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December 8, 2009




Companies that benefited from a tailwind due to the ‘trade-down’ effect are the most aggressive in signing new deals at the ICSC conference. These guys don’t get the Macro picture. They’re giving themselves too much credit for their performance. Setting up some nice shorts in 2010.

One of the themes coming out of this year’s ICSC (Int’l Counsel of Shopping Centers) Conference in New York is the change in mix landlords are seeing as it relates to composition of new lease deals. Specifically, the concepts looking to grow most aggressively are those that thrive in a weak economy – like dollar stores, off-price, and fast-fashion retailers.   So let me get this straight… These companies benefit from a ‘trade down’ effect in the most recent recession (i.e. 10% comps at Dollar General), and they use that incremental cash flow to grow more aggressively?  Guess what guys – you can’t straight-line sales/margin trends and market share gains from the past six quarters into perpetuity. It just doesn’t work that way. You may be performing well according to your plan, but amidst all the internal high-fives, keep in mind that you might not be as good as you think you are.  The Macro environment helped, whether you like it or not. Most of my favorite shorts continue to be in these trade-down segments (ROST, FDO, and DG after the KKR-inspired blow-out print).



  • With most of the focus on the 2010 FIFA World Cup confined to Adi and Nike, it’s somewhat surprising to see Wal-Mart also getting involved. While soccer is clearly the world’s biggest sport, it does not have the same relevance in Wal-Mart’s home market of the U.S. However, in an effort to drive business across the chain, Wal-Mart signed a deal with the master licensee of the event, enabling WMT to open event-branded shops in many of its stores across the globe. Products will be both exclusive and tailored to specific markets. This is the first global sports licensing deal we’ve seen Wal-Mart partake in.
  • According to an MIT professor conducting research on luxury goods and the counterfeit business, 46% percent of buyers who purchase fakes subsequently purchase an original version of the same product within two years. Perhaps luxury brands ease off on the lawsuits? Don’t think so…
  • Snuggies in, High School Musical out. According to U.S import data, Snuggies are one of the biggest growth products for this holiday season. Year over year growth in these “infomercial” robes is astounding, with over 5 million units sold in the U.S so far. On the losing side, imports of products related to High School Musical are down 95%. Sounds like it might be time for another sequel…
  • Here’s a sign of the times in commercial real estate. According to WWD’s interview with DJM Realty, retailers that “normally require 7,000 square feet to 15,000 square feet are being offered the entire space of a bankrupt Linens-N-Things, Goody’s, Steve & Barry’s and Circuit City unit [typically 20,000 square feet to 40,000 square feet], but only pay the rent on the square footage they actually needed.”



Retailers Prepare to Increase Promotions - With last week providing little encouragement, the nation’s retailers appear poised to ratchet up promotions and trigger contingencies aimed at stirring shoppers. The promotional volume may not reach the cacophony of last year, but for consumers, the real bargains could be just around the corner. Many retailers have been in a “lull” since after Thanksgiving weekend, that is in terms of sales and traffic, and not promoting. The quiet period traditionally lasts until a week to 10 days before Christmas. Black Friday weekend, which generally was OK, is already a distant memory, given the lackluster comparable-store sales results for November reported on Thursday and the bad weather on Saturday from New England to Washington, D.C., putting a crimp in business. On the bright side, business improved on Sunday and temperatures are finally dropping, giving hope that cold-weather clothing and accessories sales could pick up. In addition, retailers have been working closely with vendors on markdown schedules, lower prices and inventory reductions and seem prepared for the worst.  <wwd.com>

Big retailers take market share as online sales grow during the holidays - Online holiday sales growth is holding up, but it’s the largest retailers that are enjoying most of the gains, reports web measurement firm comScore Inc. Last week’s online retail sales were up 5% over last year to $4.72 billion, and three days topped $800 million. That included last Monday, often called Cyber Monday, when sales matched e-retailing’s best day ever at $887 million; Tuesday was just about as good at $886 million, comScore says. For the holiday season to date—Nov. 1 through Dec. 4—comScore says online retail sales total $15.295 billion, up 4% from $14.767 billion during the same period last year. “We have now passed the halfway point of the season with the 4% growth in online spending to date slightly exceeding comScore’s forecast of an overall 3% growth rate for the entire season,” says comScore chairman Gian Fulgoni. “It will be interesting to see if the encouraging growth continues as we head into the busiest days of the season. Nonetheless, I do expect that we will see the industry’s first $900 million online spending day during this next critical week of the season.” He notes particular strength in web sales of consumer electronics and computer hardware.  <internetretailer.com>

RedPrairie takes a step toward an initial public offering of stock - RedPrairie Holding Inc., a provider of web-enabled inventory, transportation and workforce management technology for retailers, manufacturers and distributors, has filed a registration statement with the U.S. Securities and Exchange Commission for a proposed initial public offering of stock. RedPrairie Holding, which is the holding company for RedPrairie Corp., says the proposed public offering is expected to consist of common stock offered by RedPrairie and certain stockholders. The Waukesha, WI-based company, which is owned by equity investors Francisco Partners, plans to use the proceeds from an IPO to pay off debt, for general corporate purposes, and possibly to finance acquisitions of other companies, technologies or products that complement its existing business, according to its SEC S-1 registration statement.  <internetretailer.com>

CVS Faces Scrutiny From Texas Fund in $1 Billion Contract Bid - A Texas pension fund will decide this week whether to award CVS Caremark Corp. a new pharmacy-benefits contract valued at almost $1 billion after the state’s attorney general sued the company for alleged Medicaid fraud. The Teacher Retirement System of Texas, which isn’t part of the litigation, will examine the lawsuit that claims the Caremark unit owes the state more than $70 million, said Charlotte Clifton, a trustee for the pension fund. The fund will also consider a 2008 state audit showing CVS charged a Texas university more than Medco Health Solutions Inc. for similar services, Clifton said. “The lawsuit and the findings by the state’s auditor will be given serious consideration,” Clifton said in a telephone interview last week. Clifton is slated to take over as head of the board’s benefits committee at the fund’s Dec. 10-11 meeting to award the contract.  <bloomberg.com>

Doha Side Deal... North American Trade Grows… - With the Doha global trade talks bogged down, 22 emerging economies, including India, Argentina, Brazil, Vietnam and Egypt, agreed to a preferential trade negotiations blueprint to cut tariffs by at least 20 percent on about 70 percent of goods exported within the group of nations. Jorge Taiana, Argentina’s minister of foreign affairs and trade, who is chairing the initiative, said in Geneva that plans are to conclude a final accord by September. Brazil’s foreign minister, Celso Amorim, noted the 22 nations taking part represent 15 to 18 percent of world trade and 16 percent of industrial production. The parties are also expected to broker an accord on rules of origin. <wwd.com>

Louis Vuitton Launches at Vegas' CityCenter - Louis Vuitton is lighting up the Crystals, the luxury retail component of Las Vegas’ glittering new CityCenter hotel-resort development, with its largest North American store. The facade of the 33,000-square-foot flagship is covered with 4,000 LED lights that are used for light shows along the Las Vegas Boulevard frontage from dusk until dawn, and the front windows have fluorescent neon display lights. Vuitton launched its third Las Vegas store last week as the gambling and entertainment mecca struggles with fallout from economic turmoil, which has hurt tourism and retailers — particularly in the luxury sector. “The whole idea of the store is to reflect Las Vegas, to appeal to the local clientele and visitors,” said Daniel Lalonde, chief executive officer of Louis Vuitton North America. “Las Vegas is a very important market for any luxury brand. There are so many international travelers who come here.” <wwd.com>

DSW Partners With Miss America - The footwear retailer announced Monday it would provide shoes and act as national sponsor for the Miss America contest. DSW also disclosed plans to collaborate with The Miss America Organization to jointly develop a new footwear brand. “DSW is proud to be associated with The Miss America Organization,” Mike MacDonald, president and CEO of DSW, said in a statement. “We look forward to sponsoring their important role as the world’s leading provider of scholarships for young women.” The agreement includes the current Miss America, Katie Stam, who is traveling on her national media tour. Next year’s title will be given on Jan. 30, 2010, when the pageant will be broadcast live on TLC from Planet Hollywood in Las Vegas. <wwd.com>

China: Disputes aganist possible anti-dumping extension - In view of the possible European Commission’s (EC’s) recommendation to extend the anti-dumping duties on Chinese and Vietnamese footwear, China has condemned the commission had violated World Trade Organization rules and would constitute an abuse of trade remedies. "China pays close attention to this case and reserves the rights to take a further measure," the country's commerce ministry spokesperson Yao Jian said.It will be up to the decision of the European Council to approve the extension. Earlier in November, 15 of the 27 member states casted their votes to oppose an extension, but it is now believed that some may have changed their decision. <fashionnetasia.com>

Consumer Credit in U.S. Declined Less Than Forecast - Consumer credit in the U.S. declined less than forecast in October, a sign the financial crisis is easing and households are gaining confidence the economic expansion will take hold. Credit fell by $3.51 billion, or 1.7 percent at an annual rate, to $2.48 trillion, according to a Federal Reserve report released today in Washington. Borrowing dropped by $8.77 billion in September, less than previously estimated. The worst recession since the 1930s eased at mid-year with the help of government spending programs. The recovery will get more of a lift from consumer purchases, which account for about 70 percent of the economy, as the labor market improves. “It’s reflective of improved consumer activity, clearly more so with vehicle sales,” said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, whose forecast a $4 billion drop, the smallest in a Bloomberg survey. “The concern is for revolving credit, where banks are pulling lines of credit.”  <bloomberg.com>

Employers in U.S. Plan to Boost Payrolls, Manpower Survey Shows - Employers in the U.S. plan to increase payrolls next quarter for the first time in a year as confidence in the economic recovery grows, a private survey showed today. Manpower Inc., the world’s second-largest provider of temporary workers, said its gauge of employment for January through March rose to 6 from minus 2 for the final three months of this year. “Companies are seeing some demand so they don’t want to let anyone else go,” Jeffrey Joerres, chief executive officer of Milwaukee-based Manpower, said in an interview. “They anticipate a slow but positive 2010.” The report adds to evidence the worst employment slump in the post-World War II era may be coming to an end. Labor Department figures last week showed payrolls dropped by 11,000 in November, the smallest decline since the recession began in 2007, while the unemployment rate fell from a 26-year high. The Manpower index improved as companies shifted from projecting additional staff cuts to no change. Seventy-three percent of employers surveyed said they anticipated staff levels will be stable in the first quarter, the highest level since the group’s records began in 1972. <bloomberg.com>

U.K. Retail Sales Annual Growth Slowed in November, BRC Says - U.K. retail sales increased at a slower annual pace in November as Britons curbed spending on food, the British Retail Consortium said. Sales at stores open at least 12 months rose 1.8 percent from a year earlier, compared with a 3.8 percent gain in October, the London-based BRC said in an e-mailed statement today. Food sales rose 2.1 percent in the three months through November, the smallest gain this year. Non-food non-store sales (internet, mail-order and phone sales) in November were 16.9% higher than a year ago compared with 18.0% in October. The slower growth rate in November than in October was in line with the slowdown in store sales. “We would have expected much stronger growth,” Stephen Robertson, director general of the BRC, said in the statement. “Uncertainty over jobs and future tax increases and government spending cuts is making customers more cautious.” <bloomberg.com>   <brc.org.uk>

Thai Consumer Confidence Rises as Economy Recovers - Thailand’s consumer confidence rose in November after falling a month earlier as Southeast Asia’s second-largest economy began to recover from its recession. An index measuring sentiment advanced to 69.1 last month from 68 in October, the University of the Thai Chamber of Commerce said in Bangkok today. The gauge tracks a nationwide survey of 2,242 respondents. “Signs of economic recovery and the government’s economic stimulus spending helped improve consumer confidence,” Thanavath Phonvichai, an economist at the university, said in Bangkok today. Thailand’s economy shrank 2.8 percent last quarter, the smallest contraction in a year, as an export slump eased. Prime Minister Abhisit Vejjajiva has stayed in power for about a year, longer than his two predecessors, enabling the government to implement a 116.7 billion-baht ($3.5 billion) stimulus package in the first half of 2009. <bloomberg.com>