Retail Callouts (11/17): RH, HIBB, JCP, KATE, KORS, AMZN, JOEZ, WMT

Takeaway: Retail Idea Bench. HIBB added to Short Bench. JCP pulled from Long Bench. Math on RH Atlanta says 65k ft is conservative size.

HEDGEYE RETAIL IDEA LIST

 

Retail Callouts (11/17): RH, HIBB, JCP, KATE, KORS, AMZN, JOEZ, WMT - 11 17 CHART1

 

This Week's Changes Hedgeye Retail Idea List

  1. Added Hibbett Sports to Short Bench: We don't have enough ammo to short ahead of earnings this Friday. But we have an extremely negative view on the margin implications as HIBB changes its business model to protect its market share.
  2. Removed JC Penney from our long bench. It became clear to us that JCP could achieve its sales goals -- but only if the economy is optimal. The problem is that we're six years into a recovery, and the liklihood of going another four is slim, in our opinion.  We pick four years as the bogey because that's when JCP faces a significant $2.2bn maturity. We're not making the 'donut' call on JCP. But we think that there's just as great a chance that this stock goes to zero as it does going to $15. Not a good risk/reward by any stretch.

 

EVENTS TO WATCH

Retail Callouts (11/17): RH, HIBB, JCP, KATE, KORS, AMZN, JOEZ, WMT - 11 17 chart2

 

RH Atlanta

We'll be at the RH Atlanta Design Gallery Grand Opening on Thursday night. This is an important one because the store is 65,000 SqFt -- the first of the '2nd Generation' Design Galleries. Remember that the first wave of Design Galleries averaged at about 20,000 feet. The Street 'gets it' that the economics in these stores are significantly better than in the legacy 9,000 ft stores, but there are massive questions (and doubts) about the economics associated with a mega-store like what RH is building in Atlanta.

 

A couple of reasons why we think this store size makes sense for RH in Atlanta.

1.  As we outlined in our RH Real Estate Deep Dive, you need to look at market size of every single store -- which we define as home furnishings spend for consumers earning over $100k.  We did that in every single region RH operates.
2.  Our math suggests that there are 22 existing RH locations that could support a store of 60,000 or greater. This assumes 2018 market share of 10%, and sales productivity of $1,200.
3.  Of these 22 locations, Atlanta is #3 on the list, behind New York and Houston. Our math suggests RH could have a store size as great as 90,000 feet.
4.  The rent economics work. Relative to RH's existing store in Atlanta, we think that occupancy math lines up well with the Denver store, which will open in 2015 (See math below).

 

RH remains our top idea in Retail.

 

Retail Callouts (11/17): RH, HIBB, JCP, KATE, KORS, AMZN, JOEZ, WMT - 11 17 chart3

 

Retail Callouts (11/17): RH, HIBB, JCP, KATE, KORS, AMZN, JOEZ, WMT - 11 17 chart4

 

COMPANY HIGHLIGHTS

 

AdiBok - ESPN Anchor Blames adidas Shoes for Derrick Rose's Injuries

(http://solecollector.com/news/espn-anchor-blames-adidas-shoes-for-derrick-rose-s-injuries/?utm_source=Sailthru&utm_medium=email&utm_term=Daily&utm_campaign=Daily%202014-11-15)

 

H&M - October Sales +14% vs Last Year

(http://about.hm.com/content/dam/hm/about/documents/en/cision/2014/11/1428617_en.pdf)

 

WMT - Walmart workers plan Black Friday protests over wages

(http://www.reuters.com/article/2014/11/14/us-walmart-labor-idUSKCN0IY1RU20141114)

 

  • "A group of Walmart employees pushing for higher wages said on Friday they were planning protests at 1,600 Walmart stores nationwide on Black Friday."

 

KATE - Ad of the Day: Anna Kendrick Makes Something Out of Nothing in Kate Spade's Holiday Ad

(http://www.adweek.com/news/advertising-branding/ad-day-anna-kendrick-makes-something-out-nothing-kate-spades-holiday-ad-161438)

 

AMZN - Amazon chief Jeff Bezos takes long-term view

(http://www.ft.com/intl/cms/s/0/41032c7c-6d79-11e4-8f96-00144feabdc0.html?siteedition=intl#axzz3JKJccClB)

 

  • "Last week, Mr Bezos gave a textbook demonstration. He abandoned a long-running and very public spat with French publisher Hachette over ebook pricing. Amazon appeared to make some big concessions. The bookseller gave up its right to sell ebooks at any price it chose – essentially the way it sells the physical product now."

 

KORS - Michael Kors' Instagram Adds 'Buy'

(http://www.wwd.com/media-news/digital/kors-instagram-adds-buy-8034767?module=hp-topstories)

 

  • "Facebook and Twitter are instrumental in inspiring fans and helping in the shopping process, but finding a way to 'shop' Instagram was a necessity, the company said."

 

JOEZ - Joe's Jeans Defaults on Term Loan

(http://www.wwd.com/business-news/financial/joes-jeans-defaults-on-term-loan-8033507?module=hp-topstories)

 

  • "Joe’s Jeans Inc. declined 21.2 percent to close at 75 cents in Nasdaq trading, after the company reported that it had fallen out of compliance with the profit requirements of its Garrison Loan Agency term loan and was seeking waivers and adjustments."

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more