Retail Callouts (10/2): NKE QUIZ, W, RH, SHLD, WSM, JWN, VFC

Takeaway: QUIZ OF THE DAY: What does this date, 10/2, signify in Nike’s history? Wayfair IPO is one to watch in light of the Zalando dud yesterday.


What does this date, 10/2, signify in Nike’s history?

Send us your response. Answer to also come in tomorrow's Retail Callouts note.





Today (10/2)

HEDGEYE MACRO: Quarterly Macro Themes Call - 1:00pm

Contact for details





W - Wayfair Announces Pricing of Initial Public Offering



Wayfair is finally going public. The deal priced last night at $29. Let's see how it trades after Zalando disappointed yesterday in Germany. Wayfair did $915mm in sales last year under four major sub-brands. It's a bigger player than most people would likely think. To put it in perspective, its sales base is bigger than RH's online business, which stands at about $700mm. The big difference, however, (aside from continuity, quality and price of assortment) is that Wayfair does not make any money. Operating margins are negative. It's unclear what the financial model will look like a few years down the road. Will it move to 2-3% operating margins, but have fierce velocity in its operating asset turns (i.e. 5-6x)? That would peg ROIC in the mid-teens for a fast growing model in a highly fragmented yet consolidating space. This is one to watch.


Retail Callouts (10/2): NKE QUIZ, W, RH, SHLD, WSM, JWN, VFC - 10 2 chart1


ZAL - Zalando Stock Debut Disappoints



  • "Zalando SE's stock market debut was described as disappointing by analysts Wednesday after the online retailer's shares swiftly shed their opening gains."
  • "The stock initially rose 12% above its issue price on the Frankfurt exchange but pared those gains within the first hour of trading."
  • "By midmorning its Zalando's shares were slightly below €23 ($29) compared with their debut of €24.10. The e-commerce company's €21.50 issue price was set at the upper end of its bookbuilding range."


Takeaway: Yeah, it might have seemed like a good idea to go public amidst the Alibaba hype. But a better comp for Zalando is Asos. An online apparel-only retailer -- also based in Europe. That chart looks like death, having lost 67% of its value year-to-date. Maybe this name should have listed in the US. 



SHLD - Sears Holdings Corporation Provides Update on actions to generate liquidity, fund its transformation and evolve its capital structure



  • "Sears Holdings Corporation today announced that the Company expects to generate up to U.S.$380 million in proceeds from its interest in Sears Canada Inc. by early November 2014, assuming the completion of its previously announced rights offering of Sears Canada shares to the Company's stockholders and the exercise of all such rights. Of this amount, the Company expects to receive at least $168 million in mid-to-late October from the exercise of the rights distributed to them by ESL Partners, L.P. and Edward S. Lampert, Chairman and Chief Executive Officer of Holdings and Chairman and Chief Executive Officer of ESL Investments, Inc., which collectively with their affiliates own 48.5% of Holdings' outstanding common stock."


Takeaway:  There are so many pressing details associated with this model and ownership structure right now. But to take a really big picture view on this one -- isn't it noteworthy for a company to have to free up liquidity when the industry in which it competes is at the tail end (peak) of a cyclical margin cycle. What happens to margins and liquidity if the environment goes the other way?





WSM - Williams-Sonoma, Inc. Announces Strategic Franchise Partnership and Expansion to Mexico



  • "Williams-Sonoma, Inc. announced today that it will bring its family of home furnishings brands to Mexico through a franchise agreement with Distribuidora Liverpool, S.A. de C.V., the country’s leading department store chain. The multi-year agreement includes both store and e-commerce rights in Mexico for the following brands in the Williams-Sonoma, Inc. portfolio: Williams-Sonoma, Williams-Sonoma Home, Pottery Barn, Pottery Barn Kids, PBteen and West Elm. The first stores are expected to open in 2015."


SHLD - Sears Holdings Corporation Announces Intent to Conduct Rights Offering of Sears Canada Shares



  • "Sears Holdings Corporation today announced that the Company's board of directors has approved a rights offering of up to 40,000,000 common shares of Sears Canada Inc. ESL Partners, L.P. and Edward S. Lampert, Chairman and Chief Executive Officer of Holdings and Chairman and Chief Executive Officer of ESL Investments, Inc., have advised Holdings that they intend to exercise their pro rata portion of the subscription rights in full as soon as practicable after such subscription rights have been distributed, though they have not entered into any agreement to do so. Fairholme Capital Management, L.L.C. also has advised Holdings that it expects that certain of its clients will participate in the rights offering at levels to be determined, subject to review of the terms and conditions of the rights offering and regulatory considerations."


JWN - Nordstrom Said Eyeing Downtown NYC



  • "The Seattle-based retailer is said to be looking for space to open a full-line store downtown. Nordstrom in June 2012 revealed plans for its first full-line store in New York City, a 280,000-square-foot flagship, to open in 2018 at the base of a future skyscraper on the north side of 57th Street between Broadway and Seventh Avenue."
  • "A real estate source said Nordstrom is looking for about 250,000 square feet of space downtown. If Nordstrom does find a site, the downtown store won’t necessarily open before the uptown store, the source said."


VFC - VF Corporation Senior Vice President & Chief Financial Officer Robert K. Shearer to Retire in March 2015



  • "VF Corporation, a leader in branded lifestyle apparel and footwear, announced that Senior Vice President & Chief Financial Officer Robert K. Shearer will retire in March 2015, after 28 years with the company."
  • "VF named Scott A. Roe, 49, currently Vice President, Controller and Chief Accounting Officer, to succeed Shearer in the role of Chief Financial Officer."


DG - Dollar General Extends Tender Offer to Acquire Family Dollar to October 31, 2014



  • "Dollar General Corporation announced that it has extended its tender offer to acquire all outstanding shares of Family Dollar Stores Inc. for $80.00 per share in cash (including associated preferred share purchase rights) to 5:00 p.m. New York City time on October 31, 2014, unless further extended. The tender offer was previously set to expire at 5:00 p.m. New York City time on October 8, 2014. All other terms and conditions of the tender offer remain unchanged."


ITX, BABA - Zara Partly Cedes China Web Control to Alibaba to Aid Growth



  • "Since opening its first website four years ago, Inditex SA has maintained full control of online sales for its flagship brand Zara. To gain a stronger foothold in China, the Spanish retailer plans to partially cede both oversight of the chain’s Web sales and a share of its profit."
  • "This month, Zara will open an online store on Tmall, a Chinese website owned by Alibaba Group Holding Ltd. where companies such as Nike Inc., Burberry Group Plc and The Gap Inc. sell their wares."


APP - American Apparel Said to Be Open to Keeping Charney



  • "The retailer, which ousted Charney as CEO almost four months ago in an acrimonious split, is considering giving him a new role, said the people, who asked not to be identified because the deliberations are private. In the meantime, Charney is serving as a paid strategic consultant."


California becomes first state to ban single-use plastic bags



  • "California Governor Jerry Brown on Tuesday signed legislation for the nation's first statewide ban on single-use plastic bags at supermarkets, drug stores and select other retail outlets."



Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

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7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

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Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

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GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

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Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

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Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

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Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

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People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

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UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

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Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

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