Takeaway: In advance of our 3/24 Black Book, we review our prior survey on buying patterns vs a yr-ago for Yoga brands. Can LULU can get much worse?

Here's the second note in a series of five in advance of our LULU Consumer Survey results on Monday March 24th at 11am ET.  When we polled consumers three months ago, we pulled away some clear insights. The concerns largely outweighed the strengths, which foreshadowed the company's results, and ultimately the stock price.


We're re-running our survey to gauge the incremental change over the past quarter, with the goal of seeing whether LULU is making progress (which could get us more constructive on the name) or not.


In preparation for 'Round 2' we want to offer up some of the notable takeaways from our last survey, as they'll be framing the discussion on Monday.




In this question, we asked consumers if they are buying more or less than a year ago. Now…we're the first to admit that we don't like this question very much. The reality is that the average consumer does not know how much she was buying a year ago. But, at least the question is consistent across brands, which is good enough for us. In our next survey, we'll see the rate of change by brand, which we think strengthens the question further.


The first chart shows the percent of women who said that they are buying MORE product than they were a year ago. Winners are Sweaty Betty, Zella (Nordstrom), Ideology (Macy's) and Prana.  Losers are Lululemon, Old Navy and AdiBok.


The second chart shows the percent of women who said that they are buying LESS of each brand versus a year ago.  Roxy scored poorly, but the company is literally just starting its Yoga brand now (it is probably unfair to even have it on the list). Then comes LULU, Puma and Adidas.  Most other brands scored respectably with 13% or less buying a smaller amount of the brand today versus a year ago. Check out Sweaty Betty and Zella (JWN) -- truly solid brand momentum.





Continuing with the 'buying more or less' theme, we thought it would be interesting to stack up our Yoga results vs what we learned when we did this for prior surveys in different categories.  We're talking different consumer groups and different income levels in each survey. But the trends are noteworthy nonetheless.  Department stores naturally trailed the pack with far more people 'buying less' than 'buying more'. Then comes Action Sports with a positive trend, followed by Yoga which puts the rest of the categories to shame.  The results of this question won't make or break our thesis -- or decision to potentially change it. But it will give us an indication as to whether the category is getting even stronger or is easing on the margin. 


LULU: SURVEY RESULTS PREQUEL #2 - category buyingmore

Video | McCullough: How to Front-Run the Fed

Chain Store Sales: Hoping Against Hope

Takeaway: After this week's drift downwards, we're hoping to see trends accelerate.

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


ICSC - Chain Store Sales Index


Chain Store Sales: Hoping Against Hope - tumblr mp0b65iLOx1r6f15co1 1280 


The latest International Council of Shopping Centers (ICSC)-Goldman Sachs weekly index, which measures nominal same-store or comparable-store sales excluding restaurant and vehicle demand, has been released. The weekly index statistically represents industry sales and is not just a sum of sales for a handful of retailers.


What we see is not a disaster by any means, but last week's positive +2.1% reading gave us a glimmer of hope. This week, though, we drifted back down to just +1.5%.


Keep in mind, as outlined in the chart below, that we're about to go against a 10-week run last year where sales growth was well below 2012 levels. In other words, we have an easy comp.


We hope we'll see trends accelerate…but we hate relying on hope.


 Chain Store Sales: Hoping Against Hope - chart2 3 18

Connect to Hedgeye.

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.

VIDEO | Keith's Macro Notebook 3/18: VOLUME DAX UST10YR

Retail Callouts (3/18): ICSC/Sales, AMZN, UA, DSW, WMT, GME

Takeaway: ICSC sales ebb again. AMZN streaming hardware late to party. UA split. DSW results worse than they appear. WMT challenging GME – good luck.




  • PSUN - Earnings Call: Tuesday 3/18, 4:30pm



  • GES - Earnings Call: Wednesday 3/19, 4:30pm
  • TLYS - Earnings Call: Wednesday 3/19, 4:30pm



  • WTSL - Earnings Call: Thursday 3/20, 5:00pm
  • NKE - Earnings Call: Thursday 3/20, 5:00pm



  • TIF - Earnings Call: Friday 3/21, 8:30am




ICSC - Chain Store Sales Index


Not a disaster by any means, but last week's +2.1% reading gave us a glimmer of hope. This week we drifted back down to +1.5%. Keep in mind, as outlined in the second chart below, that we're about to go against a 10-week run last year where sales growth was well below 2012 levels. In other words, we have an easy comp. We hope we'll see trends accelerate (but we hate relying on hope).


Retail Callouts (3/18): ICSC/Sales, AMZN, UA, DSW, WMT, GME - chart1 3 18

Retail Callouts (3/18): ICSC/Sales, AMZN, UA, DSW, WMT, GME - chart2 3 18




DSW - 4Q13 Earnings


The headline number was pretty decent relative to expectations. But after updating the model, the trajectory of DSW's business left us less than inspired. After three quarters of either the sales/inventory spread or margins improving, both took a nosedive this quarter.   One thing that seriously bugs us is that DSW called out OmniChannel investments -- almost as if they are one-time in nature. Since when is it ok to single out investments in any area and expect the Street to strip them out of results? Investments are what they are -- money spent to accelerate profit growth in the future. You can't strip 'em out. We certainly won't.


Retail Callouts (3/18): ICSC/Sales, AMZN, UA, DSW, WMT, GME - chart4 3 18


AMZN - Amazon to Ship Video-Streaming Device in April



  • " Inc. will begin shipping its long-awaited video-streaming device in early April, through its website as well as retailers including Best Buy Co. and Staples Inc., said people familiar with the company’s plans."
  • "The Amazon device will carry a variety of apps available on Roku Inc. and Apple Inc. set-top boxes and run on a version of Google Inc.’s Android software, like Amazon’s tablet computers, these people said. Roku’s most popular apps include video services Netflix and Hulu Plus and music service Pandora, as well as Amazon’s own video-streaming service."
  • "Pricing remains unclear, though the people familiar with the e-commerce giant’s plans said the device likely would come with incentives available to members of Amazon’s Prime streaming video and shipping program."


Takeaway: This is overdue for Amazon. You can buy a box from Apple, Roku and even Google (through a partnership with Sony). There'll be a real appetite for a competing product from AMZN -- especially if it leverages Prime from streaming content. One thing we wonder is if it is too late to the party. Walk into a Best Buy, and half the TVs on the wall are 'smart TVs' which already have the box embedded in the unit. No need to have Apple, Roku or Amazon there. Soon those 'smart TVs' will be 'dumb TVs' and everybody will have them. Apple seems to have this one right with their (worst secret in consumer electronics) soon-to-be move to bypass the little black box and go direct to a branded TV set.


UA - Under Armour Announces A Two-For-One Stock Split



  • "Under Armour, Inc. today announced that its Board of Directors has approved a two-for-one stock split of its outstanding common stock."
    "The additional shares issued as a result of the stock split will be distributed on or about April 14, 2014 to stockholders of record on March 28, 2014."


Takeaway: While I never quite understood the logic of a stock split, the reality is that there will always be some investors who think that a $60 stock is half as expensive as a $120 stock.


WMT, GME - Newest Player in Used Videogames: Wal-Mart



  • "Wal-Mart Stores Inc. is making a play for the used videogame business, a move that could bring in new customers while rankling GameStop Corp., which has long dominated the market."
  • "Starting next week, the world's largest retailer will allow shoppers to trade in used videogames for anything from groceries to gadgets across 3,100 of its stores. Customers will receive gift cards ranging from a few dollars to more than $35, based on the value of the games they turn in. Those cards can be redeemed in stores and online."
  • "Wal-Mart itself ran a smaller trade-in program in 2009 where it allowed customers to sell used games through kiosks in certain stores, but the retailer failed to make it work. This time, Wal-Mart has teamed up with CExchange Inc., an electronic trade-in and recycling company based in Carrollton, Texas, which also works with RadioShack Corp. and eBay Inc."


Takeaway: We give WMT credit for going the used game route, and they could prove disruptive to GME -- to an extent. But the reality is that it is a tough business, and it took GME a very long time to get it right. It is harder to manage inventory in this category than almost any other in retail. There's no way Wal-Mart can do it as well as GameStop. One of the key reasons is that you need consistent volume of gamers that view your store as a source for the content that they want. GME has that steady flow of traffic -- it is the destination for gamers. Only after it established itself as the mecca for Video Games could it build a used game business. Seems premature for WMT.




Retailers Face Big Hurdles in Bridging the “Omni-Channel Commerce Gap,” According to new Research from Accenture and hybris



  • "Organizational, operational and technology challenges are hampering retailers’ efforts to meet customers’ demand for a seamless shopping experience across all channels and touch points, according to a new research study from Accenture…"
  • "Retailers view omni-channel maturity as a key brand differentiator for their companies, and improving their ability to provide customers with a seamless shopping experience across all channels, as a top priority, according to the study, 'Customer Desires Vs. Retailer Capabilities: Minding the Omni-Channel Commerce Gap,' conducted by Forrester Consulting. However, the study shows that nearly all – 94 percent – of retail decision makers surveyed as part of the research said that their companies face significant barriers to becoming an integrated omni-channel company."
  • "The survey also found that 71 percent of the shoppers expect to view in-store inventory online, and 50 percent expect to buy online and pick up their purchase in a physical store. Yet, only one third (36 percent) of the retail decision makers surveyed said that their companies are able to provide customers with in-store pickup of online purchases, online visibility of cross-channel inventory and store-based fulfilment of online orders. All of these capabilities are considered vital for seamless retailing."


Retail Callouts (3/18): ICSC/Sales, AMZN, UA, DSW, WMT, GME - chart3 3 18




ETH - Ethan Allen names interim CFO


  • "Ethan Allen Interiors Inc. today announced that David Callen, Vice President Finance & Treasurer, has resigned from the Company to pursue another opportunity, effective March 31, 2014."
  • "The Company further announced that Corey Whitely, Executive Vice President, Operations, has assumed the additional role of interim Chief Financial Officer and Treasurer. The Company has also appointed John Bedford to the position of Vice President, Corporate Controller serving as the principal accounting officer. Mr. Bedford, 60, joined the Company in February 2008 and previously served as Director Corporate Finance & Reporting and most recently as Sr. Director Corporate Finance & Reporting."

Deader Than a Doornail

Client Talking Points


US Equity volume is deader than a doornail on the squeeze yesterday (down -20% versus TREND average). Nope, that's definitely not a good thing as front-month VIX (volatility)  held Hedgeye TREND support of 14.72, while SPX signals lower-highs of resistance at 1866 now. US consumer prices (CPI) should continue to surprise on the upside this morning with #InflationAccelerating.


Germany broke my TREND support signal line last week and was not able to get back above that (9,273) on the bounce. German Bunds well bid again with the 10-year Bund Yield down 10 basis points month/month to 1.56%. German #GrowthSlowing (on the margin) might be the read-through here.


The UST 10-year yield at 2.67% this morning has confirmed the bearish TREND (2.80% resistance). This makes sense as #InflationAccelerating has slowed US growth here in Q114. Again.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Construction activity remains cyclically depressed, but has likely begun the long process of recovery.  A large multi-year rebound in construction should provide a tailwind to OC shares that the market appears to be underestimating.  Both residential and nonresidential construction in the U.S. would need to roughly double to reach post-war demographic norms.  As credit returns to the market and government funded construction begins to rebound, construction markets should make steady gains in coming years, quarterly weather aside, supporting OC’s revenue and capacity utilization.


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.


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.

Three for the Road


FX: Yen backs up again vs Burning Buck this morning - $101.19-102.43 risk range vs USD @KeithMcCullough


"You are never too old to chase your dreams." - Diana Nyad


Most people have very little tucked away for retirement, and many aren't even trying to figure out how much they'll need later in life, a new national survey reveals. About 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000. (USA Today)

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.