Retail First Look: 8/5/09

RETAIL FIRST LOOK: AUGUST 05, 2009

05 AUGUST 2009

LEVINE’S CALL OUTS

  • DSW’s secret designer shipment has been leaked and will be revealed to the public on Thursday.  Recall that the company highlighted the “opportunistic” purchase with first quarter earnings.  While we can’t vouch for the age of the merchandise until we see it, the buzz suggests there will be shoes, handbags, luggage, and belts at select locations.  And the mystery brand is…Gucci.  Maybe the heavy radio advertising and deeply discounted Italian goods will help drive traffic and ultimately an improvement in same store sales. 
  • While most domestic brands focused on China expansion have traditionally planted the seeds in the major cities, Iconix is taking a slightly different approach.  Over the next three years, the company expects to have over 500 stores in China between Rampage, London Fog, and Rocawear.  Interestingly, ICON’s growth strategy is centered on the masses with distribution focused on densely populated, but non-major cities.
  • Contrary to traditional grocers and discounters, Whole Foods is seeing early signs that the trend towards “trading down” may be easing.  Transaction count and basket size both showed sequential improvement in the quarter and the overall comp was the first sequential improvement in 6 quarters.  Interestingly, management commented that competitors have been deemphasizing organics in favor of increased focus on value.  As a result, increased supply and lower prices in the organic produce category benefitted Whole Foods’ on a gross profit dollar basis. 
  • In a rare example, True Religion management highlighted that some of its major customers (department stores) may have remained too conservative on inventory commitments in the quarter.  As a result, the company has been lobbying for more auto-replenishment programs to maintain adequate stocking levels.  Despite the challenging environment, the retailers have been receptive to the replenishment programs and are taking slightly more inventory to ensure in-stocks for the Fall season.

MORNING NEWS 

-EU protectionist actions pose as a serious obstacle for Indian exporters - Indian exporters are facing new challenges in view of EU's protectionism of offering subsidies to the local farmers and its non-tariff barriers on services exports, according to the Federation of Indian Chambers of Commerce and Industry (FICCI). The India-EU Trade Relations in the post-recession period, Indian exporters are facing the adverse impact of the huge amount of subsidies enjoyed by EU farmers through free seeds and fertilizers and a freight subsidy to producers. In addition, they face cumbersome quality testing which increases the cost and time of Indian companies.  <fashionnetasia.com>

-Global demand from retail space declines - The demand for retail space has declined in most markets, with New Delhi reporting a 25% decline in the last six months. The capital city ranked 69th in rentals among the list of major cities across the world during the first quarter of 2009, says a survey by real-estate consultancy CB Richard Ellis. According to the report, Global Retail MarketView, the demand for retail space has declined across the world as consumers cut back on spending and unemployment continued to rise in many countries.  Emerging and less established markets have been most significantly affected. Buenos Aires saw the largest annual decline in retail rents year-on-year with a drop of 37% followed by Warsaw (33%) and Washington DC (26%). <thehindubusinessline.com>

-New legislation introduced which would provide duty-free treatment of apparel products from the Philippines - US Rep. Jim McDermott (Democrat-Washington) has recently introduced legislation that would provide duty-free or reduced duty treatment to certain apparel products from the Philippines that are generally not produced in the US. These products would be afforded duty-free treatment provided they are wholly assembled in the Philippines or the US and the component determining the article's tariff classification consists entirely of (i) fabric components cut in the US or the Philippines, or both, from fabric and yarns wholly formed in the US; (ii) components knit-to-shape in the US from yarns wholly formed in the US; or (iii) any combination of the fabric components or components knit-to-shape described in points (i) and (ii).  <fashionnetasia.com>

-Thursday Retail Sales Preview - Government subsidies may be moving the needle on new car and home sales, but also appear to have siphoned enough discretionary dollars to have hurt retailers' July sales. The 4.9% sale decline that Thomson Reuters expects would equal June's drop and indicate that demand for most retail goods, particularly apparel, is not being hoisted by government assistance. In addition to federal measures, including the hugely successful "Cash for Clunkers" auto program, and tax credits and low interest rates for certain home buyers, July was influenced by chilly weather, a dearth of tax-free holidays, still-high unemployment and, in some cases, limited inventories that meant missed purchases. Investors should look out for companies that may issue second-quarter warnings in tandem with their softer sales since they now have the full picture for the quarter. American Eagle Outfitters Inc. (AEO) and Zumiez Inc. (ZUMZ) may lower expectations, some analysts said. J.C. Penney Co. (JCP), Kohl's Corp. (KSS) and Aeropostale Inc. (ARO) are receiving the most predictions from analysts when it comes to lifting their views. Still, retailers are looking at continued softness across the board, with teen apparel and department stores pegged to see the biggest same-store-sales declines. Teen apparel retailers are expected to post a 10.5% decline, while department stores are expected to report a 9% drop. <online.wsj.com>

-Outdoor Industry Association survey sees negative outlook on Outdoor in 2009 - In a survey released today by Outdoor Industry Association (OIA), small businesses reported their revenue expectations for 2009 continue to fall and employment indicators continue to decline. Bottom line: Outdoor businesses have a more negative view about recovery than they did in the fall of 2008 or in the spring of 2009. <sportsonesource.com>

-European Retail Sales Decline More Than Estimated as Companies Shed Jobs - European retail sales fell more than economists forecast in June as companies fired workers to survive the recession, making consumers hesitant to shop. <bloomberg.com/news>

-Collective Licensing International has a Vision - Collective Licensing announced that it had relaunched the Vision Street Wear skate brand with a line of shoes for men, women and children. The line, available this month, is being sold exclusively at Finish Line stores. “Partnering with a leading athletic retailer such as Finish Line ensures that our brand reaches our core consumers looking for the perfect combination of performance and style,” Bruce Pettet, president and CEO of Collective Licensing, said in the release. “Finish Line is the ideal venue to launch Vision Street Wear. They have the same passion for high-quality, premium brands.” <wwd.com/footwear-news>

-Skechers USA President not letting Shape-Ups shoes fall to a flexible price point - In a letter to retailers sent earlier last week, Skechers USA President Michael Greenberg referenced a letter sent to all retail partners in January in which a $100 per pair minimum resale price for Shape-Ups was established.  The latest letter, dated July 29, notes that the mandatory minimum resale price for Shape-Ups was being set at the minimum resale price reflected on the wholesale line sheets.  He also indicated that the product should be “excluded from all promotions, discounts, ‘buy-one-get-one’s,’ and any other off-price vehicle that would reduce the selling price below the mandatory minimum resale price.”  Skechers will, however, permit “occasional pricing specials” and “set window periods” so retailers can “clear obsolete styles and colors.”<sportsonesource.com>

-Hanesbrands and Naturally Advanced Technologies team up - Naturally Advanced Technologies Inc. has entered into a multiphase joint development agreement with Hanesbrands Inc.,that will allow Crailar(R) Organic Fibers technology to be processed for use in commercial apparel knit products made by Hanesbrands. NAT, using technology developed with and licensed from The National Research Council of Canada (NRC), and Hanesbrands, a leading producer and marketer of innerwear, outerwear and hosiery apparel, will retrofit existing dying equipment at a Hanesbrands facility to develop a commercially viable use of the 100 percent organic fiber. <prnewswire.com>

-Pony drops Nike "V" lawsuit - Pony Inc. withdrew its trademark lawsuit against Nike Inc. Tuesday, noting the disputed “V is for Victory” marketing campaign had been wrapped up. Pony has used a chevron to mark its work for over 35 years and argued in an April 3 suit filed in San Diego federal court that Nike’s campaign amounted to trademark infringement, trademark dilution and unfair competition.  <wwd.com/business-news>

-Tom O’Riordan has stepped down as CEO of American Sporting Goods. According to O’Riordan, when he joined the company in March 2007, he was tasked with positioning the company’s portfolio of brands — which includes Avia, And1 and Ryka — for an eventual sale of the company. When a sale seemed unlikely, the former Fila America CEO decided it was time to leave. <wwd.com/footwear-news>

-Designers work with Target  on limited collections - Designing sisters Kate and Laura Mulleavy will be bringing their ethereal sensibility to a wider world when Target introduces Rodarte in December as part of its Go International series of limited collections. The 55-piece Rodarte line for Go International will launch at most Target stores nationwide and on target.com on Dec. 20, and will be available through Feb. 6. Prices for Target’s Go International Rodarte collection will range from $9.99 for knee-highs to $79.99 for a leopard print jacket. <wwd.com/retail-news>

-Gucci is hoping its temporary stores leave a lasting impression - Like other luxury retailers in the recession, Gucci is looking for high-impact, lower-cost methods of generating interest in the brand, especially among style leaders who may not be moved by conventional forms of advertising. Gucci Icon-Temporary is that method. The flash sneaker store will touch down in six or seven locations around the world where tastemakers gather, such as Art Basil Miami Beach, staying open for two or three weeks in each spot. The first stop on the tour will be Crosby Street in SoHo on Oct. 23. Other stops will include London, Berlin, Paris, Hong Kong and Tokyo. <wwd.com/retail-news>

-James Blake apparel line - James Blake will have more than just his serve on his mind when the U.S. Open kicks off in Flushing, N.Y., on Aug. 31. He’s also using the tournament as the opportunity to launch his new men’s apparel collection with Fila. Blake, 29, who switched sponsors from Nike to Fila in January, will debut the Thomas Reynolds Collection on Aug. 15 at Lord & Taylor, Paragon Sporting Goods, select Dick’s Sporting Goods and tennis specialty stores including Masons Tennis Mart and Tenniswarehouse.com. The line, which sports an R-dot logo, is named after Blake’s father, Thomas Reynolds Blake, who died in 2004 after battling lung and stomach cancer.  <wwd.com/menswear-news>

RESEARCH EDGE PORTFOLIO: (Comments by Keith McCullough): TGT

08/04/2009 03:10 PM

COVERING TGT $42.38

My timing here was awful this time (re-shorted 7/13 before the mkt ripped), and I just posted on this better than expected savings rate. Booking the loss. KM

MACRO SECTOR VIEW AND TRADING CALL OUTS

Retail First Look: 8/5/09 - SV 8 5 09