prev

An Odd Statement from Under Armour | $UA

Takeaway: Under Armour will need to evolve its product creation process if it wants to be considered a real footwear company.

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


An Odd Statement from Under Armour | $UA - running
 

3 Questions for Under Armour's Fritz Taylor

  • "Under Armour Inc...bolstered its running team by naming industry vet Fritz Taylor as VP of running...Taylor, who was most recently VP and GM of running at Norcross, Ga.-based Mizuno, also has worked for Seattle-based Brooks and Beaverton, Ore.-based Nike Inc."

Q:  What’s your take on Under Armour’s position in the running market? 

FT: "...Everyone here would admit that Under Armour has had some fits and starts — hit and misses, if you will — particularly on the footwear side. But the Speedform Apollo just launched, and it’s getting some really strong sell-through numbers, and it’s a shoe that people are saying [is] something unique that no one else can do. We’ve got a nice foot in the door that we can leverage for bigger things."

 

Q: Is the consumer open to new brands and ideas in running?

FT: "...minimal, even though it has waned, brought some energy and excitement around new concepts. Now the big thing is maximal, but a bigger thing is that runners are more switched on to new, innovative ideas and stories that can help improve their running experience."

 

Q: Is it different working at an apparel company that makes footwear than at a footwear company that makes apparel?

FT: "You can absolutely tell [the difference]. One thing I was just dealing with is that here we have to wait for apparel to set the colors [for the season], and at every other company I’ve worked for, the footwear team operated that. That immediately slapped me in the face this week: 'Oh, wait, I need to wait for apparel.'”

Takeaway from Hedgeye’s Brian McGough:

That last answer above from Fritz Taylor 'footwear needs to wait for apparel' is logical for a company like Under Armour. But the reality is that it is probably the wrong answer. The best companies (think Nike) run apparel and footwear product creation in tandem. Chronic underperformers (think Adidas) run their business in a series circuit (first apparel, then footwear in Adidas’ case). Again, that's probably okay for Under Armour where footwear is still in its infancy. But this process will need to evolve if UA wants to be considered a real footwear company. We will be watching.

Subscribe to Hedgeye.


Where’s Europe At? 9 Charts

A head of tomorrow’s interest rate decision – at which we think there’s no prospect of President Mario Draghi moving from current levels – we want to give a quick update on our European economic outlook through the 9 charts below. 

  • PMIs have moderated and somewhat flat lined over recent months (the UK and Germany Manufacturing are notable callouts), however the data remains grounded above the 50 line (expansion) and in aggregate is in-line with modest growth ticking higher, and remaining stable. We continue to marginally prefer European equities over U.S. equities.

Where’s Europe At?  9 Charts - z. pmis

  • Confidence continues to grind higher. In the next two charts we show this trend across Economic Sentiment, Consumer Confidence, and Business Confidence.

Where’s Europe At?  9 Charts - z. confidence

Where’s Europe At?  9 Charts - z. business climate

  • Italian Retail Sales is one call-out to the performance of the periphery. The Italian Retail Sales data shows fits and starts of improvement, however we think the trend line will move higher to positive as we head into the back half of the year. While Italian politics remain far from stable, we expect the young new government of PM Matteo Renzi to spur confidence. The Italian stock market (FTSE MIB) is up a monster +14.8% YTD, with Greece (Athex) up +16.2% and Portugal (PSI 20) up +17.3% as the top performing European equities YTD.

Where’s Europe At?  9 Charts - z. italy retail sales

 

  • New Car Sales across Europe have shown steady improvement over the past 14 months, and have remained positive over the last 6 months.  We view confidence in big ticket items, like a car, as a material read-through on the positive state of the European consumer (and there’s no distortion here from a cash-for-clunkers program).

Where’s Europe At?  9 Charts - z. cars

  • Inflation – we view the media’s manic deflation scares as misplaced. The ECB has long signaled to the market a very extended programs to return CPI towards its target level of 2.0%.  In the second chart below we show how far CPI has moved in the last 12 months: our take-away is that deflation of the inflation is a tailwind to consumption.  ECB VP Victor Constancio said yesterday that he expects a higher reading in April, versus the 0.5% reading in March.

Where’s Europe At?  9 Charts - z. cpi

Where’s Europe At?  9 Charts - z. cpi chg

  • Germany, along the UK (via the etf EWU), has been a preferred equity position via EWG. As we show in the chart below, the DAX is comfortably trading above its TREND line of support at 9,382. The EUR/USD remains resilient, supported by stable underlying growth of the region and policy from the ECB to better shield the member states and shore up the link between the banking systems and the sovereigns. For now, the dovish Fed head Janet Yellen is supporting a strong EUR/USD (TREND support = $1.36). Strong German Factory Orders is merely one important signal that Germany’s industry export base is firing on all cylinders. 

Where’s Europe At?  9 Charts - z. dax

Where’s Europe At?  9 Charts - z. german factory png

 

Matthew Hedrick

Associate


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.

PODCAST | McCullough: What Do You Do When the Market Is Overbought?

 

Hedgeye CEO Keith McCullough sweeps the globe, discussing the latest global macro market internals, economic trends, and how investors should be positioning themselves as we head into Q2. 



Daily Trading Ranges, Refreshed

Takeaway: As we look at today's setup for the S&P 500, the range is 24 points or 0.98% downside to 1854 and 0.30% upside to 1878.

Editor's note: This unlocked edition of Daily Trading Ranges was originally published April 2, 2014 at 8:22 am. For more information on how you can receive these levels every morning in your inbox click here.
 

Daily Trading Ranges, Refreshed - Slide1 large 

BULLISH TRENDS

Daily Trading Ranges, Refreshed - Slide2

Daily Trading Ranges, Refreshed - Slide3

Daily Trading Ranges, Refreshed - Slide4

Daily Trading Ranges, Refreshed - Slide5

Daily Trading Ranges, Refreshed - Slide6

 

BEARISH TRENDS

Daily Trading Ranges, Refreshed - Slide7

Daily Trading Ranges, Refreshed - Slide8

Daily Trading Ranges, Refreshed - Slide9

Daily Trading Ranges, Refreshed - Slide10

Daily Trading Ranges, Refreshed - Slide11

Subscribe to Hedgeye.


Retail Callouts (4/2): UA, NKE, EBAY, MKS, DDS, FDO

Takeaway: Odd statement by new UA running head. MKS snubs US retail market. EBAY goes same-day delivery. New Balance grows faster than NKE and AdiBok.

COMPANY NEWS

 

UA - 3 Questions for Under Armour's Fritz Taylor

(http://www.wwd.com/footwear-news/markets/3-questions-with-under-armours-fritz-taylor-7625997)

 

  • "Under Armour Inc...bolstered its running team by naming industry vet Fritz Taylor as VP of running...Taylor, who was most recently VP and GM of running at Norcross, Ga.-based Mizuno, also has worked for Seattle-based Brooks and Beaverton, Ore.-based Nike Inc."
  • What’s your take on Under Armour’s position in the running market? 
    • FT: "...Everyone here would admit that Under Armour has had some fits and starts — hit and misses, if you will — particularly on the footwear side. But the Speedform Apollo just launched, and it’s getting some really strong sell-through numbers, and it’s a shoe that people are saying [is] something unique that no one else can do. We’ve got a nice foot in the door that we can leverage for bigger things."
  • Is the consumer open to new brands and ideas in running?
    • FT: "...minimal, even though it has waned, brought some energy and excitement around new concepts. Now the big thing is maximal, but a bigger thing is that runners are more switched on to new, innovative ideas and stories that can help improve their running experience."
  • Is it different working at an apparel company that makes footwear than at a footwear company that makes apparel?
    • FT: "You can absolutely tell [the difference]. One thing I was just dealing with is that here we have to wait for apparel to set the colors [for the season], and at every other company I’ve worked for, the footwear team operated that. That immediately slapped me in the face this week: 'Oh, wait, I need to wait for apparel.'”

 

Takeaway: That last answer 'footwear needs to wait for apparel' is logical for a company like UnderArmour, but the reality is that it is probably the wrong answer. The best companies (Nike) run apparel and footwear product creation in tandem. The chronic underperformers (Adidas) run the business in a series circuit (first apparel then footwear in AdiBok's case). Again, that's probably ok for UnderArmour where footwear is still in its infancy. But this process will need to evolve if UA wants to be considered a real footwear company.

 

EBAY - eBay Signs Retail Chains to Same-Day Delivery Service

(http://www.ecommercebytes.com/cab/abn/y14/m04/i01/s03)

 

  • "...the eBay Now service is exclusively for local brick-and-mortar retailers in certain cities: San Francisco and the Peninsula, San Jose, parts of New York City, Chicago and Dallas.
  • While Best Buy, AutoZone and ToysRUs were among the first retailers to participate in eBay Now, the list of retailers now participating include the following featured stores: The Home Depot; Office Depot; Walgreens; GNC; Radio Shack; Macys; Microsoft; Guitar Center, Bloomingdale's and Urban Outfitters."
  • "Others retailers include Ann Taylor Loft, Armani Exchange, Barnes & Noble, Bed Bath & Beyond, Champs, Crate & Barrel, Eastern Mountain Sports, FootLocker, FootAction, GameStop, Golfsmith, JCPenny, Jonston & Murphy, Journeys, Kmart, Pier One Imports, Quiksilver, Staples and Sunglass Hut."
  • "Last fall, eBay said it would expand eBay Now same-day delivery to 25 U.S. markets by the end of this year as well as international locations such as London. The company acquired Shutl last year, allowing eBay to move from hiring "valets" to deliver goods to using a marketplace approach."

 

Takeaway: eBay has recruited a pretty powerful list of partners in its push to build same-day delivery capabilities. This is brick and mortars response to AMZN's local express. Pretty easy sales pitch for EBAY as it gives retailers the opportunity to pool resources to compete with Amazon. Only thing that remains to be seen is if this courier based logistics network can scale to support the potential demand from bigger boxes.

 

 

MKS - Marks & Spencer plans massive international expansion

(http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10737831/Marks-and-Spencer-plans-massive-international-expansion.html)

 

  • "Marks & Spencer intends to open 250 new stores outside the UK in the next three years as part of significant global expansion plans. Marc Bolland, chief executive, revealed that the high street retailer is looking to grow its international sales by 25pc and profits by as much as 40pc."
  • "Although it is retrenching in China - closing or relocating up to a third of its existing stores in Shanghai and seeking help from a local partner before it expands nationwide - it will open new stores in western Europe, India and the Middle East. Its plans include flagship stores in major cities but also 20 standalone food stores in Paris and a collection of new dedicated lingerie and beauty stores."
  • "Marks & Spencer Lingerie & Beauty has already opened at two locations in Saudi Arabia, with 10 further stores planned in the next two years."
  • "M&S has also earmarked 20 sites in India for the lingerie and beauty concept, which is smaller than the company’s traditional stores. In total, M&S wants to have 100 stores in India by 2016."

 

Takeaway: Marks & Spencer is a quality retailer by most measures, and the International expansion makes a lot of sense. Though the most interesting takeaway for us is that it wants to grow in most major markets that are NOT the US. How's that for a statement by a major International retailer with over 1,000 stores that it thinks that the US is overstored?

 

New Balance - New Balance Sees Double-Digit Growth in 2013 

(http://www.sportsonesource.com/news/article_home.asp?Prod=1&section=4&id=50526)

 

  • "New Balance Athletic Shoe reported 2013 worldwide sales of $2.73 billion, a gain of 14.2 percent over 2012 reported worldwide sales of $2.39 billion."
  • "The 14.2 percent gain marks New Balance's third straight year of double digit growth with sales rising 12.2 percent in 2012 and 14.6 percent in 2011."

 

Takeaway: This is really impressive for New Balance. We don't often hear much about its growth due to the fact that it is private. But 14% sales globally on a base of $2.5bn ain't half bad. One thing we'd note is that NB has been aggressively growing its own retail presence, which boosts the top line to an even greater degree relative to having a pure wholesale model. But it's quality growth nonetheless.  Looked at a different way, it outgrew Nike and Adidas.

 

INDUSTRY NEWS

 

Japan Dept Stores' Sales Surge Ahead of Tax Hike

(http://www.wwd.com/retail-news/department-stores/japan-dept-stores-sales-surge-ahead-of-tax-hike-7627657)

 

  • "Japanese department store retailers saw their March comps surge at a double-digit pace as consumers rushed to make purchases before a consumption tax hike went into effect on Tuesday."
  • "Japan's sales tax increased from 5 percent to 8 percent on April 1. Economists and observers are questioning whether the tax hike- the first for the country since 1997- will derail Japan's economic recovery and dent a recent rebound in luxury goods. But for March at least,department stores enjoyed brisk business as consumers stocked up on apparel, jewelry and other items. On the lower end of the market, Fast Retailng's Uniqlo chain saw almost no impact, posting nearly flat comps for the month."

 

OTHER NEWS

 

DDS - Wells Fargo and Dillard’s Announce New Credit Card Agreement

(http://investor.shareholder.com/dillards/releasedetail.cfm?ReleaseID=836699)

 

  • "Wells Fargo & Company and Dillard's, Inc. announced today that the two companies have entered into an agreement for Wells Fargo to fund, issue and service Dillard's-branded private label and co-brand credit cards. Wells Fargo will also manage the cardholder loyalty program for Dillard's."
  • "The program agreement has a 10-year term and is anticipated to become operational in the fourth quarter of 2014, following the scheduled expiration of Dillard's current program agreement. Financial terms of the agreement were not disclosed. Dillard's management believes its earnings from the new program exclusive of startup costs will be comparable to its historical earnings from the Dillard's branded credit card products and believes that earnings will increase with future program growth."

 

FDO - Family Dollar Expands Food Assortment

(http://www.businesswire.com/news/home/20140401006034/en/Family-Dollar-Expands-Food-Assortment#.Uzv6vvldWwQ)

 

  • "Family Dollar…announced today it is introducing more than 400 new food items in each of its more than 8,000 stores across the country."

 

PERY - Carmine Petruzello Exits Perry Ellis

(http://www.wwd.com/menswear-news/retail-business/carmine-petruzello-exits-perry-ellis-7626674)

 

  • "Carmine Petruzello has left his post as president of the Perry Ellis division of Perry Ellis International Inc. The company confirmed his departure, saying he left 'to pursue other opportunities,' and there are no plans to replace him at this time."

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.

next