YUM - Yum Brands cutting outlook after disappointing China results, noting the company is experiencing unexpected headwinds.
We all know that this company has been the bellweather US Consumer name in China for well over a decade. Perhaps it still is. But we should note that just two weeks ago Nike printed 30% revenue growth in China, and 51% growth in income. In addition, UA's Kevin Plank was on the financial media this morning talking about the company's new retail stores in China (on the heels of his Pan-Asian Brand Tour with Steph Curry). This is not a NKE/UA vs YUM thing. But it certainly shows how pockets of strength can exist when the consumer appetite (no pun intended) is there.
RL - Ralph is launching it's POLOTECH Shirt -- basically a Smart Shirt that it says is the next generation of wearable technology.
We give RL props on this one. The company has really taken RLX from a low-end department store brand into something much better and consistent with the broader brand statement. On the flip side, this shirt cost $295. Yes $295. For that amount of money, you can buy a FitBit, an UnderArmour Compression shirt, a pair of training sneakers, and a six pack of 5-Hour Energy shots. On top of that, RL is going to have to compete with everyone from Apple to Garmin, to UnderArmour, and Nike on the back-end user experience/community.
City Sports in Chapter 11, Might Liquidate
This City Sports announcement isn't surprising. This announcement coupled with the Sports Authority default rumors which were circling in the early part of the year come at an interesting time with the 'athleisure' space ripping the way it has over the past several years.
City Sports is a relatively small player in the athletic space with annual revenues just south of $50mm. It operates in high rent MSA's with relatively low asset turns and weak margins. Average sales per store is just $1.73mm. By comparison, a suburban retailer like Big 5 has similar sized stores but, is churning out $2.23mm per store.
City Sports cited 'a competitive market for athletic apparel' for its profitability declines, which began in earnest in August of 2014. No question that City Sports core market is becoming increasingly more difficult as the LULU and LULU imitators build out capacity in key trade areas like NYC, Boston, DC, etc. But our sense is that it’s the brands within the 4-walls that are really putting the screws to City Sports with direct/e-commerce growth in excess of 40%.
KSS - 1 Year Anniversary of nationwide Yes2You rollout.
Prior to the nationwide rollout the program had 10mm members in its beta test. Within a month of the launch that number was up to 15mm, by years end it was 25mm, and in the most recent quarter that number was in excess of 30mm. The company had to launch its Y2Y rewards program because it needed to solve 2 of its biggest problems a) brick and mortar traffic levels and b) its inability to attract new customers. It's credit portfolio is tapped in the sense that its current partner CapOne won't go any lower on the FICO ladder, by that we mean KSS extended credit terms to nearly all credit worthy customers who wanted a card as it took credit sales as % of total sales from 50% to 60% from 2011-2014. The problem is that the tender agnostic Y2Y rewards program puts credit income (25% of EBIT) at risk now that customers can go into a store and pay with an Amex, Visa, etc. and get double points. That plus the fact that KSS has reached a pivotal point in its maturation cycle where it has already captured 75%-80% of all customers that could potentially shop in a Kohl’s store makes this an underappreciated risk. For a full rundown on our thesis see our most recent KSS Black Book: Putting Credit To The Test (Link CLICK HERE)
NKE - Bob Hurley to Retire as CEO of Hurley, will now "focus on building and cultivating the community and extending Nike’s relationships with elite athletes."
DLTH - Duluth Trading Files S-1
OXM - Terry R. Pillow retiring as CEO of Tommy Bahama Group on January 30, 2016