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Takeaway: 1) De Beers 2 Negative Comments On Diamond Demand in Past Month - Staying short TIF. 2) Weekly Retail Sales still trending South.

TIF - De Beers 2 Negative Comments On Diamond Demand in Past Month

De Beers has made two moves over the past month that are extremely bearish for the diamond market and diamond demand more generally.  First the company announced that it would be cutting rough diamond prices by up to 9% in the face of weak demand. And just yesterday De Beers committed to pumping marketing dollars into China to attract gift givers in the 18-29 demo and pump up its penetration in 3rd and 4th tier cities. The largest diamond producer in the world cutting prices and spending up to attract consumers in 3rd/4th tier cities is hardly comforting.

For TIF --  Asia Pacific as a whole makes up 25% of TIF's revenue, China holds ~10% of the company's global store base, and its exposure to the PRC consumer is even higher when you factor in tourism spend. Yes, TIF is at a higher end of the scale than De Beers, but when a company with 50% market share of the total sales volume shows cracks, it’s tough to argue that it won’t reverberate through the entire industry. Especially when you consider the fact that diamond jewelry as a % sales at TIF is at all-time highs.

We went negative on TIF a month ago and while numbers for next year have come down by 5% from $4.78 to $4.55 since the last print, we still think this a good short. The reality with this company is that there are no obvious margin levers to offset the declining growth profile in the business, especially amidst increased late cycle risks. We’re staying short this one.


Retail Callouts (9/22): TIF, De Beers, Retail Sales Trends - 9 22 chart1

The downward trend in the ICSC and Redbook sales indexes shows no sign of abating.

Retail Callouts (9/22): TIF, De Beers, Retail Sales Trends - 9 22 chart2

Retail Callouts (9/22): TIF, De Beers, Retail Sales Trends - 9 22 chart3

SPLS, ODP - NY Post reporting that the Staples - Office Depot merger may be stopped the FTC's Deborah Feinstein.  The Post also ran an article cautioning FTC approval on the deal back in June.



NKE - Nike unveiled an expanded eyewear collection in collaboration with Kevin Durant.  Glasses start at $200 for adults and $140 for kids.


OLLI - Ollie's Names Robert N. Fisch, CEO of rue21, to board of directors, expanding the board from 6 to 7.


SHLD, AMZN - Sears hires new president of fulfillment Girish Lakshman, who has 15 years of experience with Amazon.


SPWH - Sportsman's Warehouse making 6.25mm share offering, value of ~$88mm as of yesterday's close.


GCO - Genesco Board authorized a $100mm in stock repurchase, replacing ~$15mm remaining on prior $75mm 2013 authorization.


PLCE - The Children's Place is amending its current credit agreement to extend the term until September 2020 and increase the revolving credit limit from $200 million to $250 million. (http://www.sec.gov/Archives/edgar/data/1041859/000114420415055829/v420679_8k.htm)