Takeaway: We are removing Hibbett Sports (HIBB) from Investing Ideas (SHORT).
Please be advised that we are removing HIBB (as a short) from Investing Ideas today. According to Hedgeye CEO Keith McCullough:
Oversold, finally – and I wanted to take the short idea off after a big market correction. We can always put it back on higher. Retail Sector Head Brian McGough's research view has not changed.
Editor's Note: This is an excerpt from Hedgeye morning research. Click here for more info.
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Some sneaky central planning dudes in Beijing stole the Greek headlines overnight by floating some rumor action (National Pension Fund buying!) out there. Yep. That’ll get your attention in an illiquid market. This fueled the biggest intraday move in the Shanghai Composite Casino since 1992!
Shanghai closed up +5.5% after being down 14% in the three prior days. Ex-Thailand (down -0.9%) Asian Equities were pretty much green across the board.
If you’re trading China and you don’t have your seat-belt on, please fasten it.
Also, in case you were wondering, the Chinese are doing this because the economic data there continues to be a disappointment.
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Takeaway: Chain Store Sales Put Up a Big Number, Need to See More as Comps Remain Difficult | BONT sale leaseback = defense, not offense.
Chain Store Sales Put Up a Big Number, Need to See More as Comps Remain Difficult
Takeaway: After a noticeable sequential slowdown in the 1-yr trend line last week, we saw a meaningful acceleration against tough comps from 2014 translating to the best 2yr comp reading we've seen reported in 2015. We'll need to see more of the same as comps remain difficult across retail until we get through September and BTS.
BONT - The Bon-Ton Stores, Inc. Announces Sale-Leaseback Agreement
Takeaway: This isn't an offensive move by BONT, and the market said as much yesterday. The deal covers 20% of BONT's 30 owned properties and the deal terms aren't overly attractive. Plus, we think it's hard to justify paying ~$15 per square foot for department store pads in markets like Milwaukee, Green Bay, and Joliet. These stores are some of the company's most attractive doors with sales per square foot 170% to 350% above the fleet average. So, why didn't BONT monetize more doors -- if these are the terms WP Carey was willing to pay, it's entirely possible that the company didn't want more of what BONT was offering.
KSS - Kohl’s Corporation Announces $600,000,000 Cash Tender Offer for Certain Notes
TUES - Tuesday Morning Corporation Announces CFO Departure
PIR - Pier 1 Imports Appoints Retail Industry Veteran Jeffrey N. Boyer Executive Vice President and Chief Financial Officer
TGT, RAD - Ex-Target exec to lead store ops for Rite Aid
Authentic Brands Group Acquires Tretorn
Kering - Potential Suitors Emerge for Sergio Rossi
Barneys to Open Men’s Store in San Francisco
Client Talking Points
Sneaky central planning dudes stole the Greek headlines overnight, throwing some rumor action (National Pension Fund buying!) out there, delivering the biggest intraday move in the Shanghai Composite since 1992! (closing up +5.5%); ex-Thailand (down -0.9%) Asian Equities were pretty much green across the board.
Yes/No, risk On/Off – this is a certified political gong show at this point, but in the midst of it the Europeans still have to report slowing economic data. German Retail Sales went negative -0.4% year-over-year (Greek Retail Sales -1.9% year-over-year), Italian unemployment still sucks at 12.4%, and most PPIs were still year-over-year deflationary.
That wasn’t a typo – that was the 1st > 2% down day of 2015 (SPX has only had 5 of those in the last 2 years!), but there were 20 greater than 2% down days in the 6 months (JUN-DEC) of the last “European Crisis” (which incidentally was the last big 2H U.S. economic data slowdown “surprise”; VIX in the high-teens very different than VIX 11-12).
**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET with housing commentary from Housing & Macro Analyst Christian Drake.
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Top Long Ideas
We came out of the most recent earnings report being very positive about management doing all the little things right. They continue to prove that they are some of the best operators in the industry. In a quarter where ZOES opened 12 new company-owned restaurants they managed to decrease both COGS and labor. We view ZOES as one of the best small cap growth names. The company is set-up for long-term success for the following reasons:
PENN’s new property, Plainridge Park in Massachusetts, had a strong opening. We expect slot win per day of $400, above Street expectations. In addition, June state gaming revenues will begin to roll out in 1-2 weeks. We expect June to be as strong as May, setting up Q2 to be estimate-beating quarter for PENN.
After a Fed-fueled week of strength in slow-growth, yield-chasing asset classes and long duration fixed income, both the Dollar and interest rates re-couped their losses from Fed Week. The dollar declined, rates increased, and as a result, those long of gold took some pain. Will this continue? Will a long, sustained rate liftoff ensue? We don’t think so. We continue to repeat that the chance of further downward revisions to forward looking growth estimates from the Federal Reserve and consensus macro is much more likely than not. The attempted suspension of economic gravity from policy makers weakens the currency and puts pressure on bond yields. We remain long of this set-up with gold and long-duration fixed income.
Three for the Road
TWEET OF THE DAY
PODCAST (5mins) Lacalle: This Time Is Different In Greece https://app.hedgeye.com/insights/44956-lacalle-this-time-is-different-in-greece … via @hedgeye @dlacalle
QUOTE OF THE DAY
The horse is here today, but the automobile is only a novelty - a fad.
President of Michigan Savings Bank advising against investing in the Ford Motor Company
STAT OF THE DAY
53% of New York City’s 27,469 Airbnb listings are rented out for more than 60 nights per year, and 30% of them are managed by hosts who have more than one Airbnb listing to their name.
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