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R3: REQUIRED RETAIL READING

February 19, 2010

Last night Nike sent out a ‘save the date’ notice for an analyst meeting in May for shareholders and analysts.  But of course word gets out at lightning speed to just about everybody (to far more people than can be accommodated). It’s gonna prove to be one of the more critical – and positive – events for Nike in a while.

TODAY’S CALL OUT

As we’ve been saying for the better part of two months, Nike should emerge as a standout name in the Consumer space in 2010. Yes, some are bullish on the name. But I think it is still underloved and underappreciated by the Buy Side, and those that are on board on the Sell Side like it for the wrong reasons. Ultimately, both the magnitude and duration of an earnings recovery here – after 2 years of flattish earnings – will be far greater than the consensus thinks.

The calendar is shaping up nicely here. Olympic press is nice (though only a slight positive as most people don’t walk around the Street wearing Luge Unitards). Then we should see better order flow globally in advance of the 1) World Cup, and 2) more importantly – the benefits of Nike’s reorg last year, which went on offense in May. Count the 9-month product development/sales cycle forward from that point. Yes, we’ll see increased flow starting in Spring. We’re going to go through why – in detail – upon release of our next Black Book on Friday the 26th. Details including the dial-in and presentation will be sent to subscribers next week.

In the meantime, here’s a noteworthy chart to chew on. It shows the timing of Nike past analyst meetings vs. the stock. How can we forget that fateful meeting a decade ago when Nike dropped a bomb intra-meeting and the stock cratered. This was a different era for a different management team with financial reporting processes that were primitive relative to what it has since built. And in fact, check out how the stock performed subsequent to every other major analyst event.

Look out for our Black Book next week.

R3: NKE: The Catalyst Calendar is Building - NKE AnalystDays 2 10

LEVINE’S LOW DOWN  

  • Wal-Mart noted that its fourth quarter sales for the company’s ecommerce site increased by 30%. The growth rate is among the highest in all of retail for an established brand, including those that operate with an internet-only strategy. For the full year, walmart.com recorded 1 billion visits to its site. As a result, it’s no surprise that Wal-Mart is looking to accelerate the growth of its multi-channel capabilities around the world. 
  • Despite a still-weak topline, KSwiss is ramping up their marketing spend as the company looks to position itself as “The” California Sports Company. In 2010, marketing spend as a percentage of sales is now expected to reach all time high levels as the company launches and develops new products as well as looks to engage additional sponsorship and endorsement opportunities. This approach to a spending induced sales recovery effort puts the company in a very small group of companies that have gone on offense at a time where visibility on sales still remains very cloudy. 
  • Keep an eye out for the latest technology aimed at bridging the gap between online or virtual shopping and physical retailing. Watch company, Nooka, just released a video depicting augmented reality technology which “virtually” allows a consumer to try on a watch and see how it would look on his/her wrist. By placing a paper template, which looks like a watch, on your wrist and then using a webcam in conjunction with the company’s website, you are then able to “try on” any watch you’d like. The screen then displays, in real-time, your live image with a superimposed virtual watch on it. Trust us, it’s really cool. http://tinyurl.com/yzn5tur

MORNING NEWS

GGP Declines Simon Offer - Bankrupt mall operator General Growth Properties Inc. said Thursday that it declined Simon Property Group Inc.’s $10 billion offer to purchase the firm. GGP chief executive officer Adam Metz said in a letter to David Simon, his counterpart at Simon, that “your objectives are not aligned with ours,” but added he hoped Simon would participate in the restructuring process getting under way. “As we have previously stated, our objective is to maximize value for the company and its stakeholders, and we are engaging in a process that is intended to accomplish that result in an expeditious manner,” Metz wrote. The move came a day after Simon urged serious talks between his firm, the nation’s largest mall operator, and its next biggest competitor. Simon declined to comment on GGP’s response.  <wwd.com>

Blackstone Said to Consider Joining Simon in General Growth Bid - Blackstone Group LP, the world’s largest private-equity firm, may join Simon Property Group Inc.’s bid to buy bankrupt General Growth Properties Inc., two people with knowledge of the discussions said yesterday. Blackstone is in preliminary talks with Simon, the biggest U.S. mall owner, said the people, who declined to be identified because the negotiations are private. Simon, which made a $10 billion takeover offer for General Growth public Feb. 16, would lead any resulting partnership, one of the people said. A collaboration with Blackstone would give Simon more “firepower” and may allow it to raise its offer after General Growth rebuffed it as too low, said Ben Yang, an analyst with Keefe, Bruyette & Woods in San Francisco. General Growth would consider a new bid if it was high enough, rather than moving forward with a plan to solicit more proposals, according to a person with knowledge of the Chicago-based company’s position. <bloomberg.com>

Adidas for Rent in Tokyo - Adidas is taking advantage of the increasing popularity of running among the Japanese and will open a new concept store, Adidas Runbase, here today. In addition to stocking Adidas clothing and shoes geared toward running, the shop will act as a base for runners in the city. Men and women will be able to rent shower and locker rooms for a fee of between 500 and 700 yen (about $5.50 to $7.70) a visit. The store also lends running shoes for 200 to 300 yen ($2.20 to $3.30) and clothing sets for 500 yen ($5.50). The store’s location is also unique, as it is not near any of Tokyo’s major shopping and retail areas. It is, however, just 1,000 yards from the grounds of the Imperial Palace, a popular running area in Tokyo. Runbase will be open from 7 a.m. to 10 p.m., making it ideal for government and office workers in the city who want to get in a run before or after work. Staff at the store will be able to help customers design their own pair of customized performance running shoes, which are tailored to the exact size and shape of each individual foot. Specialists also will hold running-themed workshops, clinics and events at least once a week.  <wwd.com>

Sears Begins Franchising Of Its Auto Centers - For the second time in a week, Sears Holdings Corp. (SHLD) said it is turning to outsiders to help expand its business as the company said Thursday that it is allowing franchisees to open Sears Auto Centers. Sears said it is offering auto dealers that recently lost their new-car franchises a new use for their space: Sears Auto Centers offering parts and services; over-the-counter merchandise; and previously owned vehicle sales. The franchises will have the same products and services available at about 850 locations. <wsj.com>

ASDA to Open Smaller Scale Stores - JPMorgan analysts say that ASDA, the U.K. arm of Walmart, intends to open 100 smaller format stores in the next three to five years, as well as 150 non-food stores, an acceleration of the roll out of its ASDA Living format. More plans are expected to be outlined soon, but it's believed that 75 percent of ASDA's growth will come from smaller stores, online and non-food.

The announcement is significant in the context of ASDA's previous experiments with smaller stores, which ended in it closing its George clothing stores and ASDA Essentials, which sold mostly own-brand goods. <licensemag.com>

Filene's Pays Creditors $41M - Filene’s Basement Inc., now known as FB Liquidating Estate, has paid out more than $41 million to its creditors, according to restructuring firm Abacus Advisors. Secured creditors have been paid in full, as holders of priority claims and convenience class claims have received their allowed payments and unsecured creditors have had 50 percent of their allowed claims paid. An initial distribution of dividend checks was completed Friday. Filene’s Basement filed for Chapter 11 protection on May 4 and was acquired by Syms Corp. June 18. <wwd.com>

U.S.-Made Apparel Prices Down Slightly in Jan. - Wholesale prices for U.S.-made apparel declined 0.1 percent in January compared with December and were flat in yearly comparisons, the Labor Department said Thursday in its Producer Price Index. Women’s domestic apparel prices declined 0.4 percent month-to-month and dropped 0.2 percent compared with a year earlier. Men’s apparel prices rose 0.5 percent in January and advanced 0.6 percent in 12-month comparisons. Prices for all goods and services increased a seasonally adjusted 1.4 percent in January, driven primarily by rising gas prices. In December, prices rose 0.4 percent and in November prices were up 1.5 percent. Brian Bethune, chief U.S. financial economist with IHS Global Insight, said price increases last month were “actually pretty tame given that January is a typical month to raise prices.” The PPI for apparel is not a true indicator of industry price fluctuations because of the relatively small number of manufacturers operating in the U.S. The Consumer Price Index, due out today, includes imports and is considered a more accurate barometer of pricing trends.  <wwd.com>

Weak U.K. retail data raise fears of double-dip recession - The heaviest snowfalls in decades and the rise in VAT caused havoc on the high street in January, forcing retail sales down sharply and raising the threat that the economy could slip back into recession in the first quarter. Sales volumes fell 1.2 per cent excluding petrol and diesel as parts of the country were brought to a standstill by snow early in the month. The rise in VAT back to 17.5 per cent after 13 months at a lower rate probably also contributed to reluctance to spend. The data, from the Office of National Statistics, echo private sector surveys from the British Retail Consortium and CBI reporting very weak sales in January. The BRC said it had been the worst January for retailers in 15 years. Including fuel, sales fell 1.8 per cent, the biggest drop in business on the high street since 1995, apart from an unusually volatile period in spring of 2008. “High street spending grew at relatively solid rates in the second half of last year and it would be no surprise if sales bounced back in the next month or two,” said Jonathan Loynes of Capital Economics. “At the very least, these numbers provide a very weak platform for sales in the first quarter of this year and therefore raise the chances that the economy may succumb to a double-dip.” <ft.com