Bull/Bear Changes to HedgeyeRetail Position Monitor – all Bench moves sans FL/TGT – but others very close to ‘Best Idea’ Status.
INCREMENTALLY BULLISH
1. TTS: Top Name on our Long Bench
- Solid concept. High end home linked.
- Personalized service is critical -- concept is one of the survivors that is high unlikely to be Amazoned.
- Impressive 4-wall economics.
- This has been thrown out with the PRTY MIK TCS of the world – but failed to capture the rally.
- Took it on the chin for clearing excess inventory. Did the right thing instead of hanging to hope that it sells.
- Housing market holds – both new and renovation – then rev accelerates. Margins already looks good in 2 quarters. CF/Balance sheet look solid today – no need to wait for that to improve. Small…but check out VRA’s chart -- I’m finally getting questions on that after an 8-week 70% run.
2. Adidas moved to bottom of the Short Bench – 8 slots lower. I still think new CEO is ‘over-appreciated’ and poses significant risk (until I look him square in the eye and ask the critical questions that I doubt he will know the answer to). US growth on fire but slowing on the margin. Can’t Swiss-engineer a German-engineered company by a CEO that I’m willing to bet does not fundamentally understand fashion retail (half dozen packaged goods CEOs before. But this will take time – a lot of it – to play out.
3. DKS Higher Long Bench – just behind TTS. I timed this wrong in 2017. But fact remains that this is the perhaps the only survivor in a space where supply is simply exiting. Nike needs it. One of best real estate stories in retail behind RH, ULTA, and HOME. Call option on Amazon buying it (yes, I can make a strong case there).
4. KORS: Higher on Long Bench. Best Idea candidate. Similar factors that should make TPR among the best retail names in 2018 likely to take KORS higher. Not the killer licensing angle at KORS than TPR/COH/KATE does. But improved industry after 3-years of pain is officially in play. KORS arguably can’t not benefit.
5. MIK: Off Short Bench. My short call is in line consensus, which I hate – especially when the stock rallies 30% in six weeks for reasons I can’t explain. Sometimes wrong is just flat out wrong.
INCREMENTALLY BEARISH
6. UAA Top Short Bench Name – just shy of Best Idea. In fact I struggle why it’s not back on Best Idea list after I backed off at $16. Business worse than even the bearish consensus thinks. Likely to guide to operating loss for 2018. Scenario exists to go from 1.2x levered to 5x+ over 3 years unless someone starts running this ship.
7. FL now higher than TGT on Best Ideas Short list. Both likely to miss the year (2018) w FL having more downside. 4Q questionable for both. TGT more of a 4Q miss, but also more consensus. FL also has 126 stores in Canada – only 5% of total…but Canadian wages headed higher by 23% this year.
