September 13, 2010


It’s footwear Monday, with news ranging from China inflation to the development of a K Swiss collaboration.  Keep an eye on Car Shoe, which is likely to see some increased door penetration as Prada looks to growth engines ahead of a potential IPO. 




- After adding several new categories and innovations to the mix over the last 12-to-18-months (e.g. running, outerwear, accessories, etc.), management of Lululemon stated that it would be holding off adding more in the near-term. While this might suggest a departure from recent growth initiatives, the company did confirm plans to build its technical R&D capability including innovation specifically. Given the initial success of recent launches including the categorization that “our bag assortment is like our outerwear assortment – it’s evaporating,” perhaps its best the company focuses on capitalizing and building on early successes despite demand for further expansion.


- Add K-Swiss to the list of “tennis” shoe makers looking to reinvigorate the brand via collaboration.  This time K-Swiss teams up with American brand, Billy Reid, to launch three men’s only styles.  This is certainly not going to help regain shelf space at Foot Locker, but it ‘s a help in building some fashion credibility as the brand continues to figure out what it really wants to be.


- As online private sale operator Gilt continues to expand, this time it’s heading down an editorial path.  The company launched Gilt MANual, a site that almost aims to be a competitor to GQ.  The content aims to be both editorial and instructional, aimed exclusively at the male who is interested in style.  We’re not sure how this sells close-outs, but it certainly helps to differentiate the site in what has become a competitive field.





Macy's Find Your Magic Campaign - Dubbed “Find Your Magic,” Macy’s Inc.’s new marketing and merchandising campaign launches this week with a team of celebrity designers including Donald Trump, Martha Stewart and Rachel Roy featured in a series of TV spots and online videos. The online videos, presented in a series at Macys.com/findyourmagic, feature the celebrity designers in amusing campaigns to dress up what appear to be everyday people in dull garb by taking them to a Macy’s store for a fashion makeover. <internetretailer.com>

Hedgeye Retail’s Take: New campaign, same faces. While national advertising is a big component of Macy’s centralization effort, we’re still not convinced The Donald is the key traffic driver the mall needs.


VF Licensed Sports Group Realigns Sales Organization - VF Licensed Sports Group said it will align the division's sales organization along key strategic channels. The changes are designed to enable LSG to provide a focused approach to assortment planning, inventory management, replenishment and marketing based on specific channel needs. <sportsonesource.com>

Hedgeye Retail’s Take: With the majority of VF’s efforts geared towards Majestic and its MLB license, this is likely an early indication of an increased focus to build out the company’s portfolio of licenses. In light of the NFL’s suggestion that it might fractionalize it current license structure, this could position VF to strengthen its stance as a current NFL apparel licensee.  


BBY and E-readers - Best Buy Co. Inc. seems to think avid readers are ready to make the switch from printed volumes to electronic readers. That’s suggested by the multichannel retailer’s decision to begin selling Amazon.com Inc.’s Kindle e-reader, as well as a host of other e-readers, this fall. Best Buy has slowly been building its selection of e-readers. In April the multichannel retailer became the first retailer other than Barnes & Noble Inc. to sell the bookseller’s Nook e-reader in its stores and online at BestBuy.com. Best Buy also sells both Sony Electronics Inc.’s Reader and Apple Inc.’s iPad, the tablet computer that can be used to read digital books. <internetretailer.com>

Hedgeye Retail’s Take: Let’s be honest, without a real ‘hot ticket’ tech product so far this holiday season, this move is likely due more to a lack of alternative product than anything else.


Prada Takes Full Control of Footwear and Accessories Brand Car Shoe - “We believe the brand can be developed internationally,” said Stefano Cantino, group communications director, pointing to a retail expansion that will add “impulse and identity” to Car Shoe. There are 250 points of sale that carry the brand globally. Cantino declined to provide sales figures for Car Shoe. Prada first bought a 51% stake in the label from founder Antonio Moretti in spring 2001. The Car Shoe trademark was first registered in the early Sixties and is known for its pebble-soled driving shoes, which originally appealed to professional race-car drivers and later became fashion accessories. <wwd.com/business-news>

Hedgeye Retail’s Take: A rebranding initiative may be in store here for Car Shoe. Linking Prada to the Car Shoe brand can only help here.


Chinese Retailers Pass on Product Costs to Consumers as Shoe Prices Surge - China’s footwear prices continue to increase due to the surging costs of finished leather and labor costs, said the China Leather Industry Association (CLIA). A recent survey of department stores in the country’s largest cities found that average prices of branded women's shoes had gone up from around RMB$90 per pair to nearer RMB$105. Footwear manufacturers explained that it was due to the 10-15% increase in finished leather as well as the 10% rise in labor costs. The new autumn footwear products in current Chinese markets saw about a 10% increase in prices. For example, a pair of branded lady’s shoes rose to RMB700 yuan from RMB600. <fashionnetasia.com>

Hedgeye Retail’s Take: Despite a step up in promotional activity headed into BTS, we’ve seen a prices stabilize of late domestically. Perhaps the pricing power we’re seeing in China is a leading


Back-To-School Sales Strong in Footwear - Back-to-school sales are marching forward for many retailers, thanks, in part, to strong early boot sales. “It has been better than expected,” said Fred Kraft, VP and DMM for shoes at Bon-Ton Stores Inc. “It’s definitely up from last year.” Hot brands at Bon-Ton this year include Rampage, Rocket Dog and Madden Girl, while ankle boots and shooties are the most popular styles. To drive traffic, the retailer has used direct mail, as well as broadsheet inserts in the Sunday newspapers. Independent retailers, too, are feeling upbeat about the season. One independent retailer added that she got an early delivery of snow boots, which are “flying off the shelves.” The cool air has been driving traffic into the store because people are thinking about buying boots and getting ready for the season. Another good sign for this year’s b-t-s season is the absence of promotional activity. Shoe Biz, Shoofly and Next all said they offered no discounts to get customers into stores. Athletic retailers are also reporting solid results this season. <wwd.com/footwear-news>

Hedgeye Retail’s Take: While colder weather of late has driven recent outerwear and boot outperformance, this commentary confirms the bullish trends we’ve seen in athletic footwear on a trailing 3-week basis for five straight weeks now. More notable is the commentary on promotional activity which appears to be stabilizing.


E-mail Click-Through Rates in Q2 Drop to Lowest Level on Record - E-mail click-through rates dropped to 5.3% during Q2 10, the lowest rate recorded since 2006 when marketing services firm Epsilon and the Email Experience Council began tracking e-mail with their Email Trends and Benchmarks quarterly report. Click-through rates peaked higher than 7% several times throughout 2006 and 2007 but have averaged 5.9% since Q2 2008, according to the report. Meanwhile, the average volume per Epsilon client tracked in the benchmark report increased 10.5% year over year and open rates remained steady at 22.1%. <internetretailer.com>

Hedgeye Retail’s Take: Not surprising given a combination of better spam filters and more productive targeted marketing (e.g. mobile, banner, etc.).


New Online Retail Concept Ahalife Launches - Ahalife has the potential to remake retail much as Vente-Privee did. It is an online design lifestyle store that features one “globally curated” product every 24 hours. The items can be chosen by a celebrity or anyone in the world who is a member of the site. Products could come from the worlds of home design, fashion, food, art, consumer electronics or charity. Prices will start at $75 and go up into the thousands. Each member can submit an idea or a photo of an item to sell. If Ahalife likes the idea, its nine-person team will hunt it down or produce it. The item will be produced according to demand or shipped immediately if it’s something available in limited quantity. Some of the upcoming curators and designers include Diane von Furstenberg, Iris Apfel, Tim Gunn, blogger James Andrew of What Is James Wearing, Alexis Bittar and Rachel Roy. <wwd.com/retail-news>

Hedgeye Retail’s Take: The latest iteration of a limited luxury product distribution site sprinkled with authoritative recommendations by some of the industry’s highest profile designers a la Facebook’s “Like It” feature has the makings for the latest must have it fashion source.  


Most Expensive Retail Locations - As the global economy crawls its way back to solid footing, retail markets are seeing the effects. Most of the high-end premises in Europe and Asia saw lease prices improve between spring ’09 and 2010, with the exception of Milan and Rome, which dipped slightly, mostly likely due to the country’s financial uncertainty. In the U.S., rates continued to fall, opening up space for domestic and international retailers to grow their store counts: Paris, Champs-Elysees $1,255.90; New York, Fifth Avenue $1,250; Hong Kong, Russell Street Causeway Bay $1,205.46; London, Bond Street $1,175.24; Milan, Via Montenapoleone $929.37. <wwd.com/footwear-news>

Hedgeye Retail’s Take: We’re not surprised as we have noted in the past that capacity in retail real estate has not contracted to levels commensurate with demand.


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