Retail Callouts (6/16): UPS Pushes On Pricing, Chain Stores Sales, UA, NKE

Takeaway: UPS pushes on pricing, with retail margins at peak, and retail sales slowing.

UPS Bulk Item Rate Hikes Bad For Retailers

(http://www.wsj.com/articles/ups-plans-to-end-some-shipping-discounts-for-holiday-season-1434409965?cb=logged0.8437177694868296)

Takeaway: Any way you cut it, this is bad news for retailers. The fact is that consumers increasingly expect retailers to offer up free shipping. In fact, we think that 'free shipping' will be an industrywide standard by the end of 2016. So the question is this -- If the shippers are starting to push back on pricing due to capacity constraints, and if consumers are highly unlikely to broadly accept paying for shipping when it was otherwise free -- then who is going to foot the bill? Yes, the retailers. If the retailers can find a way to push it back to their suppliers, then they'll do it. But very few have that power.  This is not what we want to see when retail margins are tracking at an all-time high, and makes it increasingly difficult to be bullish on this group, broadly speaking.

Retail Callouts (6/16): UPS Pushes On Pricing, Chain Stores Sales, UA, NKE - 6 16 chart1

 

UA - Class C Stock Dividend to Maintain Plank's Control

Takeaway: We rarely see stock splits structured in this manner, but this is all about Plank keeping control of the Board. He's currently sitting on 66.5% of the vote with 100% of the class B stock, but his ownership position has fallen almost 2 percentage points in a year from 18.5% in 2014 to 16.8% in 2015. At an ownership position below 15%, Plank's class B shares would be converted to class A and his grip on the company would be far less secure than it is today. The new class C structure the company announced yesterday is designed 100% to mitigate that risk.

 

UA, NKE - Sold-Out Curry MVP Shoe Price Doubles Online

(http://footwearnews.com/2015/business/retail/sold-out-curry-mvp-shoe-price-doubles-online-ebay-resale-36458/)

Takeaway: This is the first time we've seen UA basketball kicks hit the resale market in a material way. Nike engineered its distribution process to build hype in the aftermarket long ago, and has a few SKUs (The Air Yeezys for example) that are listed on eBay for $10k+. For UA, it's likely more supply than demand related...but whichever way you slice it, it's a win for UA. The company has found a star in Curry. The company has a lot of wood to chop both on the product and infrastructure side before it declares victory -- its footwear sales in 2014 at $430mm were only 25% greater than what Lebron James did for Nike alone. But it now has an asset it can use to grow the platform and demand is building evidenced by the activity in the resale market. The reality is that the technical merits of a product become far less important when they are for an athlete who is as universally likeable as Curry.

Retail Callouts (6/16): UPS Pushes On Pricing, Chain Stores Sales, UA, NKE - 6 16 chart2

 

Retail Sales Begin What Should be a 15-Week Deceleration

And so it begins… sales this week according to the ICSC index were up only 1.9%, the lowest rate in 15 weeks. Unfortunately, the weekly sales growth rate should be under added pressure through the end of September (i.e. through back-to-school) as we comp against a solid Summer of 2014.

Retail Callouts (6/16): UPS Pushes On Pricing, Chain Stores Sales, UA, NKE - 6 16 chart3

Retail Callouts (6/16): UPS Pushes On Pricing, Chain Stores Sales, UA, NKE - 6 16 chart4

 

 

OTHER NEWS

 

House Bill Aims to Close Internet Sales Tax Loophole

(http://wwd.com/retail-news/direct-internet-catalogue/internet-sales-tax-loophole-10154767/)

 

GPS - Gap Closing 175 North American Stores

(http://wwd.com/retail-news/specialty-stores/gap-closing-175-stores-in-north-america-10154542/)

 

LL - Lumber Liquidators promotes marketing head, cuts merchandising chief

(http://www.chainstoreage.com/article/lumber-liquidators-promotes-marketing-head-cuts-merchandising-chief)

 

OLLI - Ollie’s eyes IPO and 950 stores

(http://www.retailingtoday.com/article/ollie%E2%80%99s-eyes-ipo-and-950-stores)

 

Kmart taps DSW executive as marketing chief

(http://www.chainstoreage.com/article/kmart-taps-dsw-executive-marketing-chief)


6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more