May 13, 2019 Consensus

The Weekly Consensus – May 13, 2019 Volume 11, Number 19

The Big Story
If the Shoe Fits, Wear It
Mark Lenz

While Nike waits, like the rest of us, to hear how new tariffs might affect their business with China, the company has been working heads-down on ways to improve customer experience.  This includes developing a mobile app that strives to help you buy sneakers that really fit.  Last week, Nike announced the upcoming launch of Nike Fit, a new scanning technology through the Nike app designed to help customers find their accurate fit in the brand’s shoe offerings.  Industry research indicates that as many as 2/3 of sneaker buyers are buying and wearing the wrong-sized shoes.  No wonder we cannot perform like Lebron James or Serena Williams on the court.

Nike spent the past year developing its proposed solution using AI and other advanced technologies.  Invertex Ltd., a 3-D scanning specialization firm Nike purchased last year, developed the tool to make it happen.  So. Here is one question that I can think of while waiting for this new tool to be rolled out this summer.  What if you cannot see your feet anymore?  Nike thought of that and it will not be a problem. Nike will be rolling out the technology in its retail stores so an associate who can see your feet will take the measurements for you.

If the industry research is correct, and the technology performs as advertised, this will be a great advance for Nike customers in the near term that would certainly be replicated by other footwear companies in the longer term.  Does this mean that all of us will be able to perform like Lebron, Serena or Renaldo?  Probably not, but we will be much more comfortable and better equipped while trying to do so.

Although I will not be trying to perform like any of those athletes (because I would likely injure myself trying to do so), I am planning to step back from my full-time role at Consensus in a few months and enjoy some of the fruits of my labors.  I have enjoyed my thirteen years at Consensus and have met many great people and worked with many interesting businesses and situations. I’ve seen Consensus evolve from a traditional middle market boutique assisting firms in navigating the shoals of the Great Recession to a firm catalyzing some of the most exciting emerging brands in the consumer sector.

Because this will be my last Big Story, writing it caused me to reminisce about other stories I have written over the years. In looking back, there have been some hits and some misses.  For example, I argued that Pandora and its charms were a fad several times, and yet it grew into a powerful brand after broadening its product categories beyond charms.  Recent news of softness in their business and layoffs have made me think I might have been right, but a little early.  I also wrote a couple of stories about retailers taking political stances in their strategy and/or marketing.  In these highly political times, I hope no one was offended.  Lastly, I have also tried to bury Sears more than once, but like those zombies that show up in too many movies in recent years, Sears is still hanging around.  Time will tell if the “new” Sears that arose out of bankruptcy has a long life or is just part of the walking dead.  There is probably a higher probability that it will be the latter.

Thank you for reading, and I wish you all great success.

 

The whole team at Consensus wishes Mark Lenz a happy, healthy, adventurous and exciting semi-retirement, and we thank him for his countless contributions over the past 13 years.

 

Headlines of the Week

Harry’s is acquired by Edgewell for $1.37 billion

Harry’s, the digital-first shower and shave brand that led with razors when it launched in 2013, has been acquired by Edgewell Personal Care. The company owns brands like Schick (razors), Banana Boat (sunscreen) and Wet Ones (moist wipes). Harry’s had previously raised around $400 million in funding. The deal is comprised of 79% cash and 21% stock, giving Harry’s shareholders an 11% stake in Edgewell. It is expected to close by the end of the first quarter of 2020.

 

Uber ends below $45 IPO price, washing out in market debut

Uber officially began trading Friday on the New York Stock Exchange, but stumbled out of the gate as its stock settled below its $45 initial public offering price. In Uber’s first test of whether it can transition from Silicon Valley unicorn to a publicly traded company while winning over a skeptical, volatile market, the stock — which priced at $45 on Thursday — gradually drifted lower from the $46-$48 indicated range prior the open. In its first trade, Uber hit the market at $42 per share on the New York Stock Exchange (NYSE). After a choppy session, Uber ended the day at $41.60, down nearly 8% from its listing price.

 

 

Apparel & Footwear

Chico’s nixes buyout offer

Chico’s FAS apparently isn’t interested in being bought. The embattled women’s apparel and intimates retailer has declined to engage with Sycamore Partners on its cash offer to buy the company, reported Reuters. Chico’s had disclosed in a filing that the private equity firm had made an offer to acquire all the outstanding shares of the brand for approximately $3.50 per share, or $407.8 million. (Sycamore currently owns a 6.6% stake in Chico’s.). “We believe that engaging with us so we can perform our due diligence has the benefit of creating alternatives for the company’s stockholders,” Sycamore said in a letter to Chico’s board. Chico’s has been challenged by sliding sales amid a decline in mall traffic and online competition. The company’s total same-store sales fell 4.9% last year and net sales slipped to $2.1 billion from $2.3 billion.

Iconic Dallas clothier Haggar is sold to New York’s Randa Accessories

Haggar Clothing Co., a Dallas-based men’s apparel maker since 1926, has been sold to Randa Accessories, a New York company also with a long history. Haggar, which had sales of more than $500 million last year, will continue to operate with its 400 employees in its Dallas headquarters and Fort Worth distribution center, the companies said. CEO Michael Stitt is staying on to run Haggar, which has been owned by a Taiwan-based conglomerate since 2005 when it was sold by Dallas’ Haggar family. Terms of the sale weren’t disclosed. Randa is also acquiring Haggar-owned Tribal, a Montreal-based women’s sportswear supplier to 2,400 specialty boutiques in North America. Together, Haggar and Randa will have consolidated revenue of more than $1 billion.

 

Kate Spade helps Tapestry advance despite declines

Tapestry on Thursday said that third quarter net sales rose 1% to $1.33 billion, from $1.32 billion in the prior year, as net income fell to $117 million from $140 million a year ago. The company announced that its board of directors authorized a buy-back of up to $1 billion of its outstanding common stock. By brand in the quarter: Coach net sales fell year over year to $965 million from $969.3 million as global comps rose 1%, (including some 100 basis points from e-commerce). Kate Spade net sales rose 4% to $281 million as global comps fell 3%, with 700 bps from e-commerce. Stuart Weitzman net sales rose to $85.3 million from $83.8 million. Despite some declines, Tapestry’s brands are advancing, and Kate Spade in particular is gaining traction under new creative director Nicola Glass. While the apparel and accessories conglomerate saw some sales, profit, margins and comps fall in the quarter, its brands managed to beat most expectations for earnings and store comps, in part thanks to global e-commerce growth.

 

Lululemon Feud Strips Billionaire Founder of Right to Board Seat

Chip Wilson’s feud with Lululemon Athletica Inc. is alive and kicking. The billionaire’s right to designate a board nominee was terminated after he “failed to observe the requirements of the support agreement relating to certain contesting stockholder actions,” the company, best known for its yoga pants and workout gear, said in a recent filing that didn’t specify what prompted the change. Wilson returned to the spotlight last year with a book — Little Black Stretchy Pants — that bemoaned Lululemon’s performance since 2013, arguing the firm failed to take advantage of its leadership position and lost ground to rivals including Under Armour Inc. and Nike Inc. He was also an investor in a consortium that reached a $5.2 billion deal in December to buy Amer Sports Oyj, the maker of Wilson tennis rackets and Louisville Slugger baseball bats. Shares of Lululemon rose to a record last week and have surged 77 percent in the past year. Wilson, meanwhile, has sold into the rally, disposing of about $725 million of the company’s shares in 2019, according to calculations by Bloomberg.

 

 

Athletic & Sporting Goods

Brunswick works out $490 million sale of Life Fitness to private equity firm

Brunswick Corp. has agreed to sell its Life Fitness exercise equipment division to New York private equity firm KPS Capital Partners for $490 million.  The deal moves Brunswick’s entire fitness and recreation division — including Brunswick Billiards — into private hands, as the suburban Mettawa-based company focuses on its remaining portfolio of marine engines and boats.  Rosemont-based Life Fitness is a leading manufacturer of fitness equipment, including treadmills, ellipticals and strength-training machines. Brunswick put its legacy billiards line under the Life Fitness banner in 2015.

Nike says you might be wearing the wrong size shoe, so it created an AR tool to help

If you don’t know which size shoe to buy when ordering sneakers online, the world’s largest shoe company is rolling out a possible solution.  Nike is introducing a feature to its app that lets you scan your feet using your smartphone camera to determine what size shoe will be the perfect fit.  Aptly titled, Nike Fit, the AR tool seeks to replace the steel measurement device that you find under the seats at your local shoe store.  The company’s proprietary combination of computer vision, data science, machine learning, artificial intelligence and recommendation algorithms measures the full shape of both feet.

Xceed Acquires Peaks Apparel

Xceed has become the largest, most well-known and respected custom activewear brand in Mexico over the past 15 years. Wednesday, this giant in custom activewear has taken another step forward to rapidly expand its brand through the acquisition of US-based Peaks Apparel. The financial terms of the acquisition have not been disclosed but sources have confirmed the deal includes distribution agreements and a licensing deal with next generation technology software platform BrikL, LTD. Peaks Apparel will transition to the Xceed name by the end of 2019 and continue to spearhead the expansion of the organization in the US and Canadian market.

 

Adidas Steals the Buzz From Nike And Under Armour

Adidas AG has stolen the buzz in the American athletic-gear market from Nike and Under Armour lately.  The German sportswear maker reported strong sales and earnings results last week, driven by strong e-commerce business.  Adidas’ sales were particularly strong in North America, up over 10% from the previous year, exceeding the sales growth of both Nike and Under Armour.  Though Nike remains the largest company in the industry, Adidas is the most profitable, commanding a gross profit margin close to 60%, compared to 46% and 44% for Nike and Under Armour respectively.

Cosmetics & Pharmacy

CVS to close 46 store locations

Woonsocket, R.I.-based CVS Pharmacy is shutting down 46 store locations because they are “underperforming,” according to USA Today. The cuts represent less than 1% of the company’s 9,600 stores, but will cost them approximately $135 million as a “store rationalization charge.” CVS CEO Larry Merlo told USA Today in November that the company plans to reduce floor space dedicated to retail products and instead begin offering more health care services, such as the addition of  “hundreds” of teeth-alignment company SmileDirectClub’s shops and HealthHubs within its stores.

CVS Health’s ProCare Pharmacy to buy Premier’s specialty pharmacy business

ProCare Pharmacy, a subsidiary of CVS Health has entered an agreement to buy certain assets related to Premier’s specialty pharmacy business for $22.5 million, plus up to an additional $20 million for inventory, each subject to adjustment. Premier’s specialty pharmacy business currently serves 367 hospitals across 66 health systems. The business consists of Acro Pharmaceutical Services and Commcare Pharmacy, which operate facilities in Philadelphia, Pa. (Acro), Memphis, Tenn. (Acro) and Plantation, Fla. (Commcare). The transaction is expected to close in the current quarter ending June 30, 2019.

Diplomat posts Q1 loss

Diplomat Pharmacy is seeing revenue growth from its PBM segment, but the Flint, Mich.-based company swung to a loss in the first quarter, according to the company’s earnings. Revenue decreased 6% to $1.2 billion and gross profit dropped to $79.2 million from $90.4 million in the prior-year quarter. Adjusted EBITDA was $23.1 million, from $39.6 million in the prior-year period, and earnings per share were 19 cents. In the first quarter, revenue was comprised of $1.2 billion from the company’s specialty segment and $98 million from its pharmacy benefit manager segment.

 

Discounters & Department Stores

Walmart is opening dozens of veterinary clinics in its stores and launching an online pet pharmacy

Walmart is opening up dozens more veterinary clinics in its stores and launching its first online pet pharmacy, hoping to lure more U.S. pet owners who are spending billions of dollars each year on their dogs and cats. The biggest retailer in the world already operates 21 veterinary clinics in its stores across six states, but over the next 12 months it will growth that number to 100. It will start the expansion by opening nine new clinics in the Dallas-Fort Worth area later this month and into June, Walmart said in a blog post. There, pets can receive vaccines, care for minor illnesses and other routine exams. Walmart also will launch an online pet pharmacy, WalmartPetRX.com, rivaling PetSmart’s e-commerce business, Chewy.com, which also has an online pharmacy unit.

Belk lays its 130-year legacy on the line

North Carolina-based department store chain Belk enjoys icon status in the Southern states where it’s mostly thrived for over 130 years. For a brand transformation announced on Wednesday, however, the company is turning to the New York office of advertising agency Mcgarrybowen, which is much closer to the Manhattan headquarters of its private equity owner Sycamore Partners than to its own in Charlotte. It’s the latest consequence of the Belk family’s sale of the business in 2015 for $3 billion, a steep price and a savvy move, according to many observers at the time, in light of the challenges faced by retailers, especially department stores. Mcgarrybowen​ will help Belk forge new brand positioning, brand identity and a brand campaign, according to Belk Chief Customer Officer Julie Cary.

HBC looks to sell Lord & Taylor

HBC on May 6 announced it is “pursuing strategic alternatives for the Lord + Taylor operating business, including a possible sale or merger.” HBC has retained PJ Solomon as its financial adviser for the review of the Lord & Taylor operating business, according to a company press release. “Throughout the review, Lord + Taylor remains committed to serving customers across our stores and digital channels,” HBC CEO Helena Foulkes said in a statement. Lord & Taylor in 2018 notched annual revenue of CAD$1.4 billion ($1 billion), through its website and more than 40 stores, mostly in the Northeast and mid-Atlantic U.S., the company said. Lord & Taylor also has a partnership with Walmart.com.

 

 

Emerging Consumer Companies

Carta raises $300 million at a $1.7 billion valuation

Carta, the San Francisco-based company providing tools on private company ownership and related legal complexities, announced that it closed a $300 million Series E at a $1.7 billion valuation. Andreesen Horowitz led the round. Carta had announced an $80 million Series D raise in December. Founded in 2012, Carta helps private company investors, founders, and employees manage their equity interests and capital structures.

 

Bird launches $1,299 scooter

Bird, the Santa Monica-based personal mobility startup focused on electric scooters, has launched a personal scooter for those customers who would like their own. The scooters are intended to be both durable and comfortable, and with a 473-watt-hour battery, claim it can travel thirty miles before it needs to be recharged. Customer can purchase scooters in classic black and two colors unavailable to the scooter-sharing public: Dove White and Electric Rose. “We think it’s by far the sexiest scooter on the market,” said Travis VanderZanden, Bird’s founder and chief executive.

 

 

Grocery & Restaurants

Boston Beer Company and Dogfish Head Agree to Merge in $300 Million Deal

Eight years ago, Dogfish Head and Boston Beer Company teamed up to brew a collaboration beer for the annual SAVOR craft beer and food pairing experience. Today, the two companies announced the signing of a definitive merger agreement valued at about $300 million. As part of the transaction, Dogfish Head co-founders Sam and Mariah Calagione will receive about 406,000 shares of Boston Beer stock, valued at $314.60 per share, making them the largest non-institutional shareholders in the company, behind Boston Beer founder Jim Koch. Meanwhile, existing Dogfish Head shareholders will receive $173 million in cash, and Sam Calagione will obtain a seat on Boston Beer’s board of directors starting in 2020. The merger comes nearly four years after Dogfish Head sold a 15 percent stake to LNK Partners, a New York-based private equity firm.

Kraft Heinz to restate earnings for 2016 and 2017, citing employee misconduct

Kraft Heinz said in a filing last week that it will restate its financial statements for 2016 and 2017 by $181 million, after a review into its procurement and accounting procedures discovered employee misconduct. Kraft Heinz disclosed in February a $15 billion write-down on its Kraft and Oscar Mayer brands, as well as an investigation by the Securities and Exchange Commission into its accounting and procurement practices. The SEC investigation launched an internal review, which caused Kraft Heinz to delay filing its annual report twice.

John Schnatter considers sale of Papa John’s stake

John Schnatter, the former CEO of Papa John’s International Inc., might finally be cutting ties with the pizza company he founded. According to an SEC filing Monday, Schnatter has enlisted the aid of financial advisers to help sell all or part of his 31% majority stake in the Louisville, Ky.-based pizza chain. The move would mark further separation of Schnatter and the company, which have been mired in legal battles and public relations problems for a year and a half as Schnatter’s influence at the company waned.

Home & Road

Furniture industry reacts to new tariff reality

Furniture manufacturers and retailers woke this morning to the reality of 25% tariffs on some $200 billion Chinese imports, including furniture and key components, accelerating the quest for alternatives that has been underway since an initial round of 10% tariffs were imposed last fall. This effort has seen a large number of companies announce plans for manufacturing and warehouse facilities in Vietnam, with Malaysia, Mexico, India and Indonesia also emerging as potential alternatives. However, even the most optimistic assessments have described these as longer term solutions, a prospect that was wiped out by the speed with which the current tariff situation emerged. As little as a week ago, expectations were high that a deal between China and the U.S. would be reached, negating the potential for higher tariff rates. However, since that time negotiations appear to have moved backward, and last Sunday President Trump tweeted the intention to impose the 25% tariffs that five days later became a reality.

Tempur-Pedic testing its first boxed bed in Seattle market

Tempur-Pedic is making its entry into the rapidly growing boxed bedding arena with the introduction of the new Tempur-Cloud model, the company announced. Scott Thompson, chairman and CEO of Tempur Sealy International, announced the new product on a conference call with analysts. He said the 10-inch mattress, which will retail for $1,799, is being tested in Seattle and will roll out to other cities over time. The bed, which will be sold through the company’s direct-to-consumer channel, will not cannibalize sales of other Tempur-Pedic products, Thompson said. Tempur-Pedic has been the only major bedding brand not offering a boxed bed, but Thompson said TSI is no stranger to the category. “We have quite a few bed-in-the-box products within the family already,” he said on the conference call. “Obviously, we’ve got Sealy To Go, which is the low-end. Then we’ve got Cocoon, which is kind of the middle market. And what we’re announcing today is Tempur-Cloud,” aimed at higher price points. Thompson said the new boxed bed has been years in the making.

Rent-A-Center Earnings: Stock Slides Despite Q1 EPS, Sales Beats

Rent-A-Center reported its latest quarterly earnings results, bringing in a profit that surpassed what analysts called for, while also increasing when compared to the company’s loss during the same period a year ago, yet the stock took a step back late Monday afternoon. The Plano, Texas-based public furniture and electronics rent-to-own business said that for its first quarter of its fiscal 2019, it brought in a profit of $7.3 million, which is stronger than the loss the company posted during the same period in its fiscal 2018. This tallied up to roughly 13 cents per share in net income, or 59 cents per share on an adjusted basis when considering non-recurring costs. This was stronger than what analysts expected from Rent-A-Center as the Wall Street consensus estimate called for the brand to bring in adjusted earnings of 30 cents per share, according to the average estimate of six analysts who were surveyed by Zacks Investment Research.

Purple Innovation posts a 37% revenue gain for Q1

Bedding producer Purple Innovation posted a fiscal net revenue gain of $83.5 million for first quarter ending on Mar. 31, primarily driven by growth in the company’s wholesale business. The increase was a 37% jump from the $60.8 million revenue in the prior-year first quarter. “Our first quarter results, which were highlighted by strong revenue growth and a significant improvement in operating profit, represent a very encouraging start to the year,” said CEO Joe Megibow. “We continue to experience increasing demand for our differentiated product offering, especially through our wholesale channel as the combination of door expansion and strong sell-through is fueling healthy year-over-year gains.” Megibow added that most of the company’s gains in the first quarter came from growth in the wholesale business. The company’s net loss for the current quarter was $720,000, compared to a net loss of $4.3 million in the first quarter of 2018.

Jewelry & Luxury

Pandora Cuts 1,200 Jobs as Sales Drop

Pandora will push ahead with a total overhaul of its business, after sales weakened in the first quarter. Global sales fell 6% year on year to DKK 4.8 billion ($720.5 million) for the January-to-March period, the Danish charm maker reported Tuesday. Revenue in the US slipped 12% in local currency to DKK 977 million ($146.5 million), while sales in China rose 15% to DKK 548 million ($82.2 million). Global net profit declined 31% to DKK 797 million ($119.5 million). The company plans to lay off approximately 1,200 employees at its Thailand manufacturing facility. Those cuts are in addition to the 700 workers it dismissed from the factory in February. It will also reduce some workers’ hours, aiming to save a combined DKK 600 million ($90 million) in 2019.

Spence Diamonds Appoints New CEO

Spence Diamonds, the 13-store diamond retailer that’s increasingly focused on lab-grown diamonds, has named Veeral Rathod, cofounder of custom menswear brand J. Hilburn, as its new CEO. Rathod has been with Vancouver, Canada–based Spence since September 2018, when he joined the company as chief marketing officer.

He takes over from Eric Lindberg, who will stay with the company as executive chairman.

Watches of Switzerland, Owner of Mayors, Will Go Public

The Watches of Switzerland Group, which owns the Mayors chain as well as multibrand watch stores in the United States and United Kingdom, will file for an initial public offering on the London Stock Exchange sometime around May 22, according to reports. In a statement, Brian Duffy, chief executive officer of Watches of Switzerland Group, said his company “is now the U.K.’s leading luxury watch retailer and has successfully entered the significant, but underdeveloped U.S. market.”

 

Office & Leisure

Party City to close 45 stores

Party City is moving to close 45 of its 870 stores in 2019, according to its most recent earnings filings. The closures target areas where there are other nearby Party City stores that could capture those lost sales. The move is meant to free up capital to expand into “underserved markets,” the company said. In an analyst call, Party City CEO Jim Harrison said the company could open more than 200 additional stores. This year the party supplies retailer plans to pilot four smaller format stores, which run between 7,000 and 10,000 square feet, in addition to a new concept meant to be a “crisper, cleaner and easier shopping environment” with “a more open footprint,” Harrison added. Party City’s first-quarter net sales increased about 1% year over year to $511.1 million as comparable-store sales fell 1.4%, primarily because of a helium shortage.

Office Depot announces $100 million savings plan

Office Depot in North America has announced a companywide restructuring plan that it is calling a ‘business acceleration programme’ as it posted disappointing first quarter results. As a result of the actions, the reseller said it expects to achieve cost savings of at least $40 million in the second half of this year and at least $100 million in annual run-rate costs savings from 2020 onwards. Total costs to implement the plan are estimated to be around $110 million, with about $85 million of that to be incurred during the current financial year. CEO Gerry Smith said that plan was a means “to accelerate our transformation, enhance our profitability and fund future growth initiatives” and that it would create “a leaner and more competitive enterprise”.

Mint House raises $15M to give business travelers a better hotel

Hotels are convenient but rarely homey. Short-term rentals through Airbnb or HomeAway are often comfy but can be a pain to book and check-in. Business travelers often have to pick the best of two lousy options. Mint House is summed up best by Tige Savage, Revolution Venture managing partner: “Mint House is the best of a hotel without the worst of a hotel and the best of an Airbnb without the worst of an Airbnb.” The New York-based Mint House is today announcing a $15 million financing round led by Revolution Ventures, with participation from other investors and hotel industry veterans. The influx of capital and industry connections should go a long way in allowing the company to expand its offering that caters to business travelers looking for apartment-style accommodations with the predictability and reliability found in top-tier hotels.

Camping World posts loss in RV, outdoor retail segment

Camping World on Wednesday reported first quarter earnings, announcing that revenue increased 0.6% to $1.07 billion and gross profit decreased 1.2% to $298 million, according to a company press release. Income in the RV and outdoor retail segment decreased a whopping 101.5%, leading to a loss of $0.4 million. “The decrease in profitability was attributable to a combination of changes in product mix and the impact to certain inventory optimization programs,” CFO Melvin Flanigan said. Despite an acquisition spree of several outdoor retail companies, Camping World remains laser-focused on the RV market, with outdoor retail a minor portion of its portfolio.

Technology & Internet

‘Airbnb for warehousing’ startup Flexe raises $43M to help online retailers take on Amazon

As more consumers shop online, retailers need capacity to ship products across the country — particularly as they battle e-commerce kingpin Amazon. Flexe, a Seattle logistics startup that operates an on-demand warehouse marketplace, is helping them do that. The company has announced a $43 million investment round to meet demand from a growing number of companies needing “pop-up” storage space. Activate Capital and Tiger Global Management led the Series B round. Flexe operates much like Airbnb — instead of matching travelers with open homes and apartments, it matches retailers with warehouses that have excess capacity.

 

NBCUniversal Unveils ShoppableTV

NBCUniversal last week unveiled the launch of ShoppableTV, which will give TV viewers the opportunity to buy products within the environment of their favorite TV shows by holding their mobile phones to the screen during so-called on-air shoppable moments. The entertainment arm of cable giant Comcast said the new technology will alert viewers to these moments, with those choosing to use their phone then taken directly to a marketer’s website for a potential purchase.

 

Finance & Economy

US producer prices rose moderately in April

U.S. producer prices rose moderately in April, but underlying inflation pressures at the factory gate appeared to be picking up. The Labor Department said its producer price index for final demand increased 0.2% last month after jumping 0.6% in March. In the 12 months through April, the PPI increased 2.2%, matching March’s rise. Economists polled by Reuters had forecast the PPI gaining 0.2% in April and increasing 2.3% on a year-on-year basis. A key gauge of underlying producer price pressures that excludes food, energy and trade services increased 0.4% last month. That was the largest rise since January 2018 after being unchanged in March. The so-called core PPI increased 2.2% in the 12 months through April after rising 2.0% in March.

US trade deficit widens to $50 billion in March

The U.S. goods and services deficit with its global trading partners widened slightly in March as demand for foreign goods buoyed imports, the Commerce Department said. The trade deficit rose 1.5% from February to a seasonally adjusted $50 billion in March, the report said. Economists surveyed by Refinitiv expected the U.S. trade deficit in March to grow to $50.2 billion from a revised $49.3 billion in February. Though the trade deficit widened in March, it remains below the recent December high. The trade gap ballooned to $59.9 billion at the end of 2018, which was the largest gap in 10 years.