HedgeyeRetail (2/5) | DECK Cutting Store Anchor, BBBY Driving Traffic W/ Pretzels

Takeaway: DECK no near term turnaround, but cutting store anchor. New Bed Bath traffic driver - pretzels.

DECK - No near-term turnaround, but cutting store anchor


We never really understood the DECK store opening strategy. Now the company is hiring a 3rd party to close 15% of its current portfolio.


If you look at the store opening cadence since 2006 when the company had just 2 stores and fast forward to where we are today at 142 doors, and what that's subsequently done for returns as capex as a % of sales went from 1% as UGG relied on its wholesale distro to 5% at the height of the sq. ft. investment, it tells a pretty compelling negative story.


The question now is, as costs roll off and the company abandons its store strategy, will we see margins re-inflate and asset turns re-accelerate as the fixed asset base consolidates. The top line has been underwhelming for 3 straight quarters and doesn’t give us confidence in the immediacy of a turnaround, especially in an economy that is #latecycle.


We wouldn't touch this with a 10 foot pole on the long side today, with inventories up 26% on 1% sales growth. But it’s a name over the course of 6-9 months that might be worth taking a look at as working capital gets cleaned up, and assets are rationalized.


HedgeyeRetail (2/5) | DECK Cutting Store Anchor, BBBY Driving Traffic W/ Pretzels - 2 5 2016 Chart1


HedgeyeRetail (2/5) | DECK Cutting Store Anchor, BBBY Driving Traffic W/ Pretzels - 2 5 2016 chart2


BBBY - This Bed Bath promo email is hilarious. 

BBBY sent out this promo email yesterday, and it featured a bag of pretzels. That's it, a bag of pretzels. It's comical to think that a $2 discount on a bag of Pretzel Crisps can drive foot traffic. 'In Store Only'!


HedgeyeRetail (2/5) | DECK Cutting Store Anchor, BBBY Driving Traffic W/ Pretzels - 2 5 2016 chart3


JCP - JCPenney pursues sale of home office campus



DKS - Sports Authority to Take Steps Toward a Bankruptcy Filing



MAT - Mattel interested in possible merger --  has requested financial information about Mayborn, owner of prominent baby product manufacturer Tommee Tippee



Big-box home décor retailer At Home has added four more locations averaging almost 100,000 sq. ft. each to its growing store portfolio



JCP - JCPenney announced that it is pursuing sale of Home Office campus in TX in effort to reduce outstanding debt



Kate Hudson's fashion athletic brand Fabletics opening 2,000 sq.ft. store in Mall of America



Report says successful malls in India are changing strategy by reducing the size of anchor stores from ~70,000 sw. ft. to ~25,000 sq. ft. to bring in more international brands



FLASHBACK | McCullough: Non-Farm Payrolls Peaked Last Year

Takeaway: Jobs are the latest of #LateCycle indicators. NFP peaked in rate of change terms in Febraury 2015.

Click The video below to watch


This past November Hedgeye CEO Keith McCullough nicknamed the supposedly strong October jobs number the, "Where’s Waldo jobs report." His message was clear: So what.


McCullough's point was that jobs are the latest of #LateCycle indicators and that NFP had already peaked in rate of change terms in Febraury 2015. On a related note, consensus missed today's jobs number because they don't understand our thesis. 


Watch the video above for more of his analysis. And feel free to show the chart below of NFP rolling over to anyone claiming the last few months of jobs reports have been "good" ...


Click to enlarge

LNKD | Guidance = Recession

Takeaway: Guidance implies a recession or is an egregious sandbag. Either way, there may not be much left to play for this year in either direction.


  1. 4Q15 = REALLY MESSY:  LNKD produced a relatively small top-line beat on what appeared to be a soft 4Q15 guide when they issued it. During the call, mgmt introduced a lot noise through the announced sunset of its Lead Accelerator product and what sounded/read as its plan to stop disclosing LCS accounts.  Mgmt also stated that Talent Solutions add-ons and renewals both declined on a y/y basis; both factors are reflected in LNKD’s ARPA, which suggests the selling environment is deteriorating.
  2. GUIDANCE = RECESSION: LNKD’s Talent Solutions guidance breakdown is calling for a sharp deceleration in organic revenue growth from 32% in 4Q15 to ~20% in 2016.  That’s basically implying a recession since its guidance translates to sharply declining ARPA and/or net new LCS Account growth; at a magnitude that is well in excess of anything it's ever reported for either of those metrics (see analysis below).  More likely than not, this is an egregiously sandbagged guidance release given how sudden the deceleration is that's baked into it.  
  3. NOT SURE WHAT'S LEFT TO PLAY FOR: On either the short or long side.  The sandbag/recession guide should give LNKD at least a couple quarters of breathing room before another short opportunity might emerge.  But even if LNKD winds up producing upside over the next two prints, we're not sure anyone is really going to chase that with this print in the rear view mirror and macro concerns looming.  That said, we're staying on the sidelines for now.


LNKD | Guidance = Recession - LNKD   ARPA vs. JOLTS 4Q15

LNKD | Guidance = Recession - LNKD   TS 2016 Guid Scen 1



Let us know if you have any questions or would like to discuss in more detail.


Hesham Shaaban, CFA


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  • Bullish Trend
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10-Year U.S. Treasury Yield
1.96 1.81 1.87
S&P 500
1,855 1,950 1,915
Russell 2000
985 1,039 1,014
NASDAQ Composite
4,417 4,649 4,509
Nikkei 225 Index
16,464 17,606 17,044
German DAX Composite
9,307 9,691 9,393
Volatility Index
20.02 27.45 21.84
U.S. Dollar Index
96.19 98.66 96.49
1.07 1.12 1.11
Japanese Yen
116.38 121.11 116.74
Light Crude Oil Spot Price
28.73 34.49 31.69
Natural Gas Spot Price
1.98 2.28 1.98
Gold Spot Price
1,110 1,160 1,156
Copper Spot Price
1.97 2.13 2.12
Apple Inc.
91 99 96
514 579 536
Alphabet Inc.
705 747 730
McDonald's Inc.
118 125 120
Utilities Select Sector SPDR
45.01 47.93 46.42
VAleant Pharma Inc.
85.55 99.56 96.94

The Macro Show Replay | February 5, 2016



CHART OF THE DAY | Earnings Update: How Many Sectors Are Currently In A Profit Recession?

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.


"... In terms of the US profit #Recession, here’s the update now that 308 of 500 S&P Companies have reported:


  1. Total SALES -4.7%, EPS -6.4% (both metrics slowed since I updated you on earnings season earlier in the week)
  2. NEGATIVE y/y EPS SECTORS: Energy, Materials, Industrials, Consumer Staples, Financials, Info. Technology, Utilities
  3. POSITIVE y/y EPS SECTORS: Consumer Discretionary, Healthcare, and Telecom


So if you back out the 3 of 10 S&P Sectors that don’t have profit recessions trending, you have no earnings growth in the SP500 at all. Isn’t it funny how a sentence like that sounds even though it’s precisely how the “Ex-Energy” crowd has been telling stories?"


CHART OF THE DAY | Earnings Update: How Many Sectors Are Currently In A Profit Recession? - 02.05.16 chart



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