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Takeaway: Gisele’s the new KD = $570m for UA. Consumer response to HD breach could be good for retail. Brand diversity at Open. Payless wants LBJ?

EVENTS TO WATCH

Wenesday (9/3)

GIII - Earnings Call: 8:30am

VNCE - Earnings Call: 9:00am

Thursday (9/4)

PVH - Earnings Call: 9:00am

BEBE - Earnings Call: 4:30pm

ZQK - Earnings Call: 4:30pm

ZUMZ - Earnings Call: 5:00pm

COMPANY HIGHLIGHTS

UA, NKE, Adi - Under Armour inks Gisele Bundchen

(http://espn.go.com/boston/nfl/story/_/id/11451807/under-armour-signs-gisele-bundchen-wife-tom-brady-new-england-patriots)

  • "Under Armour has signed [Gisele Bundchen] to be part of its new women's campaign...Sources tell ESPN.com that it's a multiyear deal. Financial terms were not disclosed."
  • "Bundchen will be part of Under Armour's women's campaign, which kicked off last month with the signing of ballerina Misty Copeland, another nontraditional endorsement deal for the brand. The Copeland spot, featuring her against-all-odds story, has garnered more than 5.8 million views on YouTube."
  • "The campaign, with its I Will What I Want slogan, also includes skier Lindsey Vonn, soccer player Kelley O'Hara and tennis player Sloane Stephens."

Takeaway: Tough timing on this one from our perspective. The day UA loses its bid for Kevin Durant, it announces the Gisele deal. The equity market liked the trade-off, though. It was good for $570mm in added market cap. Nonetheless, we think that the Gisele deal is a head-scratcher. It's convenient that she's married to UA's highest-paid endorsee, Tom Brady. But when we think about what type of person will drive the women's business, we think of Misty Copeland, who has an inspiring story of success in a career (ballet) that the average woman can associate with. This was and is a slam dunk for UA.  But does the average woman really associate with a supermodel like Gisele who made $47mm last year ($16mm more than her husband, and $39mm more than Adriana Lima?) and has the kind of body that could make a Hefty Bag look good? Our sense is that the answer is No.  Also, consider that Gisele is a 'serial endorser'. That's not a bad thing, as she is getting the most out of her brand. But in addition to UA, she has contracts with H&M, Chanel, Carolina Herrera, gets a cut from sandals that she designs for Grendene, and has her own line of Hope lingerie 'Gisele Bundchen Intimates'. She is also the face of Pantene and Oral-B in Brazil. But the truth is that we don't know the economics here. If it's only a million bucks, then it's probably worth it. But if UA is paying up for Gisele, we'll view this as a really questionable deal.

UA video link: Click Here

HD - Home Depot Shares Drop After Chain Investigates Data Breach

(http://www.bloomberg.com/news/2014-09-02/home-depot-shares-drop-after-retailer-investigates-data-breach.html)

  • “'We’re looking into some unusual activity,' Paula Drake, a spokeswoman for the Atlanta-based company, said in an e-mailed statement. 'We are aggressively gathering facts at this point while working to protect customers. If we confirm that a breach has occurred, we will make sure customers are notified immediately.'”
  • "Brian Krebs, the independent journalist who uncovered a hacker attack at Target Corp. last year, reported that a 'massive' batch of stolen credit- and debit-card information went on sale this morning. There’s evidence that the cards are linked to Home Depot stores, Krebs said on his website, KrebsOnSecurity."

Takeaway: Ok...this is purely our opinion, but the first thing we thought when we saw the HD breach was "will the consumer really give two hoots about this?". Clearly, people that are directly impacted will be gun shy next time around. But we've got to think that this mindset, if true, will also positively impact the recovery time for people impacted by past data breaches. That probably includes Target. There are two events that we think could really rattle consumers from here, either a) a material breach at WMT, or b) Amazon. Both would be significant enough to move the needle in consumers shopping on-line vs in-store.

NKE - Payless to Revive Pro Wings, Offer LeBron James $500 Million Contract

(http://www.thenewsnerd.com/sports/payless-revive-pro-wings-offer-lebron-james-500-million-contract/)

  • "Following Kevin Durant’s monstrous deal with Under Armour, Payless ShoeSource has offered LeBron James an unprecedented contract which would pay him $50 million per year for 10 years.
  • Payless spokesperson James Weilen admitted the company drew inspiration from Under Armour, who recently offered Kevin Durant a 10 year contract worth $285 million. 'The deal with Durant proved stars will sign with smaller companies if the situation is right,' Weilen stated. 'The prices of shoes have climbed to astronomical heights, and many of today’s stars have realized the need to offer affordable, quality shoes to their supporters and fans. We believe LeBron will make the correct decision for both himself, his fans, and his family.'”
  • "In addition to the large sum of money, the company has offered the Cleveland Cavaliers superstar a large portion of stock in the company. Payless, which has existed since 1956, brings in over $3 billion in sales annually."
  • "The company wants LeBron to revive their sports line Pro Wings, which reached its height in the early 90′s. Pro Wings were often styled similarly to expensive alternatives created by ReeBok and Nike."

Retail Callouts (9/3) – UA, NKE, HD, TGT, Payless, Endorsements - chart1 9 3

Takeaway:  Uhhh...for real Payless? 1) You're not making money. 2) LeBron couldn't care less about lowering the price of his shoes. Nike has sold LBJ footwear for over $300 and he laughed all the way to the bank. 3) LBJ is not gonna wear Red Wings. 4) Do you really think he can be incentivized by stock in Payless? 5) Last we checked, he's in bed with a company called Nike that won't let him go.

Nice try though.

US OPEN BRAND DIVERSITY

It's usually the Nike and Adidas show at the tennis majors -- and for the most part, it still is (especially with Women). But we can't help but notice how other -- traditionally non-athletic -- brands are sneaking into the big televised Men's matches.  1) Novak Djokovic was one of the early defectors from the big brands by going with Uniqlo, subsidiary of Japan's Fast Retailing. He wears Adidas sneakers when he plays, but it's the distinctive Uniqlo logo that people see the most. 2) Bautista Agut, who lost to a near unstoppable Roger Federer (Nike) last night, wears Lacoste on the court alongside Asics kicks -- an unusual combination. But one that caught our attention nonetheless. 3) Tomas Berdych, who used to be a Nike endorsee, now wears H&M apparel while playing competitively, which is the first time we've seen H&M have such a prominent showing in any sporting event. We don't think this is alarming for the incumbent brands -- but it definitely shows how some non-traditional brands are getting into the endorsement game. If this hurts any of the athletic brands on the margin, it's probably UnderArmour.

Retail Callouts (9/3) – UA, NKE, HD, TGT, Payless, Endorsements - 9 3 chart2

Retail Callouts (9/3) – UA, NKE, HD, TGT, Payless, Endorsements - 9 3 chart3

Retail Callouts (9/3) – UA, NKE, HD, TGT, Payless, Endorsements - 9 3 chart4

OTHER NEWS

FL - MARKET REPORT: Foot Locker puts boot into Ashley as it raises threat to Sports Direct on rumours of private equity plan

(http://www.dailymail.co.uk/money/markets/article-2741388/MARKET-REPORT-Foot-Locker-puts-boot-Ashley.html)

  • "Mike Ashley’s Sports Direct International’s comfy position as king of the multi-branded, mass sports retailing market in the UK could soon come under threat."
  • "As shares of New York-based Foot Locker rose a further 1.5 per cent to a 52-week high of $56.97, rumours were rife that a consortium of private equity players were lining up a cash offer in the region of $70 a share."
  • "If successful, new management would then apparently put in motion extensive expansion plans to increase Foot Locker’s presence in Europe, particularly in the UK, with plans to double the number of its sites from the current 23. A move that would certainly query Ashley’s pitch."

CVS - CVS Caremark Announces Corporate Name Change to CVS Health to Reflect Broader Health Care Commitment

(http://www.cvshealth.com/newsroom/press-releases/cvs-caremark-announces-corporate-name-change-cvs-health-reflect-broader)

  • "CVS Caremark Corporation announced today that it is changing its corporate name to CVS Health to reflect its broader health care commitment and its expertise in driving the innovations needed to shape the future of health. "
  • "'For our patients and customers, health is everything and CVS Health is changing the way health care is delivered to increase access, lower costs and improve quality,' announced Larry J. Merlo, President and CEO, CVS Health.  'As a pharmacy innovation company at the forefront of a changing health care landscape, we are delivering breakthrough products and services, from advising on prescriptions to helping manage chronic and specialty conditions.'"

KER - Kering to Assume Control of Eyewear Business

(http://www.wwd.com/accessories-news/eyewear/kering-to-assume-control-of-eyewear-business-7856084?module=hp-topstories)

  • "Spying 'significant' growth potential for frames and sunglasses in the luxury and sport segments, Kering plans to take back control of its eyewear business, allowing it to squeeze extra margin in a promising product universe."
  • "The French group said Tuesday it would “evolve” its 20-year partnership with Italian manufacturer Safilo Group SpA, terminating the current license for the cash-cow Gucci brand at the end of 2016, two years earlier than planned, in exchange for compensation of 90 million euros, or $118.2 million at current exchange, to be paid in three installments."

JCP - J.C. Penney partners with Fanatics for online sports store

(http://www.chainstoreage.com/article/jc-penney-partners-fanatics-online-sports-store)

  • "J.C. Penney Company is launching a new online sports store on its e-commerce site that will be powered by Fanatics, an online retailer of officially licensed sports merchandise. Fanatics, which operates the e-commerce platform for hundreds of collegiate and professional sports teams, leagues and media sites, will provide fans with a selection of team sports apparel and merchandise at JCPenney.com, offering more than 300,000 licensed products spanning all the major sports leagues."
  • "'Our partnership with Fanatics enables us to deliver even more quality team merchandise that our customers want during their favorite sports season,' said John Tighe, senior VP of men's apparel for J.C. Penney. 'Whether it's football in the fall or March Madness in the spring, J.C. Penney has the caps, shirts and collectible gear to make any sports enthusiast a true fanatic.'"

Tom Brady and his dad team up in UGG ad

(http://www.bostonglobe.com/lifestyle/names/2014/09/02/patriots-tom-brady-pitching-latest-ugg-footwear/5foppwrL6ThVpVlFUemT1H/story.html)

  • "The Pats poster boy is featured in a new ad campaign for UGG, the fancy footwear Brady’s been endorsing for a few years. The schmaltzy black-and-white spot, shot at Brae Burn Country Club in West Newton, shows Brady and his father, Tom Brady Sr., enjoying some time together."

WTSL - WetSeal CEO Resigns

http://ir.wetsealinc.com/secfiling.cfm?filingID=863456-14-107

  • "Pursuant to such agreement, Mr. Goodman’s employment with the Company ended on August 26, 2014, at which time he resigned as the Company’s Chief Executive Officer (and principal executive officer) and from all other positions with the Company, including his position as a director on the Board of Directors."