The Weekly Consensus – January 15, 2018 (Volume 10, Number 3)

The Big Story
Kodak’s Recent Developments
Betsy White

 

Over 4,000 exhibiting companies and 1,200 speakers were in attendance at the annual CES (Consumer Electronics Show) in Las Vegas last week.  While the conference is known for its debuts of cutting edge technologies and gadgets, one presenting company with an old-economy name managed to create quite a bit of publicity and a 300% increase in its stock price.  Two announcements made by Kodak indicate it is now fashioning itself as a new-economy company.  Since it emerged from bankruptcy in 2013, Kodak has mostly licensed away its consumer products business to focus on B2B goods and services.  But both of its newest developments (pun intended) involve a further pivot, moving Kodak into cryptocurrency initiatives that expand the bitcoin universe.

The first of Kodak’s new initiatives involves an ICO (initial coin offering) of a new cryptocurrency called KODAKCoin, which is launching in conjunction with an image rights platform called KODAKOne.  Both KODAKCoin and KODAKOne are designed to assist photographers in managing and getting paid for their images.  Launching January 31 and operated via a licensing partnership with WENN Digital, photographers who sign up for KODAKOne are provided with a level of certainty and security that they are being paid for their work.

Read more

The Weekly Consensus – January 8, 2018 (Volume 10, Number 2)

The Big Story
Uncle Sam as a Partner
Billy Busko

A business class professor often reminded us, “Every business has a partner: the government.”  There are many ways that the government and its laws and regulations impact business, but one universal factor is taxes.

The Tax Cuts and Jobs Act passed by Congress just before Christmas took effect January 1st.  How will the Act impact the Retail Industry?

To provide a general and global perspective, Ernst & Young reports that the U.S. has had the highest federal corporate tax rate in the world at 35%, which on average increases to 39% including state taxes.  This compares to a worldwide average of 25.8% or a modestly higher GDP-weighted average of 27.9%.  The global book ends have been the United Arab Emirates at 0% and the U.S. at 39%.  In between are Russia (20%), the U.K. (21%), China (25%), Canada (26%), Australia (30%), Germany (30%), Mexico (30%), Brazil (34%), India (34%), Japan (35%) and France (36%).  Moreover, the U.S. has not had comprehensive corporate tax change in thirty years.  In the meantime, the global average corporate tax rate has decreased approximately 15%.

Read more

The Weekly Consensus – January 2, 2018 (Volume 10, Number 1)

The Big Story
RetailWire Discussion: What Retail Apocalypse?
Tom Ryan, RetailWire

While the disruption that has resulted in the closure of thousands of stores was the talk of retail throughout 2017, the industry scored its best holiday period since 2011 last year.

That’s according to Mastercard SpendingPulse, which was the first firm to release its holiday recap at the end of 2017. Sales from November 1 through December 24 expanded 4.9 percent vs. the previous year period, setting a new record for dollars spent. Mastercard tracks retail spending by all payment types.

“Overall, [the year 2017] was a big win for retail,” said Sarah Quinlan, SVP of Market Insights, Mastercard, in a statement. “The strong U.S. economy was a contributing factor, but we also have to recognize that retailers who tried new strategies to engage holiday shoppers were the beneficiaries of this sales increase.”

Read more

The Weekly Consensus – December 18, 2017 (Volume 9, Number 48)

The Big Story
What Will Be Target’s Next Me-Too Move?
Paul Alexander, CFA

The escalating arms race between Walmart and Amazon has been one of the most interesting storylines in the consumer economy over the last two years. But every few months or so, we get a reminder that retailing isn’t just a two-horse race. Last week provided one such instance, when Target announced its $550 million acquisition of Shipt, a food delivery startup that will give Target the ability to roll out same day delivery to millions of shoppers.

While the Shipt acquistion is a big move, Target is still playing catch-up with its two big rivals. Walmart has already experimented with same day delivery in certain markets, and it purchased the last-mile logistics company Parcel this summer. Amazon also already offers same day delivery on certain items and has a relationship with the grocery delivery service Instacart through Whole Foods. This isn’t the first time that Target has followed Amazon’s or Walmart’s lead. Target was a few months behind Walmart this year in becoming a partner retailer on Google Express’s voice shopping platform. And just last month, Target declared that it will offer free shipping on all orders throughout the holiday season, emulating part of of the value offered by Amazon Prime.

Read more

The Weekly Consensus – December 11, 2017 (Volume 9, Number 47)

The Big Story
For Retailers, Is Being Political Ever Correct?
Mark Lenz

Patagonia last week updated its homepage with this message, written in stark white on black: “The President Stole Your Land.” The change announced Patagonia’s opposition to (and legal efforts to prevent) President Trump’s recent order to significantly reduce the size of two large national monuments in Utah.  REI, another large outdoor retailer, also responded to the president’s decision by making a more subdued statement that they “are unwavering in our nonpartisan commitment to public lands.”

The federal government owns nearly two thirds of the land in the state of Utah, an amount of land much higher than in all other states in the U.S. except for two.  The announcement by President Obama creating Bears Ears National Monument last year, which makes up 1.3 million acres, while pleasing environmentalists and the local Native American tribes, did not please the local politicians and states’ rights supporters.

Read more

The Weekly Consensus – December 4, 2017 (Volume 9, Number 46)

The Big Story
Gluttony Wednesday
Doug Stebbins, CFA

One should never underestimate the power of branding.  At some point, “the day after Thanksgiving” became known as “Black Friday”, a change that has magically caused normally rational people to wake up at 2am to line up outside of stores in the freezing cold.  While many believe that the term Black Friday was coined to identify when retailers’ red ink (losses) would turn into black ink (profits), it actually was a term created by the Philadelphia Police Department in the 1950’s to describe the chaos as shoppers descended upon the city for post-Thanksgiving holiday gift buying.  As the term took root in Philadelphia, there was an effort to rebrand the day “Big Friday” to make the city seem more welcoming to shoppers.  But it was too late, the Black Friday moniker was here to stay, and it is now known nationwide as the official beginning of holiday shopping season.

Read more

The Weekly Consensus – November 27, 2017 (Volume 9, Number 45)

The Big Story
RetailWire Discussion: Amazon Go Plans to Transform Convenience in Retail Stores
George Anderson, RetailWire

It’s been nearly a year since Amazon.com opened its first Amazon Go convenience store. While the beta version of the concept, which was initially supposed to open earlier this year, took longer than expected, Amazon Go is now ready for its coming out party, Bloomberg reports.

The 1,800-square-foot store, which operates without checkouts, uses sensing technology that identifies customers who scan their Amazon Go mobile app as they enter the location. When a shopper takes products from the store’s shelves, the items are automatically added to the customer’s virtual shopping cart. If they put something back, the item is removed from the virtual cart. When customers leave the store, Amazon bills their accounts and sends a receipt to the app.

Read more

The Weekly Consensus – November 20, 2017 (Volume 9, Number 44)

The Big Story
Amazon Should Be Jealous
Marshall Schleifman

Most people are familiar with the concept of “Hallmark holidays” – celebrations that are perceived to exist primarily for commercial purposes.  Headlined by Valentine’s Day, Mother’s Day, and Father’s Day, and filled out with commemorations of Grandparents, Secretaries, Bosses and others, “Hallmark holidays” drive consumer purchases of cards and gifts to feed the corporate profit beast (in its defense, Hallmark officially disclaims credit for creating any holidays).  In fact, according to National Day Calendar, various interest groups, industry associations, and businesses now sponsor over 1,500 “national days” to attract attention and share-of-wallet.

Read more

The Weekly Consensus – November 13, 2017 (Volume 9, Number 43)

The Big Story
The “Apocalypse” Will Hurt Women More Than Men
Michael A. O’Hara

In a well-researched article, a team of four Bloomberg writers (aided by five others) made it abundantly clear last week that things will likely get a whole lot worse for brick and mortar retail in the coming years.  If 2017 is the retail “apocalypse,” (a foretelling of the battle of good versus evil at the end of the world), these authors made the case that 2018 or 2019 may be retail’s “Armageddon” (the biblical site of such battle). In America’s ‘Retail Apocalypse’ Is Really Just Beginning published on November 8, 2017, the Bloomberg authors lay out both the number of recent store closings and the amount of debt that major retailers are carrying and will likely find difficult to refinance. They also note that institutional lenders are increasingly less comfortable with retailer debt as an investment asset class than previously, and they explore the growing amount of reserves taken by consumer credit companies as people fail to repay debts owed to bankrupt companies even though they are legally required to do so.  But among the parade of horribles detailed in the article was a passing reference to a phenomenon that may have broad social ramifications not yet fully understood by most in the industry: the shifting sands from brick-and-mortar retail to ecommerce will have a meaningfully worse impact on the employment of women than men – particularly at the low end of the wage scale.

Read more

The Weekly Consensus – November 6, 2017 (Volume 9, Number 42)

The Big Story
Why Victoria’s Secret Isn’t Worried
Paul Alexander, CFA

 

News coverage of the retail industry has been dominated this year by bankruptcies, falling foot traffic, and the unyeilding encroachment of Amazon. So much of our attention has been drawn to the shift in spending from physical stores to the internet, that it has become tempting to judge a company’s future prospects through one simple, binary calculation: is this retailer heavily exposed to brick and mortar stores and malls? If yes, then its prospects are probably poor. If no, then perhaps it has a chance do well. According to this decision tree, L Brands, the parent company of the mall-based brands Victoria’s Secret and Bath and Body Works, may be in trouble. And recent events would seem to support that outlook. Sales at Victoria’s Secret have slumped recently amid discontinued product lines, millenials’ changing tastes, and new ecommerce-based competitors like Adore Me, True & Co, and Third Love. The stock market appears to have a pessemistic view of the company – shares of L Brands are off over 50% since the end of 2015. However, at the company’s annual analyst day last Thursday, L Brands reminded us that this binary decision tree is overly simplistic. Why? Because there is more to the world than U.S. malls and Amazon.

Read more

Reach Consensus