HEDGEYE RETAIL IDEA LIST
Takeaway: The ICSC numbers end the year on a low note decelerating on a 1,2, and 3 yr basis after the pre-Christmas rebound which we suspect was helped by retailers need to clean up inventory positions headed into January. Since the week 36 peak, the trend has been overwhelmingly negative. That being said, comps in the first calendar quarter of 2015 get very easy with an average comp of 1.6% compared to the rest of the year at 3.1%.
UA - Under Armour Signs Andy Murray
Takeaway: At 27 Murray isn't quite a tennis dinosaur but he's getting close. Still this is a coup for UA which was able to steal him away from Adi. The 4 year deal is just north of $5mm per year or about 2% of the company's 2014 projected marketing spend and less than a half of a percent of total revenue. That's a drop in the bucket for UA. And it gives them a bonafide presence on the court. The company's current lineup of athletes (Sloane Stephens and Robert Ginepri) don't spend a lot of time playing in front of a national TV crew. UA has been unafraid to diversify, trying its hand at everything from speed skating to supermodels, so tennis is a logical extension for the brand. At the price that they are paying…this is a win for UA.
AMZN - Free shipping saved consumers $2bil+, volume up 100mm units
Takeaway: If we assume that each order on average cost the consumer $5 to ship, we get to a total of 400 million packages shipped for free this holiday season, up 100mm units or 33% from last year. That's pretty damaging for the rest of retail. Especially when you consider the drag it has on profitability. AMZN pays close to 10% of it's revenue to cover its shipping expense every year and its e-comm operation is 6x bigger than WMT and 16X bigger than M. If it's an issue for AMZN you can bet it's a bigger issue at just about every other retailer on the planet. We've seen that from KSS where the online EBIT margin is 4% margin compared to Brick and Mortar closer to 10%. Historically, retailers have been lemmings when it comes to shipping charges and we think the trend towards free continues.
BABA - Tmall global sales increase 10 times in 10 months
WAG - Walgreen Shareholders Approve Alliance Boots Deal
APP - American Apparel Faces Growing Calls to Sell
SHLD - Sears ecommerce chief resigns