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R3: REQUIRED RETAIL READING

February 12, 2010

This morning we highlight a handful of key observations from the latest set of weekly sports apparel and footwear data. Overall, status quo on the apparel trend, with an uptick in athletic footwear led primarily by Nike. Our top pick in the space also remains Nike, although this is certainly not a call on one week's data.

TODAY’S CALL OUT

This morning we highlight a handful of key observations from the latest set of weekly sports apparel and footwear data. Overall, status quo on the apparel trend, with an uptick in athletic footwear led primarily by Nike. Our top pick in the space also remains Nike, although this is certainly not a call on one weeks data.

R3: Footwear Moves Up, Apparel Status Quo - 1

APPAREL

  • Athletic apparel industry dollar sales for the week are in line with current trends observed over the past 3 weeks. No notable change in sales cadence, with the exception of a slight narrowing of performance between the traditional Sporting Goods retailers and the Discount/Mass retailers. Recall that we recently noted a wide divergence in performance between these two channels, which suggested the consumer has been decidedly in favor of branded performance apparel vs. other value priced offerings.
  • We may be observing a small pick-up in discounting in the Sporting Goods channel, although it’s probably still too early to make a big callout on this. The 1% decline in ASP’s for the week, offset with an acceleration in unit sales suggests that there may be promotional activity. We suspect this is post-season clearance, but we will keep an eye on this in the coming weeks.
  • Adidas sport apparel sales growth has been on a path of steady decline since the beginning of the year, with those declines accelerating to a 1.2% y/y decrease. This marks the brand’s first negative reading since the beginning of last Summer.

 

FOOTWEAR

  • This week we observe a sizable inflection to the upside on overall industry sales, with the two-year trend growing for the first time in 4 weeks. Strength across the Nike brand portfolio is was a key driver of the acceleration.
  • Nike posted a 53% increase y/y for the week, driven in part by a +3000bps sequential improvement in Brand Jordan. Clearly new product introductions are helping here.

R3: Footwear Moves Up, Apparel Status Quo - 2

  • With expectations for Under Armour footwear tempered by management’s focus on building the product line and brand for the long term, we see continued weakness for the brand at retail. However, this week’s sequential deceleration was 2200bps, still a large decline but substantially better than trends we have seen in recent weeks.

R3: Footwear Moves Up, Apparel Status Quo - 3

Eric Levine & Darius Dale

LEVINE’S LOW DOWN

  • When asked about key drivers of sales in the near-term, Family Dollar’s CFO suggested that efforts to expand store hours is at the top of the list. By the end of the this month, FDO expects to have all stores rolled out with expanded hours. This marks an acceleration in the rollout, which means either sales have slowed and they are attempting to make up for it, or the extra hours actually drive incremental sales. Either way, consumables sales are still outperforming discretionary- a trend that is expected to continue until we see a measurable change in the economic backdrop.
  • Along with a better than expected earnings report, VF Corporation also announced it is stepping up its marketing and product development efforts in 2010. The company will spend an incremental $50 million or 70 bps as a % of sales, to bolster market share in The North Face, Vans, 7 For All Mankind, and in the Asia region overall. Approximately $40 million will be spent on advertising while the rest will come in the form of product development and innovation. Included in this plan is The North Face’s first foray into TV advertising.
  • Even after recording the first year of coupon usage growth in over a decade, Free Standing Insert coupons (you know, the Sunday paper kind) grew at a substantially slower pace than their digital equivalents. According to coupons.com, digital coupons grew at a rate of 10 to 1 vs. traditional paper based promotions. Approximately 20% of the U.S population used digital coupons last year. Additionally, digital coupon users tend to have higher household incomes than traditional coupon clippers.

MORNING NEWS

Coach Plans Spring Opening For First Store Focused On Men - Coach Inc. (COH) is opening its first men's-only store as the retailer moves to extend its reach beyond traditional female customers. The store will be on trendy Bleecker Street in New York City's West Village, taking over space that was occupied by a Ruehl boutique that was closed as Abercrombie & Fitch Inc. (ANF) shuttered the concept last year.  <wsj.com>

Birkhold Outlines New Lacoste Strategy - Steven Birkhold assumed the chief executive officer position at Lacoste’s U.S. business on Jan. 4 and is laying out a postrecession strategy for the French sportswear brand. The former Diesel USA ceo’s game plan includes expanding merchandise assortments outside of Lacoste’s core polo business, opening new outlet stores to de-emphasize markdowns in full-price doors, opening a concept store for the trendy Lacoste Red collection and doubling marketing expenditures in the U.S. Currently 30 to 40 percent of the U.S. business is in polo shirts. “There are literally thousands of sku’s available from the Lacoste collections in France and maybe we’ve been too narrow in our editing process for the U.S. market over the last few years,” said Birkhold, who has taken steps to widen assortments for fall. <wwd.com>

LVMH Takes Another Ebay Decision - LVMH Moët Hennessy Louis Vuitton has won another case against online auction giant eBay — this time for its flagship Louis Vuitton brand. Calling the decision a victory in protecting consumers against counterfeiters, Vuitton said Paris’ Tribunal de Grande Instance, or Superior Court, ordered eBay to pay it 200,000 euros, or $275,206 at current exchange rates, in damages, as well as 30,000 euros, or $41,281, for legal fees. The court also ordered eBay to stop using Vuitton-related key word searches or face fines of 1,000 euros, or $1,376, per infraction. “Louis Vuitton welcomes this decision which confirms established case law that aims to protect the consumer from the illicit use of company trademarks,” said Nathalie Moullé-Berteaux, global intellectual property director of Louis Vuitton. EBay said it was disappointed by the Paris court’s decision, but satisfied LVMH had been awarded just 200,000 euros, instead of the 1.2 million euros, or $1.6 million, the luxury group had originally requested. <wwd.com>

Kohl's Launches Multi Million Dollar Initiative to Fight Breast Cancer - Kohl's Department Stores (NYSE: KSS) announced today a new philanthropic initiative to fight breast cancer in the state of Wisconsin. Kohl's will donate more than $7 million over the next three years to the American Cancer Society and the Milwaukee Affiliate of Susan G. Komen for the Cure. The donation, which will be used to support breast cancer research, education and patient-assistance programs, represents the largest corporate gift ever made to the Komen Milwaukee Affiliate — or any national Affiliate — of Susan G. Komen for the Cure®, as well as to the American Cancer Society’s Midwest division, which includes Iowa, Minnesota, South Dakota and Wisconsin. "At a time when many companies are cutting philanthropic giving, we are in a financial position that allows us to expand our community relations programs with a new focus on women's causes," said Kevin Mansell, Kohl's president, chief executive officer and chairman of the board. " <prnewswire.com>

How Best Buy stays relevant in a changing online world - It’s getting more challenging to reach increasingly demanding customers online, so Best Buy Co. Inc. is carrying out a three-part web strategy of enhancing accessibility, localization and personalization, John Thompson, general manager of BestBuy.com, will tell his audience during his keynote address at next week’s Internet Retailer Web Design & Usability Conference.  In a presentation he has entitled Staying relevant in a changing landscape, Thompson will describe the steps Best Buy is taking to connect with shoppers in new ways, engage consumers at a local level and personalize key components of its web site to increase the relevance for shoppers. Thompson, who joined Best Buy in 2001 as senior vice president of supply chain and business systems for Best Buy stores, has also worked as a senior executive at other major retailers. He was chief information officer at Liz Claiborne Inc. and chief information officer and executive vice president of merchandise planning and logistics at Goody’s Family Clothing Inc.  <internetretailer.com>

Charlotte Ronson Entering Chinese Market - Charlotte Ronson has formed an alliance with Hong Kong-based MH Concepts to bring the contemporary brand to China. The partnership marks Ronson’s first Chinese venture and will begin with the fall Charlotte Ronson collection in July, when four doors open in Hong Kong, Shanghai, Beijing and Guangzhou. Six additional doors are to launch before yearend, reaching a total of 200 by 2014 throughout China, Hong Kong and Macau. The doors include freestanding stores, mall units and department store shop-in-shops. Thirty percent will be directly operated by MHC, and the rest will be franchises. Merchandise will be sold in China online at charlotteronson.cn. The entire venture is expected to generate $10 million in first-year sales. <wwd.com>

TNF Expands PlanetExplore to New York Area - The North Face today announced that PlanetExplore, a new online resource for outdoor recreational activities, is now available in the New York region. Created by The North Face, PlanetExplore is an online community of national and regional organizations, helping people of all ages find local outdoor recreational activities. The New York launch of PlanetExplore comes on the heels of The Outdoor Foundation’s recently released Special Report on Youth, which found that outdoor participation among youth continues to decrease each year, with the rate of decline steepest among the youngest age groups. After launching in the San Francisco Bay Area, home of The North Face, PlanetExplore expanded into the Midwest with a Denver release, and is now available nationwide with the New York introduction. The site has partnered with more than 100 non-profit organizations across the country, offering many opportunities to discover a diverse array of outdoor activities. <sportsonesource.com>

Burton Cuts Small Percentage of Staff and Reinstates Salaries - Burton has restructured its North American staff, resulting in a layoff of less than 2% of its global employee base. The company also announced that it reinstated salaries and merit increases that were decreased eight months ago due to the economic downturn. "Burton continues to lead the industry, which is in better shape than it was one year ago," says Burton CEO Laurent Potdevin. "Layoffs are always difficult, but in today's changing marketplace, some restructuring was necessary to maintain our investments in product development and marketing." After staff reductions, Burton employs over 600 people in North America, with its total global headcount topping 950. <sportsonesource.com>

Retailers are turning to social media, video and faster buying, study shows - The 2009 holiday shopping season was perhaps the roughest in the history of online retailing. The wretched economy caused consumers to rein in spending and conduct more comparison shopping, hunting for the best deals.

Changing consumer behavior throughout 2009, in turn, caused retailers to try new selling and branding techniques, or augment existing ones. Three areas of change included the use of social networking, online video and streamlined purchasing, according to The E-tailing Group Inc.’s annual study of 100 online retailers. 60% of the retailers in the study featured on their e-commerce sites links to social network presences, notes Lauren Freedman, president of the research and consulting firm. Freedman will be speaking at the Internet Retailer Web Design & Usability Conference, Feb. 15-17 in Orlando, FL, in a session entitled Lessons from Holiday 2009. <internetretailer.com>

U.S. Textile, Apparel Imports Fall in '09 - The volume of textile and apparel shipments to the U.S. declined in 2009 amid the global recession, even as imports from China and Vietnam continued to rise.The overall U.S. trade gap widened in December to $40.2 billion, compared with $36.4 billion in November, primarily because of a surge in oil imports. Nigel Gault, chief U.S. economist for IHS Global Insight, said U.S. exports are likely to grow but imports will be subject to fluctuations as the global economy rights itself. Despite the wider trade deficit in December, he said, “It is hard to describe the trade figures as bad news, since they show a continuing robust rebound in world trade.” Textile and apparel imports dropped 7.5 percent to 46.6 billion square meter equivalents compared with 2008, the Commerce Department Office of Textiles and Apparel said Wednesday. Apparel shipments for the year fell 6.1 percent to 21.3 billion SME. Textile shipments were down 8.6 percent to 25.3 billion SME. <wwd.com>

Consumer Groups Warn About Tax Refund Loans - Millions of Americans buy pricey refund-anticipation loans, or RALs, instead of waiting for their free IRS checks. Consumer advocates have warned taxpayers for years about the loans that, they say, drain millions of dollars out of U.S. tax refunds each year. Indeed, 8.4 million Americans took out RALs in 2008, costing them $806 million in interest payments and fees, according to data recently published by two consumer advocacy groups; the Consumer Federation of America and the National Consumer Law Center. RALs often carry annual percentage rates as high as 500 percent, according to the law center, with an average RAL of $3,300 carrying a rate of 72 percent.

Refund-anticipation lenders often target low-income taxpayers, especially those who receive the Earned Income Tax Credit, according to the IRS. About 1 in 17 tax returns filed in 2008 involved a RAL.  <abcnews.go.com>