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Cartoon of the Day: #GrowthSlowing

Cartoon of the Day: #GrowthSlowing - slowing cartoon 10.22.2014

 

Economic growth is slowing around the world.

 

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RCL F3Q 2014 EARNINGS PREP

Consensus estimates, management guidance and commentary, and questions for management in preparation for the earnings release/call tomorrow.

 

 

Please see our note:  http://docs.hedgeye.com/HE_RCL_F2Q_10.22.14.pdf



PENN F3Q 2014 EARNINGS PREP

Consensus estimates, management guidance and commentary, and questions for management in preparation for the earnings release/call tomorrow.

 

 

Please see our note:  http://docs.hedgeye.com/HE_PENN_F2Q_10.22.14.pdf



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.

Promotional Email From Retailers

Takeaway: Our retail team looks at the latest promotional email offerings from retailers.

If you're like us, you probably noted a severe uptick in promotional emails from brands and retailers over the past few weeks. That's expected, as this is the time of year when retailers transition from fall to colder-weather merchandise. In other words, an uptick in promo emails happens every year.

 

We track these pretty closely, and at least for the month of September there are some interesting changes in promo emails versus last year. Before we hit on callouts, let's be clear that it's tough to make conclusions around the year/over year trends -- for some brands with new product launches, it might be good to have more promotional campaigns.

 

For retailers with no square footage growth, it's probably bad. Also, this says nothing about the depth of the discount offered by the email. Nonetheless, we use this as one of many tools not just to draw the right conclusions, but to ensure that we're asking all the right questions to the companies.  Here are some thought.

  1. RL: The 40% uptick yy makes sense to us as the company is launching the Polo label on a much broader scale. That was not in place last year.
  2. Tory Burch: The interesting point is not the change in the business, but the fact that the company only had three promotional emails in the month of September. We'd argue that this is way too low. Definitely an opportunity to promote the brand better as it preps for the inevitable IPO.
  3. Coach: Only 10 emails in September compared to 18 a year ago. Definitely something we like to see for a brand that has become so grossly over-distributed.  Bullish on the margin.
  4. Kate Spade: 10% decline vs last year. Does not strike us as the kind of trend you'd see for a company that is worried about hitting numbers. Bullish on the margin.
  5. Urban: Trends look much better at Urban. Not quite at Anthro.
  6. Kohl's: had a fairly dramatic year-year increase (27%). This might be driven by lower email outreach in 2013 due to its e-commerce hiccup. But if we look back to 2012 -- when it had a nearly identical store base -- the company had 23 emails. Net/net, this is probably bearish on the margin.

 

Promotional Email From Retailers - chart2


MUB: Adding iShares Muni Bond ETF to Investing Ideas

Takeaway: We are adding MUB to Investing Ideas.

We are adding MUB (iShares Muni Bond ETF) to Investing Ideas today.

 

From Hedgeye CEO Keith McCullough:

 

Now is not the time to chase U.S. equity market beta. It’s time to double down on precisely what we told you do at the end of September.

  1. Buy the Long Bond (TLT and EDV)
  2. Short Small/Mid Caps (IWM)
  3. Buy Munis (MUB)

Alongside bullish on XLP and XLV (larger cap liquidity), that remains what we call the #Quad4 Macro playbook.

 

MUB: Adding iShares Muni Bond ETF to Investing Ideas - Munis


Retail Callouts (10/22): KATE, COH, KSS, JWN, RL, URBN

Takeaway: Taking a look at email promotional cadence for Sept. Bullish for KATE and COH. Negative on the margin for KSS.

EVENTS TO WATCH

 

Wednesday (10/22)

SKX - Earnings Call: 4:30pm

 

Thursday (10/23)

CRI - Earnings Call: 8:30am

UA - Earnings Call: 8:30am

CAB - Earnings Call: 11:00am

KER-FR - Earnings Call: 12:00pm

DECK - Earnings Call: 4:30pm

AMZN - Earnings Call: 5:00pm

 

COMPANY HIGHLIGHTS

 

Promotions

If you're like us, you probably noted a severe uptick in promotional emails from brands and retailers over the past few weeks. That's expected, as this is the time of year when retailers transition from Fall to colder-weather merchandise. In other words, an uptick in promo emails happens every year.

 

We track these pretty closely, and at least for the month of September there are some interesting changes in promo emails versus last year. Before we hit on callouts, let's be clear that it's tough to make conclusions around the year/over year trends -- for some brands with new product launches, it might be good to have more promotional campaigns. For retailers with no square footage growth, it's probably bad. Also, this says nothing about the depth of the discount offered by the email. Nonetheless, we use this as one of many tools not just to draw the right conclusions, but to ensure that we're asking all the right questions to the companies.  Here are some thoughts…

  1. RL: The 40% uptick yy makes sense to us as the company is launching the Polo label on a much broader scale. That was not in place last year.
  2. Tory Burch: The interesting point is not the change in the business, but the fact that the company only had three promotional emails in the month of September. We'd argue that this is way too low. Definitely an opportunity to promote the brand better as it preps for the inevitable IPO.
  3. Coach: Only 10 emails in September compared to 18 a year ago. Definitely something we like to see for a brand that has become so grossly over-distributed.  Bullish on the margin.
  4. Kate Spade: 10% decline vs last year. Does not strike us as the kind of trend you'd see for a company that is worried about hitting numbers. Bullish on the margin.
  5. Urban: Trends look much better at Urban. Not quite at Anthro.
  6. Kohl's: had a fairly dramatic year-year increase (27%). This might be driven by lower email outreach in 2013 due to its e-commerce hiccup. But if we look back to 2012 -- when it had a nearly identical store base -- the company had 23 emails. Net/net, this is probably bearish on the margin.

 

Retail Callouts (10/22): KATE, COH, KSS, JWN, RL, URBN - 10 22 chart1 new3

 

Retail Callouts (10/22): KATE, COH, KSS, JWN, RL, URBN - 10 22 chart2

 

 

KATE - Swiss Watch Exports Rise 2.8%

(http://www.wwd.com/accessories-news/watches/swiss-watch-exports-rise-28-7992721)

 

  • "Exports to Hong Kong rose 3 percent, breaking a four-month falling streak, as pro-democracy protests failed to make a dent on the month’s data."

 

Takeaway: The situation in Hong Kong is clearly a concern for luxury retailers. But, we'd point to the 3% growth in Swiss Watch exports for the month of September; the first positive data point we've seen in the past 5 months. The number by itself doesn't say much about sell through/ performance to plan, etc., but its encouraging to see that demand hasn't dried up all together. We're not overly concerned in regards to Kate Spade. The company closed on the acquisition of Globalluxe on Feb 12th. That includes Hong Kong, Macau, Taiwan, Singapore, Malaysia, Taiwan, and Indonesia. Globalluxe sales of Kate Spade were $44mm in 2013. About a quarter of their stores are in Hong Kong.  That’d equate to about 1.5% of Revenue if it went away entirely. But that’s probably not going to happen. Let’s say it’s off by 50%. We’re talking 0.8% hit to sales for a company that’s otherwise growing 40%.  For KATE in aggregate, we're really not worried.

 

SKX - Legendary Drummer and Recording Artist Turned Style Icon Set to Appear in Relaxed Fit® Footwear Campaign

(http://phx.corporate-ir.net/phoenix.zhtml?c=80336&p=irol-newsArticle&ID=1979282)

 

  • "The world’s most famous drummer—Ringo Starr—will be bringing his legendary talents and style to SKECHERS where he’s set to appear in the footwear company’s global marketing campaign for SKECHERS Relaxed Fit footwear. The new multimedia campaign featuring Ringo will begin in Spring 2015."

 

Takeaway: We know Ringo is a legendary recording artist. We did not get the memo that he turned into a 'Style Icon'.

 

 

OTHER NEWS

 

FINL - The Finish Line names Sato president

(http://www.chainstoreage.com/article/finish-line-names-sato-president)

 

  • "Samuel M. Sato, formerly president, Finish Line brand, has been named as president, The Finish Line Inc. The board of directors also elected him to the board, filling the Class II director position previously held by Bill Kirkendall."
  • "Sato joined Finish Line in March 2007 as executive VP and chief merchandising officer."

 

AMZN, ASOMY - Asos dismisses Amazon takeover talk

(http://www.theguardian.com/business/2014/oct/21/asos-amazon-takeover-talk)

 

  • "Asos chief Nick Robertson has swept aside rumours that the online fashion retailer is about to be swallowed by Amazon, declaring the internet company was not his 'dream partner'."

 

CROX - Crocs, Inc. Announces Management Team Changes

(http://investors.crocs.com/phoenix.zhtml?c=193409&p=irol-newsArticle&ID=1979759)

 

  • "Crocs, Inc. announced several key management changes. These changes include the appointment of Bob Munroe to general manager of Crocs Americas region; Greg Sullivan to the new role of senior vice president of global business transformation; Scott Yuan to general manager of Greater China; and Michelle Poole to senior vice president of global product creation and merchandising."

 

Merger between Prada Holding B.V. and Gipafin S.à.r.l.

(http://www.hkexnews.hk/listedco/listconews/sehk/2014/1022/LTN20141022003.pdf)

 

  • "PRADA S.p.A. is pleased to announce that Prada Holding B.V., the Company’s immediate holding
  • company, will be merged by incorporation into Gipafin S.à.r.l., Prada Holding B.V.’s
  • sole shareholder. Upon completion of the Merger process, Prada Holding B.V. will cease to exist and Gipafin S.à.r.l., the Company’s new immediate holding company, will be re-named as 'Prada Holding S.à.r.l.'"

 

APP - American Apparel Brings Back Creative Director

(http://www.wwd.com/retail-news/people/american-apparel-brings-back-creative-director-7994097?module=hp-topstories)

 

  • "Sources said the company has rehired Iris Alonzo as senior creative director with a mission to protect and evolve the brand and help restore some normalcy to a difficult situation."
  • "American Apparel fired Alonzo shortly after founder Dov Charney was ousted as chief executive officer in June."

 

KER - Kering Names Gianluca Flore Brioni CEO

(http://www.wwd.com/menswear-news/retail-business/brioni-appoints-new-ceo-7993120?module=hp-topstories)

 

  • "On Tuesday, the French group said it had tapped Bottega Veneta executive Gianluca Flore as Brioni’s new chief executive officer, effective Nov. 1."
  • "It was the second appointment in as many days made by Marco Bizzarri, the former ceo of Bottega Veneta, who in July took up a new post as ceo of Kering’s luxury couture and leather goods division. As reported, former Stella McCartney and British Fashion Council executive Sarah Crook is to become ceo of Christopher Kane, effective Nov. 17."

 

Gilt Names Chief Marketing Officer

(http://www.wwd.com/retail-news/direct-internet-catalogue/gilt-names-chief-marketing-officer-7991937?module=Retail-latest)

 

  • "Gilt.com has named Clay Cowan chief marketing officer, effective Nov. 10. He succeeds Lizzie Francis who left the company in August." 
  • "He will report to Michelle Peulso, chief executive officer of the Web site."
  • "Cowan was formerly senior vice president of Global Digital for Starwood Hotels and Resorts, where he oversaw global strategy, management, and revenue for the Web, mobile, digital marketing, and social. Prior to that, he was vice president of e-commerce and digital marketing for Sports Authority."

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