Retail: Destocking Over?

Inventory destocking and clean-up across the supply chain appears to be at an inflection point now that the majority of the branded apparel and footwear vendors have reported 2Q results.  The chart below shows branded apparel and footwear sales to inventory spreads over the past several quarters vs. the trend at Macy’s (one of the largest sellers of all these goods).  Yes we know that most vendors have become less and less reliant on the department store channel, but with the dominance of Macy’s market-share in branded retailing, it’s still worth a look. We’ll have a better picture of this over the next week or two when every other retailer reports 2Q inventories, but for now it is clear that the delta on sales/inventory is getting better on the margin. 


The bottom line here appears to be that this is good for most links in the supply chain.  But we can’t improve this delta (hence boosting Gross Margin) by simply shrinking inventories forever. At some point, companies are going to have to actually buy inventory if they care to grow their respective businesses. This actually smells a little like Wall Street to me, where many people are not ALLOWED to be bullish because they (or their PMs) are too afraid of being run over making a positive bet on a consumer discretionary company. At some point, retailers are going to have to start to open the gates. My sense is that this will be around Holiday. That’s also the time when we eye a period (Spring) where the delta on compares won’t be as easy, and companies will need to either benefit from, or suffer with, the capital deployment decisions made today.


Bottom line is that I still think that the Quality Trade returns in early 2010, and companies that are proactively preparing to grow their businesses for the New Reality will prove that today’s numbers are far too low (RL, BBBY, UA, and even Nike later in the year). PSS is in there – though I accept that it does not deserve the ‘quality’ label. Junk is as junk does. That’s WRC, GIL, and JNY. And yes, include ROST and TJX in there. I know everyone loves them and they’re not ‘junky,' but we’ll start to see quality of earnings and incremental ROIC head in that direction next year.


Retail: Destocking Over? - Sales Inventory Growth


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

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more