On Tuesday, UA announced its successful poach of McCreight from Sears Holdings
Is that good or bad?
Fair question. According to UA's press release, "Lands' End saw record breaking earnings growth" over the course of McCreight's tenure. Now, it's difficult to confirm or deny that characterization, because Sears Holdings does not break out the performance of its Lands End division. But that doesn't mean we're entirely bereft of insight into McCreight's performance. From Sears' most recent 10-K, describing the past couple years' performance at "Sears Domestic," of which Lands End is part:
Lands' End businesses contributed to the overall improved gross margins during fiscal 2006. As was the case within other apparel businesses during fiscal 2006, the improvement in Lands' End's gross margin reflected more extensive and effective use of direct-sourced merchandise, as well as the favorable impact of pricing initiatives and stronger in-season sales results.
McCreight also has experience in an area of particular interest to UA shareholders: The rising tide of unsold inventory. Continuing to read from Sears' playbook, in fiscal 2007: "the decrease in margin rate relates to markdowns taken to clear excess levels of inventory ... given lower overall sales levels in fiscal 2007." In short, this is one exec unafraid to bite the bullet. And that's good, because it's starting to look like inventories are mortally wounding margins at UA. (Meanwhile, gross margins at Nike
More of the same?
So here's what has me worried. Up until last quarter, UA had also been expanding margins. Today, inventories are up, and those margins are contracting. Sound familiar? Maybe I'm being overly cautious, but it sounds to me like McCreight got caught with his pants down at Sears, by the very same problem that's now dragging at UA's ankles.
Let's hope he enjoys better luck at his new corporate home.
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