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Takeaway: JCREW miss calls out why Drexler was trying to sell. Lot's of hope in PVH's guidance. COST/hi-end crushes it again. Survey on data breaches.

COMPANY NEWS

Key Call Out Of The Day Belongs to a Company That's Not Even Public -- J.CREW

J CREW 1Q14 Earnings

"Revenues increased 5% to $592.0 million, with comparable company sales decreasing 2%."

"Gross margin was 38.7% compared to 44.7% in the first quarter last year."

Selling, general and administrative expenses were $195.2 million, or 33.0% of revenues, compared to $178.4 million, or 31.6% of revenues in the first quarter last year.

Operating income was $34.0 million, or 5.7% of revenues, compared to $73.6 million, or 13.1% of revenues, in the first quarter last year.

Takeaway:  This quarter was a disaster for J Crew. If you didn't know why Mickey Drexler was trying to unload this company to Fast Retailing four months ago, now you know. If you didn't know why Fast Retailing pulled out of the bidding a month later, now you know that too. This is a serious ding to Drexler's otherwise  bullet-proof credibility.

PVH - 1Q14 Earnings

Takeaway: The company's Heritage brands were the big reason behind the EPS shortfall and guide down. The big question in our minds is how PVH gets to such an aggressive (20%+) ramp in EPS growth for the remainder of the year after being down 23% in the first quarter. Inventories look like they are in decent shape, and we just saw the fourth consecutive quarter of margin contraction, which PVH will now start to anniversary. That's at least not bearish. But for a company with this little momentum, we're extremely cautious about the 'easy margin compare' game. There's no fundamental reason why margins can't be down again and again, and again.

Retail Callouts (6/5): JCREW, PVH, ASOS, COST, VNCE, Breach Survey  - pvhsigma

COST - Costco Wholesale Corporation Reports May Sales Results

(http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-newsArticle&ID=1937545&highlight=)

"Inflation in gasoline prices had a positive impact on comparable sales for the four-week period, but a negative impact for the thirty-nine week period; foreign currencies had a negative impact for both periods. Excluding these effects, comparable sales were as follows:"

Retail Callouts (6/5): JCREW, PVH, ASOS, COST, VNCE, Breach Survey  - cost

Takeaway:  COST just put up good 3Q numbers a week ago, so today's news is no surprise. But the fact is that the headline beat again -- 6% comp vs 4.5% expectations.  If anything, this is another sign that the high-end consumer is doing just fine -- in start contrast to the WMT's and TGT's of the world. Yes, COST is hi-end, even though so many people wrongly lump it in with WMT. COST average customer income is $100k.

VNCE - 1Q14 Earnings

- Net Sales increased 32.4%

- Operating Income increased 174%

- Diluted EPS increased to $0.04

- Company raises guidance for fiscal 2014

Takeaway: Good numbers out of VNCE. But truth be told, 6 months out of the gate it should be crushing expectations.  This is hardly a KORS-like trajectory. That might be a tough one to compare it to, but when you come racing out of the IPO gate, trade at a 28x p/e all while selling $300 silk blouses, you'd better be outcomping Costco by more than 500bp.

OTHER NEWS

ASOS - Asos Warns on Profit

(http://online.wsj.com/articles/asos-warns-on-profit-1401953929)

Shares in Asos PLC dropped by more than 40% in early trading Thursday after the online fashion retailer warned full-year profit would fall short of forecasts because of the strong British pound, higher promotional activity and infrastructure investments.

"In an unscheduled trading statement, Asos reduced its [EBIT] guidance to 4.5% from 6.5% for the current financial year after the strong pound resulted in a slowdown in international sales growth to 17%..."

"Australia was the company's biggest international territory six months ago but now has fallen to third place, with about 8% of total sales. International retail sales account for 62% of total sales. Total retail sales increased by 25%, with U.K. sales up 43%, in the period."

"The strong pound meant that customers in some territories have faced price increases of more than 25%, and the company said it used promotions to try offset the worst of it."

SKX - Skechers Signs Matt Kuchar for GoGolf Line

(http://www.wwd.com/footwear-news/business/skechers-signs-matt-kuchar-for-gogolf-line-7710545)

"Seven-time PGA Tour winner Matt Kuchar will be the face of the GoGolf line, Manhattan Beach, Calif.-based Skechers USA Inc. announced today."

"Kuchar, who is currently ranked fifth in the world, will have a signature shoe line and will represent the brand in global TV, print, outdoor and digital ads under the multiyear agreement."

Alibaba - Alibaba Buys Half of Soccer Team

(http://www.wwd.com/business-news/mergers-acquisitions/alibaba-buys-half-of-chinese-soccer-team-7713190)

"E-commerce giant Alibaba Group said Thursday it has bought a 50 percent stake in China's reigning soccer champions Guangzhou Evergrande Football Club for approximately 1.2 billion yuan, or about $192 million, diversifying its investment portfolio beyond retail and logistics."

VNCE - Vince Names Natalie Ratabesi Creative Director

(http://www.wwd.com/markets-news/ready-to-wear-sportswear/vince-names-ratabesi-creative-director-7712521)

"Natalie Ratabesi, who stepped down as creative director of Philosophy last month, has been tapped as creative director of women’s design at Vince, the contemporary sportswear firm. She begins June 16 and will relocate from Milan to Vince’s design studio in Los Angeles."

"Ratabesi’s initial input will be seen in the women’s pre-fall 2015 season."

"Prior to becoming creative director of Philosophy in October 2012, Ratabesi held key design roles at houses including Christian Dior under John Galliano, Oscar de la Renta, Gucci and Ralph Lauren, where she did two tours and became senior creative director."

AMZN, WMT - 24% of Americans stopped buying online because of breaches

(http://www.usatoday.com/story/tech/2014/06/03/internet-security-survey/9907947/)

"A USA TODAY survey finds that almost a quarter of Americans have at least temporarily stopped buying online because of security concerns."

"A full 24% of those surveyed said they had stopped buying anything online in recent weeks because they were concerned about the safety of information they might put online."

"Most surprisingly, 56% said they had cut back on the number of Internet sites they used and were only going to large, well-known companies they were confident were safe."