August 8, 2016 Consensus

The Weekly Consensus – August 8, 2016 (Volume 8, Number 30)

The Big Story
RetailWire Discussion: Would Walmart + Jet.com be an Amazon killer?
By George Anderson, RetailWire

Walmart is in talks to buy Jet.com, according to The Wall Street Journal and other sources. The report has raised the question as to whether a union between the world’s largest retailer and the heavily-backed e-tail startup would prove an equal e-commerce match to Amazon.com.

The move by Walmart, should it prove true, speaks to both great opportunity and risk for the retailer.

The opportunity lies in the prospect of future retailing greatness for Jet, which is run by CEO Marc Lore who co-founded Quidsi (Diapers.com, Soap.com, etc.) only to sell it to Amazon for over $500 million in 2010.

Jet launched last year initially with the idea it would charge an annual subscription fee like Costco while promising low prices to its members. The annual fee was scrapped less than six months in as Jet sought to draw more shoppers to the site. Jet has remained true, research has suggested, to its low price mantra with retails that undercut both Amazon and Walmart. Much of its pricing power has come from the over $500 million in investments Mr. Lore has been able to attract from banks, mutual and capital venture funds.

The acquisition of Jet could potentially help Walmart reach new consumers and hasten growth in some product categories, according to data from Slice Intelligence’s panel of over four million online shoppers. According to its data analysis, Slice has found that Walmart.com’s customers tend to be more female, slightly older and less educated than Jet’s shoppers. While both companies are strong in online sales of electronics and the home & kitchen categories, a higher proportion of Jet’s sales come from grocery and health and beauty product sales than Walmart.

On the risk side, Jet is a long way from turning a profit. Much like the Amazon model, Jet has been primarily focused on gaining customers while being less concerned about profits. It has even sold goods purchased from other retailers at a loss to satisfy customers. Jet, according to the Journal, could be valued at up to $3 billion. As a point of comparison, Walmart paid $2.3 billion to acquire South Africa’s Massmart in 2010.

Discussion Questions: Does a Walmart acquisition of Jet.com make business sense? Do you think Walmart would seek to integrate Jet.com into Walmart.com or continue to run them as separate entities? How would Jet.com work with Walmart’s physical store locations?

Comments from the RetailWire BrainTrust:

Amazon killer? Nah. It might get Amazon to look over its shoulder a little bit, but Amazon’s 31 percent online market share isn’t evaporating anytime soon.

The people at Walmart aren’t dumb; they see something that they need in Jet. If they’re wrong, Big W can easily absorb a misstep. My guess is that the software for pricing and logistics is the real aspect of interest. They can set up a lot of warehouses for $1 billion and don’t need to buy into that. An immediate expansion of market demographic never hurts either.
Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive
What a terrible idea! Tying two bricks together won’t help either one float. Jet.com has been a mess since day one. Walmart needs a partner with a proven record of success to find a way to make online work for them. They should steer far away from this losing proposition. They’d be overpaying at even half of the reported price.

Peter Fader, Professor of Marketing, The Wharton School of the Univ. of Pennsylvania

Walmart has struggled with e-commerce, so it might see Jet, particularly its executive team, as a good way to challenge Amazon, but Jet is a money-losing, unproven entity without a strong consumer base. Any way you look at this, it’s a risky investment for Walmart. And it’s much too early to tell how Walmart might integrate Jet into its business.

Max Goldberg, President, Max Goldberg & Associates

A combined Walmart and Jet wouldn’t pose an existential threat to Amazon, but Walmart would gain access to an elusive shopper segment, great talent and solid technology. And Jet would benefit from Walmart’s scale and sophisticated supply chain.

Both businesses share a focus on low prices and value for both everyday essentials and higher-margin discretionary goods, and Walmart is under pressure to do something bold. It’s no silver bullet, but it makes sense to consolidate when no one but Amazon is growing at 1.5 to 2x the online market organically.
Keith Anderson, VP, Strategy & Insight, Profitero

I think it makes a ton of business sense, but more because Walmart buys a legitimate marketplace than because of the new categories and, even more importantly, it buys the algorithm.

I don’t think a lot of people understand what the algorithm does … it calculates optimal distribution points and adjusts shipping charges accordingly. That’s a very short description of a very complex thing.

So I think it’s a good move that poises Walmart for better growth potential than it has solely with walmart.com.
Paula Rosenblum, Managing Partner, RSR Research

If you are going to compete with Amazon you have to be as ubiquitous as Amazon and this doesn’t do it. Will it add some scope to the Walmart.com business? Yes. Will it add some, I emphasize “some” customers? Yes. Will it challenge Amazon? Probably no more than Walmart.com already does from a marketing or market position.

So why are they doing it? I am guessing it is for the systems that Jet.com has developed. Walmart.com is a bit clunky, though getting better. They have to be smoother online and always more efficient in logistics. Perhaps Jet.com helps them there.
Gene Detroyer, Professor, European School of Economics

Walmart’s acquisition of Jet is predicated on the belief that customers will turn to the Web to order household staples. While some people probably will, you have to assume that busy moms who have to head to the grocery store anyway (for produce, meat and dairy items) will likely purchase their cat litter and diapers there too. Color me unimpressed, especially at a rumored $3 billion price point.
Cathy Hotka, Principal, Cathy Hotka & Associates

This would be a great deal for Jet.com since it would guarantee them what they have always searched for — a profit. But for Walmart? Sure, they can afford it in the short-term, but can they make it work over time? That’s a much tougher question. Amazon’s strength isn’t so much in logistics anymore, it’s in building multiple touch points to an increasingly loyal customer base and attracting new customers with technologies such as voice activation, instant reorder, etc. That’s much harder to compete with.

If Jet.com were to be integrated into Walmart the results are likely to be disastrous. You are talking about two radically different cultures — cultures which might have a hard time integrating.

As to how the two entities might interact we could easily see the “no-brainers.” Jet.com-ordering kiosks, in-store pickup, etc.
Ryan Mathews, Founder, CEO, Black Monk Consulting


Read the entire RetailWire discussion:

Apparel & Footwear

How Ding Shizhong Made A Business Out Of His Love For Shoes

Ding Shizhong is passionate about sports shoes. So much so that the self-made billionaire says that he sometimes wears up to three different pairs in a single day when trying out the newest designs from his company, the Chinese sportswear giant ANTA.  “My first job was in shoes and shoes have never left my life ever since,” Ding says.  ANTA began as dream Ding had when he was 16 to lighten his family’s financial burden. He first began by selling shoes that his father made at home, eventually starting ANTA in 1994 as China’s planned economy was transitioning to a market economy.  The 2008 Beijing Olympics that were a key illustration of that transformation proved to be a mixed bag for the company. Sportswear brands benefited from the surge in interest in sports and the accompanying increase in purchases of sporting equipment and garb in China.  However, this collective optimism quickly led to an oversaturation in the local sportswear sector. ANTA soldiered through this slowdown in sales with a spate of store closures, shrinking its store count of 8,000 at the time by more than 2,000 in 2009. The company operates 7,000 ANTA stores today.  Nevertheless, Ding says this setback proved to be a catalyst that led to a change in ANTA’s business operations. The company crafted a multi-brand strategy to engage the diverse Chinese consumer market and subsequently acquired Italian sportswear brand Fila’s loss-making China arm in 2009. The strategy positioned the ANTA label as a mass market brand while Fila targeted the high-end sports market that ANTA had been unable to capture.  The company currently runs 600 Fila stores in China and Ding says his target is to hit 2,000 Fila stores in the future. Fila revenues have been growing at an average of 40 percent over the past five years.  Also part of ANTA’s multi-brand strategy is its joint venture with the Japanese brand Descente, which specializes in winter sports equipment and apparel.

L Catterton Acquires Hanna Andersson

L Catterton has acquired premium children’s apparel and lifestyle brand Hanna Andersson from private equity firm Sun Capital Partners.  Terms of the transaction were not disclosed. Adam Stone will continue to lead the Hanna Andersson brand as its president and chief executive officer. The Swedish-inspired children’s brand is part of what L Catterton describes as a “growing $7 billion premium children’s wear market.”  Kellwood acquired Hanna Andersson in July 2007 for $175 million from private equity firm Castanea Partners. Sun Capital Partners subsequently acquired Kellwood in February 2008 for $767 million, including Kellwood’s net debt. Along with Gerber Childrenswear, Hanna Andersson was part of a spin-off in November 2008 to Childrenswear, an affiliate of Sun Capital, with each one operating independently within Childrenswear. Gerber was sold to Providence Apparel in 2013.  L Catterton’s current and past investments in premium retail brands include Pirch, Sweaty Betty, Worth, Restoration Hardware, Baccarat, John Hardy, CorePower Yoga,Frédéric Fekkai, Pepe Jeans and Sandro & Maje.

Tengram Acquires Majority Stake In Algenist

Private equity firm Tengram Capital is buying a majority stake in prestige skin-care brand Algenist for about $20 million. Tengram is acquiring the stake from biotechnology firm TerraVia.  Algenist makes antiaging and color correcting skin-care and cosmetic products that use alguronic acid and microalgae oil, which was created by Terra Via. The brand launched in 2011 and is distributed in 23 countries through Sephora, Ulta Beauty and QVC. Under Tengram, Algenist chief executive officer Frederic Stoeckel will continue to lead the brand.  “What’s key is the fact that we are becoming a standalone entity with Tengram, and that’s going to be with the support and the means we need to keep growing the brand,” Stoeckel said.  The brand had about $23 million in product revenue for 2015, down about $1.2 million from the prior year, according to a filing with the U.S. Securities and Exchange Commission. That drop was attributable to fewer airings on QVC.

Kate Spade Misses Profit Estimates, Slashes Full-Year Forecasts

Accessories and apparel maker Kate Spade & Co slashed its full-year sales and profit forecasts, sending its shares down more than 20%.  The New York-based company also reported a lower-than-expected profit for the second quarter as a strong dollar discouraged tourists from shopping at its stores.  With demand for luxury handbags slowing in North America, Kate Spade has been adding new product categories, including apparel and furniture, to develop into a lifestyle brand.  Kate Spade’s comparable sales, including online sales, rose 4 percent in the quarter, but widely missed the average analyst estimate of a 13.1 percent rise, according to research firm Consensus Metrix.  The company struggled in its “bricks and mortar channels, where we saw lower traffic and transaction size in our tourist-dependent stores” due to foreign exchange headwinds, Chief Executive Craig Leavitt said.  “Key sale events fell short of our expectations as customers look for deeper discounts, a trend which negatively impacted both total sales and comps this quarter,” he said.

Steve Madden Stock Slips

Steve Madden’s shares remained in the red on the heels of a softer-than-expected second-quarter earnings release.  Chairman and CEO Ed Rosenfeld said the company saw “robust” gains in the wholesale divisions of its branded women’s business and Dolce Vita line, but a sluggish private-label shoe business and disappointing orders from some international distributors have posed challenges.  “While our owned and joint-venture international businesses are on plan, we have seen a slowdown in orders and shipping to our distributors in Asia and the [United Arab Emirates],” Rosenfeld said.  Madden’s chief also said that the company’s private-label business has struggled with initial orders; boot orders in particular are coming in below the firm’s expectations.  Steve Madden’s Q2 net income increased 0.7 percent in the quarter, to $24.7 million, or 42 cents per diluted share, from $24.5 million, or 40 cents per diluted share in the comparable period. Those results were in line with analysts’ forecasts.  Revenues, which gained 0.6 percent year-over-year, to $325.4 million, missed analysts’ expectations for revenues of $329.5 million.

Fast fashion has made some of the richest men on Earth

When you think of the industries that allow a person to acquire a massive fortune—the kind that makes them the wealthiest person in a country, or continent—your mind probably goes to fields such as technology, or oil.  But clothes, and especially cheap clothes have turned out to be a surprisingly good route for many of the richest people and families on the planet.  Stefan Persson, chairman of H&M and a member of the family that owns the label, is Sweden’s richest person, holding an estimated fortune of $20.2 billion as of Aug. 1, according to Forbes.  You might suspect Japan’s richest person would own an electronics or automotive company, but it’s Tadashi Yanai, founder of Fast Retailing Co., which makes more than 80% of its sales from Uniqlo. He and his family hold $17.1 billion as of Aug. 1, and he’s maintained his position as Japan’s richest despite a $4.8 billion drop in his wealth in the past year.  Then there’s Amancio Ortega, founder of Inditex, the parent company of fast-fashion pioneer Zara. He is the richest person not just in Spain, but in all of Europe. His fortune of $75.1 billion as of Aug. 1 puts him second on Forbes’ list of the world’s billionaires, and for a brief moment last year he even overtook Bill Gates as the world’s wealthiest person.  Additionally, the Brenninkmeijer family, which owns fast-fashion label C&A, is reported to be the richest in the Netherlands. Ireland’s richest family for eight years running is the Westons, owners of fancy department store Selfridges, but more importantly of the growing and incredibly cheap chain Primark.  Clothing, being a basic necessity, is always going to be a big seller, but the fortunes made by these labels are revealing. All sell cheap, trendy fashion.

Destination Adds Turnaround CFO

Destination Maternity Corp. has named David Stern, who took the top financial jobs at troubled Philadelphia-area retailers Pep Boys and A.C. Moore before they were sold, as Executive VP and Chief Financial Officer, in charge of finance, accounting, real estate, loss prevention and procurement.  Sales, profits and share values for the 1,500-store motherswear chain have fallen since 2013, when Destination began moving its headquarters from Philadelphia to Moorestown to accomodate expected growth and exploit a $40 million New Jersey financial incentive package.  Sales peaked at $545 million in 2011; analysts expect they will be below $500 million this year, according to Bloomberg LP data. Profits were over $20 million in each of 2011-13; Destination is expected to post a second straight loss this year. The stock has traded below $6 lately, from a peak above $30 in 2014.   Stern held the same titles — EVP-CFO — at North Philadelphia-based garage and auto-parts store chain Pep Boys-Manny Moe & Jack when it was for sale from 2012-2016.

Athletic & Sporting Goods

Nike Exits Golf Club Business, Tiger Woods to Search for New Clubs

In a shocking announcement Nike, the sports equipment and apparel giant said that it intends to refocus its efforts on golf shoes and clothing, and away from clubs, balls and bags.  It remains unclear how this decision will affect Nike’s star-studded roster of golfers, which includes Tiger Woods, Rory McIlroy and Michelle Wie.  Nike was in the golf equipment arena a relatively short time. It began selling golf balls in 1999, and in May 2000, Woods ditched his old wound balata for the new solid-core Nike Tour Accuracy ball.

Why Adidas Is Outperforming Nike, Under Armour

Adidas—the world’s second largest sportswear maker after Nike—delivered further proof that it is on a path toward victory. Fiscal second quarter sales in the North American market jumped 23% from a year ago, following double-digit gains in the first quarter and for the full fiscal 2015 year.  Growth has been fueled by many of the key levers that King called out, including a 60% increase in sales for “originals” and running footwear for the first half of the year. For the running business, sales have benefited from continued strong consumer interest for Adidas’ Boost technology, as well as impressive strong sales for the newer $100 AlphaBOUNCE shoe.

Can Camping Get Rid Of Its ‘Sufferfest’ Image?

Camping isn’t just for campsites anymore. “The outdoor industry is trying to come to grips with the other ways people camp and use the equipment,” said Eureka Product Manager Paul Leonard. And the alternative to traditional backcountry overnights isn’t just car camping, he said. It could be by bike or motorcycle, or at music festivals, sporting events or someone’s private farmland.  That has opened up a flood of opportunities for tent, sleeping bag and camp furniture designers to focus on the “user experience” beyond making next year’s gear just lighter.  “Being a product guy, it’s nice to see that refreshed focus — it’s not just ‘light to be light’ anymore,” Leonard said. At the summer shows we’re also seeing plenty of designs that will spur inspiration moments from consumers on the retail floor — ‘If I connect these two tents and vestibules, I can fit my bike in here, with a place to put the beer cooler over there and games table here…’ It’s a real estate deal waiting to be closed.  Still, lightweight remains an important selling point, and perhaps even more so, gear that packs down to a small size and is easily transportable for grab-and-go adventures. Core outdoor enthusiasts may have plenty of room in the Jeep, but urban millennials will have less space in the sub-compact, or may even be catching an Uber or Lyft to the trailhead or outdoor event.  And while all the party tents and fancy designs (including plenty of prints coming to camping hardgoods) are getting much fanfare, specialty retailers are telling brands that traditional tents are still their big sellers.

Cosmetics & Pharmacy

Teva To Acquire Distributor Anda From Allergan

Teva will be acquiring from Allergan its distribution business Anda, the two companies announced Tuesday. The $500 million deal will see Teva bringing under its wing the fourth-largest generics distributor in the United States.  Anda’s generics, branded and OTC pharmaceutical distribution encompasses more than 300 manufacturers and the products reach retail and chain pharmacies, nursing homes, mail-order pharmacies, hospitals, clinics and physicians’ offices. Anda is expected to generate more than $1 billion in third-party net revenue for the full-year 2016. The acquisition will bring three distribution centers with more than 650 total employees to Teva, one in Olive Branch, Miss.; another in Weston, Fla.; and third in Groveport, Ohio.  The companies expect the deal to close in the second half of 2016.

CVS Health Adjusted Earnings For Q2 Exceed Estimates

CVS Health reported an increase of 17.6% in net revenues for the three months ended June 30, 2016, to $43.7 billion. Revenues in the Pharmacy Services Segment increased 20.7% to $29.5 billion in the three months ended June 30, 2016, which CVS Health attributed to an increased pharmacy network claim volume and growth in specialty pharmacy.  Same-store sales increased 2.1% versus the second quarter of 2015. Pharmacy same-store sales rose 3.9% and pharmacy same-store prescription volumes rose 3.5% on a 30-day equivalent basis. Pharmacy same-store sales were negatively affected by approximately 355 basis points from recent generic drug introductions. Front store same-store sales decreased 2.5%, including the effect of the shift of Easter from April in 2015 to March in 2016, which resulted in a decrease in front store same-store sales of approximately 80 basis points. Front store same-store sales were also negatively affected by softer customer traffic, partially offset by an increase in basket size.  For the three months ended June 30, 2016, consolidated operating profit increased $88 million, or 3.9%. Excluding acquisition-related integration costs of $81 million in 2016 and acquisition-related transaction costs of $21 million in 2015, consolidated operating profit increased 6.5% to $2.4 billion for the quarter.

Discounters & Department Stores

Walmart Buys Jet.com

It’s official. Walmart is purchasing nascent e-tailer Jet.com for $3 billion.  The world’s largest retailer said a portion of the $3 billion will be deferred over time including $300 million of Walmart shares.  Walmart is attempting to close the online gap between itself and its primary rival, Amazon. While Walmart rung up $14 billion in online sales last year, Amazon’s approached $100 billion and it is growing sales at a much faster pace than Walmart.  Jet’s co-founder and CEO Marc Lore will be retained to run Walmart’s entire U.S. e-commerce operation and continue to run Jet.com as a standalone site. Lore will report to Walmart CEO Doug McMillon.  Lore founded Jet.com in 2014 as an online-only retail discounting site but has yet to show a profit. His first foray into e-tailing, Diapers.com, was sold to Amazon in 2011 for $550 million.

Plus-Size Fashion Is Having a Moment

lus-size is a fashion victim no more. As newcomers jump into the space and established retailers expand their offerings with new collections and collaborations, the $20.4 billion category is finally having a moment. And considering the average American woman is 166 pounds and a size 14, according to the most recent Centers for Disease Control and Prevention report, it’s about time.  “You’ve got retailers giving plus-size women real options in fashion—not just clothes that feel dowdy or oversized—trendy clothes that are made for her,” said Hans Dorsinville, exec VP-senior creative director at Laird & Partners, a 13-year-old agency that works with a host of retailers including Lane Bryant.

Online Razor Brand Harry’s Is Coming To A Target Near You

Harry’s, the online-only shaving brand and subscription service is becoming IRL.  Starting on Sunday, August 21, the direct to consumer company will be taking small real estate at Target retailers nationwide. Harry’s will start shipping its products to Target via Target.com on Wednesday, August 10.  “It’s a big moment for us, of course, to be able to offer our products at a place like Target,” said Jeff Raider, co-founder of the brand, to Mashable, at the Harry’s offices in NYC. If his name sounds familiar, it’s because it is. Raider is the same co-founder who also launched another successful startup called Warby Parker, now worth over a billion dollars.

Grocery & Restaurants

Supervalu Will Consider Save-A-Lot Sale

In an apparent acknowledgement of reports that several private equity firms would bid to acquire Save-A-Lot, Supervalu said that it still intends to move forward on a plan to spin off the discounter to shareholders, but is also considering an outright sale.  In a statement, the Minneapolis-based wholesaler “reaffirmed that it is preparing for a separation of its Save-A-Lot business. As part of that process, Supervalu has pursued and continues to pursue a spin-off of Save-A-Lot,” as described in registration forms with federal securities regulators.  “Supervalu is, however, prepared to consider other alternatives to improve stockholder value, and in this regard is also evaluating a possible sale of Save-A-Lot,” the statement continued.  Reuters last week reported that as many as six private equity firms had sights on acquiring Save-A-Lot, the discount division that Supervalu has been preparing to spin off for more than a year, and that they were preparing bids at auction.

Federal GMO Labeling: 3 Things To Expect

Last month, President Obama signed the federal GMO labeling bill into law, which immediately nullified state-based GMO labeling mandates like that of Vermont’s. Under the program, disclosure will take the form of messaging on a product, a symbol, or QR code that consumers may use to find out more information. Small food manufacturers can comply by using a phone number or URL. Here are three other things to expect from the federal GMO labeling program.  Compliance is up to three years away: “Technically the act provides for two years, but part of the issue is there isn’t even a definition yet about what constitutes bioengineered food, so there is likely going to be a lot of back and forth during a public comment period.  Products derived from animals fed GM feed will be exempt: “The bill specifically excludes from the definition of ‘bioengineered food’ animal products, so meat for example, that’s been fed genetically engineered feed.”  The USDA will develop the standards: “The law provides that the standards will be developed by the Ag Department.  Advocates for the bill felt that the USDA would provide a more business-friendly approach than would the FDA.”

Noodles & Company Plans To Streamline Menu, Slow Unit Growth

Noodles & Company officials outlined a turnaround plan that includes the streamlining of its menu, slowing new unit growth and building off-premise sales.  The Broomfield, Colo.-based company also announced the departure of chief marketing officer Mark Mears as part of a corporate restructuring. Last month, the company’s chair and CEO Kevin Reddy resigned.  Mears joined the company in June 2015. His duties will be absorbed by the existing marketing team, said David Boennighausen, chief financial officer and the chain’s interim CEO.  Noodles & Company swung to a net loss of $14.1 million, or a loss of 51 cents per share, for the June 28-ended second quarter, compared with net income of $3.1 million, or 10 cents per share, a year ago.  As previously announced, same-store sales for the quarter decreased 0.9 percent at company-owned restaurants and decreased 2.1 percent at franchised units for a 1-percent slide systemwide. Revenues, however, increased 5.4 percent to $121.4 million.  One of the key pain points for Noodles has been the underperformance of newer restaurants not in the comparable sales base. Those restaurants are averaging about 80 percent of the average sales of company-owned units, compared to the 85 percent to 90 percent range seen in the past.

Home & Road

Steinhoff Buys Mattress Firm For 115% Premium, Foreign Buyers Bet Big On US Economy

Overseas consumer goods and retail conglomerates are willing to pay up to enter the United States market.  That’s the message from Steinhoff International’s $3.8 billion takeover of Mattress Firm, which values the Houston-based retailer at $64 a share, or 115% premium to its closing price on August 5. Steinhoff, a South African furniture retailer that some dub ‘Africa’s Ikea,’ sees its acquisition as a way to enter the U.S. market, which it believes is attractive due to high disposable consumer incomes and will scale with the company’s existing operations in Africa and Europe.  Steinhoff, founded in Johannesburg, said it believes Mattress Firm’s strong brand and nationwide retail presence is an efficient way to expand into the U.S. After all, Mattress Firm has over 3,500 retail outlets, 75 distribution centers across the United States and generated $3.5 billion in pro-forma sales (when including its November acquisition of Sleepy’s). By combining Mattress Firm with Steinhoff’s scale in Africa and Europe, the Netherlands-domiciled conglomerate said it will own the world’s largest multi-brand mattress retail distribution network.  For now, even if U.S. investors can get spooked out of stocks like Mattress Firm and Green Mountain Coffee Roasters, it seems there’s a foreign conglomerate willing to buy.

At Home’s IPO Falls Flat

After launching on the New York Stock Exchange, home furnishings retailer At Home has only seen a slight increase in its share price.  A day later, the share price was $15.48, or an increase of 3.2 percent. Trading as HOME on the NYSE, it began its initial public offering at $15 a share.  This falls well below the average for all IPOs made this year so far—16.2 percent—as well as the average for home furnishings retailers since 2002—13.5 percent—according to IPO ETF manager Renaissance Capital on Fortune’s website.  In filing its IPO, the retailer said it would use the proceeds, which it had estimated at about $115.8 million, to retire debt under one of its lien facilities and “general corporate purposes,” including expansion.

ELK Group International Acquires Stein World

ELK Group International has bolstered its furniture offering with the acquisition of Memphis-based Stein World, one of the largest suppliers of accent and occasional furniture in North America.  With its “whole home solutions” credo, ELK called this acquisition as perhaps its most significant. The move expands the variety of furniture categories and price points within ELK’s already substantial catalog of premium lighting, furniture and decorative accessories.  The company has completed more than 15 home furnishing acquisitions in the past five years, with each acquired brand providing a specific strategic differentiator, according to the company, which now offers about 15,000 SKUs.  ELK said it will retain Stein World’s talented personnel, value-oriented furniture pricing and quality-driven designs, and Memphis operations, expanding its distribution network. Stein World was founded in 1985.

Jewelry & Luxury

Discount Luxury Continues To Surge

Nordstrom Inc. announced it will open two additional Nordstrom Rack locations in Canada, including one at Vaughan Mills shopping centre in 2018, another sign that while traditional and luxury retailers are struggling, discount retail is flourishing.  “We’re seeing that it’s becoming a channel for full-price retailers to offload their inventory while eliminating the middle man,” said Sandy Silva, Canadian fashion industry analyst at the NPD Group Canada. “It’s become a part of their channel of distribution.  They’re looking at the success of TJX and asking: ‘Why not carve out a piece of that pie? Why not carve out a division of my own?’”

Diamond Industry Now Subject of TV Series

It’s hard to see this as good news: The AT&T Audience Network, available on DirectTV, has ordered 10 episodes of Ice, a drama about the diamond trade. It will premiere later this year.

A release says the serialized show will spotlight the “treacherous and colorful world of diamond traders in downtown Los Angeles,” through a family that “plunge[s] into the underbelly of the Los Angeles diamond trade.”  Here is the synopsis:  Jake and Freddy are half-brothers brought together by their father Isaac, the patriarch behind G&G Diamonds, and their uncle Cam. After wildcard Freddy kills a prominent diamond dealer, his brother Jake must bail him out and save the family business while maneuvering among jewelry thugs, blood diamond deals, false certificates, and the Feds.

Young Designer Taking The Helm At John Hardy

Hollie Bonneville Barden has had the kind of wunderkind success story that you don’t typically encounter in the jewelry industry.  Upon graduating from Central Saint Martins in London, the British designer fell into a freelance gig for De Beers LV that eventually led to her becoming the company’s youngest-ever creative director.  This year, Bonneville Barden quite literally expanded her horizons, when she accepted the position of creative director at John Hardy, a move which has re-located her to New York and Bali. Not bad for a young designer who just celebrated her 30th birthday.

Jewelry Crime Continues to Drop

The mid-year report from the Jewelers’ Security Alliance shows that jewelry crime is continuing its decline this year.  There have been a total of 528 crimes perpetrated against jewelers, jewelry stores and traveling jewelry salesmen in January through June 2016, compared with 562 in the same period last year. That’s a 6 percent drop.  Dollar losses fell in lockstep, declining 7 percent, from $33.2 million to $30.8 million.  There was one homicide in the first six months of the year, the June murder of traveling jewelry salesman Muhammed Shaikh, 42.  According to The Dallas Morning News, Shaikh was at a gas station near the Dallas airport when he saw several people breaking into his rental car. When he confronted them, he was forced into another vehicle and driven off, and later found dead about two miles away.

Improved Rough, Stagnant Polished Sales

The major diamond mining companies have contained their rough production amid declining polished demand in the first half of 2016. That is, at least while they reduce rough inventory built up last year, as there still appears to be an overhang of supply in the market.  Indeed, recent data confirmed what dealers and manufacturers have been saying all along. The diamond market has been characterized by improved rough sales, stagnant polished trading and manufacturing and reduced mining production during the first half of 2016.  The polished market was particularly quiet in July as slow demand was compounded by the U.S. wholesale market shutting down for the annual summer vacation period. Dealers in Antwerp and Ramat Gan were readying for their vacations in August. Sentiment therefore weakened, with dealers frustrated by sluggish demand, rising inventory and tight profit margins.

Office & Leisure

Michaels Buys Hancock Fabrics Brand

One of Hancock Fabrics’ former rivals is now the owner of the company’s intellectual property assets.  Michaels received approval from the U.S. Bankruptcy Court in Delaware to buy them for $1.325 million.  IP assets include anything of value including the name, brands, trademarks, domain names and patents. It also includes customer information.  Hancock filed for Chapter 11 bankruptcy protection in February – it’s second time since 2007 – but later decided on liquidation.

A June auction was conducted for the sale of Hancock’s IP assets, which included 22 trademarks, 50 domain names, financial information and about 10 million customer records, according to court records.  The sale of the IP assets is “free and clear of liens, claims, interests and encumbrances” the court said. Admaco’s/Michaels’ offer was viewed as the “highest and best offer.”  Missouri Star Quilt Co. is the secondary bidder, and will gain the IP assets for $1.3 million should Admaco/Michaels be unable to close the deal on or before Aug. 31.

Office Depot Is Closing 300 More Stores

Office Depot, which scrapped a plan to merge with larger rival Staples in May on antitrust concerns, said it would close about 300 more stores in the next three years to help cut annual costs by $250 million by the end of 2018.  Office Depot, which closed 400 U.S. stores by the end of the second quarter, said its sales fell 6.5% to $3.22 billion in the quarter ended June 25, roughly in line with the average analyst estimate, according to Thomson Reuters I/B/E/S.  It was the company’s seventh straight drop in quarterly sales. Both Staples and Office Depot have been hit by competition from online retailers such as Amazon.com that have been discounting school and office supplies.  Besides store closures, Office Depot is also planning to cut costs by reducing procurement and general and administrative costs.  Office Depot said it had 1,513 stores in North America at the end of the second quarter, and about 1,800 globally.  The company said it had initiated a quarterly dividend of 2.5 cents per share and would increase its stock buyback plan to $250 million from $100 million.  The retailer reported net income of $210 million, or 38 cents per share, for the second quarter, compared with a loss of $58 million, or 11 cents per share, a year earlier.

Pot For Pets Is Growing Trend For Pet Owners

It’s become the latest trend – with more and more dog owners turning to Cannabis to help treat everything from their animal’s pain to anxiety.  Leslie Padzick is one of them.  For the past few years, her aging Schipperke, Luca -now 12- has suffered from anxiety.  This spring, Luca’s vet found a large tumor growing in his body.  Padzick contemplated an expensive surgery but worried Luca wouldn’t make it through such an invasive procedure at his age.  “I really wanted to find another option to help him,” said Padzick.  She hopped online and began researching alternatives to help with Luca’s discomfort. She found a growing trend inside of medical marijuana shops: pot marketed towards pets.  They’re In the form of Cannabidiol or CBD oil- which is derived from both Cannabis and Hemp, but don’t include THC, the ingredient that produces the high.  It’s a growing mindset among pet owners.  Veterinarian Dr. Kevin Fitzgerald says there is still much research to be done on the impacts and side-effects of pot used on pets before he can get behind the idea.  He’s not alone. The ASPCA and PETA have not endorsed Cannabis for animals due to a lack of research and veterinarians, like Fitzgerald cannot prescribe medical marijuana for animals.

Technology & Internet

Subscription Service Birchbox Raises $15 Million

Online beauty subscription retailer Birchbox Inc. has raised $15 million in financing “to bridge the company to profitability,” a company spokeswoman says.  Investors were not identified, and the spokeswoman for the online-only cosmetics and personal care products retailer declined to specify which of its existing investors were involved in the round. “Birchbox’s investors are very supportive of its ambitious long-term vision, and continue showing their confidence in the business through this round of financing,” she says.  Birchbox would not comment on when it expects to achieve profitability, but a source close to the situation says the e-retailer is likely to turn a profit by the start of 2017. According to CrunchBase, the latest round of funding brings the total raised by Birchbox to $86.9 million over four rounds.  The move comes amid a tumultuous year for Birchbox. In January, the retailer eliminated 15% of its staff—or 50 of its employees—and suspended its operations in Canada. It said then that those moves were aimed at helping the company turn a profit by the end of this year. Those cuts weren’t enough, however. In late June, Birchbox made further cuts, laying off another 30 employees, or 12% of its remaining staff.

hhgregg Lessening Losses, Stemming Sales Declines

hhgregg appears to be coming out of its tailspin.  Under the watch of formally appointed CEO Robert Riesbeck, the multiregional appliance, CE and furniture chain has stemmed the tide of widening losses and steepening sales declines.  The company, which released its fiscal first-quarter results today, said improving comp sales and rising gross margin helped narrow its losses for the second consecutive reporting period.  Net loss was $7.2 million for the three months ended June 30, compared to a year-ago net loss of $8.8 million and a prior-quarter net loss of $9 million.  Net sales slipped 4 percent to $424 million, vs. last year’s 6.6 percent decline, and comp sales decreased 3.9 percent, vs. a prior-year drop of 6.3 percent.  Driving the improvements was a mix-shift toward margin-rich majaps, which lifted gross profit margin to 31 percent from 30.5 percent last year. White-goods accounted for 64 percent of Q1 sales, up from 59 percent last year, and category comps increased 3.7 percent.

Finance & Economy

U.S. Economy Adds 255,000 Jobs In July

America’s job market remains one of the few bright spots in the economy.  The U.S. economy added 255,000 jobs in July and the unemployment rate remained at 4.9%. It far surpassed expectations of economists surveyed by CNNMoney, who had predicted a gain of 182,000 jobs.  “Employment growth remains strong,” says Jim O’Sullivan, chief U.S. economist at High Frequency Economics, a research firm.  So far this year, America has added about 1.3 million jobs. That’s a healthy improvement but still a slightly slower pace than last year, when it had gained about 1.6 million jobs by this point. Job gains for May and June were revised up a bit too.  Wage growth continued to show signs of more momentum. Wages grew 2.6% compared to 2.2% the same time a year ago.  It’s better, but still low: Prior to the recession, wages were growing at between 3% and 3.5%. It’s one of the last areas of the economy to really turn in the right direction, and a major reason why American don’t feel great about the economic recovery.

Bank Of England Cuts Interest Rates, Expands QE

The Bank of England has cut interest rates for the first time in more than seven years and warned high-street lenders to pass on cheaper borrowing costs to customers, in a bigger-than-expected package of measures designed to prevent a post-Brexit recession.  The Bank cut official interest rates to a new record low of 0.25% from 0.5% and signaled they would be reduced further in coming months as the economic fallout from the vote to leave the EU becomes clearer. The move will bring relief to borrowers but has already angered savers who have been getting low returns for years thanks to rock-bottom interest rates.  Desperate to ensure the cut is felt by households and businesses in the real economy, the Bank’s governor, Mark Carney, took a tough line with commercial banks, telling them they had no excuse not to pass the lower official borrowing costs onto customers.  As part of a four-point package, Carney unveiled additional funds for banks to cushion the blow to their profitability from lower interest rates. He personally called bank bosses after the announcement to make it clear the Bank wanted to see the full benefits of its anti-recession strategy felt by households and businesses.

U.S. Consumer Spending Exits Second Quarter With Strong Momentum

U.S. consumer spending rose more than expected in June as households bought goods and services, suggesting strength that appeared to be sustained early in the third quarter with auto sales surging to an eight-month high in July.  Despite healthy consumer spending, a report from the Commerce Department showed inflation still muted. Economists say this, together with weak business investment and the second quarter’s anemic economic growth pace, could encourage a cautious Federal Reserve to keep interest rates at current low levels for a while.