Kevin Plank, the founder of Under Armour, was born in 1972. That means that he was 16 when Michael Jordan won his first NBA Most Valuable Player award. As Jordan became a basketball-deity, perhaps Plank noticed, as many fans did, Jordan’s Nike sneakers. Perhaps that is one reason why as Plank grew Under Armour he looked to Nike for inspiration. You cannot blame Under Armour for admiring Nike. Nike has been the king of the athletic footwear and apparel market for over 40 years. As a sporting goods upstart in the 2000s, Under Armour took on Nike directly, positioning itself as the hip new sporting goods brand, while trying to portray Nike as your parents’ brand.
Retailers enthusiastically embraced Under Armour, partly because of its high-tech fabrics and new styles, but also because retailers wanted a legitimate competitor to Nike, a competitor that would keep Nike humble and limit its market power. Under Armour grew quickly, booking over $1 billion in annual sales by 2010. But Under Armour’s recent struggles have caused it to reassess its strategies. It seems that, over the last decade Under Armour has decided that rather than attack Nike, it would instead emulate it. This strategy has been met with mixed results.
Similar to Nike, over the past decade Under Armour invested heavily in endorsements and sponsorships as a key component of its marketing strategy. Nike had basically invented the endorsement game, with the launch of Air Jordan in 1984, which went on to become the greatest endorsement relationship in consumer history. As recently as 2016, Under Armour spent nearly $1.3 billion in endorsement and sponsorships, basically on par with Nike’s annually sponsorship expenditures. But as Under Armour has discovered, following your mentor’s game plan does not always yield similar results. And Under Armour is discovering that there is only one Michael Jordan, and despite lots of effort and lots of money, Under Armour’s Steph Curry line of shoes does not compare to the Air Jordan phenomenon.
Under Armour has basically admitted defeat in the sponsorship arms race. Last week, Under Armour announced that it was going to accelerate its recent reduction in sponsorships with athletes, professional teams, professional leagues, colleges and universities, and other marketing commitments. Under Armour announced that its 2020 sponsorship expenditures were $361 million, a 47% decline from its 2019 expenditures of $679 million, and down nearly 75% from its 2016 peak.
Nike is also a master at managing product supply and distribution channels. By using a tiered system of retailers, Nike tightly controlled which retailers would get which types of shoes and in what amounts. Nike was always sure to limit the availability for the hottest shoe styles. Back in 2017 Nike announced that it was strategically paring back its number of retail accounts to focus on partners that best presented Nike’s products in the marketplace. Recently, Nike has cut even more retailers that carry the swoosh. Partly to reduce supply and create artificial scarcity, but also to drive consumers to the Nike.com website, where, without retailers in the middle, Nike’s margins jump.
Under Armour has watched this strategy from afar and has decided to mimic it. In mid-February Under Armour announced that it is cutting ties with about 20% to 25% of its retail partners. By eliminating 2,000 to 3,000 retailers from its network, Under Armour intends to focus on its top 10,000 retailers. Similar to Nike, Under Armour hopes that its own website sales and margins will benefit as consumer search for UA’s latest styles and releases.
Nike has used its scarcity strategy to turn high-demand items into collector items. Under Armour is hoping to use a similar strategy to boost its brand’s appeal. Maybe Kevin Plank could convince Spike Lee to dust off his Mars Blackmon character to pitch for Under Armour. But tweaking marketing strategies can only get you so far; as Mars Blackmon used to say, “It’s got to be the shoes.”
Headlines of the Week
Crafts retailer Michaels will go private in $3.3 billion deal with Apollo Global
Arts and crafts retailer Michaels said Wednesday it agreed to be taken private in a $3.3 billion deal with Apollo Global Management. Apollo will acquire all outstanding Michaels stock for $22 per share in a tender offer. That represents a 47% premium to the closing price on Friday, the day before speculation of the deal was publicized in the media. The companies value the transaction at $5 billion. The companies said that there will be a 25-day “go-shop” period, starting Wednesday, where Michaels will be able to entertain other options, but this process won’t necessarily lead to a better offer. Michaels has over 1,200 stores in North America and roughly 44,000 employees. This won’t be the first time the retailer has retreated from the public markets. Private equity firms Bain Capital and Blackstone acquired Michaels in 2006, taking the company private in a deal worth over $6 billion. Michaels went public again in 2014.
Joann is leveraging the surge in arts-and-crafts amid the pandemic to go public. The fabrics and crafts retailer set the terms for its initial public offering with plans to raise $175 million by offering 10.9 million shares at a price range of $15 to $17. At the midpoint of the proposed range, Joann would command a fully diluted market value of $679 million. The company, which intends to list its shares on Nasdaq under the symbol “JOAN,” released the terms the day after rival The Michaels Cos. entered into a deal to be acquired by private equity firm Apollo Global Management Inc. for $3.3 billion. Joann operates 855 stores nationwide. It was taken private in 2011 by private-equity firm Leonard Green & Partners LP in a $1.6 billion deal, reported $2.6 billion in sales for the 12 months ended October 31, 2020. Proceeds of the IPO will be used to pay down borrowings under a second lien facility and if possible, to pay down borrowing on an ABL facility.
Apparel & Footwear
Timberland Taps Susie Mulder as Global Brand President After Extensive Search
Timberland has a new woman in power. VF Corp. said it has tapped Susie Mulder as global president of the storied brand. She begins work on April 5, and will report to Steve Rendle, VF’s chairman, president and CEO. Mulder will also serve on the company’s executive leadership team. The executive was most recently CEO at Nic + Zoe, where she had been in the top spot since April 2012. Prior to that, Mulder was a partner at global management consulting firm McKinsey & Co., where she led the global retail and consumer goods practice for 15 years. The president’s role at Timberland has been vacant since January 2020, when Jim Pisani stepped down.
Ralph Lauren launches a clothing rental service
Ralph Lauren has introduced a new lease on lifestyle. America’s most iconic designer has unveiled a subscription apparel rental program with his most accessible women’s brand, Lauren Ralph Lauren. Like the fashion rental pioneer Rent The Runway, along with Nuuly, Le Tote and other competitors in the booming category, the platform allows customers to keep their fits fresh while shopping more sustainably. A monthly membership to TheLaurenLook.com starts at $125 with unlimited swaps and complimentary shipping both ways. The initiative includes Lauren, Lauren Woman and Lauren Petite, with sizes ranging from 0 petite to 24W. The site will feature about 600 pieces, including daywear, special occasion, denim and loungewear.
Chico’s FAS Loses $360 Million in 2020
Chico’s FAS continues to register losses. The Fort Myers, Fla.-based retailer — parent company to the Chico’s, White House Black Market, Soma and TellTale brands — revealed quarterly and full-year 2020 earnings results early Tuesday morning, falling short on top and bottom lines and logging a $360 million loss for the year. “While sales reflect the challenging environment, we took important actions over the past year to strengthen our financial and operating foundation and position our brands for market share gains,” Molly Langenstein, chief executive officer and president of Chico’s FAS, said in a statement. “We enter 2021 as a digital-first, customer-led company with the capabilities to support continued improvement, enhanced value creation and a return to growth in the years ahead.”
Tailored Brands seeks $75M lifeline just months after exiting Ch. 11
Tailored Brands is already seeking a $75 million emergency loan from a current lender and its largest equity holder after exiting bankruptcy in December. The search for new financing followed “unanticipated declines in its business” in December and early 2021 that raised the risk of default, according to a trustee for a group of unsecured creditors who became equity holders in 7% of the organized company. A default could force Tailored Brands to restructure again or liquidate, the trustee said. A Tailored Brands spokesperson said that the company has exceeded forecasts for the past two and a half months. The purpose of the financing, expected to close this week, is to increase the retailer’s “working capital buffer and thereby further [ensure] that Company would be positioned to execute its strategic plan through a number of different economic recovery scenarios,” the spokesperson said.
Athletic & Sporting Goods
Overtime is starting a basketball league for 16-to-18-year-olds that pays at least $100,000 a year
Is Overtime CEO Dan Porter losing his mind? The sports company’s co-founder recalled that reaction from former National Basketball Association Commissioner David Stern when he pitched establishing another hoops league. Overtime announced on that it plans to start a basketball league for 16-to-18-year-olds allowing them to earn at least $100,000 per year. The Overtime Elite league will let players bypass traditional high school and collegiate levels while building their brand before becoming eligible for the NBA. It will start in September with 30 players, and will be based in a single location, which is still under discussion.
Amazon is reportedly in talks with the NFL for a Prime Video rights deal
The National Football league is close to a media rights deal with Amazon.com’s Prime Video service, which would allow the streaming platform to carry many games exclusively, the Wall Street Journal reported. A deal with Amazon would result in a significant number of Thursday night games exclusively on Prime Video and represent the league’s deepest foray into streaming, citing sources familiar with the matter. If completed, the deal will not take effect until after the 2022 season, the report said. Amazon did not immediately respond to a Reuters request for comment, while the NFL declined to comment.
Cosmetics & Pharmacy
Sephora to open 60-plus freestanding U.S. stores in 2021
Sephora is embarking on the largest store expansion plan in its 21-year history in the United States. The beauty giant will open more than 60 freestanding “client-centric” stores and 200 locations in Kohl’s stores this year. Sephora will begin to open the standalone stores this month, with locations planned across the Pacific Northwest, Florida, Texas (Dallas, Austin and Houston), Los Angeles and Nashville. The new locations will feature a sleek architectural and visual design that focuses on the classic Sephora DNA, look and feel, along with new lighting enhancements for a better beauty experience. Sephora and Kohl’s also revealed the areas that will be the first to get the 200 Sephora at Kohl’s stores opening later this year. The in-store shops are set to open in Los Angeles, including the Inland Empire; New York; New Jersey, Ohio and Wisconsin as well as the Chicago area and Minneapolis. The in-store shops will average about 2,500 sq. ft., be prominently located and feature the signature Sephora look, feel and experience.
Perfect Diary’s Yatsen to Buy Eve Lom From Manzanita Capital
Yatsen Holding Ltd., the parent company of cosmetics and skin care brands Perfect Diary, Little Ondine, Abby’s Choice and Galénic, Tuesday announced that it will acquire skincare brand Eve Lom from Manzanita Capital. Manzanita Capital will continue to hold a minority stake in the business and enter into a strategic partnership with Yatsen. The acquisition is expected to be completed in the coming weeks. “The brand has developed an incredibly loyal following driven by its hero products such as the Eve Lom Cleanser, and demonstrated resilient sales and profitability even during COVID-19,” said David Huang, founder, chairman and chief executive officer of Yatsen. Andras Szirtes, managing partner of Manzanita, noted that Eve Lom has been “part of the Manzanita family of brands for nearly 20 years and together we have been on an incredible journey of growth.”
Discounters & Department Stores
Dollar Tree eyes at least 3K locations for rural concept stores
Dollar Tree plans a major expansion for a new concept store, introduced a little over a year ago, that combines its namesake and Family Dollar banners into a single storefront. The format targets rural communities of 3,000 to 4,000 people. CFO Kevin Wampler told analysts the combination format could reach 3,000 stores “at a minimum,” according to a Seeking Alpha transcript. The retailer opened 32 combination stores in the second half of 2020, and now operates a total of 50. Comparable sales are up 20% on average at the new format stores, Dollar Tree said.
Off-pricers face slow recovery after a rough year
Off-price retailers, which tend to be insulated from macro disruptions and fare well in economies weak and strong, have not escaped the trouble that the pandemic has brought to retail. The retailers sell mostly clothes, a category all but ignored by consumers stuck at home for work and play. Month after month last year, apparel sales plunged, leaving even off-pricers to grapple with rising inventory. Their lack of e-commerce, usually a selling point for consumers eager for a store-based treasure hunt, was a liability in a period when stores were forced to close for varying amounts of time, with many consumers continuing to shy away from them when they’re open.
Walmart to spend $350B on local sourcing, work to pinpoint barriers to reshoring
Walmart will spend $350 billion over the next decade on supplies produced, grown or assembled in the U.S., John Furner, president and CEO of Walmart U.S., said in a blog post Wednesday. Furner touted benefits such as increased support for small and diverse suppliers in the U.S., plus reduced carbon emissions, as the retailer sources closer to the end consumer. Walmart also plans to work with manufacturers, academics, governments and development groups through a program called “American Lighthouses.” The groups will pinpoint barriers to U.S. production with the goal of returning manufacturing to U.S. shores long term.
Inventory mismatch squeezes Nordstrom’s holiday quarter
Nordstrom, usually a retailer with a firm grip on inventory, experienced a supply-demand mismatch that interfered with its holiday quarter. Ending inventory in the fourth quarter was down 3% from last year, which was above plan, according to a company press release Tuesday. Net sales in the period fell 20% year over year, slightly exceeding its own expectations, while e-commerce rose 24% and was 54% of sales. In the full-line business, net sales fell 19% while at the Rack off-price business net sales fell 23%. Nordstrom doesn’t report comp sales.
Macy’s shakes up leadership, nixes COO role
In a bid for efficiency to enable its Polaris turnaround, Macy’s has announced senior leadership changes, including the elimination of the chief operations role and the departure of COO John Harper from the company Aug. 1. Chuck DiGiovanna, currently vice president, real estate, will replace Douglas Sesler, who is leaving after five years of leading Macy’s real estate strategy. DiGiovanna will report to CFO Adrian Mitchell, according to a company press release.
Emerging Consumer Companies
Oatly to be carried nationwide at Starbucks
Last week, Starbucks cafes nationwide began to carry Oatly’s nondairy substitute. The oat milk will be incorporated into Starbucks’ spring menu through the new Iced Brown Sugar Oatmilk Shaken Espresso. For Oatly, coffee shops are a crucial way to introduce consumers to its signature product. Starbucks added oat milk from Oatly competitor Elmhurst 1925 at select upscale Reserve locations in 2019. Last year, it started testing a wider audience with Oatly through a pilot in the Midwest. The permanent menu addition by the coffee giant is the latest big announcement for Oatly, which made its debut in U.S. coffee shops just five years ago. Oatly recently announced that it had confidentially filed for an initial public offering in the U.S.
Tonal partners with Nordstrom, to open in at least forty Nordstrom stores
Tonal, maker of the smart home fitness trainer, announced it is more than tripling the number of physical locations it sells devices in through a new partnership with Nordstrom. Starting this month, Tonal will have 50-square-foot stations in the women’s activewear departments of at least forty Nordstrom locations across the U.S., bringing the total number of Tonal physical locations to sixty by the end of 2021. Shoppers will be able to walk in or book appointments to try Tonal devices and purchase them through employees on-hand. Tonal, which manufactures a wall-mounted device with a digital weight system that emulates various traditional gym stations, already operates sixteen locations across the country with devices shoppers can try out, with plans to open four additional showrooms later this year.
ThredUp, the San Francisco-based secondhand apparel and accessories company, announced that it filed an S-1 with the U.S. Securities and Exchange Commission for an initial public offering. It listed the size of the offering as $100 million and has applied to list on the Nasdaq under the ticker symbol TDUP. The number of shares to be offered and the price range for the proposed offering have not yet been determined, according to the company. In its IPO filing, ThredUp said the resale economy is “the fastest growing sector in retail.” The company touts the environmental benefits of buying from its platform, stating that its impact is good for “the planet, fighting fashion waste and powering resale at scale.”
Grocery & Restaurants
Kroger ‘generated strong momentum’ in 2020 fiscal year
The Kroger Co. bolstered its market share in fiscal 2020 with double-digit identical-sales gains and triple-digit e-commerce sales growth in the fourth quarter and full year, besting Wall Street’s earnings estimates for both periods. During fiscal 2020, Kroger added $10 billion to its top line. Sales totaled $132.5 billion, rising 8.4% from $122.29 billion in 2019. That growth was 14.2% excluding fuel sales and dispositions, the company said. Digital sales jumped by 118% in the 2020 fourth quarter and by 118% for the full year, with online grocery delivery service providing a notable boost. As of the year’s end, Kroger had 2,223 pickup sites and 2,472 delivery locations, covering 98% of the households in its market areas.
Freddy’s Frozen Custard sold to Thompson Street Capital Partners
Thompson Street Capital Partners has acquired Freddy’s Frozen Custard & Steakburgers, the 360-unit fast-casual concept, the St. Louis, Mo.-based private equity firm said Wednesday. Freddy’s was founded in 2002 in Wichita and features a menu of steakburgers, shoestring fries and frozen custard. The company began franchising in 2004 and now has more than 360 locations, about 30 of them company-owned. “Freddy’s is a highly unique, scaled franchisor platform that has built a premium brand over the past two decades with leading franchisee retention, remarkable growth and a passionate guest following of ‘FredHeads,’” said Bob Dunn, managing partner of Thompson Street Capital, in a statement. Joe St. Geme, a director at Thompson Street Capital said the Freddy’s acquisition allowed the company to partner with the concept founders and management “to grow a premier system by accelerating franchise development, increasing focus on marketing and technology deployment and enabling operational best practices across the footprint.”
Home & Road
Natuzzi completes sale of IMPE foam subsidiary
Italian leather upholstery and home furnishings major Natuzzi Group has completed the sale of its IMPE SpA foam manufacturing subsidiary to the Vita Group. Natuzzi had announced an agreement for the sale in January for €6.1 million. The Vita Group is a leading European provider of flexible polyurethane foam and Talalay latex and flooring products. Its three divisions serve customers across a range of industries including bed-in-a-box mattresses and bedding, furniture, hygiene and medical, mobility, construction and flooring. IMPE, based in Naples, manufactures polyurethane foam for the furniture and bedding industry in Italy. It has 32 employees and production capabilities of 20,000 tons of foam per year. Moving forward, the operation will be called Vita Italy. Natuzzi’s divestment of IMPE is part of the company’s strategy to review its value chain and streamline the Natuzzi Group’s manufacturing processes, focusing on value-added activities within its Italian factories.
Purple 4Q sales climb 40% to top $173 million
Direct-to-consumer sleep company Purple Innovation reported net sales of $173.9 million for the fourth quarter ended Dec. 31, a 39.9% increase over net sales of $124.3 million in the same quarter last year. The company posted a net loss of $2.1 million in the quarter, an 83% improvement from the $12.7 million loss in the same quarter last year. Operating income in the quarter increased to $7.5 million, more than doubling operating income of $2.8 million in the comparable period last year. The increase in net revenue was driven primarily by an increase of 57% in the company’s direct-to-consumer channel, led by strong mattress sales and higher demand for pillows, sheets and seat cushions.
Jewelry & Luxury
Aether Diamonds Says Its Lab-Grown Stones Go Way Beyond Carbon Neutrality
Many lab-grown diamond companies claim their products are better for the environment than mined diamonds. But New York City–based Aether Diamonds, which debuted online in late December, goes a step further. The brand claims to be the first company to produce “carbon-negative diamonds.” (Another startup, SkyDiamond, founded by the British entrepreneur Dale Vince, professes to offer a similar product, aka “zero-impact” diamonds.) The brainchild of David Yurman alums Ryan Shearman and Dan Wojno, Aether Diamonds is among a growing cohort of lab-grown diamond jewelry brands that prefers to bypass wholesale channels and market their goods direct to consumers.
Kering increases investment in resale, while LVMH steers clear
Luxury fashion brands and high-end resale have been circling each other for years now, with luxury alternating between interest in resale and mistrust in the benefits it offers brands. Recent moves from Kering, one of the largest luxury groups in the world, indicate that the company is taking a great interest in working directly with resellers and encouraging the growth of resale in general. Those moves also put Kering in stark contrast with rival LVMH, which, to date, has yet to intermingle with resale companies.
Forget Paris and Milan. Luxury Spenders Are Staying in China
Even as China makes its way through a bumpy Covid-19 recovery, the country’s big spenders are splashing out. Luxury brands should pay close attention to where their cash is going. Right now, that’s at home. The share of Chinese consumers’ high-end purchases made in mainland China more than doubled from 32% in 2019 to over 70% in 2020, according to Bain & Co. Luxury auto sales were resilient through the latter half of last year. Pricey and ultra-premium alcohol remained in demand. Fine wine prices, driven by Chinese buyers, were up 4% in the last quarter of 2020.
Capri Holdings hires former Walgreens exec as CIO
Capri Holdings, the luxury fashion group that owns Versace, Jimmy Choo and Michael Kors, has appointed Alejandro Martinez-Galindo to serve as its chief information officer, according to a Tuesday press release. Martinez-Galindo will report to Thomas Edwards, executive vice president, chief financial officer and chief operating officer. He will step into his new role on Monday, the company said. Before joining Capri Holdings, he has held executive roles at various companies across the retail, automotive and pharmaceutical industries. Martinez-Galindo was most recently the CIO of Walgreens and was also previously CIO at General Motors, according to the press release.
Office & Leisure
Fuzzy Lands $18M Series B For Pet Telemedicine Platform
Fuzzy – The Pet Parent Company, a subscription-based pet health care startup, received new backing as it aims to tap into the $100 billion spent on pets in 2020 alone, as well as to democratize access to pet care through pet parent education and virtual care options. Zubin Bhettay and Eric Palm started the San Francisco-based company as an in-home veterinary care business in 2016 after both experienced costly and not-so-great experiences taking their pets to receive care. “I spent five hours at the vet for something that could have been monitored at home, and got a bill for $2,500, which was more than I expected,” Bhettay, CEO of Fuzzy, told Crunchbase News. “Pet parents want the care to be better, but are often still lost and confused. There were no credible sources to go to.” To continue its development, Fuzzy raised $18 million in Series B funding led by Greycroft to give the company total funding of $36 million, according to Bhettay.
Paper Source, Inc. Announces Acceptance of Stalking Horse Bid by MidCap Financial
Paper Source, the nation’s premier omnichannel retailer of cards, gifts, party supplies and fine paper, announced that it will accept a stalking horse bid from a syndicate of lenders led by MidCap Financial to purchase substantially all of the Company’s assets. The MidCap Financial transaction also includes approximately $16.5 million in committed financing, which will be immediately available to support the Company’s operations through its stores, eCommerce and wholesale businesses. This transaction positions Paper Source for future success by providing financing to bridge to a sale that will result in less leverage, a more productive store base and more liquidity to support the brand’s omnichannel growth strategy. To implement the proposed sale, the company voluntarily commenced chapter 11 cases in the federal courts for the Eastern District of Virginia.
Alamo Drafthouse Files for Chapter 11, Announces Sale to Altamont Capital, Fortress Investment
Alamo Drafthouse Cinema, the Texas-based theater chain that has become a favorite with cinephiles for its dine-in service and fan-forward approach to exhibition, has filed for Chapter 11. The bankruptcy filing comes as part of an asset purchase agreement with Altamont Capital Partners, a previous investor in the company, as well as affiliates of Fortress Investment Group, a new backer. The company says that operations will continue as normal and the Chapter 11 process and sale will give it the capital it needs to continue operating as it emerges from a public health crisis that left many of its locations closed for months. The agreement involves “the sale of substantially all its assets.” Founder Tim League will remain involved with the company and is among the lender group buying the assets. As part of the bankruptcy, Alamo Drafthouse will close down a few underperforming locations and restructure its lease obligations. The company is requesting that the bankruptcy court approve a 75-day timeline for the transaction process and the $20 million debtor-in-possession credit facility led by Altamont and Fortress.
Technology & Internet
Disney shuts down retail stores in broader shift to technology
Like many other companies during the pandemic, Disney has been forced to go digital faster than expected. The latest move in that transformation came Wednesday, when the company announced it will close 20% of its 300 retail stores around the world. Additional store closures and an undisclosed number of layoffs will follow. The media giant said it will instead bolster its e-commerce business by offering more products on its ShopDisney website. The move is a signal from one of the most powerful companies in entertainment that the habits consumers developed during Covid — like online shopping with zippy shipping — will stick around as the economy reopens in the coming months.
Square acquiring a majority stake in Jay-Z’s Tidal
Square, Jack Dorsey’s digital payments company, is acquiring a majority ownership stake in the music streaming service Tidal, the company announced Thursday. The deal is expected to be a mix of cash and stock of $297 million and is expected to close in the second quarter of 2021. Existing artist shareholders will be the remaining stakeholders, Square said. Jay-Z, who bought Tidal in 2015 for $56 million, will join Square’s board of directors. The move is an effort to diversify Square, which is well known for its credit card processor, payment hardware and Cash App. Tidal has struggled to keep up in the music streaming wars since its launch, and Dorsey’s stake could help push the company forward.
Finance & Economy
Job growth in February may signal start of a hiring boom as the economy reopens
February’s surprisingly strong job growth signals that the economy could be at a pivot point and is about to enter a hiring boom. The economy added 379,000 jobs, well above the 210,000 expected, with most of them in leisure and hospitality, the sector hardest hit when the economy abruptly shut down a year ago. Economists say it would not be surprising to see multiple months now of job growth of at least 500,000. “It’s very consistent with other economic data we’re starting to see,” said Michael Arone, chief investment strategist at State Street Global Advisors. “The labor market had been lagging, and it’s now starting to catch up,” he said. “It was great to see all the leisure and hospitality gains, as the pandemic started to subside a little, and restrictions are being lifted.”
U.S. trade deficit widens as goods imports hit record high
The United States’ trade deficit increased in January as goods imports jumped to a record high amid a sharp rebound in consumer spending, offsetting a continued recovery in exports. The Commerce Department said on Friday that the trade gap rose 1.9% to $68.2 billion in January. Economists polled by Reuters had forecast a $67.5 billion deficit in January. Goods imports advanced 1.6% to $221.1 billion, the highest on record. Consumer spending increased by the most in seven months in January, boosted by government checks to low-income households as part of nearly $900 billion in additional Covid-19 pandemic relief.
US consumers eased off credit card borrowing in January
Borrowing by Americans fell in January for the first time in five months, as a big drop in the use of credit cards offset increases in auto loans and student loans. The Federal Reserve reported Friday that consumer borrowing fell by $1.3 billion in January, the first setback since a $9 billion decline in August. The weakness came from a $9.9 billion decline in borrowing in the category that covers credit cards. It marked the fourth straight decline in that category and was the biggest drop since a $10.8 billion fall in August. The category that covers auto and student loans posted an $8.6 billion increase in the first month of 2021, following an even bigger gain of $11.6 billion in December.
