Cartoon of the Day | Beware of (Low) Volume

Takeaway: Lower-highs on lower-volume doesn’t confirm a renewed bull.

Cartoon of the Day | Beware of (Low) Volume - Price Volume 04.22.2014

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McCullough: Beware of This Market Signal


CEO Keith McCullough discusses the recent trend of declining equity volume on "up" market days versus increasing volume on "down" market days.

'Generational Buying Opportunity' at Darden Just Got One Step Closer | $DRI

Takeaway: For whom does the bell toll? Darden's CEO Clarence Otis and his "management team."

Big news for beleaguered Darden shareholders today:

  • Activist investor Starboard has reportedly won a consent to call for a special meeting of Darden Restaurants shareholders.

'Generational Buying Opportunity' at Darden Just Got One Step Closer | $DRI - penney

The company has been and remains under intense pressure from a number of activist investors over the last year.


If you've been following this shareholder saga at all, you already know that Hedgeye's Howard Penney has been leading the charge to oust Darden's wayward management and unlock shareholder value.


Clarence Otis' hot seat just got hotter...



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Chain Store Sales: Not Looking Good (and No Excuses Left)

Takeaway: Chain stores got no lift from Easter.

Chain Store Sales: Not Looking Good (and No Excuses Left) - emptymall

ICSC - Chain Store Sales Index

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


There’s been no lift from the Easter shift with numbers flat year-over-year. If we look at the trailing 4-week average, numbers were down 40 basis points against easy compares.


With no excuses left in the chamber, it's shaping up to be a tough earnings season for a whole host of retailers.

This latest number dovetails with our #1 Q2 Macro Theme:

  • #ConsumerSlowing: The cyclical increase in consumer spending growth from the 2009 lows is under pressure. Rising food prices and a stagnating USD continue to squeeze average Americans on the margin. Given the potential for further USD depreciation and a continuation of global commodity inflation as a real macro risk, we think U.S. consumption growth will slow as it bumps up against difficult compares heading into 2Q and beyond.

Chain Store Sales: Not Looking Good (and No Excuses Left) - chart1 4 22


Editor's Note: This is a research excerpt from Hedgeye Retail Sector Head Brian McGough. Follow McGough on Twitter @HedgeyeRetail

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Daily Trading Ranges, Refreshed

Takeaway: US Equity volumes were down -18% yesterday versus the one month average.

Editor's note: This unlocked edition of Daily Trading Ranges was originally provided to subscribers on April 22, 2014 at 7:33 a.m EST. For more information on how you can receive these levels every morning in your inbox click here.

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Goldman upgrades but trouble brews in the Caribbean



Year-to-date, NCLH has fallen 15%, compared with CCL’s -7% and RCL’s +8%.   Why the underperformance despite two new ships serving the Caribbean market, the highest projected yield growth in the industry for 2014, highest % of buy ratings in the industry at 86% (including GS’s buy upgrade last night) with no sell ratings, and a bullish CEO?  One can blame the Genting overhang of potential stock sales, but that would be missing the big picture.  Caribbean discounting concerns are real and it’s not abating for NCLH, at least in the short-term.


Norweigan reports Q1 earnings next Monday after the bell.  As we pointed out in our last cruise survey, “CRUISE PRICING SURVEY: DICEY Q2” (04/04/14), Norwegian’s Q2 guidance could miss Street expectations.  We currently forecast 3% net yield growth at $0.52 EPS for Q2.  Q1 should be ok (HE: 4% net yield, $0.24 EPS) since results are boosted by the introduction of Getaway in February.  However, sell-side estimates go as high as 6.5% net yield growth for Q2.  NCLH’s 4% FY net yield growth guidance seems aggressive.  If FY 2014 EPS guidance is to be met, we think it would have to be on the cost side; otherwise, expect a guidance cut.


Our latest pricing survey, conducted on April 21st/22nd, confirms our bearish stance on NCLH (we’ll have more survey commentary in a separate note).  Caribbean pricing trends worsened for the Norwegian brand in late April bringing overall pricing lower, as seen below.  The Caribbean accounts for 56% of NCLH’s total capacity in 2014, up 6% points over the previous year.




We also think it’s important to clarify something mentioned often by the frustrated bulls - steady new ship premiums.  For the most part, we agree but a closer look shows it is because of price discounting across all ships.  We believe it is most insightful to compare Getaway and Breakaway with its peers in their respective markets –Miami and New York City.  As the charts below show, the new ship premiums have been relatively consistent with lower and lower prices, although the recent Breakaway discount in Q2 is pretty ugly.  










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