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December 23, 2009


Today is the day where the penned-up demand of Firms that were on the Dollar General deal can finally unleash their Analytical hounds to let the world know how great of a deal this really was. While FDO is still the better short here, DG’s day will come. Perhaps sooner than later.



Today is the day where the penned-up demand of Firms that were on the Dollar General deal can finally unleash their Analytical hounds to let the world know how great of a deal this really was. Seven brokers launched coverage this morning, five of them with Buy ratings, and none with Sells. The average price target for the bulls is $29. Yes, that’s 32% above where it is today. Not bad for a deal that was priced at the lower-end of the $21-$23 range. Hats off to JP Morgan, the only broker on the deal to not pump its tires.

Does DG still qualify as the type of company that can learn pretty much anything it wants to for a couple of quarters? Although it hardly proved that theory in the latest quarter, the answer is probably yes. But the fact remains that this was arguably the best period to take a dollar store public (again) in the past ten years. In 2010 is gets a lot harder. Yes, the company is helped by a better maturation curve for its stores. But it no longer benefits from the incremental consumer trade-down, shift towards consumables, and increased private label. Margins are peaky, debt is massive, and the company is signing new lease obligations like they’re going out of style. This smells so bad in so many ways.

For now, we like Family Dollar as the better short. But DG’s day will come – perhaps sooner than later.

R3: HAPPY DOLLAR GENERAL DAY - 12 23 2009 8 18 10 AM



  • As the “private sale” trend continues to grow, keep an eye on Zulily. The online private sale site is set to launch in early 2010 with a merchandise focus centered on mom, babies, and kids. The site is partially funded by Mark Vadon, founder of Blue Nile.
  • With Barnes & Noble’s Nook e-reader gaining considerable attention over the past few months as a formidable competitor to Amazon’s Kindle, it’s too bad the product will barely be brought to market in time for the holidays. While the troubles with meeting pre-order demand have been well documented, BKS recently indicated it will now be offering a Nook gift certificate and a $100 gift card to those that are no longer going to get their device before December 25th. Many customers are now up in arms, as the company has delayed shipping dates several times along the way only now admitting that the product will not make it in time for the holiday.
  • Call it cost cutting or an employee morale boost? Crocs has closed its offices for the holidays over the final two weeks of the year. Maybe it’s just a reward for the company’s ability to clear through 12 million pairs of excess inventory over the past 12 months!



Iconix Lauches European Division - Iconix Brand Group Inc. said Tuesday it has partnered with The Licensing Company to launch a European unit to pursue expansion in the region. A group of investors led by The Licensing Company and Albion Equity Partners acquired a 50 percent stake in the new division, Iconix Europe, for $4 million, Iconix said. As part of the deal, Iconix retained its own 50 percent interest in the venture and the rights to its first $6 million of distributions. Iconix said it currently has 11 existing licensing agreements in Europe. The company said it expects to record a pre-tax gain of between $5 million and $7 million related to the transaction. <wwd.com>

Brazilian Fitness Brand Track & Field Plans U.S. Push - Track & Field, a high-end fitness and lifestyle apparel brand with 36 stores in Brazil, wants to tap into the $30 billion U.S. fitness industry. The company, which uses innovative fabrics such as material that stays dry and fabric that stretches comfortably, will launch an 850-square-foot store next month at 977 Madison Avenue and 77th Street in Manhattan. “When I look at the U.S. market, most companies investing in [innovative] fabrics are very big, like Nike,” founding partner Frederico Wagner said. “It’s hard to think of these companies as being very exclusive.” Wagner said Brazil, which will host the 2016 Summer Olympic Games in Rio de Janeiro, ultimately could support a chain of 70 units, but he sees the potential in the U.S. for as many as 300 to 350 stores. Track & Field sells athleticwear for indoor and outdoor sports, and casualwear that can be worn anytime. There are also collections for cross-training, triathlons, yoga, running, swimming, biking and winter and summer sports. Prices range from $40 to $180 with the average price point at $75. <wwd.com>

Billabong to Acquire Stake in Surfstitch - Billabong International Ltd entered into a conditional agreement to acquire an interest in Australian online board sports retailer, Surfstitch. The agreement will allow Billabong acquire a minority equity interest in Surfstitch, with options to acquire 100 percent of the business. Billabong said the purchase price was not material and was subject to a confidentiality agreement.   <sportsonesource.com>

Chinese Retailer PCD Enjoys the Boom - While department stores in the U.S. face tough competition from online retailers and big-box giants, the department store chain PCD in China is booming, reports Business Week. PCD has grown rapidly since opening its first store in 1998. PCD operates 16 department stores and one outlet mall. Earlier this month, it made its Hong Kong trading debut with shares soaring 30 percent, putting the little-known PCD in the industry's big leagues. The company now has a market capitalization of $1.3 billion, larger than some of the top names in the business. As the Chinese economy rebounds, shoppers are returning to the country's stores and investors are driving up the stock prices of Chinese department store chains. <licensemag.com>

Cavalli Renews Global Eyewear License With Marcolin - Roberto Cavalli and Italian eyewear maker Marcolin SpA said Monday they have renewed the license to globally produce and distribute sunglass and prescription frames branded Roberto Cavalli and Just Cavalli until Dec. 31, 2015. The license was set to expire at the end of December 2010. The partnership between the two firms dates to 1999 for the signature branded collection, and to 2005 for the Just Cavalli label. The companies said that the license renewal marks the designer’s 40th anniversary next year. To celebrate the milestone, Marcolin and Cavalli said they are “working at an ambitious development plan...to seize new and further growth opportunities.”  <wwd.com>

Decline in Swiss Watch Exports Ebbs - Swiss watch exports, still feeling the impact of the economic crisis, nevertheless showed a marked improvement in November as their monthly decline was the most moderate for the year. Exports of Swiss timepieces fell 10.6 percent to 1.4 billion Swiss francs, or $1.38 billion at average exchange rates, last month, compared with a 22.7 percent drop reported in October, according to the Federation of the Swiss Watch Industry. In the January-to-November period, the decline in exports was 23.7 percent. <wwd.com>

Shrinking Credit Threatens Almost $9 Billion in Holiday Sales - Target Corp. and U.S. retailers may lose almost $9 billion in holiday sales as banks rein in lending to cash-strapped consumers before a new credit-card law takes effect. Sales in November and December may fall 1.2 percent to $436.7 billion from the same period in 2008, said Britt Beemer, chairman of consumer polling firm America’s Research Group. If lenders weren’t cutting customer spending limits and rejecting more credit-card applicants, sales would gain about 0.8 percent to $445.5 billion, he said in a Dec. 21 interview. Target Chief Financial Officer Douglas Scovanner says the credit-card legislation is exacerbating a spending slump just as consumers begin to consider more discretionary purchases they would usually buy with credit. Items such as clothing, jewelry and home goods suffered steeper declines during the recession and are among the most profitable sales for retailers.  <bloomberg.com>

Fed, FTC to Require Notices for Credit Decisions - The Federal Reserve Board and the Federal Trade Commission announced rules giving U.S. consumers more information when they’re lent money at higher rates because of their credit report.  Consumers given less-favorable terms will be given a notice and the opportunity to get a free report, the Fed and the FTC said in a statement today. Lenders can also comply by giving customers a free credit score, which is usually available for a fee from credit-reporting companies. Currently, lenders don’t have to explain why a borrower is getting particular terms. The rules will apply to all forms of consumer credit, including credit cards, auto loans, mortgages and student loans. The rules apply to banks and lenders such as auto dealers and financing firms. Congress has tightened regulations for lenders this year. President Barack Obama signed a credit-card law May 22 that limits rate increases, among other changes. A new Consumer Financial Protection Agency is under consideration by legislators as part of a broad regulatory overhaul.  <bloomberg.com>

Brazil Eyes Sanctions for U.S. Cotton - Brazil told a World Trade Organization forum Monday it could impose punitive sanctions of about $829.3 million because of the U.S.’ failure to scrap cotton subsidy programs found in breach of global rules. A preliminary list published in Brazil’s official daily in November cited more than 200 products that could be targeted for high tariffs, including cotton yarn, cotton fabrics, denim fabrics with more than 85 percent cotton, men’s and boys’ trousers, knitted or crocheted fabrics of cotton and woven fabrics of nylon. Other products on the provisional list include agricultural products, machinery and equipment; pharmaceuticals, and chemical products.  <wwd.com>

EU Prolongs Duties on Chinese, Vietnamese Footwear - The European Union on Tuesday extended punitive taxes on imports of Chinese and Vietnamese shoes. Ministers from the 27 EU nations "today adopted a regulation extending, by a further period of 15 months, the anti-dumping duty on imports into the EU of footwear with leather uppers originating in China and Vietnam," a statement from the bloc's presidency said. The move is designed to help southern EU producers compete against lower-cost footwear imported by companies such as Nike Inc., Puma and Adidas. The extension of the duties on leather shoes is a compromise because a U.K.-led group of northern European nations opposed re-imposing the levies for the usual five-year period, according to Bloomberg. The anti-dumping measures in the EU carry import duties of 16.5%levied on Chinese shoes with leather uppers and 10% on the same kind of shoes from Vietnam. The duties aim to counter below-cost imports from China and Vietnam. <sportsonesource.com>