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February 3, 2009

A big beat by RL, and the company gave the bulls plenty to chew on here. But a miss vs. our model, and let’s face it…expectations were high. Retail looked solid, and the balance sheet continues to improve, but wholesale definitely turned down. We’ve been waiting for a pullback to get involved – but we need to get clear on wholesale earnings to be certain that $5.75 next year is still a reality.


A big beat by RL, and the company gave the bulls plenty to chew on here. But a miss vs. our model, and let’s face it…expectations were high. Retail looked solid, and the balance sheet continues to improve, but wholesale definitely turned down. We’ve been waiting for a pullback to get involved – but we need to get clear on wholesale earnings to be certain that $5.75 next year is still a reality.

“Footwear cited as primary positive driver of wholesale, first such call out suggesting traction there perhaps modestly ahead of expectations. That perhaps explains away part of the wholesale margin decline as footwear is lower margin at this stage, but it flies in the face of a wholesale top line miss (or suggests that apparel and accessories failed to show up)."

R3: RL: Big Enough? - RL SIGMA

R3: RL: Big Enough? - RL Comp 1 10


  • Despite increased traffic and the weak economy, Rent A Center just reported a 2.3% skips and stolen rate as percentage of per store revenues, its best rate in 6 years. Additionally, management noted that the average income of its customer base continues to trickle higher.
  • According to a Harris Interactive poll, the NFL continues to widen its lead as the most favorite sport in America amongst fans who follow more than one sport. Pro football posted a 400bps increase in popularity in 2009, widening its lead over baseball. Approximately 35% of fans say football is their favorite, while baseball is favored by 16%. College football, auto racing, and the NBA round out the top 5.
  • After an incredible run of outsized same store sales gains, Japan’s deep value, fashion retailer UNIQLO reported a 7.2% decrease in January sales. Interestingly, the company warned that the sales shortfall was entirely due a shortage in inventory after the company sold out of its Heattech baselayer products during December. This marks the first retailer that definitively cited inventory shortage as the root cause of weakness in sales. Definitely not a bad problem if rectified quickly, but something to watch as retailers are faced with the decision to increase inventories or continue to run lean.


Walking Co. Files Reorganization Plan - The Walking Company Holdings, Inc. filed a reorganization plan under which the company intends to keep 207 of its 214 (over 96%) current store locations open and pay off all of its debts and future obligations to trade creditors. It plans to exit Chapter 11 protection "sometime this spring." In a court filing on Monday, the company said it had negotiated new lease agreements with landlords of about 90 of its 210 stores and that the move will generate annual cost savings of about $3 million. The retailer had filed for bankruptcy protection in December, with a plan to close almost half of its stores. The Walking Co said it has obtained a commitment from an investor group led by Richard Kayne of Kayne Anderson Capital Advisors LP to invest $10 million to recapitalize the company. Wells Fargo Retail Finance has agreed to provide $30 million as exit financing. "Today our company took a major step forward in the process of emerging from chapter 11. I want to commend all of the professionals working on behalf of the company -- the unsecured creditors committee, landlords, financial institutions, and otherwise -- on their diligence in achieving this result," said Andrew Feshbach, CEO of The Walking Company, in a statement. <sportsonesource.com>

Nike and Others Form Sustainability Coalition - Ten organizations, including Nike and the Outdoor Industry Association, announced the launch of the GreenXchange (GX), a Web-based marketplace where companies can collaborate and share intellectual property (IP) which can lead to new sustainability business models and innovation. The remaining eight are: Best Buy, Creative Commons, IDEO, Mountain Equipment Co-op, nGenera, salesforce.com, 2degrees and Yahoo. Announced at a CEO breakfast at the World Economic Forum in Davos, Switzerland, the organizations called on other corporations to join them in committing to opening up their IP to fast-track the development of innovative solutions to sustainability challenges. "Nike is today committing to placing more than 400 of our patents on GX for research, demonstrating our belief that the best way to stimulate sustainable innovation is through open innovation," said Mark Parker, NIKE, Inc. president and CEO. "Our hope is this will unleash new innovation to help solve current obstacles to sustainability issues." <sportsonesource.com>

PPR Eyeing Rentabiliweb Stake - French retail-to-luxury group PPR is set to join rival French luxury player LVMH Moët Hennessy Louis Vuitton as a minority shareholder in Rentabiliweb, which provides payment platforms for Web sites, market sources said on Tuesday. Belgium-based Rentabiliweb, whose subsidiary, Mailorama, made headlines in November after a cash handout it had planned in Paris turned into a riot, last week unveiled plans to raise funds and transfer from the Alternext to the Euronext market in Brussels and Paris. Rentabiliweb said it planned to raise around 18 million euros, or $25 million, in funds by increasing capital by roughly 6 million euros, or $8.3 million, and selling 12.2 million euros, or $16.9 million, worth of existing shares. Dollar figures are calculated at current exchange. “In the context of this capital increase, PPR could take a stake equivalent to roughly 2 percent of the firm’s capital,” said one source. “This stake reflects PPR’s strong belief in the growth prospects of the online sector, in particular e-commerce.”  <wwd.com>

Loft Gift Cards for Bloggers Stir Buzz - A new Loft blogging strategy has created some buzz, but not entirely the kind intended. A group of bloggers was invited to preview Loft’s summer collection on Jan. 26 and each received a free gift card, ranging from $10 to $500. But Loft executives insist it wasn’t a ploy to insure favorable reviews about the collection, just to generate some blogging action. “They could write whatever they want. Obviously, there’s freedom of speech,” said Gary Muto, president of Loft, which is a division of AnnTaylor Stores Corp. “These are independent bloggers, not affiliated [with] any publications. We invited them to come in and write something. We treat bloggers more as potential clients. We don’t believe bloggers to be the same as the editorial community. We don’t incentivize the press. We would never do that.”  <wwd.com>

Dick's SG Set to Move Into New Findlay Headquarters - Dick's Sporting Goods plans to fully occupy its new corporate headquarters by the end of February. The $150 million, 670,000-square-foot complex occupies 116 acres of land beside the main runway at the Pittsburgh International Airport in Findlay, PA.

About 1,200 employees will occupy the space, according to The Pittsburgh Tribune. The center is the first phase of what eventually could be a 2 million-square-foot complex. The complex, which is pursuing LEED certification, is seven stories tall at its highest point, with 675,000 square feet of space. There's a separate, 60,000-square-foot aviation center to accommodate five corporate aircraft. The new site features a waterfall-like fountain and a large sports complex.  <sportsonesource.com>

CIT Veteran Breuer Joins R&R -  Sydnee Breuer has joined Rosenthal & Rosenthal as senior vice president for business development. A 20-year veteran of CIT Group, where she was most recently senior vice president for business development and underwriting, Breuer will work from R&R’s offices in Woodland Hills, Calif., and report to Harry Friedman, executive vice president. < wwd.com>

Americans Leery of Too Much Gov't Regulation of Business - At a time of increasing debate over the optimal relationship between government and business in the U.S., new Gallup polling shows that 57% of Americans are worried that there will be too much government regulation of business, while 37% worry that there will not be enough. Half of Americans believe the government should become less involved in regulating and controlling business, with 24% saying the government should become more involved and 23% saying things are about right.

R3: RL: Big Enough? - G1

Two questions Gallup asked on Jan. 26-27 measured the American public's overall views toward government regulation of business. The first asked directly about government regulation of business. The second asked Americans if they worried more about the prospect of too much or too little government regulation. Responses to both questions indicate that Americans remain leery of too much government regulation and control over business. This sentiment persists despite a significant loss of the public's confidence in banks and skepticism about the honesty and ethics of bankers over the last two years, and with increased focus on the negative impact of the actions of some big banks and other businesses on the nation's financial crisis. These results are generally consistent with a slightly different question that Gallup last updated in late August and early September of last year. Those results showed that about a quarter of Americans felt there was too little government regulation of business and industry. The majority of Americans believed that there was either too much regulation, or about the right amount. The current "worry" question measures these attitudes in a different way, but shows the same basic pattern of results. Given a choice, a little more than a third of Americans say they worry more about not having enough regulation of business, while 57% say their worry is that there would be too much regulation. <gallup.com>