HEDGEYE RETAIL IDEA LIST
This week's changes:
The only change is that we took LULU down a notch within our Best Ideas, and we moved KATE up. We like the controversy around KATE right now, and still think it remains a very BIG idea. We still like LULU, but the stock has been acting very well, and there's no doubt that this past quarter gave the existing management team breathing room to continue to be incompetent. We still think the new CEO will be the old CEO. But recent results might push that move out by a quarter or two.
EVENTS TO WATCH
Wenesday (9/17)
PIR - Earnings Call: 4:30pm
Thursday (9/18)
RAD - Earnings Call: 8:30am
COMPANY HIGHLIGHTS
TGT - Cherokee Q2 Grows Despite Weakness at Target
- "Sales of Cherokee products at Target’s U.S. stores fell 6.8 percent during the second quarter and were down 4.6 percent during the first half. Henry Stupp, chief executive officer of the Sherman Oaks, Calif.-based brand management firm, said Target in the U.S. 'continues to experience some lingering effects of the data breach that occurred during December of 2013. While foot traffic is improving, it has not yet returned to prior levels.'"
Takeaway: A strong statement from a management team who relies on TGT as a vendor for over 50% of its business. For what it's worth, Cherokee accounts for only 0.04% of Target's business. When we saw the statement, we thought "the contract must be ending soon, otherwise Cherokee wouldn't have the guts to say something like that.". But it was extended in January through Jan/2017. We'd bet that CHKE gets an angry call from someone in Minneapolis over this one.
H&M - August Sales
Takeaway: Big number out of H&M, with 19% growth in sales. We'd argue that this is one of the better retailers to track if you want to get a sense of directional trends in global retail. While not hugely popular in the US, the company has an extremely well diversified base for its 3,341 stores -- over 53 different countries. The US accounts for about 8% of sales, which is similar to France, the UK, and Sweden. Germany is the biggest exposure with about 22%.
FL - Foot Locker to offer online customers same-day delivery
(http://www.retailingtoday.com/article/foot-locker-offer-online-customers-same-day-delivery)
- "Foot Locker has enlisted crowdsourced delivery service Deliv so it can offer online customers same-day delivery."
- "Deliv's Application Programming Interface (API) connects directly to Footlocker’s website, allowing shoppers to select same-day or next day delivery for $5."
Takeaway: Makes sense that FL is turbo charging its e-commerce offering. In the latest quarter, three of the top five e-commerce growth rates through all of retail were UnderArmour, Nike and Adidas. There's no question that the athletic brands are increasingly going around traditional wholesale accounts.
AAPL, RSH - AND THE 'SHOCKING PICTURE OF THE WEEK' AWARD GOES TO...RADIOSHACK & APPLE
Takeaway: We know Apple didn't exactly have this signage printed up in Cupertino and shipped to Suburban CT. But don't you think it would have at least some handle on how its product is advertised by third-party vendors? Scribbling 'pre-order your iPhone 6/6+' on an old whiteboard with a Sharpie doesn't exactly seem consistent with Apple's image. It is, however, consistent with Radio Shack's.
OTHER NEWS
AdiBok - Big Investors Pressure Adidas CEO
(http://online.wsj.com/articles/adidas-ceo-under-pressure-from-shareholders-1410547096)
- "Adidas investors are putting pressure on the German sporting-goods giant to accelerate a turnaround, and even discussed with executives the possible removal of the company's longtime chief executive, according to people familiar with the matter."
AMZN - Amazon hits India tax snag
(http://www.ft.com/intl/cms/s/0/60798a7e-3caf-11e4-94feabdc0.html?siteedition=intl#axzz3DNhXnfOj)
- "Amazon, which is pouring $2bn into its fast-growing ecommerce business in India, has run into regulatory trouble in the southern state of Karnataka, where tax authorities have ordered some of the online retailer’s third-party merchants to stop storing goods in its warehouses.
- The dispute with the Karnataka government involves how much tax Amazon should pay on goods sold by third-party merchants and delivered to customers directly from its Bangalore warehouse – and in particular whether the online retailer is liable to pay Karnataka state sales taxes, as physical retailers are."
HBC - Saks Says No Breach of Systems in Credit Theft Scheme
- "Saks Fifth Avenue said Friday that its network and systems weren’t compromised when six employees at its Fifth Avenue flagship here allegedly stole customers’ credit-card information and used it to purchase more than $400,000 worth of shoes, handbags and other merchandise."
WMT - Wal-Mart will not accept Apple Pay
(http://www.chainstoreage.com/article/wal-mart-will-not-accept-apple-pay)
- "Wal-Mart Stores has no plans to join Apple’s newly-announced mobile payments system, Apple Pay, which is due to launch in October."
- "Wal-Mart is supporting a retailer-owned mobile technology group, the Merchant Customer Exchange, which is launching its own mobile wallet application. The application, called CurrentC, is now in pilot and is expected to be rolled out nationwide in 2015, according to The Washington Post. Best Buy is also among the retailers supporting CurrentC."