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The Mall Says it All

Takeaway: A picture is worth a thousand words.

Editor's Note: This is a complimentary research excerpt from Retail Sector Head Brian McGough. For more information on our services, click here.

A Trip to the Mall

You don't often hear from us about our trips to the malls.


We're in there regularly, but the reality is that with about 1,100 malls in the U.S., it's just flat-out dangerous to go into a handful of stores and draw a conclusion.


That said, in a recent mall tour over the weekend, we took a bunch of pictures of things we thought were insightful. It’s not necessarily conclusive given the small sample, but interesting nonetheless.


Here's just a few of our takeaways:



This table of Sperry boat shoes in Lord and Taylor caught our eye in two ways. First, it looked horrible. But that's more to blame on Lord and Taylor. The second was that it was the only footwear display in the entire men's department that was not on sale. That sign on the right? It's marked as 'Everyday Value' at $89.95. 


Boat shoes are not going away.


The Mall Says it All - sperry



We have never, ever seen an athletic shoe store with more SKUs than this Skechers store. Seriously, it was almost painful to see all the models and color combinations.


Also, prominently displayed was its 'Designed for Speed' ad. Let's hope this foray into performance running works for Skechers, because it's been known to churn out a shoe that has a better chance of making your foot bleed than actually completing any marathon.


The Mall Says it All - skechers



Target looked simply horrible. The worst store in the mall. Full stop.


The biggest problem was being out of stock on items in key categories:

  • The two pictures on top show the footwear wall, where they sell vulcanized footwear, slides, and flip flops. 
  • The pictures in the middle were the most alarming, as they show the end-cap in the footwear department. Yes, this is the most valuable real-estate in the whole department, and it was completely barren.
  • The lower left photo shows how Target is getting ready for the spring bike season, which really should have been set a month ago. It was a wall of absolute nothingness.
  • Lastly, there's that picture to the lower right. I have no idea what this is. All I know is that it was painful to the eye. 

The Mall Says it All - target



This Coach store was rather sad. I stood outside waiting for someone to walk in. Total time elapsed was 5 minutes 30 seconds.


And for the record, the mall was otherwise reasonably crowded. 


The Mall Says it All - coach



On our trip to the mall, JCPenney was the anti-Target. Seriously. Everything was the exact opposite from Target. The store was clear, neat, and well merchandised.


The picture to the upper right shows a newly merchandised apparel area for women. It was very well lit, had great signage, and looked extremely inviting. The merchandise was not so bad, either.


Similarly, JCPenney’s footwear department beat Target’s poor showing. The athletic area -- albeit overly supplied with Nike products -- was clean and the product was competitive with what was in the Macy's down the hall. The women’s dress shoe department (shown in the lower right photo) was also world's above what we saw in Target. It was not just in how it was merchandised, but also in presentation and quality of merchandise.


And, one might say that JCPenney should  be well-above Target. Yes, that's true. But in the past, it wasn't.


The Mall Says it All - jcp



The worst thing about the FootAction store is that it was directly across from Abercrombie & Fitch, which soils the air with that horrible-smelling scent.   But we stayed in the FootAction store for a good 30 minutes (and bought something so we wouldn't be kicked out). After some painful accounting, our estimate is that 85% of the SKUs at FootAction are Nike/Jordan. That's simply astounding.


Finish Line had a great looking window, and the retailer is the only athletic store that dared dedicate some of its window space to a non-Nike brand. But we're puzzled that there's a big poster for the Spine footwear product, which is not the new UA footwear on the market (that would be the Speedform Apollo).


The Mall Says it All - footaction


Just Charts: XLP Screens Bullish, Wk 2

Consumer Staples markedly outperformed the broader market last week, falling -0.2% versus the S&P500 at -2.0%. And for a second week, the XLP is bullish on immediate term TRADE and intermediate term TREND durations from a quantitative set-up. This is a material shift as the sector traded bearish TRADE and TREND for the majority of the year-to-date.


Just Charts: XLP Screens Bullish, Wk 2 - chart12


The Hedgeye U.S. Consumption Model is also showing improvement, with 6 of the 12 metrics flashing green.

Just Charts: XLP Screens Bullish, Wk 2 - chart11


Despite an improved outlook for the sector, we continue to believe that the group is facing numerous headwinds, including:

  • U.S. consumption growth is slowing as inflation rises, in-line with the Macro team’s 1Q14 theme of #InflationAccelerating
  • The economies and currencies of the emerging market – once the sector’s greatest growth engine – remain weak with the prospect of higher inflation in 2014 eroding real growth
  • The sector is loaded with a premium valuation (P/E of 19.2x)
  • Less sector Yield Chasing as Fed continues its tapering program
  • The high frequency Bloomberg weekly U.S. Consumer Comfort Index has not seen any real improvement over the past 6 months, but expanded to -27.6 versus -28.5 in the prior week

Just Charts: XLP Screens Bullish, Wk 2 - chart13
Just Charts: XLP Screens Bullish, Wk 2 - chart14


There will be a number of consumer staples companies presenting at CAGE today – March 19th. Click here for the program


Our Best Idea in the sector remains Lorillard (LO). Please email me at if you’d like a copy of the presentation and to listen to the podcast from March 4th.   


Matt Hedrick

Food, Beverage, Tobacco, and Alcohol


Howard Penney

Household Products





Quantitative Setup


In the charts below we look at the largest companies by market cap in the Consumer Staples space from both a quantitative perspective and fundamental aspect where we can offer one.  As you will see over time, sometimes our fundamental view does not align with the quantitative setup (though not often).

BUD – I’ll have another round of bearish BUD beta please! Didn’t take much for this stock to revert squarely back into its Bearish Formation @Hedgeye – TREND resistance = $102.79
Just Charts: XLP Screens Bullish, Wk 2 - chart1

DEO – looks worse than BUD, but both are bearish TREND @Hedgeye with DEO’s TREND resistance firmly intact up at $126.82
Just Charts: XLP Screens Bullish, Wk 2 - chart2

KO – only rallied when the market did, then failed @Hedgeye TREND resistance ($39.58) as the market failed to make new highs
Just Charts: XLP Screens Bullish, Wk 2 - chart3

PEP – looks better than KO primarily because its trading above TREND support of $80.41, albeit barely
Just Charts: XLP Screens Bullish, Wk 2 - chart4

GIS – big correction on a big volume signal late last week; watch TREND support of $49.31 very closely
Just Charts: XLP Screens Bullish, Wk 2 - chart5

MDLZ – still bullish TREND @Hedgeye as long as $33.62 holds
Just Charts: XLP Screens Bullish, Wk 2 - chart6

KMB – still the best looking quantitative setup on this list. We call this a Bullish Formation as it continues to signal a series of higher-lows and higher-highs with TREND support down at $105.95
Just Charts: XLP Screens Bullish, Wk 2 - chart7

PG – having a tough time challenging TREND resistance of $80.56; if it continues to fail there, we’ll remain bearish
Just Charts: XLP Screens Bullish, Wk 2 - chart8

MO – making a serious comeback from the FEB lows; we call this a bearish to bullish TREND reversal @Hedgeye with what was TREND resistance now support at $35.66
Just Charts: XLP Screens Bullish, Wk 2 - chart9

PM – still the dog breath setup of the group; looks nothing like MO as its well below its $83.05 TREND resistance line
Just Charts: XLP Screens Bullish, Wk 2 - chart10

Cartoon of the Day: Alibaba

Cartoon of the Day: Alibaba - Alibaba03.16.2014


China’s Internet giant Alibaba said it would list in New York, and is expected to rank among the largest ever initial public offerings – it could raise as much as $15 billion. One of Alibaba's largest shareholders is Yahoo, which owns 24%.

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Video | McCullough: Why the Market is Bouncing

Textbook Bounce: SP500 Levels, Refreshed

Takeaway: In other words, this market can easily bounce to 1867. But the bigger question is what does it do from there?



After tagging last week’s immediate-term TRADE overbought bubble highs (1881 SPX on Tuesday), the SP500 had a brisk -2.1% correction to immediate-term TRADE oversold as both Gold and VIX signaled overbought. #TextbookBounce


Across our core risk management durations, here are the lines that matter to me most:


  1. Immediate-term TRADE resistance = 1867
  2. Immediate-term TRADE support = 1845
  3. Intermediate-term TREND support = 1815


In other words, this market can easily bounce to 1867. But the bigger question is what does it do from there? A close above that TRADE line would be bullish inasmuch as a close below it would be bearish.


With #InflationAccelerating (should be > 2% by Q3) and US #GrowthSlowing (might drop < 2% in 1H14), there’s no reason to chase the +1% up days, but there’s no need to sell on oversold days either.


Stick to the process. Buy/cover on oversold signals. Sell/short on overbought ones. Don’t chase.



Keith R. McCullough
Chief Executive Officer


Textbook Bounce: SP500 Levels, Refreshed - SPX

VIDEO | Keith's Macro Notebook 3/17 SPX OIL GOLD

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