R3: WMT, AMZN, Brooks, PSS, Choo IPO

R3: REQUIRED RETAIL READING

September 2, 2010

Brooks stepping up web presence and Aldo goes exclusive with AmaZappos, at the same time Mastercard reports smallest monthly growth in ecommerce this year, and PSS echoing WMT’s concern that consumers are incrementally moving from credit toward cash.

RESEARCH ANECDOTES

- In a sign that the lower end American consumer continues to have credit revoked in large numbers, Collective Brands highlighted that it’s seeing a ‘slight increase’ in the proportion of cash sales versus credit among its sample of more economically challenged customers.

 

- With a more positive start to BTS than many of their retail counterparts, Genesco noted that comps were up +8% in August compared to up +3% in Q2. More notable was the driver as the company admitted to taking a more promotional cadence in order to drive traffic, which continues to be more robust in outlet stores than malls.    

 

- After early success at their Union Square location, Trader Joe’s is now coming to New York’s West Side with its new location slated at 72nd & Broadway. What most people don’t realize is just how large the chain is – with 345 locations and $8Bn in annual sales, it has a broader reach than Whole Foods at 280 locations and on a similar ~$8Bn sales base. Expected to open in late September, this is a classic example of a private retailer opportunistically opening stores because it can, not because it should.

OUR TAKE ON OVERNIGHT NEWS 

Jimmy Choo Owner Moots IPO - Investment banks Goldman Sachs and Morgan Stanley are the front runners to advise the owner of luxury footwear brand Jimmy Choo on its strategic review, which includes a possible initial public offering and a sale expected to fetch up to £500m. <drapersonline.com>

Hedgeye Retail’s Take: Following a collaboration with H&M this time last year, the designer’s looking to leverage momentum with the masses.  Not sure if this is really really good, or really really bad. But it’s definitely binary.

MasterCard Sees August as the Smallest Month of E-Commerce Growth in 2010 - E-commerce spending increased 7.2% year over year in August, slipping back into single-digit growth, MasterCard Advisors reported today in its monthly SpendingPulse report. The August growth in e-commerce is the smallest year-over-year increase in 2010, MasterCard says. <internetretailer.com>

Hedgeye Retail’s Take: Still a key growth channel for retailers, the sequential deceleration is notable indeed – particularly with an average growth rate of 20%+ over the last 4-years. This can be partially explained away by a step-up in tax-free holidays in the month of August. But that can’t account for such a big decline.

Sears, Kmart to Debut Home Line - Casa Cristina, a new soft home collection inspired by Hispanic journalist and talk show host Cristina Saralegui, will hit Sears and Kmart stores this fall. Meanwhile, Kmart recently rolled out Stylesip, a teen girl fashion social hub, featuring the retailer's exclusive licensed lines and more. The Casa Cristina range includes comforter sets, quilted coverlets and euro shams, microfiber sheets, decorative pillows, shower curtains, embellished towel sets, cotton bath rugs and coordinating accessories. Five patterns will be offered based on Saralegui's individual style.  <licensemag.com>

Hedgeye Retail’s Take:  More attempts to mimic the “exclusive” merchandising strategies of competitors including Kohl’s and Target.  Also note that Liz Claiborne New York debuted its Home collection on QVC this past Monday. We’re pretty sure Casa Cristina is not the answer to stemming SHLD’s market share losses.

 

Wal-Mart replaces Sherwin-Williams Dutch Boy With Akzo Nobel's Glidden Brand - Akzo Nobel NV will become the sole paint supplier to Wal-Mart Stores Inc. in the U.S., with its Glidden brand replacing Sherwin-Williams Co.’s Dutch Boy on the shelves of the world’s biggest retailer. The “exclusive strategic alliance” means Glidden will be introduced to the 3,500 Wal-Mart stores across the U.S. early next year. <bloomberg.com>

Hedgeye Retail’s Take: Tough loss for Sherwin-Williams at the world’s largest retailer propels Akzo into the #2 position in the U.S. after having secured Home Depot as a customer in December.

 

AMZN Sees Large Expansion in China - The world’s biggest online retailer—Amazon.com Inc.—has big expansion plans in mind for China, now the globe’s second largest consumer economy. Some estimate that Amazon already generates $750 mm in annual web sales in China, a figure that could increase 33.3% to $1 billion as soon as next year. Based on $1 billion in annual sales, Internet Retailer calculates that China would have accounted for 8.6% of Amazon’s total international sales of $11.68 billion in 2009. A key indicator of Amazon’s emerging business model in China is the online retailer’s established base of customers—about 5 mm—and its growing appetite for leasing more fulfillment space near some of the country’s largest cities: Beijing, Suzhou, Guangzhou and Chengdu. In China, Amazon already has 530,000 square feet of space, including a 180,000-square-foot distribution center in Beijing. Amazon’s China strategy is straightforward: locate distribution centers and its supply chain near the major metropolitan areas and offer Chinese shoppers plenty of free or reduced rate shipping. <internetretailer.com>

Hedgeye Retail’s Take: Working off a much larger base than most in retail with ~9% of total sales coming from China, there’s still plenty of runway barring any changes to China’s regulatory posture towards online-based businesses.

Brooks Steps Up Web Presence - Next week, the Bothell, Wash.-based running company, a division of Omaha, Neb.-based Berkshire Hathaway, will roll out a completely refreshed website and e-commerce site designed to support its “Run Happy” mission statement. The goal, according to the company, is to not only upgrade its current merchandising capabilities but overhaul its search feature to make finding product easier, dramatically increase the rich media content, includng videos and reviews, and more fully integrate the brand’s own site with its social media ventures. <wwd.com/footwear-news>

Hedgeye Retail’s Take: The company already has one of the easier to use and functional sites, particularly for a private brand, so tying in the social media component and dressing it up a bit should be well received by online shoppers. Unfortunately too many companies approach it in reverse with fashion often trumping form.

Aldo Partner With Zappos - The Montreal-based fashion footwear company announced yesterday it had selected Henderson, Nev.-based Zappos.com to be the exclusive online carrier of the brand. Aldo footwear and handbags are currently available at Zappos.com. <wwd.com/footwear-news>

Hedgeye Retail’s Take: This is really noteworthy. Such an established brand picking Zappos as the exclusive on-line destination is certainly a win for Amazon/Zappos.

Umbro Extends Sponsorship of English Football Association - Umbro, owned by Nike Inc., has extended its sponsorship deal with the English Football Association until 2018. <sportsonesource.com>

Hedgeye Retail’s Take:  No surprise here. This is a low dollar number in the grand scheme of endorsements. Though interesting that it comes about a day after Adidas locked up MLS. 

Uniqlo Comps Decline From A Hot and Steamy Summer - Fast Retailing Co. Ltd. said Thursday Uniqlo’s same-store sales shed 9.3% for the month of August. The retailer blamed Japan’s sweltering temperatures for the decline. Uniqlo’s same-store sales refer exclusively to the business in Japan. Uniqlo's stores had fall items in the store but it was so hot that not many people want to buy. The fast-fashion giant’s comps have been very choppy this year, dropping by as much as 16.4% in March. Last month they grew 0.4%. <wwd.com/business-news>

Hedgeye Retail’s Take:  After a strong run, driven primarily by strong product intros including Heatech and J+, it appears that UNIQLO is giving its customer less of a reason to shop.  It needs something new. Fast.

 

Equal Employment Files Discrimination Case Against A&F - The U.S. Equal Employment Opportunity Commission said Wednesday it filed a workplace discrimination lawsuit against Abercrombie & Fitch Co. in federal court in California alleging the retailer refused to hire a Muslim job applicant because she was wearing a hijab, a religious head scarf. This is the second lawsuit filed by the EEOC against Abercrombie for “failing to accommodate a Muslim teenager’s need to wear a head scarf.” The first was filed in U.S. District Court for the Northern District of Oklahoma in September 2009.  <wwd.com/business-news>

Hedgeye Retail’s Take:  More of the same. Anyone that knows the story and walks the stores probably ‘knows’ that A&F is anything but an equal opportunity employer.