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Takeaway: KORS harping on weak mall traffic (strengthening brands don’t say that) + Hicks leaving FL + weak ICSC = bearish points about margin cycle.

EARNINGS CALENDAR

Retail Callouts (11/4): KORS, FL, ICSC - 11 3 chart2B

ECONOMIC DATA

Takeaway: These numbers are just bad. Period. This is the first time the ICSC reading has been under 2% year/year since Spring. The 2 and 3-year trends are just as bad.

Retail Callouts (11/4): KORS, FL, ICSC - 11 4 chart1

COMPANY HIGHLIGHTS

KORS 2Q15 Earnings

Takeaway: The $1.00 print was spot on with our estimate vs. consensus at $0.89, but a 16.5% comp wasn't enough -- not by a long shot. The company repeatedly talked about 'weak mall traffic' and a 'conservative consumer'. That's simply not something that a brand with significant runway talks about. In fact, we wonder how many times KORS cited traffic as a headwind in the past four years compared to the past 2 quarters.

Retail Callouts (11/4): KORS, FL, ICSC - 11 4 KORS

FL - Foot Locker CEO Ken Hicks to Retire

(http://online.wsj.com/articles/foot-locker-ceo-hicks-to-retire-1415077262)

Takeaway: This has implications not only for FL, but says a lot about the state of retail. We moved FL up from our Short Bench to our Core Short list. See details in the link to this mornings note: FL - THE LAST STRAW

Malls Fill Vacant Stores With Server Rooms

(http://online.wsj.com/articles/malls-fill-vacant-stores-with-server-rooms-1415042980)

  • "The Internet is moving to a shopping center near you."
  • "In Fort Wayne, Ind., a vacated Target store is about to be home to rows of computer servers, network routers and Ethernet cables courtesy of a local data-center operator. In Jackson, Miss., a former McRae’s department store will get the same treatment next year. And one quadrant of the Marley Station Mall south of Baltimore is already occupied by a data-center company that last year offered to buy out the rest of the building."

Retail Callouts (11/4): KORS, FL, ICSC - 11 4 bricks click

Takeaway: Interesting read about how demand is nearly nonexistent for B- and C mall properties. We continue to think that while these anchor tenant spaces are the most obvious to be shuttered for marginal retailers, they will ultimately stay open in order to help fuel the e-commerce business given our research that shows how bricks and clicks are inextricably linked. To close marginal stores means risking e-commerce sales to the customers around those stores. Unfortunately, that will put the supply/demand balance even more off kilter, which will put pressure on aggregate productivity. See our recent Department Store deck for details.

OTHER NEWS


Los Angeles Port Talks Hit Snag

(http://www.wwd.com/business-news/government-trade/la-port-talks-hit-snag-8020326?module=Business-latest)

  • "Negotiations to finalize a key labor contract for the West Coast ports hit a major setback as the association representing the waterfront employers charged the longshoremen’s union with orchestrating slowdowns in Seattle and Tacoma in the middle of the peak holiday shipping season."
  • "The Pacific Maritime Association claimed on Monday that the International Longshore and Warehouse Union targeted select terminals in Tacoma on Friday and expanded to more terminals in that port and also in Seattle throughout the weekend. Together, the ports handle about 16 percent of cargo arriving on the West Coast."
  • "The association estimated that the slowdown reduced productivity at the terminals by more than 40 percent."

JCP, M, KSS - J.C. Penney tries to one-up rivals with even earlier Thanksgiving opening

(http://fortune.com/2014/11/03/jc-penney-opening-thanksgiving/)

  • "J.C. Penney said on Monday it would open its stores for Black Friday shopping at 5 p.m. on Thanksgiving Day, an hour earlier than its closest competitors Macy’s, Kohl’s and Sears, and three hours earlier than it did last year, in the latest upping of the ante in the holiday sales wars."

SHLD - Kmart to stay open for 42 hours straight, starting at 6 a.m. on Thanksgiving

(http://www.chainstoreage.com/article/kmart-stay-open-42-hours-straight-starting-6-am-thanksgiving)

  • "Sears Holiding Company joined the growing list of retailers with extended shopping hours on Thanksgiving and Black Friday."
  • "Sears and Kmart stores will open on Thanksgiving Day, with Sears opening at its earliest time ever: 6 p.m, two hours earlier than last year. Kmart will open its doors for 42 hours straight, from 6 a.m. on Thanksgiving to midnight on Black Friday."

Primark Shrugs Off Weather Impact

(http://www.wwd.com/retail-news/financial/primark-shrugs-off-weather-impact-8020752?module=Retail-latest)

  • "Discount fashion retailer Primark has enjoyed a strong start to its new financial year despite warm autumnal weather that has prompted rivals to warn on profits."
  • "George Weston, chief executive of Primark owner Associated British Foods, said Tuesday that Primark's sales and profits had risen over 10 percent in the first six weeks of its 2014-15 financial year, which started on Sept. 14."
  • "'I'm really not concerned (by the weather) and we haven't had to delay or cancel any orders,' he said."
  • "'Yes, there's been an (weather) effect, but ... every year you get unseasonal weather at some point.'"