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Takeaway: TGT declaring victory prematurely. WMT last in grocery survey. Levi’s cuts 5% of workers. Brookstone preps Ch11. KSS $175 price point?

EVENTS TO WATCH

  • THURSDAY
    RH - Earnings Call: Thursday 3/27, 5:00pm


FRIDAY

  • FINL - Earnings Call: Friday 3/28, 8:30am

COMPANY NEWS

 

TGT - Target, Visa Say Fraud Limited in Wake of Data Breach

(http://online.wsj.com/news/articles/SB10001424052702304688104579464091428141708)

  • "Target Corp. said it has seen relatively little fraudulent activity on its cards following a massive data breach over the holidays...Target Chief Financial Officer John Mulligan, speaking at a Senate Commerce Committee hearing Wednesday, said there has been $2 million in fraud on the Visa credit cards it issues and none on Target's store-issued debit cards."
  • "Ellen Richey, chief legal officer at Visa Inc., said the percentage of cards stolen during the Target breach that have been used for fraud is much lower than the 2% to 5% rate that the card issuer normally sees in such circumstances due to the relatively quick notification of the breach."

 

Takeaway: The actual degree of fraud probably does not matter as much to consumers as the simple fact that their data was unknowingly handed out to people intending to do harm. The bottom line is that Target might be breathing a mini sigh of relief here -- which might be warranted as it relates to its own liability for damages done. But the big challenge is regaining customer trust. We still think that will take upwards of 2-years.

 

LS&Co. - Levi's Restructuring Will Cut 800 Jobs

(http://www.wwd.com/markets-news/denim/levis-to-streamline-operations-and-eliminate-800-jobs-7617747)

  • "Levi Strauss & Co. said it is restructuring operations — resulting in the loss of 800 jobs — through a global productivity initiative to occur in phases over the next 12 to 18 months."
  • "The initiative to streamline operations, when complete, is expected to result in an annualized cost savings of $175 million to $200 million."
  • "This first phase will result in the elimination of 800 positions, or 20 percent of Levi’s nonretail and nonmanufacturing staff. The cuts will eliminate management layers and remove duplicative roles, plus regroup country clusters and incorporate other structural changes, the company said...the company said it employed 16,000 people globally as of Nov. 24, when its last fiscal year ended."

Takeaway: This is a big deal for Levi's. 800 employees might not seem like a huge deal for most companies, but this is 5% of the company's workforce. There's got to be something other than just employee cuts at play here, because the math suggests that the average employee cost is $250,000, which is way too high given that most of the cuts will be administrative.

 

WMT - Wegmans, Trader Joe's top supermarket ratings; Walmart at bottom

(http://www.chainstoreage.com/article/wegmans-trader-joes-top-supermarket-ratings-walmart-bottom)

  • "Thousands of subscribers to the world's largest independent product-testing organization weighed in on grocery shopping via Consumer Reports’ latest survey – and gave Wegmans, Trader Joe's, Publix, Costco and Sprouts the highest scores overall among 55 of the nation's major grocery stores."
  • "Walmart landed at the bottom of the ratings, based on a survey of the 27,208 subscribers."
  • "The biggest gripe overall: Not enough open checkouts (cited by 19% of shoppers), followed by congested aisles, out-of-stock advertised specials, and lack of choice."

Takeaway: Not a surprise that Trader Joe's is near the top of the list. Though notable that Whole Foods is nowhere to be found. While we always look at these surveys with a very critical eye, if there's one organization we'll always give the benefit of the doubt, it's Consumer Reports.  Wal-Mart bringing up the rear is simply embarrassing. Lack of checkouts, out of stocks, lack of choice -- not the factors WMT wants to see cited by its customers.

 

 

ADDYY - Pharrell to Collaborate With Adidas

(http://www.wwd.com/markets-news/intimates-activewear/pharrell-williams-to-collaborate-with-adidas-7618802)

  • "...Williams today will reveal that he has been tapped as Adidas’ newest collaborator."
  • "Following in the footsteps of Raf Simons, Yohji Yamamoto and Rick Owens, Williams will launch his new line of products for Adidas Originals later this summer. The Simons, Yamamoto and Owens collaborations continue, meanwhile."
  • "The collection will be the latest in a string of fashion tie-ups for the 40-year-old producer, singer and fashion designer — who already is working with G-Star, Comme des Garçons on a fragrance line, Moncler on sunglasses and Uniqlo on a shirt collaboration. That is on top of his own collection, Billionaire Boys Club, and in the wake of past collaborations with brands such as Louis Vuitton."

Takeaway: Hardly a threat to Nike. Adidas has been doing these celebrity endorsements for years, and it's taken them into product areas where Nike simply does not belong. If Pharrell could dunk, throw a 95mph fastball, or run a sub-4-minute mile, then Nike might go there. The endorsement strategies for these two companies could not be more different.

 

KSS - Elie Tahari to Partner with Kohl’s for Next DesigNation Collection

(http://phx.corporate-ir.net/phoenix.zhtml?c=60706&p=irol-newsArticle&ID=1912835&highlight=)

  • "Kohl’s Department Stores today announced Elie Tahari will design the retailer’s fifth DesigNation limited-edition collection...The capsule ...will feature apparel for her and will be available exclusively at Kohl’s and Kohls.com beginning fall 2014."
  • "His DesigNation collection will...include dresses, sweaters, knit tops and bottoms in shades of blue, black and ivory, all at an incredible value. Retail prices for the collection will range from $40 to $175."

 

Takeaway: $175 price point seems a little steep for KSS - even if it's for Elie Tahari. We wonder what the shopper profile looks like for these DesigNation capsules.

 

OTHER NEWS

 

M - Tony Spring Shapes Bloomingdale's Team

(http://www.wwd.com/retail-news/department-stores/bloomingdales-eyeing-growth-7618900)

  • "WWD has learned that [Tony Spring, the new chairman and chief executive officer of Bloomingdale’s] has just triggered his first management changes involving reorganizing responsibilities at the highest rung. Along with the team, he’s identifying categories and services the company could develop to broaden the offering and further the store’s growth — from food to electronics to additional customer services."
  • "Among the management shifts, Francine Klein has been promoted to vice chairman, from executive vice president and general merchandise manager."
  • "Now reporting to Klein are two senior vice presidents: Arnie Orlick, outlets, and Anne Bridges, omnichannel experience and technology."
  • "Frank Doroff, vice chairman, will add new businesses and concessions to his current responsibilities for ready-to-wear and bloomingdales.com. Patricia Chadwick continues as senior vice president for new businesses and concessions, and will now report directly to Doroff."
  • "Charles Anderson, executive vice president and director of stores, will add store operations to his duties. Jay Fogg, senior vice president of store operations, will report to Anderson."

 

Brookstone - Brookstone, Specialty Retailer, Preparing For Bankruptcy Filing

(http://online.wsj.com/news/articles/SB10001424052702304418404579464260201032406)

  • "Brookstone Inc...is preparing to file for bankruptcy protection as early as Sunday, with a plan in place to be bought by another specialty retailer, people familiar with the matter said."
  • "...Spencer Spirit Holdings Inc., which owns Spencer's and costume retailer Spirit, has been in discussions with Brookstone for weeks, the people said, as Brookstone battles disappointing sales, weak liquidity and a hefty debt load. The two parties are hoping to finalize sale paperwork over the weekend leading up to a bankruptcy filing, they said."
  • "Spencer Spirit Holdings is expected to pay around $120 million for Brookstone, the people said. Brookstone has about $140 million in debt."