09/28/09 08:48AM EDT


SEPTEMBER 28, 2009




Ok, so here’s a winner. Gander Mountain (GMTN) announced its intent to go private this morning. Aside from the fact that retail has largely been left out in the cold as it relates to LBO activity this year – therefore making any transaction notable – the specs behind this one are particularly squirrely.

The two largest shareholders are making a bid of $5.15, which is 38% above Friday’s closing price. Sounds nice, huh? Not so much when you look at the fact that this is the same level where the stock was to months ago, and since then GMTN has underperformed retail (MVR) by 64%. 

But it’s not the price that catches my eye as much as the structure of the deal. The company will do a reverse stock split of 1 to 30,000, and then will then payout a $5.15 equivalent to anyone with less than a share. Based on the current holder list, this means that anyone but the largest 14 holders will be forced to sell. Score one for the big guy.

With only 25% of the shares floating, that makes it tough, if not impossible, for any opposition to have any relevance whatsoever. What if you’re a little guy that bought into the bankers’ and sell-side analyst ‘pie in the sky’ pitches when the deal came out in September 2004? At that time there were 9 analysts covering, sales were growing at 32%, and the pitch was for a 1% operating margin to go to the mid-high single digits. Now there’s 1 analyst covering, sales are struggling to maintain a low-single digit rate, margins are below 1%, and the company still has yet to earn one red cent.

Maybe the problem is not as much with the current deal as it is with the fact that this deal should never happened in the first place. Man…I remember being on the buy-side in Sept ‘04 and having my sales guy at an unnamed regional firm beating the drum on this puppy telling me I was missing out on a ‘big idea'.

Despite all the noise about better ‘transparency and accountability’ it’s amazing the stuff that still goes on.

Buyer beware…


Some Notable Call Outs

  • In perhaps the most dramatic example of rent renegotiations that we’ve seen, FINL management suggested on its conference call Friday that it has achieved rent reductions approaching 50% in some cases. With nearly 40% of its real estate portfolio set for some level of negotiation over the next 18-months, the company is poised to realize reductions in occupancy cost ahead of most peers during this time period. In addition, FINL is accelerating the closing of underperforming stores by year-end further contributing to profitability.
  • COLM introduced a new twist on green last week with its reused box initiative for online customers. Quite simply, the concept is to give outdoor customers the option of using a repurposed box for shipping. In what would be considered a positive response by most, more than 60% of online customers have selected the option in its first month of operation.
  • Despite sporting one of Europe’s weakest retail markets, Spain has announced as part of its 2010 budget bill that it will be increasing its VAT to 18% up from 16% in addition to cutting certain tax rebates. While some far east countries have been reducing VAT rates, Spain’s hike is the first raise that we’ve seen in this cycle. This may help the country tackle budget deficits near-term, but it do little incentivize the country’s consumers to accelerate already weak spending.


-Canadian Trade Group Finds No Injury From Footwear Dumping - The Canadian International Trade Tribunal found that the dumping of waterproof footwear and waterproof footwear in nearly finished form from the People's Republic of China and the Socialist Republic of Vietnam had not caused and was not threatening to cause injury to the domestic industry. Anti-dumping duties will therefore not be collected by the Canada Border Services Agency. The complainant in this case was the Shoe Manufacturers' Association of Canada, of Baie d'Urfe, Quebec.

Pasted from <>

-Textile Groups Urge U.S. to Act on Honduras - U.S. trade associations representing the fiber, textile, apparel, import, and retail industries wrote to Secretary of State Hillary Clinton, urging her to take immediate steps to restore stability in Honduras. In the letter, the groups said that the current political crisis in Honduras "has caused commercial traffic to falter dramatically, and textile and apparel plants in United States and Honduras are already being idled and workers told to go home." The letter was signed by the following trade associations: American Apparel and Footwear Association (AAFA); American Manufacturing Trade Action Coalition (AMTAC); National Council of Textile Organizations (NCTO); National Textile Association (NTA); National Cotton Council (NCC); and the U.S. Association of Importers of Textiles and Apparel (USA-ITA). <>

-New Look set for IPO - New Look is set to return to the stock market with a float early next year, six years after it was taken private. The retailer, which is owned by founder Tom Singh and private equity groups Apax and Permira, is reportedly considering a £1.7bn IPO. < >

-Australia’s largest department store group Myer has released the details of its initial public offer – It expects to raise as much as $2 billion. Myer’s shareholders, including Texas Pacific Group and other investors are offering between 479.3 million and 499.5 million shares by both selling off their existing stakes in the company and issuing new shares, according to an ipo prospectus distributed Monday. Myer’s shares will be priced between 3.90 Australian dollars and 4.90 Australian dollars, or about $3.39 to $4.26, when the offer kicks off next month. The ipo will be the ASX’s biggest listing in three years. <>

-After a challenging 12 months, the president and COO of Saks Fifth Avenue is forging ahead with a fresh footwear strategy to make the retailer more competitive in the challenged luxury segment - Among the key initiatives: tweaking the product assortment to include more contemporary brands, ramping up exclusives, introducing private label and expanding elements of the 10022-SHOE salon concept across the chain. Already, the retailer’s new efforts are paying off. Frasch said that although he remained cautious, early fall results have been promising. <> Merges with - said it merged with to form a newly named company, The new online sporting goods retailer headquartered in Washington, Utah, focuses on baseball and softball equipment. <>

-Hibbett Sports Honored by State of Alabama  - Hibbett Sports, Inc. announced that Alabama Governor Bob Riley has proclaimed Tuesday, September 29, 2009, Hibbett Sports Day for the state of Alabama. Governor Riley’s declaration cited Hibbett Sports' contributions to the community through the Hibbett Sports Operation Sports Renovation and the Hibbett Sports Superstars programs. <>

-Handbag brands Kathy Van Zeeland and B. Makowsky are making the move into footwear with a team of industry veterans - The B. Makowsky footwear line, which debuted during the FFANY show, is launching for spring ’10. Kathy Van Zeeland is expected to follow for fall. The moves come on the heels of last year’s $330 million acquisition of New York-based Van Zeeland Inc., which included the Kathy Van Zeeland, B. Makowsky and Tignanello lines, by LF USA, a subsidiary of Hong Kong-based global sourcing firm Li & Fung Ltd. Plans for expanding both lines developed quickly after the deal, said Rick Darling, president of LF USA. <>

-Billy Reid is going deeper into footwear - The Alabama-based designer will debut a women’s shoe line for holiday ’09 and plans to launch a wholesale business for his men’s styles starting with spring ’10. (The designer also just opened a shop-in-shop in Bloomingdale’s in New York.) “Over the past couple of years, footwear has really been a good category for us, so the timing seemed right,” said Reid. The women’s line will start small and grow for spring ’10. The initial holiday offering includes a high-heel boot, a riding boot and an ankle bootie, retailing for $495 to $795. All of Reid’s creations are made in Italy. The new collection is a departure from Reid’s previously planned women’s launch a season before, which included several pumps and wedges. His factory went out of business, and the designer had to start over with new ideas. <>

-eBay’s mobile channel has generated $380 million in sales this year - EBay Inc. has made big news in the world of mobile commerce, becoming the first online merchant to break out m-commerce sales, and with good cause: Its mobile app for the iPhone and its m-commerce site,, have generated $380 million in sales so far this year. <>

-Shoe Trends - Men’s sneakers aren’t just black and white. This season, it’s all about the softer shades in between. Whether dressed up or casual, alone or accented with color, gray is clearly the new black. Spring footwear is getting cool and breezy with perforated uppers for men and women. Some athletic brands also put a twist on the treatment with bright colors and bold shapes. <>

© 2020 Hedgeye Risk Management, LLC. The information contained herein is the property of Hedgeye, which reserves all rights thereto. Redistribution of any part of this information is prohibited without the express written consent of Hedgeye. Hedgeye is not responsible for any errors in or omissions to this information, or for any consequences that may result from the use of this information.