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Firing Oblivious Darden Management Is Only Way to Unlock ‘Generational Buying Opportunity’ | $DRI

 

 Veteran Hedgeye Restaurants analyst Howard Penney explains why he's in lockstep agreement with activist investor Starboard's new 200-page manifesto on Darden Restaurants and why the company's oblivious management team needs to be replaced in order to unlock significant shareholder value.


9 Charts: Europe's Economic Outlook

Takeaway: We think there’s no prospect of President Mario Draghi moving interest rates from current levels.

Ahead of tomorrow’s interest rate decision – at which we think there’s no prospect of President Mario Draghi moving from current levels – we want to give a quick update on our European economic outlook through the nine charts below.

 

9 Charts: Europe's Economic Outlook - Finanzminister beraten  ber Euro Krise

  • PMIs have moderated and somewhat flat lined over recent months (the UK and Germany Manufacturing are notable callouts), however the data remains grounded above the 50 line (expansion) and in aggregate is in-line with modest growth ticking higher, and remaining stable. We continue to marginally prefer European equities over U.S. equities.

9 Charts: Europe's Economic Outlook - z. pmis

  • Confidence continues to grind higher. In the next two charts we show this trend across Economic Sentiment, Consumer Confidence, and Business Confidence.

9 Charts: Europe's Economic Outlook - z. confidence

9 Charts: Europe's Economic Outlook - z. business climate

  • Italian Retail Sales is one call-out to the performance of the periphery. The Italian Retail Sales data shows fits and starts of improvement, however we think the trend line will move higher to positive as we head into the back half of the year. While Italian politics remain far from stable, we expect the young new government of PM Matteo Renzi to spur confidence. The Italian stock market (FTSE MIB) is up a monster +14.8% YTD, with Greece (Athex) up +16.2% and Portugal (PSI 20) up +17.3% as the top performing European equities YTD.

9 Charts: Europe's Economic Outlook - z. italy retail sales

  • New Car Sales across Europe have shown steady improvement over the past 14 months, and have remained positive over the last 6 months. We view confidence in big ticket items, like a car, as a material read-through on the positive state of the European consumer (and there’s no distortion here from a cash-for-clunkers program).

9 Charts: Europe's Economic Outlook - z. cars

  • Inflation – we view the media’s manic deflation scares as misplaced. The ECB has long signaled to the market a very extended program to return CPI toward its target level of 2.0%. In the second chart below we show how far CPI has moved in the last 12 months: our take-away is that deflation of the inflation is a tailwind to consumption. ECB VP Victor Constancio said yesterday that he expects a higher reading in April, versus the 0.5% reading in March.

9 Charts: Europe's Economic Outlook - z. cpi

9 Charts: Europe's Economic Outlook - z. cpi chg

  • Germany, along the UK (via the etf EWU), has been a preferred equity position via EWG. As we show in the chart below, the DAX is comfortably trading above its TREND line of support at 9,382. The EUR/USD remains resilient, supported by stable underlying growth of the region and policy from the ECB to better shield the member states and shore up the link between the banking systems and the sovereigns. For now, the dovish Fed head Janet Yellen is supporting a strong EUR/USD (TREND support = $1.36). Strong German Factory Orders is merely one important signal that Germany’s industry export base is firing on all cylinders. 

9 Charts: Europe's Economic Outlook - z. dax

9 Charts: Europe's Economic Outlook - z. german factory png

 

This research note was originally published April 2, 2014 at 11:35 a.m. by Hedgeye Macro Analyst Matthew Hedrick.

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An Odd Statement from Under Armour | $UA

Takeaway: Under Armour will need to evolve its product creation process if it wants to be considered a real footwear company.

Editor's Note: This is a complimentary research excerpt from Hedgeye Retail Sector Head Brian McGough. For more information on our services click here.


An Odd Statement from Under Armour | $UA - running
 

3 Questions for Under Armour's Fritz Taylor

  • "Under Armour Inc...bolstered its running team by naming industry vet Fritz Taylor as VP of running...Taylor, who was most recently VP and GM of running at Norcross, Ga.-based Mizuno, also has worked for Seattle-based Brooks and Beaverton, Ore.-based Nike Inc."

Q:  What’s your take on Under Armour’s position in the running market? 

FT: "...Everyone here would admit that Under Armour has had some fits and starts — hit and misses, if you will — particularly on the footwear side. But the Speedform Apollo just launched, and it’s getting some really strong sell-through numbers, and it’s a shoe that people are saying [is] something unique that no one else can do. We’ve got a nice foot in the door that we can leverage for bigger things."

 

Q: Is the consumer open to new brands and ideas in running?

FT: "...minimal, even though it has waned, brought some energy and excitement around new concepts. Now the big thing is maximal, but a bigger thing is that runners are more switched on to new, innovative ideas and stories that can help improve their running experience."

 

Q: Is it different working at an apparel company that makes footwear than at a footwear company that makes apparel?

FT: "You can absolutely tell [the difference]. One thing I was just dealing with is that here we have to wait for apparel to set the colors [for the season], and at every other company I’ve worked for, the footwear team operated that. That immediately slapped me in the face this week: 'Oh, wait, I need to wait for apparel.'”

Takeaway from Hedgeye’s Brian McGough:

That last answer above from Fritz Taylor 'footwear needs to wait for apparel' is logical for a company like Under Armour. But the reality is that it is probably the wrong answer. The best companies (think Nike) run apparel and footwear product creation in tandem. Chronic underperformers (think Adidas) run their business in a series circuit (first apparel, then footwear in Adidas’ case). Again, that's probably okay for Under Armour where footwear is still in its infancy. But this process will need to evolve if UA wants to be considered a real footwear company. We will be watching.

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Where’s Europe At? 9 Charts

A head of tomorrow’s interest rate decision – at which we think there’s no prospect of President Mario Draghi moving from current levels – we want to give a quick update on our European economic outlook through the 9 charts below. 

  • PMIs have moderated and somewhat flat lined over recent months (the UK and Germany Manufacturing are notable callouts), however the data remains grounded above the 50 line (expansion) and in aggregate is in-line with modest growth ticking higher, and remaining stable. We continue to marginally prefer European equities over U.S. equities.

Where’s Europe At?  9 Charts - z. pmis

  • Confidence continues to grind higher. In the next two charts we show this trend across Economic Sentiment, Consumer Confidence, and Business Confidence.

Where’s Europe At?  9 Charts - z. confidence

Where’s Europe At?  9 Charts - z. business climate

  • Italian Retail Sales is one call-out to the performance of the periphery. The Italian Retail Sales data shows fits and starts of improvement, however we think the trend line will move higher to positive as we head into the back half of the year. While Italian politics remain far from stable, we expect the young new government of PM Matteo Renzi to spur confidence. The Italian stock market (FTSE MIB) is up a monster +14.8% YTD, with Greece (Athex) up +16.2% and Portugal (PSI 20) up +17.3% as the top performing European equities YTD.

Where’s Europe At?  9 Charts - z. italy retail sales

 

  • New Car Sales across Europe have shown steady improvement over the past 14 months, and have remained positive over the last 6 months.  We view confidence in big ticket items, like a car, as a material read-through on the positive state of the European consumer (and there’s no distortion here from a cash-for-clunkers program).

Where’s Europe At?  9 Charts - z. cars

  • Inflation – we view the media’s manic deflation scares as misplaced. The ECB has long signaled to the market a very extended programs to return CPI towards its target level of 2.0%.  In the second chart below we show how far CPI has moved in the last 12 months: our take-away is that deflation of the inflation is a tailwind to consumption.  ECB VP Victor Constancio said yesterday that he expects a higher reading in April, versus the 0.5% reading in March.

Where’s Europe At?  9 Charts - z. cpi

Where’s Europe At?  9 Charts - z. cpi chg

  • Germany, along the UK (via the etf EWU), has been a preferred equity position via EWG. As we show in the chart below, the DAX is comfortably trading above its TREND line of support at 9,382. The EUR/USD remains resilient, supported by stable underlying growth of the region and policy from the ECB to better shield the member states and shore up the link between the banking systems and the sovereigns. For now, the dovish Fed head Janet Yellen is supporting a strong EUR/USD (TREND support = $1.36). Strong German Factory Orders is merely one important signal that Germany’s industry export base is firing on all cylinders. 

Where’s Europe At?  9 Charts - z. dax

Where’s Europe At?  9 Charts - z. german factory png

 

Matthew Hedrick

Associate


PODCAST | McCullough: What Do You Do When the Market Is Overbought?

 

Hedgeye CEO Keith McCullough sweeps the globe, discussing the latest global macro market internals, economic trends, and how investors should be positioning themselves as we head into Q2. 



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