HERE'S THIS MORNING'S HEDGEYE RETAIL DIRECT
Ping me if you are not on distro. It is the culmination of our morning process where my team and I grind on all the goings on out there. They give me analysis and data on everything going on, and I contextualize as a if I were a Consumer/Retail PM.
1. NKE VP of diversity fired. The only less diverse company I can point to in retail is UA. Interesting that it has averted any controversy as of yet. No mistake that they’re both in the same misogynistic sub-sector of retail.
2. Couple of notable management changes…
- LULU hired CFO, allowing Stuart to focus on COO role instead of wearing two hats. Note that Murphy has been showing his face in NDRs over the past two weeks mitigating the Stefan Larsson risk by talking about looking outside the industry for stronger leaders. There’s your stock strength.
- New CEO of Stuart Weitzman. Both bullish and bearish. Bear bc TPR is good at quickly making changes to the business when it NEEDS it. The good news is the quality of management it attracts is getting better. This one from Ferragamo. SW is 8% of sales and was up 5% through TPR’s 1H.
3. Primark print today is incrementally more positive toward adding stores in the US. Bullish 2H commentary. New store announced in FL. I’m looking for the biggest square footage acceleration in retail for the next two years to come out of Primary. There’s your deflationary consumer prices in the face of inflationary import costs. Talk about retail margin implosion??? Good luck Kohl’s (and pretty much everyone else without pricing power)..
4. WMT announced a change to its website – again. Though its geared towards focusing on brands (including private brands) I think it is more focused on price than the company is leading us all to believe. The initial redesign allowed more opacity between how product is priced online vs in store. That’s a customer p-off factor. Let’s see if it will revert to a consumer-friendly redesign with this one. That’s what I’m betting. This ups the ante for AMZN to redesign its user interface, which has not changed or evolved meaningfully in a decade. It’s a mess. I still contend that it’s going to move towards an Alibaba-ish t-mall setup – with initial steps later this year.
5. Bon-Ton announced it will be liquidating last night. It had previously announced that the company would close 47 stores, now all 260 will go away. 2 of our best idea shorts sell into Bon-Ton (HBI & UAA). HBI seeing a point in growth headwind from Bon-Ton. That will get worse. Ditto for UA. I think both companies miss again for far bigger reasons than Bon Ton. But this doesn’t help.
6. UAA delayed its licensing agreement with the MLB by 2 years. Though it’s on the hook for the off-balance-sheet endorsement liability, this makes sense given UA’s inability to leverage existing endorsements into actual dollars. If I were Kevin I’d do the same to boost margins near term. #golfclap.
7. Amazon reportedly shelving its plan to sell drugs to hospitals. If it couldn’t figure out logistics delivering bulk pharma products to hospitals, feels like vast auto parts delivery to serve DIY failure and DIFM is not soon surmounted either. Food is still the primary focus as the world knows, and Amazon is failing. Bulls should be worried about top line growth trajectory into 2H. I am.
8. JD Sports put up a good quarter – accelerated store growth, LFL +3%. Key factor is that online sales +30%. Either it’s smoking FL in Europe, or FL Europe is performing in line and missing to a greater extent in the US – which is where Nike is making its initial DTC push. I bank on the latter. This AMZN t-mall setup w Nike that I expect to see will hurt both retailers.
