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I'm keenly aware that it seems like every other theme I post is related to the impending margin pressure in 2009 as the apparel/footwear supply chains get stress-tested to a greater degree than anytime since perhaps the Asian currency crisis (and I'd argue that this time will be worse). But this trend should rob the industry of at least 3 points in margin, and spark the greatest consolidation wave the group has seen since the 1990s. Worthy of a few extra posts, don't you think?

With that, I've got to highlight Friday's import statistical release from OTEXA (the government office of textiles and apparel) which shows that apparel import prices into the US for the month of May posted a 0.9% year/year increase. That might not seem so bad, but given the preceding three months were down an average of -1.8% -- this unfavorable 270bp delta is not looking good for go-forward margins.

I'm not against cost increases - as long as the consumer is funding these costs. But unfortunately the CPI for apparel is down about 1.5%. This is spot on with levels have been year-to-date. So costs are going up, but revenues are not. What does all this add up to? Margin compression.

The chart below shows the consumer price less the consumer price (a positive value means that consumer prices are going up at a faster rate than cost inflation). Unfortunately, the trends in this spread are making lower highs and lower lows. I think we'll see that trend through 2009. That's a loooong time to wait.

More quantifiable analysis to come on this.

This still makes me very wary about GIL, WRC, GES, VFC and PVH. RL and LIZ are the way to go here given company-specific growth and ROIC levers that can weather the storm.