RETAIL IDEA LIST
CHANGES THIS WEEK:
NKE: Moved Nike back to Core Longs from our Bench. It's expensive and we're concerned about management changes, but the reality is that it could take years before anything management-related manifests in results. Until then, it's one of the few names in consumer that looks positive over every investment duration.
CRI: Off our short-bench. It's been sitting there for three quarters, which is way too long to wait for a catalyst. We have a negative bias toward the business model, but can't get an edge on timing.
DKS: Off of our short list. As we highlighted in our note last week, this is the first time in a while where DKS management set expectations at a level that are actually achievable.
M: We bumped this down from the core short list to the bench. This one is all about timing. We still think that the group (including M) will have a very ugly 2H. But for the next few months the catalysts are likely positive. And with M, unlike KSS or JCP, there's real estate value support.
GES: Off our short list. The stock is down 36% over the past year, and year-to-date short interest more than doubled to 24% of the float. Are numbers still too high? Probably. But with margins already down to 6% from 16% in three years and $5.60 per share in net cash on the books, this short has mostly played out.
ANF: We were about to take this off our long bench as we couldn't find a convincing angle aside from the management/board changes. But with 32% of the float short, this company could do something right -- even if by mistake -- and the stock will rally. Still need to vet this one.
SKX: A company that has done a lot right in recent years. But it was one of the worst looking names in our SIGMA screen this past week.
EVENTS TO WATCH
NKE - Nike signs Jameis Winston and Marcus Mariota
Takeaway: UA has the rights to 'The Combine' apparel (shirts, shorts, and socks) which explains why the top 2 rated quarterbacks for this years draft were rocking Under Armour jackets in an interview snap shot we pulled below. But, this will be the last time that either wears anything but Nike. As long as they behave themselves. And that's always been an issue for NKE, exhibit A… Johnny Manziel who just checked out of rehab. Mariota was a NKE lock given his Alma Mater (Oregon Ducks a.k.a the Nike Ducks), but we have to assume that Winston came at a little higher price tag. Jameis even wore Adidas footwear during the combine.
FL - Foot Locker finds digital fit with new shoe app
Takeaway: No surprise that FL incorporated a lot of the same features that NKE introduced 2+ months ago with its SNKRS app into the company's first mobile app. We're referring primarily to the release calendar and store locator features. Foot Locker paired that with limited shopping functionality and sneaker emojis. The direct business totaled 12% of sales at FL last year -- the lion's share of which was Eastbay, with the other store banners within the portfolio under developed relative to other players in this space. Over the past 5 years FL was able to take productivity and returns up as the company rationalized its store base and took capital out of the model. This release is just another example of how the company needs to reinvest in order to drive future growth -- while at best maintaining Nike at 73% of purchases and 80%+ of sales. FL remains one of our top shorts.
TGT - Target Website, Apps Overwhelmed by Demand for Lilly Pulitzer
Takeaway: These limited release collections are just that - limited. No doubt that Lilly Pulitzer was a big coup for TGT on day one exhibited by the internet outages, but TGT has had some big wins in the past with Missoni and Phillip Lim which sold out almost instantly. Missoni in fact caused the same type of outages back in 2011. It's a good way for the brand to make media waves, but doesn't mean much from a comp perspective unless TGT can some how get Lilly to leave a line in TGT year around. We doubt that happens.
KSS - Retirement of Senior Executive Vice President Ken Bonning
WMT - Wal-Mart to Cut Management Role to Simplify Store Operations
ICON - Seth Horowitz, Iconix Chief Operating Officer Resigns
KSS- Kohl’s Taps Thakoon for DesigNation Collection
Abercrombie & Fitch to Open 1st Vancouver Location
AAPL - Apple in talks to launch Apple Pay in Canada: WSJ
Rakuten Buys Stake in China’s Fanli
TGT - Target does creative fitness deal with Lifetime
Former Ralph Lauren Exec Launches Lingerie Collection
Chris Evert Launches Tennis Line With Tail
Mall Developer Alfred Taubman Dies