Sports Apparel Data: Pre Sales Day Scoop

Sports Apparel Data: Pre Sales Day Scoop


While we don’t read too deep into a single week’s sales as reported by POS data vendors, there’s a couple of items worth calling out for you to bake into your process for handling the sales-day onslaught tomorrow.


  • The punchline is that the back half of the month stabilized after a steep drop at the start of August.  
  • On the whole, the month does not appear to be meaningfully worse (or better) than July. But keep in mind that this sample is drawn from the sporting goods category – which consistently outpaced retail overall for the whole year.
  • Channel trends are consistent with what we’ve seen in the past, with the sporting goods channel proper leading the numbers. But as it relates to a read-through for the rest of retail, it’s worth noting that the discount and mass channels are getting ‘less horrible’ on the margin. That’s probably a decent sign for inventory.
  • There is fair consistency amongst regions, with the Middle Atlantic as the biggest negative callout. The Pacific region had a tough finish to the month, but that’s a wash as it also avoided the severe dropoff the rest of the country saw in week 2.

Sports Apparel Data: Pre Sales Day Scoop - 1


Sports Apparel Data: Pre Sales Day Scoop - 2


Sports Apparel Data: Pre Sales Day Scoop - 3


Sports Apparel Data: Pre Sales Day Scoop - 4


Sports Apparel Data: Pre Sales Day Scoop - 5




August was up a disappointing (at least for us) 40% in Macau.  With slowing growth, market share may again be a more important metric. Not good for Wynn.



Frankly, I’m disappointed in Macau’s August performance, not because +40% in and of itself is disappointing, but that mid-month trends indicated a bigger growth rate.  We should be getting our proprietary detail by property shortly so we do not yet know whether the second half slowdown was related to hold, volume, or both.  We are pretty sure that Wynn’s market share will be low with both hold and volume to blame.


The following chart shows monthly YoY change in total Macau gaming revenues.  We’ve also included a line that shows the monthly VIP hold percent since hold variances can drive big moves in revenues.




So what should we expect going forward?  On the chart, we’ve put in our estimates for the remaining months of the year and it is clear that we expect growth to slow.  Growth will still be solid though.  However, we may have to revise our estimates if the 2nd half of August slowdown was volume related.  That would be disconcerting.  As it stands now, we are projecting recent revenue levels will continue, adjusted for seasonality. 


Some may be surprised by our projection of 35% September growth since the month faces a +54% comparison last year.  However, September 2008 revenues were ridiculously low at HK$6.9 billion with a low hold percentage.  November should be the slowest growing month until we reach 2011, which will present its own challenges.

EARLY LOOK: Follow the Trail

This note was originally published at 8am this morning, September 1, 2010. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.




“Do not go where the path may lead, go instead where there is not a path and leave a trail.”
-Ralph Waldo Emerson

A college hockey coach sent me a nice recruiting letter about fifteen years ago with the quote above handwritten on it.  Although I ended up not going to the college he coached at, he did catch my attention with the quote.  At the time, as a rangy defenseman from a small town in Alberta, I’m pretty sure I didn’t know who Emerson was and I had certainly never seen the quote before.  As a result, I was quite moved by the concept and idea embedded within the quote.
Emerson was known as a passionate individualist and a “prescient critic of the countervailing pressures of society”.  He spread his gospel via dozens of essays and many hundreds of public lectures across the United States.  According to Wikipedia, Ralph Waldo Emerson was an American philosopher, lecturer, essayist, and poet.  Were he alive today, I think he may have been a Hedgeye.
In the short history of our firm, we’ve been accused of many things.  On the political front, we’ve been accused of being both Republican and Democrat.   On the market front, we’ve been accused of being bullish and bearish, and sometimes both at the same time.  We’ve also been accused of being grumpy (well, mostly Keith before his coffee) and overly negative.  The bottom line is that we have opinions, which are sometimes offensive to people, but those opinions aren’t to make ourselves feel better.  They are based on data and analysis with the objective of producing high quality and accurate research.  We express that research with our opinions, and when the facts change, so too do our opinions.

Currently as we survey the global macro landscape, we see a number of markets making trails that both concern us and really inform our broader perspective.  This morning I want to highlight three of those: the yield curve, the Swiss Franc, and copper.

1. The Yield Curve - Yesterday in our morning call, our Financials Sector Head Josh Steiner noted that the yield curve was narrowing to a point where banks were going to potentially see an impact on their earnings.  Remember, banks borrow short and lend long, so as the yield curve narrows, so inherently do their margins. So it’s no surprise given this move in the yield curve that the financial sector ETF has been the worst performer of all the sector ETFs in the last three months (down 7.9%) and broken from both a Trend and Trade perspective.   

From a global macro perspective though, the yield curve narrowing is typically a leading indicator for slowing economic growth.  When we analyze the yield curve, we focus on two durations specifically - 10s and 2s. In the parlance of the nonfinancial world, that is 10-year treasuries and 2-year treasuries, or as we like to call it, The Piggy Banker Spread.  We've highlighted this point in the chart below, but the Piggy Banker Spread has narrowed dramatically through the course of the year from ~290 basis points at its peak to ~210 basis points now.  This narrowing provides further support for our view that global growth is going to slow as it is a real time indicator for which direction long term rates are going, and the answer seems to be lower.

As a side note, we read with interest quotes from Thirdpoint’s Dan Loeb's recent letter to his investors (Dan, if you get a minute, please email us a copy).  Dan's letter, from what we could tell, went off on the system being rigged and on government intervention generally.  Admittedly, this is a point we have been very vocal on and it does worry us as we analyze and try to infer research information from markets that are managed by the U.S. government because, to be frank, we don't trust the Fiat Fools in Washington.

Nonetheless, the yield curve is a trail that is leading us to slow growth. For now, we'll accept that for what it is.

2. Swiss Franc - We highlighted this point in a note to our subscribers yesterday and want to re-emphasize it today.  The Swiss Franc has had a massive move against the Euro in the last three weeks.  In fact, the Swiss Franc is up over 7% in the time period (that's a big move in currency land) and is now back at levels not seen since the May time frame when everyone and their mother was worried about sovereign debt issues.  Well, sovereign debt issues don't go away over night, or because of ECB interventions.

The rapid move in the Swiss Franc, in conjunction with widening of credit default swaps in Europe over the past few weeks, is signaling that we may be hearing and seeing more sovereign debt issues in Europe in the coming months.  The explicit buying of the Swiss Franc and selling of the Euro is a direct vote against the Euro, and an attempt by those institutions with large currency exposure in Europe to hedge or protect the relative value of those European assets.

3. Copper
- Dr. Copper over the past three months is up 9.9%, while its global commodity brother, Oil, is only up 1% on the same duration.  This isn't surprising since copper inventories globally, most specifically measured by the London Metals Exchange, are at nine month lows.  Moreover, based on normalized demand patterns and underinvestment over the past couple of years, we expect a global copper deficit next year for the first time in four years. Most importantly, this price divergence is a trail that is leading us to China. For the first time this year we are long China in the Hedgeye Virtual Portfolio via the etf, CAF.

Copper is verifying its trail this morning as it is up another 2.1%.  That is not necessarily a surprise given the Purchasing Managers Index report from China, which is an indicator of industrial activity.  This report saw a small increase sequentially going from 51.5 to 51.7.  While this is by no means massive, it does indicate stabilization.  In a country with 1.3 billion people growing at north of 10%, stabilization is perhaps all we need to be comfortable from a growth perspective.

Taken together these paths are leaving trails that we need to contemplate before our own portfolio trails.



EARLY LOOK: Follow the Trail - chart1



I'm not sure if Ralph Waldo Emerson ever traded a P&L, but I'm guessing if he did he’d have an investment notebook, and his quote inscribed on the inside:

"A hero is no braver than an ordinary man, but he is brave five minutes longer."

Sometime that's all we need in this interconnected global market place, five minutes.

Yours in risk management,

Daryl G. Jones

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%


Over the past three months we have heard a lot of rumors about restaurant companies going private, especially the ones that are underperforming.  I get the theory that restaurants can sometimes be operated more efficiently as a private company.  In some cases that might be true, but I don’t find it to be the case with Burger King.


Rumors of the company going private have the stock up $3, which makes some sense.  Coming into today, a $3.33 move higher would add one multiple point to the valuation of the company, putting the company more in line with the average of its QSR peers, trading at 7.8X NTM EV/EBITDA. 


That is about as good as it gets for BKC.  If TPG, Goldman and Bain Capital can get out of their positions at 8.0x EV/EBITDA, they will be very happy.  BKC has been underperforming and was trading at a discount valuation primarily because MCD had made life very difficult.  This is true for all of the direct competitors of MCD - WEN, JACK, BKC and TAST.  YUM has been less adversely affected due to its global geographic diversity.  CKE restaurants would have been included on that list but they went private.   


Look no further than EPS revision trends for the past six months, which shows all of MCD’s direct competitors seeing significant downward earnings revisions.  Additionally, all of these companies are trading at a significant discount to the overall QSR peer group.


As I said last week, I believe that MCD will post something close to a +7% same-store sales figure for the month of August (sales of Frappes and Smoothies accelerated in August from July).  Currently, MCD is taking a significant amount of incremental market share in the QSR space and some of this is coming directly from BKC.  As an aside, we are hearing rumors that MCD is going to do a national McRib promotion in November.  Talk about stealing the thunder away from “the King,” as ribs have been the standout driver for BKC this year.  McDonald’s is Burger King’s problem.  What will change under private ownership?


While I would not put it past TPG, Goldman and Bain to get a deal done, I don’t see it happening at a price higher than $20-$21.  I would use this liquidity event as an exit strategy if I owned the equity.  Bottom line, I don’t see a deal getting done.


BKC - GOING PRIVATE? - estimate revisions


BKC - GOING PRIVATE? - valuation tabel


Howard Penney

Managing Director


The Macau Metro Monitor, September 1st 2010




Macau’s casino gross gaming revenue reached MOP15.773 billion (~US$1.97 billion) in August, up 40% YoY.


In August, Macau hotel occupancy reached as high as 85% and room rates were up 15-20% YoY.  Industry experts believe a variety of festivals and events later this year including Mid-Autumn Festival and National Day of Golden Week may keep occupancy around 85%.  Meanwhile, there is a labor shortage in the hospitality industry as many hotels employees were put on extra shifts to meet the growing demand.


FIRST TRANSPORT HUB OPERATIONAL IN 2014 Intelligence Macau, Macau Daily Times

In 2014, Macau will open its first integrated transport hub comprising of bus stops, taxi, light rail stations, parking space and pedestrian system.  The hub will be constructed in front of the Jockey Club in Estrada Governador Albano de Oliveira, Taipa.  The SAR Government is planning to spend around MOP 900 million in order to create a “safe and convenient environment” for locals and tourists to change from one transport mode to another.  IM believes the hub's location would benefit Galaxy Macau.



HK and Macau residents can apply for a visa to Taiwan for free via the Internet starting today, the National Immigration Agency said.  Previously, HK passport holders could either apply for a Taiwan visa on the immigration agency's website and collect it at the airport before boarding, or obtain a 30-day visa on arrival for HK$75.  To be eligible for the visa, travellers must be Hong Kong- or Macau-born or have visited Taiwan before. The visa will be valid for 90 days, with a maximum stay of 30 days.



A spike in the number of Chinese tourists due to relaxed visa restrictions helped push up the total number of travelers to Japan in July by 39% YoY to a record 880,000.  There were 170,000 visitors from China--2.4 times more than the same month last year.

R3: JNY, Adidas, SKX, LIZ, URBN, Tommy Boy

R3: Required Retail Reading


We’re intrigued by JNY’s new footwear license. Smells like yet another one of those moves to add business opportunity (and liability) without adding any more capacity (design/sourcing/marketing). That’s not sustainable.




Opinion On Tommy Hilfiger's Latest Campaign - "How can you not hate these people?" my 20-year-old son asked after surveying "Meet the Hilfigers," the family stars of "The ultimate tailgate," Tommy Hilfiger's latest campaign. The photo he saw consists of 15 blonde-ish model types wearing an assortment of rugby shirts, pleated skirts, signet rings, pinstriped suits, orange pants, duck boots, cable-knit sweaters and camel-hair everything, all arrayed around a Jeep Grand Wagoneer. The shot has a slightly off-kilter look -- Mumsy might have had one too many Bloody's and cousin Max seemingly couldn't stop playing with his hair -- so perhaps it's meant to portray an old-money family on a messier, more recession-aware day. The multimedia, multi-generational fall campaign, directed by Trey Laird and beautifully photographed by Craig McDean, is not particularly original. When it comes to classic Anglo worship and the concept of kinfolk on a journey, Ralph Lauren, of course, got there earlier.  <>

Hedgeye Retail’s Take: I can’t outdo that description. No way, no how…! 


JNY Signs Footwear Designer - Jones Apparel Group Inc. has a new name in its designer stable: hot footwear designer Brian Atwood. The company has signed a license with Atwood to manufacture, market and distribute a contemporary brand named B Brian Atwood. The deal seeks to capitalize on the designer’s rising popularity by making his products obtainable by more consumers and brings another talent to the New York-based apparel conglomerate’s brand portfolio that over the last three years has expanded to include Stuart Weitzman, Robert Rodriguez and Rachel Roy. B Brian Atwood, which will be aimed at better department stores and upscale specialty retailers, is scheduled to break for fall 2011 with shoes, followed by jewelry and handbags the year after, and sportswear and sunglasses in subsequent seasons.  <>

Hedgeye Retail’s Take: Beware! The question to ask JNY is what organization they will build around this license. Will they use it to fill out existing excess design/sourcing capacity on their core business? Will they use this to mitigate any inefficiencies in the Stuart Weitzman business? Either way, in typical JNY fashion, my strong sense is that they won’t grow operating assets accordingly, and this will boost near term profitability in an unsustainable way. 


Adidas Collaborates with Maple Lake Ltd. to Maximize Merchandising - Adidas has signed an agreement with Maple Lake Ltd. to implement QuickAssortment, a comprehensive corporate merchandise and assortment planning application for adidas’ global retail operations. Adidas and Maple Lake are implementing QuickAssortment, an affordable, powerful assortment management approach that maximizes merchandising, localization, Open to Buy and more. It is being managed from adidas’ group headquarters in Herzogenaurach, Germany, and then rolled out to adidas retail operations centers.  <>  

Hedgeye Retail’s Take: Good, but not revolutionary. This has proven to be a successful platform for Lululemon, Intermix, Barney’s, Club Monaco, Cole Haan, Levi’s, and others. 


H&M Snags Hot European Label Lanvin - It looks like H&M has snared one of the hottest labels in Europe — Lanvin — for its next designer collaboration. According to market sources, the Swedish fast-fashion giant will unveil a project with Lanvin and its creative director, Alber Elbaz, within the next week. On Tuesday, H&M launched a viral video campaign on its Web site and YouTube to build curiosity about its annual holiday designer tie-up. <>

Hedgeye Retail’s Take: It’s really tough not to love H&M. They’ve grown to own the whole ‘buy trendy apparel at a low price then wash your car with it after 3 wears’ market. 


Skechers Signs Licensing Agreement for Luggage and Travel Accessories - Skechers USA, Inc. signed a licensing agreement with Olivet International for Skechers-branded luggage and travel accessories for men, women and kids.  <>

Hedgeye Retail’s Take: Last I checked, you had to have a relevant brand before you can license it out to a category as ‘out there’ as luggage. I don’t see the downside for SKX, but can’t find much upside, either. 


Juicy Couture Hard to Come By This Fall? - After experiencing lackluster results with the line, several major retailers have scaled back their Juicy Couture business. Some are carrying the higher-priced Bird by Juicy Couture. A spot check of stores revealed that Saks Fifth Avenue dropped the Juicy Couture line at the New York flagship for fall; Bloomingdale’s flagship cut way back on its Juicy department on the contemporary floor; Nordstrom passed on the apparel line for fall; Bergdorf Goodman no longer carries the line, and Neiman Marcus has dropped the line in several stores, such as White Plains, N.Y. and Beverly Hills. For years a fixture in contemporary departments, Juicy Couture sportswear had suffered from overexposure, quality and fit problems. In April, Juicy tapped Erin Fetherston as guest designer and creative consultant, beginning with holiday 2010 and running through 2011. The company continues to open 10 to 20 retail doors a year, and will take its e-commerce site in-house Sept. 15, which is expected to become its largest door.  <>

Hedgeye Retail’s Take: This is not new to anyone following the LIZ story. But the characterization above is rather accurate. Textbook retail mismanagement. 


URBN Showcases What its Shoppers Like - What products most please consumers who shop with apparel and home accessories retailer Urban Outfitters Inc.? Now it is easier to find out because the retailer’s web site allows consumers to sort SKUs based on what its Facebook followers have clicked that they Like. The retailer has put the Facebook Like button integration at the top of the site. The retailer, with more than 313,000 followers on the social networking site, uses its Facebook page to offer Facebook follower discounts, such as 15% off orders of at least $75, highlight merchandise, and share tips on clothing care. <>

Hedgeye Retail’s Take: What’s most interesting is not what URBN is doing (which makes total sense, by the way), but how easy it is for a company to leverage technology and implement these ideas. We’re not talking a massive capex plan over 2-years to get this done. But rather a couple smart Millenials who earn sub-$100k/year, an internet connection, and above average knowledge of social media tools. And yet there are many companies that will STILL be so late to the party. 




























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