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RETAIL FIRST LOOK: THE SIGMA: WHERE DO WE GO NOW

 

RETAIL FIRST LOOK: THE SIGMA: WHERE DO WE GO NOW

 AUGUST 4, 2009

 

TODAY’S CALL OUT 

 

Note: Zach Brown takes the conch from McGough this fine morning.

 

I don’t want to dwell on Axl Rose this morning given the severe lack of relevance to retail (other than when he popped Tommy Hilfiger at a NY club in May ’06). But his quote from Sweet Child ‘O Mine rings very true today. “Where do we go now?”. The only way to answer that is with a process.

 

One of the cornerstones of our analytical process is our SIGMA (Sales Inventory Gross Margin Analysis). There’s no shortage of people we’ve confused by the imposing visual in the chart below. But once you take the time to understand it, you see that it is not only a strong financial analytics tool, but also a way to monitor the behavioral changes in how a management team (or group of them) trades one line of the P&L or balance sheet against another in the face of changes in the Macro environment.

 

Here is a quick overview of how to read the chart: the vertical axis illustrates the difference between sales growth and inventory growth, while the horizontal axis represents the year to year change in the operating margin.  We then plot the past 8 quarters of data to track the trend in where a company has been. The punchline is that companies should always strive to be headed to the upper right hand quadrant (sales outpace inventories and margins up). The background to the SIGMA chart has the year to year changes in the gross margin and the SG&A margin along with a line representing capex as a percent of sales on a trailing twelve month trend. This allows us to track what kind of margin and cash flow compares we’re looking at on a quarter-to-quarter basis.

 

Do you want to know why Retail has outperformed the S&P so meaningfully since the March 9th lows? Check out the swing in the SIGMA trajectory from 4Q08 to 2Q09.

 

We have a SIGMA book with 107 companies, which helps our team (and our exclusive Retail vertical) focus on which companies are interesting and at what time do these companies of interest become actionable.  Let us know if you’re interested. I’ll be around all day ().

 

The second image below has the location of where each of the 107 companies ended up on the SIGMA chart after reporting Q2 results (* except for those that will report in the next 2 weeks).  The sequential improvement from Q1 to Q2 is impressive: at the end of Q4 63% of the companies were in the danger zone, Q1 had 44%, and Q2 had 37%. 

 

The big question is, as the Guns N’ Roses singer Axl Rose so eloquently asks, ”Where do we go now?”  I think the answer is up.  Looking at the background in the SIGMA, the gross margin and SG&A margin compares look very easy in the back half of the year.  Our call for some time has been that we will see growth again in the back half of the year, especially in the 4th quarter.  I think we will see the yellow SIGMA line make two meaningful steps upwards to the right and finish 2009 in the sweet spot. Brian has commented recently how the market is discounting much of this, with a 39% improvement in the consensus NTM EPS growth rate over just the last 3 months. As such, we like to stick with the big earnings outliers, M&A targets, or names that will do well in a stagflationary environment (cap, liquidity, solid balance sheet, and growth).

 

Another factor that is so important to us in this market is sentiment. Chart 3 shows the sell side sentiment on the x-axis, the buy side’s on the y-axis, and the insider transaction movement next to each company’s ticker.  The chart captures the outliers with those hated in the upper left and those loved in the bottom right. 

  • There are some meaningful outliers where the consensus bears better be right on earnings, or we’re set to see squeezy the shark show his gnarly-looking teeth and bite the shorts. Good examples there are UA, OSTK, SHLD, DSW and PSS.
  • On the flip side we’ve got KR, CVS, NKE, COH, TJX and SPLS. Yes, some quality in there. But with short interest so uniformly low, and sell-side sentiment so positive, we need some big beats to keep these names afloat.

So keep your head in the game, and your eyes on the prize as we make some progress in 2H towards the sweet spot of the SIGMA.  And call us if you want detail on specific companies. 

 

RETAIL FIRST LOOK: THE SIGMA: WHERE DO WE GO NOW - Industry SIGMA Q2 09

 

RETAIL FIRST LOOK: THE SIGMA: WHERE DO WE GO NOW - SIGMA Q2 09 Table

 

RETAIL FIRST LOOK: THE SIGMA: WHERE DO WE GO NOW - The Senitment Chart 9 3 09

 

 

LEVINE’S LOW DOWN  

Some Notable Call Outs

  • According to several news sources, LIZ has hired turnaround firm Alvarez & Marsal to assist in collections and inventories. While the firm is known for prepping companies for bankruptcy, a managing director at the firm was quoted saying that they were helping LIZ to improve working capital not to prepare for a bankruptcy filing. There are those who could interpret this as a sign of desperation, we absolutely do not believe this to be the case. This “all hands on deck” approach and input from a leading turnaround firm should help accelerate LIZ’s key cost initiatives and could even result in a few introductions to potential buyers should the company decide to sell brands.

 

  • On the company’s quarterly conference call, ZQK highlighted recent softening in their footwear business relative to apparel. As it turns out, major footwear retailers are delaying the shipment of product that is typically taken in Q4 in an effort to keep inventory levels clean. One look at the family footwear SIGMA (see yesterday’s First Look Call Out) and it is evident which retailer might be concerned about inventory levels. Interestingly, BWS mentioned DC as one of their key growth drivers on their call last week.

 

  • As noted by several retailers this week, women's dresses continue to be one of the few bright spots in apparel. It is also one of only two categories in which G-III is investing in growth (sportswear is the other) given the sizeable opportunity the company sees over the long term. G-III’s current portfolio includes labels such as Calvin Klein, Jessica Howard, and the new Jessica Simpson line that is slated for a holiday release.

 

 

MORNING NEWS 

 

-Vietnam footwear exports expected to decline - Vietnam is estimated to see its footwear exports reaching $5.3 billion in 2010 despite the current drop due to the global economic downturn, according to the General Statistics Office. The sector is down 11% in first eight months of this year. In August alone, footwear exports are estimated to be down 3.31% sequentially to July and 10.71% compared to the same period last year. The Leather and Footwear Association (Lefaso) forecast that this year's export turnover of leather and footwear products would be 10% lower than the full-year target of $5.1 billion. Meanwhile, the EU's term-end check on the anti-dumping suit against Vietnam's leather cap shoes and the European Commission's decision to exclude Vietnamese leather shoe exports to the EU from the list of products eligible for the Generalized System of Preferences (GSP) from January 2009 have undermined the competitiveness of Vietnamese footwear products. <fashionnetasia.com>

 

-Pakistan's announced a ‘Mark-up Rate Support’ order for textile manufactures - Pakistan's Ministry of Textiles has announced a ‘Mark-up Rate Support’ order for textile manufactures that will be admissible to the extent of 2.5% or the difference in mark- up rate between floating rate loan and Long Term Financing Facility rate, whichever is lower. This order will be effective from September 1, 2009 and Mark-up support can be taken on outstanding running balances of principal amount of floating rate long terms loans availed by the textiles industry and disbursed up to August 31, 2009, to finance import and purchase of textile machinery. <fashionnetasia.com>

 

-Back-to-school failed to get consumers back into stores in August - Retailers reporting comparable-store sales on Thursday in many cases registered smaller declines last month than in July, and a few more were able to put up gains as state tax holidays moved to the more recent month. With Labor Day, and the opening of many schools, later this year than last and consumers shopping closer to need than ever, there was also the expectation that some b-t-s business would move into September. Even without the calendar shifts, this month is expected to pose a lesser challenge for stores as their results will be weighed against the full-blown arrival of the credit crisis a year ago. Weaker comparisons also are expected to buoy year-on-year results as retailers move, somewhat tentatively, into the third quarter and on to the fourth. While higher-priced stores again took a drubbing, August’s winners included off-price retailers and others offering hefty value propositions to attract consumers. <wwd.com/business-news>

 

-Sheepskin footwear company acquires slipper brand - Lamo Sheepskin Inc., of Chino, Calif., known for its sheepskin footwear has acquired slipper brand Oomphies from Spain-based Menorca 1820 Inc. Oomphies is best known for its classic leather mules in pastel and metallic colors. While the brand has had limited distribution more recently, it has maintained a following among more mature customers through its presence with online retailers. According to Lamo CEO Joseph Li, because there remains a loyal customer base, Lamo will continue to produce both vintage styles such as the Granda mule and Laurie open-toe wedge while introducing looks to appeal to a younger consumer base. While the shoes have been produced in Spain, Lamo will manufacture the new line in Asia with its first collection scheduled to hit stores later this month. Set to retail at $50 to $60, distribution will be focused on department and specialty stores, independents and e-tailers. <wwd.com/footwear-news>

 

-Toys "R" Us acquires KB Toys - Toys "R" Us continues to reinforce its status as "The World's Greatest Kids' Brand" with the acquisition of the KB Toys brand which includes its URL, KBToys.com, its trademarks and other intellectual property rights. Over the past few months, Toys "R" Us has secured its place as a dominant force in the toy world, most notably through the acquisitions of FAO Schwarz and eToys.com. While too early to tell what role KB Toys will play in its growing portfolio of brands over the long term, it will provide the retailer with the buying power and distribution channel diversity it needs as it heads into the fourth quarter. At present, visitors to KBToys.com will be invited to shop Toys.com, where they will find exclusive savings and daily deals offered by the chain's other e-commerce sites. <brandweek.com>

 

-Burberry May Speed U.S. Growth Amid Deals on NYC, Indiana Space, CFO Says - Burberry Group Plc, Britain’s largest luxury-goods company, may accelerate plans to open U.S. stores as premium shop space becomes available at cheaper prices, Chief Financial Officer Stacey Cartwright said. <bloomberg.com>

 

-LVMH-Richemont Merger Would Be `Master Stroke,' Bernstein Analyst Says - A merger between LVMH Moet Hennessy Louis Vuitton SA and Cie. Financiere Richemont SA, the two biggest luxury-goods makers, would be a “strategic master stroke,” according to Sanford C. Bernstein analyst Luca Solca.  <bloomberg.com>

 

-Bulgari is restructuring its U.S. executive team - Veronica McMahon Trenk has been appointed managing director of Bulgari in the U.S. Trenk was formerly managing director of the Roman jewelry house’s fragrance and skin care division in the U.S. She takes on the added responsibilities of François Kress, former managing director of Bulgari’s jewelry, watch and accessories division, who exited the firm nearly a month ago. Last month, WWD reported rumblings in Bulgari’s U.S. business with the closing of boutiques in three key markets: Palm Beach, Fla.; Aspen, Colo., and New York’s Madison Avenue. The jeweler revealed plans to open stores in San Francisco, Las Vegas and Dallas this year. Bulgari has 15 company-owned boutiques in the U.S., including stores in Atlanta, Honolulu and a 13,590-square-foot flagship on Fifth Avenue in New York. <wwd.com/business-news>

 

-Everywhere you turn these days, Puma is there - The athletic brand landed valuable airtime (again) last month, when its sponsored running star Usain Bolt raced across the track in Berlin and into thousands of news headlines. Then, Puma deepened its commitment to the motor sports market by signing a deal with Microsoft for prime branding placement in the upcoming “Forza Motorsport 3” racing game, set for release on Oct. 27. In addition to a spot in the game, Puma will also host Forza preview nights at its concept stores, release a Forza limited-edition shoe and post exclusive content about the game on Pumamotorsport.com. And further exposure will come through its sponsored driver, Natacha Gachnang, who was chosen by Xbox to be the face of Forza in its pan-European PR tour. Puma, based in Herzogenaurach, Germany, already outfits Gachnang in her FIA Formula Two races and will now provide apparel and accessories to the driver — and all Microsoft staffers — during trade events and conferences promoting the video game. <wwd.com/footwear-news>

 

-J.C. Penney joins a small group of retailers blazing the mobile apps trail - J.C. Penney has become No. 30 on a list of retailers that have created a downloadable mobile application for smartphones. It has launched JCPenney Weekly Deals, a mobile app for Apple’s iPhone and iPod Touch. <internetretailer.com>

 

-Lee Jeans unveils a retooled e-commerce site - Lee Jeans has taken the wraps off a redesigned site that features custom fitting tools and streamlined navigation. The newly retooled web site includes a revamped Fit Finder, which allows shoppers to find a pair of jeans that fit as if they were custom. <internetretailer.com>

 

-Fragrance line overshot projections by 25% - In its first week on counter, Tom Ford Grey Vetiver overshot its sales projections by 25 percent, according to industry sources. The fragrance, the designer’s third specifically concocted for men, bowed on Aug. 27 in Bloomingdale’s. It will roll out to specialty stores, including Saks Fifth Avenue, Neiman Marcus and Nordstrom later this month, and internationally starting in November. “The fragrance has started off quite well, and we’re confident it will be one of our top launches this fall,” said a spokeswoman for Bloomingdale’s. According to industry sources, Grey Vetiver will outstrip combined sales of Tom Ford for Men and Tom Ford Extreme and generate first-year global retail sales of $15 million to $25 million. <wwd.com/menswear-news>

 

-Foot Locker is ready for its online TV close-up - The New York-based retailer will launch an ad-supported Internet television channel, created in partnership with Gen2Media Corp, on its Website this fall. FootLockerOnlineTV will showcase custom video and digital advertising targeted to the company’s specific demographic. Bob Stephan, director of partner marketing at Footlocker.com, said in a statement, “We expect that the diverse and flexible ad serving opportunities ... will be an exciting opportunity for potential advertisers who my be interested in messaging our large and loyal following of athletic footwear and apparel enthusiasts.”  <wwd.com/footwear-news>

 

-Style.com today is launching SHOP THE LOOKS - Just in time for New York Fashion Week, Style.com today is launching SHOP THE LOOKS, a custom e-commerce initiative that taps into the audience's existing passion for the latest runway trends. Users can now shop from more than 30 trends or "looks," which have been curated in collaboration with the editors of Style.com.  SHOP THE LOOKS draws on the power and scale of the fashion shows on Style.com, 1 billion page views annually, as a purchase funnel for what's in stores now. Each runway slide will be tagged to correspond with one of the trends available in the SHOP THE LOOKS section, such as metallic, boho, or red carpet. In those sections, users can choose among dozens of currently available items that fit each trend. This represents the first time the Style.com user can use photos from the runway as inspiration for what to buy in stores now. Once in the SHOP THE LOOKS section users can also browse by seven main categories: clothing, bags, shoes, jewelry, beauty, accessories and sale. <prnewswire.com>


Risk Management Update: SP500 Levels, Refreshed...

My inbox started to get peppered around noon when Larry Kudlow apparently started talking about the Prices Paid side of Tuesday’s ISM report. Heck, 2-days late and about $40/oz in the price of gold discounting stagflation later, we have to salute the man for noticing. CNBC calls that segment the “Call of The Wild.” I couldn’t make that up if I tried.

 

I used to have wild monkeys and sharks hanging out on these charts. Now is no time for that. The monkey chase to higher-highs is over, so is Squeezy The Shark’s chomping on the consensus Depressionista community. We’re nestling right back into a manageable trading range here.

 

I have a major immediate term TRADE line of resistance forming at 1005 (dotted red line in the chart below), and immediate term TRADE support down at 987.

 

After being bullish on employment in recent months, I have shifted to looking for a worse than expected unemployment report tomorrow. That, perversely, could end up being US Dollar bearish. What’s bad for the buck can be good for stocks. On the other hand, anything can happen when we’re dealing with a report that the manic media monkeys can swing from the chandeliers on.

 

I continue to take down my invested exposure.
KM

 

Keith R. McCullough
Chief Executive Officer

 

Risk Management Update: SP500 Levels, Refreshed...  - a1

 


SSS Initial Take

Not surprisingly another month of mixed results, with the split between upside/downside vs. expectations at 14 to 11 respectively.  Notable upside came from the “cap” (generally the larger, more relevant names making up the retail landscape).  

  • Upside: KSS, TGT, COST, JWN, ROST, TJX, AEO, ARO, GPS, BJ, LTD, BONT, ZUMZ
  • Downside: JCP, FDO, ANF, DDS, M, FRED, PLCE, BKE, WTSLA, SSI

Callouts:

  • The divergence between KSS positive performance and JCP’s negative 7.9% result continues to highlight 1) how KSS’ off-mall real estate strategy is inherently helping its traffic performance while JCP remains more of a hostage to the mall and sluggish traffic, and 2) how KSS’ offensive strategy in taking market-share from now liquidated Mervyn’s can help contribute to overall momentum.  Keep in mind that KSS’  will actually open 37 former Mervyn’s location later this month, which will accelerate profitable market share gains in the Southwest region.

 

  • COST reported a better same store sales result but importantly highlighted a second month in a row of improving non-food comps.  Hardlines performed slightly better than softlines, with key positive results coming from sporting goods, toys, seasonal, hardware, and domestics.  Overall, non-food categories posted slightly negative same store sales and marked the second month in a row of a sequential improvement.

 

  • With AEO and ARO both reporting slightly better than expected results, ANF continues to stand out the sole teen-retailer where momentum is not improving.  Despite reducing prices in attempt to be more competitive, same store sales consistently remain amongst the worst in all of retail.  While I noted earlier in the week that inventories at a local store were so thin there were bare shelves, I’m beginning to wonder if now the problem isn’t just price perception.

 

  • GPS reported better than expected results driven by strength at Old Navy and a sequential improvement at Gap stores.  Even with years of negative comp compares, it appears that marketing and merchandising efforts are beginning to take hold.  Old Navy’s back to school marketing campaign was a key driver of the division’s +4% result for the month.  Gap’s re-launched denim was also well received, especially in the women’s category. 

 

SSS Initial Take - 1 year SSS 9 09

 

SSS Initial Take - 2 year SSS 9 09


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Apparel Outperforming Footwear on the Margin

With the exception of UA and Jordan, footwear sales are not keeping track with the stronger numbers we are seeing in apparel. The charts enclosed tell all. The good news is that ASPs remain strong. But with rising inventories in the athletic channel, price point strength might be short lived. For the first time in a while, we prefer the family footwear channel.

 

Apparel Outperforming Footwear on the Margin - Sporting Goods Table

 

Apparel Outperforming Footwear on the Margin - Footwear Table

 

Apparel Outperforming Footwear on the Margin - Sporting Goods Chart

 

Apparel Outperforming Footwear on the Margin - ASP BTS

 


PICKUP IN LODGING DEFAULTS

Over the last 90 days, we have large hotel loan defaults seem to have picked up. This trend should continue over the next 18 months and probably presents interesting opportunities for the well-capitalized.

 

 

As hotel performance continues to deteriorate in 2009 with no real signs of a 2010 recovery, the level of defaults on large hotel loans is accelerating.  Loan sponsors are increasingly depleting their reserves and funding debt service out of pocket as realized results fall short of original expectations.  Despite very low interest rates, anything short of an imminent return to peak earnings levels seen in 2007 makes the prospect of recovering "equity value" very unlikely on many loans underwritten in 2006 -2007. For this reason, as maturities loom, we are seeing more and more owners hand back the keys.  In some cases, as we wrote about in "A PROACTIVE DEFAULT" on 06/09/09, sponsors aren't even waiting for maturity.

 

According to Real Capital Analytics, owners of more than 1,000 non-casino hotels have defaulted on $16.8BN in loans and we expect many more to follow suit as the CMBS maturities bubble in 2010 and 2011. California accounted for approximately 275 of those defaults/foreclosures with roughly 80% of those hotels financed during 2005-2007.

 

Given the ongoing pick up in large loan defaults in lodging, it's no surprise that many hotel companies are taking advantage of the open markets to issue debt and equity.  This strategy allows them to accumulate dry powder to capitalize on banks flipping recently foreclosed upon properties.  As the number of defaults grows, we expect to see some attractive deals come to market, especially for those buyers that have the balance sheet and liquidity to wait a few years.  This is probably just one of the many reasons why we have seen so many equity issuances in the real estate land lately and why Hyatt is looking to go public now.

 

Below are some details on some recent large defaults:

  • Sept 1: Morgan Stanley Real Estate Fund V defaulted on a $192.5MM mortgage on the 310-room Maui Prince Hotel in Maui
    • Property included two golf courses and 1,194 acres of undeveloped land
    • Loan was part of a 2007 vintage CMBS deal maturing July 9, 2009
    • MS and Dowling Co. purchased the resort for $575MM from Seibu Group in early 2007
    • Operating income fell to a loss of $4.3MM in 2008 from a profit of $1.3MM in 2007 and is trending towards a loss of $6.5MM for 2009
    • Debt Service Coverage Ratio (DSCR) was 0.16x at 12/31/2008 
    • The resort was also encumbered by $227.5MM of mezzanine debt and a $30MM junior note
  • August 28: Lowe defaults on $322MM of primary and secondary loans on 582-room Terranea Resort on 102 oceanfront acres in Rancho Palos Verdes, CA
    • Lowe opened the hotel in June 2009 at a cost of $480MM
    • Corus Bank declined to fund the last $12.5MM of Lowe's construction loan; the shortfall caused Terranea to fail to meet the requirements to receive a promised loan from the City of Rancho Palos Verdes and subsequently fell behind payments on its secondary loan with Cascade Investments
    • A notice of default on the secondary loan ($142MM) was followed by a notice of default on Terranea's primary loan ($180MM)
  • August 28: Lowe stopped making payments on an $84MM (193K/key) loan against the 436-room Sheraton Universal hotel in LA
    • Loan was part of a 2007 vintage CMBS deal that carried a 5.8% coupon and matured Feb 2012
    • Net Cash Flow for 2008 fell to -411k from 350k in 2007
    • DSCR fell to 0.07x at 12/31/2008 from 1.43x at 12/31/2007
    • Lowe acquired the hotel in Jan 2007 for $122MM (280K/ key) from Walton Street Capital and SCS Advisors with plans to upgrade the property
  • June: Hampshire Group informed its lenders that it will stop making payments its $110MM loan on the 220-room boutique Dream Hotel in Manhattan
    • Loan was part of a 2006 vintage CMBS deal which Hampshire obtained after completed $51MM of renovations and rebranding the property which it owned since 1997
    • Net Cash Flow for 2008 fell 11% in 2008 to 7.8MM 
    • DSCR fell to 1.26x at 12/31/2008 from 1.41x at 12/31/2007, and has continued to drop in 2009
  • Other June defaults include:
    • $190 million Pointe South Mountain Resort in Phoenix, AZ
    • $117 million Loews Lake Las Vegas in Las Vegas, NV

RETAIL FIRST LOOK: THE BOTTOM IN FAMILY FOOTWEAR

RETAIL FIRST LOOK: THE BOTTOM IN FAMILY FOOTWEAR

AUGUST 3, 2009

 

TODAY’S CALL OUT

By no means could anyone call the PSS -7.3% comp good, but after seeing PSS, DSW and Famous Footwear (BWS), one thing that is clear to me is that the family footwear space has probably seen its bottom. The charts herein speak for themselves.

 

RETAIL FIRST LOOK: THE BOTTOM IN FAMILY FOOTWEAR - 1PSS BWS DSW Footwear Comps 1Yr 9 2 09

 

RETAIL FIRST LOOK: THE BOTTOM IN FAMILY FOOTWEAR - 2PSS BWS DSW Footwear Comps 2Yr 9 2 09

 

RETAIL FIRST LOOK: THE BOTTOM IN FAMILY FOOTWEAR - 3PSS BWS DSW Footwear Comp Table 9 2 09

 

RETAIL FIRST LOOK: THE BOTTOM IN FAMILY FOOTWEAR - 4Footwear SIGMA 9 09

 

 

LEVINE’S LOW DOWN

Some Notable Call Outs

 

  • While the benefit of lease negotiations has been talked about on just about every call this earnings season, management mentioned that Collective Brands is realizing 15-20% reductions on leases.  With rent accounting for ~15% of COGS and roughly 20% of the store base up for renewal each year. One of PSS’s tailwinds heading into 2010 just got stronger.

 

  • Oxford Industries (owner of Tommy Bahama) noted that demand for their Spring/Summer 2010 lines are stronger than expected. While most wholesalers have taken a more conservative approach to inventories heading into the 2H, improving business is resulting in the pulling forward of deliveries and what inventory happens to be on hand. With OXM in a similarly under-inventoried position, they too are having to ramp business to meet demand.

 

  • Among the regions of strength noted on OXM’s call was…Hawaii? It was suggested that the swine flu could be impacting retail as vacationers decide to reroute plans from destinations like Mexico where the epidemic is in full swing to alternative destinations. Florida was also highlighted as having a notable rebound through August.  

 

 

MORNING NEWS 

 

-Samsonite files for bankruptcy and reorganization - Samsonite Company Stores, the U.S. retail division of Samsonite Corp., filed both a Chapter 11 petition for bankruptcy court protection and a prepackaged plan of reorganization on Wednesday in a Delaware bankruptcy court. The store division, based in Mansfield, Mass., said it expects to exit Chapter 11 in 45 to 90 days. Under the terms of the reorganization plan, creditors would receive 100 percent of their claims. The plan includes cutting Samsonite’s 173-store count by 47% and streamlining operations. Parent company Samsonite Corp. is not a party to the filing. Donald E. Walden, vice president for finance and chief financial officer of Samsonite’s store division, said in an affidavit filed with the bankruptcy court that U.S. sales in 2008 were $108.1 million, down from $112 million in 2007. <wwd.com/retail-news>

 

-Banglaesh's exports of finished garments to Japan increased over 100% - Banglaesh's exports of finished garments from Bangladesh to Japan has increased over 100% in the fiscal year 2008-09, valued at US $74.381 million ascompared to $28.035 million in the previous year. The country has reduced its finished garment imports from China, which helped its industry to increase its sales in Japan, according to Fazlul Hoque, President Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). Hoque said that Japan is a ready market for Bangladesh as it produces high-quality products which are exactly what the Japanese market need. The ongoing trend indicates that the apparel exports of Bangladesh will reach billion dollars in the next five years. Japanese leading retail chains Uniqlo has also been purchasing from Bangladesh and is planning to make an initial investment of $100 million, added Hoque. <fashionnetasia.com>

 

-Chinese ambassador urged the EU to relax its anti-dumping measures - Chinese ambassador has recently urged the EU to restrain its use of anti-dumping measures against imports from China and called for more dialogue and cooperation. "We saw re-emergence of anti-dumping cases against China recently. We're very concerned about an increasing number of Chinese enterprises received unfair treatment," Song Zhe, Chinese ambassador to the EU said. "But we believe between China and Europe, there is more cooperation than competition, more opportunities than challenges. At present, it is urgent to strengthen economic and trade cooperation by maintaining mutual flow of trade and investment and creating more business opportunities," he added. Faced with the worst economic crisis in decades, the EU has launched a series of anti-dumping actions against China this year, covering a wide range of Chinese products. As from late July, the 27-nation bloc took five separate decisions in just three weeks. <fashionnetasia.com>

 

-Hundreds of American Apparel employees must leave due to illegal immigration status - Hundreds of American Apparel Inc. workers must leave the company because they were unable to prove their immigration status or fix problems with their employment records, the company said Wednesday. The terminations come two months after the Los Angeles manufacturer and retailer announced that a government inspection had found that about 1,600 of its workers didn't appear to be authorized to work in the U.S. About 200 more had been found to have discrepancies in their employment records. Among the infractions found were some employees' use of fake Social Security numbers. "There are approximately 1,500 workers facing termination during the month of September," said Peter Schey, a lawyer for American Apparel. The company "is very disappointed and disheartened at having to terminate a very large number of workers who by and large have been reliable contributors to the success of the company." All of the affected workers are based at the company's manufacturing facility in downtown Los Angeles, Schey said.  Virginia Kice, a spokeswoman with Immigration and Customs Enforcement, declined to discuss American Apparel specifically, saying the federal agency was "not at liberty to discuss fines levied in work site enforcement cases until the fine amount becomes final." <latimes.com>

 

-Retail sales for all core outdoor stores combined (chain, internet, specialty) declined 4% in July - Select equipment, outerwear and several footwear categories grew this July. Year-to-date sales totaled $2.6 billion, down 4% from the same period a year ago. <sportsonesource.com>

 

-China Resources Says It May Sell Stake in China Joint Venture With Esprit - China Resources Enterprise Ltd., the local partner of SABMiller Plc, may sell its stake in the venture it has with clothier Esprit Holdings Ltd. as it seeks to focus on retail, food and beverage businesses. <bloomberg.com>

 

-New Balance and aerie by American Eagle Launch Fitness/Lifestyle Shoe - New Balance and aerie by American Eagle announced the introduction of the New Balance 600, a new fitness lifestyle shoe. The NB 600 is available beginning today exclusively at all aerie standalone stores across the country. Offered at $65, the shoe is designed to complement aerie f.i.t.™, aerie’s fitness and workout wear line. The NB 600 features a comfort molded EVA sole unit, Abzorb (a proprietary cushioning foam that resists compressions for all day comfort) and a lightweight mesh upper. The 600 is available in two trendy color combinations of grey/pink and white/lime, the perfect solution for the girl who wants an athletic look without sacrificing fashion. “With this program we have the opportunity to reach a style-savvy consumer with fashionable athletic footwear that merchandises with the incredible range of aerie,” says Steve Gardner, strategic business unit manager for New Balance Lifestyle. “It’s a program that brings a fresh perspective to product and merchandising, while synergizing these two great brands.” <corporate-ir.net>

 

-Chico’s tries on a new distribution center - After making an investment of $15 million and adding about 189 full-time jobs, Chico’s in August made the move to a new 300,000-square-foot distribution facility that will give the retailer room to expand through 2016. <internetretailer.com>

 

-ColdwaterCreek.com leads the e-retailer pack in August response time - For the seventh month running, ColdwaterCreek.com gave shoppers the fastest high broadband access time among large web retailers, says Gomez. In August ColdwaterCreek.com produced a high broadband response time of 4.04 seconds.  <internetretailer.com>

 

-Cato brings on new board member - The Cato Corporation reported that on August 27, 2009 the Board of Directors appointed Mr. Bryan F. Kennedy, III to fill a vacancy on the Board effective September 1, 2009. Mr. Kennedy is President and Chief Executive Officer of Park Sterling Bank. Mr. Kennedy currently serves on the board of Park Sterling Bank and as Chairman of the Board of Hospice and Palliative Care-Charlotte Region. <prnewswire.com>

 

-Quick look at expectations for today's same store sales - August same-store sales results, being reported today, are expected to be better than July’s and mark the last month of difficult comparisons with 2008 dating back to the days before last September’s financial crisis. August comps will provide a better idea of how this year’s later back-to-school season has shaped up.  In retailers’ favor is a series of state tax holidays that shifted to August, putting more pressure on July, but working against them is a later Labor Day than in 2008, sales for which will fall into September. One factor could neutralize the other. According to the International Council of Shopping Centers, retail sales for the week ended Aug. 29 fell 0.5% from the prior week and 0.7% from the comparable week in 2008. The first week of August came in flat versus the prior week but sales were up 0.4% on a year-over-year basis. ICSC predicts August comps declined between 3.5% and 4%.  <wwd.com/business-news>

 

-Fast Retailing Co. Ltd. wants to be the biggest around - Tadashi Yanai, chairman of the firm, said Wednesday that the Japanese apparel company aims to grow its annual sales by more than seven times to 5 trillion yen, or $53.7 billion, by the year 2020. And analysts don’t think the goal is that far-fetched. “We hope to become the biggest maker and retailer in fashion,” Yanai said during a press conference. “The dream will come true if we can grow our business by at least 20 percent each year.” The executive reiterated Fast Retailing is eyeing potential acquisitions, especially in Europe, but said there are few attractive companies on the market right now. Even without acquisitions, he said he thinks the company can reach 1 trillion yen, or $10.74 billion, in sales by 2010. <wwd.com/business-news>

 

-Thom Browne offers new line of clothes with lower price points - Thom Browne is establishing two new ranges that will be priced 30% to 40% lower than his fashion-forward runway offerings, making him the latest men’s designer to adopt a strategic focus on lower prices and repositioned staples — as Tim Hamilton, Duckie Brown and others have also done recently. The new Thom Browne ranges, launching for spring 2010, do not have distinct labels but are known unofficially as Thom Browne “classics” and Thom Browne “red/white/blue.” Initiating with a few styles, they are expected to grow to 50 percent of the collection and broaden the market for the brand. <wwd.com/retail-news>

 

 

RESEARCH EDGE PORTFOLIO: (Comments by Keith McCullough): BBBY, KSWS

 

09/02/2009 03:25 PM

BUYING BBBY $35.76

McGough and Levine continue to have a very high level of conviction that the earnings recovery will be there for BBBY. KM

 

09/02/2009 03:18 PM

BUYING KSWS $9.29

So far, this dog has acted exactly like what McGough called it - a dirty wet dog. There is value here, and that's why I am buying more of it on red. KM


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

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