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Takeaway: COLM Added to Short Bench. Holiday hiring runs into tight labor market.

Hedgeye Retail Idea List

Retail Callouts (11/2): Retail Idea List, Labor Market Tightening, COLM, M, TGT, WMT, KSS - 11 2 2015 chart1

This Week's Changes

Columbia Sportswear: Added to Short Bench. It's admittedly early to short COLM, especially in light of such healthy sales, inventory and margin trends that COLM reported last week. But...the company benefitted from two extreme winters, and the likelihood of a third is slim. Management says it does not need one. But with inventories already elevated in the channel, and with the likelihood of so many consumers already having stocked up on boots and puffy jackets in the past two years, we think order trends are more likely than not to slow (or margins weaken -- or both). As a kicker, the company has seen notable success with its boot/wedge business. We actually did not know that this was a 'thing', but by the sound of management on the conference call, they did not either. This will be a tough business for COLM to anniversary in another nine months. So all-in, it's early to short this one. But at 21x earnings and near 10-year trough short interest, we think this one is definitely bench-worthy.

Retail Callouts (11/2): Retail Idea List, Labor Market Tightening, COLM, M, TGT, WMT, KSS - 10 30 15 Chart3

M, TGT, WMT, KSS - Several retailers including Macy's, Target, and Toys R Us noting labor market tightness.  The companies are taking steps such as increasing hours of current employees, and offering higher pay to attract seasonal employees.

(http://www.wsj.com/articles/retailers-work-harder-to-lure-holiday-employees-1446424171)

A 5.2% unemployment rate and the largest retailer in the space taking up the ante chip on wages for entry level employees to the tune of $5400 = a difficult labor market anyway you slice it. So many retailers seem to have blown this off thinking that it’s really not a big deal, but rather a WMT PR stunt that won’t affect them. It may be a stunt, but when the biggest retailer in the world raises the minimum wage to $10.00, it is a big deal for everybody. We’ve heard half a dozen CEO’s say “We already pay above minimum wage, so it’s not a big deal.”  Or in Kohls’ case, “Our employees love to work, so we don’t have to pay them more.”  We understand that the companies can’t negotiate wage increases with employees through Wall-Street conference calls. But there will be an impact to almost everyone who sells to the low/mid-level consumer. That's kicked into high gear in October as retailers prepare for Holiday.

AMZN - Amazon announces Black Friday deals from now until Dec 22nd.  Prime members to have exclusive early access to more than 30,000 lightning deals.

(http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=2104921)

AMZN - Amazon ending Amazon local and Amazon Payments card reader services.

(http://www.ecommercebytes.com/cab/abn/y15/m11/i02/s03)

ETH - Ethan Allen reports record orders for month of October 2015, notes impact of shift in sale calendar.

(http://phx.corporate-ir.net/phoenix.zhtml?c=81552&p=irol-newsArticle&ID=2105025)

WBA, RAD - Walgreens to divest upwards of 1000 stores as part of Rite Aid acquisition.  Walgreens operates 8173 stores while Rite Aid has 4561 stores.

(http://www.chainstoreage.com/article/wba-divest-many-1000-stores-secure-rite-aid-deal-approval)

CVS - Omnicare was served with an administrative subpoena by the DEA. The subpoena seeks documents related to controlled substance policies, procedures, and practices at eight pharmacy locations from May 2012 to present.

(http://www.sec.gov/Archives/edgar/data/64803/000006480315000064/cvs20150930-10q.htm)

Fendi Unveils New Store Concept in Miami

(http://wwd.com/business-news/retail/fendi-new-miami-store-concept-10271334/)