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July15, 2010

Can’t you tell by the title? This means that last week’s footwear data was as upbeat as what we saw out of apparel – good enough to move the 3-week trend higher. Here are some callouts by brand.  


Athletic footwear sales for last week mimicked the upswing we noted yesterday in Athletic Apparel. As with apparel, a multi-week downswing was broken, and the all-important 3-week trend ticked up.  In fairness, this is only slightly greater in magnitude than the ISCS Retail Index.  But all three metrics had not necessarily been moving in lock-step year-to-date. The fact that they are now (and the fact that this was not a calendar shift or weather issue) is a positive callout for the beginning of July.  Other nuggets worth calling out on footwear…

  1. The best trending brand that’s not toning-related is…Saucony??? Yes…This is now broken out in the sample. Average growth in the 65% range for the past 3-weeks? Not too shabby.  Too bad it’s only about 5% of sales and 10%+ of PSS’ EBIT. But with core PSS retail flat and brands like Saucony, Sperry and Keds crushing it, this gap closes daily.
  2. Next most impressive brand… Private Label!?! Are you kidding me? Check out the 3-week trend. Very solid. We need to look into this. Historically, private label sneakers sell as successfully as Fugu (Poisonous Blowfish sushi-style) served by a street cart vendor. (Bad joke. The point is…neither sell).
  3. Reebok’s growth dipped below 100% for the first time this summer. Let’s face facts…it’s still stellar. But Herbert Hainer (CEO) YouTubed himself on Bloomberg saying that sales will double again next year in this category for RBK. I don’t doubt that the wholesale shipments will be there. But the margins? I wonder if he can convince the starting 5 of the Miami Heat to walk around in those suckers.  That’s about as likely as… well…who am I kidding. It ain’t happening.
  4. Under Armour still has a whole lot of nothing in the tank. But that’s to be expected. We’re seeing the magnitude of yy sales declines, but the key is that sales, units and ASP are all in line. That’s the key we’re looking for as it relates to a signal from the data on movement of product in, or clearing product out.
  5. Nike’s numbers look good. No surprise there. But Converse and Jordan continue to trend down. We don’t think that this is not a relevance issue for either, but rather a shift in distribution to retailers not included in the sample. Nonetheless, both are massive and more profitable than 80% of other stand along publicly traded footwear companies. We’re going to do more work to research this one.
  6. Did you catch Nike’s answer to the toning shoe? It’s called “Wearing toning shoes to Ben & Jerry’s is not exercise. Get up off your rump, put on these kicks, and do some squats.’ Check out the image below.

 R3: Saucony, Fugu, Nike and Ben & Jerry’s - NKEvsSKX


R3: Saucony, Fugu, Nike and Ben & Jerry’s - 2


R3: Saucony, Fugu, Nike and Ben & Jerry’s - 3


R3: Saucony, Fugu, Nike and Ben & Jerry’s - 4


R3: Saucony, Fugu, Nike and Ben & Jerry’s - 5



- First it was Nike’s Tiger Woods video, then the World Cup teaser, and now Old Spice. In less than two weeks, the brand’s pitchman, Old Spice Guy, has garnered 5.5 million YouTube views. Now if that doesn’t help sales, then nothing will. Talk about bringing a stodgy old brand to a new audience.


- Proving that Bergdorf Goodman is in a rarified league of luxury players, the 5th Avenue store has revealed its July windows. Incredibly, they were SIX years in the making. The company’s visual director has been collecting antiques for this presentation, which is called “Beauty Challenged”. We’re just guessing, but this does not sound like a cheap endeavor.


- A poll from ShopSmart (part of Consumer Reports) reveals that the average woman spends just $34 on a pair of jeans. Woman ages 18-34 are willing to spend $60 a pair on average, but only 1 in 10 women say they’ll spend over $100. Is premium denim finally losing some luster?


NRF Expects Average American Family Spend to Increase 10% - The National Retail Federation's 2010 Consumer Intentions and Actions Back to School survey found that the average American family will spend $606.40 on clothes, shoes, supplies and electronics, compared to $548.72 last year, and close to the $594.24 in 2008.  <sportsonesource.com>

Hedgeye Retail’s Take:  If this holds true we’re setting up for a couple of good months ahead on the same store sales front.  This forecast stands out as one of the more bullish NRF predictions, especially compared to those more discretionary forecasts the trade group has made for holidays like Mother’s Day, Valentine’s Day, and Easter. 

Zumiez Ends Its Short Pursuit Over West 49 - Zumiez Inc. said it was ending its takeover pursuit of West 49 Inc., leaving the path open for Billabong International Ltd. to continue its deal to buy the Canadian action-sports retailer. Last week, Zumiez approached West 49, saying it was prepared to make an offer exceeding the C$1.30 per share Billabong offered when the two companies entered a definitive agreement to merge last month. <sportsonesource.com>

Hedgeye Retail’s Take:  Looks like ZUMZ will now refocus its efforts on organic Canadian growth.  Recall its first store in Vancouver opened this year. 

Li & Fung Nearing Deal to Acquire Jimlar Corp. - Li & Fung Ltd. appears poised to gain a foothold in footwear. Financial sources said Wednesday that LF USA, the U.S. subsidiary of the Hong Kong-based firm, is nearing a deal to acquire footwear firm Jimlar Corp., a $450 million privately held firm that owns the Frye trademark and does business through licenses such as Coach and Calvin Klein. An agreement might not be completed until Li & Fung reports earnings next month, since it is in a “quiet period” under applicable securities law. Li & Fung has been on a buying binge, and last week disclosed three acquisitions involving an initial cash outlay of $140 million for several licensing deals, including a relationship with Sean John for men’s sportswear. <wwd.com/business-news>

Hedgeye Retail’s Take:  Li and Fung continues to raise the bar in acquiring content as a compliment to its core sourcing business.  With a potential “foot” hold in the brown shoe arena, it’s likely we see the company leverage this expertise to grow its footwear sourcing.  Clearly apparel is no longer the dominant category for which Li & Fung sources for its partners. 

Tommy Hilfiger's New Lifestyle Collection and Retail Concept - Tommy Hilfiger is out to woo the twentysomething customer with a new men’s and women’s lifestyle collection that has its own retail footprint. Meet Tommy, the brand’s effort to lure customers from American Apparel, Gap, Abercrombie & Fitch and American Eagle Outfitters. The line will target an audience with a median age of 25 and veer away from the preppy looks that are the mainstay of Hilfiger’s collection sold exclusively at Macy’s. Tommy aims to focus on handmade details, distinctive materials and unexpected pairings for unique looks. Tommy is “absolutely a reaction” to the ubiquity of specialty store environments,” said Gary Sheinbaum, chief executive officer of Tommy Hilfiger USA. Knits will sell for $24 to $59, and denim, $79 to $129. Outerwear will start at $129 for men and $139 for women. The Tommy Hilfiger Group will begin selling Tommy in October in three freestanding Canadian stores — two in Toronto and one in Edmonton. The collection also will be introduced that month in dedicated areas of 14 existing Tommy Hilfiger stores in Canada. <wwd.com/business-news>

Hedgeye Retail’s Take:  More Canadian retailing taking center stage as brands and retailers look north for growth. 

Inditex Plans Australian and South African Expansion As Well As International E-Commerce - Inditex Group, Europe’s largest clothing retailer and owner of the Zara chain, plans to expand into Australia and South Africa next year as part of a campaign to enlarge its global footprint. The group opened 98 stores in 29 countries during the first quarter, bringing the total to more than 4,700 locations in 76 countries. Zara’s Australian debut would start with a few doors in key large cities in the first year, an Inditex spokesman said. Zara will launch online sales on Sept. 2 in France, Germany, the U.K., Spain, Italy and Portugal. <wwd.com/retail-news>

Hedgeye Retail’s Take:  Finally some ecommerce in key European markets, with the U.S notably absent from the list.  In fairness, leveraging infrastructure across Europe makes a ton of sense.  On the flip side, Zara remains on a very short list of domestic retailers with just an online “lookbook” to satisfy those consumers unwilling or unable to visit a physical store. 

JCP Launches Aggressive BTS Campaign Driven by Social Media - J.C. Penney Co Inc. is heading back to school with an aggressive campaign largely built around digital and social media and mobile marketing. For the first time, the department store chain will use haul videos in which consumers assess product, and mobile iAds, signaling Penney’s determination to capture a bigger share of the youth market. This year, on a monthly basis, Penney’s has been lagging its prime competitors, Macy’s and Kohl’s.  <wwd.com/retail-news>

Hedgeye Retail’s Take:  Efforts to reach the youth demo should be noted, but we wonder how much of these efforts will appear “natural” to the consumer vs. contrived.  If you haven’t seen a haul video yet, check out juicystar07 on YouTube. 

H&M Reports Strong June Sales - After a dissapointing April comp of -6% and then a weak May where the 2 year trend fell to levels last seen in August 2009 when its stores ran out of inventory, H&M finally got it right this June.  An impressive 9% comp was enough to raise its 2 year trend to +2%.  Sales which grew 20% for the month appear to have gotten slightly weaker in the last week of the month since management commented on June sales through the 22 were up 22% on its mid year report . <www.hm.com/us/press>

Hedgeye Retail’s Take:  While it’s too early to call a turn here based on one month’s data, H&M is one of the few retailers with easy compares on the topline through the remainder of the year.   

R3: Saucony, Fugu, Nike and Ben & Jerry’s - H M June 2010

Piperlime Sponsors Next Project Runway - Piperlime.com is headed to the small screen. The e-tailer, a subsidiary of Gap Inc., announced today it will sponsor season eight of Lifetime Television’s “Project Runway,” which debuts July 29. As one of the final prizes, the season’s winner will sell an exclusive collection on Piperlime.com. Also part of the collaboration, the show’s accessories wall — which designers use to complete their weekly looks — will now feature products from the site and has been repainted in Piperlime’s signature green. On the e-commerce site, a shopable version of the wall will allow customers to buy the items they see on TV.  <wwd.com/footwear-news>

Hedgeye Retail’s Take:  Interesting to see GPS using TV for its fledgling Piperlime brand while shying away from the mass media with the core Gap.  We suspect this is in part to build the brand as Amazon/Zappos steps up as well as to take advantage of outsized ecommerce growth that is prevalent across most of retail.