Vultures Are Swarming Around Houston Distressed Real Estate

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Vulture investors are swarming all around distressed Houston real estate. Because of course they are. Elsewhere, folks are beginning to worry about the effect of Amazon's ($AMZN) increased push into fashion: will it rock retail real estate even more than it has? With seven private labels now, Amazon is rumored to expand into sportswear, going directly after Nike ($NKE) and Under Armour ($UA). Query what level of data Amazon can leverage from usage of its AWS to crush its (new) competitors.

Long Influencer Marketing (Despite Ourselves)

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All Hail Gwyneth Paltrow and Kim Kardashian

So, we're not all too impressed with Gwyneth Paltrow or Kanye West: the whole idea that those two vapid degenerates are influencing anything gives us concern for the future of this great nation. And we thought that the utter dumpster fire known as the Fyre Festival would at least temporarily stick a fork into the whole concept of influencer marketing. Alas, we were wrong. Turns out that Adidas' rise and Under Armour ($UA) and Nike's ($NKE) fall is somewhat attributable to this phenomenon. "Experiential" retail is all the rage right now and not a day goes by where we don't hear some tunnel-visioned advisor mention the concept - always in the abstract we might add - as the panacea for ailing retail (see Toys "R" Us). But, maybe part of the issue was Toys' marketing strategy. Maybe, just maybe, Geoffrey the Giraffe isn't influencing much of anything. Beyonce and Serena have babies now: maybe Toys ought to take that $3 billion of new liquidity and hire one or both of them as a spokeswoman. It has worked for Weight Watchers ($WTW); it has an insane 1-year performance. This may buy some time for Toys' execs as they try and figure out what the hell "experiential retail" ACTUALLY means. 

Welcome to the Party, Hibbett Sports Inc. $HIBB

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6/26/17 Post: The past few years haven't been kind to the sporting goods and outdoor retailers with The Sports Authority, Eastern Mountain Sports (twice), City Sports, Golfsmith, Gander Mountain, MC Sporting Goods and JackRabbit Sports going bankrupt or being sold for parts. Now word is via Goldman Sachs that large brands like Nike ($NKE) will use Amazon's distribution channel directly and for exclusive products in an attempt to capture more of the millennial market. The news sent Foot Locker ($FL) and Dick's Sporting Goods ($DKS) stock reeling. This also doesn't bode well for the likes of Hibbett Sports Inc. ($HIBB). 

7/24/17 Update: "This also doesn't bode well for the likes of Hibbett Sports Inc. ($HIBB)." Well, we sure nailed that one on the head. This morning, HIBB is down over 29% on the news that it expects its Q2 same store sales to plummet approximately 10%. This, combined with gross margin pressures, will push the company to a Q2 loss - versus an expected consensus call of roughly 15 cents per share. The company also announced that it is launching an e-commerce site. Better late than never, we guess. 

Notable (Div Recaps, Golf, Molycorp, Sycamore Partners, WeWork)

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Dividend Recaps. Apparently they are not an exclusively American phenomenon. 

Golf. The best one of us shot a 125 last week so take what we're about to say with a (bitter) grain of salt: golf is pretty lame. Okay, fine, we'll backtrack and admit: we're getting into it but we definitely can see why millennials aren't biting, why Golfsmith filed for bankruptcy and why Nike straight-up cancelled its golf line. Still, a lot of lawyers, bankers, investors, (douchebags,) and advisors play. Perhaps that has something to do with the fact that golf is, in the words of Malcolm Gladwell, "crack cocaine for rich white guys." Read: a lot of you. Which is why we're bothering to mention it. Anyway, speaking of Gladwell, the new season of his solid podcast is up and you can listen to his first episode on the subject of golf here. It's worth the time - especially if you live in Los Angeles. 

Molycorp. Lots of fighting going on over the rare metals miner.

Sycamore Partners. The private equity shop is reportedly nearing a deal for Staples ($SPLS) for a reported $6b. 

WeWork. What happens to the upstart when the cycle turns? We reckon a lot of 363 lease rejections motions, that's what. 

Sporting Goods (Amazon Can Derelict Our Balls)

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The past few years haven't been kind to the sporting goods and outdoor retailers with The Sports Authority, Eastern Mountain Sports (twice), City Sports, Golfsmith, Gander Mountain, MC Sporting Goods and JackRabbit Sports going bankrupt or being sold for parts. Now word is via Goldman Sachs that large brands like Nike ($NKE) will use Amazon's distribution channel directly and for exclusive products in an attempt to capture more of the millennial market. The news sent Foot Locker ($FL) and Dick's Sporting Goods ($DKS) stock reeling. This also doesn't bode well for the likes of Hibbett Sports Inc. ($HIBB). 

Interesting Restructuring News

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  • Grocery. Cerberus Capital Management-owned Albertsons is reportedly in talks regarding a possible take-private buyout of publicly-traded grocer Sprouts Farmers Market ($SFM). Given the tough grocery environment, this is an interesting development. And it may get EVEN MORE interesting given this.
  • Oil&Gas. Crude stockpiles hit a modern record this week as American producers basically flick off Saudi Arabia/OPEC and produce, baby, produce. Crude priced down to ~$48/barrel. This - and the embattled state of Seadrill Ltd. - isn't stopping John Fredriksen from looking at picking off offshore assets. Speaking of offshore assets, the oil players are going face-to-face with power suppliers - for wind. Meanwhile, a dissenting view relating to the effect of the rise of electric cars on oil demand (paywall). Elsewhere, in Canada...
  • Retail. Bebe Stores Inc. ($BEBE) is plans to shut down its brick-and-mortar locations and become an exclusively e-comm brand - a plan that depends on the sudden charity of landlords who have shown ZERO propensity for flexibility with retail tenants. Seriously, like, ZERO. See, e.g., THE TRAIL OF RETAIL CORPSES LINING THE 2017 BANKRUPTCY ROLLS. Meanwhile, Land's End ($LE) continued to suffer from its association with Sears while reporting a perfect storm of, wait for it...decreased net revenue, decreased catalogue and e-commerce revenue, decreased same-store sales, and worsening gross margin. J.Crew  reported sliding sales, revenue and same-store comps but nevertheless reported a (very) small profit - largely on the back of Madewell. And then there is Nike ($NKE) which, in its quarterly report, noted increased profit but modest sales growth in the face of online shipping headwinds.
  • Retail II. Uh oh. It appears that Walmart may be getting it's (e-commerce) sh*t together which doesn't bode well for brick-and-mortar already suffering from the Amazon onslaught. Speaking of which, peace out Payless Inc. Wethinks we'll soon be saying "peace out" to a bunch of Chinese shoe manufacturers on top of the thousands of American jobs that will be wiped out. But dividends for Golden Gate Capital and Blum Capital Partners!
  • Rewind I: We have taken a little bit of heat for two mentions of 3D-printing in this newsletter; we have been accused of over-hyping the technology and its near-term ramifications. Well, noting the Adidas announcement this week, have we?? 
  • Chart of the Week: 

News for the Week of 12/04/16

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Filings down this week so packing in the news...

  • Aeropostale. Cascading effect. American Eagle Outfitters blames Aeropostale's going-out-of-business sales for same store sales declines and lowered forward guidance. Seems, however, that the pain is more widespread than that: this week mall retailer Express Inc.'s stock got trounced after reporting YOY net and comp sales declines (silver lining: e-commerce sales were up 15%). E-commerce isn't immune to downtrends either: Bodybuilding.com laid off 90 workers this week with minority owner Ryan DeLuca stating the VERY obvious, "E-commerce is tough and getting tougher with competition from Amazon and thousands of others." 
  • Salus Capital. The zombie that was once Salus Capital is in the news again as it funds the Chapter 11 wind-down of Hampshire Group.
  • Sobey's. Another deadbeat (Canadian) grocer. Apparently the synergies expected from buying Safeway's Canadian stores haven't come to fruition.
  • Solar. A synopsis of the industry's convergence with restructuring and challenges that lay ahead.
  • Fast Forward: Many are now starting to call Uber's business model into question: an argument made easier by a $1.2b cash burn loss in the first six months of '16. 
  • Rewind I: Cosi Inc. was unable to find a new buyer, settling, in the end, on a $10mm sale to the original stalking horse bidder (including a credit bid).
  • Rewind II: Nasty Gal. If this report is true, there is something strangely disturbing about a company called "Boohoo" buying another called "Nasty Gal." 
  • Rewind III: Bennu Oil & Gas, LLC filed for Chapter 7 weeks after the involuntary chapter 11 filing against its subsidiary, Bennu Titan. Last week we discussed feasibility and the (seeming) proliferation of Chapter 22s. This story is too brutal to even be a 22.  
  • Chart of the Week: This International Energy Agency chart forecasts that we've reached peak oil demand. Still, tepid interest in Verengo Inc.'s SoCal solar assets (no bid topping stalking horse: effectively sold for credit bid).

Chart of the Week II: Nike. The sneaker manufacturer announced this week that it would skip conventional wholesale channels like Dicks Sporting Goods, Foot Locker and others and sell its self-tying $720 HyperAdapt sneakers BtoC via its Nike+ app and at the NYC retail store. Clearly, Nike is paying attention to these recent consumer trends: