R3: REQUIRED RETAIL READING
June 11, 2010
In light of the city’s first Stanley Cup in 50-years, we decided to take a quick look at which retailers are over-indexed to the Chicago market.
TODAY’S CALL OUT
While hockey merchandise sales are not typically a key driver for athletic and sporting goods retailers, we decided to take a quick look at which retailers are over-indexed to the Chicago market in light of the city’s first Stanley Cup in 50-years. Using the population of Illinois relative to the total U.S. at 4.2%, we can see which retailers are over and under indexed to the Windy City. As the chart illustrates, the primary beneficiaries are Athlete’s Foot, The Sports Authority, Finish Line and Dick’s. While Wednesday night’s victory is likely to impact the sale of jerseys and t-shirts, we don’t expect the Blackhawks victory to have a meaningful impact on public company sales in Q2. However, the Cup could be and added bonus for TSA’s forthcoming IPO.
LEVINE’S LOW DOWN
- Lululemon noted that its class of stores opened in new markets toward the tail end of 2008 were real stand-outs when compared to the overall average comps for the quarter. These stores outperformed the reported 35% increase on a constant dollar basis. Management attributes the outperformance to traffic, which is in part driven by growth in brand awareness over the past 18 months.
- A survey from Compete suggests online coupon usage has a meaningful impact on retailers’ results. About 57% of consumers who used a coupon code on their last online purchase indicated they would not have made the purchase if the coupon was not used. Coupons also seem to have meaningful ROI impact, with those using coupons spending an average of $216 vs. $122 for those without coupons. Bottom line, keep the coupons coming.
- Add Radio Shack to the list of retailers this go around that will be selling the iPhone 4 at launch. Recall that the prior release of the 3GS was confined to Best Buy, Apple, and AT&T. To sweeten the deal, The Shack will also give consumers a trade-in credit for their old iPhone. Score one for the Shack!
UK Branded Market Bouncing Back While Independents Lose Share - The branded market could be ripe for a resurgence after figures showed the 2.5 year trend for declining sales in the sector has come to an end. Independents have borne the brunt of the decline in the branded fashion sector, notching up the biggest market share declines in the clothing and footwear markets so far this year. <drapersonline.com>
Hedgeye Retail’s Take: Not surprisingly the larger, better capitalized companies are taking share while the little guy loses. Nothing new here except that bounce of the bottom seems to be following a pattern similar to recovery we’ve seen stateside.
Rating Agencies Upgrade Neiman Marcus, Hold Barneys New York - Neiman Marcus Inc. got a thumbs-up from one ratings agency Thursday, while Barneys New York Inc. received a less flattering assessment from another. Moody’s Investors Service upgraded Neiman’s corporate family rating to “B3” from “Caa1” based on a “solid recovery in credit metrics,” while Standard & Poor’s Ratings Service took Barneys off CreditWatch without changing its “CCC” rating. However, S&P lowered its issue-level rating on Barneys to “CCC-minus” from “CCC” and lowered its recovery rating to 5 from 3 “based on our view that the company’s valuation has diminished over the past few years.” Barneys was placed on CreditWatch with positive implications on April 22. <wwd.com/business-news>
Hedgeye Retail’s Take: Nothing like a rearview ratings change for the luxury leaders, both of which are showing signs of life against easy compares.
Skechers Plans to Expand into Ireland - Skechers USA Inc. revealed its plans Thursday to launch Skechers-branded retail stores throughout Ireland later this year. Under a licensing deal with footwear retailer Shuz 4 U Ltd., SKX will open the first two shops (for men, women and kids) in Dublin and Cork by the end of 2010. Additional stores are planned over the next five years. “Our 10 branded Skechers stores in the United Kingdom give us a highly effective means to reach consumers," said Michael Greenberg, president of Skechers, in a written statement. “This licensing partnership with Shuz 4 U allows us to leverage strong European Skechers brand recognition into an expansion of our retail foothold and build on the strong wholesale business we currently have in Ireland and the U.K." <wwd.com/footwear-news>
Hedgeye Retail’s Take: By going the partnership route, this makes the move into Ireland less risky but also less rewardy. Nonetheless, it’s finally time for the Irish to don their EasyTones on the way to the pub. Something tells us Ireland is not where the real opportunity lies in Europe.
GSI Maintains E-Commerce Agreement with Radio Shack - GSI Commerce Inc. announced a new multiyear extension of its e-commerce agreement with RadioShack Corporation. Under the new agreement, GSI will continue to provide RadioShack® with e-commerce technology, order management, customer care and interactive marketing services. RadioShack has been a GSI partner since 2005. <internetretailer.com>
Hedgeye Retail’s Take: GSI continues to hold its own with those retailers who are behind the curve on building out their own e-commerce infrastructure. Given the consumer’s high propensity to buy consumer electronics online, it’s interesting to see RSH choosing to use its cash flow for other things rather than finally invest in what may be the only growth vehicle left for the retailer. Looks they bought themselves some time on this initiative at the very least.
Brands Need to Capture Teen Influencers - Not all are created equal in the eyes of social media advertising. Investing in ways to capture the attention of the most active and engaged social media teens may have a higher ROI than reaching the masses. According to a study, the top 15% most active and engaged members of Facebook and myYearbook are more likely than other teens to recommend a variety of products to their friends. Reaching teen influencers will mean taking advantage of earned-media opportunities and word-of-mouth that comes from highly trusted friends. <emarketer.com>
Hedgeye Retail’s Take: Put aside the focus on “influencers” and it seems to us that social media, which facilitates real-time, honest feedback on products and brands actually means companies need to produce good product not just good marketing. The feedback loop is only getting faster and more accurate.
Footwear: What's Selling - WWD asked a few independent footwear retailers what product was selling and what's on sale. Here are the answers:
Pegasus Shoes, Woodstock, N.Y. 1. Vibram FiveFingers, 2. Jambu Planet and Papaya, 3. Dansko Serena, On sale: “Things are always on sale,” said owner Len Sapiro. “For promotions, right now, we’re giving away a free pair of organic cotton socks with any online order, plus a $3 discount.”
When The Shoe Fits, Vancouver, Wash. 1. Brooks Adrenaline GTS 10, 2. Keen Presidio, 3. Aravon Maya, On sale: “Not a lot right now,” said owner Alan O’Hara. “The semi-annual sale will break on July 9, so right now I just have some discontinued stuff from last year, like old sandals.”
Comfort Shoe Gallery, Gig Harbor, Wash. 1. Taos Treasure, 2. Naot Believe, 3. Chaco Hipthong, On sale: “I have a sale rack of discontinued items, but as far as new products, nothing really,” said owner Lori Cain. “The sale rack is just shoes and boots left over from last winter, so it has some discontinued styles and colors. Some brands, like Dansko, never make it over there.”
Heart & Sole, O’Fallon, Mo. 1.Taos Prize, 2. Romika Maui 01, 3. Birkenstock Mayari, On sale: “Right now sandals are $10 off,” said owner Jerry Herndon. “No specific brand, just all sandals.”
Sole Food, Seattle, Wash. 1. Keen Newport, 2. Creative Recreation Cesario Lo, 3. Camper Laura, On sale: “There’s Keen, Indigo, Frye boots, a lot of sandals and closed-toe ballets,” said store manager and buyer Annie Kritsonis. “I usually put things on sale that I only have in one or two sizes left, so right now it’s a mixture of flats, sandals and pumps.”
All About Feet, Houston, Texas 1. Finn Comfort Phuket, 2. MBT Sport 2, 2. Dansko Serena, On sale: “A little bit of everything,” said associate Jackie Sabbe. “We put all the brands on sale at one point, but the big sales are at season ends. There will be a sale at the end of August and another one in January.” <wwd.com/footwear-news>
Hedgeye Retail’s Take: Ask a shoe store what they’re selling in June and what you get? Sandals, sandals, and more sandals. Add in a little performance running and these comments coincide with anecdotes with the larger chains. Strong sales of sandals of course are good for margins and limited seasonal markdown risk.