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    MARKET EDGES

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Takeaway: TGT says it will beat AMZN, easier said than done. The year of UA continues with Curry and Murray rolling.

TGT, AMZN, KSS - "Target Will Beat Amazon" Online

(http://abegarver.com/post/120664444495/target-coms-president-challenges-amazon)

Takeaway: Pretty bold statement by TGT's head of E-Comm. Granted he joined the company in 2013 and was elevated to his current position in December of 2014, so he isn't responsible for the company's historically bad track record online (see chart below). We'd actually be concerned if he wasn't talking up his team's digital prowess. The company set ambitious DTC goals at its analyst day back in March, calling for 5 years of 40% growth. But we think it’s a little too early for TGT to throw down the gauntlet with AMZN whose online revenues are 17x that of TGT. TGT has the physical brick and mortar assets and a beefed up online presence which should help curb showrooming, but it'll be incredibly difficult for TGT to undercut AMZN especially when the retailer has no margin to protect.

Lastly, TGT needs to prove that it can grow its online business without cannibalizing its brick and mortar sales. Look no further than KSS to see how difficult this actually is (the company has comped negative in its stores in every quarter but one from 2012-2014 as e-comm grew at a 28% CAGR). Plus, for TGT that channel comes in at a gross margin 650bps below the in-store average.

Retail Callouts (6/4): TGT, AMZN, KSS, UA, NKE - 6 4 chart1

UA, NKE - The Year of UA Continues

(http://www.bloomberg.com/news/articles/2015-06-03/under-armour-gets-shot-at-hoop-dreams-with-curry-in-nba-finals?cmpid=yhoo)

Takeaway: The year of UA continues with MVP Steph Curry leading his team to the NBA finals to take on NKE's poster boy King James. On the tennis court -- Andy Murray is in the semi-finals at the French Open (dressed head to toe in UA, but still wearing Adi kicks). Plus Tom Brady and Jordan Spieth had big wins at the Super Bowl and The Masters, respectively. UA has changed its endorsement tune a bit over the past few years going after more established talent, but that's been expensive for UA. Endorsements as a percent of sales have climbed ~400bps over the past 2yrs with the top line growing at an average of 30%. If there’s any real takeaway here it’s that as UA grows and succeeds in its own right, it is competing increasingly against the big boys (NKE, Adidas, Reebok, Puma) for marketable talent. It has a great advantage in that the brand is so hot, authentic and relevant. But those factors do not trump the economics associated with a higher ante-chip for sponsorship deals. We can see what’s coming on the cost side, now we just need the revenue to follow. It’ll probably come. But anyone looking for margins to go up might be in for a surprise.

OTHER NEWS

AMZN - Amazon offers free shipping for light items

(http://www.chainstoreage.com/article/amazon-offers-free-shipping-light-items)

WMT - Walmart renews commitment to associates, makes ‘significant’ change to name badges

(http://www.chainstoreage.com/article/walmart-renews-commitment-associates-makes-%E2%80%98significant%E2%80%99-change-name-badges)

Authentic Brands Group Signs Partnership Deal with Global Brands Group for Jones New York Brand

(http://wwd.com/business-news/financial/authentic-brands-jones-new-york-10140869/)

Zara USA Faces $40M Discrimination Lawsuit

(http://wwd.com/business-news/legal/zara-usa-discrimination-lawsuit-10140462/)

H&M to Open First Indian Store in New Delhi

(http://wwd.com/retail-news/specialty-stores/hm-to-open-first-indian-store-in-new-delhi-10140049/)

Neiman Marcus to be shoppable on Pinterest

(http://www.retailingtoday.com/article/neiman-marcus-be-shoppable-pinterest)