Weekly Roundup: It’s Tourney Time + Retail Rebound

Hey Influence Traders,

Its the weekend, which means its time for the Power Moves Weekly Roundup …

The Highlights

        • The NCAA men’s basketball tournament kicked off after being cancelled in 2020.
        • Twenty of 23 Biden cabinet positions are now confirmed.
        • The U.S. is starting to take a lead in its COVID response.
        • We lost an icon.
        • Retail is showing *some* signs of life … with big real estate investments.

DC Action

Confirmations seem to be coming in threes. This week we got three more:

        • Secretary of Health and Human Services, Xavier Becerra: The former attorney general of California will lead the agency that helps oversee the government’s response to the coronavirus pandemic.
        • He has not held any top health policy positions, but he is a true Washington insider, having spent almost 25 years in the House of Representatives, including sitting on the powerful House Ways and Means subcommittee, which oversees health issues.
        • This was a contentious pick, with a Senate vote of 50 to 49 and no Republican support.
        • United States Trade Representative, Katherine Tai: A House Ways and Means Committee trade lawyer and former China enforcement head at The Office of the United States Trade Representative, Tai will now lead the USTR.
        • She is considered a hardliner on dealing with Beijing on issues such as intellectual property rights, but also understands that we need to have a trade relationship with China, which could be why she received a rare unanimous Senate vote.
        • Administrator of the Small Business Administration, Isabel Guzman: The Director of California’s Office of the Small Business Advocate and a former Obama administration SBA employee will take control of the agency tasked with doling out relief money to employers struggling to deal with the pandemic.

She was confirmed 81 to 17.

We are still waiting on the confirmation of Marty Walsh as the Secretary of Labor, Eric Lander as the Director of the Office of Science and Technology Policy and a replacement candidate for Director of the Office of Management and Budget after Neera Tanden’s withdrawal.

Power Mover of the Week

Nominees: Underdogs and the NCAA – in case you haven’t figured it out yet, I’m a huge NCAA basketball fan.

 My Duke Blue Devils are out, my Villanova Wildcats are still in, but some underdogs have made #PowerMoves this first week, which is good for the TV ratings for the tournament.

We had 10 first round upsets, including No. 15 Oral Roberts knocking off No. 2 Ohio State and No. 13 Ohio taking out defending champs No. 4 UVA.

Last year’s tournament was cancelled due to COVID, which caused the NCAA to lose almost $800mm in media and ticket sale revenue.

Insurance covered $270 million of that loss, but it still stung.

In 2019, the NCAA March Madness tournament generated $1.18 billion in television ad spend for CBS (Ticker: VIAC) and Turner Sports (Ticker: T), with those networks paying a little more than $800 million for the current rights package.

Gambling will also benefit … the American Gaming Association estimates that more than 47 million people will place wagers on this year’s tournament, with 17.8 million individuals betting online.

While venue capacity is at just 25% capacity, local hotel/restaurants will not see their normal flow, although anything is better than last year.

But my Power Mover of the Week is – Retail Sales

Retail businesses are ramping up with some big infrastructure investments (see a theme here?).

Power Loser of the Week

Once again, it is a long and distinguished list of candidates:

        • Andrew Cuomo: Again, and just because. He still won’t resign despite the FBI now launching a formal investigation into his staff’s cover up of nursing home deaths.

        • Millennial Pot Smokers: This past week dozens of White House staffers were suspended, asked to resign, or forced into a remote work program because of their past marijuana use.
        • Young White House staffers had revealed their use of cannabis in an official document they were required to fill out as part of the background check to work at the White House, but they were assured by officials in Biden’s progressive administration that recreational marijuana use would not be a disqualifying factor.
        • Apparently, the Vice President’s public pronouncements of past use do not qualify.
        • My Wife: She has a visceral reaction to insects, and the once-every-17-years cicada swarm is coming.
        • Beginning in late April or early May, once the ground is warm enough, billions of Brood X cicadas will be seen across a dozen states … including New Jersey.
        • The Olympics: Spectators from overseas will not be allowed to attend the Summer Olympics in Japan. This is a major blow to travel and tourism, which rake in hundreds of million of dollars on these events.
        •  International ticket holders will now have to go through the process of seeking refunds.

But my Power Loser of the Week is … the World, because we lost an icon named Dick Hoyt.

I say that with a caveat, as Dick was a tremendous source of inspiration and is leaving the World a better place than when he found it.

I had the pleasure of knowing Dick, so please indulge me. He and his son Rick, who survives him, were collectively known as Team Hoyt, and were the embodiment of the term “inspiration.”

Dick Hoyt was a familiar sight at marathons and Iron Man competitions, pushing his son Rick, who has cerebral palsy, in a wheelchair.

Prior to Rick talking his dad into running for a classmate’s charity, Dick had never run a race. But after that, Rick told his dad that racing with him made him feel like he was not disabled.

In the end, they completed more than 1,000 races together, many in astonishing times.

Their best finish was at the 1992 Marine Corps Marathon where they finished first in Dick’s 50-59 age group with a time of 2 hours, 40 minutes, 47 seconds.

But the Boston Marathon was their race — they successfully ran it 32 times.

In triathlons, including six Ironman distances, Dick pulled Rick in a boat for the swimming legs

In 1992 they successfully biked across the entire U.S.

Dick passed away this week at age 80 — and his story inspired millions.

The World of Retail

Offices, malls and restaurants have been shuttered by the pandemic and now sit dormant.

This will have a massive impact on municipal budgets that rely on property taxes.

According to Moody’s, the hardest-hit categories are the office and retail sectors, with values declining by 12.6% for offices and 16.5% for retail.

Unused space in San Francisco increased nearly 75% last year, while empty office space increased more than 25% in Los Angeles, Seattle and New York City.

As we’ve discussed recenty, D.C. has made #PowerMoves to shore up the economy, which has resulted in brighter economic forecasts than anticipated.

Importantly, consumer spending is nearly back to its pre-pandemic level and households are sitting on trillions of dollars in savings that could fuel an epic rebound.

Although retail sales saw a 3% drop in February, it followed a 7.6% surge in January fueled by stimulus checks.

A new round of checks coming bodes well for retail sales.

Walmart (Ticker: WHT) recently reported a record $151 billion in fourth-quarter revenue, which was up 7.3 percent from a year earlier.

Target (Ticker: TGT) also reported an increase in the same period, with a surge in curbside pickup.

New Locations

For the first time in many years, retailers are planning to open more stores than they close …

Businesses such as Dick’s Sporting Goods (Ticker: DKS) and TJ Maxx (Ticker: TJX) are taking advantage of cheap rents and more flexible lease provisions to open new locations.

According to Coresight Research, retailers in the U.S. have announced 3,199 store openings and 2,548 closures year-to-date.

The number of openings is on track to top those from 2018 and 2019.

With mall and shopping center owners desperate to fill empty space, retailers hold a lot of power at the negotiating table.

In New York City, for example, retail rents are down 25% from 2019 levels.

The Dollar is Strong

One retailer that is making a Power Move is Dollar General (Ticker: DG).

DG has often shied away from going toe-to-toe with some of its bigger competitors, like WHT, opting for smaller stores in areas away from WHT’s supercenters.

But with the buyer’s market and research that its few large format stores outperform, DG is planning to open numerous larger-format concepts.

While many competitors are being cautious and opening smaller locations, DG Chief Operating Officer Jeff Owen said on a recent analyst call that they have the capacity to better serve their more remote target markets.

While getting larger, at roughly 8,000-square-feet, DG’s bottom-of-form allocations will still be a fraction of the size of WHT stores, which range from 38,000 to 182,000 square feet.

DG is based in Tennessee and is planning to open 1,050 new locations this year nationally. The company has just over 17,000 locations and believes that the U.S. could absorb double that.

With that said, DG missed a recent earning’s forecast that drove its share price down 7.5%.

But I like its #PowerMove and am keeping an eye on this name …

Cutting Through the Noise for You.

Frank

 

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