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R3: COH: An Inflection in the New Reality


January 20, 2009


The “good ol' days” of multiple handbag purchases and annual price increases are long behind us.  The new reality is that COH is now managing its margin structure to more realistic levels, while operating margins are still amongst the highest in all of apparel, retail, and luxury.  The real challenge here is one of expectations, which just don’t yet seem to be aligned with the new reality.





There is no question that COH’s limited US growth prospects, large US outlet business, and strategy to emphasize growth in lower-priced categories are all concerns.  But the reality is, the “good ol' days” of multiple handbag purchases and annual price increases are long behind us.  The new reality is that COH is now managing its margin structure to more realistic levels, while operating margins are still amongst the highest in all of apparel, retail, and luxury.  The real challenge here is one of expectations, which just don’t yet seem to be aligned with the new reality.


This morning Coach reported 3Q EPS of $0.75, exceeding Street estimates by $0.03.   Embedded in the results was the company’s first positive increase in gross margins in three years! (+30bps).  Offsetting the gross margin gain was a lack of SG&A leverage to the tune of 80bps, as the company lapped some major cost savings last year.  While there is plenty to be positive about given what appears to be a bottoming in gross margins, the bears are likely to chew on the modest miss to domestic same store sales expectations.  With North American comps of +3.2% marking a return to positive sales for the first time in 4 quarters, expectations were calling for a 5% increase.


3Q results will be scrutinized given only modest upside (on a relative basis, COH is not yet showing substantial earnings leverage off of last year’s easy compares), but the net result here is that the top and bottom lines continue to improve.  Inventories ended the quarter in great shape, down 30% y/y against a total sales increase of 11%.  We actually wonder if inventory is too lean at this point.   The reductions are in part due to the mix shift towards lower price points, but still impressive and likely to set up well for future gross margin improvement (against easing compares).    Understanding where same-store sales can actually go in the absence of pricing power is the biggest challenge and one where expectations still seem a bit too high.


R3: COH: An Inflection in the New Reality - 1




  • Burberry management indicated strong sales of outerwear and non-apparel were key product categories helping to drive the company’s better than expected top and bottom line results. Interestingly, management also attributed the strength in part to the recent launch of the company’s social media effort dubbed The Art of the Trench. The online effort is considered one of the more creative interactive marketing efforts by a fashion brand in 2009.
  • After a multi-year run, fashion bloggers are calling for the bubble to burst on the Americana trend. American heritage brands such as Red Wing, L.L Bean, and Filson, which have seen a resurgence in popularity, may be poised for a relative slowdown now that year three of the trend is upon us. With the fashion trend potentially slowing, we wouldn’t be surprised to see the log cabin/apothecary themed store designs fade away as well.
  • In effort to generate buzz ahead of its Florence museum opening, Gucci is launching a collaboration with Christies. The luxury brand and auction house will be offering an online appraisal and authentication service for collectors of vintage Gucci wares. The sight will also allow Gucci archivists to prospect for potential acquisitions of historical importance ahead of the 2011 museum opening.




Liz Sells Claiborne Outlets in Canada - In a move to limit its exposure north of the U.S. border, Liz Claiborne Inc. has sold its 38 Liz Claiborne outlet stores in Canada to Laura Canada, a privately held specialty retailer based in Montreal. Terms weren’t disclosed, but Claiborne said financial details and closing information would be made available in subsequent filings with the Securities and Exchange Commission. The remaining six Liz Claiborne outlets in Canada are expected to be closed, either prior to or at the expiration of their leases, or converted into other formats. The company emphasized that the move will have no impact on its Canadian wholesale business, which it expects to expand, or its U.S. Liz Claiborne outlets. The 99 Mexx stores and 12 Lucky stores Liz operates in Canada aren’t affected by the transaction either. “The Liz Claiborne Canada retail division has struggled over the last two years and, after reviewing our options, we concluded that the assignment of the Liz Claiborne Canada retail leases was the best decision for the future of the brand in that country,” said Andrew Warren, executive vice president and chief financial officer of Liz Claiborne.  <wwd.com>


Designer License Holding Files for Bankruptcy - Designer License Holding Co. LLC, the Bill Blass licensee partially owned by apparel entrepreneur Arnold Simon, has filed for Chapter 11 bankruptcy court protection. The voluntary filing was on Dec. 31 in a Manhattan bankruptcy court. The petition listed total assets of $18.7 million and total liabilities of $15.5 million. The petition listed Israel Discount Bank as a secured lender holding a $6.7 million claim. Among its 20 largest unsecured creditors, Sterling Factor Corp., New York, is listed as holding a claim for $534,580. Equity holders of Designer License include: Jubilee Limited Partnership, holding a 27.8 percent stake; Simon, 24.5 percent; Timothy Fullum, 24.5 percent; The Leiber Group Inc., 16.6 percent, and Daniel Gladstone, 6.6 percent. <wwd.com>


Duffy to Head Performance Footwear for Timberland - The Timberland Co. appointed Gregg Duffy as senior director of performance footwear. In this role, Duffy is responsible for the overall management of Timberland’s global performance footwear portfolio, including multi-sport, hiking and seasonal offerings.  He reports to Brian Moore, Global Vice President of Men’s Footwear and Outdoor Performance for Timberland.  Duffy has more than 17 years experience in the performance footwear industry, having held senior positions in product design and management for such brands as Puma, Saucony, Burton-Gravis and most recently, Merrell. <sportsonesource.com>


Prada Confirms Hiring of Kress - François Kress has joined New York-based Prada USA as chief executive officer, a Prada spokesman said. This confirms a report on WWD.com. No further details were available, and the company has no plans to formally announce his hire. Kress was previously managing director of Bulgari’s jewelry, watch and accessories division. At Prada, he succeeds Graziano de Boni, who left the Italian brand in late October to head up the Reed Krakoff division at Coach Inc. <wwd.com>


Cabela’s Names Head Merchant; Sets of String of Executive Promotions - Cabela’s Inc. announced that Brian J. Linneman would become its executive vice president and chief merchandising officer. Previously, Linneman was senior vice president of global supply chain and operations, Linneman will be responsible for merchandising, planning, inventory, visual merchandising and strategic planning/process improvement. Linneman's transition was included among a number of other senior level promotions: The other promoted executives now hold these titles and responsibilities: Patrick A. Snyder, Executive Vice President and Chief Marketing Officer. Snyder previously served as Senior Vice President of Merchandising and Marketing. Under Snyder’s leadership, the Company is consolidating responsibility for its e-commerce and catalog businesses. Snyder will continue his current responsibilities for market research/analysis, retail advertising, brand management and media relations. Ralph W. Castner, Executive Vice President and Chief Financial Officer of Cabela’s and Chairman of the Board of World’s Foremost Bank. Previously Vice President and Chief Financial Officer, and Chairman of the Board of World’s Foremost Bank, the Company’s wholly-owned bank subsidiary, Castner will continue his current responsibilities for finance, accounting, investor relations, tax, internal audit, legal, and risk management. Castner will also take on responsibilities for real estate, construction and facilities. Joseph M. Friebe, Executive Vice President of Cabela’s and President and Chief Executive Officer of World’s Foremost Bank. Previously Vice President, and President and Chief Executive Officer of World’s Foremost Bank, Mr. Friebe will continue to lead World’s Foremost Bank. Charles Baldwin, Executive Vice President and Chief Administrative Officer. Previously Vice President and Chief Human Resources Officer, Baldwin will continue his current responsibilities for human resources and take on responsibilities for information systems, call centers and the Company’s Outdoor Adventures division. Michael Copeland, Executive Vice President and Chief Operations Officer. Previously Vice President of Retail Operations, Copeland will continue his responsibilities for retail operations in the United States, as well as asset protection, and will take on responsibilities for operations in Canada. <sportsonesource.com>


Gregory Scott Said Offered New York & Co. Post - Gregory Scott, who resigned as Bebe Stores Inc’s chief executive officer in January 2009 after a stormy five-year tenure, could be next in line to run New York & Company Inc. Sources said Scott is being offered a top post at New York & Co., which would establish him as the lead candidate to succeed Richard Crystal, the 64-year-old chairman, president and ceo. Crystal’s employment contract was extended last year to February 2011. Sources also said Scott, considered a strong merchant more so than an operations executive, has been actively seeking a job and has been talking to companies in New York. Crystal declined comment. He is recognized as building New York & Co. into a national specialty retail force, and earlier in his career was a high-level Macy’s merchant. Scott could not be reached Tuesday.  <wwd.com>


Retailers spent 17% more on search marketing in Q4, report finds - Search engine marketing firm Efficient Frontier says its retailer clients spent 17% more on search engine marketing in the fourth quarter than they did in same period in 2008, and 46% more than in the third quarter. SearchIgnite, also a search marketing firm, says its clients spent 12% more in the fourth quarter on paid search ads than they did a year ago. Efficient Frontier also reported a 90% increase in retail-related search queries. But that didn’t necessarily increase sales. Click-through rates declined 40%, orders per impression fell 30% and conversions per click were flat. Cost per click was 9% lower for the quarter than the same time last year.  <internetretailer.com>


Retail's Technological Revolution Takes Off - Major initiatives are under way in cloud computing, social media and mobile that have the power to upend the business. Here is the vision: Retailers — and, not incidentally, apparel makers and consumers — will get any kind of computing power they need from the “cloud” — which provides an application or service available to anyone at any time as long as they have an Internet connection. Everything will be knitted together by social media and accessible from any mobile device anywhere. Call it the third-wave Web. The result could be new competitors, and a blurring of the distinctions between customers, designers and retailers. Examples include user-designed clothing and inexpensive, easy-to-use point of sale systems that small retailers can log onto online — or from their iPhones. Five-year-long implementations of business software will be history, as will the need to maintain a data center. Startup and operating costs will fall dramatically, and small companies and individuals will have access to previously unaffordable resources such as enterprise-level security. Take ShopKeep.com. Still in beta test mode, this cloud POS for small retailers is cheap and easy to use, yet it has the security of a big company because it is hosted by Amazon.com (on its own cloud offering, Amazon EC2). Two other behind-the-scenes partners provide secure credit-card processing and full PCI compliance.  <wwd.com>


Obama Pressing for Protections Against Lenders - President Obama on Tuesday stepped into the middle of a fierce lobbying battle by reinforcing his support for an independent agency to protect consumers against lending abuses that contributed to the financial crisis. The president’s move also signaled a tougher line and a more direct role as Congress weighs an overhaul of banking regulation.The financial industry and Congressional Republicans have singled out the administration’s proposed consumer agency in particular, hoping to greatly weaken if not kill it. With liberal Democrats and Web commentators fighting just as hard for a strong independent office, the issue is becoming the central flashpoint in the debate over regulation. Mr. Obama personally weighed in on Tuesday in a one-on-one meeting at the White House with Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate Banking Committee. Reports last week suggested that Mr. Dodd might drop the consumer agency from the emerging Senate bill in order to attract support from Republicans and some centrist Democrats on his committee, but Democratic aides disputed that. <nytimes.com>


The major indexes – the Dow, S&P, NASDAQ and Russell - all closed at new highs for the year. The big winner on the day was the continued outperformance of the Healthcare (XLV) as it outperformed the S&P 500 by 120bps on expectations of a Republican victory in the Massachusetts. 


The Hedgeye sector models are back to having all nine sectors positive on TRADE and TREND.


Also on the positive side were increased M&A activity and some better-than-expected earnings/guidance from Parker Hannifin.  Yesterday the market seemed to ignore another tightening move out of China and the Greek budget deficit crisis.  Other MACRO data points should have presented some additional headwinds. The National Association of Home Builders index of builder confidence decreased to 15 from 16 the prior month to the lowest level since June 2009.  After the close the ABC consumer confidence declined for the second week in a row. 


As we look at today’s set up the range for the S&P 500 narrowed from 20 points on Friday to 10 points or 0.60% (1,143) downside and 0.3% (1,153) upside.  At the time of writing the major market futures are trading down on the day.  


Yesterday, Technology (XLK) was the second best performing sector.  Within the XLK the communications equipment group provided upside leadership and AAPL +4.4% was the highlight in the hardware space after the company confirmed it will be holding a 27-Jan event to launch its “latest creation”.   Semis rebounded from a 6% selloff last week with the SOX +1.8%.


Despite virtually no MACRO data points, parts of the RECOVERY trade outperformed.  The Materials (XLB) sector has been down 4 of the last 5 days, but was the third best performing sector yesterday.  Steel stocks were among the best performers in the group with the S&P Steel Index +2.9%. 


The Financials (XLF) rebounded from a 2% decline on Friday, though the banking sector was a slight laggard.  Citigroup outperformed the large-cap group after reporting Q4 results.  The regional banks outperformed with ZION and PNC among the notable gainers.


In early trading Copper is trading down on China tightening concerns.  The Hedgeye Risk Management Quant models have the following levels for COPPER – buy Trade (3.28) and Sell Trade (3.49).


In early trading Gold is trading down about 0.8% to 1,130. The Hedgeye Risk Management models have the following levels for GOLD – buy Trade (1,119) and Sell Trade (1,150).


Yesterday crude traded up by 1.3%, but is giving back all the gains in early trading today.  The Hedgeye Risk Management models have the following levels for OIL – buy Trade (77.51) and Sell Trade (81.10).


Howard Penney

Managing Director















"The Constitution does not just protect those whose views we share; it also protects those with whose views we disagree."
-Edward Kennedy
Good or bad, everything happens for a reason.  Like the late Ted Kennedy once said, the constitution is working to protect those with differing views, especially those with views of the current administration in Washington.    
It’s fitting that “this change of guard” is happening in Massachusetts, a state that has played a big role in American history:
(1)   Plymouth was the second permanent English settlement in North America.

(2)   During the eighteenth century, Boston became known as the "Cradle of Liberty" for the agitation there that led to the American Revolution and the independence of the United States from Great Britain.

(3)   It was also a center of the temperance movement  and abolitionist activity before the American Civil War.

(4)   In 2004, Massachusetts became the first U.S. state to legally recognize same-sex marriage.

(5)   In 2010, Massachusetts has become Obama’s nightmare.

The S&P 500 has rallied 69.9% since March 9, 2009 and the average American is fed up!  In light of where we may have been heading a year ago and where we are today, this does not make sense.  Or does it?  After the close, the weekly ABC consumer confidence reading came in at -49 versus -47 last week and -50 a year ago.  Consumer sentiment is virtually unchanged from a year ago as most consumers are concerned about their personal finances because Washington is not.  
The nasty consumer confidence reading, combined with Scott Brown winning a U.S. Senate seat in Massachusetts, helps put things into perspective - Americans are fed up with the “Piggy Banker Spread” and the fact that Obama does not represent “change” in Washington.
The S&P 500 is up 3.2% so far in 2010 with the leadership coming from Healthcare, up 6.2% and the Financials, up 5.1%; both sectors are the target of the Obama administration and the re-regulation short sellers.   
Looking forward to today’s trading, here are some risk management items to consider:
(1)   Big intraday reversal to the upside in C got the Financials up again yesterday– XLF looks bullish (big driver of this recent breakout)

(2)   Yesterday was the 9th day out of 11 trading days this year that the S&P 500 has been up - short sellers of year-end feeling shame; pain trade is still up.

(3)   The closing price of the S&P 500 at 1,150 and the NASDAQ at 2,320 are higher highs – this is bullish.  

(4)   A loss for the Democrats in Massachusetts puts all of the re-regulation short sellers in the penalty box – XLV outperformed the S&P 500 yesterday by 120 bps.

Our 1Q 2010 MACRO themes continue to play out as planned.  
“CHINESE OX IN A BOX” - In China, it’s the “end of an emergency” as the cost of borrowing money is on the rise.  According to the China Securities Journal (citing unidentified people in Beijing and Shanghai), some of the nation’s banks have been told to “limit lending.”  The Shanghai index was down 2.9% last night and is now down 3.9% year-to-date.
Also, the “BUCK BREAKOUT” theme got a lift from the events in the Commonwealth, as the Dollar is once again looking more like a safe haven, trading at levels not seen since September 2009.  Yesterday, the Dollar index rallied 0.6% and is up 0.6% in early trading again today.  
Change is good!
Howard Penney
Managing Director

EWC – iShares Canada
— We remain bullish on the intermediate term TREND for Canada. With a pullback in the ETF on 1/15/10 we bought Canada.
XLK – SPDR Technology — We bought back Tech after a healthy 2-day pullback on 1/7/10.
UUP – PowerShares US Dollar Index Fund — We bought the USD Fund on 1/4/10 as an explicit way to represent our Q1 2010 Macro Theme that we have labeled Buck Breakout (we were bearish on the USD in ’09).

VXX - iPath S&P500 Volatility — The VIX broke down to our immediate term oversold line on 1/6/10, prompting us to add to our position on VXX.
EWG - iShares Germany —Buying back the bullish intermediate term TREND thesis Matt Hedrick maintains on Germany. We are short Russia and, from a European exposure perspective, like being long the lower beta DAX against the higher beta RTSI as well.

EWZ - iShares Brazil — As Greece and Dubai were blowing up, we took our Asset Allocation on International Equities to zero.  On 12/8/09 we started buying back exposure via our favorite country, Brazil, with the etf trading down on the day. We remain bullish on Brazil's commodity complex and believe the country's management of its interest rate policy has promoted stimulus.

CYB - WisdomTree Dreyfus Chinese Yuan — The Yuan is a managed floating currency that trades inside a 0.5% band around the official PBOC mark versus a FX basket. Not quite pegged, not truly floating; the speculative interest in the Yuan/USD forward market has increased dramatically in recent years. We trade the ETN CYB to take exposure to this managed currency in a managed economy hoping to manage our risk as the stimulus led recovery in China dominates global trade.

TIP - iShares TIPS
— The iShares etf, TIP, which is 90% invested in the inflation protected sector of the US Treasury Market currently offers a compelling yield. We believe that future inflation expectations are mispriced and that TIPS are a efficient way to own yield on an inflation protected basis.


IEF – iShares 7-10 Year Treasury
One of our Macro Themes for Q1 of 2010 is "Rate Run-up". Our bearish view on US Treasuries is implied.

RSX – Market Vectors Russia
We shorted Russia on 12/18/09 after a terrible unemployment report and an intermediate term TREND view of oil’s price that’s bearish.
EWJ - iShares JapanWhile a sweeping victory for the Democratic Party of Japan has ended over 50 years of rule by the LDP bringing some hope to voters; the new leadership  appears, if anything, to have a less developed recovery plan than their predecessors. We view Japan as something of a Ponzi Economy -with a population maintaining very high savings rate whose nest eggs allow the government to borrow at ultra low interest levels in order to execute stimulus programs designed to encourage people to save less. This cycle of internal public debt accumulation (now hovering at close to 200% of GDP) is anchored to a vicious demographic curve that leaves the Japanese economy in the long-term position of a man treading water with a bowling ball in his hands.

SHY - iShares 1-3 Year Treasury Bonds If you pull up a three year chart of 2-Year Treasuries you'll see the massive macro Trend of interest rates starting to move in the opposite direction. We call this chart the "Queen Mary" and its new-found positive slope means that America's cost of capital will start to go up, implying that access to capital will tighten. Yields are going to continue to make higher-highs and higher lows until consensus gets realistic.


The Macau Metro Monitor. January 20th, 2010



  • StarWorld continues to outperform the market with all time record quarterly revenue of $3,455 million
  • StarWorld records six consecutive quarters of revenue growth
  • StarWorld delivers record VIP turnover volumes of $98 billion
  • StarWorld reports a very strong hotel occupancy of 96%
  • Galaxy Macau on schedule to open in the first quarter of 2011
  • Financing of Galaxy Macau progressing on schedule



NEW FLU OUTBREAK IN MACAU macaudailytimes.com

H1N1 outbreaks have led to the suspension of a Taipa kindergarten and two classes from a special education center this week.  In addition, 5 more inmates at Macao Prison have tested positive for the virus. The Health Bureau confirmed that none of the infected students had been previously inoculated against the H1N1 flu.



In a Reuters interview yesterday, director of Macau's Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves, stated that "I think the possibility of more concessions is very low."  Genting and Harrah's were sited among hopefuls for new future gaming concessions.



Starting on February 13th, Viva Macau will add a direct Hanoi-Macau route 3x per week, offering off-peak economy fares for just US$25 one way. Viva Macau currently flys between Macau and HCM city.



The Shanghai 2010 World Expo, running between May 1 and Oct 31, is expected to attract more than 70MM visitors to Macau, according to Zhou Hanmin, deputy director of the World Expo 2010 Shanghai Committee.  As of Sunday, more than 18MM tickets had already been sold. The Expo, whose Chinese Pavilion permanent infrastructure has cost RMB$80 billion to construct, will focus on peace, development and the environment.


IGT should beat the Street for the Dec Q but the next two Qs could be tough.



We are projecting a beat by IGT, $0.22 vs. consensus at $0.20, driven by higher unit sales.  Tempering our enthusiasm, however, are lower estimates for the March and June quarters.  Longer term, we think there is potential for IGT and the rest of the suppliers to out earn Wall Street expectations.  The big caveat for IGT is stability in the Wheel line of products.  As wrote about in our 11/27/09 post, “IGT: HOW LONG WILL THE WHEEL KEEP TURNING?”, IGT remains heavily reliant on the Wheel games at the same time recent court decisions have opened the playing field.


FQ1 2010 Earnings Call Preview

We think that IGT will beat the street this quarter but that estimates need to come down for the rest of the year. Longer term we think there could be upside to the numbers provided there is little degradation in the Wheel and the timing of new markets does not slip

  • We’re at $0.22 cents vs. $0.20 cents for FQ1 2010 and $0.82 for FY2010 vs. consensus of $0.89
  • FQ2 (March) at $0.18 vs the Street at $0.20
  • We think the Street’s F2011 estimate of $1.11 could actually be low, again if new markets do not slip and the Wheel is stable


FQ1 Details:

  • Product sales of $267.1MM & gross margin of 51.2%
    • 6.8k North America shipments, comprising of 4k new unit shipments, 0.3k deferred units, and 2.5k replacements.  We have total new & expansion shipments to NA markets of 12.5k units in the Dec quarter.  We assume that IGT gets 40% share excluding Aria, which will be recognized on a deferred basis. We estimate that NA replacements will be 7.5k for the market in the Dec Q
    • ASP of $15.5k in NA:  we expect MLD to become a greater % of AVP sales as IGT has materially expanded the content available on MLD making the $3,000 price difference more compelling
    • International product sales are more of a guess, but we have roughly 8k units

 Gaming operations revenues of $285.2MM and gross margin of 59.0%

    • 250 net new casino participation placements
    • 100 net new racino & leased placements
    • Average win per day of $50.30

 Deferred revenues:

    • IGT procured a 50% share of CityCenter’s 1,940 slots, which will be recognized over the next 8 quarters
    • Systems revenues for CityCenter will remain deferred for 2 years, after which MGM must decide whether to buy the system for a fixed fee or pay based on a variable daily fee model.  CityCenter will take the next 2 years to determine the ROI of IGT’s SB system.
    • Currently there are 8-10 locations with SB banks (including those trialing the product)

 Other assumptions:

    • SG&A:  $95.0MM
    • R&D:  $53.5MM
    • Net Interest expense:  $26.0MM
    • Tax rate:  39.5%

Massachusetts and Number 8

With the odd turn of events into the Massachusetts special election, one of our top 10 ‘probable improbables’ (presented on 1/8/10) is looking even more scary.  Number 8 on our list is, “labor and the threat of unionization become a major issue in 2010”.  The could be a big, big deal for retail.


As it stands, the Employee Free Choice Act (EFCA) was introduced and championed by the late Senator Ted Kennedy. Today’s candidates are on complete opposite sides of the topic.  Coaklely (D) is a strong advocate of the bill and vows to continue to keep Kennedy’s legacy alive.  Brown (R) strongly opposes the EFCA, and with his lead at the polls, could put the bill into jeopardy.  Regardless of the outcome, there is no question that the idea of increased labor organization is gaining mindshare.  While our original thoughts may be slightly altered with a Republican victory, the key point is worth republishing. 


#8. Unionization Becomes a Major Issue. Regardless of your political view, one thing that is pretty difficult to deny is that after a tough 2009, Obama is backed into a corner as it relates to placating the masses. He’s not doing so with the Economy, and certainly not with Afghanistan. Health Care Reform is likely a bust. So what’s next? Stepping up to vilify the self-proclaimed Wall Street Elite much the same way FDR did in launching the Mellon Tax Trials in 1935 (Andrew Mellon was then the former Treasury Secretary, and the richest man in America). For what it’s worth, Mellon was exonerated, albeit two years after he died. So goes the shallow world of politics.


Massachusetts and Number 8 - Consumer Confidence Chart


Is this possible today? You bet.  But another way to show his support for those that voted for him, Obama could go the Labor route. Tom Tobin, our Health Care Sector hear, said it perfectly…


“Kids and independents elected Obama.  It may be that the 2010 midterm elections do not matter since the likelihood of losing a majority in the House appears slim.  But a political focus would also have to include the 2012 Presidential election as well.  Where Labor was a factor in the 2008 elections, replacing the optimistic kids who were on a messianic mission and the independents will be a tall order.  This is why I have the Employee Free Choice Act on my radar.  I think Obama may have made a mistake in pushing Health Reform I first, but rather should have used his fleeting political capital to secure what will surely be an enduring and growing base of union members should the Bill pass.”


Massachusetts and Number 8 - Vote table


What does this mean for retail? Everything!  Call a retailer and ask them what this means. They’ll probably say something that sounds like “We pay our store employees well and don’t think this is a problem.” C’mon man, are you kidding?  Don’t you realize that you should be monitoring the gap between your pay and work rules and those of your competition? Also, if you’re managing an Abercrombie, your competition for employees is not just American Eagle. It’s also the Nathan’s selling greasy hot dogs in the food court. Retailers should turn to China to see how labor changed the competitive landscape. Why did factory wages rise in China by over 30% in 2006? Because the migrant workers coming in to factories to cut, sew, glue, and generally get treated like dirt by non-compliant factories saw that they could go to a major city like Beijing and work at a KFC instead for more money and a better lifestyle.  This is an extreme example, of course, but if this Employee Free Choice Act gains traction, then it will be a big, big deal for retail.

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.