Retail Callouts (6/24): ICSC, TGT, WMT, AMZN

Takeaway: ICSC numbers strong as 2Q nears close. No quick fix to problems that led to Steinhafel's ouster. TGT reworks shipping policy.

EVENTS TO WATCH

 

Wednesday (6/23)

  • BBBY - Earnings Call: 5:00pm

 

Thursday (6/24)

  • NKE - Earnings Call: 5:00pm

 

Friday (6/25)

  • FINL - Earnings Call: 8:30am

 

ECONOMIC DATA

 

ICSC - Chain Store Sales Index

 

Takeaway: Three solid weeks of data as the 2nd quarter nears a close. Numbers have looked much better over the last 12 weeks compared to the start of the year. QTD growth rate up 20bps from last year.

 

Retail Callouts (6/24): ICSC, TGT, WMT, AMZN - Chart 1 6 24 2014

 

COMPANY NEWS

 

TGT - Retailer Target Lost Its Way Under Ousted CEO Gregg Steinhafel

(http://online.wsj.com/articles/retailer-target-lost-its-way-under-ousted-ceo-gregg-steinhafel-1403577233)

 

  • "Just days before Chief Executive Gregg Steinhafel resigned from Target Corp., a small group of senior executives huddled together to discuss ways to improve the flagging retailer's fortunes. Shortly after their gathering on May 2, executives delivered a message to the board: If Mr. Steinhafel didn't leave immediately, others would. The following Monday, the CEO was out."
  • "The sequence of events, according to people close to the situation, was the climax of a tense narrative that had been playing out within Target's top ranks...interviews with more than two dozen former and current Target executives, managers and vendors reveal a deep malaise within a chain that, increasingly, had lost its way. Management became mired in a new thicket of bureaucracy. Creative leeway—once the DNA of the chain affectionately dubbed 'Tar-zhay'—took a back seat to rigid performance metrics."
  • "Mr. Steinhafel held the view that online purchases risked cannibalizing sales from visits to physical stores, say former employees. It wasn't until 2009 that Target embarked on a plan to build its own website, an effort it called 'Project Everest.'"

 

Takeaway: Target's decision to enter Canada and the data breach are polarizing events which helped catalyze the coup documented here. But, that was the climax of a series of misguided initiatives that guided TGT away from its core. As CEO during this time period, the blame falls squarely on Steinhafel's shoulders - right or wrong. We give the existing management team credit for realizing that change needed to be made. But, in order to fix the structural issue inside the company it’s going to cost money…lots of it. There are no quick fixes to the underlying problems (P-Fresh, RedCard, e-commerce) if the company wants to drive long term profitability.

 

TGT - Target further incentivizes customers to shop online

(http://www.retailingtoday.com/article/target-further-incentivizes-customers-shop-online)

 

  • "Target is giving customers added incentive to shop online by offering free shipping for all orders of $50 or more. The new policy, which takes effect immediately, excludes oversize and heavy items, which will be subject to a handling fee."
  • “'We’ve heard from guests they don’t fully understand our shipping policy — so we’ve changed it to make it simpler and reduce the friction in making purchases on the site,' said Jason Goldberger, SVP, Target.com and Mobile. 'Providing our guests a better free shipping offer is just one of the many ways we continue to improve the Target.com experience.'”

 

Takeaway: Target already offered free shipping on orders over $50, but the number of items eligible was limited. This now unifies TGT's shipping policy and puts it in line with its peers. Here's how TGT stacks up to AMZN and WMT. AMZN - free shipping for Prime members and orders over $35. WMT - free shipping on orders over $50 (6-9 day delivery window). TGT - free shipping for RedCard member and items over $50 (3-5 day shipping window). We can't imagine that WMT lets TGT hold the advantage for long.

 

OTHER NEWS

 

WMT - Wal-Mart Appoints 13 Merchandising Executives in Shake-Up

http://www.bloomberg.com/news/2014-06-23/wal-mart-appoints-13-merchandising-executives-in-latest-shake-up.html)

 

  • "Wal-Mart Stores Inc. (WMT), the world’s largest retailer, named 13 executives to its U.S. merchandising operations, marking the latest shake-up since Chief Executive Officer Doug McMillon took the reins in February."
  • "As part of the changes, Scott Huff will be promoted to executive vice president overseeing merchandising operations for the U.S., according to a company memo sent by U.S. Chief Merchandising Officer Duncan Mac Naughton. Huff has been at Wal-Mart since 1994, when he started as an intern. Seven of the 13 executives named are women."


M - Macy’s adds Starbucks exec to board

(http://www.retailingtoday.com/article/macy%E2%80%99s-adds-starbucks-exec-board)

 

  • "Macy’s has added Annie Young-Scrivner, EVP of Starbucks Coffee Company and president of its Teavana business, to its board of directors."
  • "The addition of Young-Scrivner brings the size of Macy's board to 11 members. Of the 10 independent directors, five are women."

 

APP - American Apparel's Dov Charney Fighting Back

(http://www.wwd.com/business-news/human-resources/dov-charney-fighting-back-7754085?module=hp-topstories)

 

  • "A filing with the Securities and Exchange Commission Monday detailing Charney’s position said his termination was 'without merit' and that he 'intends to contest it vigorously.' He is working with Los Angeles law firm Glaser Weil Fink Jacobs Howard Avchen & Shapiro."
  • "After Charney was sidelined — he was technically suspended for 30 days to await termination — he was approached by 'certain people, including stock holders…who expressed support for his continued leadership' of the company, according to the filing."
  • "Charney’s been holding discussions with these people about 'potential changes to the composition of the board and management of [American Apparel].'"

 

UA - Sprint Teams with Samsung, Under Armour and MapMyFitness to Drive Advances in Growing Health and Fitness Technology Market

(http://newsroom.sprint.com/article_display.cfm?article_id=11468)

 

  • "Sprint is stepping up its presence in the growing health and fitness markets, announcing today the launch of an exclusive device from Samsung Telecommunications America and a collaboration with health and fitness market leaders Under Armour and MapMyFitness to offer mobile solutions for today’s active lifestyles."
  • "Sprint will provide convenient mobile access to fitness tracking, educational information, and music, as well as offer applications to help consumers as they exercise, watch what they eat and take better care of themselves."

 

NKE, ADDYY - Wimbledon’s stricter dress code isn’t meshing well with sports brands

(http://blogs.marketwatch.com/behindthestorefront/2014/06/23/wimbledons-stricter-dress-code-isnt-meshing-well-with-sports-brands/)

 

  • "While Wimbledon first stipulated in 1963 that all competitors have to dress 'predominantly in white' on the court, then changed it in 1995 to 'almost entirely in white,' this year the players have been given an even clearer mandate: accessories such as undergarments, headbands, and wristbands are now also included in the mandate."

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more