Retail Callouts (12/16): Gary, Chip, Tory stirring up the pot -- some better than others.

Takeaway: Gary, Chip, Tory stirring up the pot -- some better than others. Buy RH, short LULU ahead of next blowup/CEO sack, Buy KATE into a big '16.

RH - Gary Crushed it on Cramer

We have to give Gary Friedman props for his approximately nine minute segment on Cramer last night. Let's face it, him going on what's arguably the most volatile and biased financial media platform in an unscripted way is not what we wanted to see.  The risk of fireworks was high. But he capped off a successful day RH (CFO and IR) had on the investor conference circuit by focusing on the real value drivers at RH -- growth in product concepts, and RH's real estate transformation.  The appearance was planned well before the earnings release, by the way, coinciding with a business-focused trip to NYC. All-in, it was a positive event for the stock.

 

LULU - Watch This Video. There's a Lot of Chip-isms here.

(http://www.bloomberg.com/news/videos/2015-12-14/lululemon-founder-i-thought-of-buying-under-armour)

 

Chip popped on Bloomberg to talk about his new venture with his wife and son -- Kit and Ace, but naturally the conversation focused entirely on the direction and problems at LULU. Chip held his tongue, most likely because of the gag order agreed upon when Advent bought half of his stake, and attributed LULU's problems to a 'culture problem'. You could argue that it was exactly this that got LULU into the mess it has found itself in the first place. Chip's belief that LULU was a talent incubator resulted in a management team that wasn't qualified to run a company with $12bn in market cap. And we are not convinced the new team in place today is much better.

Chip all but confirmed that he was pushed out by board politics, and we think the catalyst there was the hiring of Laurent Potdevin as CEO. He pushed for Laurent to be hired as CEO. The Board knew Laurent was unqualified, so Chip traded his Chairman title/power for the CEO appointment. That led to Wilson being effectively neutered on the Board, and to him selling his stock.

And yes, we stand by our statement that Potdevin will be fired within six months in conjunction with another blowup and restructuring for LULU.

Those are the biggest takeaways from the interview from where we sit, not the idea that LULU could/should have purchased UA. The thought that Kevin Plank would allow a deal like that to even be discussed when he has two-thirds of the voting stock is almost comical.

The video is actually worth a watch -- if for no other reason than to see the journalists ask the worst questions we've ever heard asked of an industry veteran.

 

TORY BURCH LAYS OFF 100 EMPLOYEES

(http://www.hollywoodreporter.com/news/style-notes-derek-zoolander-poses-848731)

 

This story is a few days old, but we got a few questions on it yesterday. So here's our take.  It's interesting to us that people view Tory Burch as a preeminent  brand in the luxury space. Consider this...the footprint of the brand was around $1.9bn last year. That compares to Michael Kors at nearly $9bn, and Coach at $7bn. Kate Spade was only $1.4bn in 2014. So yes, Tory is bigger than Kate -- for now.  Tory Burch's layoffs are just the culmination of issues it's been having with its business for 2-years...the same issues that led to hiring Roger Farrah (RL) as Co-CEO in late 2014. Our prediction -- KATE will surpass Tory Burch in size and profitability (forever) within two quarters.

 

TGT - Tech security firm says it's easy to hack Target gift registry apps

(http://www.startribune.com/tech-security-firm-says-it-s-easy-to-hack-target-gift-registry-apps/362582411/

 

Over the past 2+ years we've seen a collection of execution/security gaffes at TGT. Running through them in order... 1) Data breach in 2013. 2) e-commerce site malfunction during the Lily Pulitzer launch in April 2015. 3) e-commerce site malfunction during Cyber Monday 2015. 4) Gift registry app allows hackers access to personal information. Most of the issues have been centered on the e-comm channel and that's no surprise given that TGT didn't assume full control of the business until 2011 when it kicked its former partner AMZN to the curb. To catch up we think TGT needs invest heavily in this channel if it wants to grow this business at a 40% CAGR (something its been unable to do 2015 YTD). For context, WMT is spending $1.1bn on e-commerce investments in 2016 alone. With the closure of the CVS pharmacy deal announced today, the low hanging fruit for Cornell is all but gone.

 

TGT, CVS - CVS Health and Target Announce Completed Acquisition of Target’s Pharmacy and Clinic Businesses

(http://investors.target.com/phoenix.zhtml?c=65828&p=irol-newsArticle&ID=2123024)

 

AdiBok - Adidas sees +8% growth in sales in North America, two-digit growth in the following year. But Nike too good to be messed with

(https://epaper.handelsblatt.com/vhb_epaper_neo_p/?ticket=ST-161570-gM4eMV16XNbGsoQFIs2X-s02lcgiacc01.vhb.de#article/11/Handelsblatt/2015-12-16/1/5766838)

 

Prada Makes Adjustments Amid Slow Sales

(http://www.wsj.com/articles/pradas-net-profit-plunges-26-1450190933)

 

Rakuten to Set Up Shop on China’s JD.com

(http://www.wsj.com/articles/rakuten-to-set-up-shop-on-chinas-jd-com-1450258024)


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