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Takeaway: Wayfair beats, at 2x sales we are adding it to our short bench. DKS Q4 e-commerce was strong, but the stores can't comp.

W - Wayfair Beats -- Adding to our Short Bench


In its third 'at bat' after going public, Wayfair finally beats expectations.  That said, the market already knew that one, with the stock trading up 27% in the last three days, and 56% in the last month. Furthermore, the company is still losing money -- a lot of it -- and as best as we can tell, that trend won't reverse itself for many years. The number of transactions were up 45%, which is impressive by any measure. But the average transaction size is only $191 -- a very difficult number for a furniture retailer to generate profits on.  The biggest call out is that the name is now trading at 2x sales -- which is right in line with RH. We can't even begin to list the number of reasons why that shouldn't be. We're putting W on our Short Bench.

DKS - e-commerce Saves the Day. But These Store Can't Comp

Takeaway: This is not the type of chart you want to be looking at if you sell sporting goods in a 50,000 sq. ft. box and have plans to expand the store base another 33%. And that could in part explain the muted store growth guidance on the DKS banner for the year. Store comps have been negative in 6 of the past 8 quarters while the company has been growing sq. ft. in the mid to high single digits. Guns/ammunition which naturally lend themselves to Brick and Mortar (at least we hope) haven't helped but we think the trend speaks for itself. People are buying more and more of what DKS has to sell online.

We wouldn’t typically beat a company up over outsized DTC growth - but DKS is a different animal. For starters we don't think a 50,000 sq. ft. box lends itself to a showroom, unless we're talking about RH. 2) DKS real estate deals aren't cheap. The company already needs a 9%/10% sales growth number in a given quarter to leverage occupancy. That's egregiously high especially if these stores can't comp without DTC. 3) Shipping costs aren't working in DKS favor. That would be fine if DKS online channel allowed it to reach new customers, but based on the trends we've seen it looks more like cannibalization. So now you have online transactions which used to be completed at the store coming in at a GM 700bps-1000bps below the brick and mortar business. That makes it even harder to hit the occupancy hurdle rates.

Retail Callouts (3/4): W, RH, DKS, UA, NKE, BBY - 3 4 chart1png 

UA Takes It's 'Alter Ego' (Superhero concept) From Apparel to Footwear. These things are far more popular with the high school athlete than many people reading this might otherwise think.

Retail Callouts (3/4): W, RH, DKS, UA, NKE, BBY - 3 4 chart2 


NKE - With 'Made By You,' Converse Lets Wearers' Portraits Sell Chucks


BBY - Report: Best Buy services president will leave company


EBAY - PayPal acquiring mobile payment startup


RSH - RadioShack accepting Gift cards until March 6