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  • Mens Wearhouse (MW) Experiences Soft Q4 On Patronage Deceleration

    Men's Wearhouse is set to release fourth-quarter earnings results at 5:30 pm Eastern time on Wednesday, March 13, 2013. The company will then host a conference call on March 14, 2013 at around 9 am.

    Many analysts expect this conference call to be mediocre at best. Analyst John Kernan of Cowen recently downgraded the apparel store from outperform to neutral citing negative growth. The apparel company is expected to have an EPS of negative five cents with revenue of approximately $610 million.

    Men's Wearhouse also owns stores Moores and K&G. Overall, they have over 1,000 stores around the country and is in a testing phase of international growth. The company utilizes stores of approximately 5,700 square feet in order to service their male clientele. They're able to leverage inventory space by merging the stock room and the show room, by doing so they are able to carry a vast selection of sizes and colors in sport coats, full suits, accessories, and tuxedos. In 2010 they acquired rental stores across the country and have building a rental service for proms, weddings, and other special events.

    In mid-January Men's Wearhouse announced an eighteen cent per share cash dividend on common stocks in hopes of boosting their stock after a soft Q3. During that call, MW front man George Zimmer (You're going to like the way you look, I guarantee it), stated that improving conditions would most likely be exhibited in January and February. Currently, stock for Men's Wearhouse is at $27.88, but has been steadily declining over the past six months.

    Heading to channel-checks, we have not seen any improvement in foot-traffic or the direct to consumer channel. From historical data, we believe that Mens Wearhouse patronage is closely tied to the unemployment rate and monthly jobless claims data. Data here implies further slowing.

    In March, the commerce department reported that American personal income dropped by the large amount in the past 20 years, for a total of 3.6%. It remains to be seen how this drop would have affected Mens Wearhouse, but data digging for the positive has been increasingly difficult as a counter-exercise. The forecast is not looking great for Mens Wearhouse to report 4th quarter earnings above analyst consensus and we expect a small to moderate selloff in the neighborhood of 2-6% to be possible.

    Mar 04 1:58 PM | Link | Comment!
  • A New Age Of Ecommerce Is Upon Us And Amazon (AMZN) Is Its Google (GOOG

    In the world of data and the internet there are a few camps that say that Google is the most powerful company on the planet. There are some that say that Apple is. And that is really about it. This note however, would like to posit that there is a 3rd company that sits atop the axis of power in the new world of business. That company is Amazon.

    In much the same way that Google has revolutionized data, and Apple; consumer electronics, Amazon has been silently shifting the 'box' model of commerce in their favor. Shares are up nearly 50% in 52 weeks.

    Where is the future of Amazon heading? Amazon is on the path of taking over commerce, period. Although Amazon Prime began its life nearly 8 years ago in 2005, it has recently reached a new threshold of critical mass. Simply put, users are no longer utilizing conventional methods of shopping for items that have traditionally been immune to the rise of ecommerce. These items include household items such as soap, toilet paper, stationary, school supplies, and small-ticket drug-store purchases such as lotion, face-wash razor blades etc.

    The first wave of ecommerce destroyed brick & mortar demand for media, due to the medi-centric nature of the internet and Amazon's swift capitalization. The 2nd wave, the one we are currently at the tail-end of, destroyed the big ticket electronic market as retailers such as Best Buy, Radioshack, and Circuit City have fallen victims of. The third wave will be your Bed Bath and Beyonds, Target, Walmart and and CostCos. These large-box retailers for household goods and appliances have the biggest to lose in a world of downsizing.

    The catalyst for the shift in commerce has been the optimization of shipping and returns. With Amazon prime, all users are guaranteed free 2-day shipping. Unless you have an absolute immediate need for something in less than two days, the choice to make approximately two clicks for Amazon to ship you the product is more than clear. The market for items that have such immediacy is limited. In the case of products that constantly need replenishing such as toilet paper, medication, soap, etc, Amazon has introduced a feature that automatically ships you that item within a certain timed interval. In the case of items that are deemed too insignificant to ship, such as pens, stationary, and other ultra-small ticket items, Amazon has introduced the "Ships for free" feature that will automatically include that item in the box packaging on the next larger ticket item that you do purchase.

    The other catalyst has been the optimization of shipping. Full circle, has come the advent of efficient and optimized shipping. Though FedEx and UPS has always been the pioneers of proprietary shipping methods, the real growth and expansion of this sector, that has allowed Amazon to adequately expand operations without extreme dramatic shifts in its gross margin, has been provided by boutique shipping firms that have, over time, optimized its shipping strategies.

    These firms include OnTrac in the western and pacific states, Spee-Dee Delivery, Eastern Connection in the Eastern Atlantic states, and Lone Star Overnight in the south and Midwest. The launch of OnTrac Ground Service, which debuted the next-day and two-day ground service to Amazon in August 2011 has been heaviy utilized by Amazon to facilitate its shift in commerce.

    Amazon growth is the silent horse in the race for commerce in the 21st century. No other company has the tools to rival the empire that Amazon has built. In the coming years, as commerce shifts continue to evolve towards online, watch for Amazon shares to continue its ascent and shares in Target, Walmart, Bed Bath and Beyond and other big box retailers to recede.

    Mar 02 3:16 AM | Link | Comment!
  • Nutrisystem - Earnings Downside Risk To An Earnings Miss On Preliminary Data

    Nutrisystem is scheduled to report earnings on March 5th, Tuesday, after the bell. This is the most critical report of the year for the weight loss company as analysts estimate management to announce Q4 EPS of (0.14) on 63 million while Q1 guidance is expected to be (0.06) on 121.4 million in revenue.

    Preliminary channel-checks have been poor as all measurements have been below general analyst sentiment. Our checks reveal that the sector in general is a laggard; underwhelming Q4 results from Weight Watchers confirm our position.

    Reasons for the general deceleration in the weight-loss sector (on a company to company basis) are attributed to the saturation of the market from the entry of new players such as "MyFitnessPal", "Lose It!", and "E-diets". Though the sector as a whole may be in good health, the entry of these competitors have resulted in diminished margins, and revenue for companies that have are already reached critical maturation phases such as NutriSystem and Weight Watchers. Many believe these two companies to be at the top of their respective weight-loss "sectors"; diet via monthly food packaging, and points counting.

    Nutrisystem shares could sell off or gain at least 5-10% either way depending on which way the die falls. Institutional Insider analysts believe that the risk is weighted more to the downside due to the results of our proprietary channel-checks.

    With shares trading currently at ~$8.20 shares will hit $9 or $7 on the day of earnings.

    Mar 01 4:27 PM | Link | Comment!
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