Some Positive Trade Show News; Emerald Exhibitions to Acquire the SIA Show

Finally, some positive movement in the trade show space.  I’ve hung back on writing about this for a few days but SIA President Nick Sargent sent out an email to all SIA members announcing and describing the deal, which is subject to approval by SIA’s premium members.

The email from Nick was labeled “CONFIDENTIAL: DO NOT SHARE OR FORWARD,” so naturally everybody in the industry who’s not in a coma now knows about it and has a copy.

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“Sacrifice a Little Growth…for Quality.” VF’s March 31st Quarter

Well, there you have it.  At some level, it is that simple.   But let me complete CFO Scott Roe’s comment in the conference call.  “…we are sharply focused on fundamentals and willing to sacrifice a little growth in the near term for quality. Our efforts are clearly paying off in the gross margin line. And we believe our decisions will improve the long-term health of both our brands and the marketplace.”

They improved their gross margin 1.3% (remember that’s a mixed retail and wholesale gross margin and, unfortunately, they don’t break it down between the two).  Distribution matters these days in brand building, and you can afford to give up some sales if you increase your gross margin that much.  In fact, I’d suggest you get that margin increase precisely because you made some distribution decisions that improved the “quality” of your sales.  Scott notes later, referring to off price business, that they’ve “…already cleaned a lot of that up.”

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Retail, Technology, Consolidation, and Unintended Consequences

This morning, the Seattle Times featured this article telling us that REI wage hikes for store employee announced last summer will be costing the company $24 to $25 million.  The company’s net income for its last complete year was $38.3 million.

Meanwhile, my oldest son sent me this article from Investor’s Business Daily, telling us that fast food purveyor Wendy’s will have self-service ordering kiosks in 6,000 restaurants in the second half of this year due to rising minimum wages and tight labor conditions.

I’ve been writing about the potential impact of 3D printing and other kinds of manufacturing technology for a while.  Here’s my article on the apparel manufacturing system Intel plans to introduce.

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Zumiez’s New Concept Store

Zumiez has been telling us for some time now, correctly I think, that they are approaching the number of Zumiez stores the U.S. market can support.  They ended their January 31 year with 603 U.S. stores.  No doubt they will continue to selectively open (and close) stores and there is certainly no exact number of stores this market will support.  However, I’m guessing that the number has declined due to a weak economy, an over retailed market, and Zumiez’s omnichannel influenced “trade area” strategy.

That strategy focuses on having the right number of stores in each geographic area given ecommerce and the way Zumiez’s customers are choosing to shop.  Its focus is maximizing revenue in each area.  Its premise is that opening more stores isn’t the only, or even the best, way to do that.

But Zumiez is a public company.  Growth matters, though CEO Rick Brooks (along with some other CEOs) is trying to get the Wall Street community to focus a bit more on the bottom line rather than the top.

I guess after the initial shock you get when something new and different happens, I wasn’t that surprised to see Zumiez’s new concept store WAYWARD open in this Bellevue, Washington mall two stores down from the Zumiez store.  Here’s a picture of the entrance.

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Emerald Exhibitions- Owner of Surf Expo, Outdoor Retailer, Interbike and Others- Going Public. Why?

Last Week Emerald Exhibition (EE) filed the S-1 that includes the first draft of its prospectus to go public.  Because it’s the first draft a lot of information (like price per share and number to be sold) is missing.  Still, it’s worth a review.  We’ll summarize the company’s history and activities, look at the financial results, talk about their market and how they see themselves competing, and discuss why they are going public.  I also want to point out a risk factor they seem to ignore.

Who’s Emerald Exhibitions?

What is now called EE was acquired from The Nielsen Company by Onex in 2013.

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An Intriguing Transaction: GoPro Wants to Sell Some Debt.

GoPro’s press release of yesterday had the following title: “GoPro to Offer $150 Million of Convertible Senior Notes due 2022.”  Well, okay, they’ve run through a lot of cash lately.  That they might want to raise some makes sense.  We don’t yet know anything about the terms.  “The interest rate, conversion rate, offering price and other terms are to be determined upon pricing of the notes,” the press release says.

Here’s the link to the press release.  I’m hoping one of you who has more experience with this kind of deal might call me or post a comment on my web site explaining it.

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It’s Not All About the Omnichannel? Could That Be Okay? The Buckle’s Annual Report

The way The Buckle 10K and conference call come across, you can’t quite decide, at first read, if they’ve made a specific decision to focus on brick and mortar or if they are just way, way behind in online.  I think it’s the former given how they describe their business and how they compete.

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The U.S. is Tough on Another Company: Globe’s Half Yearly Results

Globe published its results for the six months ended December 31st on February 21st and I missed it.  Better late than never I guess.

Happily for Globe, its largest market in Australasia was strong because revenues in Europe and North American (NA) were down pretty dramatically.  Total revenues fell 10.6% from $79.1 in the six months last year to $70.7 million Australian dollars in this year’s six months. (all dollar numbers are Australian).  Australasia revenue, representing 58.4% of total revenue, rose 15.5% from $35.7 to $41.3 million.

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Zumiez’s Annual Report and Some Questions I’d Ask if I were an Analyst.

I’m always grateful when a company has a short 10K and conference call.  I’m efficient at spotting the meat in a 10K, but it’s easier when it’s 77 pages, as Zumiez’s was, instead of 177 pages.  Though when it’s 177 pages, there’s usually some really interesting stuff.

Zumiez doesn’t need more than 77 pages.  They pursue the general strategy they’ve pursued since the company was founded, they make money, and their balance sheet is fine.  They are dealing with the same crappy retail and economic environment everybody else is, they are impacted by it, and they are cautious about the future.  Ho hum.

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How Was VF’s Year?

It’s accurate to say that VF ran into the same issues and economic dislocations as other brands and retailers.  During their fourth quarter, ended December 31, 2016, revenues fell 2.7% from $3.41 billion to $3.32 billion in the quarter ended December 31, 2015 (the prior calendar period- PCP).  Net income was also down from $312 to $264 million, or by 16.7%.

For the year, revenue was almost the same at just over $12 billion.  Net income fell 12.8% from $1.32 in 2016 to $1.07 billion in 2015 (also the PCP).  More details and nuance later.  I wanted you to have those numbers as we talk strategy.

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