R3: Adi, Ebay, WMT, Wedges, & India


September 21, 2010


E-commerce continues to fill the headlines with the launch of Marcjacobs.com and a robust holiday outlook for online sales overall.  At the same time, keep an eye on WMT’s efforts which link the retailer with FedEx to offer greater convenience on delivery options.





- Blog activity and increased speculation continues to circle around an apparent shortage of Louis Vuitton monogram bags.  Supposedly demand picked up, leaving the iconic bags in short supply on a worldwide basis over the past month.  While most stories point to demand being better, there is also speculation that supply have been cut too far.  Given the handmade nature of the bags, there is little hope either way that production is ramped up meaningfully over the short-term. 


- On the heels of its first concept store launch in Santa Monica in August, Nike’s second offering has come to Roosevelt Field in Long Island perhaps best known for shutting down last year in conjunction with a Justin Bieber appearance. The 14,000 sq. ft. store’s key feature is Nike’s NIKEiD technology complete with four Mac computers in the middle of the store in what is becoming the democratization of what has historically been an exclusive by appointment only service.


- Driven by the loss of $250Bn a year in lost revenues and 750,000 jobs annually from counterfeit product, Congress is making an effort to combat counterfeit merchandise sold online by rouge web sites through a bill introduced Monday.  While this won't move the needle anytime soon, if ever, it’s a step in the right direction that could eventually harness more sales for luxury brands like Ralph, Coach, Gucci, LVMH, etc.





Adidas Sees 2011 Growth on China Rebound, Russian Demand - Adidas AG , the world’s second- largest sporting-goods maker, will increase sales and profit in 2011 as China rebounds and Russia becomes the company’s top European market,CEO Herbert Hainer said . Sales of new products such as Reebok ZigTech trainers will also help boost sales next year, Hainer said in an interview yesterday at Adidas’s headquarters in Herzogenaurach, Germany. That will help compensate for the lack of a sporting event the size of this year’s World Cup. Hainer, referring to both revenue and earnings, claimed “I don’t see anything, honestly, that should hinder us from growing in 2011 and the years ahead.” The company’s biggest challenge next year will be to secure sufficient manufacturing capacity to accommodate growth, Hainer said. He’s increasing production sites in Laos, Vietnam and Cambodia, adding to those in China. <bloomberg.com>

Hedgeye Retail’s Take: It won’t be easy by any means, but comping 2010 can be done. Keep in mind that China and Emerging European markets now account for only ~20% of Adidas’ revs and the progression of the brand’s ZigTech line has been impressively well received. Anecdotally, in speaking with management at Finish Line, the two most anticipated footwear styles for the 2H are UA’s basketball shoe and the Zig (Reebok) basketball product.


Walmart.com Tests Free Shipping to FedEx Locations - Retailer’s twist on its Site to Store service targets consumers in Boston and Los Angeles. Walmart.com is offering free delivery of online orders to FedEx Corp. locations in Los Angeles and Boston, where Wal-mart Stores Inc. operates few stores. It’s a variant of Walmart.com’s Site to Store service that lets shoppers buy online and pick up in a nearby Wal-Mart store. The new service lets customers in the two test cities pick up orders at selected FedEx Office facilities. <internetretailer.com>

Hedgeye Retail’s Take: This strategy might speak more to reviving Kinko’s than anything else.  The ability to leverage both its own stores in addition to Fedex Office locations adds a level of convenience that no pure play online retailer can touch. 


Ebay Launches Look Book - EBay launched a look book Monday that takes its content from consumers on the streets. Consumers can upload photos of themselves in their favorite fall styles onto the eBay Fashion LookBook, tag three of the items they’re wearing to explain the style and label, and then eBay links the items to similar looks live on eBay Fashion for purchase. EBay expects thousands of submissions and says it’s not necessary that consumers wear items purchased from or up for sale on eBay to submit a photo. <wwd.com/retail-news>

Hedgeye Retail’s Take: While some pop culture magazines include features like this whereby celebrity outfits are translated into affordable look-a-like options, this concept takes it to the next step highlighting product for purchase. Depending on participation, retailers and designers alike are likely to frequent the Look Book as a source of inspiration.


Marc Jacobs E-Commerce Launches - The much-anticipated e-commerce site for Marc Jacobs is finally launching — at press time, it was set to go up Monday night — and, like the brand, it will be playful and unique. Most unusually, the site mixes illustration with photography and video. Illustrations of actual sales people dressed in Marc Jacobs clothes appear on the site, and their outfits and identities will change over time. Shoppers can click on illustrated items to buy. The home­page shows an illustration of a store entrance with actual runway video from both of the brand’s collections playing in the windows. <wwd.com/retail-news>

Hedgeye Retail’s Take: The use of multi-media to sell fashion product makes a ton of sense, but it’s tough to execute which is why we haven’t seen more of it. Since it’s often difficult to gauge the fit and look from stills, we expect other luxury designers to follow suit in adding multimedia content to sites if Jacobs’ launch is a success.

As a point of reference, these are the top ten most followed fashion labels on twitter that will likely be following Jacobs launch closely:

1. Lacoste: @lacoste, 204,061 followers
2. Christian Siriano: @csiriano, 185,458 followers
3. DKNY: @dkny, 178,798 followers
4. Victoria Beckham: @vbfashionweek, 163,078 followers
5. Diane von Furstenberg: @insidedvf, 107,028 followers
6. Nicole Miller: @nicolemillernyc, 89,954 followers
7. Betsey Johnson: @xobetseyjohnson, 51,977 followers
8. Marc Jacobs: @marcjacobsint, 42,749 followers
9. Tory Burch: @toryburch, 36,823 followers
10. Jeremy Scott: @itsjeremyscott, 36,568 followers


Happy Online Holidays - Direct-to-consumer holiday sales will rise 15% according to consulting and accounting firm Deloitte. But total retail sales will increase only 2%. The reason non-store shopping continues to rise is its convenience. And since consumers are shopping online, as well as on their mobile phones, there’s a prime opportunity for retailers to build brand awareness. <internetretailer.com>

Hedgeye Retail’s Take: No surprise as online sales continue to be the preferred method for consumers driven by the combination of free shipping and convenience.


Swiss Watch Exports Maintain Momentum from Hong Kong and France, Slows in USA and China - Swiss watch exports retained their momentum in August, rising 24.1%. “With two thirds of the year now behind us, the branch is 20.1 percent higher and has grown at a sustained pace since last January,” the Federation of the Swiss Watch Industry said in a statement. Sales in Hong Kong, the largest market for Swiss timepieces, rose 51.7%, while France’s business grew 54.7%. However, sales growth totaled just 7.6% in the United States, well below the world average, and China saw its sales progression slow to 4.4% after leading the pack for the first part of the year. <wwd.com/business-news>

Hedgeye Retail’s Take: With the Swiss Franc appreciating 14% against the Yuan since June the slowdown in demand is to be expected – more notably is demand in Hong Kong, which despite a similar currency devaluation continues to exhibit robust demand.


New Wedge Rules Boost Golf Sales - A new regulation governing the production of certain types of golf clubs is leading to a spike in sales of certain wedges, according to Golfsmith. The clubs will soon become scarce because of a recent "groove rule" change from the United States Golf Association (USGA). Golfsmith has seen an increase in year-to-date wedge sales of more than 20% over the same period a year ago. <sportsonesource.com>

Hedgeye Retail’s Take: Nothing drives demand for clubs like minute rule changes – this time is no different. Despite the increased interest in soon to be banned clubs, golf sales remain lackluster.


India Launches New Program to Attract Women Textile Workers - India’s textile industry of Punjab has recently launched a new program to encourage women to work in textile factories in a hope to solve the shortage of workers. <fashionnetasia.com>

Hedgeye Retail’s Take: Despite common perception, a large percent of women work in India. Case in point, over 50% of farm production is from women. While we don’t have the exact participation rate of women in the textile industry, we don’t expect this to be a substantial enough source to fully offset the current shortage.


India Concerned Over Image Relating to Child Labor Laws - For countries and industries who land on government watch lists detailing alleged use of child and forced labor, the consequences are as much about public perceptions as they are about the economic fallout. This summer, the Indian apparel industry expressed concerns about being named by the U.S. Labor Department on one of its watch lists for child labor. Indian manufacturers were particularly concerned their presence on the list would impact the image the world had and would ultimately damage operations. Under Indian law, children under the age of 14 are prohibited from working in “hazardous” industries and in homes, hotels and restaurants. But the law is rarely enforced and convictions have been few. The Indian government estimates that more than 12 mm children under the age of 14 are employed, while nongovernmental organizations estimate there are twice that many. <wwd.com/business-news>

Hedgeye Retail’s Take: This is concerning to say the least, particularly in light of the previous headline. With increased pressure to resolve shortages, expect the U.S. Labor Department to keep a close eye on who fills in at the line.



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