Retail Callouts (1/14): AdiBok Endorsements, UA, JCP Properties, RH, AMZN

Takeaway: AdiBok-unlikely to execute endorsement plan, but if it does it hurts UA. Dept. Store closures-JCPs two options.



AdiBok, UA, NKE - Adidas to Sign Up to 500 Athletes for Endorsements



"The company’s U.S. arm has the go-ahead to sign as many as 250 National Football League players and 250 Major League Baseball players over the next three years, up from a total of fewer than 40 now."


Takeaway: When a once-relevant brand duo (Adidas and Reebok) plans to buy its way into the US sports endorsement arena, it is bad news for everyone. Maybe we'd be ok with that if the company had the product to back it up. But it doesn't.  Apparently in Herzogenaurach, the order of operation is a) spend, b) sell, c) create great product.

We're especially surprised in that AdiBok is getting so aggressive with its endorsement spending after it just signed a $1.3bn (US) deal ($130mm/10 years) for Manchester United -- which is almost triple the price Nike was previously paying. This number accounts for about 5% of Adi SG&A.

In reality, we don't actually think that AdiBok will get to a point where it can execute on this aggressive plan in the US, as it ranks in the top 10 global retailers/brands that need a complete management overhaul. We think that's more likely than not in 2015.

But if it does not happen, and AdiBok continues with its plan to up the ante in the endorsement game, it severely crimps Under Armour -- which has started to sign larger athletes and now appears to have some severe competition (note that Notre Dame, a perennial Adidas school, switched to UA last year).


JCP - Landlords eager to reclaim JCPenney stores



Takeaway: The announced store closures by M and JCP are nice, but the reality is that half of that will come back as capacity selling apparel. We need to see another 90mm square feet, or 950 stores, go away -- and never come back. Our work shows that JCP needs to close 300 stores. And we think the company can take 2 different paths to achieve this end goal.

1) In the report we put together in May we identified a fleet of stores (300) that matched the demographic profile of the announced closures from January '14. In summary the annual household income within a 15 minute driving radius was about 20% below the company average.  By eliminating the bottom of the barrel demographic our math shows that the demographic profile would rise 7% and productivity would increase 20% for JCP's remaining 700 store portfolio.  At first glance it appears that the 40 closures this year are in this bucket. So, JCP can continue cull its bottom tier stores locked in less than optimal properties, or…

2)  The company could play offense and monetize its 134 'A' Mall locations. The economics are such that landlords could take an existing JCP property. Chop it up into a RH, Whole Foods, and Cheesecake factory and take rental income from the Anchors up 100+% (see image below).  Which would still allow for good returns after factoring in the redevelopment costs.

Retail Callouts (1/14): AdiBok Endorsements, UA, JCP Properties, RH, AMZN - 1 14 chart1





US December Retail Sales

Retail Callouts (1/14): AdiBok Endorsements, UA, JCP Properties, RH, AMZN - 1 14 chart2





AMZN - Amazon to take over textbook sales at UMass Amherst



Obama Pushes for Greater Cybersecurity



Online grocery delivery startup Instacart gets $220 million infusion



RSH - RadioShack offered $500 million loan from Salus Capital



Game Digital slumps 40% after profit warning



RAD - Rite Aid Completes Amendment and Extension of Existing Credit Facility


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