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Takeaway: Strength in Amazon golf biz is a bad sign for DKS. Thoughts on AAPL’s influence on Nike watch business. RH buying opportunity.


Thursday (9/11)

ULTA - Earnings Call: 5:00pm


RH - 2Q14 Earnings

CLICK HERE to see yesterday's note on RH's earnings.  RH remains our Best Idea Long and one of the best stories in retail.

NKE, AAPL - Watch

Remember the press reports noting that we should expect to see a NextGen Nike Sportswatch in 1H14 at a price point just below $400 to compete with the Adidas ($399) offering? That was set to be a meaningful upgrade from the current Nike SportsWatch, which sells for $150. But 1H14 came and went without a peep from the Nike Timing team. Why? It was clear that something was up when Nike fired its FuelBand team in April.  Apple's Tim Cook sits on Nike's Board, and Nike knew full well about Apple's iWatch plans. We're also inclined to think that Tim Cook said something to the extent of "You're going to come out with a hi-tech sportswatch that's priced $50 above what Apple is launching? That's a big mistake.".  That was probably a pretty simple decision for Nike's Mark Parker to back off that initiative, and piggyback onto the iWatch with a partnered fitness app that promotes Nike's core product in a more commercial way. 

Retail Callouts (9/11): DKS, AMZN, NKE, TGT, EBAY, WMT - Nike v Apple 1

DKS, AMZN, EBAY - ChannelAdvisor Golf Comp Sales

Takeaway: These golf trends are interesting. Amazon's growth in golf equipment is absolutely off the charts, which we think is a good barometer for the excess inventory in the channel. The time of year where most golf equipment is bought at full price is in April and May (likely not at AMZN). Then discounts pick up in June, and accelerate meaningfully as the Summer progresses. Amazon’s numbers, in particular, continue to show staggering acceleration during the summer discounting period, with 63% growth in the latest month.  This does not bode well for DKS, which is still dealing with excess inventory in golf, and is looking to reposition (and potentially exit) a large part of its golf business. As a reminder, Dick's largely serves the 'occasional' golfer, which represents an impressive 44% of golfers. Unfortunately, that group is extremely price sensitive, and accounts for only 19% of golf industry revenue. This is where Amazon competes as well.  Dick's bought Golf Galaxy at a peak in the cycle, and it is getting out at the trough -- not a winning M&A strategy. But the reality is that given the competitive dynamic, we're inclined to think that DKS will fail to participate in any upside in the golf space going forward.

Retail Callouts (9/11): DKS, AMZN, NKE, TGT, EBAY, WMT - 9 10 chart1

Retail Callouts (9/11): DKS, AMZN, NKE, TGT, EBAY, WMT - 9 11 chart3


TGT - Target Links With Toms


  • "Target has teamed up with feel-good footwear brand Toms for a limited-time collection, Toms for Target, launching in time for the holidays. Toms matches every pair of shoes sold with a pair donated to a child in need. Toms calls the program One for One."

WMT - Wal-Mart’s School Supplies Are a Little More Expensive Online


  • "Wal-Mart’s official policy is to have the same prices online as in stores, spokewoman Jaeme Laczkowski says. The difference wasn’t great: at most, a 1.8 percent premium on a $118 checkout."

SHLD - Fitch Cuts Sears Ratings on Cash Burn Concerns


  • "Fitch Ratings cut its credit ratings of Sears Holdings Corp. on Wednesday to double-C from triple-C, citing the company's steep drop in profibility and its cash burn."

Toys ‘R’ Us holiday strategy includes online and in-store enhancements


  • "With just 105 shopping days left until Christmas (as of Sept. 10), Toys “R” Us outlined its holiday strategy at a preview event in New York City.  Among the highlights: free online layaway, enhanced loyalty program, improved online and in-store checkout, and two new in-store shops." 
  • "With an eye to expanding its omnichannel capabilities, Toys “R” Us is in a pilot with Google’s Shopping Express offering shoppers same-day delivery in four markets, with New York and Los Angeles added most recently. It’s also expanded in-store pick-up service to more countries and added shipping from stores to 14 countries including China." 

Malls launch pick-up depots to lure online shoppers


  • "In the next three to six months, SmartCentres Inc. will start testing online purchase stations in three of its Toronto-area shopping centres. Dubbed Penguin Pick-Up, after SmartCentre’s penguin corporate logo, the depots will serve retailers operating in the company’s properties and other e-commerce players which sign on to the program."