The Weekly Consensus

The Future of Beauty is Biology

Paul Alexander

Last February, I wrote in this space about the clean beauty trend shifting from a focus on ingredients to a focus on sustainability. Clean beauty continues to shape many of the biggest developments in the cosmetics space, but questions about efficacy have arisen for a number of “clean” products, and, by extension, the entire trend. For many consumers, ingredients that are gentler, safer, and more sustainable are of limited value if they aren’t also highly effective. Encouragingly, the latest evolution of this search for do-it-all ingredients is spurring an exciting new clean-adjacent trend: biotech beauty.

The potential of biotech beauty is massive. New technologies can develop novel ingredients that can mimic or surpass the effectiveness and safeness of natural, organic substances, and also be sustainably grown in labs as opposed to harvested from nature. A good example of such a success is the biotechnology firm Amyris and its hydrating molecule squalane. Squalane is effective in skin moisturization, sun care, cosmetics, deodorants, and other uses, and is produced from engineered yeasts’ fermentation of sugar cane. Squalane mimics the naturally occurring lipid squalene, which has similar characteristics, but was historically harvested from shark livers. Amyris estimates that its production of squalane saves more than two million sharks per year. The company further contends that squalane is superior in quality and purity to natural squalene. Beyond squalane, Amyris boasts 12 other bioengineered ingredients, a portfolio of 11 brands that utilize its substances, and in the last year achieved over $250 million in revenues. Just three weeks ago, Amyris announced the sale of squalene, other ingredients, and future innovations to the $28 billion market cap Swiss beauty and wellbeing products company Givaudan for an undisclosed amount.

Other biotech beauty companies that underscore the recent flurry of activity in the space include Evolved by Nature, Arcaea, and Nutrafol. Evolved by Nature, which produces silk proteins under the name Activated Silk for use across textiles, medicine, and skincare, raised $120 million of series C funding last June from a group including Teachers’ Venture Growth, Chanel, the Kraft Group, and Mousse Partners. Arcaea, which uses DNA sequencing, biological engineering, and fermentation to create new skincare and haircare products, raised $78 million of series A funding in 2021 and acquired Gadusol Laboratories to assist in the development of products in June 2022. Nutrafol, a genetics and biotechnology-powered anti-hair loss brand, was named the #1 dermatologist recommended hair growth brand in the U.S. by a March 2022 study by IQVIA Provoice, and was acquired by Unilever in May 2022 (terms were not disclosed).

Biotech beauty entails challenges, however. First and foremost, scientific, lab-born innovations don’t come cheap and aren’t accessible to most entrepreneurs. Advanced research and production laboratories can cost hundreds of millions of dollars to build. And even if facilities are contracted instead of built, the simultaneous clinical testing of a new substance and investment in its branding can be cost prohibitive for many parties. Further, once a new ingredient is commercialized, it can be expensive to produce and result in products that need to sell at a premium to less advanced and/or less sustainable competitors. In some ways, this is the opposite of a problem that cropped up early in the clean beauty trend, when amorphous definitions of “clean” and low barriers of entry led to an abundance of brands and products with questionable efficacy and cleanness. Biotech beauty, on the other hand, may result in fewer, more expensive (but hopefully more reliable) new products.

The loftiest hopes for biotech beauty are not just reliability, efficacy and sustainability, but discovery. Arcaea CEO Jasmina Aganovic told the crowd at a November 2022 TEDx Talk that using biology instead of chemistry to solve beauty and personal care issues could unlock unforeseen innovations. “Biology,” she said, “will transform every single product category,” and yield “new product categories we haven’t yet been able to imagine.” TED Talk drama notwithstanding, with prognostications like that, sustainability and cleanness sound nice, but the future of biotech beauty sounds downright exciting.

Headlines of the Week

Silicon Valley Bank Is Shut Down by Regulators; Biggest Bank Failure Since Financial Crisis

Financial regulators have closed Silicon Valley Bank and taken control of its deposits, the Federal Deposit Insurance Corp. announced Friday, in what is the largest U.S. bank failure since the global financial crisis more than a decade ago. The collapse of SVB, a key player in the tech and venture capital community, leaves companies and wealthy individuals largely unsure of what will happen to their money. According to press releases from regulators, the California Department of Financial Protection and Innovation closed SVB and named the FDIC as the receiver. The FDIC in turn has created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB. The FDIC said in the announcement that insured depositors will have access to their deposits no later than Monday morning. SVB’s branch offices will also reopen at that time, under the control of the regulator. According to the press release, SVB’s official checks will continue to clear. The FDIC’s standard insurance covers up to $250,000 per depositor, per bank, for each account ownership category. The FDIC said uninsured depositors will get receivership certificates for their balances. The regulator said it will pay uninsured depositors an advanced dividend within the next week, with potential additional dividend payments as the regulator sells SVB’s assets. Whether depositors with more than $250,000 ultimately get all their money back will be determined by the amount of money the regulator gets as it sells Silicon Valley assets or if another bank takes ownership of the remaining assets. There were concerns in the tech community that until that process unfolds, some companies may have issues making payroll.


WHP Global Reveives $375 Million Equity Investment from Ares at $1.6 Billion Valuation to Fuel Next Phase of Growth

WHP Global, a leading global brand management firm announced a $375 million equity investment from funds managed by the Private Equity Group of Ares Management Corporation, providing significant growth capital for WHP Global’s next wave of brand acquisitions. The transaction values WHP Global at $1.6 billion. Founded in 2019 by retail industry veteran Yehuda Shmidman together with funds managed by Oaktree Capital Management, L.P., WHP Global is one of the fastest growing companies in the brand management industry. Today, WHP Global’s portfolio of brands generates more than $6.5 billion in global retail sales across three verticals including: Fashion anchored by Express, Anne Klein, and Joseph Abboud; Hardgoods anchored by Toys”R”Us and Babies”R”Us; and Athletic anchored by Lotto. As part of the transaction, Jordan Smith and Aaron Rosen, Partners in the Ares Private Equity Group will join WHP Global’s Board of Directors. Proceeds from the transaction include adding significant cash to the Company’s balance sheet for future M&A.



Apparel & Footwear

Authentic Brands Group Nearing Deal To Acquire Boardriders, Inc. For $1.3 Billion

Authentic Brands Group, Inc. (ABG) is nearing a deal to acquire Boardriders, Inc., the parent of Quiksilver and Billabong, for $1.3 billion, sources told Bloomberg.  Sources said the deal could be announced as soon as next week. Boardriders, owned by Oaktree Capital Management, had long been rumored to be on the selling block. The company’s six primary brands include Quiksilver, Billabong, Roxy, DC Shoes, RVCA, and Element.  Boardriders, Inc. was formed through the merger of the Quiksilver and Billabong businesses in April 2018. A Moody’s report from late February had indicated that ABG was arranging financing to support a Boardriders’ acquisition.

Gap announces big loss, declining sales and executive shakeup

Gap reported disappointing holiday-quarter results Thursday and announced a series of executive changes as the struggling retailer continues to search for a permanent CEO. The company reported net losses of $273 million, or 75 cents a share, for the three months that ended Jan. 28, compared with a loss of $16 million, or 4 cents per share, a year earlier. Gap reported sales of $4.24 billion, down 6% from $4.53 billion a year earlier. Comparable sales were down 5% year-over-year and store sales dropped 3%. Online sales, which represent 41% of total net sales, plummeted 10% compared to last year, the company said. The apparel retailer — which includes its namesake brand, Old Navy, Banana Republic and Athleta — has had a rough year as it grappled with numerous net losses, bloated inventory levels and a search for a permanent CEO. During an earnings call with investors, Gap interim CEO Bob Martin said the board has narrowed its search and the next chief executive will be an external candidate. As the company has struggled to get back to profitability, it announced it is eliminating its chief growth officer role, which has been held by Asheesh Saksena, effective Thursday. Athleta’s CEO, Mary Beth Laughton, also left the company Thursday.

Allbirds admits missteps, unveils new strategy after brutal holiday quarter

Footwear retailer Allbirds on Thursday unveiled a broad overhaul of its strategy and an executive shake-up after failing to post year-over-year quarterly sales growth for the first time in its history.  The retailer, which had been in the process of a broad brick-and-mortar expansion that it’s now winding down, was candid about its failures. The company is betting its new strategy will reignite growth, improve capital efficiency and drive profitability in the coming years. “While we made important progress, the year came to a challenging close, with results below our expectations due to both execution and macro challenges,” Joey Zwillinger, Allbirds’ co-founder and co-CEO, said in a statement. The company said its most recent quarter was hurt by a “disappointing” holiday season. Results fell short of Wall Street’s expectations on the top and bottom lines. The shoemaker said its poor performance can be attributed to a series of missteps, including its decision to shift away from its core consumer by introducing products that deviated form that base, including technical performance running products geared for elite athletes.

Mango’s sales hit record as Zara’s rival expands in US, India

Spanish fashion retailer Mango’s sales hit a record 2.68 billion euros ($2.8 billion) last year, exceeding pre-pandemic levels by 13% as shoppers kept spending on clothing amid high inflation and as the company expanded in the United States and India. “We capitalised on the end of the (COVID) restrictions and the return to normality last year with a push for new shops,” Toni Ruiz, the CEO of the privately owned retailer, told a news conference. Revenue at Mango, which is a rival of Spanish Inditex-owned label Zara, rose 20% from a year earlier, with both in-store and online sales benefitting from consumers’ post-pandemic appetite for clothes, despite tough competition in the apparel business. Its net profit rose 21% to 81 million euros ($85.66 million). Mango began to increase its presence in India and opened a flagship store in New York in May, one of nine new shops opened in the United States last year and of 119 outlets in all its markets. In 2023, Mango is planning to open 35 new stores in India, its leading market in Asia where it will have 110 outlets. The company has 2,566 outlets worldwide and expects to open more shops in 2023 than last year, but only a third will be company-owned.



Athletic & Sporting Goods

Adidas warns of first annual loss in three decades and cuts dividend after Ye split

Adidas reported a big fourth-quarter loss and slashed its dividend after the costly termination of its partnership with Kanye West’s Yeezy brand in October.  The German sportswear giant posted a fourth-quarter operating loss of 724 million euros ($763 million) and a net loss from continuing operations of 482 million euros. The company will recommend a dividend of 70 euro cents per share at its May 11 annual general meeting, down from 3.30 euros per share in 2021.  Adidas is projecting a full-year operating loss of 700 million euros in 2023, marking its first annual loss for 31 years. The estimate includes a hit of 500 million euros in potential Yeezy inventory write-off and 200 million euros in “one-off costs.”

The Athlete’s Foot Closes Acquisition Of Sneakers Market S.A. In Greece

The Athlete’s Foot (TAF) completed the acquisition of Sneakers Market SA, a subsidiary of Fourlis Group that operates TAF stores in Greece. The acquisition follows the takeover of TAF globally by Arklyz Group in 2021 and marks the beginning of a new strategic direction for the brand in Europe. With the acquisition, Greece has become the first market with TAF’s operated stores that would complement the franchise model.  The acquisition is part of TAF’s long-term strategy to expand its store footprint to complement the franchise model. TAF Greece is poised to onboard a mix of global to local street style and sports fashion brands in-store and online.

Cosmetics & Pharmacy

Ulta plans to open 100 new stores as annual sales exceed $10B for the first time

In the wake of reporting better-than-expected sales and profits for the fourth quarter, Ulta Beauty Inc. says it plans to add another 100 new brick-and-mortar stores over the next two years.  The beauty products retailer on Thursday said its fourth-quarter net income rose 18% to $341 million, or $6.68 per share, from $289 million, or $5.41 per share, a year ago. Sales for the period also rose 18%, to $3.2 billion from $2.7 billion.  The results beat analysts’ projects for earnings of $5.68 per share on revenue of $3 billion.

Unilever Sells Intuiskin to Ieva Group

Unilever has sold several beauty brands to Ieva Group­. Ieva bills itself as a “connected beauty company” linking wellbeing, personalized solutions and the environment. Specifically, Ieva acquired Intuiskin, the parent company of skin care and hair care brands Ioma, Ioma Hair and Made with Care. A purchase price was not disclosed.  Following the deal, Unilever will return to being a minority shareholder in Intuiskin. Ieva Group was founded by Jean Michel Karam in 2020. It has personalized brands, services and experiences, powered by technology and data. He established Intuiskin in 2010. Ieva’s portfolio now comprises Ioma, in personalized cosmetics, and clean skin care brand Made with Care, formerly under Intuiskin, as well as beauty brands L’Atelier du Sourcil, the brow bar retail concept, plus technical hair care brand Elenature.

Mitsui invests in Kao’s Brazil subsidiary

Japanese investment firm Mitsui & Co is investing in Kao Corporation’s wholly-owned subsidiary in Brazil, TBP Importação e Comércio de Cosméticos.  The companies have signed a Quota Subscription Agreement under which 70% of the business will be owned by Kao and 30% by Mitsui.  The arrangement is expected to go into effect in April 2023 after antitrust approval by CADE, Brazil’s Administrative Council for Economic Defense.  Kao and Mitsui said they plan to work together in the beauty and personal care field in emerging economies, and will explore how they can further expand their partnership in their areas of interest.  The move builds on Kao and Mitsui’s historic tie-up for the sales and marketing of Kao’s Bioré skin care brand (beginning 2017).


Discounters & Department Stores

J.C. Penney hasn’t had to release its finances since 2020. Here’s how the retailer is doing

The “C” in J.C. Penney stands for “Cash,” the middle name of founder James Cash Penney, but the department store is struggling to generate much in its post-bankruptcy years. As of Oct. 29, the company’s cash and cash equivalents had dwindled from $354 million the previous year to $121 million. In the first nine months of 2022, net income plummeted 43.6% to $176 million, according to filings with the Securities and Exchange Commission. “It is unsurprising that J.C. Penney has seen performance slide,” GlobalData Managing Director Neil Saunders said by email. “The range is as bland as ever, with not much to excite shoppers.”

Disciplined inventory management helped Macy’s weather tough 2022

Inventory management has become an advantage for Macy’s even in a tough retail environment, according to analysts and company executives. Macy’s CFO Adrian Mitchell pointed to inventory productivity as a “value creation lever” for Macy’s in a call with analysts last week. “We made significant progress in leveraging data and analytics to better forecast sales demand, receipt timing and flow across the supply chain,” he said. The company’s inventory levels declined 3% last year and have fallen 18% compared to 2019. Inventory turnover, while down 4% last year, improved by 15% since 2019, Mitchell said.

Kohl’s shrinks inventory position after ‘out of control’ levels in 2022

Kohl’s is revamping how it manages its inventory after net sales fell more than 7% in FY2022 and margins shrunk by nearly five percentage points. The discount department store chain is committed to shrinking its inventory plan by a percentage in the mid-single digits after the company “got out of control” with its purchasing in 2022, CEO Tom Kingsbury told analysts. With the reduction, Kingsbury added that Kohl’s would “operate so that we have plenty of room to chase receipts,” meaning the retailer will seek additional inventory as needed to meet customer demand.


Ross to open 100 stores this year

Ross Stores wants to reach a triple-digit goal this year. The retailer opened 19 locations in nearly six weeks and, repeating a goal from last year, once again wants to add 100 locations by the end of this year. Eleven recently opened locations are under the Ross Dress for Less banner, while the other eight are under the company’s DD’s Discounts brand. In a Monday announcement, the California-based company said both chains expanded into existing markets in California, Texas and Florida, while DD’s also opened its first store in Wisconsin. Ultimately this year, the company plans to open 75 locations under the Ross banner and 25 DD’s-branded stores.



Emerging Consumer Companies

Daily Blends launches AI-powered fresh food vending machines, alongside $2 million in funding

Daily Blends, a Canadian AI tech company, has secured $2 million in funding co-led by San Francisco-based Hustle Fund and New York-based 2048 Ventures. Daily Blends is fulfilling the increasing consumer demand for healthy yet affordable food by providing smarter vending machines that optimize for product availability and minimal food waste. The company plans to use the financing to accelerate the deployment of its AI-powered smart vending machines across the Metrolinx network (the largest transit expansion program in North America), offering high-quality, fresh food to millions of commuters in the Greater Toronto Hamilton area.

Vivrelle partners with Four Seasons

Vivrelle, the membership club that offers access to a shared closet of designer handbags and accessories, announced a partnership with Four Seasons Hotel Houston and Four Seasons Private Residences Los Angeles. The partnership provides hotel guests with complimentary access to Vivrelle’s closet of accessories from brands including Prada, Gucci, Dior and more, regardless of their membership status. Founded in September 2018, Vivrelle provides access to a shared closet of coveted designer handbags, jewelry and diamonds for a monthly membership fee. In a fresh take on the try-before-you-buy model, Vivrelle members are also able to purchase items they love from Vivrelle’s closet at exclusive members-only discounted prices.

Footcare brand Pedestrian Project launches

Pedestrian Project, a footcare brand whose products have been in development for more than three years, aims to create a beauty-inspired, aesthetically pleasing, clean and efficacious product line to disrupt what it considers a sleepy and dated category. The company is focusing on clean formulas, elevated packaging, appealing scents and luxurious textures. The brand launched with four clean, vegan foot-caring stock keeping units with plant butters and oils as ingredients. The lineup includes Walker’s Cream, $12; Cracked Heel Repair, $14; CBD Relief Balm, $30, and a Purifying Foot Soak, $14, which are all available on the brand’s website and on Amazon.

Rebel Girls raises $8 million to empower and inspire girls

Girl-centered media brand Rebel Girls announced an $8 million Series A funding round led by publishing giant Penguin Random House that will help the company expand to television, theater, and even the metaverse. Rebel Girls, a certified B Corporation whose mission is to inspire girls through women-focused content including podcasts and books, says it already reaches 23 million girls. Jes Wolfe, CEO and chairperson, says the company hopes to reach an audience of 50 million by 2025 as it continues to publish new books and expand into new media and storytelling formats. All the while, Rebel Girls will continue combating the lingering confidence gap between boys and girls.



Food & Beverage

Patagonia acquires cracker brand

Patagonia Provisions, the food and beverage division of Patagonia, has acquired Moonshot, a Plant Forward, Inc. snack brand.  Moonshot’s main ingredient, wheat, is grown with regenerative agriculture and organic practices, and it is traceable to the farm and the field. Farmers, the miller and the manufacturer in the supply chain are within 100 miles of each other, which results in a lower carbon footprint.  Sausalito-based Patagonia Provisions sources ingredients that rebuild soil, protect the health of ocean ecosystems and protect the environment.  “Moonshot has achieved impressive growth by producing and selling delicious and nutritious crackers with a materially improved carbon footprint compared to industry standard practices,” said Paul Lightfoot, general manager of Patagonia Provisions. “Moonshot’s values and mission are strongly aligned with Patagonia Provisions, which made it easy to warmly welcome their people onto our team.”

Ramen brand raises $10 million in funding round

Instant ramen brand immi has raised $10 million in a Series A funding round. The round was led by Touch Capital with participation from Siddhi Capital, Gold House Ventures, Anti Fund, Lab Capital Advisors and others.  The low-sodium, high-protein ramen producer will use the funds to create several leadership roles and expand its retail presence nationwide, building on its 2022 launch into Whole Foods Market, Wegmans and other distributors.  The brand also is looking to add to its current flavor lineup, which includes Black Garlic “Chicken,” Spicy “Beef” and Tom Yum “Shrimp,” and will use some of the financing to research and develop new permanent, limited-time and co-branded partnership flavors.  Immi previously raised $3.8 million in a seed funding round led by Siddhi Capital.

Sierra Nevada Makes Minority Investment in Riot Energy; Will Produce and Package Products

Sierra Nevada Brewing Co. has made a minority investment in Riot Energy, a Venice, California-based energy drink company. The California brewery will “initially serve as an investor,” but will “eventually produce and package Riot Energy products” once its CanDo Innovation Center is up and running.  Sierra Nevada announced construction of the 85,000 sq. ft. CanDo facility in September. The Chico, California-based production facility will have a 500,000-barrel annual capacity and will be dedicated to beyond beer offerings, including Strainge Beast hard kombucha and non-alcoholic versions of Sierra Nevada’s existing beer offerings.  The investment in Riot may help the more than 40-year-old brewery connect with younger consumers who are seeking better-for-you recipes.  Founded in 2016, Riot is a “100% plant-powered,” certified organic energy drink company. Its products contain “no added sugar, no artificial sweeteners and no unrecognizable ingredients.  Riot nearly doubled its footprint in 2022 and is now available in more than 7,000 stores. In January, the company expanded distribution nationwide through partnerships with Kroger, Walmart and Costco, and “plans to scale this growth even further,” according to the release.

Hot Stuff: Fly By Jing Brings in $12M to Scale Brand & Retail Presence

After moving from online into retail last year modern Chinese food brand Fly By Jing announced today it raised an additional $12 million in funding to fuel continued expansion primarily in conventional grocery stores.  Existing investor Prelude Growth Partners and Pendulum, an investment and advisory firm for leaders and founders of color, were the two largest contributors of capital, with entrepreneur Dave Gruntman, Palm Tree Crew and numerous other angel investors also taking part.  The capital will be used to drive further expansion mainly in conventional retailers, including Kroger and Albertsons in the coming months. After launching in stores last year, the company has achieved a 50/50 split in revenues between retail and D2C.



Grocery & Restaurants

Report: Bain Capital, Goldman Sachs among Subway’s potential bidders

Goldman Sachs Asset Management and Bain Capital are among those interested in acquiring the Subway sandwich chain, according to a new report from United Kingdom-Based Sky News. Other potential suitors include TDR Capital and TPG, while TSG Consumer Partners is “also monitoring the situation,” the publication reports. These potential suitors emerge nearly two months after the Wall Street Journal broke the news that Subway was exploring a sale with an estimated valuation of $10-plus billion. Subway confirmed the sale about a month after that report was published. In a statement released in February confirming its sale, Subway said, “The management team remains committed to the future and will continue to execute against its multi-year transformation journey, which includes a focus on menu innovation, modernization of restaurants and improvements to its overall guest experience. The company recently announced another record-setting year, ending 2022 exceeding global sales projections and achieving eight consecutive quarters of positive same-store sales growth.”

FAT Brands CEO Andy Wiederhorn is stepping down

FAT Brands — parent company to Fatburger, Hurricane Grill & Wings, Johnny Rocket’s, and Fazoli’s, among other brands — announced Monday that founder Andy Wiederhorn will be stepping down from his role as CEO. Wiederhorn — who oversaw 13 brand acquisitions in three years ending with the purchase of Nestle Toll House Café in May 2022 — will transition to an advisory role to the company starting May 5, with the appointment of his replacement to be announced sometime before then. After he transitions out of his role as CEO, Wiederhorn will remain on as a board member of FAT Brands and his family company, Fog Cutter Holdings LLC, will continue on as controlling shareholder of the company, according to Monday’s announcement. FAT Brands merged with Fog Cutter Holdings in Dec. 2020 in a move that Wiederhorn said at the time would give the company greater “financial flexibility.” Shortly after the merger was finalized, FAT Brands began its shopping spree throughout 2021, which included the purchase of  Global Franchise Group, Twin Peaks, Fazoli’s and, Native Grill & Wings. In Feb. 2022, news broke that Andy Wiederhorn and his family were being investigated by federal authorities on allegations of securities and wire fraud, money laundering and attempted tax evasion, including laundering “millions of dollars” in fraudulent loans from his companies, according to a November affidavit. This was not Wiederhorn’s first brush with the law either: He previously served a 15-month prison sentence from 2005-2006 after pleading guilty to tax fraud, in association with a previous company of his, Wilshire Credit. According to today’s announcement, Wiederhorn’s transition to an advisory role is related to the ongoing federal investigation as he “seeks to eliminate the distraction of the previously announced government investigation tied to him and allow senior management to focus on continuing to drive shareholder value.”

Home & Road

Bed Bath & Beyond raises more cash to fuel turnaround effort

Bed Bath & Beyond has raised a total of $360 million from its Federal equity offering. The struggling home goods chain said Wednesday it has received approximately  $135 million in gross proceeds from the exercise of preferred stock warrants that were issued as part of a public equity offering conducted on Feb. 7. The offering has now produced total proceeds of $360 million. (Bed Bath & Beyond sold convertible preferred stock and the warrants to raise an initial $225 million and said it could raise up to an additional $800 million.) In a release, the retailer, which has been working to avoid bankruptcy, said it has used proceeds received to date to repay outstanding revolving loans, “creating additional liquidity opportunities to support business operating activities.”

Two giants merge: HNI acquires Kimball for $485M

Office and contract furniture giant HNI Corp. has acquired Kimball, another big player in the office furniture space. The cash and stock transaction is valued at $485 million. Under the terms of the agreement, Kimball shareholders will receive $9 in cash and 0.1301 shares of HNI common stock for each share of Kimball International common stock they own. As a result of the transaction, Kimball shareholders will own approximately 10% of the combined company. “We are excited about joining with Kimball International, a high-quality company we have long admired for its recognized brands, furnishings expertise built over 70 years and established relationships across multiple sectors,” said HNI CEO Jeff Lorenger. “The combined company will have a stronger platform for growth, delivering significant benefits for our shareholders, members, dealers and customers. We look forward to welcoming the talented Kimball International employees to HNI.” In recent quarter sales, HNI reported $568.9 million, a 6% decline from last year. Kimball reported $183 million, a 21% increase, and its fourth consecutive quarter of substantial year-over-year growth.

Kiss ’em goodbye. Tuesday Morning store leases go up for auction

Within roughly 3 months, hundreds of locations that used to house Tuesday Morning stores could be opening under new banners. A&G Real Estate Partners has begun auctioning more than 250 leases nationwide as part of a first round of store closures from Tuesday Morning’s voluntary Chapter 11 reorganization. The stores now being auctioned range in size from 6,000 to 28,000 square feet and include freestanding and strip center sites. Many of the locations offer five years or more of remaining lease term, along with renewal options, according to the firm. Shortly after the off-price home furnishings retailer filed for bankruptcy four weeks ago, it announced it would close 296 of its 487 units, more than 60% of its physical store base. That will leave Tuesday Morning with 218 doors.

Jewelry & Luxury

Chow Tai Fook Sees Executive Changes

Chow Tai Fook (CTF)—the largest jewelry retailer in China, and one of the largest jewelry companies in the world—recently announced two big changes in its executive ranks. Chan Sai-Cheong will step down from his position as CTF’s managing director for Mainland China on March 31. Sai-Cheong joined the group in 1985, and played “an integral role” in its growth throughout mainland China, a company statement said. Kent Wong will expand his current role to oversee Chow Tai Fook’s growth and strategy in mainland China. Wong has been with the group since 1977, and frequently communicates with the U.S. market.

Safilo courts eyewear and fashion groups for Longarone plant sale

Italy’s Safilo is studying the sale of its plant in Longarone due to overcapacity and it is looking at players in the eyewear and fashion sectors as potential buyers, the eyewear group Chief Executive said on Friday. Safilo hired advisory firm BDO to draw up a shortlist of potential buyers for the plant in northeast Italy, CEO Angelo Trocchia told a news conference. The overcapacity at the Longarone plant, which is specialized in the production of metal frames, is due to the loss of some luxury brands and new customers with different needs, Trocchia added.

Hong Kong loses luster as retail units go vacant and big brands look to China

Hong Kong, one of the world’s top luxury shopping destinations, is losing its luster as high-end retail properties go vacant and famous foreign brands reduce exposure to the city in favor of opening new outlets in mainland China. Glitzy Hong Kong shopping streets once packed with luxury stores that attracted 56 million visitors in pre-pandemic 2019 now have about half of their shop units sitting vacant, according to property management companies. Rents in Tsim Sha Tsui are down 41% from pre-pandemic levels, according to property firm Cushman & Wakefield, and last year the retail district was displaced as the world’s most expensive shopping real estate by New York’s Fifth Avenue.

Portia Antonia Alexis Discusses Why ChatGPT Might Be Luxury Brands’ Next Big Weapon

ChatGPT is the new favorite. The cutting-edge natural language processing system that can create captivating and lifelike text conversations tailored to the participants’ personalities and tones has been hailed as a breakthrough in AI, with many looking at it as a potential game-changer for the fashion industry. But how does ChatGPT work, and what are its advantages for luxury brands? To learn more, we talked to Portia Antonia Alexis, a consumer business analyst, economist, and mathematician who has explored ChatGPT and its fashion applications in depth.


Office & Leisure

Lego looks to build on 2022 sales growth with more China stores

Toymaker Lego said store openings in China and strong demand in Western Europe and the Americas had delivered 17% sales growth in 2022, adding that it expects to outpace the market this year. The family-owned company known for its colourful plastic bricks said sales rose to 64.6 billion Danish crowns ($9.25 billion) last year, when it opened 155 new stores, bringing the total number of Lego shops globally to more than 900. “We have really good momentum, and I think it will continue in 2023,” Lego Chief Executive Niels Christiansen told Reuters. Lego plans to open another 145 stores this year, mostly in China, which Christiansen said in an interview he expects will help it to grow sales by a high single-digit percentage. Top sellers in 2022 included Lego’s Star Wars and Harry Potter building sets, and its City and Technic ranges. The Danish company, which employs more than 27,000 people globally, saw sales spike both during the pandemic when many people stayed home and after lockdowns were lifted. Lego’s operating profit of 17.9 billion crowns was up 5% from a year earlier, after 32% growth the previous year.

How Build-A-Bear’s CEO plans to top two years of record profits

Build-A-Bear has come a long way since opening its first workshop in 1997 in St. Louis, Missouri. Over that time, the toy company has expanded across continents, built an e-commerce site, launched a party business, formed dozens of licensing deals, rolled out products geared to teens and adults, created a Roblox experience and began work on a documentary and animated film. With that, Build-A-Bear reported the highest annual profit in the company’s history. The toy company, which disclosed its fourth-quarter earnings on Thursday, record profits in both 2021 and 2022 and now expects “another great and record-breaking year in 2023,” CEO Sharon Price John said on an earnings call Thursday morning. Build-A-Bear’s total revenue for the 2022 fiscal year totaled $467.9 million, a 13.7% jump over the 2021 fiscal year.

There’s a National Pet Food Shortage Going On—Here’s What We Know

We all know that if there’s one thing our pets love to do, it’s eat. But, you might have noticed it’s been a lot harder to find your pet’s food in stores lately. What gives? Amidst recent shortages of eggs and oranges, dog food is the latest good to be feeling the shortage heat. And, not to mention, the latest good to face rising prices. If pet food aisles seem sparse, it’s likely due to supply chain issues. A familiar issue lately for stores and consumers (especially over the past few years), supply chain issues have affected almost everything you can think of. In this case, these supply chain issues are significantly impacting smaller stores. Additionally, staffing issues, rising prices and slower deliveries across the board are contributing to the pet food shortage. Unfortunately, these supply chain issues have resulted in pet food prices increasing up to 40% from two years ago. Some pet owners may need to switch to pet food brands that are more available due to the shortage.

Technology & Internet

Meta exploring a new social network that could compete with Twitter

Meta is exploring a new decentralized, text-based social network that could compete with Elon Musk’s Twitter. Tech newsletter Platformer reported that the project, codenamed P92, would be built as a stand-alone app, but that users would log in using their Instagram credentials. The move could help Meta attract some of the Twitter users who are looking for alternatives after Musk took over and changed some of the site’s rules. “We’re exploring a standalone decentralized social network for sharing text updates,” a Meta spokesperson told CNBC on Friday. “We believe there’s an opportunity for a separate space where creators and public figures can share timely updates about their interests.” The effort by Meta would expand its offerings beyond Facebook, WhatsApp and Instagram, and into a space that has been dominated by Elon Musk’s Twitter. Decentralized social networks, like Mastodon or Jack Dorsey-backed Bluesky, rely on individual servers which use a uniform protocol, avoiding centralized control of content and possible censorship.

Stitch Fix walks back key initiatives in quest for recovery

Stitch Fix, with a C-suite in transition and struggling against a string of declines, is shifting its model again. This time, the apparel box retailer is undoing initiatives designed to spark growth that instead have undermined its performance.  “I realize we haven’t met recent expectations,” Founder Katrina Lake, who returned as CEO on an interim basis in January, told analysts Tuesday. Lake vowed to regain focus, and described a return to the company’s original differentiation — pairing algorithms and human stylists to send outfits to customers, who subscribe to the service on an ad hoc basis or a frequency of their choosing. The business model has likely grown too complicated, with some aspects interfering with their core idea, according to Tarek Abdallah, a professor of operations at Northwestern University’s Kellogg business school.  The question remains how the company will profitably grow, with a model that has been ditched by Nordstrom and ThredUp, among others, and without the tweaks meant to help achieve scale.


Finance & Economy

Hot labor market, consumer spending pushes Fed to higher rate increases

The Federal Reserve may have to ramp up its pace of interest rate hikes after several reports indicating the economy is continuing to run hotter than expected and putting pressure on prices.  Several Fed leaders have spoken in recent days about the need to reassess the pace they should ease off interest rate hikes to let previous increases take effect after a hot jobs report and consumer spending gains last month.  Fed Chair Jerome Powell told senators the Fed may need to increase the pace of its interest rate increases faster than projected if the economy does not show signs of cooling off again.

Credit card debt is at an all-time high

More consumers are leaning on credit cards to afford increasingly expensive necessities such as food and rent.  That helped propel total credit card debt to a record $930.6 billion at the end of 2022, an 18.5% spike from a year earlier, according to the latest quarterly report by TransUnion. The average balance rose to $5,805 over that same period.  At this rate, households are nearing a “breaking point,” according to a separate study by WalletHub.  Using the Great Recession as a guide, the projected breaking point is the level of household credit card debt that will become unsustainable for most people, according to Jill Gonzalez, an analyst at WalletHub.