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R3: REQUIRED RETAIL READING

July 2, 2010

Decelerating golf data for May highlights the volatility of monthly data while confirming pockets of regional strength.

TODAY’S CALL OUT

As many plan to head out to the links over the holiday weekend, the latest update on golf rounds played (albeit on a lagged basis) provides a few noteworthy highlights. May data, courtesy of Golf Datatech, reveals a sharp sequential deceleration to -2.9% from +10.5% in April.  After posting positive growth in 7 of 8 regions last month, May reveals only three key areas of strength with New England (+8.2%) Mid-Atlantic (+4.1%) and South Atlantic (+3.6%) all posting positive numbers.  Recall that DKS has a notable presence on the East Coast.

While month to month results are clearly volatile (and weather sensitive), lackluster YTD results (-3%) remain unchanged.  As such, we suspect improved demand noted by retailers is likely to continue to be driven by share gains more than anything else.  On the wholesale side, golf participation-driven demand appears to remain lackluster.  Net, net aside from monthly volatility,  rounds played remains a headwind for the industry overall.

LEVINE’S LOW DOWN 

- Whether it’s in preparation for its IPO or just another growth vehicle, Prada has finally entered the world of e-commerce.  The multi-country site is more than just a placeholder, offering a full range of the company’s high priced handbags, leather goods, and accessories.  And of course what would ecommerce be without free shipping, this time with a threshold of $2,000.

 

- According to a BIGresearch survey, 16.2 percent of consumers will head to stores to buy new patriotic merchandise this year for July 4th, up from the 14.1 percent who shopped for apparel, decorations and accessories last year.   Even more eye opening is AAA forecast for a 17.1% increase in road travel over the holiday weekend.  Approximately 34.9 million people are expected to hit the roads and travel at least 50 miles from their homes.

 

-If you haven’t already seen the news out of Hollister’s “EPIC” flagship store in Soho, then here goes.  The store is closed, temporarily, due to bedbug infestation.  According to news and blog reports, employees began complaining about bedbug bites weeks ago but were originally ignored.  After the volume of complaints grew and spread to the customer base, management finally decided to close the store to exterminate.  Unfortunately, bedbugs thrive in a dark environment. For those who haven’t been, the store has no windows!  We’re officially crossing this location off of our store visit list.

MORNING NEWS 

Amazon Acquires Woot.com - Amazon.com is acquiring daily deal site Woot.com, one of the pioneers in offering the one-day bargains that many online consumers seem to love. Amazon, which just about a year ago acquired Zappos.com in a deal valued at almost $900 million, isn’t saying much about its latest acquisition. But in a series of blog postings on Woot.com, founder and CEO Matt Rutledge says his company looks forward to becoming an independent operating subsidiary of Amazon. Internet Retailer estimated woot.com web sales of $71.6 mm in 2009. <internetretailer.com>

Hedgeye Retail’s Take:  A smart purchase for Amazon, which gives now allows the company to use its own inventory to fuel the Woot “offs”.  Given the cultlike following of Woot, we just hope they don’t over expose it.  The essence of Woot is one product per day, which it what truly makes it unique. 

Delta Apparel Acquires HPM Apparel - Delta Apparel Inc. has agreed to acquire HPM Apparel Inc., which markets U.S.-produced collegiate fashions to college bookstores under The Cotton Exchange brand. Robert Humphreys, Delta’s CEO, said the deal furthers the company’s efforts to tap into the college bookstore market, while also adding to its business with the military and other retail channels. “In addition, this business provides us additional U.S. screen print and embroidery capacity, further enhancing our speed to market initiatives,” he said. Delta said the deal would add about $25 mm in sales to the fiscal year ending July 2, 2011, while being slightly accretive to earnings. <wwd.com/business-news>

Hedgeye Retail’s Take:  Simple bolt on acquisition which should drive some synergies.  However, this does little to differentiate the company’s core business away from commodity tees. 

 

LI-NING Unveils Rebranding Strategy - LI-NING unveiled a new logo and slogan Wednesday in a brand relaunch timed to coincide with the 20th anniversary of the founding of China's dominant domestic sporting goods apparel brand. <sportsonesource.com>

Hedgeye Retail’s Take:  We continue to believe that LI-NING and other Chinese sports brands will continue to raise the bar from a competitive standpoint rather than watch Nike and Adi walk into their marketplace.  Furthermore, we’re still waiting for LI-NING to enter the market here in the U.S.  Perhaps a re-branding is just what they’ve waited for before taking the brand stateside.

Uniqlo’s June Comp Decline Disappointing - Fast Retailing said Friday that Uniqlo’s same-store sales slumped 5.8% in June on slow sales of summer items and lower foot traffic. These figures exclude Uniqlo’s business outside Japan. The brand saw its same-store sales drop 16.4% in March and slide 12.4% in April. They recovered in May, gaining 3.1%. June demand for its stay-cool innerwear range, called Silky Dry for men and Sarafine for women, was high but some stores ran out of certain sizes and colors and missed out on sales to consumers. Uniqlo expects its inventory will work better in July and August, when consumers are in the market for t-shirts and shorts rather than underwear. <wwd.com/business-news>

Hedgeye Retail’s Take:  After a very strong run, Uniqlo has on more than one occasion missed the mark on merchandising and inventory “under” management.  Making a bet that underwear would be a key summer item just seems flat out wrong and is clearly an example of complacency after the company had a hit on its hands with Heatech.

Bloomingdale's to Showcase New Brand Pippa - French Connection has developed a new brand, Pippa, and Bloomingdale’s will have the exclusive on the fall launch.  Pippa, described by officials as a collection of contemporary workwear essentials, will be at all Bloomingdale’s stores and bloomingdales.com in the second week of August, but shoppers will be able to preorder on bloomingdales.com/pippa in mid-July. Bloomingdale's feels strongly that creating an on-trend category for the young professional woman is going to resonate. <wwd.com/retail-news>

Hedgeye Retail’s Take:  Differentiation and exclusivity continue to dominate department store merchandising efforts, this time with a horrible brand name.  Pippa? Really?

Sephora Perfumery Chain Enters Brazil - The Sephora perfumery chain is about to enter Brazil, the world’s third-largest cosmetics market, and take its first step into South America following its parent LVMH Moët Hennessy Louis Vuitton’s purchase of 70% of the Rio de Janeiro-based online retailer Sacks. The Brazilian retailer offers more than 270 brands and boasts a customer portfolio of more than 830,000 clients, with four million unique visitors a month. <wwd.com/business-news>

Hedgeye Retail’s Take:  Keep an eye on Brazil which for a long time now has been playing second fiddle to China and the Middle East in terms of emerging market growth.  The luxury market is booming in Brazil and we expect it will become a major target market for premium brands over the next several years. 

The NBA and GSI Commerce Extend E-Commerce Agreement to 2017 - GSI Commerce Inc. signed an extension of its multiyear e-commerce agreement with the National Basketball Association (NBA) to 2017. Since partnering with GSI in 2007, the NBA's online sales have grown each year.  <sportsonesource.com>

Hedgeye Retail’s Take:  If there’s one client that isn’t going to take their e-commerce in house, it’s the NBA.  This remains a win-win for both parties.

PVH and Ike Behar Apparel Grow Partnership - Ike Behar Apparel & Design has extended its licensing agreement with Phillips-Van Heusen to include ready-to-wear dress shirts, beginning January 2011. For 10 years, the two have been partners. The Insignia Division of PVH's dress furnishings group has been producing neckwear for the Ike Behar brand. <licensemag.com>

Hedgeye Retail’s Take:  Formerly a higher-end dress shirt brand, it now appears that the company is heading downscale a bit with this ready-to-wear effort.  We would expect to see distribution for Behar to expand as well, beyond Saks and Neiman’s along with this new line.