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October 27, 2009



By now it should come as no surprise that October is shaping up to be a strong month for same-store sales.  In the last week alone we have gotten positive confirmation of such trends from JCG, LULU, DECK, and SKX.  With most of the focus on the absolute trends, the question still remains as to whether true underlying demand is in fact improving.  Or, is this just a case of really easy comparisons and conservative planning off of last year’s volatile base? 

In order to get a better picture underlying demand, we take a hypothetical look at October’s weekly same store sales (as reported by ICSC) , extrapolate the trends, and ultimately forecast what lies ahead.  Our exercise assumes  the two-year comp for the industry gets close to flat this month and remains there on a go-forward basis.  Holding the two-year trend constant, we then arrive at the commensurate one year trend that hypothetically lies ahead.  I know this is an overly simplistic “extend the trend” exercise, but the fact of the matter is that it is accurate more often than not when there are extreme year over year swings like we have right now .  As you’ll see, the one year monthly comps will have to meaningfully accelerate, even from here, in order to achieve a flat performance on a two year basis.  Such a radical improvement to the upside for November and December seems out of the picture, even with the strength we are seeing today.


Weekly Comparisons


Expected October Retail Chain Sales Monthly Estimate based off of reported weekly results is 1.5%.

                Note: Timing of Halloween will benefit from 2 days of Halloween (Friday and Saturday) this year





Some Notable Call Outs

  • In attempt to marry design, ecommerce, and a bit of competition, Beta Fashion has been launched in the UK.  The site, which is ecommerce enabled, sells fashion apparel and collections entirely based on user-submitted designs.  After ideas are submitted, a panel of professionals as well as other members of the site’s community can vote and choose which designs are worthy of production.  The goods are then sourced and sold in limited edition runs on the website.  While this may not be a model for economies of scale, it certainly has potential to showcase design talent which otherwise may have gone unnoticed.
  • After checking in with a private equity contact who focuses exclusively on consumer-related investments, there were a few interesting tidbits worth sharing.  First, I was told that financing is picking up for some of the better positioned companies in retail.  Small and middle-market businesses are now able to find liquidity, which is the first time in a while that we’ve seen such a trend re-emerge.  Secondly, there has been a small pick-up in the number of “books” floating around as we get towards year-end, with many of these potential deals stipulating a 4Q close.  The speed suggested here is largely believed to be unrealistic. 
  • A conversation with a large liquidator of merchandise (apparel, home, etc…) suggested that inventory in the closeout/disposition channel has dried up and the overall business is slow.   There is now the belief that the liquidation business has peaked and with inventory levels as lean as they are, business will remain slow unless there is a major change in overall demand.


-European Union - The EU could keep import duties on footwear from China and Vietnam - Diplomats from the European Union announced that the European Commission could propose and extension of 15 months on customs duties applied to footwear manufactured in China and Vietnam. This decision would be taken in spite of the widespread opposition from large footwear corporations which manufacture in these countries as well as from distribution companies in Europe. It is still not clear what route will be taken. European footwear manufacturers tend to be small to medium size companies and are concentrated in Italy, Portugal, Romania, Spain and Poland. The governments of these countries will support the continuation of these duties but it looks as if others, where there is no relevant footwear manufacturing industry any more, will be opposed. <fashionnetasia.com>

-Iconix Said Close to Deal With Ecko; Ecko Names VP, E-Commerce - Marc Ecko may be close to finding a new partner in Iconix Brand Group Inc. After months of speculation, a possible deal was in the works between Marc Ecko Enterprises Inc. and Iconix. Sources said the two firms are close to signing an agreement, and it could happen as early as today. The deal would give the marketing and licensing firm, which generates about $8 billion in annual retail sales, the rights to the Ecko brand and its trademarks. The deal also could help Ecko pay down significant debt owed to a group of lenders headed by CIT, as well as trade receivables owed to its sourcing agent, Li & Fung Ltd. Ecko hired investment bank Peter J. Solomon in November to assess and facilitate these strategic options. Mark Ecko Enterprises has named Bryon Colby, former managing director of e-commerce technology provider Fry Inc.’s New York office, vice president of e-commerce. In the role he will lead e-commerce and digital media strategy, including directing online creative services, merchandising, marketing and digital content. <wwd.com> <sportsonesource.com>

-BRAZIL: Four giants promise to protect the Amazon - On October 5th 2009 four of the world’s largest meat and leather companies signed an agreement in which they are committed to refuse the purchase of cattle from recently deforested areas of the Amazon. Marfrig, Bertin, JBS-Friboi and Minerva reached this agreement in Sao Paolo, Brazil. This decision is in response to the pressure of companies such as Clarks, Adidas and Nike who are demanding that their suppliers in Brazil guarantee that their products are not obtained from the destruction of Amazonia. <fashionnetasia.com>

-Italy - Caught red-handed! - Italian police arrested several tanners in the industrial Arzignano district for tax evasion. In total some 120 tanneries are under investigation in Italy’s most important tanning region. Police sources indicated that between 18 and 21 tanneries were directly involved in the police raids so far and that the unpaid taxes amount to more than €240 million. More arrests are expected soon. <fashionnetasia.com>

-Lululemon Hikes Third Quarter Guidance - Lululemon Athletica inc. raised its guidance for the third quarter. The company now expects diluted earnings per share to be in the range of 17 cents a share to 19 cents a share as compared to its previous guidance range for diluted earnings per share of 11 cents to 13 cents. The company's improved guidance reflects stronger than anticipated net revenues for the quarter. The company now expects net revenue to be in the range of $110 million to $112 million for the third quarter of fiscal 2009. <sportsonesource.com>

-Survey Finds U.S. Consumers Ready to Go Green - A high percentage of U.S. consumers are expected to convert to eco-friendly products across many industries, including 59 percent in apparel and 74 percent in health and beauty, according to a report by consultancy group Grail Research. For apparel, the most important feature for driving purchases of green goods, said the report, was the manufacturing of the product caused minimal harmful emissions and the packaging is made of recyclable material. For health and beauty, the most important factors are that the product is natural and not tested on animals. <wwd.com>

-Retailers and Vendors Charge Ahead on Sustainability - The global apparel industry is embracing sustainability as a key to long-term survival. Fears that the recession would slow or halt investments in sustainability, environmental initiatives and corporate social responsibility appear to be unfounded. In fact, executives said as consumers around the world continue to feel the sting of the financial crisis, the case has strengthened for better corporate practices that would spur efficiencies and lower resource consumption. <wwd.com>

-Fiber Price Sheet: October 27, 2009 -



-U.K. Store closures hit fashion and footwear - One in 10 retailers closed their doors between January and September this year according to research released today by the Local Data Company. Fashion and footwear was one of the worst casualties of the recession with 17.9% of stores in the womenswear and kidswear sectors and 12.4% of menswear stores shutting their doors in the first nine months of this year. Footwear also fared badly with 14.9% of stores closing. <drapersonline.com>

-Armani, Ferragamo Expand Online - Salvatore Ferragamo SpA on Monday became the latest fashion company to launch its own online store, while Giorgio Armani went one further and unveiled plans for mobile commerce. Customers of Florence, Italy-based Ferragamo will be able to shop on its redesigned Web site ferragamo.com in Italy and the U.K. immediately, and in the U.S. and other European markets in the next few months, Ferragamo said. <wwd.com>

-Ruffian to Design Macy's Line - Macy’s Inc. has enlisted Ruffian design duo Brian Wolk and Claude Morais to create two capsule collections for an upcoming men’s private label line called Threads & Heirs. It’s a strategy inspired by Target’s Go International guest designer series and marks the first time Macy’s has called upon talent from the high-end women’s fashion arena to shape a private label men’s program. Threads & Heirs will be produced by LF USA’s Oxford Collections, a subsidiary of Li & Fung Ltd. <wwd.com>


NKE: Hans van Alebeek, VP, sold 16,000 shares after exercising options to buy 16,000 shares for a net gain of $392k.

COLM: Klenz Walter, Director, sold 2,300 shares after exercising options to buy 5,250 shares for a net gain of $52k.

URBN: Harry Cherken Jr., Director, sold 30,000 shares for a net gain of $990k.

JCG: Tracy Gardner, President – Retail & Direct, sold 39,000 shares after exercising options to buy 39,000 shares for a net gain of $1.16mm.

MOV: Richard Cote, EVP-COO, sold 166,000 shares after exercising options to buy 200,000 shares for a net gain of $579k.

NFLX: Leslie Kilgore, Chief Marketing Officer, sold 25,800 shares after exercising options to buy 25,800 shares for a net gain of $851k.