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Takeaway: Astounding week for retail sales. TGT puts nail in coffin of price equation in Canada. LULU Lole. GILT/Rue La La makes a ton of sense.

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

ECONOMIC DATA

ICSC - Chain Store Sales Index

Takeaway:  Sales trends per the ICSC Index still look surprisingly good. The one week trend is choppy (albeit setting the highest growth rate in three years), but the two-year trend is almost equally impressive. These numbers seem inconsistent with what we're seeing from the companies reporting right now. But if they're right, then we're in for a good retail earnings season next month.

Retail Callouts (7/29): Retail Sales, TGT, LULU, Puma/KER, GILT/RueLaLa, AMZN - chart1 7 29 2014

Retail Callouts (7/29): Retail Sales, TGT, LULU, Puma/KER, GILT/RueLaLa, AMZN - chart2 7 29 2014

COMPANY NEWS

TGT - Target looks to drive BTS traffic to its Canadian stores

(http://www.retailingtoday.com/article/target-looks-drive-bts-traffic-its-canadian-stores)

  • "Target is looking to bolster sales results in Canada by appealing to parents and students this back-to-school season, offering everything from fashion to school supplies at prices that it touts as 'unbeatable.'"
  • "Target even commissioned a survey, which showed that 51% of Canadian moms describe back-to-school shopping as expensive and stressful, allowing the retailer to position itself as a stress-free, inexpensive destination. In stores, for example, bright signage identifies the different departments as well as the back-to-school shop located at the back of the store."

Takeaway: In the third move in two weeks (2% vendor rebate requests, price-matching of groceries, and now this) Target is showing that the most important component to winning in Canada is price. While that might help near-term market share, it's absolutely the wrong decision for long-term shareholders.

TGT - How to fix Target Canada’s problems in six easy steps

(http://www.canadianbusiness.com/companies-and-industries/how-to-fix-target-canada/)

  • "It’s a big job—some might even say daunting—and, frankly, we thought they could use some help. We called up some of the brightest minds in retail and put the challenge to them. Here’s their no-fail plan to deliver a direct hit for Target in Canada in six simple steps."

LULU - Lolë to Erode Lululemon Market Share with Canadian Store Expansion

(http://www.retail-insider.com/retail-insider/2014/7/lole)

  • "Lululemon will face increased competition, as Montreal-based Lolë plans to open as many as nine new Canadian stores by the end of next year. This women's activewear brand already has 14 Canadian locations, and it seeks to significantly expand both by opening new stores, as well as grow its wholesale distribution network."

Takeaway: While this article is a bit sensationalistic, to say the least, the reality is that it is more of the same -- when a category gets hot, the company that exploded the category needs to fend off competition and evolve. Selling dresses, Denim and Bags is probably not the answer -- though that's where LULU is headed. We think that an appropriate-sized/quality management team would be more aggressive in not only fending off competition, but crushing it. Despite all this, we still like LULU on the long side, as we think that the Activism set in motion by the Founder will lead to far more ways that that shareholders can win vs. lose. See our recent LULU presentation for full details.

For the summary note Click Here

Gilt, Rue La La, EBAY - Report: Rue La La attracts Gilt Groupe for potential sale

(http://fortune.com/2014/07/28/report-rue-la-la-attracts-gilt-groupe-for-potential-sale/)

  • "Fashion e-commerce company Rue La La, which specializes in flash sales for its members, is reportedly putting itself up for sale and rival online shopping site Gilt Groupe could be a potential suitor."

Takeaway: This makes all the sense in the world. The reality is that these fashion e-commerce sites might have fantastic brand cache and allure, but there is one thing that they don't have -- and never will -- scale.  When you're dealing with limited allocations of sought-after merchandise, you simply can't scale it up at a level that will materially grow the bottom line. One of the only ways for them to grow their businesses is to acquire.

PUMA Earnings:

(http://n.equitystory.com/c/fncls.ssp?u=VDVPRUPFWO)

Takeaway: Puma missed again -- because that's what it does. But the reality is the quarter was really not too bad. Revenue growth was respectable -- albeit helped by the World Cup. The only question we have is when the brand's recovery gets to a point where Kering (which owns 84%) will be comfortable stepping up and buying Quiksilver or Lululemon.

OTHER NEWS

LULU, NKE, UA, AdiBok - Workout Clothes With High-Tech Twist Sell Briskly

(http://www.nytimes.com/2014/07/29/business/workout-clothes-with-high-tech-twist-sell-briskly.html?partner=yahoofinance&_r=0)

  • "Gym shirts made of Kevlar. Underpants featuring “anti-odor technology.” No-sweat briefs. Lycra made of corn. And exercise shorts designed with Cordura, a rugged material most often associated with things like car seats and luggage."
  • "As outfits based on yoga pants have become increasingly popular as streetwear, and have even infiltrated the office in recent years, the sale of athletic apparel has exploded."
  • "'I have two daughters, and their closets are full of Lululemon,' he said. 'But I’m not sure they could find their way to a yoga place.'"

AMZN - Amazon Customers Become Designers with New 3D Printed Products Store Offering Customizable Fashion Accessories, Toys, Home Décor and More

(http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=1951812&highlight=)

  • "Amazon  announced the launch of the 3D Printed Products store (www.amazon.com/3dp), a marketplace that gives customers access to more than 200 unique print on-demand products, many that can be customized by material, size, styles and color variations, and personalized with text and image imprints. The new store is one of the largest online destinations to discover 3D printed products featuring convenient search tools, interactive 3D preview functionality and a product personalization widget."

Mall Construction Boom Is Fuelled By The Tastes Of Canada's Wealthiest

(http://www.huffingtonpost.ca/2014/07/28/upscale-malls-canada_n_5627450.html)

  • "While big box retailers like Target have struggled to get a foothold in Canadian markets, demand for luxury retailers is strong and fuelling massive expansion projects at shopping malls across the country."
  • "According to research by commercial real estate company CBRE Group, more luxury retailers are predicted to arrive in Canada, albeit at a more moderate pace compared to the flurry of activity seen in the last three years."

TGT, EBAY - Trade groups unite on payments initiative

(http://www.retailingtoday.com/article/trade-groups-unite-payments-initiative)

  • "The National Retail Federation (NRF), Retail Industry Leaders Association (RILA), Food Marketing Institute (FMI), Merchant Advisory Group, National Association of Convenience Stores (NACS), National Grocers Association and National Restaurant Association (NRA) are jointly calling for an open and universal tokenization standard in the U.S. payments system."
  • "The groups released a statement saying payment card data is currently vulnerable to theft where card information is swiped or entered, where card information is stored, and where it is transmitted."

AMZN - Amazon to open five new warehouses in India

(http://www.reuters.com/article/2014/07/28/us-amazon-com-india-idUSKBN0FX0PW20140728)

  • "Amazon.com Inc's Indian unit will open five new warehouses in the country, which will almost double its storage capacity to half a million square feet, the company said in a statement on Monday."

PVH - Tommy Hilfiger reveals global advertising campaign

(http://www.fibre2fashion.com/news/garment-company-news/newsdetails.aspx?news_id=166377)

  • "The Tommy Hilfiger Group, which is wholly owned by PVH Corp., announces its Fall 2014 global advertising campaign la víe en rõpe. The Hilfigers – the beloved all-American family at the heart of the brand’s marketing strategy – make the trek to Lake Tahoe, where California and Nevada meet, to establish a preppy outpost as the eclectic group of characters conquer the great outdoors."

URBN - Urban Outfitters, New York City

(http://www.chainstoreage.com/slideshow/urban-outfitters-new-york-city)

  • "Urban Outfitters has gone big — really big — in New York City, opening a 57,000-sq.-ft. ‘lifestyle center’ store in Manhattan’s Herald Square area."