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June 1, 2010



-In an example of how big the viral nature of the internet can be, Nike’s “Write the Future” ad set a new record for the most views.  According to web video analytics company Visible Measures, the Nike ad focused on the World Cup has achieved 7.8 million views in its first week alone.  This compares favorably to the recently launched “Earl and Tiger” video which reached 6.3 million views in its first week. 

Hedgeye Comment: Yet another blow to the traditional advertising model.  Aside from the cost to produce the 3 minute video, it certainly seems more effective to post on youtube and let the consumer do the rest.


-While continued demand for the male shape-wear may not surprise many (think Spanx for men), what did catch our eye in a NY Times article this past weekend is the primary demographic. Equmen, another leading shape-wear brand, noted that 75% of its sales come from males aged 37 to 42 - perhaps a sign of deferred gym memberships. Less surprising is the fact that online sales are significantly more brisk than at retail suggesting this trend may still be the best kept secret for many.

Hedgeye Comment: As one of the few hot spots in men’s retai (albeit small), we wouldn’t be surprised to see major leading brands dip their toes in the waters with variations of this product in the coming months. However, can shape-wear and toning co-exist?  Maybe some cross marketing between the two is on the horizon as well. (Note from McGough: the product works. Please allow me to maintain a shred of dignity and don’t ask me how I know).


ICSC Sees 2011 as the Retail Property Turnaround - Developers and retailers at the International Council of Shopping Centers ReCon convention here said bankruptcies, widespread store closures and falling consumer demand are in the rearview mirror, but don’t anticipate a strong, sustained recovery until at least next year. One fear is that there could be a false sense of security. Depending on the disruption in Europe, you could have a liquidity crisis again. Many retailers aren’t waiting out the uncertainty on the sidelines. With shoppers perking up, retailers that withstood the worst of the downturn have cash on hand and are considering expanding before rents rise. Most shopping center players agreed that retailer momentum would pick up starting next year. “There are a lot of people talking about new stores, but there are a lot of people talking about them in 2011,” said Michael Glimcher, CEO of Glimcher Realty Trust. <wwd.com/business-news>

Hedgeye Comment: With earnings for most retailers now reported, the latest commentary from the retailers themselves remains consistent with the ICSC chatter.  This especially holds true for new developments, which still appear to be at least a couple of years away from rebuilding a measurable pipeline.  We continue to believe the environment will remain much better for all players if they continue to stay on the sidelines, pursuing modest growth.  The old days of growth for the sake of growth seem to be relegated to IPO’s disguised as growth stories- at least for now. 

ASDA Buys Discount Retailer Netto - ASDA, a subsidiary of Walmart, has acquired the discount retailer Netto, which has 193 shops in the U.K., for £778 million ($1 billion), strengthening its position as the country's second-biggest food retailer and establishing a footprint in a small store format. ASDA intends to boost its smaller-format store portfolio and said the Netto outlets will be added to a new division set up for supermarkets smaller than 25,000 square feet. It hopes to complete the takeover later this summer, subject to regulatory approval, and rebrand the Netto stores by next summer. ASDA also intends to expand its non-food ASDA Living chain. <licensemag.com>

Hedgeye Comment: After staking its claim as a large format leader with stores nearly 20% larger on average than competitors, acquiring Netto is a  sharp contrast to the retailer’s prior growth strategy.  However, with large box real estate at a premium in the UK, it appears that WMT/ASDA clearly realizes that it may just have to shrink-to-grow, a step in the right direction and incremental positive in our view. It will be interesting to watch how WMT uses this acquisition over time to build a whole new level of expertise in small box distribution. 

American Brands Rushing to Europe for M&A to Sustain Growth - American brands are rushing to counterbalance the slowing domestic market by moving into undeveloped regions abroad, especially Europe. Several brands, such as Esprit and Tommy Hilfiger, once enjoyed great popularity in the U.S., only to fall out of favor later in their life cycles. Despite the loss of brand cachet in the U.S., however, these brands remained well accepted and fashionable in Europe. The weakening of the euro against the dollar over the last few weeks has only added urgency to American firms expanding into Europe. Growth-driven public companies have come to recognize they no longer have the luxury of relying on a single market, even the $10 trillion U.S. consumer economy. Acquisitions are a way to accrue real estate locations that would take years to develop on your own. <wwd.com/business-news>

Hedgeye Comment: With one major deal done this year (Tommy), it’s hard to envision a major rush here in M&A purely based on the Euro.  Remember, that US companies historically have had a hard time making a go at European retail in a large scale manner.  We find it very unlikely that retailers would look to make a “land grab” in a knee jerk manner, just to get a jumpstart when the Euro weakens.

SKS May Not Benefit All That Much From a Falling Euro - A 'Heard on the Street' column notes that while manufacturers increased prices when the euro strengthened against the dollar, prices may not be so quick to fall as the euro falls vs the dollar. Many European luxury makers have kept dollar prices firm but retailers may complain if the euro falls much further. However, the makers have a strong position with iconic brands. Plus, a weak euro could hurt the tourist shopper that has helped the company. The share price reflects takeover speculation and could fall quickly is either of the major holders decides to sell any of their stakes. <WSJ.com>

Hedgeye Comment: No direct exposure gives Saks an unquestionable advantage in a declining Euro/USD environment. Yes, tourist driven revs will take a hit, but let’s not forget the offset of domestic spending induced by increased confidence stemming from a stronger dollar.

PSS's Above The Rim Signs NBA Player Martell Webster - Above The Rim (ATR), which is being re-launched this year by Collective Licensing International, has signed a multi-year endorsement contract with rising NBA player Martell Webster. <sportsonesource.com>

Hedgeye Comment: The first of several signings we expect to be announced as CLI readies the brand for a revival in the 2H.  Also, keep an eye out for a push into basketball loving China.

Adidas Responds to Claims that the World Cup Ball Sucks - Adidas hit back Monday at criticism that the World Cup ball is difficult to control and a nightmare for goalkeepers, stressing that it was widely tested and approved long ago. <sportsonesource.com>

Hedgeye Comment: There’s nothing like a little controversy to drum up some free PR. Hey, it worked four years ago – no reason why it shouldn’t work again.

Bebe’s Social Strategy Keeps Fans Up with its Kardashian Collection - Bebe Stores’ February social marketing campaign to promote a clothing line developed with TV reality stars the Kardashian sisters was so successful that the retailer turned to the online social realm again this month to support its newest collection. <internetretailer.com>

Hedgeye Comment: Let’s just hope that the Kardshian’s can stay in the spotlight long enough for the line to actually sell through.

BBBY Rolls Out Exclusive Elizabeth Arden Collection - Bed, Bath and Beyond is rolling out an exclusive line of spa-inspired items under the Elizabeth Arden brand. The collection from licensee London Luxury includes towels in 12 colors, bath robes and slippers. <licensemag.com>

Hedgeye Comment:  Another sign that the traditional department store channel continues to lose its stranglehold on the premium cosmetic sector.  Yes, this is a licensing deal but years ago it would have been unheard of to see the Arden brand in Bed Bath and Beyond.

Wal-Mart's Sam's Club Is Customizing Bargains For Individual Members - The company's eValues program is looking to tailor bargains for each individual member based on previous buying patterns. The company has improved coupon response rate from 1-2% to 20%-30% for eligible customers. <streetaccount.com>

Hedgeye Comment:  What better place than a membership-only environment to tailor promotions by customer?  Given that each of Sam’s millions of members holds a card, which is in turn tied to the entire customers purchasing history, it’s a no-brainer to offer targeted deals based on a consumer’s brand and product preferences.  Is Costco next?