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Takeaway: DG, M, SPLS: added Short on Ideas List. BBBY added Long. WMT Sat meeting now Optional.


Retail Callouts (9/29): DG, BBBY, M, SPLS, WMT, UA, AMZN - chart1 9 29

This week's changes

Several changes this morning...three shorts, one long.

  1. We moved Dollar General form the Short Bench to the Top Short list. This one is simple. It's not a good business. It's expensive in its own right. But it's captured $3bn in EV since it announced it is stepping into the bidding process for Family Dollar.  If it 'wins' Family Dollar, it loses -- as it will have a bigger but lower quality portfolio and will have to divest the best stores in the portfolio. If it loses the bid, then the $3bn in equity value goes away.
  2. We added BBBY to the Long Bench. The company has missed for the better part of two years, and last week's print was a potential turning point. At its core, this is a quality management team with an outstanding track record. We rarely like to add a long after a positive print. But after disappointing for so long, it's unrealistic to assume that the first positive surprise will be the last.
  3. We moved Macy's two notches higher on our Short Bench. Same story, just getting closer to where we're willing to get louder from a timing perspective.
  4. We added Staples to the Short Bench. We've shorted this one several times in the past. Re-vetting it now.



Tuesday (9/30)

  • WAG - Earnings Call: 8:30am



WMT - Walmart’s new CEO has made its iconic Saturday morning meeting optional


  • "Walmart’s Saturday morning meetings have been a long-term fixture for the company. Once a month at 7:30 on a Saturday morning, the US retail giant’s top executives gather in an auditorium at its Bentonville headquarters. The required meetings have been described (paywall) as 'part evangelical revival, part Oscars, part Broadway show.' People bring their kids, and there’s a company cheer and awards for associates, as well as a more serious rundown of sales figures."
  • "But according to a recent speech by Walmart’s SVP of change management, Celia Swanson, one of new CEO Doug McMillon’s first actions as CEO was to make those Saturday meetings optional—for the first time in the company’s history."


Takeaway: It's been a while since Walton wrote, "If you don't want to work weekends you shouldn't be in retail." And the Saturday morning meeting has morphed from a deep dive on numbers into a dog and pony show complete with celebrity acts. The meetings moved from weekly to monthly in 2008 and now are optional for all. It may just be a sign of the times - heck even Baseball, hotdogs, apple pie, and Chevrolet have become passé. But, according to the report McMillon has taking the onus upon himself to reinvigorate an institution that has more or less become irrelevant.


UA - Kevin Plank Invests in Knot Standard


  • "Kevin Plank...has made an investment in online bespoke men’s wear firm Knot Standard through his personal investment arm, Sagamore Ventures."
  • "Founded in 2010 by Matthew Mueller, Knot Standard offers handmade suits using 3D imaging to obtain exacting measurements. The etailer is also unusual in that there are physical showrooms in various cities New York City; Dubai; Washington, D.C.; Dallas; Houston and Los Angeles. The new funding round will enable the four-year old firm to expand its showroom locations, as well as online offerings over the next six to 12 months."

Retail Callouts (9/29): DG, BBBY, M, SPLS, WMT, UA, AMZN - chart2 9 29


Takeaway: Since the early days of Plank investing in racehorses, Plank's investment portfolio has grown to include real business that actually make money. The bespoke suit business is one that has actually proven to be fairly lucrative. In most instances, there's at least one in-person measuring session, after which customers can go online and buy suits at will. This model works reasonably well for menswear, where sizing is fairly standard. Sizing standards are unfortunately not the same with women.

M - Macy’s, Inc. to Hire 86,000 Seasonal Associates in 2014


  • "Macy’s, Inc. today said it plans to hire seasonal associates for approximately 86,000 positions at its Macy’s and Bloomingdale’s stores, call centers, distribution centers and online fulfillment centers nationwide for the 2014 holiday season. The company’s 2014 season hiring plan compares to approximately 83,000 in 2013 (an increase of about 3.6 percent)."
  • "In 2014, approximately 10,000 of the 86,000 total seasonal positions will be based in the direct-to-consumer fulfillment megacenters in Martinsburg, WV; Goodyear, AZ, Portland, TN, and Cheshire, CT, and well as in product-specific fulfillment centers in Sacramento, CA, Stone Mountain, GA, Secaucus, NJ, and Joppa, MD."
  • "About 1,125 associates will be hired to interact with customers via telephone, email and online chat at customer service centers in Mason, Ohio; Clearwater, FL; Tempe, AZ; and St. Louis, MO."
  • "Approximately 3,000 positions will be assigned to work in the fulfillment areas of Macy’s and Bloomingdale’s stores that are equipped to fill and ship orders directly to customers, as well as to support the Buy Online Pickup in Store service available in every location.
  • More than 850 persons will be hired across the country to support the 88th annual Macy’s Thanksgiving Day Parade®, Santalands and other iconic holiday events."

Takeaway: M is steady when it comes to Holiday hiring plans. Consistently taking it's seasonal work force up about 3%-4% annually. Of course, these numbers say nothing about hours worked per employee, etc. But, put into context the M number implies about 102 new employees per store, compared to Kohl's at 60 and WMT US at 15. About 15% will be used to bulk up the e-commerce side of the business…that seems low to us. Plus an additional 1% brought in to keep blown up Snoopy dogs from flying away at the Thanksgiving day parade. These releases are all about public relations after all - intended to flaunt the good each retailer is doing for the US economy and job reports rather than a leading indicator for Holiday performance.






  • "PRADA S.p.A. announces that Ms. Miuccia Prada Bianchi and Mr. Patrizio Bertelli, who are the Chief Executive Officers, as well as Executive Directors and substantial shareholders of the Company, have just been informed by the Italian Judicial Authority of the existence of an ongoing examination according to Article  of Legislative Decree n. 74/2000 regarding the accuracy of certain past tax filings by them as individuals in respect of foreign owned companies."

AMZN - Amazon’s Grocery Delivery Business Coming to New York City


  • "Amazon is preparing to start its Fresh grocery delivery business in New York City as early as next month, according to two people who have been briefed on the plans, as the online retailer takes more aggressive steps toward making its same-day delivery service national."
  • "The company has been building up its food inventory in a warehouse in Avenel, N.J., with the goal of launching its grocery delivery business in New York City as early as October, one of these people said. The warehouse is located about 20 to 25 miles from Manhattan, in a part of New Jersey near Staten Island, New York."

Hong Kong Protests Rattle Retailers


  • "Central Hong Kong descended into chaos on Sunday as pro-democracy protesters converged on barricades as hundreds of police cordoned off streets and walkways and tensions flared amid the arrest of several lawmakers. Police used tear gas to disperse demonstrators."
  • "The protests happen to coincide with this week's National Day holidays — a key shopping season. Mainland Chinese travelers are likely to avoid the city due to planned protests in the city, so the downtrend in retail sales in the former British colony is set to extend beyond its six-month slide."

Aldi vows to fight on in supermarket price war as UK profits leap 65%


  • "Aldi has vowed to maintain the supermarket price war that has drawn legions of cost-conscious shoppers to its aisles as it announced a 65% increase in its UK profits."
  • "The German discounter said it would respond to price cuts from competitors with further discounts and claimed that attempts by rivals to match its budget approach had only served to boost sales."

PBY - Pep Boys President & CEO Mike Odell Resigns - Director John Sweetwood Named Interim CEO


  • "The Pep Boys – Manny, Moe & Jack, the nation's leading automotive aftermarket retail and service chain, announced the resignation of President & CEO and Director Mike Odell. Director John Sweetwood was named interim CEO, effective immediately."
  • "Mr. Sweetwood has served on Pep Boys’ Board of Directors since 2002 and is currently the President of Woods Investment, LLC, a private real estate investment firm.