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Takeaway: One Bright Spot In Retail Sales Print = Home Furnishings. WMT closing Super Centers. First time in 10 years.
One Bright Spot In Retail Sales Print - Home Furnishings
Headline miss ex. autos of 40bps with the discretionary bucket ex food, gas, and auto decelerating on a 1yr, 2yr, and 3yr basis. But, there was one bright spot and that was in Furniture and Home Furnishings which accelerated on a 2yr basis by 240bps against a tough comp in December of 2014.
Let's be clear as it relates to RH. We think the market opportunity for the company as it scales up its store base, expands its category collection and consolidates a highly fragmented market on the top end of the consumption period is much greater than the MSD category growth we saw throughout the year.
But, it does lend some support to category strength in spite of the commentary out of just about every CEO who competes in the space about the highly promotional/competitive environment. It's the 2nd positive data point we've seen since Holiday about strength in the category. Mastercard called out the category as the most positive in its 7.9% retail sales number.
If we look at it over a longer duration, Furniture and Home Furnishing sales are sitting 10% below its 2006 peaks compared to total retail sales which are 15% higher than 2008. We'd be much more concerned about the space if we were sitting at all time highs.
WMT - Walmart announces plans to close 269 stores globally -- 154 in U.S. and 115 abroad
Look at the WMT timeline in 2015 with the benefit of hindsight. Raise minimum wage across the employee base to $10, took earnings guidance to a point where we won't see 2015 earnings levels again until at least FY19. Now the company plans 269 store closures after a previously announced strategic review. 154 of those are in the US, with all of the 102 WMT Express doors being shuttered for good. That leaves 52 Super Center/ Neighborhood Market closures, the most in this economic cycle by far. In fact, WMT hasn't closed a Super Center since FY07 (calendar '06). If you want evidence that the US is at capacity from a square footage perspective, especially in the big box format look no further than this WMT release and, to a lesser extent, the 40 doors M intends to close which is 4x a normal year.
NKE - Nike Reaches $252 Million Deal to Extend Sponsorship at Ohio State
WSM - WILLIAMS-SONOMA LAUNCHES THE RESTAURANT COLLECTION IN PARTNERSHIP WITH FORTESSA TABLEWARE SOLUTION
AMZN - Amazon Receives Ocean Freight License to Ship Packages From China By Sea
AMZN - Amazon Opens New 3500 sq ft Pickup Location at UC Berkeley
VNCE - Vince Names David Stefko Chief Financial Officer
E-commerce fulfillment costs for retailers still rising as UPS, FDX, USPS raise rates
LOW - Lowe's announced today that it's getting ready to hire 46,000 seasonal employees to help with the busy spring and summer season.
TIF - Luxury brand sales are slowing in Hong Kong, Paris
A decline in tourism amid Paris attacks, volatile currencies and political tensions hurt spending in key shopping destinations
AdiBok - CCM Hockey reports 8% increase in equipment business in 2015, 18% sales growth over past 2 years
AdiBok - Designer Ronnie Fieg designs new Adidas shoes -- they are 'doomed'
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Takeaway: We are adding MDRX to our Best Idea List as a Short with 30% downside from current levels
Allscripts (MDRX) is a tail Short with 30% downside from current levels.
ADDING MDRX TO BEST IDEAS AS A SHORT
We've schedule a call to review our short thesis for Thursday January 21st, 2016 at 11 AM ET. Contact for further information. An invite with dial-in instructions will be sent to subscribers ahead of the conference call.
We continue to spend a significant amount of time analyzing a dataset that shows us a highly detailed and large list of customers for each vendor down to the physician level. Our work so far has identified several large Allscripts customers who are at significant risk for replacement in coming years.
Now that we know who to target, the workflow is to reach out to speak with key people to confirm the data and collect additional anecdotes about current and future plans around vendor selection, a process that we began yesterday.
While we are only at the starting line with this data process, the information we’ve gathered has already given us greater conviction in our short call. These data sets are huge and we’ll be refining the analysis as we go, so look for more on this as we progress through 2016.
KEY THESIS POINTS
Based on our interactions with investors, it is clear that the Allscripts (MDRX) story is a contentious one and is partially reflected in the short interest. Below is a summary of what we believe to be both sides the debate. While many elements of the bull case are true, we think the fundamental reality is not accurately reflected in the current stock price.
Please call or e-mail with any questions.
Takeaway: We are loudly reiterating our call that the unwind of ZIRP and QE will continue to deflate the easy money credit boom it fabricated.
Editor's Note: Curious about what will happen during the Great Unwinding of the Federal Reserve's zero interest rate policy (ZIRP)? Below is a brief excerpt from a research note written by Hedgeye Macro analyst Ben Ryan sent to institutional subscribers last week. To read the note in its entirety ping email@example.com.
... And click here to join us on The Macro Show today with Hedgeye CEO Keith McCullough. It's free.
According to Ryan:
The excessive amount of capital in play in commodity industries is only beginning to decelerate and inflect.
Using a sample of 34 different producers in 4 different sub-sectors, commodity producer debt as a % of corporate credit outstanding has multiplied ~2.5x in 10 years. This group’s aggregate debt level is up ~5x in 10 years. The chart below shows the jump in commodity producer debt as a share of aggregate corporate debt levels.