R3: JNY, Li&Fung, GPS, SKX, URBN

R3: REQUIRED RETAIL READING

October 7, 2010

 

M&A activity and chatter picking up in retail while international competition in e-commerce is keeping domestic players on their toes. 

 

RESEARCH ANECDOTES

 

- Count Glow-in-the-dark shoes among the new product you’ll see at Foot Locker this month as footwear retailers look to join in the Halloween spend. While the feature isn’t particularly new or novel, Nike takes it a step further this year with its Nike Dunk Halloween Edition sporting an upper that is entirely glow-in-the-dark. We don’t expect these styles to be a key top-line driver, but they’re at least more inconspicuous than light-up alternatives that have been banned by many schools.

 

- After stirring an initial wave of controversy with the unveiling of an unloved new brand logo, Gap is now asking its Facebook fans for input.  In fact, they are also soliciting consumers to submit their own logo ideas.  Why would they do that if they weren’t having second thoughts?

 

- Leave it to Skechers to knock-off even the shoes with the best of intentions.  The company launched a line of fabric shoes which look strikingly similar to TOMS.  Recall that TOMS gives a pair of shoes away to people in need for each pair sold.  At least Skechers is following suit by also giving away a pair to charity for each pair of “BOBS” it sells.  Would it have been that difficult for SKX to come up with an original charitable contribution of its own?

 

  

OUR TAKE ON OVERNIGHT NEWS 

 

Nine West Group to Grow Mid-Tier Business - Nine West Group has appointed Richard Olicker to spearhead growth of its mid-tier brands division. Rick Paterno, wholesale president for better footwear brands at Nine West Group said now is the time to step up the growth of the mid-tier segment, as well as the first cost direct business segment, which started last year to source and make product for private label. “There is certainly growth with private label [business] throughout the industry, and many of our competitors have been in that business for quite some time,” he added. Nine West Group’s mid-tier brands include Mootsies Tootsies, Sam & Libby, Dockers, Nine & Co. and Gloria Vanderbilt. <wwd.com/footwear-news>

Hedgeye Retail’s Take:  With Aldo becoming the fashion vendor of choice for both JCP and KSS, it looks like Nine West is attempting to step up its effort to remain on the shelves.

 

Manhattan Beachwear Acquires Apparel Ventures - Manhattan Beachwear, Inc., has reportedly acquired Apparel Ventures, Inc., effectively merging two large portfolios of swim labels. Apparel Ventures swimwear brands include a large portfolio of proprietary and licensed brands, distributed to national department stores, luxury boutiques, and specialty swimwear chains.  Proprietary brands include La Blanca and 2 Bamboo.  Licensed brands include Ralph Lauren, Trina Turk, ABS, Puma and Rampage. Manhattan Beachwear's owned brands include The Bikini Lab, 24th and Ocean and Maxine of Hollywood. Licensed swim brands include Kenneth Cole New York, Kenneth Cole Reaction, Nanette Lepore, Hermanny by ViX and Sofia by ViX. <sportsonesource.com>

Hedgeye Retail’s Take:  Perhaps the key to the swimwear business is remaining “private”.  With extreme seasonality, the product category has never been a very good business for any public traded manufacturer given it only makes money in one quarter (usually) and can sometimes be derailed by the weather.  Speedo is a case in point.

 

Li & Fung Sees 'a Lot of Orders or Next Year - Li & Fung Ltd. said it expects “a lot of orders” for next year as purchases and sourcing deals boost its market share. “With the acquisitions we have done, outsourcing deals we have done and the new business, next year looks very good,” President Bruce Rockowitz said in a phone interview late yesterday. “It looks less and less likely that there will be a double-dip recession.” Li & Fung yesterday won court approval for the more than HK$7 billion ($903 million) purchase of Integrated Distribution Services Group Ltd. that will increase revenue from China and Southeast Asia. The company wants to build a higher margin business selling brands to Asian consumers. This will create a whole new growth driver. <bloomberg.com/news>

Hedgeye Retail’s Take: While we may question the company’s “macro” view, we do believe that Li & Fung is best positioned to benefit from rapid changes in the Asian sourcing base.

 

Gap and CVS E-Commerce Sites Crashed This Week - The Gap site went down Monday at about 9:20 a.m. Eastern time. The web site started loading very slowly, taking over 11 seconds to load. The problem only continued to get worse with intermittent time-out errors and persisted until 12:30 p.m.

The CVS site went down Monday at about 1:50 p.m. Eastern and was brought back up by 3 p.m. <internetretailer.com>

Hedgeye Retail’s Take:  With so much focus on the growth in e-commerce these days, we often forget that these platforms are not bulletproof.  Yet another reason why we’re also seeing measurable increases in .com infrastructure investments to support future growth. 

 

Urban Outfitters Jams with Scarlett and Crimson - A range of Scarlett & Crimson-inspired cosmetics and accessories are now being stocked at Urban Outfitters, following success in Boots and Superdrug, according to Coolabi. Urban Outfitters' flagship U.K. stores (Oxford Street and Bluewater), as well as its major Scandinavian outlets in Copenhagen and Stockholm are featuring the Scarlett & Crimson lines. The lines include mascara and eyeliner. If the initial range proves successful, further plans are to roll out the products to more stores in time for Christmas. <licensemag.com>

Hedgeye Retail’s Take: Yet another apparel retailer getting into the cosmetic accessories game. Given the success of others ramping efforts here over the last year and the favorable margin profile of the category it’s no surprise to see a proliferation of offerings as core apparel margins continue to be squeezed.

 

Holiday Sales Could Be Good If September's Luxury and Bigger Ticket Strength Continues - It might not be a bountiful holiday, but if September same-store sales are any indication, consumers are likely to splurge on select higher-priced items, as luxury retailers got their groove back and better goods performed well for many mainstream stores. “The fact that luxury continued to post a strong performance is not surprising given the recent improvement in high-income household consumer confidence,” said Michael Niemira from the ICSC. Saks Inc. and Neiman Marcus Inc. called out robust sales in their fine jewelry categories last month, but so did Macy’s Inc., J.C. Penney Co. Inc. and The Bon-Ton Stores Inc. Comparable-store sales rose 2.6% in September, led by luxury’s 6.6% leap. <wwd.com/business-news>

Hedgeye Retail’s Take: We’d caution straight-lining any pickup in consumer spending particularly one that’s accelerating heading into the holiday’s. Importantly, along with the ramp in luxury sales, most retailers acknowledged a shift into September as BTS spending was realized later this year.

 

British E-tailer Asos Launches US Site - The U.K.’s largest online fashion store just got a little bigger. Asos.com, which has more than four million registered customers, made its U.S. debut this week with the launch of a website exclusively for the American market. The London-based e-tailer, which offers more 800 brands and 42,000 product lines spanning men’s and women’s apparel, accessories and beauty products, was launched in 2000 and did about $370 mm in international sales for the year ending March 2010. More than 100 footwear brands are sold on the U.S. site, including Converse, United Nude, House of Harlow, Timberland and Asos’ own label. Before the launch, Asos had already established a database of 200,000 customers based in the U.S. and has been actively marketing to boost traffic there. Initial efforts, according to a press release from the company, have nearly tripled U.S. traffic and doubled U.S. sales. <wwd.com/footwear-news>

Hedgeye Retail’s Take: Offering customers the full gamut from suits to swimwear, the UK retailer offers an impressive array of name brands online including many European brands not available through most domestic competitors. Offering free shipping and returns in the UK, international rates of $6 for standard 8-day delivery is competitive as long as you are willing to wait a few more days. Perhaps the cost of offering free shipping for a limited time would do the retailer well in terms of accelerating the build out its U.S. customer base.

 

 


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