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Takeaway: UA - Killer growth is getting costly. DKS opens new concept in HIBB's backyard.

UA – KILLER GROWTH IS GETTING COSTLY

Link to full note: CLICK HERE

Takeaway: What’s hotter, Brand or cost structure? At some point, EPS has to grow. It will, but at 15x a best case EBITDA # 5-yrs out, timing matters.

Every headline out there today will talk about how UA is simply killing it – and it’s well-deserved. UA’s brand heat continues to roll full steam ahead, and the company is proving itself out to be one of the true generational growth stories in Consumer.

That said, we think it's more than fair to point out that Revenue growth is accelerating, but earnings growth is decelerating. In fact, this company has not grown earnings since 4Q14. When 2015 is said and done, we’re likely to see revenue, EBIT and EPS grow at 25%, 15%, and 10%, respectively. That’s not the kind of ‘World Class’ growth algorithm that we’d expect from a World Class Brand like UA.

We understand that the company is investing today in order to capitalize on (and create outright) growth opportunities tomorrow. We like when companies play offense like that. But at 75x earnings and 36x EBITDA, is it too much for us to expect that earnings grow faster than Wal-Mart? We don’t think so.

DKS, HIBB - DICK'S Opens Mobile, AL Store

(http://investors.dicks.com/financial-information/news-releases/2015/07-09-2015-154647468.aspx)

This is the first 'All-American Sport Center' (which pairs a Dick's Sporting Goods and Field & Stream under one roof) concept that DKS will have opened and it's right in HIBB's backyard.  3 Hibbett stores fall within an average of a 10 mile drive of the new DKS location with an average drive time of just over 15 minutes.  It's just one store and one example, but we've seen an incredible overlap in competition over the past 15 years in this industry and we think that the regional competition gets even more difficult as DKS continues to fill out its Southern portfolio and Academy continues to push East. That's not good for HIBB where the 5,000 sq. ft. store and lack of e-commerce business doesn't come close to competing with the selection of a Dick's Sporting Goods or Academy.

Retail Callouts (7/23): UA, DKS, HIBB, WMT - 7 23 Sports locations 

WMT - Wal-Mart Is Ending Overnight Hours at Some Stores

(http://www.bloomberg.com/news/articles/2015-07-22/wal-mart-ends-overnight-hours-at-some-stores-as-part-of-revamp)

At one point these 24 hour stores made a lot of sense, but now the internet solves at least a part of that. Probably a good move by WMT -- allowing the company to dedicate its resources to getting the in-stock and in store presentation closer to where it needs to be overnight, while chopping a little bit off cost out of the model to help pay for the minimum wage hikes and investment in e-commerce.

ICSC - Comps Decelerate, 12 More Weeks of Tough Compares

Takeaway: Sharp deceleration in the 2yr trend line, which is what we truly care about, over the past 3 weeks as retail laps tough compares through July. That continues through September and BTS.

Retail Callouts (7/23): UA, DKS, HIBB, WMT - 7 23 ICSC ytd trend

Retail Callouts (7/23): UA, DKS, HIBB, WMT - 7 23 ICSC yoy

OTHER NEWS

JWN - Trunk Club to Enter Women’s

(http://wwd.com/retail-news/direct-internet-catalogue/trunk-club-launches-womens-10189733/)

WMT - Walmart Acquires Remaining Shares to Take Full Ownership of Yihaodian e-Commerce Business in China

(http://news.walmart.com/news-archive/2015/07/22/walmart-acquires-remaining-shares-to-take-full-ownership-of-yihaodian-e-commerce-business-in-china)

WMT - Walmart Opens New e-Commerce Fulfillment Center in Bethlehem, PA

(http://news.walmart.com/news-archive/2015/07/22/walmart-opens-new-e-commerce-fulfillment-center-in-bethlehem-pa)

WMT - Wal-Mart’s Mexican Profits Rise, Will Spend $800 Million in Bribery Case

(http://wwd.com/retail-news/mass-off-price/wal-mart-mexico-bribery-10191552/)

HD - The Home Depot Announces Agreement to Acquire Interline Brands

(http://ir.homedepot.com/phoenix.zhtml?c=63646&p=irol-newsArticle&ID=2069902)

M, AMZN - Report: Macy’s treads on Amazon’s turf

(http://www.chainstoreage.com/article/report-macy%E2%80%99s-treads-amazon%E2%80%99s-turf)