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Takeaway: Almost six months into 2014, what is clearly causal to slowing US consumption growth is #InflationAccelerating.
Takeaway: TGT announces Canada management changes. URBN doesn't blame the weather. Bberg poll says TGT cust. ready to forgive - our data disagrees
EVENTS TO WATCH
ICSC - Chain Store Sales Index
Not a terrible reading from this week's ICSC SSS numbers -- +2.4% versus last year. The sequential drop off from last week's 3.9% growth might seem troubling, but the 3.9% was of an extremely easy comp from the prior year. On a 2-year run rate, which is probably more appropriate to do, this week marks a 40bp acceleration. Not great, but positive on the margin so early in the second quarter for retailers.
URBN - 1Q15 Earnings
Takeaway: Definitely a disappointing quarter for URBN, and as everybody knows, it's all about weakness in the Urban Outfitters concept. One thing we give management all the credit in the world for is that it did not use weather as an excuse -- even though everyone else is. They noted that great companies perform regardless of the weather -- as Anthropologie and Free People did. They expect the same from Urban, which is dragging because of its own problems, not Mother Nature's. That's the kind of accountability we like to see from companies we invest in.
TGT - Target Announces U.S. and Canada Leadership Changes to Drive Company’s Transformation
Takeaway: Let me get this straight…you fire the President of Target Canada two weeks after you fire Steinhafel, and a day before you report the quarter. We'll use our powers of deductive reasoning to assume that Target Canada isn't performing to plan (this was one of the factors we outlined when we analyzed the Canadian market in our Best Ideas Short Call last month). What we're interested to know is who is making these headcount decisions. We know that TGT's CFO is serving as the interim CEO, but we'd be surprised if Mulligan was making such major organizational decisions. This is probably coming straight from the Board.
TGT - Target Customers Ready to Forgive and Forget, Poll Finds
Takeaway: The key data point in this study is that only 50% of TGT customers are confident that Target will be able to keep credit card data safe. Not a glaring endorsement from the customer. Bloomberg's visitation statistics are good for headlines, but they fail to capture the sequential change in consumer sentiment. Our data spanning 3 surveys over a 9 month window shows that shopping intent is going the wrong way for TGT.
TGT - Gregg Steinhafel Exit Package Totals Nearly $16M
9983 - Uniqlo Lets Consumers Design Their Own T-Shirts
PVH - Total Pay Up for PVH's Emanuel Chirico in 2013
GPRO - GoPro Files for $100 Million Initial Public Offering
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Tickers: DRH, SHO, WOLF, CCL
Tuesday, May 20 - Wednesday 21
Tuesday, May 20 - Thursday May 22
Thursday May 23
Thursday May 27
DRH - Director Gilbert T. Ray sold 15,797 shares on Friday, May 16 at an average price of $11.88. Following the transaction, Mr. Ray now directly owns 43,653 shares in the company, valued at approximately $518,598.
SHO - SVP, Treasurer & Secretary Lindsay Newton Monge sold 7,521 shares of Sunstone Hotel Investors stock on Monday, May 19 at an average price of $14.22. Following this transaction, Mr. Monge now directly owns 90,841 shares in the company, valued at approximately $1,291,759.
Takeaway: There is clearly a wide dichotomy between the view from the C-Suite (bottom of the fifth inning in the lodging cycle) told to investors and how C-Suite insiders trade their company stock. Recent insider activity for lodging is clearly biased to the "sell" side.
WOLF - will break ground Wednesday on a new Great Wolf Lodge in Garden Grove, CA (near Disney) that will feature a 121,000-square-foot indoor water park – the company’s largest – along with a 603-room hotel and conference center. The $250 million development is scheduled to open in late 2015.
Takeaway: New competition for the "happiest place on earth"...
CCL – (Seatrade Insider) Holland America Line will transfer the 1,258-passenger Ryndam and Statendam to P&O Cruises Australia in November 2015, making the company the biggest year-round operator in Australasia by increasing its fleet from three to five ships. Stein Kruse, CEO of Holland America Group, said these ships are definitely not replacement vessels for Pacific Dawn, Pacific Jewel and Pacific Pearl. He insisted P&O Cruises Australia will be a five-ship company ‘for the foreseeable future.’ Kruse said Australia is ‘far away from overcapacity’ and believes the additional ships will increase the number of fly-cruise passengers from the US, Europe and Asia. Holland America Line’s 99,500gt Pinnacle-class ship for 2,660 passengers, due for delivery in February 2016, will replace the capacity of the two ships moving to Australia.
Takeaway: Another bold decision that could bring dividends. Although the demographics are not as favorable (54% of Australia's ~23 million people are between the ages of 25-64), CCL is exploring the newer cruise markets to make room for the new HAL ship.
CCL – Power Failure Strands Costa Cruise Ship in Port Cruise Critic
Costa Deliziosa had a power failure in Valencia and will remain in port until the cause of the outage is identified and fixed. The blackout lasted for "a few hours" before technicians managed to restore power and essential services. Although it remains unclear exactly how long repairs will take, Costa has told passengers scheduled to sail on an upcoming 13-night Eastern Mediterranean cruise from Civitavecchia (for Rome) on May 20, that the ship will not sail as scheduled.
Takeaway: Get your act together Costa, you're having a decent year
China to pilot digital exit-entry permit to HK, Macau Macau News
According to the Ministry of Public Security of China, China will issue smart cards to gradually replace the current paper permits for those commuting between the mainland and Hong Kong and Macau. The ministry plans to pilot the new permit in Guangdong, a province in south China adjacent to Hong Kong and Macau, and local police agencies will accept applications for the e-permit starting May 20.
Takeaway: Anything that smooths the transfer of people is good for Macau.
Illinois Gaming Expansion – Illinois Democratic Representative Bob Rita of Blue Island sent a letter to House Speaker Michael Madigan and Republican leader Jim Durkin looking to gain support for his plan – the first proposal adds five casinos (including one in Chicago) and slots at horse tracks; while the second calls for a mega-casino in Chicago. Illinois faces an estimated $1.8 billion revenue shortfall unless lawmakers make permanent an income tax increase that is scheduled to roll back in January.
Takeaway: More talk, no action
Massachusetts Gaming Expansion - Foxwoods Casino Resort and the investment group Crossroads Massachusetts LLC are upping the ante and betting on finding 120-acres of waterfront property to expand their proposed destination resort project by more than three times its present size. Fall River and Foxwoods are taking advantage of an extended deadline of Sept. 23 to submit an application for the license to work on a better project and host community agreement.
Takeaway: Sounds like Foxwoods is attempting to compete with the proposed Wynn Everett development.
AAA survey – 36 million Americans, +1.5% YoY, will travel 50 miles or more for Memorial Day. The travel period in the report covers Thursday, May 22, through Monday, May 26. Gas prices are expected to stay the same as last year's national average of $3.63 per gallon.
Takeaway: Good news for leisure travel and bookings
Takeaway: Global geopolitical unrest is increasing. Some Chinese travel agents have already suspended Vietnam tours. China also at territorial odds with Philippines and Japan and curbing tourism to Malaysia/Singapore.
Singapore - Q1 2014 GDP of 4.9% missed consensus estimates of 5.5%. The expansion in GDP during the January-March period was lower than the government's initial estimate of 5.1%.
Takeaway: Not encouraging news for the mass gaming segment
Hedgeye remains negative on consumer spending and believes in more inflation. Following a great call on rising housing prices, the Hedgeye
Macro/Financials team is turning decidedly less positive.
Takeaway: We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.
Yesterday’s UP-day volume was shockingly low. The total US Equity market volume was down -21% and -41% versus its one- and three-month averages, respectively. TREND remains no-volume on UP-days versus accelerating volume on DOWN-days.
The Russell2000 bounced on no-volume yesterday to A) lower-highs, but B) below both my TRADE (1133) and TREND (1155) lines of resistance – at -4.4% year-to-date into the fifth month of the year, that’s not good. Neither is US #GrowthSlowing.
The ex-dividend drop in Italian stocks yesterday sees follow through this morning as most European Equity markets continue to make a series of lower-highs. Inflation finally ticked up in the UK too (that’s new) – thanks (ECB President) Mario Draghi.
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Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In our view, Hologic and its new management are set to show solid growth over the next several years. We have built two survey tools to track and forecast the two critical elements that will drive this acceleration. The first survey tool measures 3-D Mammography placements every month. Recently we have detected acceleration in month over month placements. When Hologic finally receives a reimbursement code from Medicare, placements will accelerate further, perhaps even sooner. With our survey, we'll see it real time. In addition to our mammography survey. We've been running a monthly survey of OB/GYNs asking them questions to help us forecast the rest of Hologic's businesses, some of which have been faced with significant headwinds. Based on our survey, we think those headwinds are fading. If the Affordable Care Act actually manages to reduce the number of uninsured, Hologic is one of the best positioned companies.
Construction activity remains cyclically depressed, but has likely begun the long process of recovery. A large multi-year rebound in construction should provide a tailwind to OC shares that the market appears to be underestimating. Both residential and nonresidential construction in the U.S. would need to roughly double to reach post-war demographic norms. As credit returns to the market and government funded construction begins to rebound, construction markets should make steady gains in coming years, quarterly weather aside, supporting OC’s revenue and capacity utilization.
Legg Mason reported its month ending asset-under-management for April at the beginning of the week with a very positive result in its fixed income segment. The firm cited “significant” bond inflows for the month which we calculated to be over $2.3 billion. To contextualize this inflow amount we note that the entire U.S. mutual fund industry had total bond fund inflows of just $8.4 billion in April according to the Investment Company Institute, which provides an indication of the strong win rate for Legg alone last month. We also point out on a forward looking basis that the emerging trends in the mutual fund marketplace are starting to favor fixed income which should translate into accelerating positive trends at leading bond fund managers. Fixed income inflow is outpacing equities thus far in the second quarter of 2014 for the first time in 9 months which reflects the emerging defensive nature of global markets which is a good environment for leading fixed income houses including Legg Mason.
OIL: higher again this morning as Brent holds $108.60 support #InflationAccelerating @KeithMcCullough
"It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change." - Charles Darwin
Target cut about $8 million from former CEO Gregg Steinhafel's 2013 pay package after ousting him from the job. But he is still making $13 million for his work last year and walking away with a severance package totaling $15.9 million. (CNN)
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