HEDGEYE RETAIL IDEA LIST
This week's changes
RL: Took the TRADE duration from Red to Green in advance of a series of meetings the company is hosting at the US Open this week. With a $14 run in the stock since Aug 1, the market is arguably expecting good news out of this already. We'll return with our take later this week.
WSM: We moved the name from the bottom of our bench to #3 -- just below NKE and RL. We think that the quarter looks solid. We're at $0.58 versus the Street at $0.53. The upside to our model is largely revenue-related, though there's occupancy and SG&A leverage inherent to what should be a 10% comp (4% stores and 17.5% e-com). In sum, we think that the near-term outlook is solid. The only thing preventing us from getting more bullish on this name is the fact that the stock is sitting at an all time high, a peak valuation, and we're eight months away from RH rolling out its Kitchen concept. It will take a while for RH to chip away at WSM. But it's a risk that matters -- particularly in the absence of any real controversy around WSM.
EVENTS TO WATCH
Tuesday (8/26)
BBY - Earnings Call: 8:00am
DSW - Earnings Call: 8:30am
Wednesday (8/27)
CHS - Earnings Call: 8:30am
TIF - Earnings Call: 8:30am
BWS - Earnings Call: 9:00am
GES - Earnings Call: 4:30pm
WSM - Earnings Call: 5:00pm
Thursday (8/28)
ANF - Earnings Call: 8:30am
DG - Earnings Call: 10:00am
COMPANY HIGHLIGHTS
RL - Ralph Lauren Enters Wearable Tech
- "Ralph is jumping into the wearable technology game."
- "Today at the U.S. Open, Ralph Lauren will introduce Polo Tech, a compression shirt that reads biological and physiological information via sensors knitted into the product. It’s just the beginning for the company."
Takeaway: This article is filled with soundbites. Definitely worth a read for anyone interested in RL. Our favorite quote is the following "The company has still more to do in the area of wearable technology as well, taking on the likes of tech companies like Apple, Google, Intel and Amazon.” We think RL has as much of a right as anyone to compete in this space, and it should. After all it has the apparel heritage, if not dominance, and the brand to match. But to make the case that a businessman will use the technology embedded in a necktie to monitor his heartbeat after a stressful meeting seems a bit of a stretch to us. Competition has been fierce in the wearable technology space, and that won't change. While this is likely an incremental positive for RL --let's just make sure we keep expectations for this product in check. There are more important things to get excited about.
M - Macy's Said Near Deal in China
- "Macy’s Inc. appears headed for an international breakthrough."
- "Senior executives are said to have flown out to China last week, raising speculation that the $28 billion department store chain was close to signing a deal there."
Takeaway: To be clear, 'signing a deal' likely means opening up Macy's stores in China, and not Macy's buying a Chinese Department store chain like Parkson Retail Group. On one hand, it does not say much about the prospects for growth in the US if the company is looking to grow in China. On the other hand, if any company could execute on a deal like this, it's probably Macy's. We're just not so sure we want to see it. The time and complexity of such a deal would almost certainly take away from Macy's operations on this side of the globe.
OTHER NEWS
AMZN - Amazon Prepares Online Advertising Program
(http://online.wsj.com/articles/amazon-preps-a-challenge-to-googles-ad-business-1408747979)
- "Amazon.com Inc. is gearing up to more directly challenge Google Inc.'s dominance of the online advertising market, developing its own software for placing ads online that could leverage its knowledge of millions of Web shoppers."
- "Initially, Amazon plans to replace those ads on its pages that Google chiefly supplies with a new in-house ad placement platform, said people familiar with the matter."
ANN - Activist Investor Presses Ann Taylor for a Sale
(http://online.wsj.com/articles/activist-investor-presses-ann-taylor-for-a-sale-1408939482)
- "Engine Capital LP, which along with a partner controls more than 1% of Ann Inc. stock, believes a strategic or private-equity buyer would be willing to pay between $50 and $55 a share for the women's retailer, 47% above Friday's closing price of $37.52 at the high end, according to people familiar with the matter."
TGT, EBAY - Homeland Security Warns of Expanded Data Breaches
- "The Department of Homeland Security estimates that over 1,000 U.S. businesses have been infiltrated by malicious point-of-sale software, significantly broadening the scope of known cyber attacks that hit Target and Neiman Marcus stores in the past year and thrust the issue into the national spotlight, spawning several Congressional probes and hearings."
- "In an advisory released Friday, the federal agency notified companies about the expanded scope of data security breaches and urged them to 'proactively check for possible point-of-sale malware infections.'"
JWN - Nordstrom completes acquisition of Trunk Club
(http://www.chainstoreage.com/article/nordstrom-completes-acquisition-trunk-club?ad=news)
- "Nordstrom announced today the closing of its acquisition of Trunk Club, a leading personalized clothing service for men."
- "The company previously announced its proposed acquisition of Trunk Club by press release on July 31."