HedgeyeRetail (2/9) | RH Locks Up SF Anchor Space, KATE, NKE

Takeaway: RH secures anchor space at SF Pier 70. KATE lapping 2015 quality of sale initiatives -- one of many tailwinds in 2016.

RH - RH Secures Lease on Historic Landmark Building at San Francisco’s Pier 70



Typical RH maneuver in its backyard of SF. Taking a Flagship spot in a new redevelopment, while being one of the first retailers to sign on the dotted line. Leads to below market rents, in an up and coming retail space. That allows the landlords to attract the right type of cotenants around RH as the anchor.

HedgeyeRetail (2/9)  |  RH Locks Up SF Anchor Space, KATE, NKE - 2 9 2016 chart1


KATE - Running Flash Sale. Same Time As Last Year.

Promotional cadence planned flat in 2016 after 2015 quality of sale initiatives at both wholly owned and wholesale distribution in the US. One of the many tailwinds for the brand as we enter FY16.

HedgeyeRetail (2/9)  |  RH Locks Up SF Anchor Space, KATE, NKE - 2 9 2016 kate2 chart2


NKE - Nike hosting All-Star sneaker events in 4 cities this year where it promises new releases and surprise drops

Another demonstration of the content owner, upstaging its traditional wholesale partners when connecting with consumers.

HedgeyeRetail (2/9)  |  RH Locks Up SF Anchor Space, KATE, NKE - 2 9 2016 chart3



NKE/FL - The footwear business could be entirely software-based in 15-20 years



AMZN - AWS announces Cross-Platform 3D Game Engine Integrated with AWS cloud &Twitch



KORS - Marc Jacobs announces new accessory strategy and price restructuring -- moving leather towards 70% of sales, exceeding Michael Kors' 68.4%



ULTA -  Jessica Alba's Honest Beauty line teams up with Ulta to expand nationwide distribution



SKX - Sketchers to extend contract with US marathoner Meb Keflezighi



Burberry - Fashion shows becoming marketing tool as Burberry will move to a see-now/buy-now collection model -- will no longer unveil clothes six months before they are available in stores



FL - FL trying to create buzz with 2016 World Sneaker Championship partnership -- will sell winning design in stores later this year



LULU - Athletic apparel retailer Yogasmoga, a fast-growing LULU rival, to open first NYC location



SBH - Sally Beauty Holdings has big ambitions for more stores and new services as it hits 5,000-store milestone


World-Renowned Demographer Neil Howe Joins Hedgeye Risk Management

Leading Thinker on Generations Who Coined the Term ‘Millennials’ Joins Forces with Independent Research Firm



STAMFORD, Conn., February 9, 2016 -- Hedgeye Risk Management, a leading independent provider of investment research and online financial media firm, announced today that renowned historian, economist, and demographer Neil Howe has joined the company as Managing Director to lead Demography sector research. Howe is regarded as a leading authority on generations and social change in America, an acclaimed bestselling author, and highly sought-after speaker.


“We are incredibly excited to welcome someone of Neil’s caliber to our growing team,” said Hedgeye CEO Keith McCullough. “He is a world-class thinker and our country’s leading authority on today’s generations. His demographic insight will augment our existing research and help our customers identify the most significant, secular trends in the U.S., abroad, and their investing implications.”


World-Renowned Demographer Neil Howe Joins Hedgeye Risk Management  - zz howe pic


Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Their first book, Generations, was called “the most stimulating book on American history that I have ever read” by Vice President Al Gore, who sent a copy to every member of Congress. Newt Gingrich called it “an intellectual tour de force.” The Boston Globe wrote of their book, The Fourth Turning, “If Howe and Strauss are right, they will take their place among the great American prophets.”


Howe and Strauss originally coined the term “Millennial Generation” in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS’ 60 Minutes.


"I'm thrilled to be working with the Hedgeye team,” said Howe. “Everyone I’ve met here is smart, superbly informed, and—most importantly—unafraid to make non-consensus calls and stick by them. Over the next several years, asset managers the world over will desperately need a no-BS source of unbiased insights. I look forward to helping Hedgeye fill that need."


Previously, with American businessman and philanthropist Peter “Pete” Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform. He later co-authored The Graying of the Great Powers with Richard Jackson, a seminal work in the emerging field of “political demography.”


Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C.


He received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.


Neil Howe Talks 2016 GOP Field ON Real Conversations

Click image to watch.

World-Renowned Demographer Neil Howe Joins Hedgeye Risk Management  - zz neil and keith rc




Hedgeye Risk Management is an independent investment research and online financial media firm. Focused exclusively on generating and delivering actionable investment ideas in a proven buy-side process, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts, all with buy-side experience, covering Macro, Financials, Energy, Healthcare, Retail, Gaming, Lodging & Leisure (GLL), Restaurants, Industrials, Consumer Staples, Internet & Media, Housing, and Materials.


CONTACT: Dan Holland



YELP | Good Luck Guys (4Q15)

Takeaway: YELP is still chasing consensus estimates while its model continues to unravel. Apparently it hasn't learned much from its mistakes in 2015.


  1. 4Q15 = LOCAL DETERIORATING: This is now YELP's fourth consecutive miss on Local Advertising revenue.  YELP produced decelerating new account growth of 22%, which is lower than the rate that it has onboarded sales reps in any quarter in 2015.  Further, YELP’s attrition rate accelerated again in 4Q15, which suggests that its CPC ad product isn’t really improving its client’s ROI.  Note that YELP has been selling CPC for well over a year and is now over 60% of revenue, so if CPC had the ROI that mgmt claimed, then we would have noticed it by now.  The one bright spot from the quarter was accelerating revenue growth in its Eat24 business, but the transactions segment is almost too small to matter (10% of revenue).
  2. GOOD LUCK GUYS: YELP issued 2016 revenue guidance slightly above consensus at the midpoint ($693M vs. $688M), which translates to ~34% revenue growth (net Brand Ad revenues).  YELP didn’t provide segment-specific guidance, so we’re not sure how mgmt plans to get there, or if it has an idea, but it’s more than a tall order.  Post 4Q results, YELP now needs accelerating new account growth on historically low attrition rates to hit consensus Local Ad revenue estimates.  That is also assuming accelerating salesforce productivity since its guided revenue growth is exceeding its saleforce growth target (20%-30%).  The wildcard is its Google AdSense ads; we're waiting for the 10-K for additional color.
  3. SCAPEGOAT: YELP announced that its CFO, Rob Krolik, will be leaving the company after it finds a replacement, or by year end.  We’re not sure if YELP is trying to use Krolik as the scapecoat, or if he’s jumping off the bus before the wheels fall off, but a new CFO won’t change much.  The problem is the business model, which can’t be fixed unless mgmt is willing to take a hard landing (down revenues).  YELP’s attrition can be attributed to poor ROI (note below); the easiest way to fix that is by introducing lower-tiered ad packages.  But the risk there is that it would need that many more brand new customers to offset its attrition (e.g. at half the price, it needs twice as much new account growth).  


YELP | Good Luck Guys (4Q15) - YELP   Acct vs. Sales 4Q15

YELP | Good Luck Guys (4Q15) - YELP   LAA Attrition 4Q15

YELP | Good Luck Guys (4Q15) - YELP   2016 Local Scen Anly


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


Hesham Shaaban, CFA




YELP: Grand Tales of ROI

02/13/15 01:34 PM EST
[click here]


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

CHART OF THE DAY: BOJ Central Planning Can't Stop Nikkei Crash

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.


"... Evidently the bottom is not in in Japan. Last night the Japanese stock market (Nikkei) moves right back into #crash mode (-22.8% since July) after closing down an eye-opening -5.4%. Why?


  1. Japan is losing control of the central-market-planning belief system (if we devalue Yen, you buy Nikkei)
  2. Instead, as Japanese Government Bonds (JGBs) yields officially go negative (10yr -0.04%), the Yen is ripping
  3. And, as the Up Yen, Down Nikkei trade goes, panic on the consensus side of the hedge fund community ensues" 


CHART OF THE DAY: BOJ Central Planning Can't Stop Nikkei Crash - 02.09.16 chart

The Weakest Hands

“The strongest weak hand suffers the largest loss.”

-Lasse Heje Pedersen


That’s an old poker maxim that Lasse Heje Pedersen effectively uses to explain the concept of draw-down risk (crashing portfolios) in what’s turned out to be a great book for anyone who needs a tutorial in modern day market strategies, Efficiently Inefficient.


Bad poker players (not knowing who the sucker is at the table means it’s probably you) are also great metaphors for schizophrenic levered long hedgies and chart chasers who continue to buy high and puke this US stock market up lower.


“Eventually they cave and sell near the bottom as their funding dries up or panic ensues. Why are most of them selling near the bottom? Because this defines the bottom.” (Efficiently Inefficient, pg 61)


The Weakest Hands - bull cartoon 02.08.2016

Click here to join Hedgeye CEO Keith McCullough live on The Macro Show at 9am. 


Back to the Global Macro Grind


Bottom? Did you say bottom? Oh, Keith – we need a bottom. Please call a bottom.


That defines a not un-consequential percentage of discussions I’ve been having on the road. As if I’m the catalyst for a bottom! Bottoms aren’t up to us humanly creatures to “call.” They are processes, not points.


Evidently the bottom is not in in Japan. Last night the Japanese stock market (Nikkei) moves right back into #crash mode (-22.8% since July) after closing down an eye-opening -5.4%. Why?


  1. Japan is losing control of the central-market-planning belief system (if we devalue Yen, you buy Nikkei)
  2. Instead, as Japanese Government Bonds (JGBs) yields officially go negative (10yr -0.04%), the Yen is ripping
  3. And, as the Up Yen, Down Nikkei trade goes, panic on the consensus side of the hedge fund community ensues


Do you know how many hedge funds are short the Japanese Yen? Moreover, do you know how many of them have the exact same catalyst? What happens when they actually get the catalyst (negative yields) and their position reacts opposite to expectations?


You can apply this line of risk management questioning to the entire macro market:


  1. What happens if European stocks stop going up on Draghi’s #cowbell?
  2. What happens if the Fed comes around to Hedgeye’s view, stops raising rates, and stocks crash?
  3. What happens if your entire positioning is based on the weakest “strong” hand, that is a government catalyst?


There was a time last year when I was bullish on both European and Japanese stocks. That was mostly an extension of our #StrongDollar view (Down Yen and Down Euro was correlating inversely with European and Japanese equities).


But, every day, I’d get on our Macro Show (morning call, daily at 9AM EST) and say that there’s absolutely no fundamental growth and/or inflation reason to be buying Japanese stocks. How weak of a perceived strong hand was that?


That is the thing about sitting at the poker table and/or at your desk trying to not lose all your (or your client’s) money – #perception risk. What if everyone at the table (in the market) has the same weak hand as you?


How many pundits and PMs had a pair of 7s, long “European stocks because they’re cheap”?


A) Lots (if they were long Spain it was a pair of 4s; if long Italy a pair of 2s)

B) Now the Italian Stock market is down -33% since July 2015 (when the SP500 peaked)

C) If the SP500 had that crash/draw-down from its July #bubble high, it would be at 1436!


But no, no, no. No one is talking about Italy or Greece (still crashing) or Spain this morning. They’ll all be talking about Japan, just like they were all talking and talking and talking about China and Oil…


The strongest vs. weakest hands you can have in this poker (macro metaphor, stay with me here!) game is currently:


  1. Royal Flush – Long The Long Bond (TLT), Utilities (XLU), Gold (GLD), Volatility (VXX) and Cash
  2. 7 (of hearts), 5 (of diamonds), 4 (of spades), 3 (of spades), 2 (of spades)


That worst hand would look something like this:


  1. Long Italian Stocks (MIB Index) for “diversification”
  2. Long the Financials (XLF) -14.3% YTD on “rate hike expectations”
  3. Short Utilities (XLU) +7.2% YTD on “rate hike expectations”
  4. Long Oil and a basket of levered Energy stocks like Chesapeake (CHK) and Linn (LINE)
  5. Long Ackman


Most of the perceived “strong hands” had LEVERAGE to either inflation or growth expectations gone bad. In other words, they had the 2-3-4 of spades and were praying for a central-planner to deliver them the 5 and the 6 of the same suit.


That’s why the biggest risk to the entire game is that the belief-system (ideology) of central-market-planners being able to bail out markets breaks down. That’s why you’re already seeing the strongest weak hands suffering some of the largest losses.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.72-1.91%


Nikkei 157

VIX 22.07-28.91
USD 95.66-98.40
YEN 114.99-118.68


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


The Weakest Hands - 02.09.16 chart

The Macro Show Replay | February 9, 2016


get free cartoon of the day!

Start receiving Hedgeye's Cartoon of the Day, an exclusive and humourous take on the market and the economy, delivered every morning to your inbox

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.