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Takeaway: Too soon to hop on short-side of SKX? AMZN feeling the weight of sales tax. New LULU copycat with big backers.

EVENTS TO WATCH

THURSDAY

  • UA - Earnings Call: Thursday 4/24, 8:30am
  • CAB - Earnings Call: Thursday 4/24, 11:00am
  • DECK - Earnings Call: Thursday 4/24, 4:30pm
  • HBI - Earnings Call: Thursday 4/24, 4:30pm
  • AMZN - Earnings Call: Thursday 4/24, 5:00pm

FRIDAY

  • VFC- Earnings Call: Friday 4/25, 8:30am

COMPANY NEWS

SKX - 1Q14 Earnings

Retail Callouts (4/23): SKX, AMZN, LULU, RSH - chart1 4 23

 

Takeaway: Clean beat by a sizable margin. DD growth in Wholesale, International, and Retail while taking up price by 5% amounted to the 21% revenue growth rate. The only troubling part of the algorithm was flat dot.com sales which management attributed to low inventory levels. Not alarming given that the company comped 5.6% but interesting given just about every other retailers reliance on that channel over the past 6 months. The company got product right - something that it hasn't consistently been able to deliver on in the past. Sustainability of this momentum is the factor to determine now. Getting in on the short side too soon for the legions of perennial SKX haters could prove very painful.

 

AMZN - Amazon Sales Take a Hit in States With Online Tax

(http://www.bloomberg.com/news/2014-04-22/amazon-sales-take-a-hit-in-states-with-online-tax.html)

  • "In one of the first efforts to quantify the impact of states accruing more tax revenue from Web purchases, researchers at Ohio State University published a paper this month that found sales dropped for Amazon when the online charge was introduced. In states that have the tax, households reduced their spending on Amazon by about 10 percent compared to those in states that don’t have the levy. For online purchases of more than $300, sales fell by 24 percent, according to the report titled 'The Amazon Tax.'”
  • "In total, brick-and-mortar retailers enjoyed a 2 percent bump in purchases in states that introduced an online sales tax, while competing online retailers got a 20 percent increase, the study found."
  • "The biggest sales uptick -- 61 percent for big-ticket items -- went to merchants that use Amazon Marketplace. These outfits pay Amazon a fee to offer products through the Amazon website, yet don’t collect taxes. The products are typically available alongside Amazon’s own listings."

Takeaway: AMZN is the only retailer that doesn't have to protect its margin, because quite frankly, it doesn't ha. It's never had one mostly because it feels that revenues are more defensible. The 10% pullback in revenues in states where AMZN has started collecting state income taxes is less than we'd expect given the 5-10% price advantage it held prior to the tax laws. At some point Congress will pass a law clarifying this issue, whether it’s the Marketplace Fairness Act or something that looks a lot like it. AMZN can afford to play on a level playing field in the tax arena and still compete on price, but the others who this study points to as the biggest beneficiaries of the share gain don't have that pricing power.

LULU - Montreal’s Lole takes aim at struggling Lululemon's market

(http://www.theglobeandmail.com/report-on-business/montreals-lole-takes-aim-at-struggling-lululemon-market/article18116318/#dashboard/alerts)

  • "Montreal-based Lole...will open a flagship store in the prominent Soho district of New York this spring as a springboard for expansion to the U.S."
  • "On Wednesday, Lole, which started as a wholesaler and branched into retail in 2010, will announce it is financing its plans partly through an investment from several high-profile backers. They include Quebec’s Desmarais family, members of the Hermes luxury fashion dynasty in France and the Simon family, which founded the largest U.S. shopping centre landlord. The group is buying a majority stake in parent company Coalision Inc. from private equity firm Kilmer Capital Partners, whose interest is dropping from 70 per cent to 20 per cent."
  • The retailer’s parent's long-term target is to increase revenues, which are expected to hit $105-million this year, to $1-billion or more annually over the next several years, Bernard Mariette, chief executive officer of Coalision, said….'It’s good timing,' Mr. Mariette, the former CEO of snowboard and surf specialist Quiksilver, said in an interview. 'Every movement in the competition is an opportunity.'”

Takeaway: Big backers stepping in behind another LULU copycat. LULU's competition spans the whole gamut - NKE, UA, GPS joined by a whole host of independents. The big players are the most easy to point to as competition but it’s the competition in aggregate that we are concerned with. We still think LULU has a lot of room to run on the top line, but will have to make its pricing model and/or value proposition more attractive in order sustain its market share -- something it's been unable to do since 2012.

 

OTHER NEWS

 

RSH - Top ops exec departs RadioShack

(http://www.retailingtoday.com/article/top-ops-exec-departs-radioshack)

  • "Troy Risch resigned his position EVP of store operations at RadioShack the company disclosed in a filing with the Securities and Exchange Commission on Tuesday."
  • "Risch spent 16 months at the troubled electronics retailer and his hiring in January 2013 was seen as somewhat of a coup since had spent 19 years at Target in various operations roles including EVP of stores."
  • "Risch joined RadioShack under the leadership of former interim CEO Dorvin Lively. However, roughly a month after Risch was hired RadioShack named former Duane Reade and Walgreens executive Joe Magnacca president and CEO to replace Lively."

ABF - Primark to Open Stores in America

(http://www.wwd.com/retail-news/mass-off-price/primark-to-open-stores-in-america-7653356)

  • "Associated British Foods plc said its popular retail brand...would open stores on the east coast of the U.S. starting next year."
  • "Primark signed a lease for some 70,000 square feet of selling space in the historic Burnham Building, which is currently being renovated, at Downtown Crossing in the heart of Boston, Mass. The site was previously home to a Filene’s department store."
  • "The Primark unit is set to open towards the end of 2015, and negotiations are under way to open more locations in the north east, through to the middle of 2016. The U.S. stores will be supported by warehousing in the region, ABF noted."