Retail Callouts (1/6): ICSC, Online Holiday Sales, COH Deal, KATE

Takeaway: ICSC-strong data point driven by discounting. COH-This Is A Really Bad Deal. IBM-dot.com Holiday sales +14% but AUR -8%

EVENTS TO WATCH

Thursday (1/8)

FDO - Earnings Call: 10:00am

BBBY - Earnings Call: 5:00pm

ECONOMIC DATA

Takeaway: Strong start to the year with a +3.8% reading. Our sense -- which is likely to be backed up with the data points that come out over the next week from the companies -- is that this was driven by promotional activity due to greater than usual excess inventory available after the Holiday.

Retail Callouts (1/6): ICSC, Online Holiday Sales, COH Deal, KATE - 1 6 chart1

COMPANY HIGHLIGHTS

COH - COACH TO ACQUIRE LUXURY DESIGNER FOOTWEAR BRAND STUART WEITZMAN

(http://phx.corporate-ir.net/phoenix.zhtml?c=122587&p=irol-newsArticle&ID=2003397)

Takeaway: Coach’s purchase of Stuart Weitzman is the ultimate sign of its perennial mediocrity. When Michael Kors, Kate Spade, Ralph Lauren, or Tory Burch want to get into the shoe business, they use their greatest asset to get there – their own brand name.  When Coach wants to get there, it buys somebody else’s brand name. That’s almost all we need to know. Link to the full not can be accessed by clicking the link (COH - This Is A Really Bad Deal).

IBM: 2014 Online Holiday Sales up 14%, Mobile up 27%

(http://www-01.ibm.com/software/marketing-solutions/benchmark-hub/alert.html)

Takeaway: This data point syncs with what we've seen from other sources that track online spending during the holiday season. ComScore reported that sales were up 15% from 11/1 - 12/21 and Channel Advisor #'s for 11/27 - 12/21 reported a similar number at 14%. These numbers represent a sequential acceleration. With IBM accelerating from 8.5% in '13 to 14% in '14 and ComScore up 500bps from 10% in '13. That make sense to us given the accelerated shift we've seen during the Holiday season from in-store to online. That's the positive, on the negative side AUR was down 8% according to IBM. Contrary to most peoples opinions, online sales are a drag on profitability for retailers who don't own content. The best example we have of that is KSS where online EBIT margins are 600bps below Brick and Mortar. So not only is the online channel cannibalizing what otherwise would have been B&M sales at a less profitable rate, retailers drove that growth through a heavy dose of discounts. Not the earnings driver many of the retailers need this 4th quarter.

OTHER NEWS

KATE - Kate Spade Swimwear Debut

Retail Callouts (1/6): ICSC, Online Holiday Sales, COH Deal, KATE - 1 6 chart2

Saban Brands Purchases Mambo

(http://www.wwd.com/business-news/mergers-acquisitions/saban-brands-purchases-mambo-8089760?module=hp-topstories)

IBM: Retail Cyber Attacks, Victims Drop in 2014

(http://www.wwd.com/retail-news/trends-analysis/ibm-retail-cyber-attacks-victims-drop-in-2014-8089482?module=Business-latest)