• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

I’m sticking with my 5/12 post on Timberland “The Bottom of the Boot” that outlines an inflection point in the business model. In this market it is never fun being positive on a name in advance of a quarter, but I think expectations are in check, there are cost levers to pull, and business trends at retail are less toxic than they have been for TBL in recent quarters.

I particularly like TBL’s positioning on the sales/inventory/margin triangulation below. Translation = TBL spent 5 quarters in the worst place imaginable – sales down, inventories up, and margins off meaningfully. Last quarter it popped its head into a part of the grid that signifies much better inventory/sales, which is usually a prompt for GM % to recover. The margin and inventory move estimated below is almost always a positive stock move. Tack on the SG&A saves from apparel outsourcing and retail store closures, and I like how this one is shaping up.