R3: THINK GLOBAL... FAST

R3: REQUIRED RETAIL READING

December 31, 2009

This might be the last day of the year, but that doesn’t give a hall pass to any self-respecting risk manager to ignore the mother of all calendar set-ups in global retail trade. Check this out…

 

TODAY’S CALL OUT

The biggest call-out this morning is a personal one. After the most hated rally in history, there’s a whole lot of people out there who are happy to be looking 2010 square in the eye in hope of another chance at alpha-generating salvation. I am simply grateful for having what I think is the greatest job on the planet, and have never in my 15 years on Wall Street been more excited about what is to come in 2010. My team has doubled and our Firm has tripled in size over the past year. As Keith pointed out in his Early Look this morning, this was not funded by TARP money. It is because of your support. We will never forget that. A sincere ‘Thank You’ from the Retail Team as well as my other colleagues here at Research Edge.

All of that said, what we don’t do here at Research Edge is take days off. So let’s look at the hand we’re dealt today. In the world of retail, the consensus view of the easiest things to look at probably point to the extra shopping day, post Christmas inventory, and impact of both weather and dot.com on this year’s holiday sales (turn on CNBC and that’s what you’ll get).  I think the most notable factors today are happening within the next 12-hours in Asia and Europe…

  • Europe: Many people forget that at the stroke of midnight, the VAT (Value Added Tax) goes up tonight in the UK to 17.5%, after a full year of a meaningful push by the government to stimulate the economy.  The debate amongst retailers is how long they can hold off in implementing price increases as to not confuse the consumer (and hurt margins) while holiday product is returned. Others, like Marks and Spencer, are more aggressively pushing prices through immediately. That’s a big gamble that the consumer will be waiting and willing to eat higher prices to protect retailer margins. Let’s be mindful of the ensuing fireworks in the coming months.
  •  Asian Free Trade Zone:  Reminder #2… China and Southeast Asia are creating a free-trade zone spanning more than 1.9 billion people on January 1, as China, and 10 South-East Asian countries join together to scrap tariffs. Duties will be dropped on everything from steel to rubber and shoes to electronics. China hopes that the zone will quickly rival the European Economic Area and the North American Free Trade Area and provide new outlets for its goods in the face of Western protectionism. Duties will be scrapped on 90% of goods traded across China, Indonesia, Malaysia, Singapore, Thailand, Brunei and the Philippines. Over the next five years, tariffs will also be removed on trade in Cambodia, Laos, Vietnam and Burma. Ok…so let me get this straight…90%+ of goods sold at retail are made in Asia, and we’re seeing Asian nations (some of which historically hate each other) band together to stimulate local consumption and trade to lessen reliance on the West AT THE SAME TIME the US Dollar ceases to be the world’s reserve currency. Does anyone else out there think that this is one of the scariest things going??? No one’s focused on this, but they should be.   

MORNING NEWS 

In an e-retail online shopping satisfaction survey by ForeSee Results, larger retailers fared better than their smaller counterparts in 2009. Based on a 100-point scale where scores above 80 are considered excellent, 5 of the 8 companies surpassing the threshold in ’09 were apparel retailers or mass merchants: Amazon, QVC, JCP, LLBean, and Victoria Secret. With e-commerce proving to be a real avenue of growth for retailers, expect this number to grow next year as the many retailers that launched sites over the LTM focus efforts towards getting it right.  <dallasnews.com>

Safilo Sells Some Retail Operations -  Safilo Group SpA said Wednesday that it had sold a portion of its retail units to Hal Holding NV for 13.7 million euros, or $19.7 million. Hal Holding acquired the Loop Vision chain in Spain, the Just Spectacles chain in Australia and all of Safilo’s retail units in China. The Italian eyewear group holds on to the remaining three chains — Solstice in the U.S. and both Sunglass Island and Island Optical in Mexico, which account for 215 of the company’s 300-plus retail units. Safilo outlined this sale in a plan released on Oct. 19. In that plan, the eyewear firm said it would sell the Mexican chains as well, for a total of 20 euros, or $28.80 at current exchange. However, the company said Wednesday it is retaining the Mexican chains “for now.” There are no plans to sell the Solstice chain. The sale was part of a recapitalization deal struck with Hal Holding in mid-December, expanding its investment in Safilo from 2 percent to a controlling share that will eventually be from 37.23 to 49.99 percent. Without a successful offer, Safilo faced bankruptcy, with debts that amounted to about 590 million euros, or $848.9 million.  <wwd.com>

Sockwell Retires from Claiborne Board - Oliver Sockwell has resigned as a director of Liz Claiborne Inc. after seven years on the board. Sockwell, 65 when the firm issued its 2008 definitive proxy in March, is the co-founder and retired president and chief executive officer of Construction Loan Insurance Corp. When first elected, he succeeded Jim Gordon, an original investor in the firm. With Sockwell’s departure, the board has nine members, seven of them independent. Doreen Toben, who retired as chief financial officer of Verizon earlier this year, was added to the board in October.  <wwd.com>

Desigual Set to Expand in 2010 - Despite the global downturn, the Spanish fashion brand Desigual remains on a rapid expansion course, including the opening of its first German — and largest European — store here. Now available in 70 countries, the vertical Barcelona-based company has pinpointed Germany and France as its most important growth markets in the year to come. At the official Berlin opening, chief executive officer Manel Adell said, “We should see some 10 stores in each of these markets soon.” Known for its lively novelty patchwork looks for men, women and children of all ages, Desigual has increased its revenues 20 times over the last seven years. Sales last year reached 162 million euros, or $238.4 million at average exchange, versus 8 million euros, or $7.6 million, in 2002, and while the company wouldn’t forecast 2009 sales, it expects to sell 10 million garments this year, up from 6 million in 2008.  <wwd.com>

Assouline Steps Up Retailing and Custom Services - Assouline, the fashion crowd’s favorite book publisher, has turned its eye toward retail expansion and luxury services. The New York-based company, founded 15 years ago in France by Prosper and Martine Assouline, has established itself as a tastemaker in the fashion world, which is a frequent subject of Assouline’s glossy picture books. An official partnership with the Council of Fashion Designers of America generates numerous books about American designers and the New York fashion scene. In addition to fashion, subjects encompass art, design, lifestyles, travel and culinary arts. The books are always rich in history, but historical significance alone doesn’t merit an Assouline project, according to Martine. It also must have some contemporary relevance. Recent and upcoming releases include books on polo, architect Oscar Niemeyer, India, Pierre Cardin, American men’s wear, the Esquire covers of George Lois and the Deyrolle fire. Subjects needn’t be serious, though, as there are also Assouline books about bikinis, Barbie and dog fashion. <wwd.com>

Hugo Boss to Close Ohio Factory, Cut 300 Jobs, Union Says - Hugo Boss plans to close an Ohio factory, affecting 300 jobs, according to labor union Workers United. <bloomberg.com>

Danner Sues Rag & Bone Over Boot - Rag & Bone has a history of looking to classic work and military wear for reference points, but a recent lawsuit brought by boot maker Danner Inc. accuses the label of being a bit too inspired in one of its recent designs. The Portland, Ore.-based shoemaker filed its complaint in U.S. District Court in its hometown on Dec. 18. The suit accuses Rag & Bone of trademark infringement for selling a boot design named the Danner Combat Boot through Barneys New York and Saks Fifth Avenue. Danner listed both retailers as co-defendants. Representatives for Rag & Bone did not return calls seeking comment Monday. Barneys said it does not comment on litigation and Saks said it had no comment. Danner registered trademarks for its scripted logo in 1974 in the men’s and women’s footwear class, and its name in 2007. The company has sold boots under the Danner brand since 1933.  <wwd.com>

Suit Against Retailer Chick Downtown - Online boutique Chick Downtown has defaulted on a $950,000 line of credit from Enterprise Bank, according to a lawsuit brought earlier this month by the lender. The suit, filed Dec. 15 in the Court of Common Pleas of Allegheny County, Pa., seeks $972,830.46 from the Pittsburgh-based e-commerce operator for the remainder of its principal and interest and attorneys’ fees. The bank’s complaint is the latest in a string of recent lawsuits filed against the online merchant. Several creditors, including Mint Collection Inc. and Molli Enterprise, have filed lawsuits accusing the company of failing to pay debts. A number listed for the company was disconnected when reached Tuesday. The retailer closed its brick-and-mortar location in Pittsburgh earlier this year. <wwd.com>

Storm Boosts Holiday Spending Online - ComScore Inc. reported Wednesday that, during the stormy weekend of Dec. 19 and 20, online sales increased 13.3 percent, to $767 million from $677 million during the comparable weekend in 2008. The challenging weather conditions in the Northeast and Middle Atlantic during the final weekend before Christmas kept many U.S. shoppers indoors and online, helping to boost e-commerce sales for the period between Nov. 1 and Dec. 24 to $27.12 billion, 4.9 percent higher than the $25.85 billion spent online during the 2008 holiday season. Adjusting for an extra shopping day this year, comScore put the year-on-year increase at a more modest 3.5 percent, but that’s still more than a 6 point swing from the 3 percent decline registered for holiday 2008 versus the 2007 season.  <wwd.com>

Denim's New Direction: Brands, Retailers Feel Pressure on Price - Denim proved to be a winning category for retailers throughout the recession and its momentum carried through the holiday season — but the warning lights are flashing. While the better-than-expected sales have been welcome news for brands and retailers alike, December’s results offered a clear picture of consumers’ pricing limitations as the new year approaches. “The reset button has been pressed,” said Andreas Kurz, former head of Diesel USA and Seven For All Mankind and now president and owner of fashion consultancy Akari Enterprises LLC. “We are back at the level where we were two years ago, and we have to start over again and with different rules.” Lawrence Scott, owner of Pittsburgh Jeans Co., has seen the change in his customers. They’ve continued to buy, but their tolerance levels on pricing have become pronounced and aren’t likely to change soon. <wwd.com>