October 7, 2010


Positioning by retailers is heating up ahead of the holiday with an uptick in seasonal hiring at KSS, online shipping incentives by others, while Bergdorf is jumping the shark setting windows already here in early October. 




- Expect to hear some commentary on the new Gap logo at next week’s analyst meeting.  As it stands now in the world of fashion and marketing blogs, Gap has definitely elicited some negative feedback.  Let’s hope there’s some product to back up the new image or else it will be difficult to see how comps accelerate with a simple change in font.


- Bergdorf Goodman gets the award for Christmas in October.   The luxury department store has already begun to set its holiday windows, skipping Halloween and everything in between.  Talk about holiday fatigue.


- Costco noted that it sees some light at the end of the tunnel for the TV category, which has been under pressure for several months now.  The company expects promotional activity to pick up (helped by vendor support) over the November/December holiday period, which in turn should help spark unit demand.


- Louis Vuitton can't keep up with the demand for its logo. It is reportedly closing key stores in Paris an hour earlier than normal in order to retain merchandise. So, if you want your LV that badly, you're going to have to make sure to start shopping earlier. Normal hours are set to resume next month.





KSS To Hire 40,000 this Holiday - Kohl’s Corp., the fourth-largest U.S. department store chain, plans to hire about 40,000 people this holiday season, 21 percent more than last year, to prepare for a projected uptick in sales. The employees will work in the company’s 1,089 stores, as well as distribution centers and credit operations. U.S. retailers could add as many as 650,000 jobs this holiday season, 30% more than last year. <bloomberg.com>

Hedgeye Retail’s Take: So, are they cutting their full time employees and just adding cheaper part time labor or is KSS just bullish on the holiday season? 


Neapolitan Tailored Clothing Company Kiton Buys Italian Based Textile Mill Carlo Barbera - Biella, Italy-based textile mill Carlo Barbera has found its white knight in Kiton, the Neapolitan tailored clothing company established in 1956 by Ciro Paone. During a fashion preview in New York City on Wednesday, Antonio De Matteis, Kiton’s chief executive officer, revealed his company has purchased a controlling stake in the mill, which has been weighed down by financial problems. He said the purchase price was 3.3 mm euros, or $4.5 mm at current exchange. The deal does not include the Luciano Barbera clothing line that is available at luxury stores such as Neiman Marcus and Bergdorf Goodman. <wwd.com/business-news>

Hedgeye Retail’s Take:  Talk about old school.  One of the finest suit and shirt-makers on the planet is heading towards vertical integration, a strategy that is sure to keep quality at its highest. 


Retailers Join Forces on Shipping - Bidding to match, and surpass, the successful free shipping program of Amazon.com Inc., 15 retailers and GSI Commerce Inc. have launched ShopRunner, a service that offers consumers free two-day shipping and free returns. Amazon’s Prime loyalty program does not cover free shipping when items are returned. Consumers pay $79 per year for the benefits, the same $79 annual fee Amazon charges for its Amazon Prime free shipping program. Retailers such as The Sports Authority Inc., Toys 'R' Us Inc. and Wilsons Leather already are taking part. GSI says such merchants at Borders, Barnes & Noble, Ice.com Inc. and CSN Stores LLC are among the two dozen other online retailers scheduled to participate.  <internetretailer.com>

Hedgeye Retail’s Take: After some internal discussion on this one, this appears to be more of a headline event than one with a real financial impact. Assuming $79 covers roughly 10-12 shipments annually, Amazon’s Prime program makes sense given the breadth of product and staples the retailer offers (e.g. diapers, detergent, etc.). On the other hand, it’s tougher to justify for some of these other retailers when figuring that one would have to purchase a hoody a month just to cover the cost.


MasterCard: Web Sales Grow 7.8% in September - E-commerce sales growth picked up modestly from August, a modest increase from 7.2% growth in August, MasterCard Advisors reported. Online apparel sales registered the highest growth among e-retail categories, at 13.4%. Total apparel sales, online and offline, were up 3.8%, following a 2.6% gain in August, according to the monthly SpendingPulse report. Overall, September continued the pattern of consumers spending selectively and leaning towards non-discretionary rather than discretionary items. The strong performance of the financial markets, which often helps the higher-end sectors, did not appear to do so in September.  The month benefited from late back-to-school shopping, with some apparel shopping pushed back from August to September as parents postpone fall and winter purchases until the cooler weather arrives. <sportsonesource.com>

Hedgeye Retail’s Take: We question the sustainability of these results particularly in apparel given our expectation of a deterioration in consumer spending over the balance of the year.


JCP and Condé Nast Unveil Modern Bride Concept - Condé Nast is collaborating with JCPenney to launch a Modern Bride-inspired retail concept in stores. The retailer has been granted the rights to use the magazine brand in all categories, including a jewelry line for launch this February. In time for Valentine's Day, JCPenney's fine jewelry department will feature an expanded assortment of bridal jewelry, including engagement rings and wedding bands, with Modern Bride signage and packaging in a specialty store environment. <licensemag.com>

Hedgeye Retail’s Take: Not a bad move given the high likelihood of demographic crossover between the two brands. 


Home Depot, CVS, and Amazon Are Tops for Online Gift Cards - A study of the gift card programs of the Top 100 online retailers  finds only 50 offer digital gift cards. Among those, the five digital gift card programs rated as best by research and advisory firm RSR Research were: The Home Depot Inc., CVS Caremark Corp., Amazon.com Inc., American Eagle Outfitters Inc., and Sears Holdings Corp. The study analyzed digital gift card purchases made in July. It evaluated the retailers’ programs using 20 criteria including comprehensiveness of the offering, selection, the purchase process and the recipient experience. <internetretailer.com>

Hedgeye Retail’s Take: We question the validity of the study given the highly undifferentiated nature of what is essentially cash.


Clothing Helps Drive 6.5% Sales Increase For M&S - Sales at Marks & Spencer Group plc rose 6.5% in the second quarter ended Oct. 2, with clothing sales up 7.8%. However, chief executive Marc Bolland warned that trading conditions would become more challenging later this year.  <wwd.com/business-news>

Hedgeye Retail’s Take: Notable in that at most retailers, footwear has outperforming category relative to apparel.


GSI Commerce to Open Louisville Facility - GSI Commerce Inc. will hold a grand-opening ceremony on Monday, Oct. 11, for a new Louisville facility. The new facility will specialize in the customization of sports apparel such as jerseys, T-shirts, and fleecewear. <sportsonesource.com>

Hedgeye Retail’s Take: The company’s 5th domestic facility increases GSI’s fulfillment space to 2.6mm sq. ft. reflecting the increasing demand for more stable e-commerce management as well as fulfillment from the industry’s leading provider.


Rose Gold In Style - Designers are viewing spring through rose-colored glasses, and their collections show it. Metallic rose-gold leather appeared throughout the Paris collections, surpassing other metallics as the new neutral for spring. Perhaps it was Victoria Beckham’s now well-known request to have designer Brian Atwood create shoes to match her rose-gold Rolex that sparked the trend, but he’s not the only one that is riding this wave.  <wwd.com/footwear-news>

Hedgeye Retail’s Take: Metallic shoes have been a strong trend for several years now so with a relatively limited color palette – so why not rose gold in an attempt to perpetuate the trend?


Apparel Continues Topping List of Exports in Vietnam - Finished garments continued taking the lead among Vietnam’s exports since the beginning of 2009, posting a total turnover of US$8 bn in the first nine months of this year. The export of garments to the Republic of Korea grew 84%, the highest growth rate as compared to other industries, mainly thanks to a reduction in tariff in line with the ASEAN-RoK Free Trade Agreement. Apparel exports to the US , which accounts for 55% of the industry’s revenues, increased by 20%. In particular, garment exports to the European market have bounced back in the past three months, at 7%, following a long period of dropping. Vice Chairman of the Vietnam Garments and Apparel Association (Vitas) Le Van Dao said a number of domestic garment companies have received orders for the first half of 2011, plus prices have risen by 10-15% year-on-year.  <fashionnetasia.com>

Hedgeye Retail’s Take: In addition to stronger demand out of Europe, Vietnam is the obvious beneficiary of wage inflation in China driving companies to look towards other SE Asian countries. We expect this is just the beginning of a longer term ramp in export demand as Vietnam is at a structural advantage to others in the region.


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

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“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.

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Inside the Atlanta Fed's Flawed GDP Tracker

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

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