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Takeaway: Port labor situation getting too much play relative to importance. ANF miss despite decidedly better product. GPS comp -3% - get used to it.

COMPANY HIGHLIGHTS

 

Fears Grow Over West Coast Ports as Comps Hit

(http://www.wwd.com/retail-news/trends-analysis/fears-grow-over-west-coast-ports-as-comps-hit-8024518?module=Business-hero)

  • "Retailers already concerned about weak demand as they head into the critical holiday season have a new concern: limited supply."
  • "In reporting weaker-than-expected sales and negative comparable sales for the third quarter and projecting lower-than-expected sales and a low-single-digit comp decline in the holiday quarter, which has just begun, Ann Inc. also said it was being hit by delayed shipments due to congested West Coast ports, which have been crippled by a union dispute."

Takeaway: Let's be clear about something...disputes with Port workers only happen in the fourth quarter. You will never see workers threatening to strike in the month of June. It's a seasonally low freight shipping period, which gives the workers zero leverage. They'll always threaten a strike from October-December. This happens every 2-3 years, and rarely ends up in a prolonged work stoppage that negatively impacts retail or the US consumer. The better companies see this coming from a mile away, and usually ship product a few weeks early. Air freight companies are all over this as well -- they'll make sure the product finds its way into the US (albeit at 10-12x the price of ocean freight).  If things get too bad, the President will usually step in and force an agreement between unions and shippers. Rubbing the two constituents the wrong way isn't ideal, but it's a better choice for Obama than kids not getting presents this holiday.

ANF - ABERCROMBIE DISAPPOINTS

(http://phx.corporate-ir.net/phoenix.zhtml?c=61701&p=irol-newsArticle&ID=1987330)

Q3 Sales: -12%

Q3 Comps: -10%

  US: -7%

  Int'l: -15%

e-commerce: +8%

Takeaway: We took this name off our long bench a month ago because we just did not have confidence in anything beyond the consensus 'cost cutting, Board change' thesis. Our concern was that when all is said and done, you'd be left with a brand that is Abercrombie -- and lacking relevance with its core consumer. What's interesting is that the product over the past two months has reportedly gotten better -- in quality and aesthetic. Apparently consumers don't care. Even e-commerce was up only 8%, which is unacceptable for any brand (19% of total sales for ANF). We're fine staying away from this one at any price within spitting distance of $30.

TGT - Target Names Jacqueline Hourigan Rice as Senior Vice President, Chief Risk and Compliance Officer

(http://pressroom.target.com/news/target-names-jacqueline-hourigan-rice-as-senior-vice-president-chief-risk-and-compliance-officer)

  • "Target Corp. announced it has hired Jacqueline Hourigan Rice as senior vice president, chief risk and compliance officer."
  • "Rice joins Target effective December 1 and will report directly to Brian Cornell, chairman of the board and chief executive officer of Target. In addition, the company is elevating the position to include centralized oversight of enterprise risk management, compliance, vendor management and corporate security under her leadership."
  • "Rice comes to Target from General Motors Company where she was most recently the chief compliance officer. Her 17-year-career with the company included key global leadership roles in areas that included ethics, compliance and data privacy."

Takeaway: Two C-suiters over the past 6 months from GM with titles that involve Security and Risk strikes us as a little ironic. That may be an unfair characterization of the two individuals - we know very little about either of them. But we don't understand why TGT is adding to the executive team in areas that have very little touch with the end consumer. Maybe there are seats that need to be filled but we characterize this as a B priority. Nearly all of the executives who surround Steinhafel are still in their respective seats and most are Target lifers. Cornell is approaching his 3 month anniversary with the company and we'd expect to see some turnover soon. That is if the company wants to go from TGT 1.0 to 2.0.

GPS - Gap Q3 Earnings Better Than Expected (http://www.gapinc.com/content/gapinc/html/media/pressrelease/2014/med_pr_GPS_Sales_November0614.html)

October Sales: $1.29B  (Comp -3%)

Q3 Sales: $3.97B  (Comp -2%)

Q3 EPS Guidance: $0.78 - $0.79 ($0.06 from tax rate) vs Consensus $0.71

Takeaway: GPS is batting 3-for-3 this quarter when it comes to missing sales expectations. Flat sales for the quarter and a $0.06 tax benefit is nothing to get excited about. Operating expenses came in lower than expected, but that's down from the guided 8% growth. Our thoughts are the same now as they were when Glen Murphy announced that he was jumping ship; GPS isn't in trouble because Glen Murphy is leaving, Glen Murphy is leaving because GPS is in trouble.

OTHER NEWS

LULU - lululemon athletica appoints duke stump as executive vice-president, community and brand

(http://investor.lululemon.com/releasedetail.cfm?ReleaseID=880462)

  • "lululemon athletica inc. announced that Duke Stump has been appointed to its senior leadership team as Executive Vice-President, Community and Brand effective December 1, 2014. Mr. Stump will be responsible for continuing to build an authentic and differentiated global Brand and Community experience, and amplifying lululemon's global impact. He will report to the Company's Chief Executive Officer, Laurent Potdevin."

TGT - Target Is Closing Another 11 Stores

(https://time.com/money/3558447/target-closing-stores/)

  • "Target decided to close eight stores in May, including two stores in the Las Vegas area and two stores in Ohio. This week, Target announced it will be closing 11 more stores in the U.S., including two Chicago-area locations and three Targets in Michigan."
  • "The 11 stores will be shut down by February 1, 2015."

PETM - Private-Equity Firms Invited to Final Round of PetSmart Bidding

(http://online.wsj.com/articles/private-equity-firms-invited-to-final-round-of-petsmart-bidding-1415314908)

  • "A handful of private-equity firms have been invited to the final round of bidding for PetSmart Inc., according to people familiar with the matter."
  • "Firms including BC Partners, Apollo Global Management LLC, KKR & Co. and Clayton Dubilier & Rice Inc. have been asked to submit second-round bids and meet with the pet-supply retailer’s management, the people said."

COLM - Columbia Sportswear opens store dedicated to performance fishing gear

(http://www.chainstoreage.com/article/columbia-sportswear-opens-store-dedicated-performance-fishing-gear)

  • "Columbia Sportswear Company opened its first-ever store dedicated to its performance fishing gear (PFG) at the Avalon Mall in Alpharetta, Ga. Columbia’s PFG collection is inspired by the performance, style and comfort needs of professional and recreational anglers of all ages."
  • "The 3,176-sq.-ft. store has a clean design, boutique feel and digital integration that includes an interactive knot-tying station."

SHLD - Comedian Mike Myers takes jab at Sears Canada in rebranding promo

(http://globalnews.ca/news/1657511/watch-comedian-mike-myers-takes-jab-at-sears-canada-in-rebranding-promo/)

  • Sears Canada enlisted a little star power for what appears to be a rebranding video to let Canadians know the struggling retailer isn’t going away.
  • In the marketing video, Toronto-born comedian Mike Myers stopped by Sears Canada’s corporate office to visit his older brother Peter, a long-time employee.
  • The Wayne’s World star asks his brother “is Sears Canada going away?”
  • “We are not going anywhere,” his brother replies.