Retail Callouts (10/5): Hedgeye Retail Idea List, WMT Headcount Reduction

Takeaway: Wayfair moving up on short list. ULTA added to Long Bench. Wal-Mart scratching and clawing for every basis point of margin.

Retail Idea List

Retail Callouts (10/5): Hedgeye Retail Idea List, WMT Headcount Reduction - 10 5 chart1

**Moved Wayfair higher on our list of Core Shorts as conviction grows.

**Added ULTA to Long Bench. We were involved on the short side over a year ago as more of a tactical trade. But we're diving deep into the underlying long-term drivers now. Stay tuned.

 

WMT - Wal-Mart confirmed Friday it is eliminating 450 positions within its Arkansas HQ. This represents a 2.5% headcount reduction at the home office.

(http://www.chainstoreage.com/article/walmart-cuts-0-jobs-headquarters)

 

2015 has been less than a banner year for WMT. For starters the stock is down 24% YTD as the company took one on the chin as it invested in both its people and e-comm capabilities. The new minimum wage standard at $9.00 alone will cost the company $0.24 (up from the original guidance of $0.20) add on top of that investments in e-comm and Fx pressure and we get to an earnings growth rate for the year of -10% at the mid-point of the guide.

 

We've seen Walmart try to offset these costs over the past year by renegotiating terms with its vendors (not once but twice), cutting some 24hr locations, and reducing employee hours. Now its going after its headcount at HQ. The 2.5% reduction is just a drop in the bucket compared to the 13% cut TGT announced earlier this year. But, its pretty obvious that WMT is scratching and clawing for every bps of margin. That's bad news for the rest of retail.

 

SPLS - Staples announces it will not be open on Thanksgiving Day stating it want to allow customers, and employees to spend time with their families.  Staples stores had been open the prior two Thanksgivings.

(http://investor.staples.com/phoenix.zhtml?c=96244&p=irol-newsArticle&ID=2092307)

 

US Justice department is launching a new strategy to deal with counterfeit goods and cyber attacks.  Plan to include working with third party marketplaces and providing funding to local law enforcement in key jurisdictions.

(http://footwearnews.com/2015/business/retail/us-government-cyber-crimes-counterfeit-hacking-158559/)

 

W - Wayfair entering into agreement to have Alliance Data provide its private label credit card services.

(http://finance.yahoo.com/news/alliance-data-partners-wayfair-launch-113000042.html)

 

HBC - Simon Property & Hudson's Bay JV closed on acquisition of GALERIA Kaufhof properties.

(http://investor.hbc.com/releasedetail.cfm?ReleaseID=935020)

 

APP - American Apparel files Chapter 11 bankruptcy.  It reached an agreement with 95% of its secured lenders to implement a pre-arranged financial restructuring.

(http://investors.americanapparel.net/releasedetail.cfm?ReleaseID=935021)

 

H&M - H&M's first store in India sees impressive turnout for the opening.  Store is 25,000 SqFt in New Delhi's Citywalk mall.

(http://wwd.com/retail-news/mass-off-price/hm-makes-impact-on-india-retail-10251243/)


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