RETAIL FIRST LOOK: SENTIMENT RULES
SEPTEMBER 9, 2009
TODAY’S CALL OUT
Anyone who thinks that they can hide behind duration mandate and not at least acknowledge how near-term sentiment impacts their stocks is simply not being intellectually objective.
Our analysis below breaks down over a hundred retail-related companies and triangulates buy-side sentiment, our sell-side ratings factor, and the delta in insider buying/selling. The visuals clearly flag areas of both risk and opportunity.
We break out the analysis into four charts/segments to avoid the visual from being illegible. We look at 1) apparel/footwear retail, 2) brands, 3) specialty retail, and 4) all other. We could write pages interpreting the charts, but we’ll let you make your own conclusions. Some of our initial take-aways are as follows:
- Bearish Callouts: These are names with low short interest, high sell-side factors, and no positive momentum with insiders buying. TJX, GPS, GCO, NKE, WWW, COH, CVS, KR, MAT, and FGXI.
- Bullish Callouts: Hated across the board. High short interest and negative sell-side factors. We omit any names where management is selling, and of course, look for instances where the opposite is happening. UA, BKS, VLCM, EK, ETH, LIZ, KSWS, and COLM. WFMI would be on this list of the insider selling factor was not the highest in the entire group (!).
Let us know if you’d like any additional depth or color on the analysis.
LEVINE’S LOW DOWN
Some Notable Call Outs
- While the Street continues to reward GPS for its turnaround of Old Navy, lean inventories, and steady margins, the company is quietly experimenting with its direct brand, Piperlime. The multi-branded shoe site launched women’s apparel today. The offering consists of about 65 premium and designer contemporary brands. The offering is denim heavy, but also includes a wide range of sportswear. Free shipping and free returns are also included with each order. We wonder if this is now GPS’ in-house laboratory for testing fashion and then using the data in real time to influence the company’s vertically integrated merchandise.
- The numbers and raw data associated with Walmart are always staggering and sometimes worth repeating. In this case, I stumbled across some data on Walmart’s private label brand “Great Value”. At an estimated $10 billion in annual sales, the brand would be the 39th largest retailer in the U.S if it were to stand alone. This makes it bigger then Bed Bath and Beyond, Whole Foods, amazon.com and Family Dollar. The brand is also very close to the amount of business P&G does with Walmart on an annual basis, which was just under $12 billion in fiscal ’09. We know the numbers are huge, but when we get a nugget like this it just acts as a reminder of the power and scale that Walmart exerts.
- In yet another example that consumers continue to be driven by price, Craigslist debuted at No. 25 on the annual STORES Favorite 50 online retailers list ahead of well-known retailers like Gap (No. 28) and Zappos.com (No. 38). With consumers increasingly accustomed to shopping both traditional and non-traditional channels for best prices, it should come as no surprise that the other newcomers included Footlocker’s Eastbay.com (No. 27) and SierraTradingPost.com (No. 39).
-Online retailer Yoox Group has decided to push ahead with an initial public offering despite the uncertain financial markets - Shareholders of the Bologna, Italy-based e-tailer approved the IPO on Tuesday. Yoox is expected to list on the Milan Stock Exchange STAR segment for small companies by yearend. In the first half of 2009, Yoox’ revenues rose 46.6%. Geographically, Italy accounted for 27.6% of sales; Europe, excluding Italy, for 49.8%; North America for 14.9%, and Japan for 5.9% of revenues. The nine-year-old company operates its own online stores, yoox.com and thecorner.com, and runs e-commerce sites for designer brands, from Marni and Diesel to Emporio Armani and Emilio Pucci. During the first half, Yoox developed online stores for Moschino, Bally and D&G, bringing the total stores to 13. <wwd.com/business-news>
-Message at WWDMAGIC: High Fashion at Value Prices - Apparel and accessories retailers and manufacturers at the trade show here found common ground in the new reality — consumer frugality — and in how to deal with it. Although major challenges persist as the economy struggles for consistent traction, the three-day show at the Las Vegas Convention Center last week appeared more upbeat. But price sensitivity and cost-cutting remained key themes. <wwd.com/retail-news>
-Many online consumers come face to face with ads on Facebook - Online social networks like Facebook and MySpace accounted for more than 20% of U.S. online display advertising in July, says comScore Ad Metrix. MySpace and Facebook account for more than 80% of advertising on social networks. <internetretailer.com>
-Maidenform Brands, Inc., a global branded marketer of intimate apparel, has entered into a license agreement with Komar Company - The license agreement grants Komar the exclusive right and license to manufacture, market, sell and distribute women's and children's sleepwear, women's long underwear and women's swimwear under certain Maidenform brands to select retailers in the U.S., Canada and Mexico. <prnewswire.com>
-Indonesia's man-made fiber sector has been given a boost - Three major manufacturers having invested US $7.1 million on new factories and machinery which will help lower production costs. The three fiber manufacturers are PT Teijin Indonesia Fiber Corp PT Indonesia Toray Synthetic and PT Sulindafin. The new machinery will run on cheap gas instead of costly electricity. According to Secretary General of the Indonesian Synthetic Fiber Producers Association, new machines can cut from 5 to 10% of the current energy costs incurred by the companies. These three companies had purchased the new machineries under the technology up-gradation program initiated by the government, which entitles them to claim a subsidy of 10% on total investment. He said that there were 18 synthetic fiber manufacturing companies in Indonesia in 2007, out of which only 12 were operational. The sector had been experiencing a 10% hike in production costs because of the surge of crude oil prices. <fashionnetasia.com>
-Report says Dick's Sporting Goods Top of Mind for Sporting Goods Shoppers - Full-line sporting goods retailers like Dick’s Sporting Goods and Sports Authority are top of mind when consumers think about where to shop for sporting goods, including footwear and apparel, but the larger and broader mass merchant stores like Wal-Mart and Target rise to the top when consumers are prompted with retail store names. Data from the SportsOneSource 2009 Where America Shops report. Full-line sporting goods retailers are at the top of list, with Dick’s Sporting Goods (42%) and The Sports Authority (32%) at the top of the list for unaided awareness levels. Both retailers ranked ahead of discount/mass merchant giant Wal-Mart (28%), indicating that when in the market for sporting goods, the first thought would be to go to a full-line retailer rather than an a other type of retailer. Foot Locker (21%) was the mall specialty retailer mentioned most often and Cabela’s (10%) was the most often mentioned outdoor retailer on an unaided level. Combining the unaided and aided awareness responses, Wal-Mart received the largest number of respondents (86%) indicating they were aware of the retailer, Foot Locker was second (85%) and Target was third (82%). However, Foot Locker was the top-ranked retailer in awareness among teens and young adults. A bit surprising given the focus of the retailer, Foot Locker actually had a higher overall awareness level with females than males when assessing the adult (over 25 years old) survey demographic. Only five retailers, including Dick’s Sporting Goods, Bass Pro Shop and Cabela’s, received higher awareness levels from males over the awareness level received by females. <sportsonesource.com>
-Anna Sui for Target - Anna Sui for Target, part of the retailer’s Designer Collaboration series, channels the well-dressed women of “Gossip Girl” and debuts in 600 select Target stores out of more than 1,700 units, and on Sunday at target.com/annasui. Designer Collaborations taps established talents to create collections inspired by a muse, creative element or collaborative partner. Alexander McQueen launched the effort in March with McQ Alexander McQueen for Target, inspired by Leila Moss, lead singer of The Duke Spirit. Sui had wanted to design for Target for some time but “couldn’t figure out what the concept would be,” she said. When the retailer approached her with Designer Collaborations and the muse element, the project began to make more sense. <wwd.com/retail-news>
-After being sold by K-Swiss Inc. in May, Royal Elastics is repositioning itself under new ownership - John Bondoc, who previously worked at Royal as creative director and now heads REH, the investment group that bought the brand, said he has sharpened the demographic focus of the label. “We needed to tweak the brand identity,” he said. “Now, it’s younger, [directed at] the 15- to 25-year-old consumer, who is typically a creative-minded person in art, sport or fashion. It’s a lifestyle. The inspiration has to come from being young.” To help reacquaint the Royal Elastics team with the culture it’s targeting, Bondoc opened a design studio in a loft in downtown Los Angeles. “A lifestyle brand has to be embraced by the culture,” he said. Bondoc said he also was taking price points down. While the brand had sold for $80 to $250, the spring line will range from $60 to $80, with some signature product topping out at $110. “The idea is to cut off the extremely expensive end and add a lower-priced shoe,” he said. That move was made possible by one of the brand’s investors, a China-based footwear factory. Bondoc said he realized as he was putting together investors to buy the company that a strategic partner that could also produce more value-oriented shoes was imperative. <wwd.com/footwear-news>
-True Religion Nugget on Credit Card Division - True Religion, the Vernon, Calif.-based premium denim brand, stopped using factors in mid-July, opting to expand its own credit division and work closely with international distributors as well as small boutiques that pay with credit cards or cash on delivery. <wwd.com/retail-news>
-For Neiman Marcus Inc., it’s been one tough year of mounting losses and declining sales - The luxury chain Tuesday reported a $168.6 million net loss for the fourth quarter ended Aug. 1, including noncash pretax impairment charges of $143.1 million, compared with a net loss of $35.7 million in the prior year’s quarter, when there were $31.3 million in charges. On an operating basis, the company lost $192.1 million in the last quarter, versus a $6.2 million loss a year earlier. With the nation’s affluent dramatically curtailing their store visits and purchasing less per visit, Neiman’s total revenues in the quarter fell to $768 million, compared with $1.03 billion in the prior year. Comparable revenues decreased 23.4%. Neiman tightly managed expenses, resulting in a total reduction of $183 million, which included the elimination of approximately $100 million of non-variable costs from our expense structure this year. <wwd.com/menswear-news>
-A new home range, the Country Living Collection, hits 1,200 Kmart stores and 500 Sears stores this week - The line features modern and traditional styles from the pages of the Hearst-owned lifestyle magazine. The collection includes fashion bedding, kitchen textiles, tabletop and bath ranges, as well as furniture. Items retail from $6.99 for washcloths to $279.99 for furniture. "The addition of Country Living to our portfolio increases the options available to our Sears and Kmart customers in both look and style, and in a broader range of products that our customer has already told us she wants," says Doug Wurl, vice president and general merchandising manager for home fashions at Sears Holdings Corp. "The magazine's reach, coupled with the accessibility of our stores and online channels, create the potential for a true national brand with elevated design sensibilities and enormous appeal." Country Living magazine offers more than 11 million readers content on decorating, gardening, entertaining and travel. <licensemag.com>
-Burberry Group plc is set to join the most exclusive club on the London Stock Exchange, the FTSE 100 - The FTSE 100 is a listing of the companies with the highest market capitalization on the LSE. As of Tuesday’s close, Burberry’s market capitalization was 2.2 billion pounds, or $3.63 billion. The figure has tripled over the past year. Burberry is the only fashion and luxury goods company currently in the FTSE. By contrast, L’Oréal, PPR and LVMH Moët Hennessy Louis Vuitton are listed on the CAC 40, the benchmark French stock market index. On Tuesday, Burberry’s shares closed at 5.08 pounds, or $8.38, up 0.5 percent on the previous day. “Burberry is so fortunate to have such a strong momentum, both at a corporate and brand level,” Burberry chief executive Angela Ahrendts told WWD on Tuesday. “The team remains focused on pursuing our core strategy, which we believe will continue to deliver shareholder value.” <wwd.com/retail-news>
RESEARCH EDGE PORTFOLIO: (Comments by Keith McCullough): BBBY
09/08/2009 03:23 PM
SELLING BBBY $36.52
Just doing a little housekeeping; making some sales in names we bought well on last wednesday's lows. We can always buy a stagflation victim lower. KM
INSIDER TRANSACTION ACTIVITY:
- Eva Sage, EVP, HR, sold 100,000shs (~$2.1mm) upon exercising the right to buy 100,000shs accounting for 100% of total common holdings.
- Sabrina Simmons, EVP, CFO, sold 40,000shs (~832k) upon exercising the right to buy 40,000shs accounting for 60% of total common holdings.
- Robert Fisher, Director, sold 277,013shs ($4.9mm) roughly 2% of total common holdings.
- Ernie Herrman, SEVP, Group President, sold 6,658shs ($241k) roughly 7% of total common holdings.
- Jerome Rossi, SEVP, Group President, sold 1,331shs ($47k) less than 5% of total common holdings.
PSS: Matt Rubel, Chairman, CEO & President, sold 100,000shs ($1.6mm) under 30% of total common holdings.
SKS: Stephen Sadove, Chairman & CEO, sold 100,000shs ($598k) less than 10% of total common holdings.
CHS: John Burden, Director, purchased 10,000shs ($610k) adding approximately 20% to total common holdings