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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 – July 17, 2017 (Volume 9, Number 27)

The Big Story
Abercrombie & Fitch: A Moose of a Mess
Maeghan Thompson

Abercrombie and Fitch announced last Monday, July 10th, that the company would no longer seek to sell itself despite having previously entertained takeover bids, including from competitors such as American Eagle and Express. ANF’s stock price plummeted more than 21 percent upon the announcement, and shares of Gap, American Eagle and Express all fell more than four percent. Abercrombie now finds itself again with the daunting task of restoring its flagship brand to popularity, and the prospect of finding a helping hand from a would-be acquirer seems dim. In the meantime, the secular headwinds buffeting retail are as palpable as ever. Abercrombie was once the hottest teen brand in America. So how has it gotten to this point? What lies ahead?

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The Weekly Consensus – July 10, 2017 (Volume 9, Number 26)

The Big Story
RetailWire Discussion: Primed for Prime Day
Tom Ryan, RetailWire

For its third annual Prime Day, Amazon is ramping up the excitement to again wallop year-ago levels.

The first Prime Day occurred on July 15, 2015 and appeared to be a one-off occasion to celebrate Amazon’s twentieth anniversary. Proving successful in boosting sales and attracting new Prime members, the retailer ran the event again on July 12, 2016. Adding more than 800 limited-time “Lightning Deals” in the evening, last year’s Prime Day sales rose more than 60 percent and exceeded Amazon’s Cyber Monday sales.

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The Weekly Consensus – June 26, 2017 (Volume 9, Number 25)

The Big Story
Almighty Amazon
Betsy White

The news flow from and about Amazon over the past week has been amazing and relentless – starting with the announcement of Amazon’s $13.7 billion purchase of Whole Foods, to the beta launch of Prime Wardrobe (the Stitch Fix-like service that lets consumers try on apparel and accessories at home before they buy) and the pending agreement with Nike to sell its products directly on Amazon.com.  These developments have inspired analysts to speculate about Amazon’s next disrupting move, whether it will be in pharmacy or furniture sales (Ikea just began selling on Amazon.com), or if Amazon will just acquire one or more of the biggest names in retail.  Companies mentioned as potential acquisition targets include the aptly-named Target, as well as Nordstrom, Lululemon, Gap, BJ’s Wholesale Club, and even Warby Parker.  With a market cap of almost $500 billion and no net debt, Amazon certainly has the financial ability to buy almost any business it wants.

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The Weekly Consensus – June 19, 2017 (Volume 9, Number 24)

The Big Story
Coming Soon to You, a Pop-Up
Billy Busko

On Memorial Day Weekend 2004, I was visiting the Hamptons, where outlandish sightings are common.  But I was particularly struck by a handsome house in town that had a large red bullseye painted on the front – Target style.  Intrigued, I approached the building, and, indeed, it had been converted into a Target store.  On July 4th, the building remained, but the store was gone.  I assumed that Target was too low-end for the Hamptons and that the store closed because of a lack of business.  Not so – I later found out that Target had previously opened other New York stores in Tribeca and Rockefeller Center and on a boat docked along the Hudson River, all intentionally opened for only one month.

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The Weekly Consensus – June 12, 2017 (Volume 9, Number 23)

The Big Story
The Last Merchant Prince
Paul Alexander, CFA

When Mickey Drexler announced his retirement last week, a number of industry observers called it “the end of an era.” Most people making this statement were referring to the longevity and influence of Drexler’s career, the highlights of which include building The Gap and Old Navy into household names, and making J.Crew one of the most popular brands of the early 2000’s – successes that earned him the moniker “the merchant prince.” However, his retirement may also be viewed as a metaphor for the changing complexion of retail leadership, and the end of an era for the industry as a whole.

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The Weekly Consensus – June 5, 2017 (Volume 9, Number 22)

The Big Story
Giving and Taking Credit
Mark Lenz

As part of its recent first quarter earnings announcement, Signet Group (the retail jewelry stalwart and parent company of Kay, Zale, and Jared) reported that it will outsource its customer credit business.  Signet’s customer credit program has provided a competitive advantage for the company over the years, but it has come under increasing pressure from investors in recent months.  There are perceived balance sheet benefits related to outsourcing, and additionally, questions have begun to mount about whether Signet has been recognizing bad debts in a timely manner (due to its approach to evaluation).  Outsourcing should address each of these concerns, but it could also have drawbacks.

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The Weekly Consensus – May 22, 2017 (Volume 9, Number 21)

The Big Story
Big Blowhard Brand
Doug Stebbins

There is a big difference between a label and a brand.  Virtually every product has label.  But just because a product has a colorful logo does not mean it is brand.  A brand has meaning to the consumer.  A strong, established brand is able to create a specific perception in customers’ minds concerning a product’s qualities and attributes. Creating a brand can be time-consuming and expensive, and the results are unpredictable.  Many products try to accelerate the brand development process by aligning with a celebrity and hoping that the attributes of the celebrity rub off on the product in the minds of consumers.  But, what happens when the process is reversed, and a brand is developed to create a celebrity?  That is exactly what is happening with Big Baller Brand.

As the website says “Big Baller Brand is a Lifestyle Apparel company founded on core family values, and inspired by the 3 Ball brothers from Chino Hills, California.  Lonzo, LiAngelo, and LaMelo Ball are basketball players with Championship pedigree”.  Keep in mind that the average age of the three Ball sons is 17 and combined they have scored the same number of points in the NBA as I have.  You may be wondering how these three brothers, two of which are still in high school, got their own brand.  The answer is twofold:  YouTube, and their father, LaVar (LaVar is apparently the source of the “Championship pedigree” noted above).

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The Weekly Consensus – May 15, 2017 (Volume 9, Number 20)

The Big Story
Terrible, Horrible, No Good, Very Bad
Marshall Schleifman

In Judith Viorst’s 1972 children’s book Alexander and the Terrible, Horrible, No Good, Very Bad Day, from the moment Alexander wakes up, things just do not go his way.  Poor fortune visits him at every turn throughout the day.  It feels fitting that Viorst’s protagonist shares his name with former New York metropolitan department store chain Alexander’s, whose story ended terribly, horribly, no good, very bad in a 1990s bankruptcy.  And based on first quarter results reported last week across the department store group, terrible, horrible, no good, very bad trends appear to continue to haunt the subsector, and are rapidly accelerating.

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The Weekly Consensus – May 8, 2017 (Volume 8, Number 19)

The Big Story
The Venus® Brand
Michael A. O’Hara

Jerry Seinfeld once observed that sports fans are more loyal to teams than to athletes, pointing out that as beloved players leave their cities we stop rooting for the person but still root for the “laundry.”  This may be why I hated Magic Johnson when I was a teenager, even though he was a once-in-a-lifetime talent in my favorite sport who was also articulate, funny, gracious, and remarkably unselfish.  His tragic flaw:  he played for the Los Angeles Lakers.  As an adult, I love Magic, and have learned to appreciate transcendent players, even if they aren’t lucky enough to play for Boston teams.

But not everyone is as open minded as me about other cities’ sports stars.  (Feel free to send me an email congratulating me on my high-mindedness.)  This suggests that transcendent athletes in individual sports may be able to build brands that exceed those of team sport athletes.   Many (most?) people outside of Cleveland root against Lebron James.  But, as we learned at last Wednesday’s 7th annual Next Great Consumer Brands, everyone loves Venus Williams.

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The Weekly Consensus – May 1, 2017 (Volume 9, Number 18)

The Big Story
The 7th Annual Next Great Consumer Brands

As the seventh-annual Next Great Consumer Brands event culminates this week at the Nasdaq MarketSite in Times Square, we are pleased to welcome another exceptional collection of high-potential consumer and retail brands.

Away

Launched in February 2016, Away is a travel brand founded by Steph Korey and Jen Rubio (both formerly of Warby Parker). Away creates special objects that are at home on the road—that carry you forward, making your trip easier, and in a small way, your life better. It started with luggage.

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