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RETAIL: STRENGTH IN LICENSED APPAREL?

October 22, 2009

TODAY’S CALL OUT

With the sports apparel data showing large increases and an acceleration yesterday, we suspect that there is some underlying strength in the licensed apparel business. It has been sometime since the licensed business has been mentioned as a positive, but we believe there are some interesting trends developing that give the fan-based merchandising business a tailwind. While we are not making a call that license apparel is back in full force like it was three to four years ago, here are few reasons why we could see a pick up:

  • Season to date, NFL viewership has increased the most since 1989, with average games being viewed by 17.4 million fans.
  • CBS and Fox have averaged 22.3 million viewers for their doubleheader games on Sundays, which makes these broadcasts television's most-watched each week.
  • The MLB playoffs have benefitted from close games and extra innings helping to increase viewership 13% over last year.
  • The New York Yankees could add a boost to the licensed business as its fan appeal spans far beyond the local NY market. Participation from other large market teams such as the LA Dodgers is also a plus.

We don’t want to get too carried away, but the beginnings of the trend should not be overlooked. Companies that could benefit from the surge in licensed apparel and fan based apparel:

  • Adidas - it’s impact might be insignificant on the grand scheme of things, but owning the NFL license helps.
  • Sporting good retailers: DKS, HIBB- the big winners who benefit from all fan based apparel,
  • UA: although the brand isn't being displayed across the headlines or on the jerseys, Under Armour is closely associated with football and could benefit from a rub-off effect. Fans identify with their favorite athletes and ultimately attempt to mimic their look.

 RETAIL: STRENGTH IN LICENSED APPAREL? - 1

LEVINE’S LOW DOWN

Some Notable Call Outs

  • It’s not often that a retailer shares its weather forecast for the upcoming quarter with the Street. However, Tractor Supply included its weather outlook along with other more traditional guidance on its 3Q conference call. The company’s weather analytical provider is forecasting a slightly colder October followed by a slightly warmer November and December. I wonder if they get an hourly breakdown as well…
  • As M&A continues to heat up in the retail and apparel space alongside a growing IPO calendar, capital raising also appears to be building momentum. Diapers.com (supposedly the fastest growing retailer in the U.S over the past 3 years) just secured $30 million in financing from existing and new investors including Accel Partners and Bessemer. The company intends to use the capital to secure its position as a leading online merchant of baby products. Looks like Babies R Us and BuyBuyBaby are in for some formidable competition.
  • In case you missed it, Kroger hired General Motors’ former head of Global Human Resources to lead its human resource efforts. On the surface it appears there are many similarities between the two businesses. Large union workforces, outsized cost structures, and aggressive competition are just a few worth mentioning. Oh, the irony…

MORNING NEWS 

China’s Economy on a Road to Recovery - China’s economy grew by 8.9 percent in the third quarter of this year, the government announced, shoring up the notion that the world’s third-largest economy is on a road to recovery. Still, questions remain about the sustainability of China’s recovery from the world economic downturn, with much of the growth dependent on massive government spending and public works projects. Central government leaders have not ruled out funneling more money into stimulus spending, and have repeatedly said recovery is in its initial stages. <wwd.com>

USTR to Address Counterfeiting at U.S.-China Talks - Amid rising trade tensions, Obama administration officials plan to raise concerns about intellectual property rights and enforcement at high-level meetings in China next week. The U.S.-China Joint Commission on Commerce and Trade, set for the industrial city of Hangzhou on Oct. 28 and 29, is a forum to address bilateral trade issues. U.S. Trade Representative Ron Kirk and Commerce Secretary Gary Locke will cochair the meeting with Chinese Vice Premier Wang Qishan. Secretary of Agriculture Tom Vilsack also will be in the U.S. delegation. <wwd.com>

Germany May Apply VAT Charge to Municipal Services, FTD Says - Germany’s new coalition government may require municipal companies to pay value-added tax on services they provide, Financial Times Deutschland reported, without saying where it got the information. Under the proposal, services including state sewage and refuse collection would no longer be exempt from VAT and would pay a 19 percent tax, the same rate as private firms, the newspaper said. The move may provide federal and regional authorities with as much as 4 billion euros ($6 billion) in added revenue, the newspaper said. <bloomberg.com>

China: Textile, garment exports' biggest plunge in 3 decades - China's textiles and garments exports are expected to shrink by 10% this year, the biggest decline in 30 years, said Sun Ruizhe, vice president of the China National Textile and Apparel Council. Data from the General Administration of Customs of China show that the value of the country's textiles and garment exports in the first nine months of 2009 amounted to $121.64 billion, down 11.17% year-on-year. The export value of textiles and garments in the first eight months of 2009 amounted to $104.89 billion, down 11.81%, compared with the same time period of 2008. <fashionnetasia.com>

Holiday Survey Suggests Shopping Early and On the Cheap - Retailers are squaring off with both their consumers and their landlords this holiday season, and so far they’re winning only half the battle. A new survey from Accenture showed that, even though more shoppers might come out on Black Friday, consumers generally plan to make gift purchases early this year with a focus on discounted goods. And the Federal Reserve’s Beige Book showed consumer spending was weak in most of the country in September and early October. Already, projections place holiday sales at about even with last year’s dismal take and well below 2007 levels. Meanwhile, stressed-out stores are asking for deals from their landlords and getting them. Accenture, which surveyed 526 consumers last month, found that 69 percent expect to do the bulk of their holiday shopping by Dec. 7, up from 60 percent last year. <wwd.com>

Sears enters the online books price war - Amidst the online book price war between Amazon.com, Walmart.com and Target.com—and Barnes & Noble’s Inc. entry into the electronic book reader business—Sears.com is launching its own merchandising tactic. Once customers have purchased a book online from any of those retail sites, they can e-mail the receipt to Sears.com and receive a credit equal to the purchase price of a $9 book and apply the credited amount toward a purchase of $45 or more on Sears.com. “The $9 credit can be used at Sears.com on the purchase of any items, so it`s like getting the books for free,” says Sears senior vice president of online Imran Jooma. <internetretailer.com>

Best Buy and Netflix partner to stream movies to TVs on the Internet - Best Buy Co. and Netflix Inc. have taken a step to bridge the gap between Internet and television. Best Buy is now selling online and in stores exclusive, Insignia-branded Blu-ray disc players that enable Netflix members to stream movie and program picks over the web to their televisions. <internetretailer.com>

China: Implementing anti-dumping measures on nylon imports - To protect local companies, China is planning to impose anti-dumping duties up to 36% on imports of nylon 6, which is widely used in the production of hosiery and knitted garments, from the US, EU, Russia and Taiwan. While tariffs for the other countries will be between 4% and 9.7%, the highest duties will be given to products from US companies. <fashionnetasia.com>

Bob Pressman Among Fred Leighton Bidders - On Monday, a set of investors that includes former Barneys New York principal Bob Pressman asked a judge to approve its $25.8 million bid for the 38-year-old vintage fine jewelry brand in U.S. Bankruptcy Court in Manhattan. According to court documents, the prospective offer came from a group made up of Och-Ziff Capital Management Group, jewelry firm Kwiat and Triton Equity Partners, where Pressman serves as chief executive officer. <wwd.com>

Designers Rally to Save Garment Center - “This is the game changer.” That’s how Yeohlee Teng summed up Wednesday’s Save the Garment Center rally that drew 750 supporters including Michael Kors, Diane von Furstenberg, Nanette Lepore, Elie Tahari and other designers onto Seventh Avenue to raise awareness of the New York neighborhood’s plight. “This will change the conversation with the city,” Teng said after the event. “It won’t just be about square footage anymore. It will be about issues that are more indicative of what is going on now — saving jobs, being American and cultural identities.” <wwd.com>

Nigeria: Textile revival fund aims to boost economy - Speaking at an International Conference on Nigeria's Textile Industry in Lagos, the Minister of State for Commerce and Industry, Mr. Humphrey Abah, said the Nigeria's Federal Government is planning to launch a revival fund to save the country's shrinking textile industry, which aims to inject $57 billion growth to the economy, according to Minister of State for Commerce and Industry Humphrey Abah. <fashionnetasia.com>

Under Armour Settles Sunglasses Lawsuit - Under Armour Inc. settled the trademark infringement lawsuit against a Denver company’s sunglasses. The suit alleged Navajo Manufacturing Co.’s “Ultimate Action” shades copied the design and style with a logo like an italicized version of Under Armour’s interlocking “U” and “A.” Navajo’s lawyer, Simor Moskowitz, told the Daily Record in Maryland tha “the parties had a meeting of the minds.” Terms of the settlement were not disclosed <sportsonesource.com>

PSS Tops WWD Growth in Brand Strength List - Landor Associates studied 2,500 brands to determine which showed the greatest increase in brand strength from 2005 to 2008. All were selected from Young & Rubicam Brands’ BrandAsset Valuator database. Top scorers, called Breakaway Brands, were evaluated on the basis of relevance, how necessary the brand has been in a consumer’s life, and what made it special or unique. 1 PAYLESS SHOESOURCE: Growth in brand strength 58 percent, “Payless was thought of as a not nice, but cheap place to get shoes,” said Landor’s Nelson. “They transformed into a shoe shop that democratizes fashion.” Matthew Rubel was hired as chief executive officer in June 2005, and promoted to ceo of parent company Collective Brands Inc. in 2008. He sparked the change to redesign dark stores, created children’s play areas, and expanded offerings to name brands, including Airwalk and Dexter, along with designer labels Lela Rose and Alice + Olivia. For his spring runway show, Project Runway alum Christian Siriano paired couture gowns with shoes from his Payless collaboration. In 2010, new Payless stores are planned in Russia through Collective Brands and franchise partner M.H. Alshaya Co. <wwd.com>

Billionaire Green’s Arcadia Says Profit Rose on Young Fashions - Arcadia Group Ltd., the U.K. fashion retailer owned by billionaire Philip Green, said full-year profit rose 2.1 percent as the Topshop and Miss Selfridge chains increased sales of cut-price fashions to young shoppers. Operating profit climbed to 266.2 million pounds ($441.6 million) in the year ended Aug. 29 from 260.7 million pounds a year earlier, the London-based company said today in an e-mailed statement. Arcadia didn’t report net income. Revenue increased 2.7 percent to 1.89 billion pounds, while sales at stores open at least a year were unchanged. <bloomberg.com>