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PENN 4Q09 CONF CALL TRANSCRIPT

PENN 4Q09 CONF CALL

 

"While we are disappointed with fourth quarter net revenue and EBITDA levels which continue to reflect the impact of the economy, we believe the fourth quarter of 2009 could be the Company's most successful quarter ever from a future development and expansion perspective.  It is evident from our fourth quarter progress that we have well-developed strategies to create new long-term value for shareholders by deploying Penn National's strong balance sheet and facility development skills to operate in new jurisdictions. New facilities in Maryland, Ohio and Kansas -- all of which will be opened within the next two to three years -- will further diversify our geographical reach, expand our current base of slot machines by approximately 20% and position the Company to be less susceptible to cannibalization from future gaming expansion."

- Peter M. Carlino, Chairman and Chief Executive Officer of Penn National Gaming

 

Highlights from the Earnings Release

  • "Unfortunately, we have limited control over how consumers are continuing to respond to economic pressures and as a result, the gaming industry experienced revenue compression again in the fourth quarter... operating results reflect reductions in consumer spending in almost every market and while customer visit levels are off only modestly, we're continuing to see less spend per visit. We have undertaken extensive analysis of gaming trends, which indicate that regional gaming spending declines are slowing. However, at this time, these trends generally do not support expectations of 2010 revenues exceeding 2009 levels and these expectations are reflected in our guidance."
  • Maryland update: "We have commenced construction on one of the state's first gaming operations, a $97.5 million Hollywood-themed facility with 75,000 square feet of gaming space, 1,500 video lottery terminals, food and beverage offerings and parking for over 1,600 vehicles.... the facility is expected to open to the public in late 2010, which will likely result in historically high returns on capital before other facilities in the state come on line."
  • Ohio update: "Penn National has begun to develop the Toledo and Columbus facilities, with planned investments of approximately $300 million and $400 million, respectively, and targeted opening dates in late 2012. We have already completed the acquisition of the 44-acre Toledo site and approximately 24 acres in the Columbus Arena District. In addition, as announced last month, we are also working closely with Columbus community leaders on the parallel pursuit of an alternative Columbus site. We recently entered into an option to purchase the 123-acre site of the former Delphi Automotive plant on Columbus' West Side as an alternate location for our planned development of Hollywood Casino Columbus."
    • "On January 27, 2010, the Ohio Legislature approved the language for a Constitutional amendment changing the designated casino location in Columbus to the Delphi site. The issue is now scheduled to appear on the statewide ballot in May 2010. Given the uncertain outcome in the legislature and at the ballot, we are pursuing development at both Columbus sites simultaneously."
  • Kansas update:  "Subject to background investigations and licensing by the Kansas Racing and Gaming Commission, which are expected to be completed in early 2010, the Penn National/ISC joint venture will begin construction in the second half of this year with a planned opening in early 2012. With an overall budget of approximately $410 million inclusive of land and licensing, this facility will feature a 100,000-square-foot casino floor with capacity for 2,300 slot machines and 86 table games, a high-energy lounge and a variety of dining and entertainment options. We estimate that Penn National Gaming's share of the future cash expenditures will be approximately $155 million."
  • 1Q2010 Guidance:
    • Revenues: $596.7MM
    • EBITDA: $137.9MM
    • EPS: $0.23
  • 2010 Guidance:
    • Revenues: $2433.MM
    • EBITDA: $563MM
    • EPS: $1.00

CONF CALL Q&A

  • Why were the margins at many of the properties horrible? Please walk through it
    • Joilet: Operating with just the casino there. Have opportunities to be more efficient with marketing spend. Expect margin improvement next Q
    • Bay St. Louis: Recession was late hitting there.  Seeing more softness there, driven by very aggressive promotional spend by their Gulf Port competitor
    • Tunica: Have $1MM of one time items like severance etc, don't see the same promotional aggressiveness as Southern Mississippi
    • Charlestown: Saw in line performance in the month of Jan, trying to figure out most efficient use of marketing dollars now that they have the tax credits.  Table tax rate will be 35%, so net net margins should be 27-28% on a normalized basis
  • January trends?
    • Consumer sentiment is NOT favorable. You can say that the deterioration is slowing, but they really don't have a clue in terms of where 2010 will go. "Don't see a lot of reason for enthusiasm for 2010." Don't have clue regarding the core business.  Their guidance is a "smigit of art and a bit of prayer"
    • Things are still getting worse but at a slower pace, doesn't mean its getting better
    • Dec was partly affect by weather
    • Jan had no weather issues, and they were down about 3% on aggregrate, Excluding Penn National and Lawrenceburg though, revenues were down ~5%. The only good news is that the last week of January was very strong, bu that could be due to no football and good weather
    • Doesn't see anything that gives them comfort that there will be a big improvement in unemployment that will help their customer's situation and make them want to spend more
    • Have a very conservative view for 2010 (they hope)
    • Lawrenceberg - continue to see reasonably good growth there on their capital investment, especially last weekend
  • Is NY totally dead or is there any hope there?
    • Where mystified by the process in NY. It was very clear that they were the winning bid on 2 of the rounds, but then they reopened the bidding.  The conditions laid upon the "winner" matched Penn National's bid
    • There bid was unconditional on tax relief, and the payment was all upfront. No idea why their bid didn't win as it was clearly the highest and best bid
  • View on Ohio slots at tracks vote in Nov 2010?
    • Do anticipate that it will be on the ballot in Nov, but its unclear that the racetracks will spend enough money to get it passed
    • No coalition today that either supports or opposes it
    • They support the issue and will spend their fair share on the campaign
  • Table game potential in Maryland and Maine
    • Maine: Would require a 2/3rds vote to get it approved and it wouldn't have to get on the ballot, however, others say that it does need to go on the ballot
    • Maryland: Governor said he would like to see the facilities up and running first.  Would have to go back to statewide voters to get approved anyway, and no appetite for legislative approval either at the moment
  • Still interested in Las Vegas, would they consider a fixer upper like Riveria?
    • Riveria is a tear down... so no
    • Would have to be something more substantial
    • Fontainbleau will take $1.5BN to finish... (we don't think that Icahn will necessarily finish it and definitely not at those levels)
  • How should corporate expense run next year?
    • $69MM for next year
    • No significant amounts of lobbying, or at least much reduced
    • Don't have table games in there bc they don't know when they will be up and running (PA)
    • No unusual expenses expected in 2010 except leverage to down revenues
  • Not expecting much contribution from Perryville in 2010
  • Not willing to cut costs enough to upset the customer experience
  • Referendum in Ohio is just about the site, not the whole casino issue
  • What's driving EBITDA growth guidance in last 3 quarters of year?  Lawrenceburg and Penn National growing throughout the year and easier comparisons
  • Cash = $713.1MM, Debt = $2.335BN, capex $61.9MM
  • Q1 capex $139.5m ($100m of project), 2010 capex $428m (maintenance $96m)
  • What type of customer? - 65% rated, similar to prior years but spend per visit down - Lawrenceburg used to do $130 per visitor down to $100 per visitor
  • WV table game guidance - 15% of revenue from table games typically
  • Breakdown of $520 million write down - related to Ohio impact - Lawrenceburg BV of $700m now
  • Pre-opening expense runs through gaming expenses at the property level
  • Spent $27 million in Ohio for lobbying
  • Timing of 2010 project capex by quarter:  $106m in Q1, $75m in Q2, $170m in Q3, $70m in Q4
  • VLT impact in IL:  none in 2010 due to timing of licensing, won't be much going forward either
  • Modeling Kansas:  similar to any other regional gaming property despite state ownership
  • Ohio will generate an "adequate" return for shareholders
  • Tightened view on what is an acceptable rate of return given the uncertain environment
  • Restricted payments basket:  has $600-700m remaining.  Evaluating stock buyback.  Also looking at way of locking in value in preferred equity - not opposed to doing some financial engineering.
  • "Will be discouraged if competitors aren't experience the same things we are"

 

 

 


ARO: Reading the REAL Release

Amidst the sea of sales and earnings releases, how can we not take note of one of the most bizarre sales releases (blunders) in a long time?  This morning at 8AM, Aeropostale (ARO ) mistakenly issued last year’s January sales release.  Based on this, it appeared that ARO once again blew out expectations, with another double-digit comp increase. About an hour later, a revised press release arrived and the REAL results indicated a less impressive 6% same store sales gain, in-line with expectations.  Both releases also noted earnings revisions to the upside, which only added to the confusion. Tack on an oddly timed 3 for 2 stock split along with the official word that the co-CEO’s take the helm next week, and ARO remsins one of our top short ideas.  For an outline of the broader thesis, take a look at our 1/29 note Revisiting a Crowded Debate.

 

-Eric Levine


Same Store Sales: (Little) January Looking Good

Even with concern about lack of clearance merchandise, Jan was one of the more unanimously positive months we’ve seen in a while.  While we don’t want to get carried away with a month that only accounts for 7% of annual sales, the sequential acceleration across durations can’t be ignored.

 

 

The early read this morning on January sales is positive with results largely in-line to better than expectations.  Even with the month being of least importance in the grand scheme of things, there were notable earnings revisions to the upside coming from M, PLCE, GPS, ARO, AEO, ARO, KSS, SSI, and TJX.   Companies that outperformed during the Dec/Nov period appear have maintained momentum (even with tight inventory levels) while the underperformers continued to lag.

 

On the surface, results out of COST were better than expectations but below the surface there were some key moving parts.  Positive contribution from gas and FX helped to offset a negative 150-200bps hit from the calendar shift of the Super Bowl into February. BJ noted about the same 200bps negative impact from the Super Bowl. Unseasonably cold weather in the southwest was also cited as a headwind during the month.

 

Perhaps most interesting was a comment out of COST regarding food inflation/deflation. January marked a substantial change in the deflationary trend with the impact now measured at less than 1%.  This marks a substantial change from the mid-single digit deflation that has been impacting the food and consumables category for the past several months.

 

In a sign that sales day continues to diminish in its level of importance, another company (PLCE) announced that it’s going to discontinue reporting monthly sales – At least they’re going out with a bang, with a significant beat again this month on both sales and earnings.

 

January Recap:

 

Upside to expectations & guidance: M, PLCE, GPS, AEO, ARO, KSS, ROST, TJX, SSI

Upside to expectations: COST, ANF, DDS, LTD, ZUMZ, BJ, JWN, SKS

In-line: WTSLA, TGT, JCP

Downside to expectations: BKE, CATO

Downside to expectations & guidance: FRED, HOTT

 

Same Store Sales: (Little) January Looking Good - Total SSS

 

Same Store Sales: (Little) January Looking Good - 1yr SSS

 

Same Store Sales: (Little) January Looking Good - 2 yr SSS

 

Eric Levine

Director


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HOT: LOOKS CAN BE DECEIVING

At first glance, Q4 looked amazing and full year 2010 guidance was solid. No complaints on RevPAR but digging a little deeper we found that things weren’t as good as they appear.  

 

 

By our math, the “clean” EPS number for the quarter was $0.25 (using a “normalized tax rate” and excluding all charges and a fully diluted share count).  However, even the "clean" number contained $21MM of what we believe are mostly termination fees.  Normally “termination and other fees” run at around $11MM per quarter.  If we adjust out for abnormally high termination fees, we get “normalized" EPS of $0.21, which was in line with our original estimate and the Street.  Beating on termination fees is not exactly encouraging.  Even so, there were a lot of positive things to point to in this quarter's results

 

Here are some additional and, we hope, unique thoughts: 

  • For anyone wondering where the upside to guidance came from, we have an answer for you – it's call SFAS 167.  If you recall, on the last call HOT explained that the new accounting rules would benefit their 2010 EBITDA to the tune of $10 to $15MM.  Well, now that number is $40 to $45MM and it's all accounting - no associated “cash flow” with this raise.  The Street’s 2010 EBITDA estimate was $730MM so if you add the extra $30MM the number goes to $760MM, actually ABOVE the new guidance of $750 million.
    • “This new accounting rule impacts the accounting for securitized vacation ownership loans. As a result of the adoption of this rule, the Company expects its reported assets (accounts receivable and other assets) to increase by approximately $400 million and its reported liabilities (short-term and long-term debt) to increase by $445 million, prior to any tax effects. Also as a result of the accounting change, vacation ownership pretax earnings for 2010 are expected to increase by approximately $20 million to $23 million and EBITDA is expected to increase by approximately $40 million to $45 million. The new accounting rule is not expected to have any impact on the Company’s cash flow.”
  • It also becomes clear that 1Q2010’s EBITDA guidance was also inflated by roughly $8MM, so again a bigger guide down versus the Street than meets the eye
  • We understand why HOT is adding back the $17MM of cost of sales price discount adjustments to get to “Adjusted EBITDA”, but to be fair, wouldn’t you also take out the $23MM of gains on securitization then? Same goes for adding back $2MM of D&A on discontinued operations.
  • HOT is excluding all the Bliss associated expenses - which were all in SG&A while Bliss revenues were in Management fees & other.  We wrote about the Bliss sale on Nov 2, 2009 “HOT: A BLISSFUL EXIT” and on Jan 11,2010 in “HOT: 4Q IN REVIEW”.  However, we wrongly assumed that Bliss expenses and revenues wouldn’t come out until 2010. 
  • 2010 & Q1 RevPAR guidance was actually quite good, no doubt aided by HOT's international exposure

Q4 RECAP

 

Cliff notes:

  • RevPAR was better than expected, especially international.  Occupancy led the way
  • F&B revenues declined only 9-10% … a nice sequential improvement
  • Management & fees where low quality with higher than normal termination fees doubling from prior quarters
  • Timeshare income was better due to the higher than previously reported gain

Details:

  • Owned, Leased and Consolidated JV revenues and EBITDA cleanly beat our estimates
    • International RevPAR was much better than we estimated, to the tune of 5.5%.
    • North American RevPAR came in 1.7% better than our estimate
    • We suspect the vast majority of the beat here came better F&B and other revenues, which we suspect declined less than 10% in the Q vs. out -20% estimate
    • Total costs per occupied room decreased 2.3% (estimated 6.8% in local currency) 
  • Management fees were messy since Bliss was excluded
    • Base fees were in line, just $1MM less than our estimate
    • Incentive fees were $3MM better than our estimate, declining 19%
    • Franchise fees were $1MM better than our estimate
    • “Other Management & Franchise Revenues” came in $12MM higher than our estimate, due to what we believe were higher termination fees.  The $42MM included $21MM of deferred amortization of gains (like every quarter), the balance is usually mostly termination fees. 
    • Bliss was excluded
    • So base, incentive and franchise fees decreased 9.7% compared to guidance of down 8-10%
  • Timeshare beat due to a $23MM gain on securitization, strange because when the announced the deal the gain was stated at $15MM… hmmm anyone else confused here?
    • Originations were better than we estimated though but margins were lower, probably due to discounting of inventory

R3: Look at AmEx, not Just SSS

R3: REQUIRED RETAIL READING

February 4, 2009

 

Let’s not overlook perhaps the most notable datapoint over the past day – which is from AmEx. Non discretionary spending is widening its gap versus discretionary. This plays into our view that even with ‘easy compares’ we need to look at share of wallet more than anything else, and that 2010 should be a difficult delta for discretionary categories.

 

 

TODAY’S CALL OUT

 

While everyone is pouring over same store sales data this morning, let’s not overlook perhaps the most notable datapoint – which is from American Express. Note that spending is up year/year to no surprise, but non discretionary spending is widening its gap versus discretionary. This plays into our view that even with ‘easy compares’ we need to look at share of wallet more than anything else, and that 2010 should be a difficult delta for discretionary categories.

 

R3: Look at AmEx, not Just SSS - 1

 

 

LEVINE’S LOW DOWN 

  • With the American Living brand about to hit its two year anniversary, Ralph Lauren President Roger Farrah had some comments about the brand’s challenges and success so far. He noted that the launch of the brand came at a difficult time in the market overall, making it even more difficult to launch the premium priced line. The biggest learning was the delta between where the line was priced and what the customer was willing to pay for a brand with no history or heritage. The JC Penney customer was also not as receptive to the color palette of the line. Both pricing and colors have now been corrected for Spring and Fall ‘10. Granted, no CEO in this business ever says “we adjusted colors and pricing so that we still have it wrong in the upcoming season.”
  • Wolverine World Wide management expects product costs out of Asia (China) to remain favorable through the first half of 2010, with an uptick coming in the second half of the year. Management also noted that it is not entirely clear at this point how much costs will be up, but that in a few weeks after the Chinese New Year is complete the outlook will be much more clear. The company did not elaborate – but we think that this is a function of VAT and import/export duties, which are unlikely to change before the New Year.
  • It’s game on for American Eagle Outfitters and Hollister in Soho. It appears that AEO is moving its downtown flagship on Broadway in Soho, to a newer 20,000 square foot location just a few blocks north. Interestingly, the store will be situated directly across the street from ANF’s first Hollister flagship. Teen tourists are rejoicing all over at the prospect of one-stop shopping…

 

MORNING NEWS  (and Hedgeye Retail’s 2 Cents)

 

Karkus Exits Under Armour - Under Armour Inc. said Wednesday that Suzanne Karkus, senior vice president of apparel, has resigned to pursue other interests. The company has named Matthew Mirchin, senior vice president of sales for North America, interim head of its North American wholesale apparel unit while it searches for Karkus’ successor. In a regulatory filing with the Securities and Exchange Commission, the Baltimore-based performance apparel firm said that following Karkus’ departure on Feb. 16, she would be paid six months’ salary, or $200,000 based on her 2008 compensation, pursuant to the employment agreement inked when she joined the firm in January 2008. That contract called for her to receive a half year’s pay in the event her employment was terminated “under certain circumstances.” The company has yet to provide salary information for 2009. Karkus will also receive $120,000 “primarily to cover her transition and other expenses.” Prior to joining Under Armour, Karkus was president of Izod Womenswear for four years and, during a six-year tenure with Calvin Klein Jeanswear, advanced to president of its women’s division. While Under Armour has struggled with its fledgling investment in footwear, the apparel business has continued to flourish. In the fourth quarter ended Dec. 31, apparel revenues increased 26 percent to $192.1 million, 86.5 percent of the corporate total. By contrast, footwear revenues, while up 60.6 percent for the full year, fell 5.1 percent to $8.7 million in the quarter. Calls seeking comment from Under Armour weren’t returned. The firm’s stock dropped 3.4 percent to $25.88 in trading Wednesday. <wwd.com>

Hedgeye’s 2 Cents: When the SVP in charge of 90% of the P&L either resigns or is forced out, it’s never a great sign. Granted, when Raphael Peck – former head of footwear – resigned last year, it was a precursor to Kevin Plank bringing on Gene McCarthy, who we think was the best free agent in footwear. Our sense is that McCarthy and Karkus were not exactly the best of friends. We’d expect to see a high profile hire here quite soon.

 

Jones Buys Robert Rodriguez Collection - Jones Apparel Group Inc. is continuing to expand its portfolio in the contemporary category. After buying a 50 percent stake in Rachel Roy in 2008, the apparel conglomerate has acquired Moda Nicola International LLC, which owns the Robert Rodriguez Collection. Jones’ plan is to help the Los Angeles-based designer of women’s contemporary sportswear and eveningwear and his business partner and chief executive officer, Nicola Guarna, grow the label deeper in its existing 600 doors, which include Neiman Marcus, Bergdorf Goodman, Saks Fifth Avenue, Nordstrom, Harrods and Holt Renfrew. According to Jones, the deal is valued at about $28 million, with Jones having made “initial cash payments to the selling members of MNI,” who are to receive future cash payments “upon achievement of certain financial targets set within the agreement.” Last year, MNI generated net revenues of about $17 million. <wwd.com>

Hedgeye’s 2 Cents: Is it me, or is JNY getting back to its old destructive roots a bit too quickly?

 

Wal-Mart Cutting 300 Headquarters Jobs - Wal-Mart Stores Inc. said Wednesday it will eliminate about 300 jobs at its Bentonville, Ark., corporate headquarters as part of a strategy to improve efficiency and cut costs. The latest move comes after the retailer last week said it will break up Wal-Mart U.S. into three geographical regions, create a new merchandising execution organization, change the way products are sourced globally, close 10 Sam’s Club stores in the U.S. and lay off 11,000 employees. The positions at Wal-Mart’s headquarters are primarily in corporate support areas, said Mike Duke, president and chief executive officer. In a memo to employees, Duke said asking the home office to make staff reductions was only fair in light of the push for operations to become leaner and more customer-focused.  <wwd.com>

Hedgeye’s 2 Cents: Non-event.

 

Adidas America Announces Restructuring - Adidas America Inc. on Wednesday said it laid off a small number of employees as part of a U.S. restructuring at its Portland headquarters but indicated that it still expects to see job growth in the U.S. this year. The company issued the following statement, "Today adidas America, Inc. announced a restructuring of its organization in support of the launch of a new US business plan. This action will result in a net increase to employee headcount at the company's Portland, Oregon headquarters. The purpose of this restructuring is to simplify the business, increase efficiency, prioritize resources and position the company for long-term growth and opportunity. While the company is ultimately creating more jobs, many of the new positions demand a different skill set and experience level, thereby requiring the company to release some employees and recruit new talent. Although these decisions are very difficult, the company is making the strategic moves necessary in order to not only maintain but increase market position." Adidas America spokeswoman Stephanie Von Allmen, speaking to Oregonlive.com, declined to divulge the specific number of job cuts, but said it would be fewer than the 60 jobs that will be added during the course of 2010. She said the company would release further details of the restructuring at a later date. The company employs 800 at its U.S. headquarters in North Portland. <sportsonesource.com>

Hedgeye’s 2 Cents: I think I’m pretty good at math, know this industry quite well, and have a decent enough memory. But if you were to ask me how many times the North America ops at Adidas has been restructured, I’d need to research it a solid half hour before giving an accurate answer.

 

 

CAA Among Investors That Buy J Brand Firm - Fashion’s Hollywood connection just got a little bit closer. J Brand’s rapid rise to prominence in the premium denim segment is getting an additional boost from a new private equity owner that includes an unlikely partner: none other than the powerhouse Creative Artists Agency. Star Avenue Capital LLC has acquired a majority interest in Los Angeles-based J Brand in a deal said to be valued in excess of $50 million. Star Avenue was established in early 2009 as a three-way partnership between Star’s management, private equity firm Irving Place Capital — a key investor in operations such as Aéropostale, Seven For All Mankind, Stuart Weitzman and The Vitamin Shoppe — and CAA to target emerging brands and concepts for investment. It’s the first major investment for Star Avenue. As part of the deal, J Brand will welcome as chairman former Jones Apparel Group Inc. chief executive officer Peter Boneparth, who joined Irving Place Capital in March as a senior adviser focusing on the retail and apparel sectors. “Premium denim was a category that we targeted early on as one that would be an obvious deal given our experience from Irving Place, and given how these brands respond so well to media activation,” Mark Genender, managing director of Star Avenue, told WWD exclusively. <wwd.com>

Hedgeye’s 2 Cents: Banker Bonanza redux.

 

Cutter & Buck gets new CEO - Seattle sportswear company Cutter & Buck has named Jens Petersson chief executive officer, replacing Ernie Johnson. Seattle sportswear company Cutter & Buck has named Jens Petersson chief executive officer. He replaces Ernie Johnson, who took the helm in 2006, a year before Cutter & Buck signed a deal to be bought by European apparel distributor New Wave Group. Johnson, a former banker, now is chairman of Cutter & Buck's board of directors. Petersson, 46, who previously was deputy CEO of New Wave, said he plans to step up Cutter & Buck's marketing efforts and better communicate with customers on the Internet. Social-networking Web sites such as Facebook are "very much on my agenda," he said, citing the U.S. economy as another top concern. "We hope we've seen the bottom and a recovery is coming as soon as possible." Something else he hopes will blow over soon: the Tiger Woods sex scandal. Cutter & Buck specializes in golf apparel, and Woods' absence from the game "obviously is not a positive," Petersson said. "What's best for all of us in the industry is he comes back and plays." <seattletimes.nwsource.com>

Hedgeye’s 2 Cents: An often overlooked gem in golf apparel – seriously.

 

Esprit Plans China Online Sales as Retailer Expands - Esprit Holdings Ltd., the biggest Hong Kong-listed clothier, may set up an online sales network in China as it pushes expansion in the world’s most populous nation, where it says margins are similar to those in Europe. Chinese spending on casual clothing is growing and Esprit is likely to see a “stronger influence from China” in future fashion collections, Chief Executive Officer Ronald van der Vis, who took over in November, said in an interview.   <bloomberg.com>

Hedgeye’s 2 Cents: Important move. US investors don’t know Esprit, but they should.

 

Burberry Promotes Janowski - Burberry has named Andy Janowski to the newly created post of chief operations officer, reflecting the brand’s increased focus on its supply chain. Janowski joined Burberry in 2006 as senior vice president, supply chain, and created a global team that transformed purchasing, manufacturing, sourcing and shipping, resulting in cost savings and reduced environmental impact and distribution processes, Burberry said. Burberry’s wholesale sales in the third quarter grew 10.5 percent, due partly to earlier, more streamlined shipments and an ongoing strategy to deliver new ranges more frequently to customers. “In his three-and-a-half years with the company, Andy has strategically built, modernized and shaped a leading, world-class supply chain team,” said chief executive officer Angela Ahrendts. <wwd.com>

Hedgeye’s 2 Cents: “Increased focus on supply chain”? That was the buzzword catchphrase a few years ago (like 10). A bit late to the party boys.


PENN: NOT MUCH INCREMENTALLY POSITIVE

PENN missed the Street but hit our EBITDA estimate on the nose. Wish we could same about Q1 and 2010 guidance.

 

 

We don't have a lot to add to the earnings release.  The takeaway is clear:  2010 is not off to a good start in the regional markets and the recovery duration looks farther down the road.  PENN provided 2010 guidance well below us and the Street consensus, particularly for Q1.  EBITDA and EPS guidance for Q1 was 17% and 39% below the Street, respectively.  Full year 2010 guidance was better, falling "only" 11% and 26%, respectively, under the Street.  However, visibility on gaming revenues is always limited so back end loaded guidance never gives us much comfort. 

 

At least three legs of PENN long thesis remain:  solid management, a deep long-term development pipeline, and a balance sheet to fund it.  Unfortunately, the significantly lower estimates probably mitigate the "cheap stock" fourth leg of the thesis.


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