Retail Callouts (4/10): BBBY, PIR, RH, WSM, KER, LULU, TGT, WMT, LB, VNCE

Takeaway: RH/WSM vs BBBY/PIR tag team – no contest. KER looking for sports brands -- LULU? TGT and WMT battle over granola. LB/Vicy sheds outerwear.



BBBY and PIR Both Put Up Less-Than-Stellar Results. But there's an Important Theme.


Look at the SIGMA trajectory for both retailers. Sales down, inventories up, weak margins. But how come that is in such stark contrast to what we saw out of RH and WSM? Aside from better product, merchandising, and marketing, there's a structural factor as well.  BBBY generates only 4% of its sales online. PIR is only at 5%. That means when people don't want to leave their homes due to weather, sheer laziness, or whatever, BBBY and PIR are at a competitive disadvantage. RH and WSM, however, generate nearly half of their respective sales online.  They both have the ultimate channel hedge to complement their premium product offering. This quarter it made a difference.


BBBY may have printed earnings that are in line with prior guidance, but any way we slice it, this SIGMA trajectory looks horrendous. A 6% sales decline on a 5% inventory build is was out of character for BBBY.


Retail Callouts (4/10): BBBY, PIR, RH, WSM, KER, LULU, TGT, WMT, LB, VNCE - chart1 4 10


As bad as Bed Bath looks, Pier 1 looks even worse. Not enough sales, way too much inventory, and no margin to be found.


Retail Callouts (4/10): BBBY, PIR, RH, WSM, KER, LULU, TGT, WMT, LB, VNCE - chart3 4 10


KER - Gucci Owner Kering to Consider Buying Sports Brands



  • "...Kering SA will consider acquiring sports and lifestyle brands in three years as it assesses the performance of the Puma label, Chief Executive Officer Francois-Henri Pinault said."
  • "Any deal will hinge on Kering’s ability to reverse the fortunes of Puma...which has been undertaking a reorganization since 2009, he said in an interview in Hainan, China. Pinault, who’s also Kering’s chairman, said he’s 'convinced' the Paris-based company should have a sports-and lifestyle-oriented business."


Takeaway: The list of premium sports brands that Kering can buy is actually quite small. But there's one that is a) premium, b) global, c) in need of major help, and d) is run by a fellow Frenchman.  In case you have not guessed already, that's Lululemon.


WMT and TGT Fight Over Granola


Takeaway: Wal-Mart offering organics at a 25%+ discount is a daunting development for incumbent organic brands at WMT. But what's more interesting is that TGT came out with a simultaneous announcement that it will dramatically up its organic product -- but it is not bringing price into the equation. Ultimately, will people want a better brand selection at Target, or a focused selection with deep discounts at WMT? Our sense is that Wal-Mart will win this one. But the wild card remains how each company conveys the value proposition to consumers.


WMT - Walmart to Offer Organic Line of Food at Discount Prices



  • "Walmart plans to announce on Thursday that it is putting its muscle behind Wild Oats organic products, offering the label at prices that will undercut brand-name organic competitors by at least 25 percent."
  • "For now, Walmart will carry the Wild Oats label, which is owned by the Yucaipa Companies, a private investment firm, only in its pantry section, with items like tomato paste, chicken broth and cinnamon applesauce cup. Over 90 percent of its offerings at Walmart will be organic…"
  • "Instead of hitting the entire national market at once, Walmart will first introduce Wild Oats at 2,000 stores in the coming months, only half of its national footprint, and then roll it out to the rest of the country. Mr. Sinclair said that concerns about supply kept the retailer from introducing the brand in all its stores at once."


TGT - Target Ups Organic Offering



  • "The mass retailer is expanding its selection of natural, organic and sustainable brands under the 'Made to Matter' umbrella."
  • "The 'Made to Matter — Handpicked by Target' collection is comprised of 17 leading natural, organic and sustainable brands. Target is making the products more accessible to consumers. Merchandise will be available throughout the store, both in the products’ usual aisles and as part of displays for the collection. Select products also will be available on and Target’s mobile app."
  • "'Made to Matter' brands include Annie’s Homegrown, Burt’s Bees, Chobani, Clif Bar & Co., Ella’s Kitchen, Evol, Horizon Organic, Hyland’s, Kashi, Method, Plum Organics, Seventh Generation, SheaMoisture, Target’s Simply Balanced, Vita Coco, Yes To and Zarbee’s Naturals. 'The Made to Matter' collection includes all products now offered at Target by the participating brands and at least one new exclusive item from each brand."


LB - Victoria's Secret Trims Apparel Collections



  • "WWD has learned that Victoria’s Secret will be narrowing its apparel offering by dropping most of its wovens, outerwear, denim and some of the dress offering as well. Hundreds of millions of dollars worth of revenues will be shed, with one apparel source estimating anywhere between $500 million and $750 million of volume."
  • "Changes to the Victoria’s Secret collection will begin being evident right away but most noticeably by next fall. The decision to cut back, revealed internally at L Brands headquarters in Columbus, Ohio, on Tuesday, impacts Victoria’s Secret Direct. It does not affect the Victoria’s Secret stores, which stick to the core offerings. It also does not affect Pink…"


Takeaway: No argument here. The reality is that if you ask a hundred consumers what Victoria's Secret does best, not a single one will say 'denim'. The one product extension that makes sense to us is Yoga, where it has had very good success (which will continue).


VNCE - Vince Unveiling Kids' Collection in June



  • "The brand’s new kids’ line will be launched in June at stores such as Barneys New York, Bergdorf Goodman, Neiman Marcus, Saks Fifth Avenue, Bloomingdale’s and Nordstrom, as well as 25 kids’ specialty retailers, select Vince locations and The collection is licensed to Tawil Associates in New York, which is Vince’s second licensing partner. Its first is with Brown Shoe for women’s and men’s footwear."
  • "For girls, retail prices range from $24 for a tank to $598 for a scuba leather jacket. For boys, prices start at $34 for a crew-neck T-shirt and go as high as $398 for fall and winter jackets."


Retail Callouts (4/10): BBBY, PIR, RH, WSM, KER, LULU, TGT, WMT, LB, VNCE - chart2 4 10


Takeaway: It's way too early in Vince's lifecycle to be extending into kids. It's one thing to sell a T-shirt for $75 and jacket for $1,000 to an adult, but to push a $500 price point for an 8-year old? Seems a bit extreme for product that from 20-feet away looks like it might have come from Uniqlo at 1/10th the price point.







  • "Abercrombie & Fitch Co. today announced that Joanne C. Crevoiserat has been named Executive Vice President and Chief Financial Officer of the company, a position she is expected to take up in May, 2014."
  • "Since 2007, Ms. Crevoiserat has served in a number of senior management roles at Kohl's Inc., most recently as Executive Vice President of Finance and prior to that, as Executive Vice President of Merchandise Planning and Allocation. Prior to Kohl's, Ms. Crevoiserat held senior finance positions with Wal-Mart Stores and May Department Stores, including serving as CFO of the Filene's, Foley's, and Famous-Barr brands."


GPS - Gap CEO Glenn Murphy Compensation Falls



  • "Murphy’s total reported compensation was $18.7 million, 24 percent below the $24.6 million reported for 2012, according to Gap’s definitive proxy filed this week with the Securities and Exchange Commission."
  • "His salary was unchanged at $1.5 million while his cash bonus — or non-equity incentive plan compensation — fell 40.5 percent to $2.7 million from $4.5 million a year ago, when he received the highest amount possible under Gap’s compensation plan."
  • "Combining salary and bonus, the cash portion of his compensation fell 30.4 percent to $4.2 million from $6 million in 2012."

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more