Retail Callouts (7/30): WMT, TGT, LULU, WWW, MW, UA, AMZN

Takeaway: WMT signs tech deal #14. Latest web traffic data crushing TGT. We take the other side of Barron’s being down on LULU LBO. WWW debt upgraded.

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 HIGHLIGHTS

 

WMT - Wal-Mart on the Prowl to Boost Web Expertise

(http://www.wwd.com/media-news/digital/walmartlabs-brings-on-luvocracy-7816046?module=hp-topstories)

 

  • "The retailer, which has become one of the most voracious dealmakers in tech, said Tuesday that it would buy social marketplace Luvocracy through its @WalmartLabs research and development arm.
  • "The deal marks the unit’s 14th acquisition and another signal that the world’s largest retailer plans to use all the tools at its disposal to boost its market share. Already about 245 million customers visit Wal-Mart’s 10,900 stores and its 10 Web sites each week."

 

Takeaway: Who would've thought that WalMart would end up as 'one of the most voracious dealmakers in tech? Don't be fooled, most of what WMT does in tech is to get better information and data to support growth in its physical stores. Nonetheless, WMT is winning the online battle against its top competitor, Target. The chart below shows the spread in internet traffic between the two -- specifically TGT traffic rank less WMT. In other words, over the past six months, there has been a dramatic shift in online share from Target to WalMart. That's what happens when your customer loses confidence in your ability to protect data.

 

Retail Callouts (7/30): WMT, TGT, LULU, WWW, MW, UA, AMZN - chart1 7 30

 

LULU - Barron's Nixes Potential for Lululemon LBO

(http://blogs.barrons.com/focusonfunds/2014/07/29/dont-hold-your-breath-waiting-for-lululemon-lbo/)

 

Takeaway:  When we added LULU to our Best Ideas List as a Long in June, we noted that the activist path being taken by Wilson would likely fail in its initial goal to regain control of the company, but that an LBO was highly unlikely. But in our note from earlier this month (link below) we pulled a 180 on the LBO component. The IRR makes sense right here, right now, as long as Wilson contributes his shares to the partnership and becomes a de facto creditor to the financial buyer. That would take leverage levels down to a level that's extremely manageable.

LINK: LULU - LBO MATH = DOWNSIDE SUPPORT

 

WWW - Moody's upgrades Wolverine World Wide's CFR to Ba2, upgrades senior unsecured notes to Ba3

(https://www.moodys.com/research/Moodys-upgrades-Wolverine-World-Wides-CFR-to-Ba2-upgrades-senior--PR_305029?WT.mc_id=NLTITLE_YYYYMMDD_PR_305029)

 

  • "Approximately $375 million of rated debt affected"
  • "'The upgrade reflects Wolverine's continued meaningful reduction in debt with net debt falling below $900 million at the end of the second quarter of 2014, its lowest level since the October 2012 acquisition of the Performance+Lifestyle Group (PLG)' said Moody's Vice President Scott Tuhy. He added 'Wolverine has now substantially integrated the PLG acquisition and we expect the Company will maintain stable to moderately growing earnings across its large portfolio of brands as a whole for the near to intermediate term.'"

 

Takeaway: Not a major deal, given this is only about a third of WWW's debt. But given that WWW is perhaps the most hated stock in retail (seriously -- it's sentiment scores are worse than JCP, and on par with SHLD and RSH), any positive change in debt rating is notable.

Retail Callouts (7/30): WMT, TGT, LULU, WWW, MW, UA, AMZN - Chart2 7 30

 

OTHER NEWS

 

TGT - Target clarifies national grocery price matching policy

(http://www.cbc.ca/news/canada/nova-scotia/target-clarifies-national-grocery-price-matching-policy-1.2721374)

 

  • "Target Canada is clarifying a major policy change on price matching, the retailer told CBC News Tuesday."
  • "Starting Tuesday, consumers can present digital flyers from selected online Canadian retailers and Target will match that price, confirms Lisa Gibson, spokesperson for Target Canada."
  • "Those retailers include Walmart.ca, Bestbuy.ca, Futureshop.ca, ToysRUs.ca, BabiesRUs.ca, CanadianTire.ca, Sears.ca and Amazon.ca."
  • "Target will also match any other retailers advertising in the local area. That means consumers can present a digital copy of a local ad or a digital copy of one of the selected online retailers. Target will meet or beat that price."

 

MW - MW Aims to Be U.S.' Top Men's Wear Retailer

(http://www.wwd.com/menswear-news/retail-business/mens-wearhouse-aims-to-be-biggest-7815447?module=hp-topstories)

 

  • "The Men’s Wearhouse Inc. has lofty ambitions — to become the largest seller of men’s apparel in the United States — but Wall Street has some doubts about the plan."
  • "Currently at number three behind Macy’s Inc. and Kohl’s Corp., the retailer is projecting sales of $3.7 billion by the end of 2017 as it works to absorb its former rival and latest conquest, Jos. A. Bank Clothiers Inc. Together, the companies had sales of $2.6 billion in 2013."

 

Fast Retailing - Uniqlo Opening First Chicago Store

(http://www.wwd.com/retail-news/mass-off-price/uniqlo-opening-first-chicago-store-7816105?module=hp-topstories)

 

  • "Uniqlo isn’t entering the Midwest quietly."
  • "Its first store in the region will be a 60,000-square-foot flagship at 830 North Michigan Avenue in Chicago, the Japanese retailer’s second largest store in the U.S. The Chicago unit is set to open in fall 2015 in the heart of the city’s downtown and part of the Magnificent Mile, where neighbors will include Topshop and H&M."

 

LB - World's 2nd Largest Victoria's Secret Flagship to Replace Montreal Chapters Bookstore

(http://www.retail-insider.com/retail-insider/2014/7/victorias-secret-montreal)

 

  • "The world's second largest Victoria's Secret location will replace Montreal's Chapters bookstore on busy Saint Catherine Street West. The 35,000+ square foot flagship will be located directly across the street from La Senza, owned by Victoria Secret's parent company."

 

AMZN, Flipkart - Amazon Invests $2 Billion in India to Challenge Flipkart

(http://www.bloomberg.com/news/2014-07-30/amazon-invests-2-billion-in-india-to-challenge-flipkart.html)

 

  • "Amazon.com Inc. (AMZN), the world’s largest online retailer, announced plans to invest $2 billion in its Indian operations just hours after local rival Flipkart Online Services Pvt. secured $1 billion from investors."
  • "The spending will support Amazon’s growth with India on pace to become the fastest market to reach $1 billion of gross sales, the company said in an e-mailed statement today."

 

RSH - Moody’s: RadioShack may run out of cash

(http://www.chainstoreage.com/article/moody%E2%80%99s-radioshack-may-run-out-cash)

 

  • "Financial woes continue for RadioShack, which was recently notified it is in danger of being delisted by the New York Stock Exchange. According to a new report from Moody’s Investor Service, RadioShack is likely to run out cash by the end of October 2015."

 

PETM - Jana Urges PetSmart to Pursue Sale Instead of Taking on Debt

(http://www.bloomberg.com/news/2014-07-29/jana-urges-petsmart-to-consider-sale-before-recapitalization.html)

 

  • "PetSmart Inc. activist investor Jana Partners LLC, ratcheting up its campaign against the pet-care chain, urged the retailer to put itself up for sale before “short-circuiting” its prospects by taking on debt."
  • "PetSmart has been considering changes to its capital structure with an eye to returning more money to shareholders."

 

CROX - Crocs names Reebok exec VP of North America retail

(http://www.chainstoreage.com/article/crocs-names-reebok-exec-vp-north-america-retail?ad=news)

 

  • "Claire Fahie-Conley, VP of U.S. retail for Reebok, has been appointed Crocs' VP of retail for North America. In this role, Fahie-Conley will be responsible for overseeing all aspects of the retail footprint in North America, including the entire fleet of full-price and outlet stores."
  • "Prior to joining Crocs, Fahie-Conley spent 20 years at Reebok."

 

UA - Under Armour signs multi-year partnership with Patrick

(http://www.fibre2fashion.com/news/garment-company-news/newsdetails.aspx?news_id=166417)

 

  • "Under Armour has signed two-time First-Team NFL All-Pro cornerback Patrick Peterson to a multi-year partnership. Selected to the Pro Bowl in each of his first three seasons, Peterson is an elite playmaker with game-changing speed and has established himself as one of the top young players in the NFL."

 

 


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