HEDGEYE RETAIL IDEAS LIST
EVENTS TO WATCH
Wednesday (7/30)
KER - Earnings Call: 12:00pm
WFM - Earnings Call: 5:00pm
Thursday (7/31)
GIL - Earnings Call: 8:30am
SHOO - Earnings Call: 8:30am
COMPANY NEWS
DLTR, FDO - Dollar Tree, Inc. to Acquire Family Dollar Stores, Inc. to Create North America’s Leading Discount Retailer
- "Dollar Tree, Inc., the nation's leading operator of discount variety stores selling everything for $1 or less, and Family Dollar Stores, Inc., a leading national discount retailer offering name brands and quality, private brand merchandise, today announced that they have entered into a definitive merger agreement under which Dollar Tree will acquire Family Dollar in a cash and stock transaction. The value of the consideration is $74.50 per share, a 22.8% premium over Family Dollar’s closing price as of July 25, 2014."
Takeaway: Dollar Tree is clearly a superior company to Family Dollar -- though admittedly that's the equivalent of comparing a Pug to a Bulldog. DLTR has an SG&A structure that is 3 points higher than FDO, and yet its EBIT margins are double FDO's, and it has ROE and ROIC that are both 50% higher. The deal price of 11x EBITDA is lofty, though it's fair to assume that we'll see DLTR run the FDO stores dramatically better. We'd love to stay biased on the short side with this one, but there's likely a couple of years worth of outsized EPS growth for NewCo (which is called Dollar Tree) as the merger plays out. The bottom line is this…if we're certain about one thing, it's that we've got to be near the top of the cycle when two retailers like this decide to merge at such a hefty price.
TGT, WMT - Target to match grocery prices from anywhere in Canada
- "Starting July 29, Target will match grocery prices from any other store in Canada. That means you can take a flyer from a grocery store in Moncton and your Halifax Target will match the produce price."
- "Coupon expert Gail Quigley says a bit of online research can save $100 a month for savvy shoppers."
Takeaway: The last thing TGT should be doing is matching prices on groceries for all other retailers. The reality is that if it wants to play the price game, WalMart, which has 3x as many stores in Canada, will crush it like a bug. This move comes just a week after TGT Canada told its vendors that it wants 2% discount on all purchases. This kind of action probably does not mean that the business is beating plan. Near-term trends aside, the strategic implications here are simply not good. Target shouldn't be competing on price. It should be competing on quality -- that's where it has a realistically defendable niche.
NKE - Mark G. Parker's Total Pay at Nike Declines
- "Mark G. Parker, the president and chief executive officer of Nike Inc., saw his total compensation for fiscal 2014 dip 4.8 percent to $14.7 million from $15.4 million in fiscal 2013."
- "Parker’s base salary slipped 3.7 percent to nearly $1.6 million."
Takeaway: We don't know where we stand on Parker…either a) the guy is one of the best CEOs in retail, or b) he is simply the best personality fit for an extremely eccentric, yet effective organizational structure. Either way, something tells us that Parker is perfectly fine making ONLY $14.7mm last year.
WSM - Williams-Sonoma, Inc. Announces Executive Promotions, New Roles Position the Company for Continued Growth
(http://www.williams-sonomainc.com/files/press-releases/WSM-JUL2014PER.pdf)
- "Williams-Sonoma, Inc. announced several strategic organizational changes to position the company for continued growth. The announcements were made by Laura Alber, President and Chief Executive Officer."
- "Chief Marketing Officer Pat Connolly will assume the position of Chief Strategy and Business Development Officer."
- "Chief Information Officer John Strain has been promoted to the position of Chief Digital and Technology Officer. In this new role, Mr. Strain will assume additional responsibility for the company’s digital and direct marketing efforts."
- "Dean Miller has been promoted to the position of Chief Operating Officer."
Takeaway: Whether you like WSM or not, it's tough to argue that it has one of the best management teams in the business. After all, its been an incubator for Restoration Hardware to source virtually all of its Executive team. Seriously, of the top six executives at RH, only one was not born out of WSM. More moving pieces at WSM means more people for RH to lure away with a bigger stock-based paycheck.
OTHER NEWS
TGT - Take a Tour of the New TargetExpress
(http://www.youtube.com/watch?v=aXTXHkgJuok#t=119)
- "Store team leader, Karl Anderson, gives us a tour of the first ever TargetExpress store."
VFC, REI - United Students Against Sweatshops Organizes Protest Against REI
- "Students and community members held protests Saturday at over 30 REI locations across the country, which led to the arrest of 20 activists at a Rockville, Md., store for nonviolent, peaceful protest."
- "The protesters, organized by the United Students Against Sweatshops, were holding a national day of action in protest against REI's refusal to sever ties with The North Face. The protesters are upset that the apparel brand's parent, VF Corp., has not signed the Accord on Fire and Building Safety in Bangladesh."
RSH - RadioShack Gets Notified That It’s Out of Compliance With NYSE
- "RadioShack Corp., the struggling electronics retailer, was notified by the New York Stock Exchange that it’s out of compliance with requirements because its stock has traded below $1 for 30 straight days."
- "Under the exchange’s rules, RadioShack has six months to get back into compliance by boosting its stock price to at least $1 on the last trading day of the month and having an average closing price at that level over a 30-day period, according to a statement yesterday."
VFC - Timberland promotes Stewart Whitney as new Brand President
(http://www.fibre2fashion.com/news/garment-company-news/newsdetails.aspx?news_id=166262)
- "Timberland, a leading global outdoor lifestyle brand, announced that Stewart Whitney has been promoted to brand president effective October 5, 2014. Whitney, who has successfully led Timberland’s growth in the Asia Pacific region since 2008, will report to Patrik Frisk, who has held the position since the brand’s 2011 acquisition by VF Corporation."