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Takeaway: PVH - 15x earnings with limited top-line growth potential doesn't get us excited. DG lose/lose. WMT stat supports need for physical stores.

COMPANY HIGHLIGHTS

PVH - 3Q14 Earnings

Takeaway: PVH turned a 1% top line miss into a 3% EPS beat, but guidance for the balance of the fiscal year leaves a lot to be desired. The $0.08 beat with the $0.10 guide down for the year translates to a $0.18 guide down on the top end of guidance for the fourth quarter. A few quick takeaways. 1) This is the 5th straight quarter where PVH has underperformed on the top line. Excluding the Bass divestiture, the top line slowed 200bps sequentially on the 1 yr and 570bps on the 2yr. Comparisons get easier (again) into the 4th quarter and guidance looks doable even with the currency headwind. But, over a slightly longer duration we have a hard time getting to the Street's numbers which call for 6% growth per annum. 2) Manny made his traditional post-earnings CNBC shop and touted how healthy the company's inventory position was. By our math, the sales/inventory spread was -8%. That's in stark contrast to the company's rhetoric.  3) Reduced interest expense and tax rate drove the 11% earnings growth in the quarter. We're cognizant of the fact that debt reduction alone will drive 3% to 4% of earnings growth. But that's not a reason for us to get excited about owning a name at 15x earnings with limited top line growth prospects when we're at the tail end of a margin cycle for its wholesale distribution channel.

Retail Callouts (12/4): PVH, DG, GIL, WMT, TGT, COH - 12 4 chart1

DG - 3Q14 Earnings

Takeaway: We'll take the FDO commentary to mean that the current 11.6x EBITDA bid isn't enough and the final offer will be closer to $80 or about 13x. When a company is looking to pay that much for such a poor quality asset, we need to really ask ourselves about the prospects management sees in its core. On the other side of that - the stock is up 14% since the bid for FDO was announced in mid-August and Dreiling committed to push off his retirement. Clearly, the Street thinks that there's some merit to DG buying FDO -- even at a higher price. We'll take the other side of that.  We still think that with DG, if it wins the FDO bid, then shareholders lose. If it loses, then the stock retraces closer to where it was before the bidding war began.

GIL - 4Q14 Earnings

Takeaway: We don't have an opinion on GIL's stock right now, but are not particularly surprised by today's disappointment. Interesting as well to see the company change up its reporting structure. Companies usually don't do that when they want to improve transparency over the near-term.  It will take a lot more than a 12% sell-off for us to get interested in this name on the long side.

Retail Callouts (12/4): PVH, DG, GIL, WMT, TGT, COH - 12 4 chart2

WMT - Report: Wal-Mart CEO says 10% of mobile orders are in-store

(http://www.chainstoreage.com/article/report-wal-mart-ceo-says-10-mobile-orders-are-store)

Takeaway: This is simply a fascinating statistic. It shows how e-commerce and brick & mortar is inextricably linked. We maintain our view that this will cause many retailers to hang on to stores that they would otherwise close due to weak productivity. Not a good margin event.

OTHER NEWS

TGT - Debit, credit issues temporarily affect Target stores Canada-wide

(http://www.tbnewswatch.com/News/365405/Debit,_credit_issues_temporarily_affect_Target_stores_Canada-wide)

"Customers at Target stores in Canada could only pay with cash for about 90 minutes Tuesday afternoon due to a problem with the retailers main card processor."

COH - Coach May Spend Big to Acquire Stuart Weitzman

(http://racked.com/archives/2014/12/03/coach-may-buy-stuart-weitzman.php)

WMT - Walmart Canada Extends Store Hours for the Holiday Season

(http://www.newswire.ca/en/story/1457251/walmart-canada-extends-store-hours-for-the-holiday-season?utm_medium=twitter&utm_source=twitterfeed)

U.K. Targets Tech Firms With ‘Google Tax’

(http://online.wsj.com/articles/u-k-targets-tech-firms-with-google-tax-1417642405)

Vineyard Vines Docks on Upper East Side

(http://www.wwd.com/menswear-news/retail-business/vineyard-vines-docks-on-upper-east-side-8056783?module=Retail-latest)

"The store had a soft opening before Thanksgiving and so far, sales are exceeding expectations. They declined to provide a volume projection for the unit, which had its grand opening on Wednesday night."

SPLS - Staples Announces Staples Exchange, Bringing More Products and Services to Customers

(http://investor.staples.com/phoenix.zhtml?c=96244&p=irol-newsArticle&ID=1994866)

"Staples  announced the roll-out of Staples Exchange, a world-class platform that makes it easy for suppliers to offer products to Staples customers."

"Staples Exchange is a unified platform that allows vendors to sell through all of Staples’ e-commerce channels, with multiple integration options. Unlike other retailers, Staples does not require vendors to use a third party that charges integration fees, instead giving them a single portal to enroll with all of Staples’ sites, like Staples.com, and coming in 2015, Staples Advantage, Staples Canada and Quill.com."