- CKR’s management has chosen not to react to today’s tough environment with “margin impairing low prices and discounting” and addressed on its last conference call its concerns around raising prices too much at the expense of growing traffic. I am encouraged to see that management is acknowledging the risks of both discounting and increasing prices and the impact both actions can have on margins and driving increased traffic. If anything, the company is wavering closer to the risk associated with increasing prices too much, but we will not know the real traffic impact until the company reports its 2Q09 results. That being said, comparable sales results are trending up in 2Q09, on tougher comparisons, which should help margins in the quarter at the same time the company is lapping the initial spike in food and packaging costs that it experienced last year in 2Q.
Per the Shanghai Daily, "China's social security fund will stabilize its stock investments to lay a foundation for better returns during the next two years, according to Dai Xianglong, chairman of the National Council for Social Securities Fund."
I am starting to warm up to getting long China ahead of the inevitable Olympic hype. I have not owned anything China in over a year, so this statement should be considered within the bearish view I've held.
*Full Disclosure: I own the Chinese ETF (FXI)
The GDP slowdown news in Asia is historical fact now, and inflation readings for July to date seem to be cooling off, alongside the Chinese Yuan taking a breather. This is all positive, directionally, for a stock market that's in dire need of less than bad news.
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The US Dollar is in a very precarious technical position and needs this kind of Fed rhetoric to morph into action. So far this morning, the currency market has bought into Plosser’s narrative, taking the US$ Index +30 basis points to 72.05.
I'd like to see rates hiked and the US Dollar clearing the 72.61 bar.
It is time to manage this domestic currency crisis proactively.
- 1) It’s no secret that Dick’s and Under Armour have been married for much of the past three years. Well, UA’s eyes are wandering over towards Sports Authority. The two came out publicly on ESPN this Sunday featuring Chicago Bears star Devin Hester promoting the Performance Trainers.
- I think that the implications here are material. The DKS/TSA union has been sacred in retail. What’s good for one is good for the other – and vice/versa. But my rather strong view is that with UA reaching close to max productivity inside DKS stores, it has to look elsewhere for growth. In other words, Dick’s is starting to outlive its usefulness for UA (to the same intensity it had in prior years). I think we’ll continue to see this trend diverge, and the performance gap between the two widen. In the battle between content and distribution, content usually wins.
- What does this mean for Nike? Check out the photo below that shows a TSA employee fixing a UA exhibit, but with a traditional Nike uniform. Nike has been massively dominant in TSA – especially vis/vis DKS/UA. Does this mean that Nike makes a bigger push into DKS? It’s possible. But all I am sure of is that frictional change with brands in this space across major accounts is rarely clean. For Nike this is a rounding error. But as someone like DKS tries to navigate through this tweak, it could be a bit choppier.
- 2) In an unrelated brand marketing photo-op, how can I pass on showing the photo of Devin Hester filling up his muscle car with some good ‘ol wholesome $5/gal gas? Tough to buy that kind of publicity… Nike job UA.
- 3) Check out Darren Rovell’s Sports Blog on CNBC. He put up an interactive poll last night asking viewers to rate new ads for Nike, UA, and Reebok. Nike wins the ‘best commercial’ vote by a factor of 2x, but interestingly only beat out UA on the ‘intent to purchase’ poll by 2/3. Still big, but not as much when you consider that Nike has 35% of the UA market and UA has about 2%.
- The bottom line here is that it seems to me that Under Armour is hitting puberty from a brand evolution perspective. It is gaining the confidence to go beyond traditional brand messages, and more importantly, beyond its primary distribution partner.
- I still think that margins at UA need to come down, but the branding story definitely continues to evolve nicely. I’m more concerned about Dick’s, who loses a significant traffic driver on the margin.
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