Hedgeye Senior Macro Analyst Darius Dale explains to Maria Bartiromo why the Fed is unlikely to raise interest rates this year and what investors should do in response on Fox Business' Mornings with Maria.
In this 5-minute presentation available only to The Macro Show viewers, Hedgeye Restaurants & Consumer Staples Sector Head Howard Penney presents an update on his sectors and previews his institutional conference call on White Wave $WWAV.
Takeaway: PIR is shaping up to be a binary outcome – Mgmt. vs the Street. We’re yet not sure where we come out, but it’s now high on our vetting list.
PIR - Seems Binary; Worth A Deeper Look
The earnings algorithm was nothing short of messy with a 2% comp and 3% sales growth deleveraging to -50% EPS growth. But with short interest at 3yr highs and expectations cut in half from where they were 6 months ago, an inline earnings number is enough for a rally on the print. We can poke holes in this story all day, but we need to candidly ask ourselves what management knows about the cost cutting and margin opportunity that the Street does not. While short interest more than doubled since the end of March to 15%, PIR continued to lever up to buy stock, with share count down 7% yy, and net debt to capital at 21% (vs -2% last year). This seems like a binary story to us -- -and we're not yet certain about which way it'll go. But this seems to us like a ratan balloon being held underwater -- it's only a matter of time before either the bulls or bears win in a meaningful way. We're adding this to our queue of names to vet more thoroughly, and will be back with a more concrete view by duration.
Other Factors That Caught our Attention
E-comm was up almost 100% in the quarter. With DTC penetration at 17%, up from 9% last year (and 4% two years ago), the quick adoption rate by the PIR customer looks promising at face value. But, PIR’s customer base is right in the Wayfair wheelhouse (amongst a litany of other competitors) and you have to believe that PIR’s merchandise assortment is enough to keep the customer coming back for more. Management would point to the fact that in-store online order rates were up 600bps YY to 31% as a way to prove that the brand is properly engaging with the customer across channels. We still have our doubts.
The sales to inventory spread improved marginally from where’s it been over the past 2 quarters, but the company still has a lot of wood to chop to hit its goal of a positive spread by years end. With promotional activity up YY in 1Q, we would have expected a slightly better improvement. Now the company will be forced to step up its promotional game through the balance of the year. Consensus gross margin expectations for the rest of the year call for 30bps of deleverage which seems optimistic with inventory at its current levels and e-commerce adoption rates and in-home fulfillment accelerating.
AdiBok - AN OFFICIAL LOOK AT THE ADIDAS YEEZY 350 BOOST LOW
RAD - 1Q16 Earnings
WMT - Report Alleges Wal-Mart Using Tax Havens
KORS - Michael Kors and John Idol Compensation Top $15 Million
AMZN - New regs pose drone dilemma for retailers, except Amazon.com
ICON - David Jones Joins Iconix as CFO
A&P Shopping It's Stores
ANF - Aaron Levine Joining Abercrombie & Fitch
FL - Foot Locker races to tell a story
Estée Lauder Europe Shuffles Executives
One of world’s largest retailers looking for a CEO
Jared opens new store banner
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Watch the replay for our Black Book presentation on The WhiteWave Foods Company (WWAV) below.
We have had WWAV on our Best Idea List since 4/11/14, and will provide a detailed 100+ page updated presentation.
Yes valuation is rich, but rightfully so, WWAV has been lapping its competitors in the marketplace. We strongly believe that this name still has more room to run. WWAV operates in many segments that are nowhere near their full potential, and are still gaining popularity among mainstream consumers.
Their brands are all number one or two in their respective categories, with the ability to transcend across categories. We have seen it with Horizon, entering the center-of-store with Mac & Cheese and other snacks and Earthbound into frozen, So Delicious into creamers, the list goes on and will continue to get longer.
Bottom line this growth story is not over, and we are very excited to tell you more about our thought process during our live presentation.
Longer term there are many way you can win with WWAV:
- Growth of the base business ― distribution growth & category expansions
- Growth through acquisitions ― string of pearls approach
- Sell the company ― many large CPG companies are looking for growth
US Toll Free:
Confirmation Number: 39984323
Materials: CLICK HERE
TICKERS: MAR, RCL, CCL
- June 23 - CCL Q2 2015 10am
Airbnb receives $24 Billion Valuation - Revenue is projected to top more than $900 million in 2015.
- The company projects revenues to grow to $10 billion by 2020, and expects $3 billion in EBITDA by 2020.
- For 2015 Airbnb is forecasting an operating loss of $150 million.
- Airbnb expects to close a $1 billion round of funding this year at the $24 billion valuation.
- Revenue growth rates over the past two years have been roughly 90%, and has largely contributed to its rich valuation.
- Listings on the site have more than doubled YoY, with 1.4 million listings at the end of May, compared to 600,000 listings in February of 2014.
- Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests.
Takeaway: If these forecasts prove true, AirBnB will be a major threat to the lodging and vacation rental industry.
MAR - MAR and TRIP announced yesterday that they are expanding their partnership and will add Marriott's global hotel portfolio to the TripAdvisor Instant Booking platform. Starting later this summer, travelers will be able to conveniently make a booking at any of Marriott's more than 4,200 hotels around the world without leaving the TripAdvisor site.
Takeaway: A great deal for TRIP as it builds out its Instant Booking platform and a smart decision by MAR. Don't fight the OTAs, collaborate instead.
RCL - will invest $3.5m on upgrading cruise facilities at Vietnam's Chan May Port. John Tercek, VP commercial development of RCL signed a berthing preferential agreement with Nguyen Huu Tho, president of Chan May Port. This is the first agreement between RCL and Vietnam. The upgrading of Chan May is expected to be completed in July.
Macau - Junket Industry Needs More Supervision, says US Trade Union. US-based International Union of Operating Engineers (IUOE) says it has sent a communication to the Central Commission for Discipline Inspection of the Chinese Government, claiming the government’s anti-graft policy will not work if Macau’s regulation of the VIP gaming industry is not to be extended.
Takeaway: IUOE has been aggressive in raising multiple issues within the gaming industry in Macau.
Macau - Casinos are keen on "compromise" over proposed smoking ban. MGM China Co-chairperson Pansy Ho Chui-king, said that they were simply trying to reach a compromise on the matter and were not attempting to pressure the government into reconsidering its plan to impose a full smoking ban on casinos.
Ohio - Ohio Senate is pushing to add 3,000 new gambling terminals. The push by the Senate to add lottery machines appears connected to a related provision that would allow the Ohio Department of Education, which receives funding from the lottery, to tap an extra $61 million from the lottery in the second year of the two-year budget.
Takeaway: Could be good news for Intralot and IGT.
China - May new home prices +0.6% m/m vs +0.2% in April
- Annualized (4.9%) y/y vs (5.7%) in April
- Prices down m/m in 41 of 70 cities vs 47 in April
Hedgeye Macro Team remains negative on Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.
Takeaway: European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.
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