R3: REQUIRED RETAIL READING
April 16, 2010
TODAY’S CALL OUT
Coming off of Calloway’s big win at the Masters, the company pre-announced its first quarter last night. At first glance, the results appear to be largely in line with the consensus, although it’s quite possible that expectations were running even higher given more recent, positive commentary on the category in general.
In looking below the headline results however, there are a few interesting comments:
- Management cited unfavorable weather conditions which had a negative impact on the start to the golf season in many of the company’s key markets as reflected in the 20% decline in rounds played through February according to National Golf Foundation data. Given the strong sales of seasonal apparel and general merchandise in March across the board, we wonder if this wasn’t a case where the quarter started out sluggish and ended with some renewed strength. Management did not comment on the monthly trend and did not suggest sales have really picked up. A more general statement was made saying, “we believe that golf spending will increase as weather conditions improve and the golf season opens.”
- Perhaps more important than the weather report is management’s commentary on the promotional environment. Further confirmation was given that inventory levels across retail are healthy and aggressive discounting is now in the past. This is consistent with early signs of a recovery for the space we saw when DKS reported its 4Q results in early March.
- Finally, management suggested that the ELY product cycle is favorable, in part buoyed by the success of its pro’s on the Tour. Thanks again Phil! However, this optimism was left hanging, with management reiterating that it’s 2Q results will be critical to making full year targets.
- All in, the overall announcement reads like a mixed bag. Sales momentum appears to have been slightly tempered by weather only to now be helped by recent marketing wins at the pro level. Clearly business is OK, not great for ELY. We do wonder with the weather being such a big tailwind to other seasonal categories recently, why it’s not giving management more confidence?
Eric Levine
Director
LEVINE’S LOW DOWN
- Saks CEO noted that the opportunity to monetize the company’s real estate holdings (i.e NYC flagship store) still exists and but is not something that company is actively looking at. He went on to note that while anything is possible, the monetization of real estate assets or a sale-leaseback is not top of mind or high on the company’s priority list.
- Add Gymboree to the list of companies citing potential negative impact on cost of goods from recent and dramatic increases in cotton prices. While the company has made its commitments to fabrics a long way into the future, it did not that is beginning to see upward pressure from cotton prices in a couple of areas.
- Ann Taylor LOFT threw a party at Manhattan’s hot spot the Bowery Hotel last night to showcase its latest collection/collaboration called LOFT Style Studio. The fall capsule collection is a collaboration with four well known stylists. And while I wasn’t there firsthand to see the goods, I can’t resist sharing this random comment from someone who was interviewed on the scene. “It’s like they want to be J.Crew, but J.Crew is so inspired by other more high fashion things, so by the time you’re inspired by something else inspired, it has this weird watered down effect.”
HEDGEYE CALENDAR
MORNING NEWS
Sport Supply Group Buyout - Sport Supply Group Inc. is going ahead with the buyout offer from Canada's ONCAP Management Partners LP, the mid-market private equity business of Onex Corp. after failing to win any other binding bids. <sportsonesource.com>
UPS` U.S. Package Volume Grew for the First Time in Two Years - UPS reported that its U.S. domestic daily package volume grew less than 1%. The slight rise was the first year-over-year domestic daily package growth in more than two years. <internetretailer.com>
India Introduces Levy on Raw Cotton Exports - Indian government has been pressured by the domestic textile industry and has recently imposed a punitive duty on raw cotton and cotton waste exports for a period of six months. The decision came after the fact that raw cotton and cotton yarn prices had been hiked by 35% in the last few months, which has impacted the downstream consumers. Exports of raw cotton have been slapped an export duty of Rs 2,500 per ton and shipments of cotton waste attract a levy of 3% of the free-on-board value, while cotton yarn exports are required to be compulsorily registered with Textile Commissioners Office. <fashionnetasia.com>
ITC Establishes Punitive Tariffs on Plastic Retail Bags from Vietnam, Indonesia, and Taiwan - The International Trade Commission cleared the way Thursday for punitive tariffs to be imposed on plastic retail bags from Vietnam, Indonesia and Taiwan in a trade remedy case that could impact industries such as textiles. The ITC, in a 5-to-1 vote, ruled that the domestic industry is being injured by imported plastic bags from Vietnam that are sold in the U.S. for less than fair value and subsidized by the Vietnamese government. According to the ITC, last year, an estimated $43 mm worth of bags were imported from Vietnam, Indonesia shipped an estimated $13.5 mm worth and about $19 mm worth was imported from Taiwan. <wwd.com/business-news>
Chinese Sports and Recreation Sales Rise 13.3% - China’s gross domestic product rose 11.9% in the first quarter, the country’s National Bureau of Statistics reported. The value of production by textile companies rose 21.6%, while retail sales of sports and recreation articles rose 13.3%. <sportsonesource.com>
Store Owners Seeking Premium U.S. Real Estate Wait for `Retailers to Die' - Retailers planning to open stores this year may have difficulty finding space in the most desirable malls and shopping centers, industry executives said. <bloomberg.com/news>
Luxury Industry Set for Mergers, Acquisitions, Stock Listings, Bain Says - The luxury-goods industry may be set for a new wave of mergers, acquisitions and initial public offerings as it recovers from its worst year on record, according to consulting firm Bain & Co. <bloomberg.com/news>
Skechers Rolls Out First Animated Series at MipTV and More - "Zevo 3," Skechers Entertainment's first animated series for kids ages 6 to 11, was previewed at MipTV in Cannes. Meanwhile, Day 3 saw more presales roll in for Atlantyca, Nickelodeon, Kelencontent and others. Skechers Entertainment's "Zevo 3," 26x22, is scheduled to air this fall on Nicktoons in the U.S. Moonscoop is handling international sales and distribution. The series follows three young teens, who gain super powers when exposed to a compound called Zevo. A licensing program is in the works and master licensees will be named soon, according to Kristen Van Cott, co-executive producer and senior vice president of creative development for Skechers Entertainment. <licensemag.com>
Callaway Preannounces 11% Sales Growth - Callaway Golf Company said first quarter sales are estimated to rise 11% to $303 million from $272 million for the first quarter of 2009. Earnings per share are estimated to be approximately 24 cents, well ahead of 11 cents earned a year ago. <sportsonesource.com>
Kodiak Footwear Expands More in the US - Iconic Canadian work and outdoor resource Kodiak Group Holdings Co. is celebrating its 100th anniversary this year with an eye toward growing the U.S. business. While the company’s Kodiak brand has been available in the States since the ’80s, according to EVP David McCarthy, a U.S. office was only established in Portland, Tenn. to distribute both the Kodiak and Terra brands in the mid-2000s. As a result of the increased U.S. focus, the company recently expanded its sales force from seven to 20, said McCarthy. And, while he declined to reveal sales figures for business in the U.S., McCarthy said the Cambridge, Ontario-based company plans continued growth here. Fall ’10 will see the launch of Kodiak’s first lifestyle collection under the Heritage name. The series of men’s and women’s styles have a vintage look and is set to retail for $125 to $175. <wwd.com/footwear-news>
Saucony Sprinter Endorsement - Saucony announced Thursday that it signed sprinter Lauryn Williams to a multi-year deal. Williams, 26, is a three-time IAAF World Champion gold medalist in the 100-meter sprint and 4x100-meter relay. Williams competed in the 2004 Athens Olympic games (where she took a silver in the 100-meter) and in the 2008 Beijing games. Under the terms of the deal, a biannual grant in Williams’ name will be awarded to support track-and-field programs for girls as part of Saucony’s Run for Good Foundation, which targets childhood obesity. Lexington, Mass.-based Saucony is a division of Topeka, Kansas-based Collective Brands Inc. <wwd.com/footwear-news>
Airwalk’s First Endorsement - Englewood, Colo.-based Collective Licensing (also a division of Collective Brands Inc.) announced Thursday an addition to its roster, signing freestyle motocross athlete Ronnie Renner as the Airwalk brand’s first athlete in the field. Renner, 32, took gold in last year’s X-Games Step-Up and has appeared in shows on MTV and Fuel TV. <wwd.com/footwear-news>
All-American Running Back Drafted by Adidas - In anticipation of the 2010 NFL Draft, Portland, Ore.-based Adidas said it signed a multi-year agreement with C.J. Spiller, an All-American running back from Clemson University. Spiller was widely expected to be a top prospect in the draft. Under terms of the deal, Spiller will be involved in product development for the football and training footwear and apparel programs, and will appear as a face of the Adidas football program in marketing efforts. Spiller, also a three-time All-American in track, is one of only two college players in history to notch 3,000 rushing yards, 1,500 kickoff return yards, 1,000 receiving yards and 500 punt returns yards (the other is Adidas labelmate Reggie Bush). Spiller set more than 30 school and conference records. <wwd.com/footwear-news>
Mattel Posts Surprise First-Quarter Profit as Sales Beat Analyst Estimates - Mattel Inc., the world’s largest toymaker, posted an unexpected profit in the first quarter on sales of Toy Story and World Wrestling Entertainment action figures and games. <bloomberg.com/news>
MasterCard Launches A Payments Lab that Could Boost Its Online Offerings - MasterCard Worldwide today said it has established a research and development arm. The unit could boost the payment card network’s offerings for online retail payments. <internetretailer.com>
Jamba Juice Debuts Branded Apparel - Licensee Headline Entertainment has rolled out the first line of Jamba Juice-branded apparel at mass and specialty retailers, as well as online. A separate launch will follow this summer at Jamba Juice stores. The apparel line ($12 to $22) includes T-shirts, a hooded sweatshirt, canvas tote bag and two different style hats for men, women and kids. <licensemag.com>
