The Big Story
Thanks and Praise to the NASDAQ
Michael A. O’Hara
The Summer of 2009 was quiet for initial public offerings, especially for the IPO team at the NASDAQ. Only a year removed from the collapses of Bear Stearns, Lehman Bros. and Washington Mutual and the bailouts of AIG, Chrysler and General Motors, the financial markets, while showing the first “green shoots” of hope, were hardly teeming with new listings. On one of these slow news days in the Summer of 2009 the NASDAQ invited Consensus to Times Square to celebrate the first publication of our Retailer Health Ratings®. While not exactly the IPO of Facebook, we were honored to take the stage with our colleagues, families and a small collection of friends and ring the bell (actually, push the button) to start the day’s trading.
After the ceremony, we spent time talking with VP David Wicks about the NASDAQ’s strength in publicly listed consumer-facing stocks and his plans to bring content to the amazing new multi-media structure they just opened in the middle of Times Square called the MarketSite.
Two days later, we reached back to David proposing a concept that would expose the NASDAQ to the next generation of listed consumer companies and also bring to the MarketSite an audience of equity investors and lenders in the consumer sector, each one with a portfolio of multiple consumer companies ranging from the largest private companies on the market to smaller, founder-led firms. For Consensus, this was the chance to bring our professional friends under one roof for a full day of observing, contemplating and celebrating the future of our industry.
Our first live event was in March 2010 – a day that saw the thermometer hit 80 degrees and the city split by the St. Patrick’s Day Parade. 75 investors and lenders took us up on our invitation that year, and we breathed a sigh of relief that event was a success. A year leader, attendance tripled largely on word of mouth, and the year after that we pushed the limits of the MarketSite’s capacity under the local fire code. After that, our event always maxed out, creating a burden on the NASDAQ, which had found other uses for the MarketSite since its opening in 2009, including hosting live broadcasts from CNBC. As our event grew and the MarketSite shrunk, it was time for us to find a new venue. Last week, we announced we are moving the event a few blocks to the larger NY TimesCenter.
The seven years of partnership with the NASDAQ on what is now called The Consensus Great Brands Show had too many big moments to recount here, and a number of companies found the capital they needed to grow their business through the event. The team at the NASDAQ was unwaveringly smart, supportive and professional, and they never backed away from a challenge. David Wicks and his colleagues remain true friends to our firm and the event, and we can’t thank them enough for seven great years.
The Consensus Great Brands Show will take place September 25-27, 2018. Information about the event can be found at www.greatbrandsshow.com.
Headlines of the Week
Brookstone filed for Chapter 11 bankruptcy protection on Thursday and said it is shuttering all of its 101 stores in malls across the United States. It blamed a “continued deterioration of traditional mall traffic.” The company said it will continue to operate its 35 airport stores and e-commerce and wholesale businesses, and hopes to sell them. Several mall-based retailers have filed for bankruptcy protection during the past few months, many of them apparel brands, including The Limited, Wet Seal, Rue21 and department store chain Bon-Ton.
Implus, a provider of athletic, fitness and outdoor accessories, announced the acquisition of substantially all of the assets of Pro Performance Sports LLC d/b/a SKLZ, a leading provider of multisport athletic performance and skill development training products. SKLZ will propel Implus into the sporting goods category and further expands their fitness division. In conjunction with the transaction, Implus will be adding a new satellite office in Carlsbad, CA, to support growth into the new category of business. Consensus acted as advisor to SKLZ in the transaction.
Apparel & Footwear
Perry Ellis International Inc said on Friday it had received a revised, unsolicited $458.6 million buyout proposal from men’s fashion accessories maker Randa. Randa Accessories’ $28.90 per share offer for Perry Ellis comes about a month after it made a $28 per share proposal, as it looks to scuttle Perry Ellis’ agreement to be bought by its second-largest shareholder George Feldenkreis. Perry Ellis accepted Feldenkreis’ $27.50 per share, or $437 million, offer in June. A special committee formed by Perry Ellis to evaluate the proposals said it would look into the offer, open talks with Randa and grant it due diligence access. The committee, however, said there was no assurance that these discussions would lead to any transaction with Randa, adding that it continues to back Feldenkreis’ merger agreement. Perry Ellis had rejected Randa’s previous offer, saying the proposal was “highly conditional, nonbinding and insufficient in terms of value and certainty of the provided debt financing commitments, as well as the lack of evidence of sufficient cash equity on hand.” The latest offer comes after Randa repeatedly urged Perry Ellis shareholders to pick its proposal over Feldenkreis’ lower bid.
Julian Eison is the founder of Eison Triple Thread, which sells custom luxury menswear. The company has been around since 2016, has a store in San Francisco’s Union Square, and counts NBA players Steph Curry and Damian Jones as fans. It is now debuting an app that will recommend clothes from its collection based on users’ Spotify data.
Once users download the app, called FITS, they log in to their Spotify account, which gives ETT their listening data, since Spotify’s API is open for developers. (ETT is not working directly with Spotify, although Eison says the two companies have had “conversations.”) They are then prompted to take a lifestyle quiz, which will provide the company with information like what type of field they work in as well as their skin color. Eison says these types of information are important because “we can’t recommend you a suit if you work in a creative field, and we know different colors look better on different skin tones.”
Getting dressed in the morning can now net you exclusive rewards, thanks to a new line of smart clothing released by Tommy Hilfiger on Thursday. Every item in the clothing manufacturer’s new capsule, Tommy Jeans XPLORE, contains an embedded Awear Solutions’ Bluetooth low-energy smart chip that allows the wearer to pair their item with the company’s XPLORE iOS app using Bluetooth. Once paired, wearers essentially become a micro brand ambassador, earning points for wearing their item, competing in daily and weekly challenges, and collecting Tommy-branded heart-shaped icons on the app’s map. Once you’ve racked up enough points, Tommy says they can be exchanged for products, gift cards, signed merchandise, and experiences, such as a tour of the Tommy archive or VIP passes to a Tommy runway show.
J.Crew’s shoppers have been defecting in droves for a long time now, so the apparel chain is trying something new to win back some of their loyalty: its first rewards plan open to everybody. The chain, which has reported 13 straight quarters of sharp comparable sales declines, recently announced a loyalty program that offers standard perks such as a $5 store credit for each $200 spent and goodies like free standard shipping to people who sign up for the program, which costs nothing to join. While J.Crew, part of J.Crew Group along with smaller but growing Madewell, does already offer rewards to its store card holders, the program, called J.Crew Rewards, goes further by being open to anyone regardless of how they pay.
Athletic & Sporting Goods
Under Armour on Thursday reported second-quarter revenue that topped Wall Street estimates, as the company saw international sales surge, showing signs that investments overseas are paying off. The Baltimore, Maryland-based company also took a hit, however, from investments in both its direct-to-consumer business and its expansion outside of North America. It hiked an existing restructuring plan and now expects to incur more costs in a push to trim excess inventory. The sneaker maker’s net loss widened to $95.5 million, or 21 cents per share, in the second quarter ended June 30, from $12.3 million, or 3 cents per share, a year ago. Excluding one-time items, it reported a loss of 8 cents, in line with analysts’ estimates based on a survey by Thomson Reuters.
Cosmetics & Pharmacy
After reporting a disappointing close to its fiscal year where sales were dampened by price cuts, Procter & Gamble announced it would raise prices on several products. Squeezed by rising commodity costs, P&G said it would increase North American prices for paper products: Pampers diapers, Bounty paper towels, Charmin toilet paper and Puffs tissues. The average list price will rise 4 percent for Pampers and 5 percent on Bounty, Charmin and Puffs. P&G’s fourth-quarter results landed with a loud thud: beating on profit expectations, but disappointing on sales and issuing modest growth predictions for the coming 12 months. While sales volumes increased overall, lower pricing wiped out those gains in business units selling razors, toothpaste, detergents, diapers and related products.
Cosmetics group L’Oreal said it had bought Germany’s Logocos Naturkosmetik, a manufacturer of vegan beauty products increasingly in vogue with the French group’s customers. L’Oreal, which did not disclose financial terms, said it aimed to expand sales of the German company’s brands internationally, and especially in western Europe. The world’s biggest cosmetics manufacturer, L’Oreal has branched increasingly into plant-based products in recent years, at a time when shoppers are becoming more wary of chemical ingredients and are seeking out natural alternatives.
Discounters & Department Stores
J.C. Penney is one of the most high-profile stories in retailing today. Everyone has an opinion about why the company isn’t performing as it should — as its $2.50 stock price shows — but apparently that’s not deterring CEO candidates. The Plano-based retailer’s board hadn’t planned to be in a search for a new CEO at this time, but Marvin Ellison resigned from the company in late May to become CEO at home improvement retailer Lowe’s, a job that, with his background at Home Depot, he said was too hard to pass up. Penney chairman Ron Tysoe said in an interview with The Dallas Morning News that the hunt for someone to replace Ellison is moving fast.
At one level, last week’s announcement that JC Penney was going to stop wooing younger customers in favor of focusing on baby boomer moms seems to make a lot of sense. During the devastating Ron Johnson era, Penney’s was practically driven out of business by trying to execute what I call the customer trapeze way too quickly while simultaneously doing a number of other bone-headed things. In a bid to “contemporize” the brand, Johnson dropped many (it turns out profitable) lines that were deemed old and stodgy in favor of more fashion-forward assortments aimed at attracting younger customers. And sales promptly fell off a cliff. The more-than-a-century-old retailer has been trying to dig itself out of this hole ever since.
Grocery & Restaurants
Campbell Soup has tapped management consulting firm Deloitte to help guide a previously announced strategic review while activist shareholder Third Point separately takes a stake in the company, stoking takeover speculation, people familiar with the situation tell CNBC. Campbell stirred questions about a potential sale when it announced in May that it was conducting a “thorough and critical” review of its operations and holdings after it disclosed “unacceptable” earnings and the departure of CEO Denise Morrison. The soup giant is already working with investment bank Centerview Partners on the review. It may also hire a second bank, depending on its decided course of action, the people say.
Focus Brands Inc. and Jamba, Inc. announced that the companies have entered into a definitive merger agreement, where Focus Brands will acquire Jamba for $13.00 per share in cash, in a transaction valued at approximately $200 million.
Nutritional supplement company Bulletproof 360, makers of Bulletproof Coffee products, has raised $40 million in a Series C funding round led by previous investor CAVU Venture Partners.
Home & Road
The parent company of the Thomasville and Broyhill furniture brands entered bankruptcy protection with plans to quickly sell its iconic holdings. HH Global II BV, which operates High Point-based Heritage Home Group, said it has signed an agreement to sell its luxury brands division to RHF Investments Inc., which owns popular high-end brands Century, Hancock & Moore and Highland House. RHF would acquire Hickory Chair, Maitland-Smith and Pearson brands and related operations in Hickory and other domestic sites.
Heritage also said it has signed a letter of intent and is trying to complete negotiations to sell its Thomasville & Co. (Thomasville, Drexel and Henredon brands) and Broyhill business units to a single buyer.
Fiscal year first quarter sales at The Container Store were up as the retailer’s custom closets business was cited by company officials as a key driver. For the period ended June 30, consolidated net sales were $195.8 million, up 6.9% from the comparable quarter the prior year. Retail sales were up 7.8% while Elfa sales were down 1.9%. Comparable store sales were up 4.7%. Consolidated net loss and net loss per share were $6.8 million and $0.14 compared with $7.7 million and $0.16, respectively, in the first quarter of fiscal 2017. Adjusted net loss per share was $0.08 compared with $0.11 in the first quarter of fiscal 2017.
Jewelry & Luxury
Thieves made off with artifacts from the Swedish royal family earlier this week after robbing a cathedral in the middle of the day. The daring heist happened at the Strängnäs Cathedral, located about an hour west of Stockholm. According to reports, the robbers stole two crowns and an orb with a crucifix, which were on display at the cathedral in a glass case with an alarm, shortly before noon. The cathedral is a popular site for tourists and was open to the public at the time.
When is a diamond a diamond, and does it matter? Those were two key questions that emerged from the wide-ranging changes the Federal Trade Commission (FTC) made to its jewelry guidelines last week. In that update, the US consumer agency amended its definition of a diamond, removing the word “natural,” thereby giving synthetics suppliers ammunition when arguing that their products are the real deal. That change, on a basic level, is largely academic. It remains prohibited to sell synthetics just as “diamonds,” Sara Yood, senior counsel at the Jewelers Vigilance Committee (JVC), explained.
Swatch Group is leaving Baselworld indefinitely, dealing another blow to a watch and jewelry trade show already facing an uncertain future. The Swiss watch company made the announcement over the weekend, calling out Baselworld organizer The MCH Group for putting profit above innovation despite the need for watch and jewelry trade shows to change to adapt to the market today. “Today everything has become more transparent, fast-moving, and instantaneous … In this new context, annual watch fairs, as they exist today, no longer make much sense,” Swatch Group said in a statement emailed to National Jeweler Monday morning.
Today we live in an age of authenticity. Authentic brands, authentic communications and authentic relationships with consumers is demanded. An overwhelming 86% of consumers say brand authenticity is important when deciding which brands to support, according to a study conducted by Stackla. These findings were validated by another global study by Cohn & Wolfe. In that survey of 15,000 respondents, 91% of global consumers said they would reward a brand for its authenticity via “purchase, investment, endorsement or similar action.” Of this 91%, over 60% will either “purchase or express increased purchase interest” in a brand they perceive to be authentic.
Office & Leisure
Shares of Mattel plummeted more than 8 percent after the company disclosed that it would be cutting 2,200 jobs on Wednesday. The company said this reduction represents 22 percent of its global non-manufacturing workforce. The toy company had announced a cost savings program in October, with the goal of eliminating $650 million in costs over two years — one-third of which it expects to achieve this year. As part of that initiative, Mattel had already planned to sell several manufacturing factories in Mexico. These job cuts come just months after the company said it was shuttering its New York office, affecting about 100 employees. On Wednesday, Mattel’s quarterly sales missed Wall Street estimates, weighed down by the liquidation of key customer Toys ‘R’ Us and the absence of a big movie tie-in in the quarter.
Allow us to introduce you to Joann—yes, just Joann. The craft and fabrics store, an omnipresent retailer in suburbs across the country is undergoing a major revamp, including a name change: Jo-Ann Fabrics is now simply Joann, sans dash and the word “Fabrics.” But the makeover isn’t just in name only. It will also include added technology to Joann’s stores, and a new mobile app. Part of the reason Joann dropped the “Fabrics” from its name? To teach potential customers (and remind old ones) that the store is much more than just fabric, Steve Miller, senior vice president, marketing and ecommerce at Joann Stores, told Adweek, it’s a crafting mecca.
Technology & Internet
Sonos’ investor road show seems not to have gone as smoothly as the multiroom smart-speaker company had hoped. A few weeks ago, Sonos set an initial-public-offering price range from $17 to $19 a share that would have valued the company at around $1.8 billion. Instead, shares debuted on the Nasdaq exchange under the ticker SONO at $15 per, valuing Sonos at about $300 million less than it had aspired to. Shares opened at $16 and quickly rose 20% once trading began.
Apple announced financial results for its fiscal 2018 third quarter ended June 30, 2018. The Company posted quarterly revenue of $53.3 billion, an increase of 17 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.34, up 40 percent.
Apple reported strong results for its fiscal third quarter on Tuesday but the iPhone-maker lost its position as the world’s number-two smartphone vendor, according to multiple analyses. Research firms International Data Corporation (IDC), Counterpoint Research, IHS Markit and Canalys all reported that Chinese smartphone maker Huawei leapfrogged Apple to second place, based on the number of devices both firms shipped in the quarter that ended on June 30.
Brandless, the community-driven, direct-to-consumer company offering a curated, proprietary assortment of high-quality, fairly priced products, today announced it has raised $240 million in Series C funding, led by the SoftBank Vision Fund.
Finance & Economy
Activity in the services sector slowed more than expected in July. The Institute of Supply Management’s index fell to 55.7 percent, nearly 3 percentage points below an expected decline to 58.6 percent from 59.1 percent in June, according to economists polled by Reuters. The majority of the 16 service industries which responded to the survey cited escalating trade tensions as a primary concern. The tit-for-tat tariffs between the U.S. and other global economic powers took a bite out of business activity despite positive sentiment on domestic conditions.
It’s a great time to be in the work force. With the labor market tight and companies increasingly competing to attract and retain qualified workers, 58 percent of employers plan to give out raises by the end of 2018, according to a report released Friday by CareerBuilder. Pay bumps will be 5 percent or more at 24 percent of companies, the survey found. The midyear forecast from the employment-focused website also shows good news for job seekers: Nearly two-thirds of U.S. employers (63 percent) plan to hire full-time workers in the second half of 2018, up from 60 percent a year ago. Additionally, 45 percent of companies plan to increase starting salaries.