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Hedgeye Retail: Urban Outfitters Deserves Credit for Accountability | $URBN

Takeaway: This is the kind of accountability we like to see from companies we invest in.

Hedgeye Retail: Urban Outfitters Deserves Credit for Accountability | $URBN - 2

URBN 1Q15 Earnings

 

Hedgeye Retail: Urban Outfitters Deserves Credit for Accountability | $URBN - chart2 5 20

TAKEAWAY FROM HEDGEYE’S BRIAN MCGOUGH:

Definitely a disappointing quarter for Urban Outfitters, and as everybody knows, it's all about weakness in the URBN 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.

 

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

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Cartoon of the Day: Abandon Ship

Takeaway: We’ve been hitting you with this DOWN-volume-UP-day thing square in the head this year.

Cartoon of the Day: Abandon Ship - volume cartoon 5.20.2014

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BNNY: Reiterating Short Into Earnings

We added Annie’s (BNNY) to our Best Ideas list as a short on 04/07/2014 at $37.16/share.  Since this time, the stock has traded down approximately ~15% while earnings estimates have essentially remained flat.  With the company set to report 4QF14 earnings on June 10th, we are reiterating our short.

 

To be clear, we believe Annie’s is a strong, resonant brand that is well positioned to grow within the natural and organic segment of the food industry.  This is generally acknowledged by the street, as the company has been awarded a substantial premium valuation to its peer group.  While this gap has tightened since we released our call, it still exists to a notable degree.  BNNY is showing significantly stronger top line growth than its peers, but we have legitimate concerns with the company’s ability to manage EPS in the intermediate-term; a risk that we believe is not fully reflected in stock.

 

In our view, managing a rapidly growing business is becoming increasingly challenging – a problem the recent Joplin plant acquisition could exacerbate.  While last year’s balance sheet issues give cause for concern, management has done an adequate job tightening internal controls.  What is more concerning to us, however, is increased competition (WWAV, WMT), building margin pressure (cheese, organic grains), a lack of earnings visibility and aggressive estimates. 

 

We remain bearish on an intermediate-term TREND duration and continue to believe that 4QF14 and FY15 estimates will prove too aggressive as Annie’s incurs some common growing pains.

 

Research Recap:

New Best Idea: Short BNNY (04/07/2014)

Presentation: Short BNNY (04/10/2014)

BNNY: Intermediate-Term Downside (04/11/2014)

 

BNNY: Reiterating Short Into Earnings - chart1

 

Howard Penney

Managing Director

 

Fred Masotta

Analyst


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BNNY: Reiterating Short Into Earnings

We added Annie’s (BNNY) to our Best Ideas list as a short on 04/07/2014 at $37.16/share.  Since this time, the stock has traded down approximately ~15% while earnings estimates have essentially remained flat.  With the company set to report 4QF14 earnings on June 10th, we are reiterating our short.

 

To be clear, we believe Annie’s is a strong, resonant brand that is well positioned to grow within the natural and organic segment of the food industry.  This is generally acknowledged by the street, as the company has been awarded a substantial premium valuation to its peer group.  While this gap has tightened since we released our call, it still exists to a notable degree.  BNNY is showing significantly stronger top line growth than its peers, but we have legitimate concerns with the company’s ability to manage EPS in the intermediate-term; a risk that we believe is not fully reflected in stock.

 

In our view, managing a rapidly growing business is becoming increasingly challenging – a problem the recent Joplin plant acquisition could exacerbate.  While last year’s balance sheet issues give cause for concern, management has done an adequate job tightening internal controls.  What is more concerning to us, however, is increased competition (WWAV, WMT), building margin pressure (cheese, organic grains), a lack of earnings visibility and aggressive estimates. 

 

We remain bearish on an intermediate-term TREND duration and continue to believe that 4QF14 and FY15 estimates will prove too aggressive as Annie’s incurs some common growing pains.

 

Research Recap:

New Best Idea: Short BNNY (04/07/2014)

Presentation: Short BNNY (04/10/2014)

BNNY: Intermediate-Term Downside (04/11/2014)

 

BNNY: Reiterating Short Into Earnings - chart1

 

Howard Penney

Managing Director

 

Matt Hedrick

Associate

 

Fred Masotta

Analyst


Daily Trading Ranges, Refreshed

Takeaway: Almost six months into 2014, what is clearly causal to slowing US consumption growth is #InflationAccelerating.

Editor's note: This unlocked edition of Daily Trading Ranges was originally provided to subscribers on May 20, 2014 at 7:30 a.m EST. For more information on how you can receive these levels every morning in your inbox click here.  

 

Daily Trading Ranges, Refreshed - Slide1

BULLISH TRENDS

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BEARISH TRENDS

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Daily Trading Ranges, Refreshed - Slide10

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