While we don’t have a specific stock call on RCL into tomorrow’s earnings, we thought we’d “Youtube” RCL’s commentary last quarter and CCL’s commentary from their earnings call last month.




  • “The booking environment remains fairly consistent and relatively stable.”
  • “We are also seeing more pronounced seasonality than is the norm and we are giving the upside that we enjoyed in the third quarter back in the fourth.”
  • “The recent news have been full of reports that the economy is rebounding or is about to be rebounding but we have not seen any evidence of that in our bookings to date.”
  • “We have seen some early signs of a possibly expanding booking curve but it is still quite contracted by normal standards. We also have several new products in emerging markets and since these products tend to be shorter in duration and closer to the guest’s home, they also tend to have a closer in booking pattern.”
  • “Looking out to the summer of 2010, we are encouraged by the early peak season demand. On the other hand, we continue to see slow demand for Mexican Riviera cruises and demand out of Spain and the State of Florida is weaker due to their more difficult economies.”
  • “For the fourth quarter of this year and the first two quarters of 2010, our cumulative booked load factors are still running behind this same time last year but we are seeing a rapid recovery and with new bookings running more than 40% ahead of last year since mid-September, we expect to see higher book load factors in all quarters before year-end.”
  • “Peak season was better than we expected but it now appears that the traditionally weaker fourth quarter will be worse than we had previously thought. Our holiday sailings have required more discounting than we anticipated and our low season Caribbean cruises are being hurt by Florida’s weaker economy.”
  • “In aggregate, our forecast range is still quite wide but we do believe we have better yields -- we will have better yields in the first quarter of 2010 than we did in 2009, driven by the performance of our newest vessels and avoidance of the type of dramatic discounting we experienced last year.”
  • “Overall for 2009 we expect to source 40% of our company’s total business from outside the United States and then more than 40% in 2010. Although the winter season is upon us, we still have limited visibility to the performance of our products that depends more on sourcing of non-U.S. customers. It does appear that Rhapsody of the Seas in Australia/New Zealand will enjoy improved year-over year performance. For our products in Asia, Dubai, Brazil, and Panama, it is too early to tell.”
  • “For the first quarter and the full year, we are expecting both will have higher yields in the corresponding period in ’09”
  • “Bookings that we are experiencing today would be proportionately equal to slightly higher on a capacity adjusted basis to what we were seeing back in ’07 and ’08. I would lean toward higher because we have more of a load factor deficit than we did back in ’07 and ’08, given the contracted booking window.”
  • Oasis Commentary: “Bookings remain strong and she continues to command the lead pricing in the category.”
  • “It’s been fairly steady. It’s better than it was at the beginning of the year but I want to be very reluctant to say that we saw a dramatic shift in the way the consumer is spending money on board.”



  • “Ticket prices came in $0.01 better on slightly stronger-than-anticipated closing pricing.”
  • “Net onboard and other yields in our European brands were down less than in our North American brands, a trend similar to the experience in net ticket revenue yields. For the first time this year, we saw an increase in two of the onboard revenue categories: Shops and photo. The rest of the major categories were down, but for the most part, it was an improving trend from the prior two quarters.”
  • “ With continued strength and booking patterns during the last 13 weeks, occupancies on a capacity adjusted basis for the first nine months of 2010 are now at approximately the same levels as last year. Booking volumes during this past quarter for North American and European brands covering the first three quarters of 2010 are each up over 40% versus the easier comparisons to last year. But these bookings are also strong on an absolute basis. Actually, on absolute basis, these are the strongest bookings we have seen in our history.”
  • “We have seen more demand and have been able to move pricing higher in certain trades. Our U.S. premium brands are showing increasing pricing strength, which is a significant reversal from 2009. This also suggests that with the strengthening of the U.S. economy and the rise in the equity markets that the higher-end customer is feeling better about taking their vacations, and the superior value of cruise vacations is driving a lot of business our way.”
  • “Breaking the recent 13-week booking pattern down by markets for North American brands, other than for Mexican Riviera cruises, pricing for all other itineraries are up year-over-year, with particular strength in Europe cruises for spring and summer of 2010. Also, long and exotic cruise pricing is nicely up year over year, a nice reversal from last year.”
  • “Given the continuing strength in bookings, which has resulted in occupancies catching up with last year, we are now expecting North American brand revenue yields will be higher by 2% to 3% for the entire year 2010.” 
  • “With the recent strength of European brand bookings, we are expecting European yields for all of 2010 to be slightly lower on a local currency basis and higher on a current dollar basis.”
  • 2010 guidance: “I think if you look at our first quarter guidance, we were down in the 3% to 4% range. I think that the catch up -- by the time we catch up with all that in the second, we will gradually improve yields year-over-year. Second quarter will be better obviously than the first quarter. The third quarter will be better than the second quarter”
  • “In terms of bookings for 2010 in terms of  percent of the cabins that are currently filled is very consistent with our historical figures from '05, '06 and '07. Yes, they may be below the historically-strong numbers of '08, but they really are now back to the '05, '06, '07 levels.”
  • “Historically, in the fourth quarter, we do see a reduction in the overall booking curve, but this quarter, we didn't see as big of a reduction as we normally, so you can say we saw a little bit of an improvement in the booking curve as well.”
  • “Our projections for next year include relatively flat onboard for 2010, holding at these levels in the third and fourth quarter.”
  • “Everywhere is doing better with two glaring exceptions: The Mexican Riviera and Brazil. Other than that, I think, generally, Caribbean, Europe, Australia, Asia, they're all doing a little bit better.”
  • “I think, if there's been any leading indicator to wave, it's been how fourth quarter bookings have been, and they've been very encouraging. So we're pretty optimistic about wave.”

A Glimpse into Demographic Headwinds for Teen Retail

A Glimpse into Demographic Headwinds for Teen Retail


Since 1998, the population growth of consumers between the ages of 13 and 23 has been slowing, and in 2010 will reach negative levels that will last through 2016.  Broadly speaking, it suggest that teen retailers will lose approximately 815,000 consumers over the next 7 years which equates to a loss of approximately $1.3 bn (using 2008 levels of apparel and footwear spending of $1,604 by consumers age 25 and under).  With all the complex Macro cross currents, having $190 mm (118,750 people x $1,604 spent on apparel and footwear) fewer dollars to capture is the last thing the teen retail space needs in 2010. 


One can argue that diversification is a positive here – like Abercrombie – which has concepts to capture different parts of each sub-segment that carry varying growth rates. But we’re not sold on that one. We’d argue that it leaves a diversified company with a ‘consistently mediocre’ portfolio as it relates to demographic exposure.


A Glimpse into Demographic Headwinds for Teen Retail - Retailer Demographic Chart 1


A Glimpse into Demographic Headwinds for Teen Retail - 2


A Glimpse into Demographic Headwinds for Teen Retail - Teen Retail Spending Table



He Who Panders To The Political Bubble

Today’s FOMC decision revealed nothing new. The Bubble in US Politics remains, and He Who Panders To The Political Bubble (Bernanke) will most likely retain his job as a result of falling in line with Washington’s revisionist consensus.


What will be most interesting from here is what Bernanke does post this immediate term job retention exercise. After he is confirmed by the Senate, he will have to face that stubborn little critter called the data.


There was a time when the US Federal Reserve claimed to be “data dependent.” Just because we have a Bubble in US Politics does not mean that the data ceases to exist. The most recent US inflation reports for the month of December were much higher than Bernanke’s forecasts (CPI and PPI came in at +2.7% and +4.4% year-over-year inflation, respectively).


We think the inflation data continues to rise sequentially until at least August. For He Who Panders To The Political Bubble, our advice in addressing this inflationary data in the coming months would be in line with the picture we have attached below. Hope and pray that everyone in Washington is as willfully blind to the data as you have become.


All the while, remember, hope is not an investment process.



He Who Panders To The Political Bubble - bern

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%

Greek CDS: Is 300 Bps a Prescription for Pain?

We’ve had our EYE on the run-up of Greece CDS prices over the last weeks. As the chart below depicts, it’s interesting to note that once CDS prices of Bear Stearns and Lehman Brothers broke above the 300 bps level, the end came shortly thereafter. While we’re not explicitly calling for a Greek sovereign default nor a correlation between CDS prices and sovereign default, risk in Greece is heightening. Could the 300 line also govern a Greek breakout? History has a way of repeating itself. Stay tuned.


Matthew Hedrick



Greek CDS: Is 300 Bps a Prescription for Pain? - GR

DKS: Sandbag Confirmed

This morning’s preannouncement out of DKS reflects comp store sales up +2% from prior sandbagged guidance of down 6%-4%, and earnings north of $0.54 vs. the prior range of $0.41-$0.46. Let’s not mistake ‘a good quarter’ for ‘beating low expectations.’ With consensus at $0.49 already discounting what appeared to be overly conservative guidance, and the buyside whisper in the $0.50s, we’re not surprised in the lack of action in the stock today.


A few key points from the preannouncement include:

  • SSS outperformance began in the last week of November and continued through the holidays
  • Better than expected comp across all major categories
  • F09 full year comp includes Golf Galaxy, F08 doesn’t (note that Callaway last night noted that the golf category finally past its bottom)
  • But all that said, the 1 and 2-year comp trends at DKS are right in-line with peers, and in fact, represent a roll-over from what we saw in 3Q


Given the update from DKS, let’s take a look at the natural read through considerations for HIBB and FL. It’s important to note that ~55% of DKS revenue is generated by hardlines with only ~30% from apparel and ~15% footwear. On the other hand, Hibbett’s sales mix is the exact opposite (athletic footwear, apparel, equipment). A few points to note for HIBB in the quarter include Alabama’s national football title, which the company mentioned could add “a few” million to sales (1-2pts in yy rev growth) as well as the pickup in athletic footwear. Highlighted as the most challenging category on its call in November, footwear trends have been improving on the margin since. With the outlook for HIBB’s 4Q comps at -2% to +2%, there appears to be modest upside to this range and earnings.


Additionally, with FL’s mix predominantly driven by athletic footwear there is arguably less to glean from this morning’s news other than what we have already highlighted in recent industry trends. Consistent with our view, the focus on FL’s quarter is going to be less about headline results than Hick’s strategic plan for the business (for more detail see our 12/17 post “FL: The Footlocker Wish List”).


The bottom line here is that this is not really a big deal. For many reasons we’ve highlighted of late, we think that there will be a meaningful turn in the athletic cycle in 2010. THAT’s when we think we’ll see a meaningful acceleration out of Nike – which is the best play here. UA also makes the cut, as does FL and likely HIBB.


DKS: Sandbag Confirmed - Sporting Goods CompTable 1 10


DKS: Sandbag Confirmed - Sporting Goods CompChart 1 10




Over the last two days we have been making the case that a housing bottom is forming, but it’s a case of “Government stimulus vs. Gravity.”  Today, gravity is gaining momentum as government stimulus may be waning.


Sales of new homes in the U.S. dropped in December; the number of homes purchased declined 7.6% to an annual pace of 342,000, the lowest sales pace since March 2009.  For all of 2009, sales dropped 23% to 374,000, the lowest level since records began in 1963.


Part of our bullish call on housing in 1Q09 was based on the fact that the government was coming to the rescue of the real estate industry by providing enormous support to consumers wanting to buy a new home.  Not surprising, as the sales of news home began to take off in 1H09 housing prices (as measured by the Case-Shiller home price index) began to improve sequentially; though still declining year-over-year.


Yesterday’s Case-Shiller data, which is a lagging data point, showed that sequential home price momentum is starting to slow.  On top of this, we have now seen new home sales decline 9.3% in November and 7.6% in December.   It would only make sense that price support will wane further. 


As we head into 2Q10 we are starting to get incrementally concerned as we will be lapping the not as easy comparisons from late 1Q09/2Q09, particularly as gravity takes over from government stimulus.  This concern is reflected in our portfolio; we are short Toll Brothers (TOL).



Howard Penney

Managing Director


HOUSING BOTTOM FALLING? - housing v prices

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