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Takeaway: TGT CMO responds to scathing employee letter. Adi CEO talks succession plan. WMT won't oppose minimum wage hike.

HEDGEYE RETAIL IDEAS LIST
 

Retail Callouts (5/19): TGT, Adi, WMT - ideas

EVENTS TO WATCH

MONDAY (5/19)

  • URBN - Earnings Call, 5:00pm

TUESDAY (5/20)

  • DKS - Earnings Call, 10:00am
  • TJX - Earnings Call, 11:00am

 

WEDNESDAY (5/21)

  • TIF - Earnings Call, 8:30am
  • PETM - Earnings Call, 10:00am
  • TGT - Earnings Call, 10:30am
  • AEO - Earnings Call, 11:00am
  • WSM - Earnings Call, 5:00pm

THURSDAY (5/22)

  • BKE - Earnings Call, 10:00am
  • BONT - Earnings Call, 10:0am
  • ARO - Earnings Call, 4:15pm
  • ROST - Earnings Call, 4:15pm
  • GPS - Earnings Call, 5:00pm

 

FRIDAY (5/23)

  • FL - Earnings Call, 9:00am

COMPANY NEWS

TGT - The Truth Hurts

(https://www.linkedin.com/today/post/article/20140513221110-3501295-the-truth-hurts)

Target CMO, Jeff Jones, in response to the article posted by an anonymous employee on gawker: (http://gawker.com/target-headquarters-in-desperate-need-of-help-says-e-1573101642)

  • "You’d think that these two incidents alone [Data Breach & CEO resignation] would create enough pain to last a brand a lifetime but one of the most challenging things that has happened, in my opinion, have been reports, some attributed to unnamed team members, that paint a picture of a culture that is in crisis. When a recent post on a well-known blog called me out by name, it only felt right that I should respond."
  • "While we would have preferred to have a conversation like this with the team member directly, speaking openly and honestly, and challenging norms is exactly what we need to be doing today and every day going forward."

Takeaway: Normally we wouldn't characterize the opinion of one disgruntled employee as indicative of the corporate culture, but the fact that TGT's CMO, Jeff Jones, personally addressed the anonymous letter in public is telling. Jones was actually the only person called out as being a positive influence in the executive ranks. He's speaking up on behalf of the executive officers of Target, most of whom are afraid for their jobs.  They should be.

ADDYY - Adidas CEO Herbert Hainer to prepare succession in coming years: Report

(http://economictimes.indiatimes.com/news/international/business/adidas-ceo-herbert-hainer-to-prepare-succession-in-coming-years-report/articleshow/35263715.cms)

  • "The long-serving chief executive of Germany's Adidas said preparing the sportswear giant for a change at the top when his contract ends in 2017 will be among his biggest priorities, Sueddeutsche Zeitung reported on Saturday."
  • "I will not stay forever...One of my key tasks in the next three years will be to initiate the change at the top and to escort it." 

Takeaway: Not a big shock given that Hainer has started to divert his attention towards other interests including the role of President and Business Chairman of the Bayern Munich football club. That, and the fact that he's been unable to consistently grow the core brand in key markets on a sustainable basis without relying on acquisitions.

WMT - Wal-Mart Says It Won't Oppose Increase in Minimum Wage -- Update

(http://www.nasdaq.com/article/walmart-says-it-wont-oppose-increase-in-minimum-wage--update-201406)

  • "Wal-Mart Stores Inc. said it wouldn't oppose an increase in the federal minimum wage, its most explicit comment yet on the controversial debate to move past the $7.25-an-hour minimum."
  • "'We are not opposed to minimum wage increase, unless its directed exclusively at us,' said Wal-Mart U.S. President Bill Simon, referring to an attempt by the District of Columbia city council to require big retailers to pay starting wages that are higher than Washington's minimum wage."
  • "Wal-Mart spokeswoman Brooke Buchanan said the company's official position hasn't changed and it remains neutral on whether or not the minimum wage should be increased. 'Just because we don't oppose it, doesn't mean we support it,' she said."

Takeaway: WMT supporting a hike in the minimum wage law is like AMZN supporting a federally imposed online sales tax. Intuitively it doesn't make sense, but it does level the playing field. WMT and AMZN are big enough to handle the fallout from these respective changes in policy, but its competition would be much harder pressed because of the disparity in scale.

INDUSTRY NEWS

 

comScore Reports $56.1 Billion in Q1 2014 Desktop-Based U.S. Retail E-Commerce Spending, Up 12 Percent vs. Year Ago

(https://www.comscore.com/Insights/Press_Releases/2014/5/comScore_Reports_56_1_Billion_in_Q1_2014_Desktop_Based_US_Retail_ECommerce_Spending_Up_12_Percent_vs_Year_Ago)

  • "comScore, Inc...today released its estimates of Q1 2014 U.S. digital commerce sales. Q1 2014 saw desktop e-commerce spending rise 12 percent year-over-year to $56.1 billion, marking the eighteenth consecutive quarter of positive year-over-year growth and fourteenth consecutive quarter of double-digit growth. M-commerce spending on smartphones and tablets added $7.3 billion for the quarter, up 23 percent vs. year ago, for a digital commerce spending total of $63.4 billion in the first quarter."
  • Other highlights from Q1 2014 include:
    • The top-performing online product categories were: Apparel & Accessories, Consumer Packaged Goods, Sport & Fitness, Digital Content & Subscriptions, and Home & Garden. Each category grew at least 13 percent vs. year ago.
    • Desktop E-commerce accounted for 11.7 percent of consumers’ discretionary spending, the highest first quarter share on record.
    • Of the additional $7.3 billion in mobile commerce (m-commerce), purchasing using smartphones accounted for 62 percent vs. 38 percent from tablets.

Retail Callouts (5/19): TGT, Adi, WMT - chart2 5 19

 

What's Selling: Women's

(http://www.wwd.com/footwear-news/retail/whats-selling-womens-7683956)

STELLA MAE, Burlington, Vt.

  • Frye Sabrina boot
  • Clarks Caslynn Cheryl wedge sandal
  • Victoria Classico sneaker

Spring trend: “We have a big assortment, so really there isn’t one trend that people will come in to find. For summer, we’ve been selling a lot of sneakers and wedges — both high and low,” said store manager Laura Cunningham. 

GOODMAN’S SHOE STORE, Indianapolis

  • Naot Kirei Mary Jane shoe
  • Mephisto Helen sandal
  • Bernie Mev Comfi slip-on

Spring trend: “We’re custom-oriented, so most of our clients are more focused on fit and foot problems, but when we get into spring and summer, we really sell Naot more than anything,” said manager Matt Ivan.

SCARPA, Charlottesville, Va.

  • Coclico Sela sandal
  • Attilio Giusti Leombruni oxfords
  • Lola Cruz Toe-Ring Sandal

Spring trend: “Clients are buying more Birkenstocks than they were a few years back, and more people are picking up lace-up oxfords than in years past,” said merchandising and store manager Susie White.

DEBRAS BOUTIQUE, Mobile, Ala.

  • Pura Lopez wedges
  • Rag & Bone Wyatt bootie
  • Dolce Vita Nona heel

Spring trend: “Funky shoes that aren’t so matchy-match are very popular,” said store associate Chad Chappell. “And things that are versatile sell well.”

 

OTHER NEWS

SCC, SHLD - Sears Canada Announces Sale of its Minority Interest in Trois-Rivières Joint Arrangement

(http://phx.corporate-ir.net/phoenix.zhtml?c=117881&p=irol-newsArticle&ID=1932027&highlight=)

  • "Sears Canada Inc. announced today that it has entered into an agreement for the sale of its 15% minority ownership interest in the Centre commercial Les Rivières shopping centre in Trois-Rivières, Quebec, a joint arrangement the Company holds with affiliates of Ivanhoé Cambridge, for pre-tax consideration of $33.5 million. Ivanhoé Cambridge is purchasing the 15% interest that it does not already own from Sears. The transaction is subject to customary closing conditions and is scheduled to close on June 2, 2014."
  • "Sears will continue to operate its department store in the shopping centre, and Ivanhoé Cambridge will continue to manage the property."

BRBY - Burberry Renews Part of Japanese License With Sanyo

(http://www.wwd.com/markets-news/designer-luxury/burberry-renews-part-of-japanese-license-with-sanyo-7685645)

  • "...Burberry has inked a new license with Sanyo Shokai Ltd. for its Blue and Black label collections."
  • "As reported, Burberry plans to take its Japanese business in-house next year when its current license with Sanyo expires. The move is aimed at bringing the Japanese offer upmarket and in line with Burberry’s worldwide distribution."
  • "On Monday, Burberry and Sanyo announced a new, three-year agreement that sees the British brand licensing its sporty, premium Black and Blue lines, which are both aimed at a younger audience, to Sanyo. Those lines will no longer carry the Burberry name, but will continue to be owned by the British brand."