In the last Weekly Consensus, our colleague Billy Busko wrote The Big Story about NFTs, retail and the metaverse. Continuing with that theme, one of this past week’s major headlines was the announcement that Microsoft is buying the gaming company Activision Blizzard. The almost $70 billion price tag is the largest ever all-cash purchase of a business in the U.S., the largest video game M&A transaction, the largest purchase ever made by Microsoft, and yet the price is only 3% of Microsoft’s $2.25 trillion market cap. Still, $70 billion cash is a big number, so what is Microsoft getting with Activision Blizzard upon the expected 2023 closing of the transaction?
Approximately $15 billion or 9% of Microsoft’s revenue is generated by its gaming business via its Xbox hardware and subscription service, but Activision Blizzard is 100% about gaming. Activision Blizzard owns thousands of games, including the popular franchises Candy Crush, Call of Duty, and Warcraft. For the twelve months ended September 2021, the company’s revenues totaled $9 billion, yet the combination of Microsoft Gaming and Activision Blizzard will only create the third largest gaming business, after Sony and Tencent.
It turns out the gaming industry is already enormous and projected to grow much bigger. In 2021, worldwide gaming revenues are estimated at $178 billion, and are projected to grow to almost $200 billion in 2022. In the five years after that, the market size is expected to be $300 billion by 2027.
It’s no wonder that there were more than 1,100 announced or closed deals in the gaming space in 2021, with disclosed values totaling almost three times the value of transactions in 2020. The deal frenzy has not abated in 2022 – the Microsoft-Activision deal announcement was preceded this month by the announcement of a $12.7 billion deal for the purchase of Zynga (the owner of FarmVille and Words With Friends) by Take-Two Interactive (Grand Theft Auto owner).
There are reasons other than just the size and projected growth of the gaming market behind this deal activity. Microsoft’s Satya Nadellla has stated that “gaming will play a key role in the development of metaverse platforms.” Although the Weekly Consensus article last week cautioned that in the metaverse, video games “to date are considered primeval because they are limited in scope and self-contained,” gaming is lauded by both Mr. Nadella and media personality and marketing professor Scott Galloway as the anchor for the metaverse.
To answer the question posed in the first paragraph, the Activision Blizzard transaction gives Microsoft a growth vehicle as one of the world’s leaders in gaming. It also positions the company as a leader in the building and evolution of the metaverse, which is projected to be an even bigger market than gaming can be on its own. With their bet, the leaders of Microsoft have made it clear that they believe the metaverse is real and going to be very big – and not today’s version of Tulip Mania.
Headline of the Week
Microsoft announced Tuesday it will buy video game giant Activision Blizzard in a $68.7 billion all-cash deal. This would be Microsoft’s largest acquisition to date, followed by its purchase of LinkedIn in 2016 for $26.2 billion. Under the deal, Activision CEO Bobby Kotick, who has faced calls to resign over the cultural problems within his company, will remain CEO during the transition. Microsoft said Activision as a company will report to Microsoft’s Xbox boss Phil Spencer after the deal closes, implying Kotick could depart after the transition. Microsoft has gotten more aggressive with gaming over the past several years. It bought Minecraft maker Mojang for $2.5 billion in 2014. And last year, Microsoft completed a $7.5 billion acquisition of game maker Bethesda. The deal also plays into a long-term vision for Microsoft as it competes with Meta (formerly Facebook) to build technologies to create a virtual world called the metaverse. Today, virtual worlds are dominated by gaming, but the hope is they expand to cater to other demographics and replace a lot of traditional social networking activity online.
Apparel & Footwear
Footwear brand Aerosoles finalized a deal to sell itself to American Exchange Group, according to a press release. American Exchange — which owns its own brands along with doing design, manufacturing and wholesale work for outside accessories brands — plans to increase the distribution channels for Aerosoles as well as expand the brand to new categories. Aerosoles previously tried to sell itself more than four years ago as it sought a balance between winning over new consumers and maintaining its reputation as an affordable and comfortable option for older women. The company was profitable for decades before it ran into all the many challenges that drove dozens of other malls brands and retailers into bankruptcy in the late 2010s. The brand survived bankruptcy and today sells in major retail outlets, including Nordstrom, Macy’s, DSW, Zappos and Belk, along with its direct channel. American Exchange’s portfolio of owned and licensed brands includes Jones New York, Alexis Bendel, Nicole Miller, D.C. Comics, Zoo York and others.
Is Rebecca Minkoff close to a deal to sell her lifestyle brand? According to sources, Minkoff is in talks to sell her 16-year-old company, which has been saddled with debt and has faced difficulties during the pandemic. The brand, which caters to the Millennial consumer, manufactures and markets handbags, clothing, footwear and accessories, and just launched a home line. The company is owned by Rebecca Minkoff, cofounder and creative director, and her brother, Uri Minkoff, cofounder and chief executive officer. Reports were circulating in the market that a deal could potentially be done this week. It couldn’t be learned who was buying the brand. Sources indicated that Minkoff plans to go the route of an Article 9, a secured transaction where the borrower agrees to offer personal property for security against a debt.
Gap Inc. is globally launching an assortment of collectible non-fungible tokens (NFTs) with a gamified digital experience. NFTs are unique digital assets stored on a blockchain ledger which certifies the owner. There is no way for an NFT to have more than one owner, and only the certified owner can sell it. For this release, Gap is collaborating with Brandon Sines, the artist behind digital merchandise brand Frank Ape, for a limited edition drop. The gamified digital experience accompanying the launch encourages customers to collect Gap hoodie digital art at the Common and Rare levels to unlock the opportunity to purchase the Epic – limited edition digital art by Brandon Sines and a physical Gap x Frank Ape by Sines hoodie.
It was rent payments, retailing in the age of COVID-19 and a thwarted turnaround that sent Escada’s U.S. division to bankruptcy this week, the company said in court filings. Escada America LLC filed for Chapter 11 protection from its creditors in Los Angeles federal bankruptcy court late Tuesday, stating that both its debts and its assets ranged from $1 million to $10 million. The business has over 58 full-time employees and runs Escada’s 10-door retail network in the U.S. with office space in New York. The division is part of the broader Escada business, which Beverly Hills-based private equity firm Regent bought from the Mittal family in late 2019. While the filing covers only the Escada America unit, there have been financial difficulties at the brand, which also saw its German division file for insolvency in 2020. The company said in court filings that it cut its overhead expenses by $13.4 million over the past 21 months and negotiated with its landlords for rent relief.
Forever 21 has named Winnie Park as CEO, effective immediately. She joins from Paper Source, where she served as CEO for six years and helped transform the retailer from a brick-and-mortar-focused company into a lifestyle brand with a digital platform spanning social media, digital content, online subscriptions and affiliate partnerships. Park also oversaw its sale to an affiliate of Barnes & Noble. She will report to Marc Miller, CEO of SPARC. Prior to Paper Source, Park’s roles including a nine-year tenure at Hong Kong-based DFS, a division of LVMH, where she launched the company’s first global ecommerce site for fashion, beauty, accessories and spirits, serving China, Korea, Japan, Southeast Asia, Europe, the Middle East and the U.S. She also has lead Women’s Merchandising for Dockers at Levi Strauss and worked as a consultant for fashion retail and consumer digital at McKinsey & Co. Park will oversee Forever 21 as the company works with its fellow SPARC brands, including JCPenney and Juicy Couture, to improve their collective fortunes.
Athletic & Sporting Goods
Seawall Capital, the private equity owner of Kent Watersports, announced the company’s rebranding to Kent Outdoors and the acquisition of BOTE and Kona Bicycles. It said the rebranding and acquisitions would help the company better serve America’s growing interest in the great outdoors on and off the water. The addition of BOTE and Kona Bicycles adds to its existing portfolio of 20 watersports brands. BOTE, based in Walton Beach, FL, was initially known for its stand-up paddleboards but expanded to inflatable kayaks, floating dock systems and more in the watersports category.
Amer Sports has sold the Finnish adventure wearables brand Suunto to Liesheng, a Chinese technology brand. Amer is the parent of Enve Composites, Louisville Slugger, Arcteryx, Wilson and other brands, and the former owner of Mavic. Amer has been owned by the Chinese sports brand ANTA since 2018. According to Suunto, the transaction has been signed and it’s expected to close in the first half of 2022. Founded in Guangdong, China in 2015, Liesheng products are sold in more than 100 countries around the world. Amer Sports said it divested of Suunto as it refocuses its brand portfolio. “Amer Sports’ strategy is to focus on developing internationally recognized sporting-goods brands within the lifestyle, apparel, and footwear segments, shifting more business to D2C (direct-to-consumer) channels, as well as enhancing its presence in large markets such as China and the US,” the company said.
Cosmetics & Pharmacy
Unilever Plc plans to sharpen its focus on health and hygiene and plans to sell off slow-growth brands as it weighs making a higher offer for GlaxoSmithKline Plc’s consumer unit. Unilever said it will announce a revamp of its structure later this month. The Dove soap owner said it will refocus around its health, beauty and hygiene operations, suggesting divestitures may involve its food operations, which include the Ben & Jerry’s and Magnum ice cream brands. The strategy shift comes after Glaxo said over the weekend that it rejected three offers from the consumer-products company for a bundle of brands including Advil painkiller and Sensodyne toothpaste, the latest of which was worth £50 billion ($68 billion). Alan Jope is aiming to make his biggest changes at Unilever since becoming chief executive three years ago. With analysts valuing the Glaxo consumer business at as much as £48 billion, any successful offer from Unilever would likely have to include a significant premium over that level, as well as a consideration of synergies, to tempt Glaxo away from the spin-off plan, which is already at an advanced stage.
Mexican household products business Betterware has announced the acquisition of Jafra Cosmetics’ US and Mexican operations from its parent company, the Germany-based Vorwerk Group. The deal, which is pending regulatory approval in Mexico, is expected to close in the first half of 2022 and will involve a combination of $225 million in debt financing and $30 million cash. While Betterware and Jafra focus on different product segments, they both rely on a sales force of consultants who sell through their respective networks. The deal expands Betterware’s categories to include beauty, personal care, and fragrances while bringing Jafra’s 443,000 consultants, who sell around 5.8 billion Mexican pesos ($282.91 million) annually, into the Betterware fold. Luis G. Campos, president of Betterware, said in a statement that the acquisition “aligns perfectly with Betterware’s strategy” and that it would also allow the company to expand geographically to North America.
Alphabet’s life-science subsidiary Verily is teaming up with cosmetic giant L’Oréal in an effort to better understand skin care and develop new digital tools in the dermatology space. The partners plan to study dermatological health over time to better understand the environment and aging’s impact on skin and the “deep biology of the skin.” Verily’s R&D team and L’Oréal’s Active Cosmetic Division plan to work together to develop new digital technologies and diagnostic products for skin care, according to the release. The companies said that the new products could include AI algorithms or sensors. Skin conditions are common in the U.S. Some of the most common skin conditions include acne, atopic dermatitis, hair loss, psoriasis, rosacea and skin cancer. In fact, skin cancer is the most common kind of cancer in the U.S., according to the CDC. L’Oréal and Verily pitched the new collaboration effort as a way to better understand skincare and incorporate technology into the space.
The Axilone Group, a major player in the design and manufacture of primary packaging for skincare, perfume and make-up, has announced the acquisition of Anewcos, an innovative player in the formulation and filling of cosmetic products, based in China. Founded in 2011 in Suzhou (Jiangsu province, China), Anewcos employs around 120 people on a 13,000 m² site. Anewcos provides the formulation, development and filling of beauty products for major Chinese brands. The company specializes in skincare products, as well as powder magazines and foundations. Flexible and responsive, Anewcos has developed a complete portfolio of innovative and proprietary formulas, recognized by major Chinese brands. The acquisition of Anewcos gives the Axilone Group the opportunity to accelerate its growth with, in particular, Chinese brands, by offering them complete turnkey solutions and to diversify its product portfolio beyond its historical businesses. Anewcos’ expertise in formulation will enable the Axilone Group to increase its capacity to innovate and develop the packaging solutions of tomorrow.
Discounters & Department Stores
Walmart filed a series of trademark applications late last month that indicate the retailer has bigger plans for the metaverse, including through the development of cryptocurrencies and nonfungible tokens. CNBC first spotted the batch of documents that were submitted to the U.S. Patent and Trademark Office on Dec. 30. The applications encompass concepts like “virtual goods” across product categories such as furniture, toys and sporting gear, along with downloadable software for managing cryptocurrency portfolios or establishing an electronic wallet. Games and other services powered by augmented and virtual reality technology also make appearances. The news suggests the metaverse could play a significant role in Walmart’s strategy as the big-box brand centers more of its business around the digital world.
Neiman Marcus Group announced Friday it hired Amanda Martin to serve as its senior vice president and chief supply chain officer. The company also promoted Vijay Karthik to become its senior vice president and chief technology officer. Martin will oversee the company’s supply chain operations, photo studio and customer service departments. Karthik will manage the company’s end-to-end customer-facing IT development and structure, cloud platforms, omnichannel engineering and operations, according to a company press release. The company also announced plans to invest more than $90 million into its systems and distribution facilities and $200 million in technology for priorities like the company’s Connect platform, the acquisition of Stylyze and new digital labs.
Macellum Advisors, owner of nearly 5% of Kohl’s common stock, issued a letter to other investors in the retailer Tuesday that called for a board shakeup. The investment firm pushed Kohl’s to make a series of moves, including selling property, ramping up stock buybacks and breaking out its e-commerce segment. In a response, Kohl’s said it was “disappointed with the path” Macellum is pursuing and “the unfounded speculation” in its letter. In the letter, Macellum also said that “a sales process must commence” for the company as a whole absent a board revamp. “[W]e believe there are multiple buyers that have expressed interest in an acquisition,” wrote Jonathan Duskin, managing partner with Macellum.
Rickie De Sole, who has been Vogue.com’s executive fashion director for the past two years, has joined Nordstrom as women’s designer fashion and editorial director, the retailer said Tuesday in a blog post. In the newly created role, De Sole is tasked with “bringing a heightened point of view to the merchandising offering to deliver against business goals and growth plans,” the company said. She will also develop the women’s designer editorial plan, create designer content and act as a spokesperson. At Vogue, De Sole supported “business initiatives and content across digital, print and social platforms as well as editorial collaborations and e-commerce,” per the post. Before that she served as fashion director at W Magazine, accessories director at Vogue and public relations manager at Prada.
Walmart has launched an online and in-app experience based on a platform from nutrition technology company Sifter that includes a “Shop-by-Diet” scanning tool allowing customers to determine if products meet certain health preferences like diets, allergens, interactions with medications and medical conditions, Sifter announced last week. After scanning a product’s barcode, shoppers select health filters and the tool will let the shopper know if the product fits all, some or none of the chosen attributes. Shoppers can also examine the nutrition panel on the product page to see if it meets their needs and set up a “diet profile” that saves wellness goals, allergens, ingredients to avoid, health and lifestyle diets, and medications.
Emerging Consumer Companies
Sydney-based instant delivery grocery service Milkrun has raised $75 million to expand across the country as the race between Australia’s instant delivery startups accelerates.
The investment will fuel the company’s expansion from Sydney’s inner-city suburbs across greater Sydney and into other Australian cities. Launched in September 2021 by the founder of direct-to–consumer mattress company Koala, the start-up offers 10-minute delivery of supermarket items and fresh produce at retail prices rather than an inflated delivery cost.
Hard kombucha and hard seltzer-maker Flying Embers has closed a $20 million series C funding round, led by global spirits giant Beam Suntory. The investment will help fund expanded marketing and sales initiatives, as well as new product launches and the expansion of the company’s beyond beer portfolio. Existing investors Power Plant Ventures, Quadrant Capital, Monogram Cap and Beechwood Capital also participated in the round. In 2021, Flying Embers grew its total business 93%. Since its launch in 2017, Flying Embers has expanded its distribution to 42 states and Canada, and added direct-to-consumer shipping in California, Oregon, Vermont, Nevada, Montana, Kentucky, North Dakota, Nebraska, Virginia and Washington, D.C.
Food & Beverage
Organic baby food brand Yumi has raised $67 million in a Series B funding round, adding more than 70 female investors or women-led firms to its capitalization table. The fundraise intentionally was launched to address gender inequalities commonly seen in venture capital and equity ownership. Founded in 2017, Yumi is a female-founded and-led direct-to-consumer provider of meals, snacks and vitamins for babies and children developed by nutritionists, pediatricians, metabolic health experts and chefs. The menu includes blends and finger foods that are organic, vegan and gluten-free. Proceeds from the funding will be used to support retail expansion and new product launches.
As sugar reduction continues to be a top priority for food and beverage manufacturers, seven low- and zero-sugar brands are banding together to form the Alliance to Control Excessive Sugar (ACES), a new business group dedicated to promoting better-for-you products. The group was conceived by its chairman, Super Coffee CEO Jimmy DeCicco, and includes his own company alongside mini cookie maker HighKey, probiotic soda Olipop, lemon water brand Lemon Perfect, protein drink Koia, ice cream and cookie mix brand Enlightened, and low-sugar cereal Three Wishes. ACES launched this week with a website, sweetaces.org, where consumers can read about the project and sign up for themselves or a friend or family member to receive a free “Passport” style coupon book, which includes $30 worth of manufacturer discounts for each of the seven brands. Each brand has pledged up to $1 million in discounts for their products.
French startup La Vie, which specializes in the production of plant-based alternatives to traditionally pork-based products such as bacon or lardons, announced a record €25 million Series A funding round. The round was led by Seventure Partners, followed by investors such as Partech and Oyster Bay Venture Capital and also included angels such as actress Natalie Portman and Oatly Chairman Eric Melloul. Formerly known as 77 Foods, the plant-based pork fat specialist’s patented bacon was launched in retail and foodservice last October. La Vie lardons are available across France at Carrefour. The brand also made headlines at the end of 2021 following its poster campaign in the Paris metro, which specifically targeted flexitarian and omnivorous consumers.
Grocery & Restaurants
Los Angeles-based franchise operator Tasty Chick’n LLC has completed the acquisition of 90 KFC units across eight states, the company said Tuesday. Tasty Chick’n is part of the restaurant management company Tasty Restaurant Group, which is affiliated with private-equity firm Triton Pacific Capital Partners. The restaurant group manages close to 370 quick-service restaurants on behalf of Triton Pacific-sponsored funds, including Pizza Hut, Burger King, Dunkin’, Baskin-Robbins, KFC and Taco Bell across 16 states. The 90 KFC units include 15 KFC/Taco Bell combination restaurants, which the company said will provide an entry point into the Taco Bell brand. “We are thrilled to expand our relationship with Yum! Brands and are enthusiastic about the future growth opportunity this transaction affords,” said Craig Faggen, Triton Pacific’s CEO. “KFC is a long-standing leader within the chicken category for quick-service restaurants. The industry, however, remains highly fragmented, and the opportunity to purchase a sizable, well-established business such as this is limited. As a platform investment, we view tremendous growth potential through add-on acquisitions and new unit development.” In 2021, Tasty Chick’n acquired 21 Dunkin’ locations, and in 2020 Tasty Restaurant Group picked up 37 Pizza Hut locations in Virginia and West Virginia, as well as five Burger King units in Iowa.
The Austin, Texas-based Smokey Mo’s TX BBQ has been acquired by Switchback Capital LLC, a private equity firm with plans for modernization and expanded franchising. Craig Haley, president of the 16-unit Smokey Mo’s who joined the company in October, said the concept was family owned and the previous owners have retired and will no longer be involved in operation of the company. The concept was launched in 2000 by Morris (Mo) Melchor, who got started in the barbecue business as a teenager, Haley said. Of the 16 units open now, five are franchised locations, and the plan is to continue growing in Central Texas with new corporate store openings beginning in the third quarter of 2022. The company is also excited to grow the franchising side. “For the last 12 months, we’ve been creating a best-in-class franchising process,” wrote Haley. “Our current franchisees are very much looking forward to expanding their Smokey Mo’s portfolio of stores.”
The poke concept Sweetfin on Tuesday announced a strategic investment that will help the 14-unit chain triple in size and will give U.S. entry to the operator of a much larger fast-casual brand from Europe. Poke House, an Italy-based brand with more than 75 units across Europe, has become the largest minority investor in Santa Monica, Calif.-based Sweetfin. Terms were not disclosed but Sweetfin president and co-founder Seth Cohen said the partnership will accelerate the U.S. brand’s growth and potentially open doors down the road for international expansion. Poke House, a fast-casual brand operating in Italy, France, Portugal, Spain and the United Kingdom, was co-founded by tech entrepreneur Matteo Pichi, who grew the brand to more than 70 units in just three years. It’s described as a hybrid retail-digital concept with a proprietary CRM platform, a strong loyalty program and data-driven analytics. According to press materials, Poke House finished 2021 with more than $50 million in annual revenues. “We are thrilled to enter the American market in partnership with an iconic and beloved brand that has made California-inspired poke a true institution,” said Pichi in a statement. “We’re proud and enthusiastic to have arrived, through this investment, to enter the most important food retail and delivery market in the Western world.”
Home & Road
Mattress manufacturer Bedding Industries of America has acquired a majority interest in its Midwest licensee Chicago-based Illinois Sleep Products. The transaction takes BIA’s owned factory holdings to a total of 465,000 square feet. The company opened a 90,000-square-foot manufacturing facility in Rialto, Calif., last year and operates in 135,000 square feet on its campus in New Jersey. The Chicago factory produces in 240,000 square feet. In addition to its factories, BIA has a network of more than 80 licensees worldwide. Founded in 1986 by husband-and-wife team Ed Ciolkosz and Susan Ciolkosz, ISP has been a licensee of BIA for almost seven years and manufactures in its 240,000-square-foot factory. Under the terms of the acquisition, ISP’s management team and its more than 100 employees will remain with the company.
The senior leadership team of Conn’s Inc., a specialty retailer of furniture and mattresses, home appliances, consumer electronics and home office products and provider of consumer credit, presented details of the company’s enhanced strategic growth plan and financial and operating goals at an Investor Day webcast. During the Investor Day webcast, Conn’s outlined its three-year financial and operating goals: Growing total revenues to approximately $2 billion to $2.2 billion, representing an estimated 9% to 12% CAGR; Increasing e-commerce revenues from approximately 6% of total retail revenues in Q3 of fiscal year 2022 to approximately 20% of total retail revenues; Continuing Conn’s geographic expansion; Maintaining a stable credit business, producing at least 1,000 basis points of credit spread; Producing a high single digit EBIT margin. Conn’s operates more than 150 retail locations in Alabama, Arizona, Colorado, Florida, Georgia, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia. Its primary product categories include furniture, mattresses, home appliances, consumer electronics and home office.
Jewelry & Luxury
LVMH Luxury Ventures has acquired a minority stake in streetwear brand Aimé Leon Dore, according to a press release emailed to Retail Dive on Tuesday. The amount was not disclosed, but according to its website LVMH Luxury Ventures typically makes equity investments of between 2 million euros ($2.3 million at press time) and 15 million euros in companies with revenue between 3 million euros and 30 million euros, seeking stakes of 5% to 25%. Aimé Leon Dore will continue to operate independently in New York City, “with support and guidance from LVMH Luxury Ventures,” per the release.
Signet Jewelers said overall sales for the holiday season soared 30.4% over last year to hit $2.4 billion, a new record for the company. Holiday comps rose 25.2% over the prior year and 35.1% over 2019. Comps do not include Diamonds Direct, which Signet purchased in November, but Diamonds Direct’s numbers are included in total revenue. The holiday period is defined as the nine-week span that ended on Jan. 1, 2022. The sales gains were “broad based with all banners and merchandise categories up double digits,” the company said in a statement.
Richemont’s third-quarter sales climbed 32 percent, with the company’s jewelry brands recording the highest year-over-year sales growth of its three business groups. In the third quarter ended Dec. 31, revenue from jewelry sales climbed 38 percent at constant exchange rates, topping €3 billion ($3.41 billion) and accounting for more than 50 percent of Richemont’s total Q3 sales (€5.66 billion/$6.43 billion). Richemont owns Cartier, Van Cleef & Arpels and Buccellati. Sales of the fashion and accessory brands under the Richemont umbrella were a close second in terms of sales growth, with sales up 37 percent year-over-year in Q3.
Domestic sales of luxury goods reached 471 billion yuan ($74.24 billion), a near doubling in two years, according to Bain & Company’s annual “China Luxury Report 2021, released Thursday. Performance varied markedly in 2021, with some luxury brands seeing as little as 10 percent growth in China, while others enjoyed growth rates above 70 percent. Different categories also grew at different paces, with leather goods the fastest growing at around 60 percent year-on-year, followed by fashion and lifestyle, up about 40 percent. The amount luxury consumers in China spent on jewelry was up 35 percent year-on-year, high-end watch purchases rose about 30 percent and luxury beauty spending increased about 20 percent. In the year to come (and some years following this one) Bain expects trends that have shaped the market over the pandemic period, including the repatriation of spending, off-shore duty-free shopping in Hainan and digitalization, will continue to be major factors.
Office & Leisure
Pet essentials retailer PetSmart is in talks to go public through a SPAC deal with KKR Acquisition Holdings Corp, Bloomberg News reported on Thursday, citing people familiar with the matter. The SPAC deal between the blank check company, backed by private equity firm KKR, and PetSmart would be valued at $14 billion, including debt, the report added. The discussions are in the early stage and can still end without an agreement, according to the report. Private equity firm BC Partners Inc acquired PetSmart for $8.7 billion in 2014, as it sought to capitalize on consumers lavishing their pets with expensive treats and gear. However, the company quickly faced strong headwinds as many customers snubbed its stores for the convenience of online shopping. In response, PetSmart acquired Chewy in 2017, adding $2 billion to PetSmart’s debt load to do the deal. The initial public offering (IPO) valued Chewy at almost three times the $3.35 billion PetSmart paid for the company.
A Nashville-based pet food company is joining the Mars Inc. conglomerate. Mars has snapped up NomNomNow Inc., according to Bloomberg, which first reported the deal. NomNomNow, whose brand name is Nom Nom, sells fresh food, treats and supplements for dogs and cats. The company was founded in the San Francisco area and announced a 180-job production facility in Nashville in 2018. Today, Nom Nom lists Nashville as its headquarters. Nom Nom will be “an autonomous brand” within Royal Canin — which itself is a division of Mars Petcare, said Racquel White, spokeswoman for Royal Canin North America. Bloomberg lists a $1 billion purchase price for Nom Nom in a Jan. 14 headline about the acquisition by Mars. Nom Nom attracted $34 million in a Series B raise in April 2021. Investors in Nom Nom have included Anchor Capital GP, Coefficient Capital and Greycroft.
Technology & Internet
Chinese online retailer JD.com announced it had formed a strategic partnership with Ottawa-based Shopify to help U.S. merchants sell their products in Mainland China. The partnership marks a step up in the China expansion for Shopify and is another in JD’s internationalization trajectory. It will also open access to JD’s 550 million customers in China as Shopify clients. The companies said that merchants in Shopify’s network could list products on JD.com’s website, and the Chinese e-commerce company would handle distribution. The partnership will also simplify access and compliance for Chinese brands and merchants looking to reach consumers in Western markets. JD will support Chinese brands to set up direct-to-consumer channels through Shopify. And through JD Worldwide, online merchants on Shopify can sell in China within three to four weeks, compared to the average 12-month timeline for international brands to initiate sales in the Chinese e-commerce marketplace. The announcement is part of a larger strategic partnership between JD and Shopify that aims to help solve cross-border commerce challenges in product sourcing, selling and logistics for merchants in the U.S. and China.
The cryptocurrency market had around $130 billion wiped off its value in 24 hours as major digital coins continued their multi-day sell-off. Bitcoin was last down around 4% at $33,755.57, according to Coin Metrics, the lowest level since July 2021. Ether plunged 7% to $2,239.08, its lowest level since late July, according to Coin Metrics. The movements in cryptocurrencies follow those of stocks, which have continued to fall since the beginning of the year and just came off of their worst week since March 2020. Investors have been selling risk assets like technology stocks as they prepare for tighter monetary policy from the U.S. Federal Reserve and higher interest rates. Bitcoin proponents often suggest the digital coin is a hedge against inflation, but that theory has not held up so far. Meanwhile, investors are also assessing the impact of further regulation on the cryptocurrency market.
Finance & Economy
Retail sales took an unexpected dip in December in what could be a signal that persistently rising inflation is prompting a pullback in consumer spending. Consumers paid more for everything from groceries to cars in 2021 as companies passed along the costs of pricier raw materials and supply chain delays. Spending remained strong thanks to pent-up demand throughout the year, despite the rising costs and longer waits for big-ticket items like cars and furniture. Pressure from inflation has been building, though, as have concerns that consumers will eventually pullback on spending as they tire of higher prices hitting their wallets with no relief in sight.
Buying second-hand was surging in popularity before the pandemic shook up the retail industry but supply chain issues and tightening household budgets has added to consumers’ unabating drive to find resale deals. With a global desire to shop responsibly and sustainably – resale is predicted to be a major player in the retail landscape for 2022. To be a real success, resale needs to blend with online selling, with e-commerce set to explode over the next few years. One of the biggest challenges for retailers and brands has been understanding how to monetize resale on their own platform. As with many retail innovations, technology is leading the way.
Jobless claims took an unexpected turn higher last week in a potential sign that the wintertime omicron surge was hitting the employment picture. Initial filings for the week ended Jan. 15 totaled 286,000, well above the Dow Jones estimate of 225,000 and a substantial gain from the previous week’s 231,000. The total was the highest since the week of Oct. 16, 2021, and marks a reversal after claims just a few weeks ago hit their lowest level in more than 50 years. Jobless claims are seen as a leading real-time gauge of the employment picture, which has brightened in some respects but is still beset by multiple trouble spots.
The real estate market was on fire last year, with the frenzied pace of sales activity pushing home prices to record highs. The median home sales price was $346,900 in 2021, up 16.9% from 2020, and the highest on record going back to 1999, according to the National Association of Realtors. Home sales had the strongest year since 2006, with 6.12 million homes sold, up 8.5% from the year before. While that was bad news for would be buyers, it was a boon for those who already owned a home. A typical homeowner accumulated $50,200 in housing wealth, looking at the median price from 2020 to 2021. By the end of 2021, there were fewer homes for sale than ever. The inventory of unsold existing homes fell to a record low of 910,000 at the end of December. That’s a 1.8-month supply of homes at the current pace, also an all-time low.