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Takeaway: Two changes to Hedgeye Retail Ideas List: HIBB, BBY. Initial Black Friday/Thanksgiving read throughs = not positive.


Retail Callouts (12/1): Hedgeye Retail Idea List, Black Friday Data Points, KSS, TGT, M, FL, DKS, DG - 12 1 chart1

This Week's Changes Hedgeye Retail Idea List

  1. Moved HIBB higher on the Short Bench -- as close as we can get without it being a core short. We're convinced that HIBB's capital intensity is heading higher while margins are likely to head lower.
  2. Took Best Buy off our Long Bench. This was a TRADE idea for us. The stock's 33% run since we started evaluating it in October doesn't leave much left for us -- at least not without outsized risk.


Retail Callouts (12/1): Hedgeye Retail Idea List, Black Friday Data Points, KSS, TGT, M, FL, DKS, DG - 12 1 chart2


Retail Callouts (12/1): Hedgeye Retail Idea List, Black Friday Data Points, KSS, TGT, M, FL, DKS, DG - 12 1 chart3

The initial data points from Black Friday weekend are not good. Actually, they're flat-out bad. That's really no surprise. The 'sales hype' engine that is fueled by the retailers in advance of Thanksgiving every year ran unusually hot this year.  Couple that with a 16% run in the XRT from the October lows, and a 21x p/e for retail, and it's really not a good combination.

Yes, Cyber Monday could help save the day as consumers shift to online channels. But keep in mind that IBM's Online Sales index for Thursday and Friday was +11.3%, which is an 800bp deceleration from the 19.3% level was saw over the same period last year. Cyber Monday will definitely be positive, but perhaps not as positive as last year. Overall, we're hard pressed to think we'll see Retail Sales(ex. Food, Auto, & Gas) above the 3.3% rate we saw last year.

One concern we have with the shift to online is 1) e-commerce is lower margin for department store and multi-line retailers -- full stop. It's higher margin for brands like Nike and Ralph Lauren. But not for any retailer with a basket size under $150.  2) Retailers don't know where sales will show up -- in store or on-line. As such, they need to keep stores fully-staffed (at 2-3x pay on Thanksgiving) in order to satisfy demand that might or might not be there.  Our point is that it is dilutive both ways.

We still think shorting KSS is the best way move here. We'd also short TGT, M, FL, DKS, and DG.


UA - Person of the Year: Kevin Plank


Zell Confirms Bid for Grocery Stores to Be Shed by Albertsons


"Billionaire investor Sam Zell confirmed he’s interested in snapping up about 140 stores to be divested as Cerberus Capital Management LP acquires Safeway Inc. and merges it with the Albertsons LLC grocery chain."

JWN, AMZN, URBN, ZU, AEO - Survey: Nordstrom, Amazon most engaged brands on Pinterest