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The Weekly Consensus

Ideas, observations, and news on the consumer products and retail industries
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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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The Weekly Consensus – August 6, 2018 (Volume 10, Number 30)

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.

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The Weekly Consensus – July 30, 2018 (Volume 10, Number 29)

The Big Story
Chick-fil-A’s Latest Eyebrow-Raising Move: Meal Kits
Daniel O’Brien

Fast food has held a unique position in American culture and the American diet for decades. It is impossible in many towns and cities to drive down Main Street and not be met with large neon signs, golden arches, and Colonel Sanders staring you in the face. One company, however, has long differentiated itself from the major burger chains. Best known for its delicious chicken sandwiches, cordial customer service, and controversial political views, Chick-fil-A has taken a different approach to fast food than most. It is now experimenting with a new product offering that could separate itself from the pack even further. The company will soon begin testing an offering of meal kits that customers can pick up in store and bring home to prepare on their own. This test, which will begin in mid-August in the Atlanta, Georgia area, could drive incremental sales if customers who are already in store decide to add meal kits for future consumption to their transaction. But getting into meal kits also entails a number of challenges and risks.

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The Weekly Consensus – July 23, 2018 (Volume 10, Number 28)

The Big Story
Toys “R” Us’ Hidden Technology Treasure Could Be Worth Millions
Paul Alexander, CFA

As the investment bankers charged with selling the intellectual property of the Toys “R” Us bankruptcy, we at Consensus have been working with potential investors to reimagine and relaunch the brand. While poring over the company’s wealth of trademarks, brands, domains, franchise agreements, and more, we experienced the investment banking equivalent of stumbling across a lost treasure chest in your grandmother’s attic: we found a trove of unused “IPv4 addresses” that may yield value to the bankruptcy estate in the millions of dollars.

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The Weekly Consensus – July 16, 2018 (Volume 10, Number 27)

The Big Story
‘Twas the Hours Before Prime Day
Maeghan Thompson

As you’ve not doubt heard, this year’s Amazon Prime Day starts today, Monday, July 16th, only a few hours from now (12pm PT/3 pm ET). Prime Day 2018 will run through tomorrow, Tuesday, July 17th for thirty-six hours, which is six hours longer than last year’s event.  If Prime Day continues to grow as it has in recent years, which seems reasonable, millions of people right now are likely stretching their clicking and tapping fingers, and readying their “Buy now with 1-Click” buttons.

Prime Day was launched in 2015 to celebrate the 20th anniversary of Amazon’s founding.  Each year since, it has taken place in the middle of July to reward Amazon Prime members all over the world with special deals, making it the unofficial Black Friday of summer.  Internet Retailer estimates that total 2017 Prime Day sales (through Amazon and other retailers) reached $2.4 billion, and Amazon reported the day achieved 60 percent year/year sales growth. In addition, Amazon signed on more new Prime memberships on Prime Day last year than on any other day in company history. For 2018, Internet Retailer estimates total sales will grow 67% to just over $4.0 billion.

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The Weekly Consensus – July 9, 2018 (Volume 10, Number 26)

The Big Story
Full of Vacancy

Last week, it was reported that mall vacancies have hit their highest level since 2012 and are closing in on all-time records. According to a report by REIS, the commercial real estate data company, the amount of occupied retail real estate in 77 major U.S. metropolitan areas dropped by 3.8 million square feet in the second quarter, the largest decline since 2009.

The news coincided with the last of more than 700 Toys R Us stores closing last week, after the company filed bankruptcy earlier in the year. In all, more than 4,100 major retail stores closed so far in 2018, according to Coresight Research. Six hundred Walgreens have closed this year, while Bon-Ton, Sears and Kmart, Best Buy, Signet Jewelers, Mattress Firm, and GNC have all closed two hundred stores or more this year. Claire’s, Foot Locker, and The Children’s Place have closed one hundred or more locations.

Shopping centers saw 8.6% of their retail space unoccupied in the second quarter, up from 8.4% at the start of the year, according to the REIS report. The vacancy rate peaked at 9.4% in 2011. Back then, the economy was still in a recession, and too many malls had been built in the preceding decades, resulting in a glut of retail space. “We were over-retailed,” said Barbara Denham, a senior economist at REIS. “The recession knocked a lot of stores out of business. While the industry made corrections, it may still be the case that the U.S. is over-retailed. The Wall Street Journal recently noted that for every person living in the U.S., there is 24 square feet of retail space. In Australia, it amounts to 11 square feet, and in the U.K., it is just five square feet.

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