• run with the bulls

    get your first month

    of hedgeye free



Higher hold contributed to the record setting February but not as much as originally thought. 



We estimate above normal hold contributed only 4% of the 40% YoY growth and less than 1% if you normalize both Februarys.  No way around it, February was a blowout which is very strange considering the relative weakness of January, weakness that the 10 day Chinese New Year shift cannot explain alone.  In the last few years, we’ve heard that the CNY celebration is becoming less of a seasonal factor.  Remember that January grew only 7% on only slightly lower hold.  CNY occurred on 1/31 this year vs 2/10 last year. 


As we already knew, LVS was the big winner in February and not surprisingly, some of the upside was hold related.  However, LVS gained Mass share and Rolling Chip volume share as well. As we suspected, Wynn Macau got clocked in terms of luck but Mass and RC share was better than trend. Surprisingly, MGM actually held high but market share was well below trend. MPEL held the lowest in February, which drove GGR share to the lowest level since Dec 2009. 



Market Observations:

  • Mass drove most of the growth with revenue up 51% YoY in February and up 38% combined for January and February. 
  • While VIP revenue climbed 37% in February, January’s VIP actually declined 1% holding back combined Jan/Feb revenues to +18%. 
  • Even slots performed well, although not nearly as strong as Mass growth, up 24%.  Slot growth was the highest in almost 2 years.
  • The March comparison is very difficult (1 and 2yr) and we are only projecting 13-17% growth


LVS:  Terrific month and it wasn’t just high hold

  • 64% GGR growth YoY in February led the market
  • 68% Mass growth led the market
  • If hold had been normal, YoY growth would’ve been 49%. Normalizing hold for both Februarys yields YoY growth of 44%, which would’ve still led the market on a hold adjusted basis
  • LVS’s GGR, Mass, RC, and slot revenue share all increased relative to recent trend
  • QTD, LVS’s GGR is up 40%


WYNN:  Solid month excluding the hold impact

  • While January GGR was down 13%, Wynn Macau rebounded to up 29% in February
  • Mass revenue grew 48% YoY – the 2nd highest growth rate in 2 ½ years
  • While VIP revenue grew 24%, RC climbed 48% as hold was 20-30bps below normal
  • QTD, WYNN’s GGR has grown 9%


MGM:  Not one of MGM’s finest months

  • GGR share fell to its lowest level in almost a year and Mass fell to a record low as well
  • Despite lucky play from its patrons, MGM’s RC share was at its lowest in a year and a half
  • MGM held high for the 2nd consecutive month
  • YoY GGR growth of 25% was the 2nd lowest in the market next to SJM
  • QTD MGM’s GGR is up 29% but with constant hold the growth rate drops to 22%


MPEL:  CoD mass strength offset relative VIP bad luck

  • GGR share hit its lowest level since December 2009 at 12%
  • Low VIP hold was mostly to blame at 2.63% (inclusive of direct play) but the hold comp was low as well (2.45%)
  • Mass share fell 0.3% bps MoM to 13.2%
  • VIP volume share grew 0.6% bps MoM to 12%, highest level since Sept 2013


Galaxy:  Another strong month with share at a recent high

  • Galaxy held well above normal but exactly in line with last year
  • Mass share was in line with trend while RC share was slightly above trend
  • YoY GGR growth of 60% was 2nd to only LVS
  • QTD GGR grew 38%








VIDEO | Keith's Macro Notebook 3/11: LATAM GOLD UST10YR

Charts: EUR and GBP Rocket!

Editor's Note: Below is a complimentary research note from Hedgeye Analyst Matthew Hedrick published on March 7, 2014 at 10:25 AM. FXB is currently one of the top ten stock picks in our Investing Ideas Newsletter. For more information on how you can subscribe to Investing Ideas, click here

Charts: EUR and GBP Rocket! - 3 11 2014 11 30 03 AM


The EUR/USD and GBP/USD have ramped an impressive 1.96% and 2.15%, respectively, in the last month -- the performance is consistent with our Q4 2013 Macro Theme call of #EuroBulls (presented on 10/11/2013) and our bullish outlook on the British Pound since last November.

Below we update our outlook on each currency cross:


  • ECB President Mario Draghi kept rates on hold this week (as expected) and did not issue any “new” non-standard measures, adding in its 2014 outlook for GDP to expand +10bps to +1.2%  (vs the previous forecast in December) and inflation to dip -10bps to 1.0%.
  • Broadly, we believe Draghi’s continued posture of “ready and willing to act” (to ensure the survival of the Eurozone at any cost and to keep financial conditions accommodative) will continue to support the common currency and strengthen investor confidence in the equity market #EuroBulls (etf FXE).
  • On the other side of the cross (USD) we expect Fed-head Janet Yellen to likely pull back on the tapering program to a more dovish position in response to our Macro call of  #GrowthSlowing that should weigh on the USD to the downside.
  • EUR strength reflects country/regional strength: Manufacturing and Services PMI continue to remain grounded above the 50 line (expansion). Services hit a 32-month high at 52.6 in February and Manufacturing grinded higher to 53.2.
  • Confidence up: Eurozone Feb Economic Sentiment Indicator rose to 101.2 in February (exp. 100.9) vs 100.9 in January. The Services Sentiment Indicator rose to 3.2 FEB (exp. 2.5) vs 2.3 JAN.
  • The deflation of inflation across the Eurozone (the current reading at 0.8% Y/Y) equates to more consumer purchasing power via lowering the consumption tax.
  • Other Data: Eurozone Retail Sales rose to 1.3% JAN Y/Y (exp. -0.2%) vs -0.4% DEC and the Eurozone Unemployment Rate maintains the 12% level. 
  • We remain marginal European equity bulls over US equities. Our preferred investment in the region is long German and UK equities (EWG and EWU) and long the Pound/USD (FXB).

Charts: EUR and GBP Rocket! - zzzz. eurrroooo



  • We remain bullish on the British Pound versus the US Dollar (etf FXB), a position supported over the intermediate term TREND by prudent management of interest rate policy from Mark Carney at the BOE (oriented towards hiking rather than cutting as conditions improve).
  • The Bank maintaining the base interest rate at 0.50% this week along with its asset purchase program target (QE) 375B GBP.
  • UK high frequency data continues to offer evidence of emergent strength in the economy, and in many cases the data is outperforming that of its western European peers. In the BOE’s Quarterly Inflation Report (in February) 2014 GDP was revised higher to 3.4% from 2.8% previously forecast.
  • PMIs remain one highlight: Manufacturing in February came in at 56.9 versus expectations of 56.8 and Services recorded 58.2 versus expectations of 58.0.
  • CPI has also moderated in recent months, currently at  1.9% in January Y/Y – we expect this cut in the consumption tax to continue to boost business and consumer confidence and with it consumption
  • The British Pound is holding its Bullish Formation, trading above its intermediate term TREND and long term TAIL levels of support.

Charts: EUR and GBP Rocket! - zz. Pound

Enter the World of Hedgeye.

the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Retail Callouts (3/11): ICSC, SHLD, JCP, RH, NKE, URBN, HMB, DKS

Takeaway: Good ICSC week. UK storms hit, but Furniture Strong. Least Relevant Brands Survey. NKE robbed by ManU. URBN Inventories. H&M Wedding.


  • BONT - BofA Consumer & Retail Conference: Wednesday 3/12, 9:40am
  • DKS - BofA Consumer & Retail Conference: Wednesday 3/12, 10:30am
  • JWN - BofA Consumer & Retail Conference: Wednesday 3/12, 10:30am
  • PETM - BofA Consumer & Retail Conference: Wednesday 3/12, 1:30pm
  • WSM - Earnings Call: Wednesday 3/12, 5:00pm




ICSC - Chain Store Sales Index


Last week's sequential growth in sales (which obviously varies with the calendar) actually ticked above the growth rate in each of the past two years. That's a rarity. The year/year growth rate went above 2% for only the second time this year.  Ordinarily, we would not ring the victory bell for such a scant improvement in sales, but this year is the exception to almost every rule.


Retail Callouts (3/11): ICSC, SHLD, JCP, RH, NKE, URBN, HMB, DKS - chart1 3 11

Retail Callouts (3/11): ICSC, SHLD, JCP, RH, NKE, URBN, HMB, DKS - chart3 11


UK Sales Hit By Weather Too: February storms hit high-street sales



  • "The monthly health of spending survey conducted by the British Retail Consortium and the consulting firm KPMG found that like-for-like sales adjusted for increases in floorspace were 1% lower in February than a year earlier."
  • "Online sales rose strongly as the wet weather kept consumers at home and were 14.3% higher last month than in February 2013. The two best performing categories of in-store sales – home accessories, and flooring and furniture – reflected the recovery in the housing market."
  • "A separate report from Ipsos Retail Performance found that shopper footfall was down across the country last month, with the biggest declines seen in the south-west and Wales, regions particularly hard hit by the weather. The sample of more than 4,000 non-food stores across the UK reported a decline in footfall of 5.3% against February 2013 and a month-on-month fall of 12.2%."


Takeaway: The most interesting point to us is the categories that were most resilient -- Home, Flooring and Furniture. Yes, it might be the housing market, but we think it is more a function of the categories. Simply put, if people need home accessories, weather won't stop them. If someone needs to buy a new bed, they might delay it for a week -- maybe. But they'll definitely still buy it. So many other retail categories are made up of impulse purchases.  There's hardly anything impulsive about home furnishings. That's one of the many factors that gives us confidence in the near term trajectory at Restoration Hardware.




URBN - 4Q14 Earnings


The URBN print might not have been ugly (tho wasn't pretty) but the biggest callout for us was its inventory position. The company's inventory/sales spread was the worst it's been in seven quarters. Of course, they say that they're comfortable with the age and condition of the inventory. But we have NEVER ever seen a negative swing in a company's SIGMA trajectory (quadrant 3: Inventories up, margins down) without seeing a future hit to margins. 


Retail Callouts (3/11): ICSC, SHLD, JCP, RH, NKE, URBN, HMB, DKS - chart3 3 11


DKS - 4Q13 Earnings


Weather was definitely a boon for the top line in the quarter. The company had guided for a (1%) - (2%) comp on an unshifted basis and ended up posting a 6.3%. We won’t take anything away from them - they delivered in an environment where nearly every other retailer failed. But, we seriously question the company's 3-4% comp guidance for '14.


Retail Callouts (3/11): ICSC, SHLD, JCP, RH, NKE, URBN, HMB, DKS - chart6 3 11


NKE - Manchester United seal world-record £600million Nike sponsorship deal



  • "Manchester United are set to announce a world-record kit deal worth more than £600million."
  • "The faltering Premier League champions will make a major statement that proves they are still the biggest name in world football by renewing an arrangement with shirt manufacturers Nike."
  • "It will bank United more than £60million-a-year over the course of a decade-long agreement."
  • "That is almost double the current best kit manufacturing deal, which sees Real Madrid earn £31million from their arrangement with adidas. United currently have a deal with Nike worth £23.5million-a-season - less than Real, Arsenal, Barcelona and Liverpool."


Takeaway: We rarely rail on Nike for how much it spends on endorsement deals. The reality is that the company has proven to be a good steward of capital over time, with sponsorships as well as general corporate capex. But taking ManU from £23.5mm per year to nearly 3x at £60mm?? That borders on egregious -- actually, it crosses the border. Paying £23.5 when the team was dominant, to paying £60mm when it struggles to beat Man City makes no sense to us.  Let's hope Nike has something up it's sleeve on this one. Because it looks like it just got robbed. 


HMB - H&M Debuts First Wedding Dress And It Costs Less Than $100



  • "The mass retailer will be selling its first wedding gown for just $99...both in stores and online later this month, according to a rep for the brand."
  • "This will be the first H&M wedding dress sold in a regular collection, although a wedding gown did appear in the Viktor & Rolf one-time collection back in 2006."


Retail Callouts (3/11): ICSC, SHLD, JCP, RH, NKE, URBN, HMB, DKS - chart4 3 11


Takeaway: This company is so good. While they'll hardly threaten Vera Wang's business, the reality is that there are a lot of women who will buy a wedding dress at H&M in a heartbeat. Aside from the fact that H&M has built up so much credibility as a fashion leader, not everyone has the resources or the willingness to spend $1,211 on a wedding gown (that was the average price spent last year).


SPWH - Outdoor goods retailer Sportsman's Warehouse files for a $201 million IPO



  • "Sportsman's Warehouse Holdings, an outdoor sporting goods retailer with 47 locations across the US, filed on Friday with the SEC to raise up to $201 million in an initial public offering. The Midvale, UT-based company, which was founded in 1986 and booked $656 million in sales for the 12 months ended November 2, 2013, plans to list on the NASDAQ under the symbol SPWH. Sportsman's Warehouse Holdings initially filed confidentially on December 11, 2013."


Takeaway: Not sure who is advising this company strategically, but sounds to us like yet another retailer that falls in the 'should not be public' basket.


SHLD, APP - Sears, Kmart, American Apparel Among Least Engaged Brands



  • "Kmart finished third from the bottom and Sears sixth from the bottom in this year’s distillation of the lowest-ranked brands. The bottom 10 also included American Apparel Inc. in the seventh slot and Coty Cosmetics at number eight."
  • "Blackberry finished lowest among the 555 brands studied by Brand Keys with a ranking of 52 percent, meaning respondents rated it as satisfying just more than half of the attributes consumers look for in an ideal brand in its category."
  • A total of 32,000 consumers between the ages of 18 and 65 were polled for the 2014 index, with 70 percent of them questioned by phone, 25 percent in face-to-face interviews and 5 percent online.


Retail Callouts (3/11): ICSC, SHLD, JCP, RH, NKE, URBN, HMB, DKS - chart5 3 11


Takeaway: This is a really interesting study. We can't speak for the methodology, but 32,000 consumers is a tough sample to screw up. If there's any single takeaway it's that K-Mart, Sears, and American Apparel all showed up -- and JC Penney did not.


BONT - The Bon-Ton Stores, Inc. Announces Brendan L. Hoffman's Term as President and Chief Executive Officer Will End in 2015



  • "The Bon-Ton Stores, Inc. today announced that Brendan L. Hoffman, President and Chief Executive Officer, has notified the Company's Board of Directors that he will not renew his employment agreement with the Company at its expiration on February 7, 2015. Therefore, Mr. Hoffman's term as President and Chief Executive Officer will end, and he will also resign as a director of the Company, onFebruary 7, 2015."

Highs & Lows

Client Talking Points


Argentina, Brazil and Chile equities were all down another -1.2% to -1.6% yesterday, taking the MSCI Emerging Markets Latin America Index to -10% year-to-date.  Meanwhile, food and energy inflation rages higher in the face of these countries seeing Keynesian currency declines.  No, this is not good news for companies like Procter & Gamble, Coca-Cola, etc.


Gold loves the stagflation trend that’s manifesting. It always has. It’s up another +0.5% to +12% year-to-date this morning (versus the Dow which is down -0.4% YTD) after holding support on what was barely a correction. Needless to say, #InflationAccelerating remains Hedeye’s Top Q114 Macro Theme.


The UST 10-year yield of 2.79% hasn’t budged in the last 24 hours. This remains one of the most important live quotes on my risk management screen. Now it just needs to verify lower-highs beneath Hedeye’s 2.81% TREND line to confirm our U.S. #GrowthSlowing theme. We're watching this closely.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

We remain bullish on the British Pound versus the US Dollar, a position supported over the intermediate term TREND by prudent management of interest rate policy from Mark Carney at the BOE (oriented towards hiking rather than cutting as conditions improve) and the Bank maintaining its existing asset purchase program (QE). UK high frequency data continues to offer evidence of emergent strength in the economy, and in many cases the data is outperforming that of its western European peers, which should provide further strength to the currency. In short, we believe a strengthening UK economy coupled with the comparative hawkishness of the BOE (vs. Yellen et al.) will further perpetuate #StrongPound over the intermediate term.


Las Vegas Sands has transformed into that rare stock that should appeal to “Growth,” “Value”, and “Dividend/Cash Flow” investors alike. The stock now yields higher than the S&P 500 (43% sequential quarterly dividend increase), and the company is buying back $200 million + in stock a quarter, yet still retains a pristine balance sheet. The significant capital deployment opportunities can be funded out of annual free cash flow of nearly $4 billion. Management has indicated they are willing to raise leverage 1.5x which would still keep them well below industry average and if directed toward dividends, would result in a yield of over 6%. And we haven’t gotten to the $10-14 billion in mall assets that could be monetized. We know of no other stocks in consumer land that provide this combination of cash flow, growth, cash return to shareholders, and value levers.


Darden is the world’s largest full service restaurant company. The company operates +2000 restaurants in the U.S. and Canada, including Olive Garden, Red Lobster, LongHorn and Capital Grille. Management has been under a firestorm of criticism for poor performance. Hedgeye's Howard Penney has been at the forefront of this activist movement since early 2013, when he first identified the potential for unleashing significant value creation for Darden shareholders. Less than a year later, it looks like Penney’s plan is coming to fruition. Penney (who thinks DRI is grossly mismanaged and in need of a major overhaul) believes activists will drive material change at Darden. This would obviously be extremely bullish for shareholders and could happen fairly soon driving shares materially higher.

Three for the Road


FX: Euro and Yen doing a heck of a lot of nothing so far this morning vs @federalreserve's #BurningBuck @KeithMcCullough


"To produce we must be able to make endless mistakes." - Lesley Garner


Colorado made about $2 million in marijuana taxes in January, state revenue officials reported Monday in the world’s first accounting of the recreational pot business. The tax total reported by the state Revenue Department indicates that $14.02 million worth of recreational pot was sold. The state collected about $2.01 million in taxes. (Washington Post)






  • REGENT cruise lines 4Q 2013 conference call:  
  • CZR 4Q 2013 conference call:  5 pm (36895079)
  • STN 4Q 2013 conference call:  4:30 pm  

Monday-Thursday, March 10-13

  • 2014 Cruise Shipping Miami Conference

Wednesday, March 12

  • SGMS F4Q 2013 conference call:  5:00 pm (pw: 36357318)
  • MTN FY2Q 2014 conference call:  4:30 pm

Friday, March 14

  • Hyatt Investor Day


BYD - Activist investor Elliott Management and EICA disclosed a 7% and 5% in BYD, respectively.


Takeaway:  We welcome activist involvment in BYD as operating change needs to be made. Margins and win per position have lagged the competition. With the right operating team in place, we estimate BYD could enhance EBITDA by $110 to $150 million, or $8 to $10 of equity value.  


CCL - Another sickness outbreak on 'cursed' cruise ship Oriana Southern Daily Echo

P&O Oriana has suffered yet more problems after norovirus broke out for the second time in a week.  The ship is due to dock in Southampton on Thursday.   So far 4 of 1,740 passengers returning from on its Northern Cape winter cruise have been struck by the highly contagious bug.  On March 2, the liner was delayed by 12 hours leaving Southampton on March 2 after 57 previous passengers went down with Norovirus and the ship had a broken propeller.


Takeaway: Terrible luck for P&O Cruises UK (CCL brand)


PENN –will break ground on Plainville casino on Friday


Takeaway:  PENN moving quickly to open what should be a high ROI property, even with a 49% gaming tax rate


No more than 6 gaming licensees post-2020 Macau Business Daily

Secretary Tam says there “should be no increase” in the number of gaming concessionaires – six at present – allowed in the city’s gaming market following the expiry of the current permits in 2020 and 2022.


Takeaway:  An obvious positive for current Macau operators 



Hedgeye remains negative on consumer spending and believes in more inflation.  Following  a great call on rising housing prices, the Hedgeye Macro/Financials team is turning decidedly less positive. 


Takeaway:  We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.

investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.