R3: Key Nuggets From A Volatile Day

Combine Sales Day with an incredibly volatile market, and you get a noisy day to say the least. Here are some key company-specific observations:

 

  • Despite a negative same store sales result for Target, the company noted a handful of categories which remained positive for the month. Health & beauty increased by low to mid single digits, ladies apparel increase mid single digits, and decorative home increased by low single digits.

 

  • Costco noted that sales of TV’s were soft in the month, with both units and total sales dollars down. Less couponing year over year was part of the reason for the weakness. On the food side, evidence continues to build (albeit slowly) on the inflation front. Food and sundries were slightly inflationary, driven mostly by deli, with slight inflation in beef and pork.

 

  • ROST noted that they “may have misjudged the impact of the Easter shift on [their] March and April business”. Unseasonably cool and wet weather in California was also cited for the below-plan month. Home (up low double digits) and shoes (up mid singles) were the leading categories in the month.

 

  • At Kohl’s footwear and home were cited as having the strongest performances in the quarter. The Southeast and West regions were also standouts over the same period.

 

  • Nordstrom noted that fashion and fine jewelry, women’s shoes, and dresses were the best performing categories for the month. Additionally, CA was cited for lagging the company average but results for the state were within the same range as March. Overall traffic increased for the 8 straight month. Considering JWN’s heavy CA concentration, it is notable that they did not suffer the same negative effects from weather as others did.

 

  • JC Penney noted that women’s accessories, shoes, and handbags continue to benefit from the company’s efforts to improve the assortment. The final two weeks of the month were also cited as being soft.

 

  • Gap noted that women’s performance was better than men’s, with particular strength in shorts, knits, and denim (white too). From a timing standpoint, the Gap’s second summer product flow is set to be in stores next week, which is one week later than the prior year. We’ll see if newness can help regain the positive traffic momentum that stood out in March but was lost in April.

 

  • At ANF, the company noted that UK’s Hollister locations and domestic tourist stores were outperformers for the month. However, it was noted that the flagship Fifth Avenue location was excluded from the callout. Recall that the NYC Abercrombie is the oldest and most mature of the high profile locations.

 

  • While sales day is usually about “sales”, American Eagle Outfitters used the occasion to also update investors on the pace of its share repurchase activity. The company bought back 4 million shares in April for a cost of $72 million, leaving 26 million shares left under authorization for repurchase.

 

  • Limited reminded us that Memorial Day is later this year and as such, May results will be negatively impacted. Total comps for May are forecast to be flat to up low single digits.

 - Eric Levine

   Director

 

 

HEDGEYE CALENDAR

 

R3: Key Nuggets From A Volatile Day - 5 5 Retail Calendar

 

MORNING NEWS 

 

Simon Property Firm and Final Offer - Mall giant Simon Property Group Inc. on Thursday raised its bid to acquire General Growth Properties Inc. in a "last and final" effort to sway its rival from going forward with a competing offer to finance its exit from bankruptcy, The Wall Street Journal reported. In a proposal now valued at $33.5 billion, Simon offered $6.5 billion, or $20 per share, for General Growth's equity. Simon also would pay $7 billion to eliminate General Growth's unsecured debt and would assume roughly $20 billion of mortgages on General Growth's malls.  <www.bizjournals.com/washington>

 

PVH Completes Hilfiger Deal - Phillips-Van Heusen Corp. said Thursday it has completed the acquisition of Tommy Hilfiger BV and certain affiliated companies from funds affiliated with Apax Partners LP. In March, PVH reached an agreement to purchase Hilfiger for $3 billion, plus the assumption of $138 million in liabilities, creating a group with combined revenues of roughly $4.6 billion. PVH also said it has completed several previously noted activities, including financings, the proceeds of which were used to fund the acquisition or are being used to provide ongoing liquidity for PVH. These activities include:

• Issuance of 5,750,000 shares of PVH common stock on April 28, which includes 750,000 shares sold as part of the underwriters’ overallotment option. The price at which the shares were sold to the public was $66.50 a share.

• Issuance of 8,223,841 shares of PVH common stock to the selling shareholders of Hilfiger, as part of the purchase price for Hilfiger.

• Issuance in private placements of an aggregate of 8,000 shares of PVH Series A convertible preferred stock to affiliates of LNK Partners LP and affiliates of MSD Capital, which are currently convertible into 4,189,360 shares of PVH common stock, for an aggregate purchase price of $200 million.

• Issuance of $600 million of 7.375 percent senior notes due 2020.  <www.wwd.com>

 

Liberty Nearing Deal - Liberty, the 135-year-old London department store, is set to be bought by an investment fund for up to £40m. Marco Capello, the former managing director of Merrill Lynch Global Private Equity, is thought to be close to buying the Liberty business through his investment fund BlueGem Capital Partners. Liberty's confirmed it had received takeover "approaches" yesterday after months of speculation about the company. Earlier this month it said it was considering the sale of the freehold of its 125,000 sq ft mock Tudor building on Great Marlborough Street. It is understood that Mr Capello could acquire the business before the end of next month. By then Liberty is also expected to have completed a separate sale and leaseback deal on the shop for in excess of £40m. The luxury investor Robert Bensoussan and the global supplier Li & Fung are also among those to have expressed an interest in bidding for Liberty, according to the fashion industry magazine Drapers. The magazine reported that Mr Capello had significantly outbid the competition and plans to buy Liberty for as much as £40m.  <www.independent.co.uk/news>

 

Canali Flagship Opens in London - Canali, the luxury Italian men’s wear firm, will open its largest boutique to date at 126-127 New Bond Street in London today covering 7,500 square feet. The location will serve as the brand’s U.K. commercial headquarters and showroom as well. “The U.K. is our third-strongest market after the U.S. and Italy,” said Paolo Canali, the label’s commercial director. “Two-thousand ten started with a much more positive note. We’ve seen a 20 percent increase in the first quarter in our own stores,” said Canali. “Men are buying suits again.” Canali added he expects the store to generate 6 million pounds, or $9.1 million at current exchange, in the first full year. According to the brand, a total of 20 boutiques will open this year, bringing the total store count to 175 units.  <www.wwd.com>

 

VFC Fined - VF Outdoor Inc. will pay a $207,500 fine after allegedly making unsubstantiated “antimicrobial protection” claims in the hangtags of shoes sold by its San Leandro, Calif.-based The North Face division, the U.S. Environmental Protection Agency announced Thursday. As Footwear News reported in September, the complaint centered on 30 or so styles (about 70 SKUs) of outdoor, running and multisport footwear that used Agion topsheets in the footbeds. (Agion is the maker of a silver-based antimicrobial technology widely used in the footwear world and counts brands such as Adidas, Ecco, Columbia, Timberland and Under Armour as clients.) <www.wwd.com/footwear-news>

 

U.S. Launches Investigation of IPR Infringement in China - The USITC will hold a public hearing in connection with the two investigations at 9:30 a.m. on June 15, 2010. The U.S. International Trade Commission (USITC) has launched the first of two investigations into the effect on the U.S. economy and U.S. jobs of intellectual property rights (IPR) infringement in China. The investigations were requested by the Committee on Finance, U.S. Senate, in a letter received on April 20, 2010. The first report, China: Intellectual Property Infringement, Indigenous Innovation Policies, and Frameworks for Measuring the Effects on the U.S. Economy, will describe the principal types of reported IPR infringement in China, describe China's indigenous innovation policies (under which China reportedly promotes the technologies and brands of Chinese companies over those of non-Chinese companies), and outline analytical frameworks for determining the quantitative effects of the infringement and indigenous innovation policies on the U.S. economy as a whole and on sectors of the U.S. economy, including lost jobs. The second report will focus on the effects of intellectual property infringement in China and the country's indigenous innovation policies on the U.S. economy. <www.sportsonesource.com>

 

TomTom Goes Star Wars - Lucasfilm, VoiceSkins.com and TomTom have teamed up to bring Star Wars' voices to TomTom navigational devices. Sith Lord Darth Vader is available for download now (£7.95, $12) and will be followed by C-3PO (June), Yoda (July) and Han Solo (August) releases. "The TomTom brand is synonymous with high-quality navigation," says Casey Collins, senior director of international licensing and marketing at Lucas Licensing. "Star Wars fans are sure to be delighted when they hear just how great these voices sound on their TomTom navigation devices."  <www.licensemag.com>

 

 


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