• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


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


April 13, 2010


After almost three full years, Ralph Lauren is set to launch its Paris flagship store on the Boulevard Saint Germain.  This often discussed property has been a measurable drag on EBIT and earnings since the company began paying rent in August 2007.  With its opening only days away, RL is now poised to ramp not only sales and profits, but to greatly expand the company’s brand presence in the key Paris market.  We estimate that the company is likely paying $1,000 per foot for the 23,000 square foot flagship, or $23 million annually.  Certainly not a rounding error!  This equates to about a $0.15 annual drag on earnings for each of the last couple of years since the company was assigned the lease.  Further drilling down, the rent alone was a drag of ~100bps of retail segment EBIT margin or ~50bps to company-wide EBIT margins in fiscal 2010. 

While the exact ramp of store productivity is still unknown, it is fair to say that the worst is now behind for the company’s P&L as it relates to the trophy Paris property.  Expect much fanfare in the press and in the city of Paris over the coming weeks with store’s official opening.  And of course, expect to see a reduction in the earnings drag that can be wholly attributed to the 17th century townhouse below…

R3: RL: Bonjour Paris - RL Paris


  • According to a study by Retail Systems Research, retailers in the near-term are allocating funds towards IT projects that directly impact the consumer experience on the selling floor. For example, upgraded and modern POS systems were the most budgeted item for this year, with 18% of respondents indicating they would be spending on this area. Personal scanners, self-service scales, product information kiosks, and employee training technology are the second most budgeted item, with at least 14% of respondents indicating they would be budgeting at least one of these items.


R3: RL: Bonjour Paris - Calendar


Ocean Freight Overcapacity Issues - Ocean freight carriers will spend years trying to cope with a substantial overcapacity problem. In addition, importers’ reliance on West Coast ports as the primary entry point for Asian-manufactured goods may wane by mid-decade because of the expansion of the locks in the Panama Canal which is expect to be complete in 2014. Ocean carriers such as Maersk, APL Lines, Evergreen Line and Hanjin Shipping were hit hard by the dip in trade volume. That blow was compounded by their pre-recession investments to order new and larger ships. Although trade volume has started to rise again, it will take years for the level of imports to catch up with overcapacity. The amount of idled capacity still hovers around 10%. Most industry watchers acknowledge that 2010 will show improvement over 2009 and that freight rates will rebound somewhat, but a number of major lines have projected 2010 still won’t be profitable. <wwd.com/business-news>

China Seeks WTO Probe of EU Duties on Shoes - The European Commission rejected Beijing's call for a formal investigation by the World Trade Organization of of EU charges on Chinese shoes. In December, Brussels extended import duties of up to 16.5% on Chinese shoes, claiming that they unfairly undercut the cost of EU producers, but Beijing lodged a complaint with the WTO in February and on Monday called for a formal inquiry panel. The case is being closely watched because it is only the second time that Beijing, which joined the WTO in 2001, is seeking to use the world trade body to challenge EU tariffs following a formal complaint last summer about duties on metal fasteners. <sportsonesource.com>

Pakistan Government Expects $10 bn Textile Exports - Pakistan expects to ship $10 bn worth of textile exports despite the energy crisis, which has crippled the industrial output. “We have fixed an ambitious export target of $25 billion till 2014 in the new five year textile policy for 2010/15 with 2 times value addition target,” said Mirza Baig. He underplayed claims by the value-added textile sector that Pakistani industries were shifting to Bangladesh. Pakistan has emerged as one of the major cotton textile product suppliers in the world market with 30% of world yarn trade and 8% of cotton fabric, but its total textile exports are only $7.4 bn which accounts for only 1.2% of the over all share. <fashionnetasia.com>

R3: RL: Bonjour Paris - Apparel Imports Pakistan

UK March Retail Sales - Clothing and footwear sales growth slowed in March after a strong February as economic uncertainty caused shoppers to hold back on non-essential purchases. UK retail sales values rose 4.4% on a like-for-like basis from March 2009. Food sales were boosted by Easter purchasing falling in March this year but April last year. For non-food, consumer caution in the face of economic and political uncertainty favored essentials and replacements over discretionary items. Clothing and footwear slowed but homewares improved, helped by mid-season sales and promotions.  <drapersonline.com>

TK Maxx Woman Concept Store Launches in London - Off-price retailer TK Maxx has launched its new women-only concept in southwest London, mixing designer bargains with cheap-as-chips brands. <drapersonline.com>

Jos. A. Bank To Open Factory Outlets - The 473-unit Hampstead, Md.-based retailer said Monday it plans to test the concept with five stores this year, and, if successful, could add 50 to 75 units around the U.S. in 2011 and beyond. JOSB has been looking at the factory outlet concept for a long time as a potential brand extension. The company operates seven outlets, but they’re older units, scattered around the country, that carry clearance merchandise and are not located in A-list centers. <wwd.com/business-news>

Phil Mickelson and the Golfsmith Challenge - Phil Mickelson captured his third green jacket Sunday at Augusta and triggered the fulfillment of an estimated $1 mm promotion undertaken by Golfsmith International Holding. As announced last month, any Golfsmith customer who purchased a new Callaway Diablo Edge, FT-Tour or FT-iZ driver between March 12th and April 7th, would receive a full refund if Mickelson won the year's first Major tournament as part of Golfsmith's "If Phil Wins, You Win" promotion. Golfsmith and Callaway, which provides the clubs that Mickelson used to win with at Augusta, made an insurance investment that eliminated any financial risk associated with the promotion. <sportsonesource.com>

LVMH Beats Estimates for Q1 - Revenues at LVMH Moet Hennessy Louis Vuitton rose 11% (13% organic) in Q1 as demand for luxury goods rebounded in the United States and Europe and retailers began re-stocking their shelves with Champagne, watches and jewelry. In organic terms, the world’s largest luxury goods maker reported double-digit increases across all its business divisions: up 10% in fashion and leather goods; 12% in perfumes and cosmetics; 13% in selective retailing; 20% in wines and spirits; and 34% in watches and jewelry. <wwd.com/business-news>

Kellwood Cuts Costs - Usually companies outsource to save money, but at Kellwood Co., doing the unexpected and bringing the tech department in-house — plus hiring 54 new employees to staff it — saved it $3.6 mm in only five months. After a reorganization, acquisitions including Vince, new ownership and new financing transformed the company and saved it from bankruptcy, the old IT organization was no longer relevant or needed. The company’s top priorities for this year are to support new acquisitions with e-commerce and retail technology, and to move the whole company to one reporting and dashboard system. The company uses Gerber for product data management, Oracle for financials and Manhattan Associates for warehouse management. <wwd.com/business-news>