Overheard On Wall Street: The Buzz On Kohl’s & Global Brands Group

Kohl’s Corp.

Athletic initiatives and its new plans to speed up supply chain operations could drive near-term upside at Kohl’s, UBS Investment Bank analyst Michael Binetti wrote Thursday.

Following meetings with the firm’s management, Binetti said he believes same-store sales at Kohl’s can accelerate in the second half due to easy weather compares and a favorable holiday calendar shift. But he expects the retailer’s efforts in athletic and supply chain to be a boon to near-term performance.

“While Nike grew 20 to 30 percent at Kohl’s each quarter in the past year, we believe Nike can still grow by double digits in ’16,” wrote Binetti. “Kohl’s is getting access to better product lately [such as Dri-FIT compression tops]. In our view, Kohl’s is benefiting from broader product allocation as Nike tries to replace lost Sports Authority sales.”

Binetti added, “Importantly, our industry checks suggest Under Armour plans to launch sportswear at Kohl’s by 4Q — on our store tour, we noticed Under Armour has started rolling out Connected Fitness wearables at Kohl’s, with Under Armour fixtures in store.”

On supply chain, Binetti was impressed by Kohl’s latest efforts to reduce inventory and react faster to trends via its “Speed” initiative.

“While several recent initiatives [beauty, loyalty] have seen mixed results, Kohl’s new supply chain ‘Speed’ initiative seems more significant,” Binetti said. “On our store visit, employees commented on faster replenishment and deeper inventories of hit product in juniors lately … ‘Speed’ could be a big help in reducing inventories [a multi-year problem] and in offsetting 30 [basis points] of [gross margin] pressure from [e-commerce] mix every year going forward.”

Global Brands Group Holding Ltd. & CAA Form Mega Deal

This week, China-based Global Brands Group announced that it has partnered with Hollywood giant Creative Artists Agency to form joint venture CAA-GBG.

The newly combined businesses, CAA-GBG, are being dubbed “one of the world’s largest global brand management companies” by the firms.

Global Brands, which spun out of supply chain management firm Li & Fung Ltd., will own a majority interest, at 72.7 percent.

The deal will see Global Brands combine its brand management division with CAA’s stable of celebrity clients, brands and licenses.

Clients of the new venture will include Coca-Cola, Jeep, Hershey’s, Jennifer Lopez, Eva Longoria and the Bob Marley estate.

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