Who says that September is a seasonally slow month?  57% y-o-y revenue growth suggests otherwise.


The hot streak we saw in August continued throughout the month of September.  September revenues were up 57% with VIP revenues leading the charge with 71% y-o-y growth, Mass grew 27% and slot revenue increased 24%.  A pick up in the growth rate is no surprise since September 2008 was the first easy comp where y-o-y growth turned negative.  The easy comps will continue through June 2010.


September is typically a seasonally slow month for many reasons including back-to-school season and junkets and players saving dry powder for Golden Week. However, it seems that this September didn't experience that seasonal slowdown due to a number of factors including easy comps, looser visa restrictions, stock market rally, new supply additions, and stimulas pumped into the chinese economy.  While still early in the month, indications in the press suggest that the strength we saw over the last two months is continuing in October.


The rising tide lifted all ships in September, however MELCO and SJM seemed to be the greatest beneficiaries of this hot month. See below for details on y-o-y performance and market share changes.


Y-o-Y Property Observations:


LVS table revenues up 8%

  • Sands was up 10%; with 13% growth in VIP win and 5% growth in Mass
    • VIP RC decreased at Sands (~28%),  however hold comparisons were very favorable
  • Venetian was up 6%; all the growth came from Mass which was up 15%
    • VIP RC (Rolling Chip) was up 12% but hold was down
  • Four Seasons was down sequentially from August but still more than doubled revenues from last year to $28MM


Wynn table revenues were up 16%

  • Mass was down 9%, offset by a 23% increase in VIP


Crown table revenue grew a whopping 244%, with both properties exhibiting strong results

  • Altira was up 39%, however September 2008 was a very easy comp given the sub 2% hold 
    • Hold was below normal at Altira, around 2.6%
  • CoD continued to ramp with total revenues growing 32% sequentially to an estimated total of over $145MM
    • Unfortunetly Mass ramp continued to be slow, we estimate $18MM 
    • VIP RC grew 5% sequentially, despite September being a seasonally weak month
    • September was another good hold month for the property


SJM continued its winning streak, with table revenues up 87%

  • Mass was up 40% and VIP was up 125% 
    • L'Arc opened September 21rst with roughly 100 Mass and 50 VIP table
    • SJM revenues should continue to stay strong with the addition of Oceanus in either Dec or early Jan


Galaxy table revenue was up 57%, mostly driven by a 70% increase in VIP win

  • Starworld continued to perform well with table revenue up 74%, soley driven by 92% increase in VIP revenues


MGM table revenue was up 42%

  • Mass revenues grew 30%, while VIP grew 47%
  • Sequentially results were 34% lower than July & August, partly due to sequentially lower hold (which was still materially better than what MGM held in Sept 2008)



Market Share:


LVS' share decreased to 20% from 24% in August

  • Sands' share increased to 8% from 7% in July
  • Venetian & FS' share decreased to 11.3% to its lowest share month since March 08 from 17.1% in August
    • However, all the share loss was in lower margin VIP which plunged from 16.5% to 8.9% sequentially
    • Mass share was flat m-o-m at 18.5%


WYNN's share increased to 13.8% from the low's of 12.6% in August


Crown's market share was 17.5%, up from 16.2% in August


SJM's share increased for the second month in a row to 31.5% from 26.4% in August


Galaxy's share eeked back to where it was in July to 10.6% from 10.1% in August


MGM's share decreased to 7% from 10.5% in the prior month


AN INDIAN SUMMER IN MACAU - Macau Total Bac Marketshare sept



AN INDIAN SUMMER IN MACAU - Macau Mass Market Rev Share sept



AN INDIAN SUMMER IN MACAU - macau rc turnover share sept




Surprising Strength: SP500 Levels, Refreshed...

The US Dollar opened at its highs, and has proceeded to back off those highs. As a result, after opening weak, US Equities have since strengthened.


For short sellers of the REFLATION trade, this has been frustrating, but respect and understand that there are still a lot of funds chasing performance into mutual fund year end AND that mathematical correlations aren’t 100%, particularly on shorter durations.


High R-Squares of inverse correlations (like SPX vs USD) are never perpetual. The #1 risk to my current market view is that, as the Burning Buck becomes consensus, that this dominating 2009 inverse correlation starts to unwind. In the long run, I think raising rates is bullish for America’s balance sheet. And don’t forget that after the Australians raised rates earlier this week, their stock market went straight UP!


For now, the risk management setup is as follows:


1.       Immediate term TRADE resistance (dotted red line) = 1080

2.       Immediate term TRADE support (dotted green line) = 1047


A close above 1071 (the YTD high) would be very bullish for price momentum. A close below 1047 puts this market’s bullish TREND line of support in play. That line, however, is a lot lower, down at 990 (see chart below).



Keith R. McCullough
Chief Executive Officer


Surprising Strength: SP500 Levels, Refreshed...  - a1


US Strategy: Dollar Rhetoric



Yesterday, the S&P 500 closed at 1,065, up 0.7% on the day.  Day four of the S&P 500’s rally as the momentum behind the recovery trade continued into Thursday.  Also, earnings season got off to a solid start with AA, RT, and MAR and PEP all reporting better-than-expected results on the bottom line, while domestic demand trends are still an issue.


In addition, September same-store sales came in ahead of elevated expectations, rising for the first time in over a year; a number of companies in the retail space also raised EPS guidance. 


Four of the six best performing stocks in the Consumer Discretionary (XLY) were Household Durable names, with the LEN and DHI the top two.  The homebuilders were up on speculation that expectations that the first-time homebuyer's tax credit would be extended for another 6 months. 


The market also benefited from a larger than expected drop in initial claims.  Yesterday, initial claims fell 33,000 to 521,000 in the week-ended Oct 3rd; below consensus expectations of 540,000.  The four-week moving average fell to 540,000 from 549,000, the lowest level since January 2009.


Yesterday’s portfolio activity included buying EWT – Taiwan Index.  Coming in yesterday, Taiwan was down -1.4% over night, and I have been waiting here for a down day to buy into ahead of the Chinese stock market opening again.


The dollar index fell 0.7% to its lowest level since August 2008. Support for our “bombed out buck” is coming from all around the world today.  In particular key Asian central banks intervened heavily in the currency markets yesterday on fears that the appreciation of their currencies against the US dollar means that their exports could be losing ground against China. 


The VIX declined for the fourth straight day and is now down 15.7% over the past week. 

Yesterday four of the nine sectors outperformed the S&P 500, with every sector positive except utilities, which was flat on the day.  The three best performing sectors were Materials (XLB), Energy (XLE) and Industrials (XLI), while Utilities (XLU), Healthcare (XLV) and Financials (XLF) were the bottom three.  We are currently long the XLV. 


Today, the set up for the S&P 500 is: TRADE (1,050) and TREND is positive (988).   The Research Edge quantitative models have 9 of 9 sectors in the S&P500 positive on TREND and 8 of 9 sectors are positive from the TRADE duration.  The only sector not positive on TRADE is the Utilities.        



Howard Penney
Managing Director


US Strategy: Dollar Rhetoric  - S P500


US Strategy: Dollar Rhetoric  - s pperf


US Strategy: Dollar Rhetoric  - s plevels

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The Wendy’s turnaround story will not be complete until it can find ad advertising message that resonates with the consumer.


Today WEN is launching its biggest ad campaign in years with a focus on product quality and a new bacon cheeseburger meant to take on competitors’ premium burgers.  The tag line for the campaign is "You Know When It's Real" as it attempts to emphasize fresh ingredients and in-store preparation.


Thinking back to the initial success of the McDonald’s “I’m lovin it” slogan and Burger King’s rejuvenation of “The KING,” both advertising campaigns were critical in successfully driving incremental customers.  To date, Wendy’s has not benefited from the money it is spending on advertising and marketing.  For reference, Wendy's spent $305 million on ad time and space in the U.S. last year while McDonald's spent $820 million, according to TNS Media Intelligence.


Yesterday’s move in RT was interesting – the upgrade helped – but it’s over done.  For RT, the biggest red flag continues to be food costs.  Even with better reported sales than I was modeling for the quarter, food costs as % of sales were up nearly 300 bps with favorable YOY commodity costs!


RT’s company same-store sales were surprisingly good relative to the industry.  RT’s outperformance relative to Knapp Track grew to 4 points in Q1 versus 2.4% in 4Q09 (though softer prior year comparisons account for some of this outperformance).  RT’s traffic outperformance grew to 9-10% during the first quarter from 8-9% in Q4 so the company’s average check continues to be under increased pressure. 


Management addressed the issue of its lower average check and stated that it is focused on increasing its average check to the $12.50 to $14.50 range from its current mid-$11 range with some benefit expected as early as the second half of fiscal 2010.  Specifically, management thinks it will have some ability to take price in 2H.  The company is relying on this menu price increase combined with new products, changing menu mix with more appetizers and dinner items (dinner entrees have moved to 45% of sales from 25% last year) and reducing incentives as the company overlaps promotional efforts from January to help boost check going forward.  I was surprised by RT’s sales performance this quarter so the company could continue to surprise me but taking price in this environment without hurting traffic will prove difficult.  To that end, management stated on its earnings call, “I think what's most important is we want to drive traffic, it's most important to us right now and we will continue to drive positive traffic at whatever cost that represents.”  So despite the focus on average check, getting people in the restaurant continues to be the company’s primary focus.


Franchise same-store sales growth was weak in the quarter while SG&A was a little lower than I was modeling.  Contributing to the decline in SG&A were reduced advertising costs as marketing dollars were shifted from television to promotion and lower supervisory labor as RT increased the span of control for both regional and area supervisors.  RT increased its span of control about 6-9 months ago so the associated decline in SG&A was nothing new, but this type of cost savings initiative is concerning in the long-term as it often impacts the customer experience.







This habit is hard to kick!





OCTOBER 9, 2009





With all the noise from SSS having passed, let’s see what it REALLY means as it relates to the underlying trend in consumer spending. As a reminder, let’s keep in mind that Personal Consumption is about $10 trillion. Retail sales is only $3.7 trillion. Chain store sales is about $500 billion, and yes that number continues to shrink as more retailers opt out of reporting monthly numbers to the National Retail Federation. While this is hardly an original thought, the bottom line is that underlying trends are getting better on both a one and 2-year basis. The latter is particularly important given that it blocks out noise associated with weather, fashion, etc… In looking strictly at the math – which has not been a bad bet of late – we’ve got another three months of this. Then we need a stronger consumer to keep the trajectory going. Are you willing to make that bet? I’m not. I’m sticking with those companies that are proactively managing their businesses to win regardless of the underlying consumer climate. That’s when the winners will be more apparent. I continue to believe that there will be a meaningful quality/junk bifurcation trade in 1Q10.






Some Notable Call Outs


  • Absent in yesterday’s partnership announcement between JC Penney and Liz Claiborne was any mention of the small, but high profile menswear collaboration with John Bartlett. While the line was well received by the fashion world, it too will be shuttered as the Liz Claiborne and Claiborne wholesale brands convert to a licensed model.


  • Earlier this summer we passed on a blog post from Fashionista suggesting that LVMH was shopping DKNY. Now the same blog is suggesting the company has had enough with its smaller, money losing fashion brands, Celine, Loewe, and Kenzo. Supposedly DKNY is also still for sale but so far there have been no serious offers. We have no track on this French luxury powerhouse, but with media power shifting to the blogosphere we can’t rule this one out.


  • While sales in early September were expected to and did get a boost from Labor Day timing, it’s also worth noting that week 5 was also a strong week. Most retailers reported strength at the end of month, which likely coincides with the beginning of the extreme volatility (weakness) that began to permeate the malls at this time last year.





-Yohji Yamamoto Inc., a Japanese distributor of mens and boys clothing, has filed for bankruptcy protection with the Tokyo District Court - Japanese investment company Integral Corp. released the news Friday by issuing a press release stating that it will finance the fashion house’s restructuring efforts. Yohji Yamamoto, which was rumored to be suffering, has called a press conference for Friday evening in Tokyo. A spokewoman declined to comment at press time. <>


-US Retail Sales See First Rise In a Year - US retail sales have seen the first rise since the financial crisis of September 2008. September’s sales were up 1.1% on the same month last year, according to the Retail Metrics comparable sales index. The rise was attributed to stronger autumn fashions, more aggressive promotional activity and a particularly weak comparative performance when the markets collapsed last September. Fashion retailers that beat expectations included Limited Brands, owner of lingerie chain Victoria’s Secret, which saw a 1% rise in sales despite analysts predicting a 2.4% drop. Teen clothing chain Aeropostale saw a 12.7% sales rise. The US luxury market is still in decline with department stores such as Neiman Marcus and Saks reporting double digit declines. <>


-Obama Allies Continue Laying VAT Groundwork - Despite President Barack Obama's "firm pledge" not to raise "any form" of taxes on families making less than $250,000 per year, the President's advisors and Democratic allies continue to float the creation of a Value-Added Tax (VAT). "It's getting more and more obvious that President Obama and Democrats in Washington, D.C. are laying the groundwork for a VAT," said ATR President Grover Norquist. "Apparently not content with violating his tax promise several times during the healthcare reform debate, President Obama now wants to tax every purchase made by every American -- including those earning less than $250,000." <>


-Levi’s Third-Quarter Profits Fall - Falling sales in the U.S. and European markets coupled with rising costs led Levi Strauss & Co. to a 41.2% earnings slide during the third quarter. For the three months ended Aug. 30, the San Francisco-based denim giant saw earnings decline to $40.7 million, compared with earnings of $69.2 million during the same period a year ago. Selling, general and administrative expenses rose $7.4 million, or 1.9%, to $396 million. <>


-Skechers USA Inc. announced that the company is expanding into Mexico - The Los Angeles-based company has entered into a deal with Leon, Mexico-based footwear company Grupo Charly to exclusively license and distribute the brand in Mexico. Grupo Charly will use its manufacturing resources in Vietnam to produce the collection, according to a statement. Men’s and women’s shoes will hit key retailers in Mexico this year, and children’s product will debut in 2010. Additionally, Grupo Charly plans to open a minimum of 10 Skechers retail stores in Mexico by 2014, with the openings beginning next year. Pushing a major expansion initiative, the brand announced earlier this week its upcoming move into India, and other deals for distribution in Chile, Malaysia and Brazil have already been inked. <>


-Gap Inc. plans to move its Man­hattan offices downtown without downsizing the staff - The San Francisco-based retailer is consolidating its two New York creative offices into a 200,000-square-foot space at 40 Worth Street in TriBeCa, putting the creative teams from the Gap and Banana Republic divisions — including designers, technicians and production personnel, as well as some business functions that support the corporate office — under one roof. The teams will be phased into the new site starting next year and finishing by the end of 2012. Gap says there are financial benefits in combining in one place over the long term but the short-term, however, will incur costs associated with the move. <>


-Ferragamo Plans to Open Stores in Mongolia, Turkey in 18 Months - Salvatore Ferragamo SpA, whose shoes are worn by Jennifer Lopez and Zhang Ziyi, plans to open stores in Mongolia, Turkey and Egypt to tap rising demand for luxury goods in emerging economies. The Florence, Italy-based company may start stores in those locations in the next 6 to 18 months, adding to planned ones in China and the U.S., Chief Executive Officer Michele Norsa said in an interview in Hong Kong. The board meets today to review 20 projects that may lead to the opening of as many as 10 stores globally next year, he said. <>


-Majestic Athletic Airs First Network TV Commercial - With the start of the MLB (Major League Baseball) Divisional Series, Majestic Athletic will be airing its first network television commercial.   Majestic’s spot is one of few product ads that feature actual MLB on-field footage. The ad promotes Majestic's new replica jerseys launched early this year.  The new replica offers a significant improvement by incorporating official fonts for player names and numbers. <>


-Dina Lohan launching her own line of footwear called 'Shoe-han' - Another member of the Lohan clan is getting into fashion. Last week, Lindsay Lohan made her debut as "artistic adviser" for the French fashion house Emanuel Ungaro. Now, according to, her mother Dina will sell her own line of foot wear. The forthcoming, and very affordable, collection will be known as Shoe-han. No, this is not a joke. The shoes represents a collaboration between one of the world's most controversial stage mothers and a Long Island-based company called "I Love My Shoes." <>


-Christian Lacroix, which is in administration, receives a formal purchase offer from Ajman sheikh - The offer from Al Hassan Bin Ali Al Nuaimi, in cooperation with the couturier, must still meet the approval of the commercial court here. However, the Paris administrator told Agence France Press it is “likely” to meet approval because it would preserve jobs and pay third-party debts. A date for a hearing has yet to be fixed, but is expected around Oct. 20. It is understood Bernard Krief Consulting and Financière Saint-Germain also have submitted bids. <>





LIZ: Doreen Toben, Director, purchased 5,000 shares ($25k).


NILE: Diane Irvine, CEO, sold 6,000 shares ($366k) after exercising the right to buy 6,000 shares, roughly 16% of total common holdings.


PETM: Jaye Perricone, SVP Real Estate, sold 10,000 shares ($220k) after exercising the right to buy 10,000 shares, nearly 24% of total common holdings.


GIII: Deborah Gaertner, President of Women Sales, sold 4,000 shares ($64k) after exercising the right to buy 4,000 shares, nearly 14% of total common holdings.


PETS: Bruce Rosenbloom, CFO, sold 3,000 shares ($60k) after exercising the right to buy 3,000 shares, roughly 12% of total common holdings.


PERY: Cory Shade, General Counsel, sold 2,000 shares ($34k), roughly 31% of total common holdings.






The “Golden Week” that began with the celebration of the founding of the People’s Republic of China had seen “okay” traffic through Macau’s casinos until last Sunday when, according to DM, it seemed as though “the entire population of China…stormed the Gongbei border crossing into Macau”.   DM says that the Lisboa and the Venetian were particularly full and media were suggesting that revenues could be up as much as 40% on Golden Week last year.  While it will be a tall order to top the 53% year-over-year growth of September, October looks to be off to a very strong start.






Wynn Macau was expected my many to fall on its debut, seen as expensive and as having all the upside priced in.  Today, its first day of trading, it closed at HK$10.78 (up 6%).  This is good news, of course, for Wynn Resorts but also for Las Vegas Sands.  Wynn’s rival is planning to list the Venetian Macau Limited's operations in Hong Kong in the near future.  LVS has a more pressing need for cash than Wynn; debt covenant pressure and the restarting of Lots 5&6 mean that LVS needs a successful Hong Kong IPO.





Oceanus is on track for a December 18th opening, although the date hasn't been finalized. Oceanus is directly opposite Sands and will have roughly the same number of gaming tables (300-350), but has the advantage of being connected by footbridge to the ferry terminal.  Frank McFadden will be in charge of Oceanus.  He has an impressive track record, having worked with Sands Macao from it’s opening until 2006 when he began working for Stanley Ho, starting at the Grand Lisboa.  Sands is now ran by Pete Wu, another impressive operator who has revitalized the property since he came on board.  The fact that Oceanus has a footbridge connection to the ferry terminal is undoubtedly an advantage for Oceanus, but Sands has 300 hotel rooms to Oceanus’ zero.  DM says that the Sands vs Oceanus battle will be one to watch. 



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