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February 1, 2009

If athletic footwear is a negative standout in and around all the SSS data points this week, we’d look to opportunistically buy key names that should be winners in 2010.


Sales trends appear to have been relatively constant for the most part in January, with discretionary items – mostly apparel – outpacing the discounters. January is one of the least significant months of the year, accounting for only about 6% of annual sales – though it is more meaningful as it relates to clearance activity for the quarter. Within softlines, we saw athletic footwear take a dive over the past 2-weeks, despite stable performance in apparel. This is noteworthy in that athletic footwear was flat-out abysmal from April through Mid-December, and then picked up meaningfully. Perhaps a near-term head-fake.

The actionable point here is that if anything footwear-related underperforms meaningfully, esp NKE, FL, FINL, and UA, then it is a chance to step in front what should be a major turnaround in this group in 2010. We’ve been vocal on this, so I won’t reiterate here. Let us know if you need additional thoughts.

 R3: 2-Cents on SSS, Footwear, and News - 1

R3: 2-Cents on SSS, Footwear, and News - 2

R3: 2-Cents on SSS, Footwear, and News - 3


  • According the Retail Advertising and Marketing Association, 3.6 million Superbowl viewers are expected to buy a new television, up substantially from 2.6 million last year. The average price of all flat panels is now $587 vs. $832 in 2008, which is likely a key reason for the expected increase in units sold. Perhaps it’s just the excitement in Indianapolis and New Orleans- probably not!
  • During 2009, top online retailers sent an average of 132 promotional emails to consumers, up 12% from 2008. That is roughly 11 emails per month or 2.5 emails per week per subscriber. Since 2007, promotional email volume is up about 39%. Not surprisingly, November and December represent the months with highest volume of promotional email, averaging 13 and 15 emails per subscriber respectively.
  • According to online coupon aggregator Retailmenot.com, a free shipping code for Kohls and a printable 20% off coupon for Gap were the most used/downloaded promotional coupons for the month of December. Victoria’s Secret, Amazon, and Best Buy were the most searched brands in online coupons for the month. Growth in coupon popularity continues to surge, as Retailmenot registered a 44% increase year over year in traffic to the site (19.34 million users in December ’09).

MORNING NEWS  (we now include our 2-cents at the end of each of these stories.)

Wal-Mart creates a global e-commerce unit, reorganizes U.S. web operations - Wal-Mart Stores Inc. has set up a new global e-commerce unit called Global.com to drive online growth in new markets as well as in those where it sells today. The retail giant also restructured its Walmart.com U.S. division to integrate it more closely with store operations. “Now that we have a well-defined blueprint to continue to grow our online business, it’s time to leverage our size and global footprint to take advantage of this evolving customer trend,” said Eduardo Castro-Wright, vice chairman, in a memo to staff. Castro-Wright oversees both the company’s U.S. operations and its global sourcing organization. Wal-Mart, which operates e-commerce sites in the U.S., U.K., Canada, Mexico and Brazil, says the Global.com unit will work to develop global e-commerce strategies and create a single global e-commerce platform that could be used in every market. The idea of a single global e-commerce platform echoes the model used by the world’s largest online retailer, Amazon.com Inc.  <internetretailer.com>

Hedgeye’s 2 Cents: This is overdue, and is one area where Wal-Mart has not been ahead of the curve.

Under Armour Mulling West Coast Design Center  - Under Armour is exploring opening a West Coast design center, with Portland and Los Angeles among possible locations, according to a report in the Portland Business Journal. The business magazine, citing e-mail exchanges it received, said officials in Portland, which employs about 100,000 activewear employees at firms such as Nike, Adidas and Columbia Sportswear, are looking to recruit Under Armour in hopes that firm may want to tap the local talent base. But the article also indicated that Under Armour does not appear to be aggressively pursuing the effort. UA's top executives rejected an offer to meet with Portland Mayor Sam Adams to discuss a possible Portland design center. The report also said Under Armour gave a "lukewarm reception" when Greenlight Greater Portland, the area's private economic development group, sent two executives to Under Armour's headquarters in Baltimore. The report also noted that e-mail messages said an Under Armour executive visited Los Angeles in July to explore its options there. Brad Dickerson, Under Armour's chief financial officer, downplayed the notion of any large presence outside of Baltimore. Dickerson pointed to Under Armour's recently unveiled 140,000-square-foot Tide Point building as example of the company's commitment to growing locally. Around 300 Under Armour employees will occupy the space by the end of January. In total, there is room for 450 workers. "Anything else we do would be on a very small scale," Dickerson added. <sportsonesource.com>

Hedgeye’s 2 Cents: Why does UA already have a lukewarm reception to opening offices in Portland? Because it already has defacto hiring ops there. UA has people on the ground frequently in the Portland area to tap into talent – mostly Nike’s. It particularly flexed its muscle in CQ209 when Nike was in lay-off mode. Also, remember that Nike’s apparel business (still 90% of UA business) has heavy presence in NYC.

Jones Taps Richard Dickson - Richard Dickson is joining Jones Apparel Group as president and chief executive officer of branded businesses, a new post. He begins Feb. 8. Wesley Card, president and chief executive officer of Jones, will relinquish the president's title. Dickson, 41, will report directly to Card and will be responsible for managing the company's wholesale and and retail businesses worldwide. Most recently, Dickson was with Mattel Inc. as general manager and senior vice president of Barbie. Earlier he was senior vice president, marketing, media and enetertainment worldwide for Mattel Brands. Before that he spent over 10 years at Bloomingdale's before launching Gloss.com, an e-commerce beauty Web site. <wwd.com>

Hedgeye’s 2 Cents: Non-fashion guys have rarely worked in Fashion businesses. That said, Barbie is about as mature as mature can get, and sells into the most consolidated retail channel out of any category out there. Ironically, selling into the Macy’s of the world is a step-up for Dickerson. But do Anne Klein suits have the same consumer connection and defendability as Barbie?

Versace Agrees on Job Cuts, Unveils Lower-Priced Line - Gianni Versace SpA has signed a preliminary agreement with unions on job cuts in Italy and introduced a lower-priced women’s wear collection as part of a plan to return to profitability in 2011. The deal is “the guarantee that our plan as we organized it will succeed,” Chief Executive Officer Gian Giacomo Ferraris said in a telephone interview. The accord, which includes the closure of Versace’s three-year-old accessories factory in Burago, near Milan, will be concluded Feb. 4, Ferraris said. The cuts will commence in March and end in June. Versace, which was founded by the late Italian designer Gianni Versace in 1978, said Oct. 28 it would eliminate about 350 out of 1,360 positions worldwide, or 26 percent of its workforce, and scale down investments. The luxury clothing maker expects to report a 30 million-euro ($42 million) operating loss for 2009, while sales probably fell 19 percent to 273 million euros, hurt by falling wholesale revenue, Ferraris said. <bloomberg.com>

Hedgeye’s 2 Cents: Versace is a great brand, but the organization is a mess – and it’s not getting better. If these layoffs eat further into the talent pool inside Versace, then there’s big trouble.  That’d be a nice set-up for JNY to buy it. 

American Apparel's Push for Tush - Do you pass by those ubiquitous American Apparel skimpy billboards throughout the city and wish you could be one of those scantily clad hipsters being photographed in someone's poorly lit basement?  Do you have a great booty? Well, now's your chance.  Presenting, the American Apparel Best Bottom Contest. If you have an inflated affinity for your own bottom that's better kept secret, and you have the level of naked comfort required for a friend to photograph said bottom and submit it to a national contest for American Apparel, then this competition is for you: The temple of technicolor cotton goods is holding the interactive competition on its website wherein individuals may submit photos of their derriere for consideration online.  Those cheeks deemed worthy enough of serving as the official rear end of American Apparel are then posted for everyone's voting.  <nbcnewyork.com>

Hedgeye’s 2 Cents: I couldn’t make this up if I tried.

Saks, Neiman's Settle Humane Society Fur Lawsuit - Saks Inc. and Neiman Marcus Inc. said Friday they resolved a lawsuit brought by the Humane Society of the U.S. over mislabeled fur. The animal rights group named the two luxury retailers as defendants in a consumer advocacy complaint filed in Washington, D.C., Superior Court in 2008. The suit alleged the companies had improperly labeled raccoon dog fur as “faux” or misidentified its source animal on labels or advertisements. Lord & Taylor settled its portion of the suit in December and Andrew Marc settled in March. Macy’s Inc. is now the sole remaining defendant in the case. Saks Inc. and the Humane Society said Friday they had reached a settlement requiring stricter labeling standards. In addition, the retailer agreed to change its advertising policies and endorse federal legislation designed to end the sale of fur-trimmed garments without total sourcing disclosure, the Humane Society said. <wwd.com>

Hedgeye’s 2 Cents: This is one of those negatives that could be turned into a big positive with the proper PR strategy. Unfortunately, Macy’s does not get that.