• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

R3: REQUIRED RETAIL READING

September 22, 2010

Investors and retailers alike continue to place bets on the growing plus size market, this time with a purchase out of bankruptcy.  Despite obesity rates being at all time highs, retailers until now have struggled with profitably reaching this demographic 

RESEARCH ANECDOTES

-According to the Luxury Institute, 57% percent of high-end consumers identify quality customer service as a defining characteristic of luxury goods.  However, expense cuts over the past year or so have left 50% of luxury consumers noticing a drop off in the quality of the luxury consumer experience. Additionally, 76% of respondents believe high quality of the goods themselves is a defining characteristic of a luxury product, while at the same time 51% of consumers believe quality has declined.

 

-According to CoStar, investment in retail real estate has been steadily improving throughout 2010.  Through the first 8 months of the year, $22 billion has been invested in retail related properties.  This marks a substantial pick up from 2009, which saw total investment of $12 billion for the entire year.  There are also signs that this trend may continue, with signs beginning to show that lenders are beginning to feel comfortable disposing their distressed assets in an effort to clean up their books.

 

-For the first time, more computer games were purchased via online downloads than in retail stores, according to NPD. So far in 2010, PC game sales sold in brick and mortar stores still have a dominant 57% share, but if higher ASPs in physical stores continues, online  downloads will take over which will have implications for retailers from GME to BBY.

 

-Fashion ads may soon have to label photos that have been retouched curbing the latest trend from too thin to impossibly skinny. With brands and designers becoming increasingly liberal in their use of photoshopping subjects (recall RL’s ad controversy in Japan involving Flippa Hamilton), the British government is convening next month to evaluate the effects of these fallacious representations on their female audience. While the soda industry adopted labeling for caffeine, we suspect the outcome here is likely to require more than a simple label.

OUR TAKE ON OVERNIGHT NEWS 

 

Urban Brands Bought Out of Bankruptcy - Urban Brands Inc., parent company of the Ashley Stewart plus-size specialty apparel chain, inked a deal with an affiliate of Gordon Brothers to buy the business out of bankruptcy proceedings. The Secaucus, N.J.-based Urban, along with 54 affiliated debtors, filed Chapter 11 petitions for bankruptcy court protection Tuesday in a Delaware bankruptcy court. Urban Brands operates 210 stores in 26 states and has 2,100 employees. <wwd.com/business-news>

Hedgeye Retail’s Take:  Looks like the start of another attempt to capitalize on the plus-size trend.   Unfortunately, the holy grail of retailing targeting this demographic has yet to be found (profitably).  Despite this, obesity in the U.S remains at record levels, leaving the potential for getting the business fixed very high. 

Canadian Sporting Goods Company Forzani Sees Sales Lift in BTS - The Forzani Group Ltd. reported same-store sales climbed 5.8% in seven weeks ended Sept. 19. Comps at its corporate stores jumped 8.9% while comps at its franchised locations dipped 0.2%. In the two weeks ended Sept 19, comps grew 8.1%. A 12.1% gain in corporate comps offset a decline of 0.1% at franchised locations. In the five weeks ended Sept 5, comps advanced 4.8% with corporate comps up 7.4% and franchise comps sliding 0.4%. <sportsonesource.com>

Hedgeye Retail’s Take:  No surprise here as the Canadian market is mirroring the same product and inventory trends we see here in the U.S.  Less competition in that market also helps. 

Forever 21 in India - Fashion brand Forever 21 has made a foray into the Indian retail market, opening a 10,000 square feet flagship store in New Delhi. The store was inaugurated by Bollywood's sultry actress Bipasha Basu and Forever 21's president, Alex Ok. Don Chang, owner and founder of Forever 21 said, "The Indian women truly understand and appreciate fashion and opening of Forever 21 will encourage fashionistas to give into their style desires and will provide them a much needed “Fashion Stimulus." <just-style.com/news>

Hedgeye Retail’s Take:  Nothing really surprises us anymore when it comes to Forever 21.  The brand continues to persue unabated growth across multiple store formats, varied real estate profiles, and now multiple geographies.   

Plus Sized Retailer Avenue Launches Mobile Shopping App - Avenue, a premier plus size brand in the portfolio of Redcats USA, launched its iPhone application. This new application enables fashion enthusiasts to now experience and shop a streamlined version of Avenue's website at the click of a button. They can also browse new arrivals, search for specific items, take advantage of Avenue's great promotions and deals, make purchases with just a few clicks, and find the closest Avenue retail store within a matter of seconds.  <retailsolutionsonline.com>

Hedgeye Retail’s Take:  More plus size in the news, this time mixed with m-commerce.  We continue to believe mobile shopping is nothing more than e-commerce on a smaller screen.  The better the technology, the more likely transactions will begin to take place. 

Japanese Athletic Company Mizuno Launches New Global Golf Brand JPX - Mizuno, the leader in golf technology and innovation, is set to launch a new global brand, "JPX", to deliver the highest performing game improvement equipment in the world. Superceding the award winning MX line of equipment, the JPX brand will bring Mizuno's very latest game improvement technologies to the United States. JPX will complement Mizuno's legendary MP Series, which is world renowned amongst professionals and better amateurs. Heading the JPX launch are the JPX-800™ and JPX-800 Pro™ irons. <worldgolf.com>

Hedgeye Retail’s Take:  Based on the description, JPX hardly seems like a new brand.  Instead, it appears to be a line extension or sub-brand under the Mizuno umbrella.  Either way, golf’s anemic growth probably puts a lid on the idea of creating an entirely new brand for a market that has been stagnant for a while.

China: Fujian Province Toughens Control Over Tanners - China’ Fujian province has recently launched a new pollution prevention program for the Quanzhou leather industry to step up pollution prevention and treatment in the region. <fashionnetasia.com>

Hedgeye Retail’s Take:  As we’ve mentioned over the past few months, the Chinese government is focused on cleaning up the tanning industry.  Both regulation and massive tannery closures are expected to take place over the next year or two.  Leather looking more and more like a commodity that could see pricing increases soon.

Local Advertising Sees Slow Rebound Overall but a 30% Increase Online - Local advertising spending is holding up better in 2010 than previously expected, according to estimates from BIA/Kelsey. The firm, which initially predicted a nearly 1% drop in overall local ad spending this year, forecast growth of 2.1% to $133.3 billion by year-end. Drilling down into where that spending will occur, online is the source of all growth in the space. Traditional local spending, after a dramatic plunge in 2009, will continue a downward trajectory through 2011 and will not recover to earlier spending levels. But rising spending on the web will fuel overall increases in the local space from 2010 through 2014. The growth of online local ad spending, along with the stagnation of traditional efforts, will mean online takes an ever greater slice of the local advertising pie in coming years. Online has already increased its share by 50%, from 10% in 2008 to 15% this year. <emarketer.com>

Hedgeye Retail’s Take:  With location based services embedded in smartphones, it certainly feels like the tipping point has been reached for the decline of traditional local advertising.  Penny Shoppers and billboards take note.

R3: Plus Sizes, Forever 21, NKE, and Leather - 1