R3: M, PSUN, CROX, and Moody's

RESEARCH ANECDOTES

  • Sears continues to up the ante with its apparel program, this time recruiting UK retailer Next for its latest collaboration. Sears.com becomes the exclusive retailer of Next product in the U.S in a similar arrangement to the MANGO/JCP partnership (except this deal has no retail presence). Recall that Sears also has a partnership in place with French Connection as well as announced sublet with Forever 21. In other words, Sears is becoming a mall within a mall.
  • According to an InsightExpress study, 45% of consumers prefer receiving mobile coupons via text message, with 28% preferring to locate them via an app, and 27% preferring to receive them in-store. A substantial number of mobile ad and coupon campaigns are currently focused on geographic targeting, allowing advertisers to drive traffic to a specific region or local.
  • Following in the footsteps of Burberry, Gucci livestreamed its Milan runway show as part of its Gucci.com redesign. Unlike other live runway events online, Gucci’s virtual fashion show included virtual guests and virtual seat assignments. Throughout the show, 10,000 “guests” Tweeted and chatted as they watched the latest fashions strut down the runway.

OUR TAKE ON OVERNIGHT NEWS 

 

Macy's Plans To Hire More for Holiday - Macy's Inc. plans to hire 65,000 seasonal workers to staff its stores, call centers and distribution centers for the holidays. The department store, which employs 161,000 year round, said the holiday hiring represented a slight increase from the past given the 3 to 3.5 percent comparable-store sales gain it expects to see in the second half. “It is vitally important that our customers are well-served during the busiest shopping time of the year," said Terry Lundgren, chairman, president and chief executive officer. Most of the positions are part time. <wwd.com/business-news>

Hedgeye Retail’s Take:  Given that customer service has been on the decline for a while in the traditional department store channel, it’s good to see a commitment to holiday staffing.  With that said, if sales don’t materialize expect the temporary help to be cut back and matched commensurately with sales demand.

 

Moody's Cuts Outlook on Retail Sector - This might be about as good as it gets until 2012. Moody’s Investors Service Wednesday cut its credit outlook on the retail sector to “stable” from “positive.” The debt watchdog said growth in U.S. retail earnings, before interest and taxes, would “slow to a modest low-single-digit pace over current levels for the next 12 to 18 months.” “Consumers continue to face high unemployment and personal debt levels along with low asset values and tight credit availability which will continue to make them focused on value,” Moody’s said, noting holiday sales and margins would increase only marginally. Retailers are coming up against tougher comparisons on both the sales and the margin fronts and executives are running out of ways to boost growth. “Retailers have generally exhausted the ability to increase earnings from expense reductions and inventory efficiencies,” Moody’s said. <wwd.com/business-news>

Hedgeye Retail’s Take:  A seemingly proactive move here from Moody’s and an outlook which we can’t disagree with.  We’re simply moving beyond the point of “this is as good as gets”.

 

PSUN Tough Road Ahead - A year after becoming president and chief executive officer of teen retailer Pacific Sunwear of California Inc., Gary Schoenfeld gave a pep talk before the crucial back-to-school season. With the $1 billion company posting an eighth consecutive quarter of losses in August — and forecasting a ninth — he might have to give a few more. It isn’t business as usual at PacSun, which along with the flow of red ink, had to fend off a hostile takeover bid last year by the much smaller athletic brand Adrenalina Inc. The recession has weakened the teen retail sector. There are fewer jobs for young people and their parents have diminished discretionary income. Apparel spending among 13- to 17-year-olds dropped 6% in June according to The NPD Group. In an effort to reverse its slide, PacSun has identified three key areas: product, customer relevance and engaging shoppers in stores. The turnaround blueprint includes pumping up the fashion quotient in juniors, reviving its shoe category and offering more exclusive items from vendors. After years of elevating its private label business, PacSun is courting vendors, including Fox, Volcom, Hurley, Quiksilver, O’Neill and Roxy, as partners for exclusive offers, in-store displays and events that are intended to lure shoppers from other mall-based competitors .<wwd.com/business-news>

Hedgeye Retail’s Take:  Nothing new here except that patience appears to be waning.

 

Niche Team Sports Growing - According to the SGMA, overall participation in the top seven team sports in the U.S. declined in the last year but participation in seven 'niche' team sports is on the rise. Those seven 'niche' team sports which had respectable gains in participation since 2008 are fast-pitch softball (up 13.8%), ice hockey (up 12.2%), rugby (up 8.7%), beach volleyball (up 7.3%), lacrosse (up 6.2%), indoor soccer (3.7%), and gymnastics (3.6%). <sportsonesource.com>

Hedgeye Retail’s Take:  While it’s important to keep on an eye of the demographic trends underlying athletic participation, we don’t see UA or NKE making a big push into softball or beach volleyball anytime soon.

  

Crocs Launches E-Commerce in Canada and Australia - Crocs, Inc. announced the launch of Canadian and Australian websites as well as a new consumer mobile site. In addition to providing supplementary revenue opportunities, the new online offerings are designed to enrich the Crocs online experience.  <sportsonesource.com>

Hedgeye Retail’s Take:  Expanding on the company’s revamped e-commerce platform, we should continue to see additional countries added to Crocs’ direct to customer infrastructure. 

 

The Sports Authority Checks in With a Location Based App - The Sports Authority Inc. is testing location-based promotions by offering discounts to customers who check in at stores and sports stadiums using a location-based rewards iPhone application. The rewards app comes from Loopt Inc., a social mapping company that allows users to check in wherever they are using their mobile phones and see where their friends are, similar to location-based services offered by Gowalla and Foursquare.  <internetretailer.com>

Hedgeye Retail’s Take:  As we’ve noted in recent months, location based applications present the biggest opportunity for marriage between mobile devices and retailing.  Driving traffic to stores may actually be an even bigger opportunity in the intermediate term than actual transactions taking place over an iPhone.

 

Levi's Conducting $100 mm Global Media Review - Levi's is conducting a global media review, the brand has confirmed. The brand spends an estimated $100 million annually on ads worldwide -- about $50 million of that in the U.S., according to Nielsen. Omnicom's OMD is Levi's lead U.S. media shop and is believed to be participating in the review. Another contender is said to be Publicis Groupe's Starcom, which works for the brand in some overseas markets. <brandweek.com>

Hedgeye Retail’s Take:  Despite the review (which is part of any brand’s marketing process) we continue to expect Levi’s to push the envelope with its marketing.  If you haven’t see this, check it out: http://www.youtube.com/user/walkUSA


Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more