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December 14, 2009


Anyone check out the USDA report on food stamp usage? 11% of the population on the program is the highest level in recent history – above any other recessions in the past 40 years. Where do people on food stamps get the most bang for their stamp? Hint…73% of DG’s mix is consumables, and 4% of sales comes from food stamps.

With one out of every eight Americans now receiving food stamps according to a USDA report out late last week, receipts of the government subsidy continue to hit record levels. While inherently bearish for the US economy, one benefactor of this trend is Dollar General for which food stamps now represent roughly 4% of sales. We’d argue that this is yet another unhealthy factor that helped drive this business in recent years. Is it any surprise that consumables are now 73% of the mix at DG (up from 72% yy), and its private label sales are up to 21% of consumables? Nope. Note to dollar store management teams… accelerating growth in your footprint (see our comments last week about these guys being among the few striking new real estate deals) after an unhealthy comp peak driven by a trade-down effect and mix-shift, and unsustainable cash flows is simply not the best capital deployment strategy.  You can’t straight-line business trends into perpetuity – especially when you’re at the top of your game. We firmly believe that DG and others that benefitted from the ‘trade down’ effect over the past two years will be key shorts in 2010.

RETAIL FIRST LOOK: Case Building Against Dollar Stores - Food Stamps Historical Participation Rate

Source: USDA Food and Nutrition Service Program Data; goldismoney.info



  • In one of the more aggressive moves to help drive market share gains, Gildan announced that it offered a special distributor inventory devaluation discount to wholesalers when it lowered selling prices in October. This move essentially adjusted customer inventory that was already purchased to reflect the price reduction. The company also announced that it expects selling prices to be down 5% on average in 2010 compared to low-single digit declines realized this year, reflecting further evidence of continued supplier pricing pressure.
  • While the sales performance of Christmas trees varies from region to region so far this holiday season, the overall season is expected to generate $1 billion in sales of natural trees. Additionally, 35% of consumers who celebrate Christmas are expected to purchase trees this year, up from 25% in 2008. A quick search suggests that tree sales are performing well, although weakness is occurring in areas where weather has been challenge.



Nike puts its best footwear forward with two product launches - Nike , the world's largest sportswear company, likes to keep its eye on the ball, writes Jonathan Birchall . Last week, as the world was obsessed about the private life of Tiger Woods, the golf champion who endorses the company's golf brand, Nike pressed ahead with two new product launches. Both reflect its efforts to maintain its premium brands through technical and performance-focused innovation. Its new Total90 Laser III soccer boot costs $200, but includes new design features and links to online soccer coaching sessions. At $165, the Zoom Kobe V basketball shoe will be about $45 more than the current Zoom Kobe IV model, but is about an ounce lighter, using technology developed by Nike for its running shoes launched at last year's Beijing Olympics. The Kobe shoe will also be on sale on New Year's Day in China, Nike's second-largest market, two weeks before it reaches US stores. However, sales in China turned negative this year after the dramatic Olympic-year gains, while US sales have also declined. <ft.com>

New Balance Inks New Korean Distributor - New Balance has entered into an exclusive 11-year Korea distribution agreement with E-land, also known as The Group, an integrated fashion and retail company in Korea, as part of the company’s plan to expand its presence in key international markets. The distribution agreement commences on January 1, 2010 and will include New Balance product distribution and a license to design and produce New Balance Lifestyle apparel. “New Balance is proud to partner with The Group, a market innovator and leader in the fashion and retail business in Korea.” says Rob DeMartini, President and CEO, New Balance.  New Balance will also open a New Balance Experience Store in Korea in 2010. The company currently has 187 points of sales in Korea and plans to increase this to 280 by 2012.  New Balance has had a presence in the country since 2000. <sportsonesource.com>

CoutureLab Goes Brick and Mortar - CoutureLab.com, the luxury Web site that sells one-off designs and handmade pieces by brands and artisans from around the world, has sent a satellite from cyberspace onto the streets of Mayfair. The site has opened its first brick-and-mortar boutique, a 1,400-square-foot space at 37 Davies Street, between Claridge’s and Selfridges, that offers a look at the CoutureLab offer — and a forum for craftsmen to showcase their work. “A store was always in the plan,” said Carmen Busquets, who founded CoutureLab in 2007 and is one of the investors behind Net-a-porter.com. “Sometimes on CoutureLab, you can miss the attention to detail. And consumers get frustrated when they see a one-off item on screen, and it’s already gone.”  <wwd.com>

All Points East: The Expanding Asian Market - Luxury goods companies and fashion houses shifted their focus Eastward in 2009 with a flurry of store openings and special events. While China and other emerging markets in Asia certainly felt the impact of the economic crisis, they did so to a considerably lesser degree than the U.S., Japan and Europe. And companies eager to offset slumping sales in many corners of the world reached out with increasing frequency to new customers in Hong Kong, Shanghai, Beijing, Singapore, Macau and elsewhere — even Mongolia. Much of this year’s retail expansion activity was focused on China, and for good reason. In a recent report, J.P. Morgan estimated that most companies registered sales growth of more than 40 percent in Mainland China in 2009 as its customer base, including locals and travelers, increased by more than 30 percent. Analysts Melanie Flouquet and Corinna Beckmann forecast the Mainland China consumer base will grow another 25 percent in constant currency terms in 2010, while that of the rest of Asia, excluding Japan, is seen rising 10 percent. <wwd.com>

Fashion Joins the Social Media Revolution - Social media has turned the fashion world — and just about every other world — upside down. This year, Dolce & Gabbana was so enamored of bloggers, the company sat them in the front row, displacing some department store executives. YouTube has made stars of beauty maven and single mom Lauren Luke, and fictional misfit Fred Figglehorn. Middle-school fashion blogger Tavi Gavinson, 13, skipped classes to attend Marc Jacobs’ runway presentation and other shows. Designer houses like Louis Vuitton are live-streaming their fashion shows; Ralph Lauren, Chanel, DKNY and Gucci are among the many labels with iPhone apps, and Alexander McQueen is tweeting. And now the idea that “if you are not online, your customers will be” is a standard theme at <wwd.com>

Free-shipping, home-page promos ramp up in drive toward Christmas - Among the top 100 online retailers, 73 offered free shipping deals during the week of Monday, Dec. 7, up from 68 a week ago and the highest total since Internet Retailer began tracking free shipping offers in early November. In the comparable week a year ago, 71 offered free shipping. In addition, 81 retailers in the top 100 also presented major promotional displays on their home pages—many highlighting potential gifts and discounts of 40% or more—and a number of retailers followed up with special e-mail offers to shoppers who had signed up for e-mail promotions. Among the e-mail promotions, one of the most robust was Kohl’s, which sent a different e-mail every day, with offers such as 25-65% off electronics and 50-60% off outerwear. <internetretailer.com>

Congress Pushes Trade Office Budget Boost - Congress sent a $447 billion spending bill to President Obama on Sunday that would boost the budgets for the nation’s two top-trade agencies and increase funding for China enforcement offices and trade remedy oversight. The legislation, passed by the House on Friday and the Senate on Sunday, increases appropriations for dozens of government agencies in the 2010 fiscal year, which began Oct. 1, and adheres closely to the priorities of the Obama administration. The majority of Democrats have placed a premium on reshaping the trade agenda by tightening enforcement laws and pursuing trading partners, particularly China, which violate trade rules and hurt U.S. manufacturers. To that end, Congress increased the budget of the Commerce Department’s International Trade administration to $456.2 million from $429.9 million in the 2009 fiscal year. The Import Administration, a division of the ITA that monitors textiles and apparel and investigates antidumping and countervailing duty trade cases, will receive $68.2 million, up from $66 million.  <wwd.com>

Bill Blass Group Files Suit - Bill Blass Group filed a lawsuit last week in a Manhattan federal court against its former beauty licensee, alleging breach of contract and trademark infringement claims. Blass said in court papers that it terminated its fragrance and cosmetics deal with First American Brands on Nov. 6 after the licensee missed royalty payments. According to the complaint, First American Brands has failed to respond to Blass’ “significant efforts” to contact it. “Given [the] defendant’s patent refusal to communicate, BBG can only assume that this former licensee is proceeding as if the license agreement had not been terminated and is continuing to sell and manufacture products,” Blass’ attorneys wrote. A spokeswoman for First American Brands said Friday she was not aware of the suit and would not comment. Blass is seeking an injunction, $5 million in punitive damages and $150,000 for breach of contract, among other relief. <wwd.com>