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Call Invite | General Mills Black Book (GIS) – The GIS Playbook for the next 12-18 months.

We have a positive bias to GIS and will be adding it to the Hedgeye Best Ideas list as a LONG.  The Best Idea call will be a detailed look at the company and what can be done to improve the overall performance of the company!


We break down the 90 page Black Book into three key points:



The opportunity to create significant shareholder value from repositioning the company is significant. The recent performance suggests that management may be too stuck in the past to reshape the company in a way that will accelerate top line growth. There have been a number of events over the past few years that suggest the timing is optimal for an activist to come on and re-shape management and the board.



GIS has done a lot of things to stave off an activist attack, but it will all be for nothing if they do not execute on their growth plan. GIS is a great company with strong brands, but its business practices and backward looking are insular. Reshaping the portfolio of brands, CPW and G&A cuts are just some of the ways to create significant shareholder value.



GIS needs to reshape the company to stay as a premier global food company! Alternatively, GIS would make a solid acquisition target, especially for a large consumer snack food company. GIS needs to accelerate its growth and management is struggling to do it internally.  In our view, selling the company would be an ideal scenario for all stakeholders. Or reinvent the company through meaningful acquisitions and divestitures.



We are cognizant of the fact that GIS is trading at a premium valuation and speculation is rampant that the company may be in play.  We agree the company is in play and it just a matter of time before the intrinsic value of the company is realized. 


The call will last about an hour including time for Q&A.

Retail Callouts (5/1): VFC, COLM, TGT, Puma

Takeaway: VFC not returning to 'smoke the quarter' mode anytime soon. COLM - call to be made here.


Retail Callouts (5/1): VFC, COLM, TGT, Puma - 5 1 chart2 D




VFC - Bad Setup Going Forward

Not a good quarter. 2% revenue growth and flat earnings pretty much says it all. While VFC technically hit the quarter, it was an ugly one from an otherwise quality company. This company only beat 2 of the past six quarters. It's no surprise the CFO Bob Shearer (one of the best in the business) retired.

Currency took 600bps off the top line, 70bps off of EBIT margins and cost VFC 13 points of earnings growth. That being said, sales still decelerated on a 1 & 2 yr basis on a currency adjusted basis. This is the first time in 11 quarters VFC did not grow earnings where 2% sales growth deleveraged into flat EPS growth.

Of course currency was a big headwind, but that's no secret. The question is, will the market continue to give global brands a free pass. We hear a lot of concern about NKE's ability to weather the FX market, but based on the guidance coming from NKE, VFC, RL, WWW, and COLM it seems to be the best operator. Despite the biggest FX hit Nike has felt in over five years, the company basically plans to leverage its top line growth rate into earnings by a factor of 2 (+msd sales into +dd eps).

Retail Callouts (5/1): VFC, COLM, TGT, Puma - 5 1 chart3


VFC's DTC continues to outpace consolidated sales growth up to 24% of sales from 23% last year, but was up only 5% (11% constant currency) a 700bps deceleration sequentially on the 2yr trend line. Having said that, the company now has over 1300 units globally. And, The North Face DTC was up 20% in constant currency compared to the company at 11%. That’s not good with for wholesale partners. Especially as the company is guiding to another year of 30%+ e-comm growth.

This is the worst SIGMA move we've seen from VFC in many years, with the sales/inventory spread at -5% at  4Q12. This is hardly a bullish margin setup, which makes it even more unrealistic to bank on VFC returning to 'smoke the quarter' mode anytime soon.

Retail Callouts (5/1): VFC, COLM, TGT, Puma - 5 1 chart1


COLM - Columbia Meaningfully Outperforming The North Face

Takeaway: This was a mixed bag. On one hand, this was the smallest beat (3%) the company has reported since 4Q12 -- and we all know that this is a company that smokes every quarter come hell or high water. But on the other hand, when we strip out the impact of PrAna, organic sales grew at 4%, and earnings grew at 12% -- which is very respectable from where we sit. It's also important given that COLM appears to be meaningfully pulling ahead of VFC's Outdoor businesses -- which is a rarity.

This chart is extremely telling. It shows the spread in growth for The North Face vs. the Columbia Brand (excl Mountain Hardware, Sorrel, and PrAna). Anything North of the x-axis represents TNF outperformance in a given quarter, while anything below = COLM outperformance. Over the past 5 quarters, COLM has materially outperformed TNF and in 1Q15 comped the comp. The sustainability is a critical issue for us to dig into. There's a call to be made here.

Retail Callouts (5/1): VFC, COLM, TGT, Puma - 5 1 chart4





TGT - Target to return 55 store leases to landlords, will auction remainder



Kering - Rihanna’s First Ad For Puma Released



Off-Price Retailers See Competition on the Rise



VNCE - Vince Opens First D.C. Boutique



Minimum Wage Hike Measure Introduced in Congress



Eyeglass Retailer Warby Parker Valued at $1.2 Billion


MTW: Removing Manitowoc from Investing Ideas

Takeaway: We are removing Manitowoc from Investing Ideas.

Please be advised that we are removing Manitowoc (MTW) from Investing Ideas today. "The main reason why I am taking it off, like Goldman Sachs, is to cut exposure – more a market call," writes Hedgeye CEO Keith McCullough.


Here's the report Industrials Sector Head Jay Van Sciver wrote explaining our reasoning in greater detail.


MTW: Removing Manitowoc from Investing Ideas - z moc

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Keith's Macro Notebook 5/1: Russell 2000 | German Yields | Volatility


Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.


The Hedgeye Gaming, Lodging, and Leisure team will host a conference call on Tuesday May 5 at 1PM to discuss the latest findings from our proprietary cruise pricing database.


Points of discussion include:

  • Expanded Pricing Database 
    • Almost doubled the number of itineraries to 20,000
    • Inclusion of river cruises and other ocean brands
    • Pricing two years out (on a rolling basis)
  • Latest pricing pivots (RCL,CCL, NCLH) 
    • (NEW*) weekly sequential pricing 
  • Is RCL holding price in the Caribbean?
  • New ship premiums
  • Same-store pricing 
  • NCLH 1Q preview
  • Research topic: Asia 
    • Pricing vs Bookings
    • China vs non-China
    • Ocean vs River

Sell in May and Go Away

Client Talking Points


The Russell 2000 has a very positive relationship to the USD, we like the Russell when the dollar is going up and we don’t like it when the USD moves lower (as U.S. consumer purchasing power goes down as well). The Russell is now signalling bearish trade (immediate term) and trend (intermediate term). 



The German 10YR Yield is up 157% since Monday (we care about rate of change not absolutes as a risk management factor). This is a mega move and it is driving the UST 10YR. People have been confused with the Fed getting easier and the USD going lower why bond yields haven't gone down as well...there has been a huge rate move that is correlated to European bond yields coming off of all time lows.


We have been highlighting this for the past few days, but risk ranges are WIDENING - this is a key leading indicator in our model and a signal to raise cash. Risk ranges are widening in the foreign currency markets and in the fixed income markets which eventually gets to the equity and commodity markets. Be very careful - Sell in May and Go Away on this bounce.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

The Dodge Construction Starts Index accelerated at its highest rate since 1982. The index was driven largely by non-building projects, which was 74% higher for the first three months compared to last year. The Architecture Billings Index (ABI), a survey of architects, increased ~3% month-over-month and ~5% year-over-year for March. The ABI Index typically leads nonresidential and residential construction spending by 9-12 months. More importantly, the ABI Index leads Manitowoc Crane Orders by 2 quarters. This suggests MTW’s crane sales should see a pickup in the first half of the year. MTW reports April 29th after the close. Earnings Call will be held at 10:00am eastern time the following day.


iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. Housing went 4 for 4 in a data heavy calendar for the sector this week with demand improving across both the new and existing markets and the fledgling acceleration in price growth finding some positive confirmation. The builder stocks had a choppy week of performance as investors held mixed opinions of earnings reports and management commentary out of DHI and PHM but, from a fundamental data perspective, the Trend remains one of discrete improvement.


Ten-year rates dipped 12bps on the week (forward-looking growth expectations) and the USD got crushed for a 1.5% loss. Growth and inflation expectations get priced in AHEAD of the more dovish policy tone resulting from any sign of deterioration in the labor market. Wednesday’s Fed meeting will be the next catalyst that will steer the market’s expectation on forward-looking growth and inflation. We expect the dots (forward-looking federal fund rate expectations) to be pushed out….again.

Three for the Road


LIVE at 130pm ET $ATHN Best Long Idea Q&A w/Healthcare Sector Head Tom Tobin Click here: https://app.hedgeye.com/insights/43841-live-athn-best-long-idea-q-a-with-healthcare-sector-head … cc @HedgeyeHC @HedgeyeHIT



The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.

Martin Luther King, Jr.


ATHN reported 290 basis points year-over-year Gross Margin expansion driving majority of Non-GAAP EPS Beat of $0.24 v $0.14 consensus (Consistent with our view that ATHN has tremendous operating leverage).

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.51%
  • SHORT SIGNALS 78.32%