Don't Bet Against Bieber, Buy into What he Wears
2/14/2011
If 2010 was the year of the replenishment cycle in retail land, characterized by consumers returning to the malls and outlets after their 2009 belt tightening campaign, than 2011 may be the year of the impulse buying cycle. With the jobs market on the mend and paychecks a touch fatter (broadly speaking) thanks to stimulus, consumers are prepared to splurge once in a while. Those splurges will be at times of necessity (see sales of pricey rain boots last fall and then winter boots during the holidays), when the price is right for a product being stalked, or flat out consumption of full-priced merchandise that distinguishes itself in the closet. The most interesting products I am seeing in the malls is within footwear, and it's not solely relegated to women's shoes. Men's and children's shoes certainly have some trend existent. Am I Clinton Kelly, not exactly. I do concoct mean ensembles for work and going out, but alas am lacking Clinton's fashion credentials. However, I know what I am seeing in the malls and online, and it all boils down to embellishment. That embellishment comes at a premium price for the consumer, which is music to the ears of retailers and manufacturers grappling with higher costs of production. In order to adapt and overcome in the new era of apparel inflation, one best be selling less of the same and more of the sizzle to the consumer. Women's Shoes * Kitten heels (yes, they are back) Men's Shoes The Little Ones How to Play the Investment Thesis Numerous names are prevalent to position your portfolio accordingly. In my view, the following are the basic criteria for the investment: 1. Must have buying leverage on suppliers I generally prefer the footwear manufacturers over the retailers as they offer more potential for earnings surprises due to (1) price increases; (2) sales to emerging markets; and (3) expectations have begun to be lowered. Nordstrom from the stable of retailers is a name we continue to view favorably. From the manufacturer perspective, it's Nike and Polo Ralph Lauren (RL). Both of these companies have scale, both companies have pricing power, and both are releasing interesting products. Nike would be the Bieber trade, while Polo a play on increased points of distribution for its upper end women's shoes and category expansion in men's.
Brian Sozzi
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