- 1) Brands are flocking to China. Unfortunately, many of these brands have no reason to exist in the first place. Brown Shoe (BWS) attacking the Chinese middle-tier footwear opportunity? C’mon…first get the opportunity right in the US. ANY preexisting brand that cannot work in a developed market certainly can’t hack it in China.
- 2) I like the Lotto deal. It is a premium Italian brand that clearly has a place on the feet of Chinese consumers. Without knowing financial terms, I’ll say at least that the strategic move was a sound one for Li Ning.
- 3) There is definitely too much product being shipped in for the Olympics. Period. And it will take a lot to convince me otherwise. Think about it. Are the big brands growing aggressively in China to sell product around a 2-week sporting event? No. They want to be front and center in the eyes of consumers attending the event. Unfortunately, this means building a massive number of stores filled with a whole lot of product. China is a black hole where even the best brands have no clue how much product is in the market. There will be excess inventory in the wake of August.
- 4) On a less doomsday-ish note, any inventory glut will pass. This is not like Atlanta, which took years to recover from the overbuilding around the 1996 Summer Games. I can’t imagine that any PM owning this stock would look at ‘post-Olympic market stress’ and subsequently deem the market broken. But still, an important growth driver will be frozen for a few quarters.
- 5) I think we’re going to see a content transition in China. Yes this is purely my opinion, and I cannot quantify it. But Chinese consumers want US brands such as Nike, and European brands like Adidas to show the world that they’ve arrived – even if it means spending a week’s worth of income on a pair of kicks. But we’re seeing local brands gain some steam, like Warrior and Feiyue – not to mention Li Ning. Not only will these brands accelerate in China, but my bet is that they’ll become more prominent in Western markets.
- 6) If Nike and Adidas are smart, they’re looking at deploying cash to add Chinese brands to their portfolios before they are playing defense and spending more marketing dollars to combat them. If I’m a Chinese brand with any history of relevance whatsoever, I’m scrounging every last Yuan I can find to build my brand image. I’ll get it back many times over when I’m acquired.
7 Tweets Summing Up What You Need to Know About Today's GDP Report
"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.read more
GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist
“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.read more
Inside the Atlanta Fed's Flawed GDP Tracker
"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.read more
People's Bank of China Spins China’s Bad-Loan Data
PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.read more
UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'
“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."read more
Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)
"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.read more
An Update on Defense Spending by Lt. Gen Emo Gardner
"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.read more