The Weekly Consensus – October 22, 2018 (Volume 10, Number 40)

The Big Story
Furniture, Flagships, and the Future
Paul Alexander, CFA

 

The Restoration Hardware catalog arrived at my house last week, and as usual, it contained hundreds of pages of high-end furniture and décor items. However, the page that I found most interesting didn’t have any product on it at all. This season’s book leads off with a short letter from Gary Friedman, the Chairman and CEO of RH (the acronym that Restoration Hardware has been using in recent years as part of a subtle re-brand). Entitled “The Death of Retail Is Overrated,” Friedman’s letter outlines his vision for RH’s stores and makes an optimistic case for the future of physical retail. The letter announces a new 90,000 square foot RH flagship in New York City, complete with multiple galleries, an art installation, and a restaurant, and suggests that compelling stores such as this one are the future of retail. Friedman likely doesn’t mean for all retailers to interpret his letter as strategic real estate and merchandising advice. But since he doesn’t explicitly warn against that, let me do it for him: flagships and expensive experiential retailing are not for everyone.

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The Weekly Consensus – October 15, 2018 (Volume 10, Number 39)

The Big Story
Economic, Social Trends May Keep Halloween Spending Creeping Up
Maeghan Thompson

Halloween is a celebration of all things dark and spooky, but predictions of retail selling this year are hardly scary.  Like prior Halloween seasons, consumers are snapping up pumpkin-flavored everything, fun-size chocolate, fake cobwebs, jack-o’-lanterns and costumes, and industry observers expect that by All Saints’ Day on November 1, Halloween-related spending will roughly mirror last year’s record-breaking figures.

This year’s total spending forecast for Halloween, according to the National Retail Federation’s (NRF) annual survey, is expected to reach $9 billion, which is slightly lower than last year’s record-breaking forecast of $9.1 billion (the survey’s margin of error of 1.2%).  Fewer Americans are expected to participate in Halloween this year, 175 million versus 180 million last year, however, the average spend per person is predicted to be up modestly, from $86.13 to $86.79.  Most consumers will be focusing on costumes this year, as 68% of Halloween shoppers plan to purchase costumes, driving $3.2 billion of sales, according to the NRF survey.

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The Weekly Consensus – October 8, 2018 (Volume 10, Number 38)

The Big Story
New Brands and Old Retail Continue to Converge

Last week, we learned that Eloquii was being acquired by Walmart, and Birchbox would receive a strategic investment from Walgreens. The latter announcement included additional detail that Birchbox “retail experiences” will be created in Walgreens stores – eleven stores to start, but the goal will be to expand to more.

These developments have several similarities. In both cases, digital-first brands are allying with brick-and-mortar retailers to seek new distribution opportunities and new demographics. In both cases, old-guard retailers entrenched in the mass and convenience space are attempting to reach new, younger audiences and enhance their own brands in the process. The new products emerging from these partnerships will not be all that revolutionary. The customer experiences and the makeup of the target customers, however, are intended to be something more transformative, particularly for Walgreens and Walmart.

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The Weekly Consensus – October 1, 2018 (Volume 10, Number 37)

The Big Story
CGBS for the People and the Planet
Betsy White

It was great to see many of you at our Consensus Great Brands Show (CGBS) at The TimesCenter last week, and we hope that you enjoyed hearing from our presenters and exhibitors as much as all of us at Consensus did.  We always strive to showcase a roster of strong, growing, and innovative brands, but looking back on the day, we noted two additional themes that came through – commerce that’s good for the planet, and products that promote healthier living.

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The Weekly Consensus – September 24, 2018 (Volume 10, Number 36)

The Big Story
2018 Holiday Sales: More Diamonds Than Coal?
Billy Busko

Three months from today is Christmas Eve.  Gifts will be wrapped, but what will be opened?

It’s that time of the year when early prognosticators reveal their holiday sales forecasts based partly on recent back-to-school sales and various other factors.  For perspective, holiday sales account for roughly 20% of total annual retail sales overall, but can represent significantly more for many businesses.

The back-to-school shopping season is the second-largest seasonal shopping period of the year in terms of consumer spending.  Totaling $84 billion, sales last year (2017) saw a dramatic increase of 10% over 2016 and were record-setting.  Although final numbers for 2018 are still being tabulated, it looks like this year was be able to hold onto almost all of those gains, but narrowly fell to $83 billion, according to the National Retail Federation (NRF).  2018 college spending is expected to have reached a record $55 billion, while elementary through high school spending is expected to have totaled $28 billion.  The slight drop overall is credited toward electronics (laptops, tablets, smartphones) being more frequently purchased throughout the year as part of everyday life rather than being associated with school.

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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.

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The Weekly Consensus – September 10, 2018 (Volume 10, Number 34)

The Big Story
RetailWire Discussion: Nike Campaign Tests ‘All Publicity Is Good Publicity’ Adage
George Anderson, RetailWire

Nike has courted controversy with its latest “Just Do It” campaign, which includes an ad featuring Colin Kaepernick, former quarterback of the San Francisco 49ers, who gained notoriety in 2016 when he refused to stand for the National Anthem in protest of the mistreatment of minorities in the U.S.

The new ad features a tight black and white shot of Mr. Kaepernick’s face with copy that reads: “Believe in something. Even if it means sacrificing everything.” The former quarterback has not found a job in the league since declaring for free agency in March 2017. Mr. Kaepernick has filed a legal complaint against the NFL alleging collusion among teams to keep him out of the league.

As word of Mr. Kaepernick’s inclusion in the new campaign got out, protests spread across social media with some calling for a boycott of the Nike brand. Others rose to the brand’s and Mr. Kaepernick’s defense. Whether consumers were for or against Nike, it’s clear that Mr. Kaepernick’s inclusion has led to increased media exposure — roughly $43 million worth, according to Apex Marketing Group.

Discussion Questions: Will Nike sales be hurt or helped as a result of including Colin Kaepernick in the brand’s new “Just Do It” campaign?

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The Weekly Consensus – August 27, 2018 (Volume 10, Number 33)

The Big Story
Lab-Grown Diamonds and Love
Mark Lenz

 

In recent months, announcements by DeBeers and the Federal Trade Commission (FTC) concerning lab-grown diamonds have set the diamond industry abuzz.  In May, DeBeers announced that it was going to begin a lab-grown diamond jewelry business called Lightbox.  Lightbox will sell fashion jewelry with diamonds in soft shades of pink, blue and white, up to one carat total weight, beginning this fall.  Next, in late July, the FTC expanded its definition of a diamond to include those grown in a laboratory.  The FTC’s previous definition of a diamond said that a diamond is a natural mineral consisting essentially of pure carbon crystallized in the isometric system. The word natural does not appear in the new FTC definition of diamonds.  However, a lab-created diamond must be “qualified by a clear and conspicuous disclosure” with words such as ­laboratory-grown, so that a purchaser will know it is not a mined diamond.

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The Weekly Consensus – August 20, 2018 (Volume 10, Number 32)

The Big Story
The Most Wonderful Time of the Year
Douglas Stebbins

 

There are three words that are forbidden around my house this time of year.  With three students and a teacher living under our roof, nobody who values their life would ever utter the term “Back to School”.  While students and teachers may dread the return of classes and homework, most retailers recognize that there is no bigger shopping incentive than an upcoming first day of school (other than Christmas).  That is why one cannot turn on the TV or surf the web this time of year without being bombarded with back-to-school advertising.  But not all retailers benefit from back-to-school equally.  To figure out which of the retailers benefit the most of back-to-school, we looked at the 2017 results for 129 publicly-traded retailers and calculated what percentage of their revenue occurred during calendar third quarter.

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The Weekly Consensus – August 13, 2018 (Volume 10, Number 31)

The Big Story
Rite Aid’s Roller Coaster
Marshall Schleifman

Last Wednesday evening, pharmacy chain Rite Aid and supermarket Albertsons mutually agreed to terminate their pending merger.  Despite general support for the strategic merits of the combination, some large institutional Rite Aid shareholders opposed the deal and both major shareholder advisory firms urged against it believing that the economics of the proposal disproportionately accrued to Albertsons’ side.  Rite Aid abruptly cancelled its shareholder vote scheduled for Thursday morning, providing no reason for doing so.  This curious breach in standard procedure simply may have been intended to avoid the embarrassment of a failed vote or it may have been the follow-through on a high-stakes Rite Aid negotiation threat when Albertsons would not make a concession to appease the holdout shareholders.  While Rite Aid’s press release stated that it had “heard the views expressed by [its] stockholders”, Albertsons’s press release explained that it was “unwilling to change the terms of the merger.”

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