• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

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

 

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)

  • LB - Earnings Call, 9:15am
  • 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

ECONOMIC DATA

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.

Retail Callouts (5/20): TGT, URBN, ICSC - chart1 5 20

COMPANY NEWS

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.

Retail Callouts (5/20): TGT, URBN, ICSC - chart2 5 20

 

TGT - Target Announces U.S. and Canada Leadership Changes to Drive Company’s Transformation

(http://pressroom.target.com/news/target-announces-u-s-and-canada-leadership-changes-to-drive-companys-transformation#sf26374004)

  • "Target today announced a number of leadership changes in the U.S. and Canada that will further the company’s efforts to drive U.S. traffic and sales, improve its Canadian operations, and advance its ongoing digital transformation."
  • "Effective immediately, Tony Fisher, president, Target Canada, will depart the company. Mark Schindele, senior vice president, merchandising operations, will assume the role of president, Target Canada. In this position, Mark will report to Kathee Tesija, chief merchandising and supply chain officer, whose responsibilities include Target Canada."
  • "To bring further strategic counsel and deep Canadian market expertise to the team, Target will also be naming a non-executive chair in Canada. In this newly created advisory role, the non-executive chair will provide counsel and support to the president of Target Canada to ensure all strategies and tactics align with the Canadian marketplace."
  • "In the U.S., Target is also elevating three senior merchandising leaders and realigning the team to better leverage functional expertise as the company focuses on driving improved performance."
    • "Trish Adams has been promoted to executive vice president, apparel and home
    • Jose Barra has been promoted to executive vice president, essentials and hardlines
    • Keri Jones has been promoted to executive vice president, merchandising planning and operations"

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

(http://www.bloomberg.com/news/2014-05-19/target-customers-ready-to-forgive-and-forget-poll-finds.html)

  • "Following a data breach over the holiday season that affected millions of shoppers, only 7 percent of customers plan to reduce spending at the chain over the next year, according to a Bloomberg National Poll. The survey, conducted May 8-11, also found that Target’s decision to replace its chief executive officer this month had little effect on consumers’ desire to shop at the chain."
  • "Despite the turmoil, 85 percent of customers expect to shop about the same amount at the chain over the next year, the survey found. Seven percent will spend more, and 7 percent will shop less. One percent had no opinion. The results had a margin of error of as much as 4.5 percentage points."
  • "About half of customers are confident that Target will be able to keep credit and debit-card information safe from here on in, the survey found. The removal of Steinhafel, meanwhile, made no difference for 84 percent of the 1,020 people polled. Eight percent said they would likely make more purchases at Target after the CEO change, while 7 percent it would reduce their spending."

 

Retail Callouts (5/20): TGT, URBN, ICSC - chart3 5 20

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.

OTHER NEWS

TGT - Gregg Steinhafel Exit Package Totals Nearly $16M

(http://www.wwd.com/retail-news/people/steinhafel-exit-package-totals-nearly-16m-7685830)

  • "Gregg Steinhafel will receive about $15.9 million in severance and other benefits following his dismissal as chief executive officer of Target Corp."
  • "According to Target’s definitive proxy, Steinhafel, upon signing an agreement that includes a nonsolicitation clause and a release of claims, will be eligible for $7.2 million in severance payments, plus $10 million in a deferred compensation plan and, based on Target’s closing stock price as of May 5, restricted stock units with a grant date fair value of $4.1 million."
  • "Subtracted from that total of $21.3 million are $5.4 million in supplemental pension plan payments forfeited in exchange for his severance."

9983 - Uniqlo Lets Consumers Design Their Own T-Shirts

(http://blogs.wsj.com/japanrealtime/2014/05/19/uniqlo-lets-consumers-design-their-own-t-shirts/)

  • "Uniqlo on Monday introduced a new service that lets consumers develop their own T-shirts. Called UT Me, it enables them to use a smartphone or tablet computer touchscreen and a new Uniqlo app to create unique graphics and text, which are printed onto a T-shirt in their size."
  • "The T-shirts are delivered to customers’ homes, though they can also pick them up in person by visiting Uniqlo’s store in the Ginza district of Tokyo, which has been equipped with a T-shirt printer to demonstrate the service until August."
  • "The service, available only in Japan for now, charges 1990 yen per shirt (about $19.60), plus 450 yen for delivery, excluding tax. For now, customers can have any color T-shirt, as long as it’s white, though the company says other hues are a possibility eventually."

Retail Callouts (5/20): TGT, URBN, ICSC - chart4 5 20

PVH - Total Pay Up for PVH's Emanuel Chirico in 2013

(http://www.wwd.com/business-news/human-resources/total-pay-up-cash-down-for-pvhs-emanuel-chirico-in-13-7686109)

  • "An upswing in PVH Corp. chief executive officer Emanuel Chirico’s stock awards helped neutralize a decline in his cash take last year as his total compensation increased by nearly half, to more than $18 million."
  • "The numbers on Chirico’s pay were included in PVH’s definitive proxy, which also revealed that Helen McCluskey, the former ceo of The Warnaco Group Inc. and a PVH director since the sale of Warnaco to PVH in early 2013, wouldn’t stand for reelection to the board at the company’s annual meeting next month."

GPRO - GoPro Files for $100 Million Initial Public Offering 

(http://www.sportsonesource.com/news/article_home.asp?Prod=1&section=8&id=51216)

  • "GoPro Inc. filed paperwork Monday with the Securities & Exchange Commission for a $100 million initial public offering."
  • "The filling reports GoPro earned net income of $60.6 million on sales of $985.7 million in 2013, up 87.4 and 87.6 percent respectively from 2012. The company’s stock would be listed on the NASDAQ and trade under the symbol GPRO."
  • "The company expects to use the net proceeds from the offering for general corporate purposes, including working capital, and to fully repay its term loan under a credit facility, which had an outstanding balance of $111.0 million as of March 31, 2014. It may also use a portion of the net proceeds to acquire or invest in complementary businesses, technologies or assets."