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

(http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-newsCompanyArticle&ID=2136090)

DKS - Sports Authority to Take Steps Toward a Bankruptcy Filing

(http://www.bloomberg.com/news/articles/2016-02-04/sports-authority-said-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

(http://news.sky.com/story/1636597/mattel-makes-play-for-tommee-tippee-owner)

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

(http://www.chainstoreage.com/article/home-dcor-retailer-continues-expand)

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

(http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-newsCompanyArticle&ID=2136090)

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

(http://www.chainstoreage.com/article/fabletics-continues-offline-push)

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

(http://www.livemint.com/Industry/MDVIOuBc4OXQ2Byhk9NA6I/Malls-renovate-as-ecommerce-players-draw-away-footfalls-Re.html)