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A Crain’s article reported yesterday that MCD’s Chicago-area restaurants are bringing the Dollar Menu to breakfast “as the fast food chain turns to discounts to revive slowing morning sales.”  According to the article, the local deal, which will include six items priced at $1: sausage biscuit, sausage McMuffin, medium coffee, two hot cakes, two hash browns, and fruit-and-yogurt parfait, is similar to the breakfast value offerings that MCD has sold in other markets, such as Seattle.  For reference, the sausage sandwiches previously sold for around $2.


MCD said on its last earnings call that outside of the benefit the company has gotten during the breakfast timeframe from advertising coffee, the rest of breakfast has slowed down some.  This slowdown is not unique to MCD as the article states that morning meals at fast food restaurants fell 2% YOY during the spring, according to the NPD Group.  It does signal, however, that MCD’s coffee and specialty beverage sales are not creating the much anticipated lift in sales during breakfast.  MCD just launched its national advertising campaign behind the espresso-based beverages in May.  Although MCD stated that it experienced some benefit during the breakfast daypart from the advertising, if there was a substantial pick up in coffee purchases (MCD has said that more than 50% of McCafe sales happen at breakfast), I would have expected that to translate into increased breakfast food purchases, which was not the case. 


The article references a memo that Steve Plotkin, the head of McDonald’s Western Division, wrote to franchisees last month, in which he states, “Breakfast sales are declining, and the only growth that we have had in the last two years has been based on price and not demand.”


This slowdown in breakfast demand just increases my conviction that MCD’s specialty beverage launch will not prove to be the success that investors have anticipated for some time.  U.S. same-store sales growth has come under pressure in recent months.  If the company cannot drive incrementally more specialty beverage sales during the initial months of this national campaign (while offering giveaways) and in the summer months, it will become significantly more difficult going forward.


From a margin standpoint, this move to launch more value items at breakfast could prove to be detrimental.  Historically, breakfast has generated a lower average check for MCD than the other dayparts but yielded a higher margin transaction.  Increased dollar menu sales at breakfast will remove some of this margin favorability. 


ISLE missed and contrary to popular belief, July was not any better than the difficult months of May and June. Trends haven't improved in August either. Not good for the regional gamers.





Highlights from the release:

"Our results during the quarter make it clear to us that the economy appears to be engaged in a slow, long-term recovery process, and consumers are being more discriminating about their leisure spending"


"First quarter results were generally in line with our expectations at most of our properties, with the decrease in company EBITDA primarily attributable to decreases in gaming revenue and EBITDA at the Company's properties in Biloxi and Lula MS, Lake Charles, LA and Bettendorf, IA. The Mississippi properties were impacted by continuing softness in their respective markets and an increase in unemployment rates, Bettendorf was negatively impacted by access issues caused by bridge repairs and the opening of a new gaming facility by one of our competitors in the Quad Cities, and Lake Charles was negatively impacted by changes in the promotional spend in the market."


" It is, however evident that our year-over-year revenue and margin comparisons are difficult because government stimulus checks during the same period of the last fiscal year clearly had a positive impact on consumer spending."


"We are holding firm in our resolve to defer the great majority of our planned renovation and project capital expenditures until we achieve more visibility into an economic turnaround. However, we are continuing to evaluate the competitive landscape in Colorado to capitalize on the opportunity presented by recent regulatory changes in that market, and we are also looking forward to the substantial completion of our Lady Luck conversion projects by the end of this month at our properties in Caruthersville and Marquette."


General management observations:

  • Biggest operating challenge is consumer spending
  • Industry is going through significant changes. Over the next few years supply increases will likely outpace demand



  • Color on August in Colorado
    • Not seeing trends in August quite as strong as what they saw in July, but will add some tables to accommodate demand. Up in line with the market in July (19%)
  • Betterdorf - we're encouraged by the opening of the 2 way bridge - which was one of biggest issues they had.
    • Last year in 1Q09, Betterdorf benefited from Davenport being closed.  Lots of noise in the market to just back out bridge opening impact
  • Florida:
    • Just waiting to see what happens.  Governor has until end of August to sign the compact with the Seminoles
      • Unclear what happens if the deadline passes.  Seminoles are still trying to change the compact. However, if those changes are substantive than the legislature may want to reopen the session to get comfortable.
    • Still hoping for the tax cut
      • Minimum will be an aggregate number from parimutuel - must pay at least what they paid last year but there will be 2 new facilities to split among more facilities (ongoing)
      • Tax will be split equally by casino, not "pro-rata" by revenue
  • International - Zero in 2011
  • Cost structure is just about as lean as they can get it, so future opportunities hinge on better flow through whenever a recovery occurs
  • They are seeing slightly better to constant volumes in most locations.  However, there is a decrease in what people are spending per patron when they show up.  Seeing an increase in unemployment across all locations.  Increase in gas prices isnt going to help.  They have seen an increase in promotions across most markets, but they are trying very hard not to buy revenues
  • Why not look at new states like Maryland/ Kansas for a managment opportunity?
    • That's what Eric Hausler has joined the company to focus on
    • A lot of these situations will take a long time to play out, whether bankruptcy situations or new markets
    • Don't have the capacity for a new greenfield project
    • Why not look at new states like Maryland/ Kansas for a management opportunity
  • Decrease promotional spending at Lake Charles
  • Still buying and replacing slot machines, maybe not to same extent as in the past
  • Growth capital spending?
    • Very little committed right now: Colorado, renovations at Lake Charles
    • Won't commit until they see some economic recovery
  • Corporate expense?
    • $40MM for 2010, including $7MM of stock comp
  • Rated vs non-rated play trends?
    • 3% decrease in rated play vs 8% in retail play
  • Lake Charles and Mississippi unemployment rates are going up
  • New licenses in Iowa, impact on ISLE? Probability?
    • Only accepting applications from counties where referendum has passed
    • Very conscious of impact on other casinos
    • Appears that the upper NW corner of the state that shows some growth potential without significantly cannibalising another property
  • $93MM R/C balance
  • May and June were pretty rough for ISLE and the industry, and July looked to be a little better, how about August?
    • ISLE didn't see a big difference / improvement in July
    • Middle of their 2009 was when they saw their business fall off the map (Sept), so comps will start to get easier
    • However, fundamentally, August is no better
  • Bank line EBITDA calculation: EBITDA + losses from UK operations (unrestricted sub) (+/-) non cash charges/ gains ; Net Debt: get to net cash over $65MM


If you have been reading the headlines attached to Japanese export data releases in recent months you will be excused for being somewhat confused, as the pundits vacillate between optimism and despair with each new data point. Below are the headlines reported by Bloomberg news for each release since the April data was published in late May:


5/27: “Japan Exports Fall at Slower Pace as Recession Eases”

6/24: “Japan Export Slump Deepens, Casting Doubt on Recovery”

7/23: “Japanese Exports Fall at Slower Pace as Slump Eases”

8/26: “Export Slump Deepens, Signaling Japan Economic Recovery Could Be Weakening”


This manic depressive cycle of hope and fear underscores the great dilemma for anyone following the Japanese economy: the almost complete dependence on external demand for expensive durable goods and external supply of basic materials. Until recovery in the EU and North America achieves critical mass, Japan is essentially dead in the water. All government attempts to stimulate internal demand will ultimately function as a band aid since the economy is structured with such a profound dependence on external trade (fun fact: according to some estimates Japan is calorically 60% dependent on food imports).   To make matters worse, the new programs being cooked up by the presumptive Democratic Party victors will not only fail to address these structural weaknesses or the looming demographic disaster, they will actually increase the national debt to well beyond 200% of GDP and keep the zero rate train rolling.


Exports for July reported last night declined by 36.46% year-over-year. We have begun to see signs of recovery in the major European economies, and some of the important developing economy markets for Japanese exports are starting to show modestly increasing consumer spending levels, but there is clearly no chance that auto or big ticket consumer electronics sales in any these markets will be able to rebound to pre recession levels in the intermediate term.


As Japan readies for this weekend’s national election it finds itself in the familiar role of global waterboy, sitting on the bench next to the US while the real recovery game is happening on the field. We will continue to trade Japanese equities tactically on Yen relative strength, but remain bearish on the long term on fundamentals there.


Andrew Barber



STICKING TO OUR STORY - Japan Exports0826


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Despite recent management assertions to the contrary, we believe the big slot expansion at Sands Bethlehem will be delayed past year end.



Everyone knows that the retail and hotel portion of Sands Bethlehem is being mothballed until both economic and liquidity conditions improve. However, we have now confirmed that LVS will only "modestly" increase its slots at Bethlehem by 250 units instead of the 2,000 units commonly expected (by the sell side).  We've also seen incorrect sell side projections of almost 3,000 units shipping into PA in 2010, despite the fact that only one of the two Philadelphia projects has even broken ground and the other still hasn't nailed down a site.  But we're used to the sell side being wrong.


Back to Sands Bethlehem, the property appears to be promoting very aggressively to increase visitation to the property, especially midweek.  Our EBITDA estimate for Bethlehem is $22MM in 2009 and $38MM in 2010 (vs the Street close to $70MM).  Unless there is a miraculous economic recovery, it could take at least three years for the property to reach mature margins approaching 20%.  The Street consensus numbers suggest Sands hitting 19% margins after just 2 full quarters of operations.  Pipe dream.  As a reminder, when you include the fees payable to PA, the real tax rate is close to 60%.  According to another PA operator, there is no way that labor will be less than 10% of revenues, and then one has marketing and all the other costs to consider.  That same competitor allocates 4-5% of gaming dollars to marketing, but given that Sands' property is brand new, its spending on marketing is materially above that percentage.


LVS is still all Macau, all the time, and that is certainly our focus.  The Bethlehem situation is only marginally negative for LVS and the slot manufacturers.






 AUGUST 26, 2009




  • Despite outside appearances, Staples believes this year’s promotional level for the back to school season is consistent with last year. Sales are off to a good start for the season. Within the quarter PC sales had a strong showing with comps up mid single digits, driven by strength in laptops and notebooks. Overall, same store sales trends in the North American market have now improved sequentially for the third quarter in a row.


  • It might be “too little, too late” for Borders as the company re-merchandises its stores by substantially shrinking its multimedia department while increasing the focus on children’s. As a result of inventory clearance, declining secular trends, and poor competitive positioning, Borders’ music/dvd same store sales declined by 50% in the quarter. The category overall accounts for roughly 8% of total sales vs. a 23% peak in 2002. Despite all the changes underway, Borders continues to lose market share, which same store declines in the quarter of 13% vs. Barnes & Noble which posted a 6.9% decrease over the same period.


  • As Winn Dixie continues to execute a corporate turnaround, it recently relaunched the Jacksonville market with the completion of 51 remodels. In response to the massive market upgrade, Publix responded immediately with a zoned circular program focused specifically on the trade area. The competitive response, while not overly aggressive on price or breadth, is clear acknowledgement that Publix isn’t going to sit back and watch WINN regain share easily. Expect more competitive response from Florida as Winn remodels additional districts against what is already one of the most challenging state economies in the country.


  • In a sign that new management is comfortable with the merchandising changes underway at Chico’s, the company returned to television advertising for the first time since August 2006. The ad campaign will run through October during programming oriented towards women viewers. Coinciding with the return to TV, was the reporting of the company’s first positive same store sales result in 11 straight quarters. Momentum has carried into August and the company expects to report another quarter of positive same store sales trends in 3Q.


  • Rather than wait for lease expirations, Casual Male is taking their efforts to reduce rents on offense. The company is attempting to renegotiate every one of its 487 leases. Approximately 100 stores per year are expected to come up for renewal based on the normal course of business.


  • One of the key beneficiaries of the weakness in the video game industry is close-out retailer, Big Lots. After testing video game sales in 25-30 stores, the company is expected to rollout the category to the entire chain by the middle of September. The company noted there is great value being offered by the studios and gaming manufacturers in an effort to clean up inventories. The pet category also remains a key area of focus for BIG, with double digit same store sales increases in the category.


  • Concerns over a potential surge in cotton prices due to the same drought conditions that drove sugar prices up 20% in the first 8 days of August have subsided. Sugar prices are now flattening and cotton is 11% off its highs over the last 8 sessions. This is positive for both Hanesbrands and even more so for Gildan (cotton is roughly 30% of COGS).





-Neil Cole, chairman, president and chief executive officer of Iconix Brand Group Inc., oversees a company that owns and manages 19 brands — from Badgley Mischka and London Fog to OP, Rocawear and Candie’s, all of which are known for their provocative marketing campaigns. “You’ve got to do something exciting and innovative and touch consumers’ sensibilities to get share of mind,” said the ceo, the brother of designer Kenneth Cole. Overall, the brands include over 200 fashion licenses and 15 direct-to-retail licenses and represent over $8 billion in annual retail sales. When asked if Iconix is hunting for more acquisitions Neil Cole replied "Definitely. That is part of our growth strategy. We were just named one of Fortune Magazine’s 100 fastest-growing companies and a lot of that comes with acquisitions: Today we have 19 brands, our goal is to own 50 over the next three to five years, and it’s going to come through acquisitions. As a public company we can’t talk specifics, but we’re now engaged with five different iconic brands we feel would be wonderful additions."  When asked about the role  of social media in Iconix's marketing and advertising Neil Cole replied, "In our youth brands, it is huge now, and a critical component in every campaign. We use it today in every one of our brands. We work with Facebook, Twitter and many different blogs and ways of connecting to consumers wherever they are. We have young people in marketing who understand how to get the word out without spending a lot of money. We’re launching campaigns through social networks where we hit millions and millions of people before we spend a nickel on traditional media." <wwd.com/business-news>


-The Finish Line on Tuesday announced the creation of a new e-commerce division- The Finish Line on Tuesday announced the creation of a new e-commerce division and appointed former chief information officer and EVP of information systems and distribution Donald Courtney as president of the group. The new division brings together the e-commerce advertising, design and content team, which had been divided between the marketing and information systems departments. It will focus solely on content, sales and the customer experience at Finishline.com. Courtney will report directly to CEO Glenn Lyon. <wwd.com/footwear-news>


-As they trudge through the back-to-school season, retailers don’t see much of a break for holiday - The latest predictions call for holiday same-store sales to be flat to down in the low single digits compared with a year ago. On the upside, profit margins are expected to be better, due to conservative buying, possible pent-up demand and lower prices to project an aura of greater value and dodge the markdown mania of a year ago. Stores will benefit from easy comparisons with last year’s depressed season, and an extra day for shopping between Thanksgiving and Christmas — 28 this year, versus 27 in 2008. “It’s going to be a tough season,” said Lisa Schultz, executive vice president of apparel design at Sears Holdings Corp. Apparel, apart from denim, cashmere and festive styles, is expected to be less of a factor than ever as demand increasingly skews toward small electronics, such as the Kindle, and giftables. Previews of the upcoming holiday merchandise indicate a wider array of items at stores’ lowest or “opening” price points and more exclusives either through private label products or working with suppliers.  Also high on the merchandising agenda are:  Giftables, such as candles, picture frames, soaps, chocolates and tree ornaments, which will usurp some space traditionally devoted to more expensive products like apparel and outerwear.  Cashmere, which seems to grow each year as a percentage of the offering, as well as skinny jeans, embellished jeans and pet apparel and accessories. While retailers are better prepared than last year, executives recognize there is still immense economic uncertainty that could keep consumers out of stores and throw even their ultraconservative projections out the window. <wwd.com/business-news>


-Esprit Profit Falls 26% on Europe Recessions, Missing Analyst Estimates - Esprit Holdings Ltd., the biggest clothing retailer listed in Hong Kong, said full-year profit fell 26%, the first decline in more than a decade, after its biggest markets in Europe fell into recession. The clothier’s profit growth may resume as Germany and France haul Europe out of its worst economic slump since World War II, unexpectedly returning to growth in the second quarter. Esprit, which makes more than four-fifths of revenue in Europe selling products from jeans and sunglasses to towels and bed sheets, suffered as the euro-region economy slid into recession. The company expects to see earnings improve the first quarter next year as economies recover. <bloomberg.com>


-Belle Profit Climbs 15% on China Shoe Sales, Beating Analysts' Estimates - Belle International Holdings Ltd., China’s largest retailer of women’s shoes, said first-half profit rose 15%, beating analyst estimates, after it boosted promotions to raise footwear sales. The shoemaker, whose brands include Staccato and Joy & Peace, continued to open stores and focused more its footwear business, which has higher margins. Belle this month agreed to sell its Fila sports brand business in China, Hong Kong and Macau to Anta Sports Products Ltd. for as much as HK$600 million ($77 million).  <bloomberg.com>


-Westfield Says Property Values Have Bottomed After Writedowns Prompt Loss - Westfield Group, the world’s largest owner of shopping centers, said property values in the U.S., U.K, Australia and New Zealand markets have reached their low and the company doesn’t need to sell shares to raise capital. <bloomberg.com>


-Target, Digital Fusion team up for ad play - MTV Networks’ Digital Fusion has partnered with Target to unveil a potentially high-impact ad treatment for online video called The Scrubber, which -- at least in this case -- incorporates Target’s colors and logo into a video player. The two companies have presented a demo of The Scrubber using a video clip from the site NickJr.com. The "Scrubber" name appears to refer to the way Target’s messaging and brand imagery envelope the player itself, as well as any corresponding ad units. For example, during a short clip featuring a craft project for kids, Target branding takes over the bottom of the video screen, as the company’s recognizable bull's-eye logo actually serves as the video’s playback timer -- moving from left to right through the duration of the clip. Also, as the video streams, the Target bull's-eye interacts with several branded icons placed within the bottom border of the player, triggering various overlay ads to appear on the screen touting different, theoretically timely offers.  In addition to the iconography, Target also runs a brief pre-roll ad message prior to the clip as part its Scrubber treatment. Plus, the retailer’s logo is seen persistently in the lower right hand corner of the player. <brandweek.com>


-Sears builds home improvement site - After two years of beta testing, Sears Holdings Corp. has finally switched on ManageMyHome.com, a site designed to help consumers with home improvement projects. The site went live Tuesday, and Sears Holdings—which owns Land’s End, Kmart and Sears—is positioning it as a one-stop online destination for home-related projects. This will also serve as Sears' main selling point to differentiate ManageMyHome.com from other home improvement portals, said Jim Hilt, vp of divisional holdings for Sears. He argued that while many do-it-yourself sites already exist, only a few actually give homeowners the motivation and resources to succeed. “It’s not just about giving [homeowners] another place to store information or keep track of stuff, but . . . to help them actually do it,” Hilt said. Sears Holdings is relying on word-of-mouth, social media and home enthusiast blogs to build buzz. Likewise, the company is driving traffic to ManageMyHome.com via e-mails to customers who’ve made a significant home furnishings or equipment purchase.  <brandweek.com>


-Survey and analyst agree: Old Navy leads in back-to-school retail sites - A new study by the National Retail Federation and an industry expert both rank Old Navy as one of the best back-to-school retail web sites. <internetretailer.com>


-Ike Behar is rounding out its offering for the dressed-up man with its first license for outerwear, which will hit stores for fall 201 - The deal partners the family-owned dress shirt maker with a new entity, Harbour International, a company formed by one of the owners of the leather coat resource Boston Harbour LLC, and an investment group from China. “In the last six months, Ike Behar has worked to become the premier American dresswear brand,” said Behar president Alan Behar. “Since my father started making shirts, we have added neckwear, small leather goods, cuff links and, most recently, tailored clothing. It made perfect sense to complete the story with a range of dressy outerwear.” The Ike Behar outerwear business will be headed by coat veteran Carlo Quintiliani, who joined Harbour International from Stuarts Leathers. He said retailers can expect a 20-piece collection of suit-friendly coats and jackets with modern, sophisticated styling. The coats, all 38 inches in length or shorter, will come in cashmere, luxury wools, leathers and technical materials, and will be sold at better specialty stores. “These will be coats for the guy with the corner office who wants confidence, fashion and elegance in his clothes,” Quintiliani explained. <wwd.com/business-news>


-A new concept at the newest Bass Pro Shops takes bowling pin target shooting to a whole new level - The new Bass Pro Shops store in Altoona, IA features a 15,000 square foot bowling center.  The nautically themed Uncle Buck’s Fish Bowl and Grill was an extensive joint effort between Brunswick and Bass Pro Shops to create the first-ever in-store bowling center. This new 15,000 square-foot bowling center features 12 custom-designed lanes divided into two 6- lane areas, billiards room with a fireplace, two tournament pool tables and a casual family dining area for up to 150 people. An island-themed bar features an elevated 750-gallon saltwater aquarium of exotic fish. Bowlers will walk up to a wooden ship to rent shoes and reserve lanes, while surrounded by hand-painted wall murals of ocean life along with fish mounts suspended from the ceiling.  <sportsonesource.com>


-Miley Cyrus' upcoming CD "The Time of Our Lives" will release Aug. 31 only at Walmart stores and its online site - The latest release from the "Hannah Montana" star will feature seven tracks, including her new single "Party in the USA." The CD, which will retail for $8, is currently available for preorder at Walmart.com. A digital album version is also available for $7. Earlier this month, Walmart rolled out its new Miley Cyrus & Max Azria clothing line, offering tops, pants, graphic tees, shoes and accessories. Everything in the collection retails for less than $20. The fourth season of Disney's "Hannah Montana" will begin production in 2010. <licensemag.com>


-Country music star Kenny Chesney plans to roll out his first apparel line at an invitation-only concert next week, coinciding with MAGIC - Chesney's Blue Chair Bay clothing label will feature T-shirts, shorts, khakis, button-down shirts and hats. The line will retail from $35 to $72. "MAGIC is the biggest show in the world for this sort of the thing and I love the idea that these clothes are out there for the buyers to get to see them," says Chesney. "The clothes are casual, comfortable and easy to wear wherever you're headed... and that was the whole point. Whatever you've got to do, something in this line will work." <licensemag.com>


-Peru has decided not to impose any safeguard duties on Indian cotton yarn imports - Peru has decided not to impose any safeguard duties on Indian cotton yarn imports, an effort made by the Cotton Textiles Export Promotion Council (Texprocil) and the diplomacy by Indian Embassy in Peru. Exports of Cotton yarn from India reached US$ 94.45 million during 2008, representing a growth of 73.62%. Due to the safeguard investigations, imports of Cotton yarn from India during the first six months of 2009 recorded a sharp decline of 54.25% to US$ 24.79 million. In face of a downturn faced by Cotton yarn factories in Peru represented by Sociedad Nacional de Industrias, a complaint was filed to National Institute of Defense of Competition and Protection to the Intellectual Property claiming that rising imports of Cotton yarn are causing threat to the domestic Cotton yarn producers in Peru and requested imposition of safeguard duties on imports of Cotton yarn from all countries including India. <fashionnetasia.com>


-South African clothing manufacturers and companies are going to meet up with union leaders this week to try to prevent a strike - South African clothing manufacturers and companies are going to meet up with union leaders this week to try to prevent a strike of 60,000 workers due to wage disputes. Under annual wage negotiations, the Southern African Clothing and Textile Workers Union has been asking for income to rise by 7.9%, compared to the 5% offered by employers. If the talks on Wednesday (Aug 26th) fail to strike a deal, the union will ballot its members on the possibility of industrial action.  <fashionnetasia.com>


-Fast-fashion specialty retailers have outperformed department stores a study says - Fast-fashion specialty retailers “with exceptional speed-to-market” have outperformed department stores and less nimble specialty stores not only in their profit margins, but also in their pace of revenue growth, according to a study by The Sage Group LLC’s Apparel and Retail Group. Surveying results from 47 retailers, all of them publicly held and the overwhelming majority of them based in the U.S., Sage found in the last 12 months, the five stores with the best EBITDA margin — earnings before interest, taxes, depreciation and amortization as a percentage of sales — were Hennes & Mauritz, at 23.4%; The Buckle Inc., at 22.5%; Zara operator Industria de Diseno Textil SA (Inditex), at 20.3%; Urban Outfitters Inc., at 19.8%, and Fast Retailing Co. Ltd., owners of Uniqlo, at 18.6%. Other specialty retailers — such as Gymboree, Jos. A. Bank Clothiers Inc., Aéropostale Inc., Gap Inc. and American Eagle Outfitters Inc. — filled out the top 10 rankings with marks ranging from 18% down to 13.9%, but Kohl’s Corp. distinguished itself as the best broadlines retailer with an 11th-place finish at 12.6%. Abercrombie & Fitch Co. (11.7%) and Limited Brands Inc. (11.6%) followed, before the first upscale department store appeared on the list, Nordstrom, whose 11.4% mark placed it at 15th. “On a market-cap weighted basis, stock prices for the fast-fashion subset have gained 17.3 percent over the past year, trading at 11.3 times [EBITDA for the last 12 months], on average,” Sage noted. By comparison, the department stores cited in the study — Macy’s, J.C. Penney Co. Inc., Nordstrom and Dillard’s — had seen their stock prices decline 17.8 percent over the last year and were trading at an EBITDA multiple of 7.9 times.  <wwd.com/business-news>



RESEARCH EDGE PORTFOLIO: (Comments by Keith McCullough): AMZN


08/21/2009 10:38 AM


I've been looking for an out in this position, and what else can I say - I'm out. Selling green. KM



Despite the steep recovery in property prices on the mainland and in Hong Kong, Macau has been slower to rebound.  In Shanghai and Beijing, prices are back to their pre-crisis peak levels and in Hong Kong prices are now within 6% of last year’s peak levels.  Macau’s property prices are still 33% below peak levels reached at the end of 2007.  

SCMP sees an implied upward trend, citing eight catalysts driving a recovery in the Macau property market: improving news flow, relaxation of visa restrictions, macro recovery, an equity market rebound, the successful opening of Melco’s City of Dreams, greater co-operation among operators, cost-cutting, and foreign exchange and tax changes.


MACAU PERSPECTIVES: IPO DOUBTS gamblingcompliance.com

Regulators could still find significant obstacles to put in the way of both Wynn and LVS’s IPO bids in Hong Kong.  Although news has emerged that visa restrictions could possibly ease from October, and stock market conditions are favorable, GC sees the listing committee as being less cooperative than analysts may be assuming.  LVS is singled out as having serious issues to resolve vis-à-vis its liquidity, stalled projects, and the Singapore project that is stretching its financial capacity.

There is concern over where LVS will put money to raise from an IPO.  Another question is whether or not LVS will be able to sell its Four Seasons condominiums to the public as planned.  There is a potential conflict, also, in that LVS could be incentivized to compel patrons to go to their venue in Singapore, where gaming tax will be lower.  Whether LVS has the right to run its CotaiJets ferry concession, “a key tool to support visitation”, is under litigation.  Yet another issue is whether Singapore will allow junket operators.  A South Korean junket operator with a VIP room at the Venetian Macau was recently arrested for “running an unlicensed gaming operation”.  To speculate that the Singapore government may be averse to inviting such characters to their shores might not be too wild an assumption.

For Wynn, there are rumors circulating that dependence on a certain junket operator could see its market share in Macau slip to fifth among Macau’s operators.  This could obviously, if true, affect the stock.



Taubman Centers has pulled out of Macau Studio City, recovering its 25%, US$65 million interest in the shopping mall development.  Morgan Parker, Taubman’s Asia Pacific region president is cited as saying, “Under the established agreement, if the developers, Cyber One, were unable to secure financing within an 18 month period, Taubman would get its 25% share back.  That’s what happened, as the set period expired on August 11th.”

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