Q4 Retail Themes & Key Ideas Call: Tomorrow at 11am


Conference Call Friday October 30th. 11 AM EDT

The Research Edge Retail team, led by Brian McGough, will host a 4Q Retail Themes and Key Ideas call and web presentation along with CEO and Macro strategist Keith McCullough to review key findings on Friday, October 30th 2009.

From Dollar General to NIKE, Inc, the retail sector sits in the crosshairs of the current shifting economy. We'll cover actionable investment ideas over multiple durations. On the Q&A, we'll not only address all questions related to our content, but will also be available to comment on any retail tickers from a TRADE/TREND/TAIL risk management perspective.

The call will be available to subscribers and trialers of Research Edge Retail, and will include:

  • Macro impacts on global consumption patterns
  • Demand and supply interplays regionally & globally
  • The margin cycle in global Retail
  • Shifting Private Equity dynamics, and their role in structural change
  • Retail winners and losers from the Bankers Bonanza
  • Retail names and our Bombed Out Buck

Subscribers please contact to request call and presentation access. 

If you are a qualified institutional investor not currently subscribing to the Retail product, please reply or email our Head of Sales Jen Kane at to request a trial.





DG (Dollar General): IPO Black Book Available

We are proud to announce the availability of our DG (Dollar General) Black Book to subscribers to our exclusive Retail network. The report is available for institutions who are premium subscribers of the Retail team, and on an a la carte basis for all institutional Research Edge subscribers.


About Research Edge's DG Black Book

Dollar General will be one of the companies joining what we call the Banker Bonanza with its IPO. As the private equity / LBO industry moves to get paid for their boom-time excesses, we'll be putting this suspect class of IPOs under the microscope for our subscribers. Research Edge is one of the only research teams not muzzled from covering IPOs by participation in the banking deals. Un-conflicted, Un-constrained, Un-compromised.

Our DG IPO Black Book, which is included in the subscription for Premium subscribers of Brian McGough's Retail segment, is also available a la carte to others.


  • DG went private with stellar timing, just as unit growth halted, and margins compressed
  • We examine how the change in mix and other investments have impacted margins during its 'private period'
  • Given such changes, is the planned acceleration in store growth realistic, and are margins sustainable in that context?
  • Ultimately, what is a realistic price for the equity in light of the current market environment, prospects relative to competitors, and change in financial structure?


For Premium and Exclusive Retail subscribers, please email for your copy of the DG IPO Black Book.

For institutional investors who do not yet subscribe to Research Edge Retail and would like to trial the research or purchase the DG IPO Black Book a la carte, please reply to this email with your request.




DG (Dollar General): IPO Black Book Available - DG BB Cover



PSS: Levine, Oprah, and Project Runway

Here's Levine's response to a dialogue with a client about whether the PSS/Oprah deal had any airtime.

Author's Note: "Levine is one of the snazzier dressers in our office..."


Question: Any airtime for this deal?

McGough: Not sure...will check.


Levine: Come on guys, don’t you watch Project Runway?  See below-


Payless guest designer Christian Siriano will be a special guest on The Oprah Winfrey Show scheduled to air tomorrow, Thursday, Oct. 29. At the end of the program, Christian and Oprah announce a special Payless offer for Oprah viewers.

The offer is 50% off the customer’s entire purchase and will be valid from the initial airing of the program through normal store hours on Friday, Oct. 30. Viewers are directed to visit to access the special offer either by downloading a coupon or sending a special text message.




Quick observation from Allison Kaptur on our Tech Team about the add on Oprah's site.  "Most interesting to me is that this is not a smartphone offer – this is accessible to anyone with a phone that can text, which is probably a better choice for Payless customers in aggregate."


PSS: Levine, Oprah, and Project Runway - 10 29 2009 1 10 35 PM

Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.


Another sloppy quarter from a regional gamer. We're not feeling great about the next few quarters either.





Property commentary

  • Market share at Lumiere grew to 19% in 3Q09  from 15% last year
  • Bossier city benefitted from higher hold to the tune of $200k in EBITDA 
  • Belterra admissions increased 2.2%, despite spend per visitor decreasing.  Hotel occupancy also increased
  • Boomtown New Orleans revenues look to have stabilized on October, finally
  • Reno market continued to experience decline, but it looks like gaming revenues are stabilizing
  • Argentina was impacted by H1N1, currency, and inflation
  • Corporate expense - down 14% YTD and 2.3% in the quarter

Balance sheet

  • Have about $145MM of net cash
  • Amended credit facility in July for a price of 50bps incremental spread, 50 bps upfront fees, and a 15% reduction in committment
  • Issued $450MM of new debt and used proceeds to repay their most restrictive bonds and bank outstanding
  • Bottom line they increased liquidy and financial flexibility to pursue their development pipeline
  • They still need an extension on the credit facility, hopefully by the end of the year


Contruction Update

  • River City cash budget $357MM of which $228MM was already spent
  • Sugarcane Bay cash budget is $391MM
  • Baton Rouge asked for more extensions which were granted.  Allowed them to get a max price contract by 1Q2010. Will start construction in May 2010


  • Heighted competition in some markets, elaborate
    • Penn opened a new riverboat near Belterra
    • Indiana Downs also opened a new permanent facility vs a temporary tent
    • In New Orleans had several weak months over the summer due to the economy and promotions offered on the Mississippi Gulf Coast. (Like Beau Rivage)
    • Lake Charles, they do $400/ day while Delta Downs does $300/ day.  Delta Downs was aggressive on the promotional side - Dan Lee got defensive regarding BYD's comments about lack of demand to expand at Lake Charles. 
    • Entire Reno market still hurting from Indian gaming in CA
  • Timing of CapEx spend on Baton Rouge and Sugarcane
    • Sugarcane to be $425MM next year
    • Baton Rouge near $60MM
    • Maintenance capex of $40
  • Plan to have the R/C rolled over before they start construction of Sugarcane
  • Not seeing much cost reduction in construction
  • When would Baton Rouge open?  Contract calls for opening with 18 months of contruction so the earliest they can open is late 2011. Think that that is a reasonable time
  • Very honest on cannabilization on Lumiere when River City opens. Think that they can do $120-130MM across the 2 properties at marturity
  • Slower growth in Southern Louisiana due to being at capacity (re: L'Auberge)
  • Trends in Oct at L'Auberge? Continued at the 3Q09 pace, but Dan is more optimistic about Nov & Dec
  • Will order the steel by year end for Sugarcane Bay - assume that the extension of the bank line will be done by then
  • Hope that both Sugarcane Bay and Baton Rouge do a 15% cash on cash return.. won't break out the property's results (meaning L'Auberge / Sugarcane since Sugarcane is really just an expansion)
    • Good luck on that
    • L'Auberge should open in 2011

PSS: Oprah Likes Payless Too

Check out Oprah's web site, and the snapshot below. I said it before and I'll say it again -- this team 'gets marketing.'  Their shift to a consumer-direct traffic-driving approach instead of a 'throw a bunch of stuff against  the wall and see what sticks' mentality is a winner.


Linking itself to Oprah is not a complete unknow to those following the story closely. But what I care most about is whether this is in numbers. And it is not. Cost to PSS was not meaningful. Revenue benefit will be.


Remember, the story here is that strategies like this are taking PSS' traffic higher while avg selling price heads up. WMT is downsizing footwear. Costs of goods continue to come down, and wholesale brands are starting to work.


I repeat -- numbers are too low.


PSS: Oprah Likes Payless Too - 10 29 2009 1 10 35 PM


US Strategy – Last Man Standing

US Strategy – Last Man Standing


Only Consumer Staples remains positive on both TRADE and TREND.


On Wednesday, the S&P 500 closed at 1,042, down 2.0%.  Yesterday’s was the fourth down day in row for the S&P 500 and nearly every sector is broken on TRADE.  Once again the heightened volatility continued yesterday with the VIX up 12.4% and it has now moved 25.6% in the past week.  The VIX has been up for five straight days.  


The S&P 500 closed around the worst levels for the day, as the continued correction in the risk trade was fueled by concerns about the early steps on the part of global central banks to reduce some of the stimulus measures. The MACRO calendar is also working against the market, with the unexpected decline in September new home sales. 


The low beta defensive stocks outperformed yesterday.  Consumer staples were the best performing sector, with Tobacco stocks up on the day. 


Housing stocks underperformed again yesterday with the XHB down 4.9%, as new home sales fell 3.6% month to month in September to a 402,000 annualized pace, the biggest decline since last December and well-below the consensus of 440,000. In addition, August was revised down to 417,000 from 429,000.  The Homebuilders are rallying in early trading today; there is clear bipartisan support in Congress for extending the credit past Nov. 30 and making it available to more homebuyers.  What remains unresolved: just how far past Nov. 30, the size of credit and how many more buyers would qualify.


Yesterday, four sectors outperformed the S&P 500 and every sector was down on the day.   The three best performing sectors were Utilities (XLU), Healthcare (XLV) and Consumer Staples (XLP), while Energy (XLU), Financials (XLF) and Materials (XLB) were the bottom three. 


The Materials (XLB) continued to underperform today as the REFLATION trade unwinds, as the dollar is now up for five straight days.  The UUP was up 0.4% yesterday and is now up 1.8% over the past week. 


Today, the set up for the S&P 500 is: TRADE (1,028) and TREND is positive (1,017).   The Research Edge quantitative models have 9 of 9 sectors in the S&P 500 positive on TREND and 1 of 9 sectors are positive from the TRADE duration.  The only sectors positive on both durations is Consumer Staples.     


The Research Edge Quant models have 2.5% upside and 1% downside in the S&P 500. 


The Research Edge MACRO Team.


US Strategy – Last Man Standing - S P500


US Strategy – Last Man Standing - s pperf

US Strategy – Last Man Standing - s plevels