R3: REVISIONS DON’T LIE

R3: REQUIRED RETAIL READING

February 8, 2009

 

The post-mortem on last week’s retail sales and subsequent earnings revisions shows us that the group needs to find some way to grind the 27% NTM expected growth for retail higher. Otherwise, I’m open to suggestions as to how a 20x P/E is sustainable.

 

 

TODAY’S CALL OUT

 

Let’s take a post mortem on one of the more gut wrenching retail sales days in recent memory. As we all know, numbers came in better than guidance across the board, and largely better than most spoken expectations.  But with the precipitous sell off on the event, it just goes to show that Retail is at a place right now where it needs a LOT of good news to take the group higher in aggregate. We still think that this will be the year marked by a massive bifurcation between the quality and the junk (and some new names will fall in and out of each category).

 

Despite such solid numbers, and the first uptick in the earnings revision factor in 10 weeks, we actually saw the expected 12-month forward growth rate (bottom up) for retail flatline at 27% -- also the first time since mid-November this rate did not climb. Translation, any continued evidence that the expected growth rate will not grind higher will make it all the more difficult to sustain the 20x P/E for US Retail.

 

R3: REVISIONS DON’T LIE - 1

 

R3: REVISIONS DON’T LIE - 2

 

R3: REVISIONS DON’T LIE - 3

 

 

LEVINE’S LOW DOWN

  • In one of the more interesting M&A transactions of late, LA based J Brand Denim was sold to a group of investors led by Star Avenue Capital and Irving Place Capital.  Hollywood agent powerhouse Creative Artists Agency was also listed as an investor.  Given the involvement of the talent agency, we expect we'll be seeing many more celebrities wearing the jeans.  Product placement coming as well…
  • Launching at New York Fashion Week, women's "slimming" intimates brand Spanx is introducing a mens line.  The line of compression undershirts is being marketed as having benefits which include firming the chest, flattening the stomach, improving posture, and eliminating bulk under clothes.  Shape-ups watch out…
  • With Valentine's Day approaching it's worth sharing some "candy" facts.  Nearly 71 million pounds of chocolate candy is sold during the week leading up to Easter. By comparison, only 48 million pounds of chocolate candy is sold during Valentine’s week. Halloween sees the most chocolate candy sales, with nearly 90 million pounds of chocolate candy sold in the final week of October.
  • During the commercial breaks at the Super Bowl last night Dockers paid the big bucks for an interesting advertisement http://www.youtube.com/watch?v=LozgCbTDjaU.  The 98 second Dockers “I wear no pants” commercial promised free pants at http://dockers.com/freepants.  For those who sought free pants, there was serious disappointment as the website was initially down due to overload of volume and then once you finally got access to the site there was only a chance to win by signing up.  If you want to get a sense of how successful the ad was, just google “dockers free pants.”
  • In what has become a customary move for the company, DICK's Sporting Goods sent an email blast ad for championship merchandise shortly after the Saints won the Superbowl. The email was sent roughly and hour and fifteen minutes after the final whistle. By contrast, the company hit the send button on a similar email only 30 minutes after the New York Yankees won the World Series this past fall. The relative lack of speed to market with the New Orleans Saints email was most likely the result of the lack of certainty over the outcome of the game down to the final minutes. In contrast, the Yankees were  up three games to two at the time, meaning that only they could have clinched that night. The email, titled "Congratulations, New Orleans - Get Your Locker Room Gear Now!", featured a free shipping campaign whereby all eligible purchases over $69 dollars qualified.
  • Following two 10-second spots from Skechers during the game and Reebok marketing its new ZigTech sneakers from a giant yacht docked in Ft. Lauderdale, the toning category got even more exposure over Super Bowl weekend. With a struggle for advertising dollars evident by the abundance of network ads and movie preview spots, there is little doubt SKX was able to negotiate a discount to the ~$3mm 30-second spot sticker price. By using its current campaign for the spots (instead of new creative), we estimate SKX's cost at approximately $1.5-$2mm, or $0.02-$0.03 in EPS.

 

MORNING NEWS

 

Bon-Ton Promotes Pair - Kiki Lockwood has been appointed senior vice president and general merchandise manager of ready-to-wear at The Bon-Ton Stores Inc. She succeeds Joyce Armeli, who was named to the same post in the center core and children’s areas. They report to Tony Buccina, vice chairman and president of merchandising for the York, Pa.-based department store group. Armeli replaces Therese Callahan, who is retiring after a more than 40-year career, including the last three years at Bon-Ton. Lockwood joined Bon-Ton in 2002 and had been vice president and divisional merchandise manager of women’s better sportswear. <wwd.com>

 

Burberry to Live Stream 3-D Fashion Show - Taking a few cues from “Avatar,” Burberry will live stream its fall runway show in 3-D in four major cities. While models hit the catwalk at the Chelsea College of Art & Design in London on Feb. 23 at 4 p.m., select guests in New York, Paris, Dubai and Tokyo will be adjusting their 3-D glasses in customized screening spaces designed by chief creative officer Christopher Bailey. Attendees in Los Angeles will also catch every last turn, though the start time will be 7 p.m. PST due to the time difference. This five-city visual bonanza will mark the first time a brand has broadcast live simultaneous events in 3-D worldwide. Viewers will be welcomed in New York at Skylight Studios, in Paris at a Colette-hosted event at L l’ecole des Beaux Arts, in Dubai at The Address, in Tokyo at a “Burberry Night” at a yet-to-be-identified club and in Los Angeles at Milk Studios, where Tina Brown of The Daily Beast will host the festivities. <wwd.com>

 

Kenneth Cole to Reach Turkey in New Deal - As part of a strategy to further broaden its worldwide business, Kenneth Cole Productions, Inc. inked an exclusive retail licensing deal with The Park Bravo Group, the Turkey-based firm that operates Park Bravo and Park’s stores, and has licensing partnerships with such brands as Nine West, Enzo Angiolini, AK Anne Klein and La Senza for the Turkish market. In the agreement, Park Bravo will distribute and market Kenneth Cole New York men’s and women’s clothing, footwear and accessories in Turkey. The deal will kick off with two Kenneth Cole New York retail stores in Istanbul, slated to open next month. <wwd.com>

 

Martin + Osa President Exits - Laura Dubin-Wander, president of Martin + Osa, has left the company, WWD has learned, raising more questions about the future of the specialty division of American Eagle Outfitters Inc. An American Eagle spokeswoman confirmed Dubin-Wander departed a few weeks ago and a new president was not named. Dubin-Wander’s duties were assumed by Chuck Chupein, chief operating officer. Dubin-Wander, who could not be reached for comment, had been Martin + Osa’s president since April 2007. Previously, she had been president of Dana Buchman and Laundry by Shelli Segal. Dubin-Wander also worked at Victoria’s Secret Catalogue as a director of merchandising and as a buyer at J. Crew.  <wwd.com>

 

Moxsie.com lets customers buy clothes when not on its e-commerce site - Moxsie.com, an apparel merchant focusing on independent fashion and designers, is targeting fashion shoppers on sites they’re likely to visit and enabling them to purchase products without leaving the page they’re on. It’s doing so through ShopAds, online and mobile display ads from Adgregate Markets that, when clicked, create an entire e-commerce experience—from product page through checkout—within a screen overlay that shows up above a web page. Moxsie is using ShopAds to bring limited-time deals through highly targeted ads on fashion web sites like Racked.com. ShopAds allow Moxsie to acquire new customers and increase brand engagement by allowing impulse shopping from fashion shoppers looking for new styles and deals, Adgregate Markets says.  <internetretailer.com>

 

Ocado May Be Valued at Up to $1.9 Billion in IPO - Ocado, a U.K. grocery delivery company, may be valued at as much as 1.2 billion pounds ($1.9 billion) when it lists shares on the London Stock Exchange in May, the Sunday Times reported, without citing anyone for the information. The company plans to appoint three investment banks by the end of this month to advise on the initial public offering, the newspaper said, citing unidentified London financial “sources”. Goldman Sachs Group Inc., UBS AG and JPMorgan Cazenove are among the frontrunners, the Times said.  <bloomberg.com>

 

Bebe Stores to Debut Kardashian-Inspired Fashion Line - A new apparel collection will launch soon at Bebe stores nationwide, inspired by E! Entertainment reality stars Kim Kardashian, Kourtney Kardashian and Khloe Kardashian-Odom. The line, called Bebe-Kardashians, features dresses, skirts and tops. The collection hits U.S. Bebe stores mid-February and will be followed by an international launch. The apparel retails from $59 to $129. "A partnership and design collaboration with Kim, Kourtney and Khloe is such an innate fit for Bebe," says Manny Mashouf, founder and chief executive officer for Bebe. "They exude an attitude that is exactly what today's modern woman is—or aspires to be—confident, desirable and feminine. All three are in the know and have each contributed in their own way to the design and styling of the Bebe-Kardashians collection." Bebe-Kardashians will debut Feb. 16 during New York Fashion Week at Style360. <licensemag.com>

 

Super Bowl Sidelines: Commercial Earnings Through the Years -

$311.8 million: spent by Anheuser-Busch, top Super Bowl advertiser, 1

$213 million: total ad revenue from Super Bowl XLIII, 2009

$39 million: total ad revenue from Super Bowl XXIII, 1990

$3 million: cost of a 30-second Super Bowl commercial, 2009

$700,000: cost of a 30-second Super Bowl commercial, 1990

59%: share of U.S. adults planning to watch Super Bowl XLIV

46%: portion of U.S. adults who enjoy the game more than the commercials

13%: share of U.S. adults who enjoy the commercials more than the game

$1 million: Doritos’ award to two unemployed brothers for creating Doritos’ Super Bowl spot in 2009, rated tops in USA Today ad meter

 <wwd.com>

 

Super Bowl Merchandise and the Bets Behind It  - Shirts on sale the day after the Super Bowl in 2008, won by the New York Giants. Super Bowl items are expected to reach $100 million in sales this year. Though the experts considered the Colts the favorite to win, FootballFanatics.com, a Web operation in Florida that is licensed to sell official Super Bowl merchandise, preordered more Saints material, assuming that the interest would be much greater if the Saints won. The Saints were a better story, said Richard Perel, the company’s vice president for Internet advertising, and they had never even appeared in a Super Bowl, as opposed to the Colts, who last won in 2006. In times past, it was mainly local retailers who had to gear up for the flood of fans thrilled by victory and eager to shop on the day that is the, well, Super Bowl for sports merchandise. The N.F.L. estimates retail sales this year of $100 million in Super Bowl-related merchandise. <nytimes.com>

 

Reebok Debuts ZigTech - On March 11th, Reebok allows athletes to find out with the highly anticipated launch of ZigTech, the brand’s most technically advanced running and training shoe. ZigTech allows your key leg muscles to do less, so you can do more. Simply put, it’s like an energy drink for your feet.  “Wearing ZigTechs give players a bounce, an energy that lets us train longer with less strain on key leg muscles, like shins. This ultimately enables athletes to stay healthier during the season.” Everything about Reebok’s ZigTech footwear is designed to conserve and return energy to the athlete for a soft and springy ride. The one-of-a-kind ZigTech bottom unit features an innovative, lightweight foam that is engineered into a dramatic, geometric, zig-zag shape. This unique zig-shaped sole absorbs the impact of heel strike and sends a wave of energy along the length of the shoe to help propel the athlete forward with each step.  The lightweight, flexible bottom unit, minimalist upper, and whisper-quiet ground contact also contribute to making ZigTech a new standard in running and training footwear. In fact, by wearing Reebok’s ZigTech footwear, training longer just got easier. The technology causes up to 20% less wear and tear on key leg muscles, especially the shins and hamstrings.  <businesswire.com>

 

Retail Employment Rises in January - Apparel retailers added 23,600 jobs in January, running counter to a decline in payroll levels nationwide as most employers lacked the confidence to hire full-time workers. Clothing and accessory stores hired 13,300 workers last month to employ a total of 1.37 million. Department stores added 10,300 jobs to reach 1.47 million, the Labor Department said Friday. Department stores, clothing stores and grocery stores led retail industry employment gains, said Sandy Kennedy, president of the Retail Industry Leaders Association. The entire retail sector, including apparel retailers, added 42,100 jobs in January, the Labor Department said. Retailers could be responding to early indications that the job market is on the verge of improving, said Phillip Swagel, visiting professor at McDonough School of Business at Georgetown University and a former economist for the Treasury Department. Wages have started rising, the number of hours worked is beginning to increase and temporary employment picked up, he said.  <wwd.com>


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