Takeaway: Hedgeye Retail Idea List. W premium to RH hard to reconcile. NKE wearables plan on track with AAPL. VFC Frisk timing questionable.


Retail Callouts (10/27): Hedgeye Retail Idea List, W, NKE/AAPL, VFC, WMT - 10 27 chart1B

No changes this week.


Tuesday (10/27)

CROX - Earnings Call: 5:00pm

Tuesday (10/28)

COH - Earnings Call: 8:30am

Wednesday (10/29)

RL - Earnings Call: 9:00am

HBI - Earnings Call: 4:30pm

Thursday (10/30)

SHOO - Earnings Call: 8:30am

COLM - Earnings Call: 5:00pm


W - Wayfair Comes off Post-IPO Research Restriction

Takeaway: Eight out of Nine initiations are 'Buy', which is not a big shocker given that the stock is trading 13% below the IPO price, and 34% below where it closed on the first day of trading.  But even after the massive sell-off, the stock is still trading at a slight premium to RH. We're looking at price/sales (1.9x vs RH at 1.8x). There's no way we could justify the two names trading anywhere in the same ballpark. RH has a real brand, a plan to triple its business, and double its margins. Wayfair largely caters to the middle market with a 'kayak-like' technology that might or might not ever be profitable. 

NKE - Nike and Apple to create wearable that has ‘more stealth’ and is ‘more integrated’


  • "Despite Nike having shut down its FuelBand fitness-tracking bracelet and the team that created it, wearables will still be 'a big part of the future', Nike chief executive Mark Parker has insisted."
  • "'Speaking in an interview with Bloomberg TV, Parker said that teaming with Apple for the creation of wearables allowed Nike to  'do things together that we couldn’t do independently'."
  • "He added that the plan for the company was 'to expand the whole digital frontier in terms of wearables, and go from what we say is tens of millions of users – right now there’s 25 million Nike+ users – to hundreds of millions.'"

Takeaway: Remember the press reports noting that we should expect to see a NextGen Nike Sportswatch in 1H14 at a price point just below $400 to compete with the Adidas ($399) offering? That was set to be a meaningful upgrade from the current Nike SportsWatch, which sells for $150. But 1H14 came and went without a peep from the Nike Timing team. Why? It was clear that something was up when Nike fired its FuelBand team in April.  Apple's Tim Cook sits on Nike's Board, and Nike knew full well about Apple's iWatch plans. We're also inclined to think that Tim Cook said something to the extent of "You're going to come out with a hi-tech sportswatch that's priced $50 above what Apple is launching? That's a big mistake".  It was probably a pretty simple decision for Nike's Mark Parker to back off that initiative, and piggyback onto the iWatch with a partnered fitness app that promotes Nike's core product in a more commercial way. 

VFC - Timberland’s Frisk leaves to be CEO of Canada’s Aldo Group


  • "Patrik Frisk, who headed VF Corp.’s Timberland business, is leaving the company to become chief executive officer of the shoe retailer Aldo Group Inc."
  • "'After over 10 wonderful years at VF Corporation, I have decided to move on and take on a new challenge,' Frisk said Thursday in an e-mail. 'From November, I will be based in Montreal, Canada, leading the Aldo Group.'”

Takeaway: That's two C-Suiters hitting the road within the past 30 days. Shearer certainly earned some R&R after 28 years in the seat, but this Frisk announcement is a little bit puzzling. Just 6 months after being named Coalition President of Outdoor Americas and a month and half removed from the Timberland analyst day (where he outlined the $3.1bil plan) he jumps ship for Aldo? If there is any company that can absorb this type of turnover its VFC. We're not questioning the company's bench strength, but in light of the company's first two quarterly misses in a 12 month period since 2009 the timing raises an eyebrow.


WMT - Wal-Mart names veteran exec as India COO


  • "Wal-Mart Stores Inc. has named Murali Lanka as COO of its Indian operation effective Dec. 1. Lanka has held various positions with Wal-Mart and Sam’s Club since 1989 and served as head of operations of Wal-Mart India from 2008-2013, and most recently held the position of regional general manager for Wal-Mart in Texas."

AAPL, RAD, CVS - Apple Pay Faces Challenge as CVS, Rite Aid Reject System


  • "CVS and Rite Aid are among 220,000 U.S. merchants that already have technology in place to read the short-range wireless signals that enable customers of Apple Pay or similar services to make a purchase by waving their smartphones. The retailers weren’t among those specifically named as accepting Apple Pay when the iPhone maker revealed its system last month."
  • "The drug retailers, which are part of a consortium developing a competing payment system, stopped Apple Pay last week, said a person familiar with the situation who asked not to be named."