HRD subs…
Seven key topics today.
“Don’t you know the first law of physics? Anything that’s fun costs at least 8 dollars!” Eric Cartman (maybe Cartman does not think UA stock is fun – it might go below $8)
Make it a great one…
B
1. HBI earnings day. No backing off on the pre-print jitters. HBI already preannounced the third quarter – so it’s all about the 4Q guide. First conf call for new CFO Hytinen from TPX – prob won’t get too far over his skis. Unless the company gives me proof that there will be a meaningful acceleration in operating/free cash AND real organic growth in the US (and globally) then I remain comfortably short this name into the single digits. Actually, I don’t need proof. I simply need management to show me that it is playing – and winning -- a game of strategic chess vs the entire softgoods supply chain when its ability to fund real – and even acquired – growth is simply tapped. I don’t think management is lying – I think it has a flawed plan it actually believes.
2. In the midst of a 13% implosion in its stock, UAA issued an 8k at 2pm yesterday saying that it omitted the $88.1M of restructuring charges for the 9 months in 2017. So EPS for the nine months is $.09 not $.29 in the press release for earnings. It’s a good thing no one cares, bc if UA was actually valued on earnings it’d be worth Cartman’s “$8 fun” threshold.
3. The KORS/Choo merger closed. If I’m right on COH as my Best Long idea, it’s going to be difficult to not go long KORS. I initially thought the Choo deal was bad. But after diving deeper, it’s nearly as complimentary is KATE is for COH (only KATE was 40% lower in valuation).
4. One point that really resonated with my team yesterday is the potential for a PORTION of UA to be bought by Kering. Plank can’t be fired given that he owns 65% of the voting rights. Yet we saw KER hire Rothschild yesterday to sell its 86% stake in Puma. Why not? The brand is hot – prime time for a deal - -and finally time to make up for a what was a flawed investment at the time. Bought it for €5.3B a decade ago and now is valued at €5.9B. That’d be a great deal for shareholders. KER not selling bc it doesn’t like the space tho. Would it buy some UA? Plank might actually let it happen (and I stress MIGHT) if it could get some Luxury expertise and European connections in a ‘Shark-Tank-ish’ kind of way.
5. When discussing UA retail yesterday with a client, it struck me that LULU should be opening men’s-only stores in the US. I think the US market could easily support 50-75 stores. Me’s biz is picking up steam at LULU and has material upside. All of a sudden, this becomes a square footage story again. LULU is my top long behind COH.
6. Solid quote from GGP CEO in conf call. “So we’re starting to see almost every retailer open bricks-and-mortar stores and they all sort of go towards the best retail. Again, that’s why I fundamentally go back and say that, if you own the top billion square feet of retail in America, long-term long you’re going to win.” Obvious, but clear statement about high-low strategy w REITs. Stay away from the DDR’s of the world – strip mall = biggest risk.
7. Big Five commented (in 22min conf call) that comping down msd for the qtd due to “continued reduced demand for firearm related products compared to last year”. Re gun trade…Remember how long it took Golf to finish a bottoming process?
