Retail Callouts (5/8): KATE, LULU, AMZN, EBAY, WMT

Takeaway: LULU/Kit & Ace conflict of interest makes Chip exit more likely. KATE - Buy the stock for Mother's Day. AMZN/EBAY ChannelAdvisor Comps.

EVENTS TO WATCH

Retail Callouts (5/8): KATE, LULU, AMZN, EBAY, WMT - 5 8 chart2 B

 

 

COMPANY HIGHLIGHTS

 

KATE - To see our full note KATE – Happy Mother’s Day CLICK HERE

 

LULU - Kit&Ace Conflict of Interest, Chip Exit More Likely

 (http://www.wsj.com/articles/an-exotic-cashmere-upends-lululemon-1431044063)

 

Takeaway: When we added LULU to our Best Idea's List in June of 2014 (we removed LULU from our Best Idea's List on 3/24/15) we outlined the probable outcomes resulting from Chip's activist push. Where we shook out after weighing the puts and takes was a) Chip would not get his way and b) eventually sell his stock. Chip is a brand builder, not a brand leader and he was vocal in an interview with PwC in 2014 about his displeasure his non-compete imposed restraint. The writing appears to be on the wall for his complete exit from the company now that Kit and Ace is nearing critical mass.

In our LULU Black Book in March 2015 we said that there’s $4.00 in earnings power hidden in this company, but we need the conviction that management could find it. We are still far from convinced, though the leadership on the board has proven over the past 12mnths that it is willing to separate itself from Chip. In order to justify a 30x p/e and give anyone hope of something in the $70s or $80s (presumably what you’re playing for in buying it today) we think that the company needs to completely reset its business model.

 

 

OTHER NEWS

 

EBAY, AMZN - ChannelAdvisor April Comp Sales

Retail Callouts (5/8): KATE, LULU, AMZN, EBAY, WMT - 5 8 chart1

 

WMT - Wal-Mart grabs some former Target Canada assets for $350-million

(http://www.theglobeandmail.com/report-on-business/wal-mart-grabs-some-former-target-canada-assets-for-350-million/article24326484/)

 

KSS - Kohl's expands 'shop online, pick up in-store' service

(http://www.retailingtoday.com/article/kohls-expands-shop-online-pick-store-service)

 

RL - Ralph Lauren Launching Luxe Concept in Milan

(http://wwd.com/retail-news/designer-luxury/ralph-lauren-launching-luxe-concept-milan-10125740/)

 

John Legend to Open H&M Store

(http://wwd.com/retail-news/mass-off-price/john-legend-to-open-hm-store-10125422/)

 

Warby Parker continues to expand, opens store in Chicago

(http://www.chainstoreage.com/article/warby-parker-continues-expand-opens-store-chicago)

 

JCP - Joe Fresh to be pulled from J.C. Penney stores in 2016

(http://www.theglobeandmail.com/report-on-business/international-business/us-business/joe-fresh-to-be-pulled-from-jc-penney-stores-in-2016/article24310076/)

 

Advent brings IPO of perfume chain Douglas forward - sources

(http://uk.reuters.com/article/2015/05/07/douglas-ipo-idUKL5N0XY5BW20150507)

 

Fitbit Files to Go Public

(http://www.nytimes.com/2015/05/08/business/dealbook/fitbit-files-to-go-public.html?_r=0)

 


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