R3: Adi, SKX, KCP, VLCM, and SHLD

R3: REQUIRED RETAIL READING

October 20, 2010

 

Adi enters the competitive arena for hoops with new kicks for Derrick Rose and Dwight Howard.  We continue to believe the biggest beneficiaries of new product launches are the retailers, which will not only benefit from new SKU’s but also stepped up marketing from the brands. 

 

RESEARCH ANECDOTES

 

- In the never ending quest to effectively market and ultimately sell plus sized apparel, Forever 21 is rebranding its efforts in this category.  The company has changed its plus size sub-brand from Faith 21 to Forever 21+.  The merchandise remains the same.

 

- Toys R Us continues its expansion efforts in a-typical sites.  Not long after announcing a major holiday effort to open 600 pop-up shops, the company is also opening in outlet centers.  The Shops of Grand River in Leeds, Alabama will be the site of the company’s newest location.

 

- According to a study by RightNow, consumers will pay more for a superior customer experience.  In fact, 85% of those surveyed say they would pay more over standard prices for such an experience.  More than half would actually pay 10% or greater.  55% of consumers have also become customers of a particular brand because of that brand’s customer service reputation.  With costs on the rise, we wonder if adding service back into the stores could be the answer to combating the increases.

 

 

OUR TAKE ON OVERNIGHT NEWS 

 

Adidas Launches Signature Shoes for Rose and Howard - Adidas launched signature basketball shoes for NBA stars Derrick Rose and Dwight Howard. Rose, of the Chicago Bulls, will wear adidas adiZero Rose while Howard, of the Orlando Magic, will wear adidas Beast. <sportsonesource.com>

Hedgeye Retail’s Take:  With Nike pushing LeBron and Kobe, UA launching Brandon Jennings, Reebok betting on John Wall, it was only a matter of time before Adi got more visible with its basketball efforts.  Good for retailers, especially FL and FINL.

 

Adidas Expands its Partnership with Sennheiser - Audio specialist Sennheiser and sporting goods manufacturer adidas are extending their joint headphone line with the addition of the CX 680i Sports, MX 680i Sports, OMX 680i Sports and PMX 680i Sports models, designed for use with the iPhone. <sportsonesource.com>

Hedgeye Retail’s Take:  As technology and sport continue to blend, it’s no surprise that efforts continue to move forward to capitalize on the iPhone’s popularity.  Both Nike and Adi have long partnered with CE manufacturers to co-brand products including headphones and mp3 players.

 

Shape-ups Campaign to Star Karl Malone - Skechers USA, Inc. announced that the company is launching a series of Shape-ups fitness footwear television spots starring NBA basketball legend Karl Malone along with guest star Kareem Abdul-Jabbar. The spots follow Shape-up commercials featuring NFL legend Joe Montana. <sportsonesource.com>

Hedgeye Retail’s Take:  We wonder if SKX is having trouble finding athletes that are actually still playing or if this marks a clear targeting effort towards 40+ year old men?  Upon further review, it’s likely the latter.  Either way, we still believe the men’s formula will be far tougher to crack given that competition for the male wallet is entrenched with the traditional sporting goods brands rooted in authenticity.

 

KCP Ends Women's Sportswear Collection Licensing Agreement Early - Kenneth Cole Productions has ended its five-year licensing agreement with Bernard Chaus Inc. for the Kenneth Cole New York women’s sportswear collection, effective June 1, and will take the line in-house.The Chaus agreement was scheduled to expire in June 2012. KCP claims the move was strategic, bringing women’s sportswear in-house to leverage existing capabilities and build their women’s business. Kenneth Cole has been designing, developing and sourcing women’s sportswear in-house for the product that is sold in its own stores, outlets and online. The Kenneth Cole New York collection, developed by Chaus, was primarily geared to department and specialty stores such as Nordstrom, Lord & Taylor, Bloomingdale’s, Dillard’s and Belk, with some carried in Kenneth Cole stores. Kenneth Cole will start making all the women’s merchandise, beginning with the fall 2011 season. Chaus will manufacture and market the line through spring 2011. Going forward, the entire Kenneth Cole New York collection will be under the design supervision of Ingo Wilts, senior vice president, creative director of Kenneth Cole. <wwd.com/retail-news>

Hedgeye Retail’s Take:    This likely has as much to do with Chaus’ struggles as it does with going on offense to “own” the women’s sportswear collection.  Either way, this will not be an easy task.

 

Volcom to Distribute in Spain - Volcom, Inc. intends to directly distribute the company's products in Spain having acquired strategic assets from its current distributor in the region. Terms of the transaction were not disclosed. <sportsonesource.com>

Hedgeye Retail’s Take:  Looks like VLCM is on track for a traditional global expansion effort, one which eventually buys back distributorships after the seeds have been planted in a particular region.

 

Another Revamp For Sears.com - For a second time this year, the e-commerce site gets a new look, this time with a fresh logo and increased emphasis on user-generated content. The retailer also has launched a service that enables shoppers to see ratings and reviews and create a public profile. <internetretailer.com>

Hedgeye Retail’s Take:  Facebook married with Sears?  Even that won’t help stem the market share losses. 

 

Modell's Launches Winter Shops - Modell's Sporting Goods launched their first ever Winter Shop to be featured in each of the chain's 146 stores this holiday season. <sportsonesource.com>

Hedgeye Retail’s Take: Smart move to finally put all the fleece, hats, gloves, and outerwear all in one place.  In the past, product was dispersed within each brand pad, making shopping for seasonal gear more difficult and time consuming.

 

FiveFingers YouAreTheTechnology.com Named Site of the Day - FWA (Favorite Website Awards) awarded Vibram FiveFingers' YouAreTheTechnology microsite with the coveted Site of the Day award. The site illustrates the "naked truth" about running, by underscoring the power and 'natural technology' of the human body. <sportsonesource.com>

Hedgeye Retail’s Take: The barefoot running shoe is gaining traction and a killer website certainly helps. This website explores the naked truth, literally… http://www.youarethetechnology.com/

 

NBA Bans Shoe on Claims of Enhanced Performance - For the first time in its 64-year history, the National Basketball Association (NBA) has banned a new line of shoes based on the league's rule against an "unfair competitive advantage" that increases a player’s vertical leap. The league’s ban on Athletic Propulsion Labs' Concept 1 confirms the company’s claims that the shoe, with its Load ‘N Launch™ Technology, performs as advertised. No professional player will be allowed to wear the product in games for the upcoming 2010-2011 NBA season. Prior to the ban, the Concept 1 shoe had already attracted the interest of NBA players, including a raft of rookies, some of whom have tested them in non-NBA settings. Retailing for $300, the shoes continue to be sold primarily through APL’s website, and the company is exploring a potential expansion into select athletic footwear and sporting goods retailers. <sportsonesource.com>

Hedgeye Retail’s Take: At $300 this specialty shoe isn’t a mass market product, but with its shoes now banned by the NBA, it’s time for Athletic Propulsion Labs to find new applications – we may have another player in the toning category before long here and one with credible technology.

 

Outdoor Sales Slow to Recover, Slight Uptick - Rebounding slightly from a stagnant August, outdoor product retail sales growth increased at a snail’s pace in September, tied to still-warm weather patterns, lingering weakness in the economy and continued lack of consumer confidence.  <sportsonesource.com>

Hedgeye Retail’s Take: Despite an unseasonably warm September and tough comps in October, a cold snap lead to a 44% increase in outdoor sales in the first week of October. With Outdoor Outerwear up +35% again last week, Q4 is off to a strong start – something we’re likely to receive confirmation of on VFC’s Q3 call tomorrow.

 

Eurozone Retail Headwinds - Transport strikes in Paris and London this month have not only brought misery to thousands of commuters, but reflect widespread public anxiety about the impact of government measures to stem ballooning budget deficits. Economists predict the austerity measures being implemented across the Eurozone will dampen household morale throughout the second half, causing consumer spending to slow — although the majority think a double-dip recession is unlikely. The prospect of widespread public sector spending cuts has already begun to send shivers through the U.K. retail sector, while French households are struggling to emerge from the doldrums despite brightening job prospects. Repeated strikes in France risk further harm to an already tepid retail outlook. As consumers head into the crucial holiday spending season, growth in Germany, the currency area’s biggest economy, is far outstripping that of debt-laden peripheral countries like Spain, Ireland, Italy, Portugal and Greece. <wwd.com/business-news>

Hedgeye Retail’s Take: At best, these strikes are a multi-day disruption, but could have lasting effects on the Eurozone as consumer confidence deteriorates. Our expectation for a downturn in consumer spending domestically in the 2H does not impact the U.S. alone.

 

Shoppers Take a Nonlinear Path to Purchase - A lingering recession, coupled with consumers’ rapid adoption of digital tools, has inexorably altered shopping behavior in categories like groceries, home electronics, apparel and quick-service restaurants. Consumers engage with a variety of digital platforms as they research small and large purchases, when they’re in physical stores and during post-shop activities such as product reviews and referrals. Further, the path to purchase is increasingly nonlinear, according to the findings of a global retail study conducted by Microsoft Advertising and Carat. The study, conducted in March 2010, examined how the recession has changed shoppers’ purchasing habits and how different media touchpoints affect consumer shopping behavior, including the way people learn about, research and discuss their purchase decisions. This shift has altered the traditional purchase funnel whereby marketers move consumers from awareness to sales to include digital media. For example, consumers may first learn about a product based on a tweet from a friend or a post on a social network, then go online via computer or smartphone to research the product, search for the product and consult product reviews.  <emarketer.com>

Hedgeye Retail’s Take: As e-commerce sites evolve, consumers can now act on referral based leads, compare price and rifle shoot purchasing more than ever – a much improved process relative to the old shotgun approach. The shift of the ‘traditional purchase funnel’ has likely changed for good.

 

 


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