aggregate denim businesses. It's numbers yesterday were ugly. Trends are not getting better. It sounds like US mass channels are not a complete disaster, which is a positive (or absence of a negative), but does VFC want an increasingly desperate (and levered) huge competitor? Probably not. FX played a role in the 3.4% revenue decline in the quarter, though wholesale trends in both Europe and Asia are eroding. I found it most interesting to hear management note that Japanese customers have dramatically downshifted in price point. Note that these numbers come on the heels of Levi's recent completion if the acquisition of 73 Levi's and Docker's stores from now defunct Anchor Blue retail Group. And then this morning we see VFC throw its hat in the ring to buy Eddie Bauer assets. There are questions to be answered in this space. Stay tuned...

Swedish fast fashion retailer H&M reported disappointing same store sales in June,  of -5%.  This marks the second month in a row of missed expectations.  Despite the company's value driven strategy, the overall global market weakness coupled with an intense promotional environment (especially in Europe) appears to be taking its toll. 

Retail First Look: Europe/Asia Retail Call Outs - H M 1 yr

 

LEVINE'S LOW DOWN

Some Notable Call Outs

- At a conference on Tuesday, Stage Stores management offered one of the more articulate examples of how it's capturing market share from the liquidation of its main competitor.  In the 100 markets where Stage and Goody's competed head to head, the company is now seeing an 800 to 900 bps incremental comp improvement.  Additionally, the company has identified 50 former Goody's boxes that fit their demographics.  The cost to convert these locations is trending towards a net investment of $12-$17 per foot vs. a typical store which requires $27 per foot.  As the survivors begin to take advantage of dislocation in the industry, we expect to see a tail of above-average profitability accruing to those positioned for growth.

- At the same conference, PVH CEO Manny Chirico mentioned that second quarter business for the company's flagship Calvin Klein brand has been strong both domestically and internationally.  Domestic performance is coming from market share gains while international is being driven by organic growth.  The company's retail segment continues to suffer and is expected to shrink from 700 doors at the beginning of 2008 to 400/450 over the next 2 years.

- Based on the press release it looked like Amazon was launching a major effort in the outdoor category, with an expansion in hardlines and softlines.  However, after further exploration it appears that this is really more of remerchandising effort and also a reemphasis on the affiliates Altrec.com, Backcountry.com, and mountaingear.com.  This strategy appears to be no different than the "mall based" approach that the company employs across all of its merchandise categories.  We won't ignore the powerful growth in Amazon's business model but this effort does not look like a game changer for the outdoor industry in the near term.

 

MORNING NEWS 

- NRF estimates a negative BTS season - Back-to-school shopping will be a somber affair this year, according to new data released by the National Retail Federation. In its 2009 Back-to-School Consumer Intentions & Actions Survey, NRF forecasted b-t-s spending to shrink by 7.7% on average per family, to $549, while footwear purchases will decrease by 15% , to $94 per family. NRF predicts that 56% of shoppers will be hunting for sales more than during last year's b-t-s season, 42% will buy more generic brand products, and 40% will use coupons for their b-t-s purchases. <wwd.com/footwear-news>

- Kellwood Co. faces midnight deadline to avert bankruptcy filing - Round-the-clock talks between Kellwood Co. executives and bondholders took on extra urgency Tuesday as the company tried to avoid defaulting on $140 million in notes that mature at midnight tonight. Sources familiar with the negotiations said St. Louis-based Kellwood was unlikely to make an immediate decision on what action to take in the event of a default, hoping to resolve an impasse with Deutsche Bank, its largest noteholder, and avert a bankruptcy filing. <wwd.com/business-news>

- Heelys announces new CEO - Five months after the resignation of its former CEO, Heelys Inc. has found a new leader. The company on Tuesday named Tom Hansen as its president and CEO, effective Aug. 1. Hansen is currently president of TM Advertising, where he has created campaigns including American Airlines' "We Know Why You Fly" and Nationwide Insurance's "Life Comes at You Fast." Hansen said in a statement: "We plan to bring that same innovative, entrepreneurial spirit to the creation of new products, new designs and a new brand marketing effort that will provide the solid foundation for Heelys to not only grow short term but to thrive for some years to come." Hansen also acknowledged Heelys' "reduced sales volume" and noted that "several cost and infrastructure opportunities" will help restore profitability for the company "very soon." <wwd.com/footwear-news>

- New footwear report on India bullish - The Indian footwear market has recently seen a demand shift from low-priced footwear to medium and high-priced products. But the huge potential that this development creates is as yet largely untapped. The growing aspiration to look trendy but comfortable has increased the demand for footwear having international high-fashion brands in Punjab. And for the brands, it is an opportunity to provide the Punjabi consumer with products that have a classic elegance - tasteful luxury, enduring quality and fine imprint of craftsmanship. Jimmy Choo, Pavers England, GUCCI, Moschino - just to name a few, the global luxury brands in footwear have already entered the Indian market. Till a few years ago, buying a foreign footwear brand would require a trip abroad, a gift from overseas friends/family or at the most an online purchase. But it changed with the permission for 51% Foreign Direct Investment (FDI) in single-brand outlet in early 2006 that allowed foreign footwear brands to enter India. It also strengthened the organized retailing in footwear. The affluent customers in India today have a wider choice in buying stylish and comfortable shoes. <dailyindia.com>

- Indian retail trade expected to grow 13% per year for next 3 years - Indian retail trade will reach $590 billion within two years, according to the minister for commerce and industry. "Retail trade is estimated to grow at 13% per annum from $322 billlion in 2006-07 to $590 billion in 2011-12," Jyotiraditya Scindia said in a written reply to Parliament. The government has no plans to change the sector's controversial foreign direct investment (FDI) policy, and fully recognises the need to ensure that small retailers are not adversely affected by the growing organised retail and that there is no adverse effect on employment, said Scindia. The share of organised retail in India's total retail sector has expanded from 3.3% in 2003-04 to 4.1% in 2006-07. <fashionnetasia.com/industryupdate>

- Spanish unemployment is showing possible early signs of recovery - In May and June the jobless rate fell 1.5% from an astounding 18.7%, the highest in Europe. Meanwhile, Spanish retailers from the fashion and footwear sector are seeing improved sales since hitting a low in March. In a statement to the media Miguel Angel Fraile, General Secretary of the Spanish Trade Confederation (CEC), expressed optimism that consumer demand would continue to recover "little by little" and that this recovery would be a "soft one" in the summer months. Small and medium retailers suffered a fall of 20% in average sales in the first quarter compared to the same period in 2008, but Fraile is confident that the situation was unlikely to deteriorate since it was "not possible to consume less". He also pointed out that poor March sales may have been tied to lack of retail offers in stores in the run up to Easter Week in April. In the first three months of 2009 sales in Spain fell by up to 70% in sub sectors such as home equipment and furniture; 40%  in automotive products; 30% in electrical home appliances and 25% in fashion and footwear.  Leisure activities declined by just 15% - 20% and food purchases between 2% - 5%. The situation in Spain contrasts sharply with that of China, for example, where retail sales continue to grow at 15% and demand for imported western goods is still strong. <fashionnetasia.com/industryupdate>

- Sri Lanka export figures down from decreasing textile and garment exports - Decreasing textile and garment exports in Sri Lanka have dragged down total export figures for May, with earnings falling over 25% this year compared to last year. Sri Lanka's export earnings reached $538.5 million in May, a 27.8% drop on the same period last year, according to the Central Bank, with textile and garment exports shrinking 22.7% to $237.5 million. "Textiles and garments exports to the EU and the US decreased by 17.9% and 29.4% respectively, due to lower demand emanating from these countries," the Central Bank said. <fashionnetasia.com/industryupdate>

- Bangladesh government to aide garment sector - Bangladesh's commerce minister Faruk Khan has given indications to the garment sector that financial help will be given to them from a stimulus package when the new budget is announced. The industry has complained of the effects of the economic slowdown, and Khan said that sectors that have been affected by the situation would get a share of the $726.7 million stimulus package that has been proposed for the forthcoming budget. <fashionnetasia.com/industryupdate>

- Singapore Retail Sales Drop in May for Eighth Month as Wages, Tourism Fall - Singapore's retail sales fell for an eighth month in May as jobs losses, wage cuts and fewer tourist arrivals depressed spending. <bloomberg.com/news/industries/consumer>

- New bill to drop tariff on Outdoor apparel - Columbia Sportswear, The North Face and Patagonia are a few of the recreational performance outerwear companies that stand to benefit from a tariff-dropping bill introduced in the House and Senate. The U.S. Outdoor Act, introduced Friday would eliminate duties on about 80 styles of imported high-tech apparel designed for hiking, biking, skiing and other outdoor recreational activities. If enacted, the bill would save outdoor apparel manufacturers close to $600 million over 10 years, according to the Congressional Budget Office.  "This bill removes unnecessary tariffs on apparel not currently made in the U.S.," said Blumenauer. "In addition, the companies that benefit from these reduced tariffs will be required to contribute a portion of their savings toward research programs that are developing ways to keep America's apparel industry globally competitive and more environmentally sustainable."  <wwd.com/business-news>

- BRBY reports strong retail sales and weak wholesale for first quarter - First-quarter revenue at Burberry Group plc rose 8.5% due mainly to strong retail performance in Europe and Asia. Retail sales, which accounted for about two-thirds of total revenue in the period, grew by 12% on an underlying basis (up 28% reported). New space generated 8% of this growth, with Burberry Middle East contributing 4%. Comps in the quarter were flat year-on-year, reflecting positive customer response to the Spring/Summer ranges, particularly to new accessory programs and recent strategic initiatives, including men's tailoring, denim, sport and childrenswear. Europe and Asia both delivered double-digit percentage growth, with exceptional performances again in the UK and Korea (both helped by favorable currency movements). The United States and Spain remain more difficult markets, with comps in both markets again down double-digit in the quarter. For the year as a whole, Burberry plans to open a net 10-15 mainline stores, with an increase in average selling space of 10-12%. Wholesale revenue declined by 28% on an underlying basis (down 21% reported). Burberry is projecting wholesale revenue to be down by about 25% at constant exchange rates for the six months to 30 September 2009. This includes the impact of the closure of Thomas Burberry; the continued planned rationalization of many small specialty accounts in Europe; and the conversion of Burberry Middle East from wholesale to retail. Excluding these actions and closures, first half wholesale revenue is planned down around 15% at constant exchange rates as wholesale customers adjust their inventory levels in line with current sales trends. Spain remains challenging. A further three franchise stores were opened in the quarter in Emerging Markets, including the first Burberry store in Bahrain. China continues to perform strongly, while Russia and parts of the Middle East remain difficult. Total licensing revenue in the first quarter declined by 3% on an underlying basis (up 12% reported), benefiting from timing differences in royalty receipts, mainly in Japan. In the year to March 2010, Burberry still expects underlying licensing revenue to decline by between 10% and 15%, although reported licensing revenue should increase year-on-year reflecting currency benefits. <burberryplc.com>

- US Wholesale apparel prices - Wholesale prices for U.S.-manufactured apparel decreased 0.2% in June compared with May and rose 1.3% from a year earlier, the Labor Department said Tuesday. Women's and girls' domestic apparel prices declined 0.1% in June, but increased 1.7% in 12-month comparisons, according to the Producer Price Index. Men's and boys' apparel fell 0.4% month-to-month, but increased 1.9% year-over-year. Prices for all U.S.-made goods increased 1.8% in June, driven mostly by a surge in gas prices. The advance in prices followed a rise of 0.2% in May and a climb of 0.3% in April. <wwd.com/business-news>

- Health care reform and WMT -  Wal-Mart Stores Inc. stands to gain considerable ground in its public image and labor relations. The country's largest retailer has long been cast as antiworker after a series of negative incidents and a vigorous effort against unionizing its stores, but in recent times has improved its stance through better employee benefits. Now, Wal-Mart has inserted itself into a game-changing debate of historical proportions that promises to burnish its reputation and establish the company as a model corporate citizen in the eyes of workers and consumers. At the same time, business groups, including the retail industry's major lobbying group, the National Retail Federation, find themselves on the other side of public sentiment by opposing several of the health care proposals, including an employer mandate. Such a stance in this economic climate is loaded with public relations headaches. The retail industry employs 24 million people, 50 to 60 percent of whom are eligible for health care benefits, according to industry figures. That means 10 million to 12 million retail employees, many of them working part-time, are not eligible for employers' health coverage. A new USA Today/Gallup poll out Tuesday said 56 percent of Americans favor a health care reform bill, 33 percent oppose it and 12 percent do not feel strongly either way. To finance the bill, 61 percent believe employers who do not provide insurance should pay a fee. <wwd.com/business-news>

- Target, Kelly Services May Back Mandatory Health Care by Large Companies - Target Corp. and Kelly Services Inc. said they may support Wal-Mart Stores Inc.'s call for mandatory medical insurance by large companies as part of a proposed overhaul of U.S. health care. <bloomberg.com/news>

- BWS's Famous Footwear launches BTS branding campaign "Make Today Famous" its 1st national cable TV ad campaign ever - Famous Footwear today announced its first nationwide branding, advertising and social media campaign that will reach consumers across the country with an empowering message - Make Today Famous(TM). To unveil Make Today Famous to consumers nationwide, Famous Footwear is implementing its largest, most integrated branding campaign to date. The campaign kicks off the retailer's Back-to-School season, a time when more people are shopping for shoes than most other times during the year, and includes Famous Footwear's first-ever national cable television advertising campaign and radio spots in 47 major cities.The campaign features a significant social/digital media component that includes dedicated website MakeTodayFamous.com, online banner ads, a Facebook page, YouTube channel (www.youtube.com/Fam0us Footwear, with a zero in place of the "o" in the word "Famous"), Twitter handle (@Famous_Footwear) and viral video. In fact, a 30-second video "teaser" released on Father's Day, which shows a dad swaddling his newborn son and raising him into the air to give the giggling child a different view of the world, garnered approximately 70,000 views in the first 48 hours. More videos are planned, including a soon-to-be released digital short, and will be available at MakeTodayUnexpected.com, which launches August 3 and includes fun and interactive shoe-themed quizzes and games. <phx.corporate-ir.net>

Retail First Look: Europe/Asia Retail Call Outs - bws image

- Retailers and designers get personal with group meetings with customers to boost sales - Battling the recession, designers and retailers are wooing customers at intimate gatherings that range from informal fashion presentations in private homes or hotels to in-store events after business hours. The goal: to inspire shopping by offering an exclusive experience and interaction with fashion arbiters. Saks Fifth Avenue, Neiman Marcus and Nordstrom, among other stores, are pushing the strategy, which is cost-effective and represents targeted use of marketing budgets. "Any time we can work one-on-one with customers we can do a much better job of customizing trend presentations - versus pulling a fashion show for a large group where you don't necessarily know what they are looking for," said Kimberly Grabel, senior vice president of marketing at Saks. The luxury retailer is increasing these get-togethers throughout the 53-store chain - including flagships that previously focused on large-scale events like runway shows, she said. Nordstrom designer buyer Margaret Hinojosa de Garza said she helped arrange an invitation-only cocktail party for about 65 women, who are among top customers, at the retailer's store at Dallas' NorthPark Center that featured Jason Wu's fall collection. The designer appeared at the store a day late after his flight was canceled because of bad weather.  The company is using the tactic in about half of its 176 full-line stores, a spokeswoman said. <wwd.com/markets-news>

- Surf/Skate industry shows resilience - The surf/skate industry is showing notable resiliency during recent global economic challenges, posting U.S. retail sales of $7.22 billion in 2008 according to the the 2008 SIMA Retail Distribution Study released by the Surf Industry Manufacturers Association.  The study indicates that the surf industry experienced a slight dip in 2008 with retail sales hitting the $7.22 billion mark compared to $7.48 billion in 2006 (a 3.5% decrease). Softness was most apparent in the fourth quarter of 2008, coinciding with the global economic indicators of that time. However, the surf industry has shown substantial growth of 10% for the last five years. The 2008 SIMA Retail Distribution Study cites several key factors as driving the overall consistency of the surf industry, including: loyalty of core surfers and skaters to the lifestyle and sport; and, the increasing demand for surf/skate footwear and accessories as evidenced by the double-digit growth of these key categories. Passion and youth largely drive the surf industry. <sportsonesource.com/news>

- Graj + Gustavsen has teamed up with Cherokee to relaunch the 1970s apparel brand A. Smile - The line, slated for a 2010 rollout, will be repositioned to the young, contemporary consumer market. A. Smile launched in 1969 and offered young men's and women's fashion with a focus in jeanswear. "A. Smile's legacy as a revolutionary apparel brand in the 1970s resonates with the mindset of today's consumer who is seeking an authentic, counterculture lifestyle," says Simon Graj, founding partner of G+G. "We are thrilled to be partnering with Cherokee, one of the most recognizable names in retail and licensing. As brand innovators, we will work to build on A. Smile's strong brand identity and unconventional premise to deliver a cool and relevant concept." Cherokee currently has license agreements in categories such as family apparel, fashion accessories and footwear, as well as home furnishings and recreational products. <licensemag.com>

- Amazon.com launches outdoor shop - The Seattle-based e-tailer announced Tuesday it had launched a dedicated outdoor recreation store on its Website. Housed at Amazon.com/outdoors, the new site features an expanded offering of outdoor footwear, apparel and gear.  According to a release, the growth of Amazon's camping and hiking category was the impetus for the new store, which launches one week before the semiannual Outdoor Retailer trade show in Salt Lake City. The site stocks hiking boots, sandals, trail runners, climbing shoes and casual styles for men, women and kids from brands including Merrell, Vasque, Lowa, Adidas and New Balance. <wwd.com/footwear-news>

- London-based online retailer ASOS is going global and coming to America - ASOS.com, the London-based online fashion retailer, which made its name spotlighting celebrity-influenced looks, is setting its sights globally. The company began marketing itself in Sweden and Denmark two years ago - it already ships worldwide - and is considering targeting countries such as the U.S. and Japan, with the eventual plan to introduce separate ASOS sites for different countries. ASOS, like Net-a-porter, appears to have sidestepped the recession that's hit much of the British clothing industry and has added labels such as Gap and Mango to its mix of house and outside brands. <wwd.com/markets-news>

- Zappos gets a large pool of applications for ad agencies - The chance to work with a hot brand like Zappos is too much for many agencies to pass up, even when it means pouring in tons of time, effort and money into a Byzantine review process in which they have little chance of succeeding. Zappos recently got RFP responses from 104 agencies, with 22 then chosen to do 90-minute presentations at Zappos headquarters in Las Vegas this week. In an unusual twist, it required shops to submit storyboards and ad mockups for the initial round, all in a tight two-week turnaround. While many agencies privately grumbled, one that was not chosen as a finalist offered unusually public criticism that the review exemplified all that is broken in the account review process. In a blog post, Ignited executive creative director Mike Wolfsohn said a site the agency set up for the review was given only a cursory glance by Zappos employees, with just five pages of 25 being read, never even viewing the page presenting the team that would work on the account. "If agencies are going to spend weeks preparing their response, the least any client can do is commit 30 minutes to look at it," he said. The post echoed the private complaints of many shops that took part in the review for the $7 million account. Zappos is meeting with agencies this week, through Friday. <brandweek.com>

- Borders UK fights to avoid bankruptcy - Struggling bookseller Borders UK is in advanced talks with the private equity arm of turnaround specialist Hilco over a possible sale of the business. <retail-week.com>

- Sears, Kmart and, most recently, Toys"R"Us have launched Christmas in July promotions, including online boutiques and discounts - Sears Holdings rolled out Christmas Lane Web shops at Sears.com and Kmart.com, featuring holiday décor, winter-weather items and gifts. The retailer has also set up in-store Christmas décor shops in 372 Sears stores. Beginning Sunday, Toys"R"Us stores will kick off a one-week Christmas in July sale, offering 40 percent to 50 percent off toys and games. Discounts include $100 off Play Along's Hannah Montana Malibu Beach House, as well as 50 percent off Hasbro's Star Wars Clone Wars Republic all-terrain tactical enforcer vehicle. The toy retailer also plans to open an in-store holiday station where kids can create greeting cards, play games and get a free candy cane. <licensemag.com>

- JCP launches new BTS campaign - JCPenney has launched its back-to-school initiative, which includes a teen microsite highlighting the retailer's young men's and juniors' lines for fall. The push showcases JCPenney's newest apparel lines such as RS by Sheckler, Rusty, Third Rail a Zoo York Production and Decree. The Web microsite, www.jcp.com/teen, features a digital runway where visitors can create their own looks, as well as a sign-up to receive text messages about back-to-school sales and special offers. The back-to-school marketing campaign is also supported with a JCP Teen Facebook page, cinema and TV spots, an exclusive concert series and more. <licensemag.com>

- Ray-Ban this month will open its first online store - The site is launching as the 70-year-old company enjoys a bit of a fashion revival. Its iconic Wayfarer sunglasses, newly recolored in bright solids such as red and turquoise, have been widely photographed on the street and on celebrities. The Web store "is a natural extension, a logical step for the brand, providing the loyal customer with limited access to the brand" more accessibility, said Pierre Fay, executive vice president of Wholesale NA Luxottica Group, which owns Ray-Ban. <wwd.com/markets-news>

 

NOTABLE RESEARCH:

FINL: BB&T upgrading to Buy from Hold.

UBS: Initiating on:

                FL with a Neutral, target of $10.

                NKE with a Neutral, target of $54.

                UA with a Sell, target of $18.

PLCE: Bank of America/Merrill Lynch initiates with a Buy, target of $32.

CHS: Jefferies initiating with a Buy, target of $15.

 

INSIDER TRADING ACTIVITY:

NKE:

-Donald Blair, VP & CFO, sold 3,000shs ($155k) less than 10% of common holdings as part of 10b5-1 plan.

-Trevor Edwards, VP, sold 3,000shs ($155k) less than 10% of common holdings as part of 10b5-1 plan.

-Hans Van Alebeek, VP, sold 2,250shs ($116k) roughly 20% of common holdings as part of 10b5-1 plan.

-Eric Sprunk, VP, sold 2,250shs ($116k) roughly 30% of common holdings as part of 10b5-1 plan.

-Eunan McLaughlin, President Affiliates, sold 2,250shs ($116k) roughly 10% of common holdings as part of 10b5-1 plan.

-Gary Destefano, President Global Operations, sold 3,000shs ($155k) less than 20% of common holdings as part of 10b5-1 plan.

 

MACRO SECTOR VIEW AND TRADING CALL OUTS

Retail First Look: Europe/Asia Retail Call Outs - SV 7 15 09

 

 


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.64%
  • SHORT SIGNALS 78.57%
next