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The key call out in Consumer over the past 24 hours is one that probably slipped right by most Consumer analysts. Diving into the composition of MasterCard’s results, it certainly does not support those who are banking on a rebound in underlying consumer patterns.

While showing continued progress on a number of fronts this quarter, MasterCard’s US credit card volume continues to show no meaningful signs of turning around. In fact, credit card volumes for the last three quarters now, on a year over year basis, have been: -16.9%, -18.9% and -17.9%; not the kinds of numbers that signal a recovery. Granted, the volumes have stabilized and importantly they have arrested the decline that was in place from 2Q08 through 1Q09, but since then we have yet to see them move decisively back towards the positive column, which is what we’d expect to see amid the backdrop of a real (vs. perceived) recovery.   For reference, credit card volumes are a better proxy than debit cards for the discretionary side of the US consumer’s wallet, as consumers tend to revolve discretionary items, whereas they put staples on debit cards which are paid in full at the time of purchase.

Expect to hear more from us in coming weeks about the consumer finance angle as it relates to driving spending. It matters big time...




Some Notable Call Outs

  • Steve Madden management offered one of the more articulate looks into the M&A environment than I’ve heard in a while. The company is actively looking at making an acquisition, and is currently looking at deals in the $30-$40 million range. Additionally, the company actually has a Letter of Intent out on a deal that they expect to close by year end. Finally, the company is very focused on acquiring an athletic or athletic inspired brand. Now I guess we just sit back and wait for the press release...
  • According to Tweetbrands, a website that tracks the most commonly referenced brands on Twitter in real-time, Nike and Ikea are the only two retail or apparel names to crack the top 50. The relevance of such a tracking service is very low on a standalone, “snapshot in time” basis but we expect companies to watch closely both the frequency and context of real-time dialogue concerning their brands’ on Twitter and across other social networks.
  • While upfront orders still remain under some pressure, Ralph Lauren’s upside to its topline forecast was driven by strong acceptance of new products, a double-digit increase in replenishment, and the ability to accelerate shipments into the quarter to meet improving demand. Despite these positive sales drivers, management cautioned that wholesale customers still remain cautious in their ordering commitments through Spring and Summer ’10. As a result, it appears that “at once” orders and “read and react” will remain a key driver of near-term results should the demand environment remain better than forward orders would otherwise indicate.



China's Canton Fair Export Orders Rise on Christmas Demand - The Canton Fair, China’s biggest trade show, received 16 percent more export orders than six months ago as overseas demand for electronic gadgets and clothes picked up ahead of the Christmas shopping season. Contracts rose to $30.5 billion at the end of the 15-day expo in southern China’s Guangzhou, led by orders for machines, electronics and appliances, said the fair’s spokesman Chen Chaoren. European Union and U.S. buyers thronged the show, a barometer of foreign demand for local products, from Oct. 15, boosting visitor numbers by 14 percent, he said. <bloomberg.com>

Wal-Mart Settlement OK'd By Nevada Judge; Cuts Prices on Turkey, Televisions - Judge Philip Pro’s ruling in U.S. District Court in Las Vegas closed the book on 39 actions against the world’s largest retailer. The suits, filed in federal courts in 30 states, accused the company of cheating workers out of hourly wages by forcing them to work through breaks and other means. Wal-Mart said it would pay between $352 million and $640 million to settle the cases, but that the agreements would need individual court approval. In other news, Wal-Mart Stores Inc., the world’s largest retailer, cut prices on turkeys and plans reductions on flat-panel televisions to win holiday sales from rivals. U.S. stores are selling whole, 12-pound (5.4-kilogram) turkeys for 40 cents a pound starting today, Wal-Mart said in a statement. That’s a third of last Thanksgiving’s average price in a survey by the American Farm Bureau Federation in Washington. A a 42-inch Sharp Corp. flat-panel TV for $498, down $270 from its regular price, and a 46-inch model, which usually sells for $1,158, for $698, according to Wal-Mart. <wwd.com> <bloomberg.com>

Disney Wins Approval for Park in China’s Richest City - Walt Disney Co. won government approval to build a theme park in Shanghai, giving the world’s largest media company access to consumers in mainland China’s richest city. The agreement with China to construct Disney’s fourth park outside the U.S. “marks a very significant milestone,” Chief Executive Officer Robert A. Iger said in a statement. Disney and its Shanghai partners are now allowed to move toward a construction and operation agreement, the statement said. Disney’s foothold in mainland China comes after a decade of negotiations and will cost 24.5 billion yuan ($3.6 billion), according to Hong Kong newspaper Wen Wei Po. <bloomberg.com>

October Shows Signs of Life for Retailers - On Thursday, when individual chains report their October sales, the industry is expected to post its strongest sales figures yet in this recession. Contrary to predictions made only a few weeks ago, the nation’s stores could be poised for a merrier Christmas this year than last. The latest sales figures come from his organization, which estimates sales for all forms of payment, including cash, checks and credit cards. They show, for example, that sales of women’s apparel increased 0.6 percent in October, the first positive figure since August 2008. However, women’s apparel sales are still 12.2 percent lower than in the heyday of consumer spending, in October 2007. That theme — up compared with last year, but still down compared with the height of the boom — played out across several retailing categories, including jewelry and luxury goods. <nytimes.com>

Industry Sees Positive Signs in California - Retailers and manufacturers in the nation’s most populous state said the battered economy seems to have bottomed out despite persistent high unemployment and state budget shortfalls. Signs of improvement are emerging as businesses stabilize after slashing costs and staff and revising their expectations and strategies. Retail buyers are placing new orders, as well as reorders, in a flurry of pent-up spending. And there are indications that some shoppers are beginning to crack open their wallets. Kohl’s opened 30 California stores in September — all in former Mervyns locations — and hired 4,200 employees in the Golden State. American Rag Cie, the specialty retail chain that has three locations in Los Angeles, San Francisco and Newport Beach, Calif., plans to expand its jeans section, World Denim Bar, as a stand-alone store with seven new units in California over the next two years. <wwd.com>

American Eagle's Times Square Screening - American Eagle’s four-floor, 25,000-square-foot flagship opening Nov. 19 in Times Square here is an entirely different animal for the retailer –— double the size of the next largest unit in the chain. In addition, the flagship, at 1551 Broadway at 46th Street, will have a 25-story interactive LED sign — that’s 15,000 square feet of outdoor electronic signage. All the wattage will be used to capture consumers’ attention. “They kind of know we’re here,” said Jim O’Donnell, chief executive officer of American Eagle Outfitters Inc. “Now they’ll really know we’re here.”As for the signage, the company plans to go big and bold and be “part of the Times Square landscape,” O’Donnell said. “We priced the signage and if we sold every inch of that screen out to third parties, we would offset the entire rent of the building. At some point we might do some cobranding with some companies.” <wwd.com>

Retailers Bet on Warm and Fuzzy Holiday Themes - Nostalgia and other emotions — visions of sugar plums, softly falling snow, reindeer and Santa — will be plentiful in holiday marketing campaigns but may not be enough to shake most American consumers out of their sleepy spending ways. Shoppers with tighter budgets and lower sights set on gift giving are struggling with worries about job security and high unemployment, depressed home values, flat personal income and tougher consumer credit terms. <wwd.com>

'Shoptimism' Book Tracks the American Consumer - Lee Eisenberg is totally consumed — with consumer culture. The author of “Shoptimism: Why the American Consumer Will Keep on Buying No Matter What” (Free Press) aims to find out why enough is never enough in the land of the shopper. He left no cash wrap uncovered, interviewing market researchers, demographers, behavioral economists and neuroeconomists, who use brain scans to determine what sets consumers’ hearts aflutter. In the course of his research, Eisenberg got a job at Target and donned the red shirt so that he could explore the dynamics of buying and selling from the point of view of the sales associate. <wwd.com>

New Balance Names Licensing Partner - New Balance announced on Tuesday that the firm has tapped Boston-based Klone Lab LLC, as the new U.S. licensing partner for all sandals and slides. The agreement is effective January 2010. Klone Lab has worked with various other footwear brands including Speedo, Reef, Timberland and Converse. The company will launch a collection of New Balance slides and sandals for the spring ’10 season, followed by kids’ and wellness footwear for spring ’11. <wwd.com>



  • Thomas Szkutak, SVP & CFO, sold 70,000 shares for a gain of $8.3mm.
  • Jeffrey Wilke, SVP, sold 20,000 shares after exercising options to buy 20,000 shares for a net gain of $2.2mm.
  • Andrew Jassy, SVP, sold 15,000 shares after exercising options to buy 15,000 shares for a net gain of $1.7mm.

DECK: John Gibbons, Director, sold 2,1000 shares for a gain of $195k.