Highlights from ICR

January 23, 2013

Last week Roulston Research attended the ICR Retail Conference and Miami. Below are our thoughts on the company presentations we attended:

Bob Evans (BOBE) – Has come a long way under CEO Steven Davis. They really have focused their food business and figured out the grocery store buying process. Restaurants are looking at take out as a good way to supplement the operational transition. Very impressed by management focus and understanding of the issues.

Wendy’s (WEN) – Breakfast returns to back burner and company focusing on other day parts.  Used to follow this much closer but couldn’t help but feel this story is same old/same old. Breakfast start and stops, new menu items that work and don’t, the” me too” of the big three (even though the best burger and salad option). Can’t see the compelling story.

B&G Foods (BGS) – Flying under the radar is an understatement. Niche products in niche categories have created good growth and returns. Not knowing much of the background this company is a well-disciplined player in the food space. 

Bravo Brio Restaurants (BBRG) – A niche market with a controlled growth strategy. Wonder why they are public but like the opportunities. They really get the real estate/demographic strategy it seems and lots of store growth potential. Would seem to be a nice fit in bigger company.

Denny’s (DENN) – Can’t help but like a company that recognizes the 3am customer as representing a different day part and demographic. This company has some growth plans that make it much less sleepy than at first glance. Can they grow it profitably? Can they improve operations? Some questions but also opportunity it seems.

 Krispy Kreme (KKD) – Flying under the radar they are focused on franchise expansion. Surprising recovery seems to be a result of recognizing they oversold the product thru non store growth(you could buy these doughnuts at one point everywhere). The question here is same store sales growth. They can grow thru attractive franchise attraction but how far?

Dunkin Brands Group (DNKN) – Going to California was the announcement. As the father of multiple recent college Alums this franchise expansion just seems to be a great alternative to Starbucks.  Their positioning is well thought out and the recognition of day parts in their thought process is  creative and refreshing.

SodaStream (SODA) – A well-capitalized marketing concept that is definitely gaining traction. WMT acceptance and new product development is bolstering the company. This is a paradigm changer. Can’t understand one thing-Who goes after them first in legacy soda biz?  Can’t imagine this company staying independent.

Cardtronics (CATM) – The ATM network space is intriguing. There is a data collection point in the transaction that players are starting to recognize. This company is struggling to monetize the regulatory changes happening. But the space has some interesting paradigm changes occurring.

 Express (EXPR) – As we saw on our mall tours they missed this year on both the fashion and store presentation. They say fashion (knits in particular) came back in later holiday. Let’s look at next store set but they missed at Christmas and this company is fashion sensitive.

Wet Seal (WTSLA) – Very impressed by new CEO appearing on day 10 at the conference. Goodman is impressive and seems very focused on the right ways to compete in fast fashion. With a crowded market place count us among skeptics.  This could be the sleeper as a great balance sheet and cash with the Clinton Group involvement could be interesting.

Pacific Sunwear (PSUN) –It seems the bleeding has stopped. Do they have a growth market? Is this truly a distinguishable brand for a worthwhile market? To many questions here it seems.

TJX Companies (TJX) – There are just some companies doing the right thing…seems like always. These guys are laser focused on productivity as if they were a manufacturer. Very impressive to find a retailer finding things to improve when macro trends already blowing winds the right way. Have a hard time believing this does not have more legs.

Limited (LTD) – Victoria Secret is the crown jewel as everyone knows and is growing and positioning very well. Just concerned as to what is next step here. Don’t profess to follow this closely.

Urban Outfitters (URBN) – Dick is back and it shows. After a stumble these guys in the mall tour seemed to be back on their game and it shows.  Controlled growth with some operational improvements and think this company is back in a good position. 

Body Central (BODY) – Needs a new CEO and soon. This seems to be a rudderless ship. Could this be a private equity opportunity? Not sure where it positions itself in the long run but needs management help.

Coldwater Creek (CWTR) – Every event like this has winners and losers. The management seems so in denial here that not only is it past being a short, but one has to wonder how a board could listen to the management. Not one answer to a question in 20 minutes seemed to be prophetic or insightful of any recognition that bad fashion in a declining demographic target is not a good recipe.

American Eagle (AEO) – On their game. Seemed to hit fashion right this holiday and yet management shows an ability to self-criticize that is refreshing.  There is some interesting growth in the story as Aerie has some interesting opportunities it seems and is getting some traction, granted from small base.  Management seems to be on their game here.

Cabela’s (CAB) – This is a niche growth company with stellar management in a space near and dear. It’s hard to believe what a category killer they are and yet how dominant their footprint can be in their space. Management knows the customer and knows their business.

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