September 17, 2018 Consensus

The Weekly Consensus – September 17, 2018 (Volume 10, Number 35)

The Big Story
Consensus Great Brands Show Set to Present Exciting Slate of Companies
Paul Alexander, CFA

Consensus will host the eighth annual Consensus Great Brands Show on Wednesday, September 26th at TheTimesCenter in New York City. We are pleased to welcome and showcase another collection of exciting and compelling consumer and retail brands.

b8ta

Founded in 2015, b8ta is a software-powered retailer designed to improve the customer and maker experience. b8ta operates flagships stores throughout the U.S. with the mission of helping customers discover, try, buy and learn about new products while empowering makers with a simple retail-as-a-service model that puts them in control.

Bedgear

Founded in 2009, Bedgear is the rapidly growing global lifestyle brand of performance bedding that has redefined the way people view sleep, with personalized products and patented fabric technologies that help generate a cooler, drier sleep environment for maximized recovery at night.

Burrow

Burrow designs and manufactures uncompromising furniture and other nice things for modern life at home. Burrow delivers products for the home that make so much sense, people wonder why it hasn’t always been this way.

Felix Gray

Felix Gray reimagined the eyewear experience to bring happiness and productivity to today’s screen-filled world. Felix Gray glasses filter blue light and eliminate glare to combat symptoms of digital eye strain, such as eye fatigue, headaches, and blurry vision. Felix Gray offers non-prescription, prescription, readers, and sunglasses. FitVine WineFitVine Wine was born when friends made a pact to craft amazing wines that also fit their lifestyles. The FitVine team strives to combine their love for wine and fitness with an ethic for sustainability. Hari MariReaching far beyond the traditional black and brown and uncomfortable options offered by generations past, Hari Mari is building a premium flip flop brand that is based in color and comfort – one that is as much at ease on the busiest urban streets as it is on sand-filled coasts.

iFLY

iFLY believes great luggage shouldn’t cost more than your airfare. Through its partnership with Walmart, iFLY has become the most popular mass market luggage brand in the U.S., the #1 rated and reviewed luggage brand online, and Walmart’s 2018 Supplier of the Year. iFLY started producing luggage in 2013 and since then has sold well over 3 million units.

NambéA design company at its core, Nambé was born in Santa Fe, New Mexico at the height of the mid-century modern décor trend. Celebrating this iconic aesthetic, Nambé works with esteemed designers to develop award-winning products that bring function and style into the home.

S’well

S’well makes fashionable hydration accessories that look great and do good. Since its inception in 2010, S’well has made it its mission to rid the world of plastic bottles by creating covetable hydration accessories that are as stylish as they are hard-working, and that give back to communities in need.

Snowe

Snowe is a direct-to-consumer home essentials brand that simplifies the experience of shopping for your home. Since its 2015 launch, Snowe has amassed a cult following for its luxury-quality, thoughtfully designed essentials for the bed, bath, table, and more.

Thursday Boot Co.

Thursday is one of America’s fastest-growing consumer brands, specializing in footwear built for comfort, durability, and versatility. Named for the unofficial start of the weekend, the company has attracted a devoted customer following for its contemporary take on classic products.

Universal Standard

Universal Standard was created in 2015 to obliterate the dividing line of size – a style barrier which, until now, determined who had the privilege and freedom to dress with quality and style. Starting with the premise that clothes should look and feel good on everyone, Universal Standard offers a line of contemporary, elevated essentials for all women.  Urban Stems

Founded in 2014, UrbanStems is the online flower delivery company that creates a one-of-a-kind gifting experience. UrbanStems’ team works in tandem with farmers to create fresh, unique bouquets. UrbanStems offers free delivery, photo confirmations from couriers, and a seamless online experience.

For additional information, visit Consensus Great Brands Show, or to register, click here.

 

Headlines of the Week

Finland’s Amer Sports leaps on $5.3 billion approach by China’s Anta

Finnish sports equipment maker Amer Sports has had a 4.6 billion euros ($5.3 billion) takeover approach from China’s Anta Sports and private equity firm FountainVest.  Amer shareholders would get 40 euros per share in cash if the deal went ahead, the Helsinki-based maker of Salomon hiking boots, Wilson tennis rackets and Arc’teryx outdoor clothing said, lifting its shares more than 25 percent.

 

Apple Unveils Bigger iPhones at Higher Prices, and a Heart-Tracking Watch

Apple has long had a playbook for iPhones, its most important product: Keep rolling out bigger, faster and more expensive models. On Wednesday, it repeated that strategy by introducing another round of iPhones that are — you guessed it — bigger, faster and more expensive. More notable, perhaps, was how much Apple is now evolving its smart watch into a clearly health-related device.

 

 

Apparel & Footwear

New York & Company unveils major rebranding plan

New York & Company announced the official launch of its corporate reinvention to a multibrand lifestyle platform ahead of the company’s investor day event. The company’s vision is to be the premier incubator of lifestyle brands by leveraging its expertise in celebrity, design, customer, e-commerce, operations, real estate, and inventory optimization to identify accretive brand and profit opportunities. The new multibrand lifestyle platform is aiming to accelerate growth of the New York & Company brand through ongoing celebrity partnerships, including collaborations with Eva Mendes, Gabrielle Union and Kate Hudson. The recently acquired plus-size brand Fashion to Figure and a new lingerie lifestyle brand will also be areas of focus. New York & Company will also rename itself RTW Retailwinds as part of the brand overhaul.

Crew launches third-party marketplace

Crew is selling some accessories, footwear and lingerie using a marketplace approach — having the brands drop-ship the items directly to customers. The retailer takes the orders and payment and provides tracking, but returns must be made directly to the sellers, according to a note on the company’s website. J. Crew Marketplace is less a curated page of goods and more a notice to customers that certain items will be drop-shipped directly from brands. Drop-shipping is an age-old fulfillment tactic for catalog and online retailers that allows for higher wholesale margins as they bypass fulfillment headaches and inventory risk. Amazon is selling at least half its assortment via third-party sellers, and Walmart has launched a series of pages dedicated to Lord & Taylor and Moosejaw in addition to its general third party sales there.

Ted Baker to Bring Footwear In-House with License Deal

Fashion brand Ted Baker has agreed a deal worth up to £21m to bring its footwear licence back in-house. The listed business has entered into an agreement with Pentland Group, its footwear licensee since 2001, to acquire No Ordinary Shoes Ltd and No Ordinary Shoes USA LLC for £13m, plus an adjustment for net assets in place at the completion date, which is anticipated to be between £4m to £8m. Pentland currently holds the exclusive global licence from Ted Baker to manufacture and distribute footwear under the Ted Baker brand. The aggregated sales of No Ordinary Shoes Ltd and No Ordinary Shoes USA LLC for the year ending 31 December 2017 totalled £39.8m.

 

Athletic & Sporting Goods

Castanea Partners Announces Investment in West Coast Fitness

Castanea Partners announced that it made an investment in West Coast Fitness LLC, a leading franchisee and area representative of Orangetheory ® Fitness that operates ten Orangetheory studios and oversees an additional seventeen studios owned by other franchisees in Los Angeles and San Francisco’s South Bay area. West Coast Fitness founders Paul Marcus and Brendon Ayanbadejo remain significant shareholders and will continue to lead the business.

Nidecker Brothers Acquire Rome SDS, and Bataleon Parent Low Pressure Studio

The Nidecker brothers are making major moves in snowboarding.  They announced that they have acquired Vermont-based Rome SDS in addition to Low Pressure Studio in Europe, which is home to the Bataleon, Lobster and Switchback brands.  Rome will join the operating platform of Low Pressure Studio (LPS), which is based in Amsterdam. However, Rome’s creative, R&D and design will stay in Waterbury, Vermont.  The Nidecker brothers – Henry, Xavier, and Cédric – made these acquisitions separately from the Nidecker Group.  The Nidecker Group already has a lot on its plate and has grown rapidly the past several years by adding brands. Currently it is home to the Nidecker, Yes, Jones, Now, and Flow brands. Nidecker has been a family-owned business for 130 years.

Cosmetics & Pharmacy

Walgreens to Buy Pharmacy Files, Inventory from 185 Fred’s Stores

Walgreens will be purchasing all pharmacy patient files and related pharmacy inventory from 185 Fred’s stores in the southeastern United States, the two companies announced. The deal will see Walgreens paying an aggregate consideration of $165 million to the Memphis-based retailer for the files, subject to adjustment plus an amount equal to the value of the pharmacy inventory. Fred’s said that once the transaction is complete, it will still operate roughly 162 pharmacies across 600 stores. Once the transition is complete, Walgreens said patients will have access to its pharmacy services across its roughly 9,800 pharmacies nationwide.

Ouai Haircare Names New CEO, Announces Investor

Ouai Haircare, the brand started by Jen Atkin, is gearing up for its next phase of growth.  Colin Walsh, formerly the chief executive officer of DevaCurl, has been named CEO of Ouai. In addition, the brand confirmed that Alliance Consumer Growth has come on board as a minority investor. “The brand turns three in February and I felt it was time to bring someone in to help us develop our strategy in the business,” said Atkin, who has parlayed her career as hair stylist to Hollywood’s hip set into a multifaceted career as influencer, entrepreneur and educator. Under Walsh’s tenure at DevaCurl, from late 2013 to when Ares Management acquired it in 2017, sales quadrupled to a reported $75 million. According to industry sources, Ouai is on track to hit $23 million in sales for 2018.

Fred’s Sees Sales, Comps Dip as It Continues to Right Its Ship

Memphis-based retailer Fred’s swung to a net loss in its second quarter as it looked to button up its expenses and continued to explore and execute transactions — all aimed at reducing its debt load, building up its cash flow and generating positive EBITDA. For the quarter ended Aug. 4, the company saw net sales decline 4.3% to $419.7 million, alongside a comparable-store sales slide of 3.5%. The company’s net loss from continuing operations was $22.9 million, or $0.62 per share — an improvement over the $28.9 million net loss the company posted in Q2 2017.

Discounters & Department Stores

Walmart Doubles Spending in Battle for Truckers

Walmart Inc., pinched by the worsening shortage of truckers, plans to double its spending on attracting and retaining drivers by year-end. The retailer, whose private fleet of 6,500 trucks is one of the largest in the nation, will offer referral bonuses of up to $1,500, shorten the on-boarding process for new hires by more than a month and broadcast its first national TV ad focused on its 7,500 truckers. The program, which coincides with National Truck Driver Appreciation Week beginning Monday, aims to fill vacancies and improve the image of long-haul driving as a career amid a tight labor market.

Think fast, think small: How Kohl’s rode the omnichannel wave

The “retail renaissance” is upon us if the headlines are to be believed, and several players who generated major worries that brick and mortar may never recover just five years ago are making triumphant comebacks. One such player is suburban big box retailer Kohl’s. Kohl’s has made some significant changes to its operation in order to ride the very changeable wave that is the integration of e-commerce and brick and mortar retail, the most celebrated of which is a program to accept Amazon returns in some Kohl’s stores (even without packaging).

Saks Off 5th Wants in on the Discount Retail Boom

Everybody likes a bargain, but the discount division of Hudson’s Bay Co. has been unable to tap the appetite for good deals that’s lifted sales at rival retailers. The Canadian owner of Saks Fifth Avenue is trying to turn around its Saks Off 5th chain, which reported falling same-store sales for the seventh time in the past eight quarters. In contrast, revenue at Nordstrom Inc.’s Rack grew 4 percent on that basis last quarter, while TJ Maxx operator TJX Cos., on the lower end of the off-price spectrum, is thriving, too.

 

Grocery & Restaurants

Hershey to Acquire Pirate Brands From B&G Foods

The Hershey Company and B&G Foods, Inc. announced that they have entered into a definitive agreement for Hershey to acquire Pirate Brands, including the Pirate’s Booty, Smart Puffs and Original Tings brands. The Pirate Brands purchase price is $420 million.

Tech pioneer Stacked acquired by private-equity

The five-unit Stacked: Food Well Built concept in Southern California has been acquired by private-equity firms Hargett Hunter and TriSpan, the company said Monday.  The acquisition of the Huntington Beach, Calif.-based concept is a bigger step into the restaurant space for both equity firms. Terms of the deal were not disclosed. Stacked co-founders Paul Motenko and Jerry Hennessy will continue to lead the company as co-CEOs, the company said.

Jollibee Foods Corp. buys stake in Tortas Frontera

Philippines-based Jollibee Foods Corp. has purchased a 47-percent stake in Tortas Frontera, the fast-casual Mexican concept created by Chicago restaurateur Rick Bayless, the company said Friday. Jollibee paid $12.4 million for the stake in Tortas Frontera, which is an offshoot of Bayless’ Frontera Grill and Topolobampo portfolio, the Nikkei Asian Review reported. Jollibee officials indicated the goal was to get a toehold in the Mexican restaurant business. Tortas Frontera, first opened in January 2011, has four restaurants, with three outlets at Chicago’s O’Hare International Airport and one at the University of Pennsylvania in Philadelphia.

Home & Road

German Food and Beverage Company Acquires Wilton Brands

Dr. Oetker, a German company that owns food and beverage brands, has agreed to acquire baking and cake decorating company Wilton Brands. Terms were not disclosed.

Wilton and its employees will remain headquartered here in Naperville, Ill. and will be run as a division within the broad portfolio of companies owned by Dr. Oetker. Sue Buchta will remain in her role as CEO. Based in North Rhine-Westphalia, Germany, Dr. Oetker is a privately held, global multibillion dollar industry leader in food and beverage, including baking products and baked goods. In addition to the Dr. Oetker brand, the company owns multiple well-established baking and dessert brands in more than 35 countries.

MacKenzie-Childs Acquires Handcrafted Collectibles Brand

Home furnishings design and manufacturing company MacKenzie-Childs has acquired Patience Brewster, Inc., a brand specializing in handcrafted holiday ornament collectibles. The brand’s founder and designer, Patience Brewster, will become a member of the MacKenzie-Childs creative team to support the design and development process to expand the Patience Brewster by MacKenzie-Childs collection. Patience Brewster by MacKenzie-Childs will continue to include the original designs with the same point of view it has always had. The partnership will also allow MacKenzie-Childs to accelerate its growth in the seasonal home furnishings category.

Jewelry & Luxury

Richemont Names Jérôme Lambert Group CEO

Richemont has announced the promotion of Group COO Jérôme Lambert to Group CEO, effective immediately. Lambert has served in a number of top roles at Richemont, including heading up both Jaeger-LeCoultre and Montblanc. More recently, he oversaw the company’s specialist watchmakers division before taking on the role of COO last year. Richemont’s specialist watchmakers, online distributors and other businesses, as well as central and regional functions, will now report directly to him.

Signet Jewelers ‘Would Sell Lab-Grown Diamond Jewelry If Consumers Demand It’

Signet Jewelers would be willing to sell jewelry set with lab-grown diamonds if consumer demand shows it to be worthwhile, said the firm’s CEO Gina Drosos. She made the comments in a conference call with analysts. While the jewelry retailing giant doesn’t carry lab grown diamonds currently, “we have a very customer first mindset on this and we want to focus on delivering the products and experiences that customers want. So we are very closely monitoring and assessing the demand for this emerging category.”

Spence Diamonds to Open 3 New Stores This Year

Spence Diamonds will open three new stores this year: two in the Dallas/Fort Worth area, and one in Ottawa, Canada, according to Eric Lindberg, the retailer’s executive chairman. Spence currently has three stores in the United States—in Austin, Texas; San Jose, Calif.; and Scottsdale, Ariz. (pictured right)—as well as seven in Canada, where it began. When these three new stores are built, it will have a total of 13. But the company sees greater expansion in the next three years and is aiming for between 28 and 40 stores by 2021—which means it will open between five and 10 stores a year.

Office & Leisure

Party City hopes to fill Toys R Us void with ‘Toy City’ pop-ups

The disappearance of Toys R Us this summer has left a void for shoppers this holiday season. One that Rockaway-based Party City is eager to fill with its new pop-up store concept, Toy City. “The Toy City concept is a logical extension of our brand — one that allows us to leverage our existing pop-up store capabilities and capitalize on the category whitespace that recently has been created,” Ryan Vero, retail president of Party City, said. According to Vero, Party City will open a total of 10 pop-up stores in New Jersey from September through December, including five combination Toy City and Halloween City pop-up stores— all previous Toys R Us locations. These pop-up stores will join nearly 50 Toy City locations nationwide this season. Party City also will continue to operate its more than 900 party supply stores nationwide.

 

Genuine Parts Won’t Counter Staples Offer for Essendant

Staples Inc. has emerged as the leading candidate to acquire Essendant Inc. after Genuine Parts Co. said Monday it wouldn’t make a counteroffer for the office supplies company. Essendant agreed in April to combine with Genuine Parts’ S.P. Richards business. Essendant announced, however, that it would end its agreement with Genuine Parts and pursue a deal with Staples, which Essendant’s board said was a superior offer. Genuine Parts had three days to change its offer to buy Essendant, but said it wouldn’t make a new offer and that it expects the deal agreement to end. The company also said that Essendant will have to pay Genuine Parts a $12 million termination fee. Staples, an office supplies retail chain, proposed to buy Essendant for $12.80 a share in cash, Essendant said, which comes to $482.7 million.

Technology & Internet

Jack Ma to Hand Alibaba’s Helm to CEO Daniel Zhang Next Year

Alibaba is heralding the end of the Jack Ma era. A former English teacher who helped found Alibaba Group Holding Ltd. two decades ago, Ma outlined plans to hand the executive chairman role to Daniel Zhang, a finance veteran who’s presided over an ambitious expansion and won over investors in three years as chief executive officer. Ma will officially pass the baton in exactly 12 months’ time, on his 55th birthday, but remain on the board until 2020.

 

Walmart’s Jet.com Revamps Site to Narrow Focus on Urban Shoppers

Walmart Inc. has refurbished its Jet.com site to cater even more to the city dwellers who make up the bulk of its shoppers. The e-commerce site, acquired by Walmart in 2016, will now offer images and products tailored to the location and preferences of the visitor, the retailer said Thursday. Most New York City residents can schedule three-hour delivery windows for groceries and other merchandise, and next month Jet will unveil a dedicated site for Nike and Converse products, which it will sell from its own inventory rather than through third parties.

 

Finance & Economy

Good news for retailers this holiday season: Americans are spending on big-ticket items

Americans spent a record $2 billion online on Labor Day, making it one of the biggest online shopping days of the year and giving new hope to retailers ahead of the closely watched holiday season.  Online spending on Labor Day grew 23 percent to $2.08 billion, from $1.69 billion a year earlier, as shoppers bought big-ticket items like electronics, appliances, mattresses and grills, according to data from Adobe Analytics.  The data paint a picture of growing consumer confidence, as a low unemployment rate and signs of wage growth help boost sales for some of the country’s largest retailers.

 

US consumer prices rose an annual 2.7 percent in August

Consumer prices rose 2.7 percent in August from a year earlier, with higher housing and gasoline costs driving most of the increase.  The Labor Department said that the consumer price index advanced 0.2 percent on a monthly basis. Despite the monthly gain, annual inflation softened from the 2.9 percent pace set during the 12 months ended in July.  The more modest inflation rate should help to boost the spending power of Americans whose recent wage gains had been eaten up by higher prices. The Federal Reserve is closely monitoring inflation levels in order to determine if short-term interest rates should be increased to keep prices stable.