October 1, 2010

More movement in the C-level ranks at Dick’s with the departure of its CMO, while Wal-Mart resets the bar for affordable prescription drugs partnering with Humana in a rare case of cost deflation for the domestic consumer. 


  • Forever 21 continues its quest for retail domination, this time taking one of the most expensive pieces of real estate in Manhattan. The fast-fashion retailer is expected to take a short, sixth month lease on Fifth Avenue formerly occupied by Takashimaya. Clearly Forever 21 believes it can operate in any type of location after signing a sub-lease in a Sears last week and a $1,000 per foot location this week.
  • Keep an eye on supermarkets coming to a mall near you. Mall operators are beginning to experiment with filling vacant space with traditional supermarkets, in an effort to rejuvenate traffic and visitor frequency. Westfield’s Seattle Southcenter mall has seen a 26% increase in traffic over the first few weeks since Seafood City opened in a vacant Mervyn’s location. Aldi also recently inked a deal to open a store in Illinois.
  • According to a Harris Interactive poll, mature consumers (age 65+) are most pessimistic about an improvement in the economy over the next 6 months. While 22% of the overall population expects the economy to improve in the next sixth months, only 8% of those age 65+ expect their financial condition to improve. The echo boomers (18-33) are the most optimistic, with 28% expecting an improvement over the next 6 months.


Wal-Mart Sets Bar for Affordable Prescription Drugs - Wal-Mart Stores Inc., the world’s largest retailer, said it will team with health insurer Humana Inc. to offer the cheapest prescription drug plan in the U.S., as the companies seek to take sales of medications from rivals. The companies will begin marketing the plan today to Americans in Medicare, the U.S. government health program for the elderly and disabled, William Fleming, a Humana vice- president, said in a conference call yesterday. The policies, which take effect Jan. 1, will cost $14.80 a month, less than half the average premium this year, and will boost sales for both companies, Fleming said.  <Bloomberg>

Hedgeye Retail’s Take: This appears to be a win-win for both consumers and WMT given the substantial reduction in the price of the premium.  Given that the elderly are the most challenged demographic from an economic standpoint, we’d expect this program to be well received. We’d also expect others to follow in order to close the price gap.


Dicks' CMO Out - Jeff Hennion, EVP and chief marketing officer at Dick's Sporting Goods, has left the company. According to a filing with the Securities & Exchange Commission, his job was terminated, effective Sept. 24. William Colombo, vice chairman of Dick's SG, will assume the responsibilities of chief marketing officer on an interim basis until the search for a new CMO is completed. Hennion had been EVP and chief marketing officer of Dick’s SG since 2008. Previously, Hennion was SVP — chief marketing Officer, a position he held since 2005. <SportsOneSource>

Hedgeye Retail’s Take: Big shoes to fill for the chain which has built a major presence on the national advertising scene. 

Rawlings Returns to Helmets Business (JAH) - Rawlings is planning to launch a line of football helmets. According to the St. Louis Post-Dispatch, Rawlings is outfitting a limited number of high school, college and professional athletes with helmets this fall in advance of its planned launch in March 2011. The helmets will broaden the company's offerings to complement its line of football pads, gloves, uniforms and apparel. Rawlings stopped making football helmets two decades ago. The article noted that Rawlings' re-entry comes as Schutt Sports in early September was forced to file Chapter 11 bankruptcy protection in early September after losing a patent battle with Riddell. Schutt is appealing a court's $29 million judgment that it has to pay Riddell in the patent infringement case. <SportsOneSource>

Hedgeye Retail’s Take: With concussions finally being addressed with a high degree of seriousness, this is precisely the time for Rawlings to step in and give Riddell some competition. 

Hong Kong Auction Bellwether for High-End Luxury Demand - A jade seal of China’s 18th century Qianlong emperor is one of the star attractions at Sotheby’s 3,200-lot Hong Kong auction that may raise HK$1.6 billion ($210 million) in a test of Chinese demand for art. The seven-day marathon also includes cases of Chateau Lafite Rothschild; a 6.4 carat pink diamond; antiques; jewelry and paintings by masters including Chinese abstract painter Zao Wou-ki, New York-based Sotheby’s said. The sale will show whether rising wealth in China will continue to drive an increase in prices. Sotheby’s said the sale has 800 more lots than its April auction in the city, which took a record HK$2 billion and revived prices in most categories to pre-credit-crisis levels. “The estimate for the fall auction is the highest in our 37-year history of auctions in Asia,” Kevin Ching, Sotheby’s chief executive officer for Asia. <Bloomberg>

Hedgeye Retail’s Take: The days of multi-million Sharks in tanks appear to be in the past as the Asian audience shifts its tastes towards more traditional collectibles. 

Bloggers Beware - Marketers and other corporate communications professionals may sometimes feel they have a thankless task: carefully craft messages about their company’s thought leadership, social responsibility efforts and new product or service launches, only to find those messages distorted as they’re disseminated through the media. PR and communications firm Burson-Marsteller analyzed more than 150 messages sent out by companies in the Financial Times Global 100 list of firms and discovered a large gap between the messages that went out and how they were covered on blogs. Message distortion was highest for companies in Latin America and the US, with a global average of 69% of blog postings not reflecting the message companies were trying to send. According to the report, bloggers tended to include “opinions, personal experience, knowledge of competitors and products, and speculation.” Distorted messages are not a new phenomenon; they have been a problem in mainstream media as well. <emarketer>

Hedgeye Retail’s Take: While the perception of an official presence on blog sites is largely seen as a high risk proposition by most companies given the lack of quality checks, the message here is that it’s a risk worth taking given the misinformation perpetuated by miss/less informed public. 

R3: WMT, DKS, JAH, and E-com - R3 10 1 10


R3: WMT, DKS, JAH, and E-com - R3 2 10 1 10

Latest Research on Online Shopping - 58% of U.S. adults go online to research products and services they are considering purchasing, an increase from 49% who did so in 2004, a new report finds. Further, the number of those who do research about products on any given day has jumped from 15% of adults in September 2007 to 21% in September 2010, according to the report released today by the Pew Research Center’s Internet & American Life Project.  Additionally, 24% of U.S. adults say they have posted comments or reviews online about the products or services they buy, indicating that many consumers are willing to share their opinions about products and their buying experiences, the report says. These new statistics track with other Pew Internet Project data that show more consumers are buying online. For instance, the percentage of Americans purchasing products online rose from 36% in 2000 to 52% in 2010. And the percentage making travel reservations or purchasing travel services such as airline tickets, hotel rooms or rental cars rose from 22% in 2000 to 52% in 2010. <InternetRetailer.com>

Hedgeye Retail’s Take: Believe it or not, some retailers are still on the sidelines in this game and increasingly disadvantaged as a result.