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July 30, 2010


There was some noise in the market yesterday suggesting that basketball footwear trends are getting worse and this is impacting trends at Foot Locker.  The NPD data below shows quite the opposite trend.  One additional point on the basketball category, which in general has been a laggard relative to performance running.  The real opportunity for the category is building and will be a Fall event.   The small, but relevant, launch of UA’s shoe along with whatever Nike is working on to juice sales of the “Big Three” in Miami is more excitement in the category than we’ve seen in years.  Seasonally, hoops is also more 2H than 1H weighted.

R3: Hoop Trends - R3 7 30 10 2


R3: Hoop Trends - R3 7 30 10 1


  • Due to recent increases in cotton prices, Carter’s now expects finished good costs to rise by 10% for the company’s spring ’11 deliveries.  Selective price increases will be taken to offset the inflationary pressures.   On the footwear side of things, Steve Madden suggested that they are expecting a 5% increase in costs.
  • Despite tough comparisons with last year’s record boot season, Steve Madden remains bullish on prospects for growth in the category this year.  The company noted that early reads drawn from Nordstrom’s Anniversary Sale, Macy’s pre-sale, and their own “Sneak Peak” all indicate boots should have another solid season.   Perhaps what is most interesting here is that the bullish trends are coming at a time when the weather has been least conducive to facilitating sales of the product category.
  • Keep an eye on Hermes China luxury sub-brand, Shang Xia, which launches in September.  The brand is 100% locally designed, sourced, and managed locally in China.  While specifics are still scant regarding the line, speculation suggests it will launch with housewares, accessories, and furniture.  While the first store is rumored to be in Shanghai, there may be plans to eventually open a store in Paris, presumably to add authenticity to the “luxury” status of the start-up brand.



When a Box Isn’t Just a Box - All eyes will be on the West Coast next week, where Bloomingdale’s and Nike unveil prototypes in Santa Monica Place in California. In the case of Bloomingdale’s, it’s a beachy version of the department store’s contemporary-driven SoHo unit in Manhattan, which the company hopes to replicate elsewhere. At Nike, “there’s a new mission on retail stores now,” said a source. “They want to take control of the environment where their products are sold.” Jeanne Jackson, former Banana Republic president and former chief executive officer of walmart.com and Gap Inc. Direct, was a Nike Inc. board member but last year shifted into the role of president of direct-to-consumer and has been leading the retail effort. The two-story, 20,000-square-foot Nike store will provide sports teams customized products in 115 styles, market-tailored product offerings, community resources and the introduction of Nike+ Run Club, and is Nike’s first multicategory opening in the U.S. since the last one in 1999 in Denver, according to Nike media relations manager Jacie Prieto. “We have been approached in the past six months by maybe a half-dozen major brands to do new prototype work,” said Tom Bowen, a principal of Callison, the architecture and design firm. There is a surge among strong retailers looking at ways to position themselves ahead of the competition through new prototypes. We also see much more focus on making prototypes internationally adaptable. <www.wwd.com>

Hedgeye Retail’s Take:  With limited square footage growth in the future for many retailers, the importance of innovative and differentiated concepts is reaching new heights.  Fortunately for the consumer, it appears we have turned the corner to some degree on investment in innovation, something that was surely missed over the past 2 years.

Sears Lures Youth With Music - Now + Here, a new department that launched Thursday at Sears stores nationwide, aims to seduce that most fickle of audiences — juniors and young men. “This is part of our overall apparel transformation,” said Melanie Henson, chief marketing officer of Sears Holdings Corp. The retailer has begun to upgrade its apparel business under John Goodman, executive vice president of apparel and home, who joined Sears about nine months ago. The new Now + Here areas, located at the mall entrances of Sears units, marries two of the demographic’s main pursuits — fashion and music. Sears partnered with Live Nation, the largest producer of live concerts in the world, to give Now + Here an authentic music component. The retailer is tapping into fall’s hot trends with brands such as Battle Gear, Girly Grunge, Biker Chic and Sweet Dreams. <www.wwd.com>

Hedgeye Retail’s Take:  Sounds like a mini Hot Topic shop-in-shop on the way into the store and we all know what the iPod has done to the music industry.  Clearly this effort is aimed at getting a younger male to cross the Sears lease line, but we’re not convinced.

Wage Hikes in Bangladesh Move Closer to Reality - Following months of violent protests in Bangladesh’s garment industry, Labor Minister Khandaker Mosharraf Hossain said Thursday that the government would nearly double the wage rate for the country’s three million garment workers in November. The move came under intense pressure from workers, workers’ rights groups and the U.S. and European Union at a time when retailers and brands are increasing apparel production there to offset rising costs in China. The garment industry, which exported $12.5 billion for the 12 months through June, accounts for nearly 80 percent of Bangladesh’s annual exports. <www.wwd.com>

Hedgeye Retail’s Take:  As expected, another reason for apparel inflation.

Location-based Mobile Advertising is Here - Google is stepping into location-based advertising with the introduction of mobile banner add that show users nearby services. The unit is an offshoot of AdWords' location extensions. It allows advertisers to attach their phone numbers and business location on an expandable map. The new ad format will run on sites and applications that are part of the Google Display Network. Users of smartphones like iPhone and Android will see a text call to action and small thumbnail graphic. Tapping on the ad expands it to show a Google Map with the business plotted and number displayed. Google will only charge advertisers when users tap to call the business or visit the advertiser's mobile site. <www.brandweek.com>

Hedgeye Retail’s Take:  At some point there has got to be some consumer backlash from all this technology tracking a consumer’s every move.  In the meantime, this adds yet another layer of efficiency to the marketing process for both the advertiser and the ad server.

Opposition to the Delahunt Bill - As some members of Congress gathered today to promote the recently introduced Delahunt bill to mandate sales tax collection by Internet retailers, others pushed a new House resolution by Rep. Paul Hodes (D, NH) that opposes it. The Hodes resolution, which has bipartisan support from four representatives, runs counter to House Rule 5660, The Main Street Fairness Act, which was introduced on July 1 by Rep. William Delahunt (D, MA) and calls for Congress to support the Streamlined Sales and Use Tax Agreement and authorize states that abide by that agreement to force Internet and catalog retailers to collect and remit sales from customers in those states. In effect, the Delahunt bill seeks to overturn the status quo that says retailers don’t have to collect sales tax in states where they don’t have a physical presence, such as stores, offices or distribution centers. <www.internetretailer.com>

Hedgeye Retail’s Take: No one said this was going to be an easy battle, but with States looking to fill their budget gaps, it’s an easier argument than it has ever been over the past 20 years.

AEO Online Snafu  - American Eagle Outfitters three youth-focused apparel brands—American Eagle Outfitters, Aerie and 77kids—were unable to sell online for three days last week. The retailer’s brands, all of which are featured online through the main web site AE.com, were down from approximately 5 p.m. Eastern time on Monday, July 19, until approximately 6 p.m. on Thursday, July 22, according to Gomez, which monitors the performance of web sites as a division of Compuware Corp. American Eagle, No. 51 in the Internet Retailer Top 500 Guide, posted a notice to site visitors during the downtime: “We’re making updates to our sites. Free shipping on us when we’re back, through Monday, July 26.”

Hedgeye Retail’s Take:  Sounds like something went terribly wrong for the site to be down that long.  While we are pro ecommerce, this incident clearly highlights the risk of running in theory a “single” store platform.  Or, maybe we’re reading into this too much and AEO was just stealing a play from the Apple playbook in taking down the site to generate buzz.

Rawlings Goes Football - The National Football League has signed Jarden's brand Rawlings to a multi-year deal as exclusive licensee for select tailgating products. The Rawlings line will include tent canopies, grills and chairs. The deal also includes an extension deal, beginning in 2011, to be managed by Jarden Sports Licensing. The agreement expands the partnership with the NFL across a number of Jarden's brands, including Coleman, Bicycle and Shakespeare. Non-exclusive tailgate products will include coolers, stadium seats and footballs—all to be merchandised under the TLG8 brand umbrella and its "Real Brands for Real Fans" tagline. The entire collection will launch in April 2011. <www.licensemag.com>

Hedgeye Retail’s Take:  We can’t think of a better portfolio of brands than Jarden’s for this partnership.  Unfortunately the fan will have to wait an entire NFL season before the entire collection launches for the 2011 season.