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January 19, 2009

We’re seeing signs that the end of the earnings revision cycle may be near.


We think that 2010 will be the year we shift away from the group call, and towards the individual company/stock call. The first three weeks of the year are not particularly supportive of this view, but seem to be setting up for the delta on revisions to finally be hitting peak.

Why do we say this? Simply put, we’re seeing earnings revisions decelerate and stock performance erode on the margin at the same time we’ve got an acceleration in expected EPS growth approaching peak growth on near-peak multiples.

Remember that back in March, we had trough multiples on trough earnings. Ten months later, we’re close to the opposite.

Could there be another 5% hidden in there? 10%? Yeah…I guess. But we’re definitely past the 7th inning stretch.  As the 9th inning approaches, we’d better have done our analysis on which team can win a championship regardless of a Macro tailwind.

R3: Peak of the Earnings Revision Cycle? - 1

R3: Peak of the Earnings Revision Cycle? - 2


  • After acquiring leather goods brand Lambertson Truex from bankruptcy this past summer, word has it Tiffany is nearing the brand’s relaunch. The new line is expected to be shown to the press in April and is likely to hit stores in September. This will mark the Tiffany’s first efforts in the luxury leather goods arena.
  • As one of the few brands still without functional e-commerce, Carters is on track for its .com launch in the first half of 2010. While management is conservative with expectations for sales and profits coming from the direct business, we can’t imagine why over time this won’t become a meaningful contributor to both Carters and Osh Kosh. We wonder if baby registry is also on the horizon…
  • Unlike other off price retailers that have been reporting consistently strong results, Burlington Coat Factory seems to have been hit hard by unseasonably warm November weather. After posting positive same store sales for September and October, the company finished the quarter with a 5.2% decline. Management attributed the weak results to warm weather patterns in November. Given that scenario, we wonder how much sales picked up in December/January when the cold freeze swept across the country. Management did not offer any insights, but given the company’s “coat” heritage it would not be surprising for the trends to have changed dramatically in the last 3-4 weeks.


Carlyle Planning Moncler IPO Next Year, Weighing Acquisitions - The Carlyle Group, the world’s second-largest private-equity firm, is planning an initial public offering of skiwear maker Moncler next year after adding stores and boosting sales. “We’re doing a number of things that would allow us to hold an IPO” of Moncler, Marco De Benedetti, head of Washington-based Carlyle’s private equity business in Italy, said in an interview at his Milan office. “That may be in a year or so.” Moncler “is a business that’s caught the attention of buyers, but we’re not in negotiations to sell it right now.” Carlyle bought a 48 percent stake in Milan-based Moncler in 2008 and has helped the brand add more than 30 stores, compared with four previously. Sales probably grew 23 percent to about 370 million euros ($532 million) in 2009, the company said. Carlyle is now looking at potential investments in the fashion industry that could be merged with Moncler before a sale. “We’re looking at potentially buying a brand we could add to Moncler, something that could be integrated” into the label, De Benedetti said. The ideal target would have sales of as much as 100 million euros, he said.  <bloomberg.com>

Australia's Rebel Group IPO plans on hold - Private equity firm Archer Capital has stalled plans for an initial public offer of shares in Australian sports retailer Rebel Group due to market concerns, a source with direct knowledge of the situation said on Monday. Rebel Group has been valued at up to $735 million. The decision could dim the outlook for other IPO hopefuls in the retail sector, such as Pacific Equity Partners' REDGroup Retail, which owns Australia's two largest bookstore chains, Borders and Angus & Robertson. The source, speaking on condition of anonymity because the matter was confidential, highlighted that the market prices of some recent retail offers remained below their issue prices. Rebel Group, which includes the Rebel Sports and A-Mart All Sports sporting goods chains, was formerly known as Ascendia Retail. Local media put the value of the group at up to A$800 million ($735 million) and said it had planned to list by March. <reuters.com>

Gap hires a Limited Brands exec as its chief information officer - Tom Keiser has joined Gap Inc. as executive vice president and chief information officer. Keiser is responsible for improving Gap’s global technology platforms. He reports to Gap chairman and CEO Glenn Murphy. Keiser had been executive vice president and chief information officer at the Limited Brands, operator of such multichannel retailers as Victoria's Secret and Bath & Body Works. “I’m excited about joining Gap Inc. as the company executes on its plan to further expand online and internationally,” says Keiser. “And I look forward to leading the I.T. team to ensure we have the most effective infrastructure and platform to support this growth strategy.” <internetretailer.com>

Gilt Groupe names communications and brand execs - Online luxury retailer Gilt Groupe Inc. has hired Conde Nast Digital executive Jennifer Miller as its vice president of corporate communications and named Christian Leone, Gilt Groupe's vice president of marketing and communications, as its vice president of brand relations. Miller will focus on developing relationships with the consumer press, engaging consumers directly and enhancing employee communications. She previously was executive director of public relations for Conde Nast Digital where she oversaw the public relations team for the company’s web-only brands such as Style.com and Epicurious.com. Leone is responsible for building and developing relationships with brands. He reports to Alexandra Wilkis Wilson, the company’s founder and chief marketing officer. <internetretailer.com>

Nike Launches Golf Clubs Without Tiger Woods  - Nike Inc. will launch new golf clubs that are not directly linked to Tiger Woods. Instead, Nike said its Victory Red STR8-FIT Tour fairway woods, which will go on sale Jan. 28 for $299, were designed with input from all 13 U.S. golf endorsers. Promotional materials make no mention of Woods, whose tradition of wearing red shirts on the final day of golf tournaments inspired the Victory Red name, according to the Wall Street Journal. The materials note that the clubs were tested in tournament play by  Lucas Glover, who claimed his first major victory last year when he won the U.S. Open Championship. <sportsonesource.com>

Gildan Activewear Missing Six Employees in Haiti - Gildan Activewear Inc. is unable to account for six of its 44 employees in Haiti, Chief Executive Officer Glenn Chamandy said in a memo to employees. As reported, one of Gildan's three contractor facilities in Haiti was "substantially damaged" in the magnitude-7 earthquake that struck Tuesday. In an internal memo, the Montreal apparel maker said its immediate efforts have been focused on trying to provide assistance to the operator of the destroyed facility, Palm Apparel. As the earthquake occurred when the plant was in full production, a large number of workers have been trapped under the collapsed building structure. The company said the six Gildan employees it hasn't yet been able to reach in Haiti may be trapped in the building rubble.   <sportsonesource.com>

Macy’s CEO elected National Retail Federation chairman - Terry J. Lundgren, chairman, president and CEO of Macy’s Inc., was elected this month chairman of the board of the National Retail Federation, a major trade association whose e-commerce arm is Shop.org. Lundgren succeeds Myron E. Ullman III, chairman and CEO of J.C. Penney Co. Inc.

Other officers elected during NRF’s recent annual convention include:

  • Stephen I. Sadove, chairman and CEO of Saks Inc., first vice chairman
  • Kip Tindell, chairman and CEO of The Container Store, second vice chairman and chairman of NRF’s awards and nominations committee
  • Robert M. Benham, president and CEO of Balliet’s LLC, corporate secretary
  • Roger N. Farah, president and chief operating officer of Polo Ralph Lauren Corp., chairman of NRF’s finance committee.

Each officer will serve a two-year term.

Also elected to the NRF’s board for three-year terms were:

  • Marty P. Albertson, chairman and CEO, Guitar Center Inc.
  • Daniel Lalonde, president and CEO, Louis Vuitton North America Inc.
  • Laurent Milchoir, CEO, Etam Group.


EMC Sports Acquires Soffe Accessory Business - EMC Sports Inc., a division of Eric McCrite Co., has purchased from New Balance the Soffe Accessory business, patents and licenses. The patented hair and sleeve scrunchies are sold by major retailers and team dealers. Since 1989 Eric McCrite Co. said it has been distributing “Soffe” and other brand name sporting goods, at wholesale, to team dealers, retailers and decorators. Eric McCrite, at EMC Sports, Inc., said, "When we first looked at this business we thought the majority of sales came from cheerleading, but that is not the case, the bulk of the sales are with the sports related sleeve and hair scrunchies. Our basketball, lacrosse, softball and volleyball scrunchies in 12 team colors are what drives the business with cheer and dance following close behind." <sportsonesource.com>

Crabtree & Evelyn to Exit Bankruptcy - Bath and body soap marketer Crabtree & Evelyn Ltd. plans to emerge from bankruptcy by the end of this month. The Woodstock, Conn.-based company set the timetable Thursday when a Manhattan bankruptcy court approved its first amended reorganization proposal. After coming out of bankruptcy, the company will close on a $26.3 million exit loan from its parent, Malaysian firm Kuala Lumpur Kepong Berhad. As part of its restructuring, the retailer exited 35 retail sites, leaving 91 locations in operation. It also has a new e-commerce platform, crabtree-evelyn.com.  <wwd.com>

Caccia Dominioni Said Leaving Benetton -  Benetton chief executive officer Gerolamo Caccia Dominioni is expected to leave his post in April at the end of his three-year contract, according to sources in Italy. A spokesman at the Italian apparel manufacturer declined comment Monday. Caccia Dominioni was previously the London-based vice chairman and chief operating officer of Warner Music International, a division of Warner Music, and he succeeded Silvano Cassano as Benetton ceo in 2007. Cassano left the company after clashing with the Benetton family over international strategy. Alessandro Benetton holds the title of executive vice president, and his father, patriarch Luciano Benetton, that of chairman. Sources say the involvement of the family could also have led to friction with Caccia Dominioni. As for the future, the question is: Could another nonfashion executive take Benetton’s helm? Cassano is a former Fiat executive and his predecessors Luigi De Puppi and Carlo Gilardi came from the worlds of home appliances and banking, respectively.  <wwd.com>

Consumer Prices Rise in December - Retail apparel prices rose a seasonally adjusted 0.4 percent in December compared with November and advanced 1.9 percent compared with a year earlier, the Department of Labor said today in its Consumer Price Index. Women’s apparel prices rose 0.6 percent month-to-month and increased 2.9 percent year-over-year. Men’s apparel prices declined 0.3 percent in December, but rose 0.5 percent in 12-month comparisons. The overall CPI was up 0.1 percent in December, and rose 2.7 percent compared with a year earlier. The so-called core prices, which excludes the food and fuel sectors, also rose 0.1 percent for the month and advanced 1.8 percent year-over-year. Discounts in December weren’t as steep this year as in previous year’s, which helped drive prices up, said Jessica Penvose, an economist with the Labor Department. <wwd.com>

Gallup Economic Weekly: Job Creation Remains Weak - Economic confidence falls, but consumer spending continues to exceed year-ago comparables. Gallup's Job Creation Index suggests that the job situation deteriorated last week with slightly fewer companies hiring while slightly more were letting employees go. Add in the disappointing December jobs report, and it is not surprising that economic confidence also worsened last week. Still, consumer spending continues to be encouraging. Although flat compared with the prior week, it remains slightly above last year's same-week comparables, as upper-income Americans who are less affected by job market conditions are spending a little more now than they were at this time last year. Job Creation as reflected by U.S. workers' reports of their own employer's hiring/firing activities deteriorated last week. Gallup's Job Creation Index was at -2 -- down from the +1 of the prior week. Hiring was down slightly as 23% of employees reported their companies were hiring compared with 24% the prior week.of U.S. workers said their company was hiring and 14% said their company was letting workers go. Economic Confidence took a tumble last week as Gallup's Economic Confidence Index worsened to -29 -- 7 points worse than the -22 of the prior week. Economic confidence is essentially where it was last month after showing improvement during each of the past three weeks. nearly a dollar from levels a year ago.Consumer Spending was unchanged last week with self-reported daily spending in stores, restaurants, gas stations, and online averaging $68 -- the same as during the prior week and up a modest 6% from the same week a year ago. <gallup.com>