Retail Callouts (10/15): NKE, WMT Wage Implications for Major Retailers, KSS

Takeaway: NKE BIG targets=Very Doable. Wouldn’t want to be a wholesaler while this occurs. WMT wage move=significant margin headwind for US retailers.

NKE | QUICK TAKE ON ANALYST MEETING

Takeaway: BIG targets = Very Doable. Say what you want, but the model’s changing for the better. Wouldn’t want to be a wholesaler while this occurs.

For Full Note CLICK HERE

For Our Black Book From 10/12 CLICK HERE

 

WMT | 4 REASONS IT'S HORRIBLE FOR RETAIL

Takeaway: WMT’s blow-up is far from over. It’s about as late-cycle as we can fathom, and will absolutely hit those who haven’t proactively prepared.

For Full Note CLICK HERE

 

On wages more specifically - WMT will have invested $5,400 per employee over the remainder of this year and the next. If we apply that amount the relevant number of employees at each of the following retailers (see table below) ,it equates to a mid to high teen EPS hit for each retailer, except KSS which is at 24%. We probably won't see it play out all at once, but the bottom line is WMT is going to $10 per hour. And the company employs 16.5% of workers in the Food & Beverage, Health/Personal Care, Clothing, and General Merch categories. It's not just those who are currently below WMT on the pay scale who will feel the pain because others at the high end will have to keep the competitive gap in order to attract the right type of talent. Maybe a company like JWN or FL which pay sales associates on a commission basis won't feel the full brunt of the WMT induced wage pressure. But, for everyone else -- especially those  who have not proactively managed their expense line -- it’s a significant margin headwind.

 

2015 & 2016 WMT Wage Hike Equivalent

Retail Callouts (10/15): NKE, WMT Wage Implications for Major Retailers, KSS - 10 15 2015 chart1C

Retail Callouts (10/15): NKE, WMT Wage Implications for Major Retailers, KSS - 10 15 2015 chart2

 

BRBY - Burberry noting weakness in China saying "demand from luxury consumers, particularly Chinese customers, was affected by a more challenging external environment."

(http://wwd.com/business-news/financial/burberry-sales-asia-h1-10262992/)

 

JAH - Jarden Corp acquiring Jostens for $1.5bn, 7.5x EBITDA.  Company sees synergy opportunities with Rawlings.

(http://www.sportsonesource.com/news/article_home.asp?Prod=1&section=8&id=57904)

 

TGT - Target becoming first major card issuer to use credit cards with PIN number.  The new system will increase security for Red Card customers.

(http://www.cleveland.com/business/index.ssf/2015/10/target_converts_to_credit_card.html)

 

COST- Maggie Wilderotter, Chairman of Frontier Communications, joins Costco board.

(http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-newsArticle&ID=2097230)

 

ETSY - Etsy launches Same Day delivery option in New York called Etsy ASAP.  Service charges a flat rate $20 fee per order.

(http://www.ecommercebytes.com/cab/abn/y15/m10/i14/s02)


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