04/16/15 09:14 AM EDT

Retail Callouts (4/16): NKE, UA, CROX, KSS, JCP, ETSY, GES, SHLD

Brian McGough

Takeaway: Athletic brands spending big on women. More wage pressure – still more to come. Etsy IPO – Good Idea or Bad Idea? CROX looking better to us.

COMPANY HIGHLIGHTS

NKE - Launches Largest Women's Campaign Ever

(http://www.adweek.com/adfreak/nike-turns-cant-can-its-largest-womens-campaign-ever-164059)

Takeaway: We always cringe when we hear 'biggest campaign ever'. The way we see it, if a company is growing, shouldn't every year mark the 'biggest campaign ever'? In fact, Nike generates about 20% of its sales from women -- or $5bn+. Put in context, Nike's women's sales are 10-20% greater than the combined total sales of UnderArmour and Lululemon. That said, Nike sees that LULU will arguably stop ceding share, and they see full well that UnderArmour is putting on a full court press with the recent signing of Misty Copeland and Gisele Bundchen -- on top of Kevin Plank's statement that Womens should be as large, if not larger than its Men's business. UA might be a threat...but perhaps the scariest number of all is Nike's $10bn SG&A budget. It could double its dollars for its' Womens line and nobody would even notice -- except the competition.

Giant Foods to raise minimum pay to $9 an hour

(http://www.pennlive.com/food/index.ssf/2015/04/giant_wages_9_a_hour.html)

Takeaway: Some companies may use the recent wage hike trend to hug their employees with a press release on wages that has minimal effect on the bottom line. Here Giant Foods is taking their minimum wage up to $9 an hour, noting that 2/3 of the employees already make more than that. Still 10,000 employees are getting a pay bump, and the Giant employees who already made $9/hr a week ago are probably now haggling their supervisors for a fair raise as well.

Our analysis shows that for wages in the department store space, KSS is at most risk with the highest potential impact to EPS, and the lowest compensation rate according to glassdoor.

This is not an issue now, and that's fine. But when retailers inflate temporary workforces in July ahead of back-to-school, and then again (but to a greater degree) around holiday, we think that the spread between those who have proactively managed workforces (WMT, TGT, TJX, MCD, etc…) versus those who have not (KSS, JCP, M) will widen.

ETSY - Etsy Inc. Prices IPO at $16 Share

(http://www.wsj.com/articles/etsy-inc-prices-ipo-at-16-share-1429132484)

Takeaway: So...Etsy is going public. This is either a really good idea, or a really bad idea. We're inclined to think it is the latter. Etsy is an online marketplace for handmade or vintage items, as well as manufactured goods that fit Etsy's 'green' guidelines. Etsy has about 54 million members -- about 39% of which are active. There are 1.4mm active sellers and 19.8mm active buyers globally. One interesting point is that Etsy is the largest B-Corp to go public. To meet B-Corp certification standards, a company has to meet certain environmental, transparency, and accountability standards. In addition, it made a 'considerable' commitment to consider the interests of its stake holders, not just its shareholders. That's admirable -- though as investors we need to account for how this approach accrues to shareholders. If it drives more active users -- both buyers and sellers -- then it's a pretty unique idea. But the stakes are high given that this company generates about $195mm in revenue, a 57% gross margin (good), but is losing money.