By now, most people in our industry have spent some time thinking about the collapse of Silicon Valley Bank, the second largest U.S. bank (measured by assets) to fail in history. Depositors, mostly venture-backed companies, sought to withdraw $42 billion on March 9 alone, triggering a run on the bank every bit as dramatic as the one that sent George Bailey running through Bedford Falls in the movie It’s a Wonderful Life.
JP Morgan Chairman of Market and Investment Strategy Michael Cembalest labeled his annual state of the market report issued on January 1, 2023 “The End of the Affair.” Most presciently, his report began with five charts on the state of our major banks’ balance sheets, the first of which included the percentage of retail deposits as a share of total deposits as the Y-axis, and loans plus securities as a percentage of deposits on the X-axis. His point in this chart was to emphasize that banks with significant treasury holdings, purchased when interest rates were at historical lows, faced significant market risk if they needed to monetize these assets in an environment where comparable new bonds offered significantly better interest rates. The potential need to monetize these bonds at a discount correlated to the percentage of non-retail depositors, because retail depositors (generally individuals) are mostly protected by the FDIC’s deposit insurance cap of $250,000. SVB’s depositors, however, were overwhelmingly weighted towards venture backed corporations that deposited amounts raised from investors greatly in excess of the FDIC limit, thereby creating an incentive to withdraw their uninsured funds at the first sign of trouble. Apparently, these metrics were disclosed; the signs were there.
Now, politicians are rushing to put heads on pikes. However, SVB’s model was an open book – few among us can say we didn’t understand where SVB’s deposits came from. SVB held ultra-safe treasuries, which was responsible, but it does not appear that they deployed hedging strategies that would have protected them from interest rate hikes that now feel foreseeable given the imbalance in supply and demand experienced in 2021 (when shipping container costs famously grew ten-fold, for example). It is also likely that SVB expected its venture capital partners not to initiate a run on the bank given how important they were to the venture ecosystem.
Nearly every corner of the consumer industry experienced innovation-driven change from 2010 to 2021 led by companies backed by venture funding and, in many cases, SVB. At Consensus, we started to see venture exiting consumer in mid-2018. Now, with the loss of the leading innovation bank, it’s a safe bet that innovation in consumer businesses will come more from large corporates than Palo Alto, and we will see investors’ focus return to good execution, proven models, and scale. A decade ago, investors would talk about the “cash-on-cash” return when they made an investment in our industry. We suspect this terminology will return to our vocabulary starting now.
In his January 1 report, Cembalest included a chart titled “The Tortoise and the Hare” graphing the trajectory of the ARK Innovation ETF versus a basket of old economy stocks, including farm, office cleaning supplies, and industrial REIT stocks. The lines crossed in early 2022, and it appears the tortoise has since jumped out to a sizeable lead on the hare.
Apparel & Footwear
G-III Apparel Group is preparing to move on from Tommy and Calvin with Donna and Nautica. The company — which faced the prospect of losing half of its sales when PVH Corp. decided last year to transition out of licensing deals for its Tommy Hilfiger and Calvin Klein businesses — on Thursday laid out two new initiatives that will help it adjust. While releasing fourth-quarter results, which included losses driven by an impairment charge, G-III said it planned to expand on its small Donna Karan business and that it had also picked up a license for Nautica from Authentic Brands Group. G-III bought Donna Karan in 2016 from LVMH Moët Hennessy Louis Vuitton. Since then, the spotlight has been on DKNY, which G-III repositioned and relaunched, building a roughly $600 million business. While Donna Karan is not as big as Tommy Hilfiger, it has the potential to be a more profitable business for G-III since it won’t have to make royalty payments to use the brand.
Despite retail industry headwinds, Skechers has seen positive consumer trends going into 2023. “Since mid-holiday the consumer has been pretty robust,” said Skechers CFO John Vandemore during a Monday morning session at the UBS Global Consumer and Retail Conference in New York City. “We continue to see really strong consumer trends.” The Los Angeles-based footwear company last month reported better-than-expected results for the fourth quarter, reporting total sales of $1.88 billion, up 13.5% over the same period last year. Diluted earnings per share also beat expectations, at $0.48. For the full-year of 2022, Skechers broke annual sales records of $7.4 billion, up 18% from the prior year. The encouraging update comes as some other footwear retailers report a similarly upbeat consumer in the back half of the holiday.
After reporting record results in 2022, Crocs has hit the ground running in 2022. “The quarter is off to a great start,” said Crocs CEO Andrew Rees during a session today at the UBS Global Consumer and Retail Conference in New York City. “And 2023, while there is much uncertainty in front of us, is also off to a great start. That great start is really driven a lot by innovation and new product introductions.” In 2022, Crocs Inc. achieved about $3.6 billion in revenues, an increase of about 53.7% over 2021. Crocs brand revenues were $2.7 billion, up 19% on a constant currency basis. Hey Dude revenue for 2022 exceeded initial expectations and reached $986.2 million for the full year. (The figure includes the period in 2022 before Crocs acquired the brand.) While Crocs was a major beneficiary of the comfort trends that took root in footwear throughout the pandemic, Rees said the company has managed to sustain that momentum, even as more people return to offices and live events.
Zara parent company Inditex recorded another historic high in 2022 as customers returned in droves to physical stores but also continued to increase their online spend. Fourth-quarter sales were up 13 percent versus the same period last year to 9.5 billion euros as foot traffic continued to stabilize around the world. In 2022 as a whole, sales rose 17.5 percent year-over-year to 32.6 billion euros. In constant currencies, sales were up 18 percent, while net income rose 27 percent to 4.1 billion euros in the full year. Inditex’s results were largely in line with consensus, but analysts were wary as the company revealed 1.6 billion euros of planned spending. The results exceeded the company’s pre-pandemic numbers, and come even as the company raised prices throughout the year to keep pace with inflation. Inditex also owns upscale Massimo Dutti, young concepts Pull&Bear, Bershka and Stradivarius, as well as lingerie and loungewear brand Oysho.
Lands’ End, the classic all-American fashion brand, fell into the red in the fourth quarter but saw “sequential” improvement each month of the period. The net loss for the fourth quarter ended Jan. 28 was $3.3 million, or $0.10 loss a diluted share, compared to net income of $7.1 million, or $0.21 a diluted share, in the fourth quarter of fiscal 2021. Net revenue decreased 4.6 percent to $529.6 million, compared to $555.4 million in the year-ago quarter. Andrew McLean, chief executive officer, stated, “We executed well throughout the fourth quarter to deliver sequential sales and margin improvement in each month of the quarter, resulting in revenue and adjusted EBITDA at the higher end of our expectations. We are pleased to see this momentum continue in the first quarter, particularly in our core swim category. “Looking ahead in 2023 and beyond, we plan to continue to focus on providing high-quality products in key categories that customers want and that present opportunity to drive outsized value creation, including swim and outerwear,” McLean added.
Athletic & Sporting Goods
Continuing its relationship with the brand, Macy’s is integrating more of Reebok’s activewear products into select stores, online and on its mobile app, the retailer announced. The collection includes sportswear and activewear for men and women, including extended sizes that span fitness, lifestyle and various training categories. Consumers can now shop the sportswear assortment, ranging from sports bras and shirts to joggers and jackets, priced between $25 and $85. As part of the expanded partnership between the two companies, Reebok will create products and capsule collections exclusively for Macy’s.
Buffalo Games and EastPoint Sports have merged. In a deal that closed on Jan. 31, EastPoint Sports merged with and into Buffalo Holding Corp., a wholly-owned subsidiary of Buffalo Games. The merger combines Buffalo Games’ expertise in the games and puzzles category with EastPoint Sports’ extensive offerings in the realm of game room products, outdoor tailgate games, and lawn games. EastPoint Sports is known for its portfolio of games, including KanJam, cornhole, foosball, and a wide array of products marketed under top licenses, including Hasbro’s NERF, NFL, NHL, and more. Buffalo Games is the largest designer and manufacturer of jigsaw puzzles in the U.S. and creates products under license from Thomas Kinkade, Star Wars (Lucasfilm), Charles Wysocki, and more.
Salt Creek Capital has acquired Power Gripps USA (DBA Versa Gripps USA), a branded manufacturer of weightlifting accessories. Versa Grips are used by professional athletes, bodybuilders, and weightlifters to improve grip strength and assist with lifting heavier weights. By providing a more secure grip on the weight, Versa Grips allow the user to lift more weight with more reps which can lead to greater muscle gains and improved strength over time. Versa Grips are made at the company’s facility in Maine and come in a range of sizes and styles to fit different hand sizes and training goals. Some models feature extra padding or wrist support for added comfort and protection during heavy lifts. Versa Grips was founded in 1998 by Michael and Heather Parker and is headquartered in Sorrento, Maine.
Cosmetics & Pharmacy
Beauty and wellness company Waldencast PLC said it signed a binding letter of intent to acquire a 60% controlling interest in a newly formed entity to be comprised of the business of its Southeast Asia (SEA) distributor. The letter of intent is binding upon the SEA distributor, but Waldencast’s obligations are subject to the satisfaction of certain conditions. The financial terms were not disclosed.
Gotha, the Italian manufacturer of colour cosmetics, continues its series of acquisitions with the take-over of Beauty Rain Srl, which specialises in the assembly of make-up components. With this operation, Gotha is proceeding with its integration plan of its most strategic production processes. It comes on the heels of the acquisition in 2022 of iColor Group, a Chinese make-up and skincare company with two main sites in Shanghai and Suzhou, and of Mia Cosmetic, an Italian filling company specialized in hot-poured, foundation, mascara, gloss, and highlighter products. Terms of the newest acquisition have not been disclosed.
Despite Birchbox’s silence amid customer and vendor concerns, the company’s website appears to be back up and running. As of March 2, the beauty subscription retailer had a disabled website for several weeks, according to previous reporting from Retail Dive. Although the website appears to be working again, users are still unable to check out and are instead provided an error message about technical difficulties. Customers have been left in the dark after the company posted on Instagram in November that it was experiencing setbacks. In November 2021, Birchbox was acquired by Femtec—whose CFO is currently furloughed. Two other beauty box retailers, Ipsy and Boxycharm, recently combined.
Apollo Global Management Inc. has agreed to acquire chemical maker Univar Solutions Inc. for $8.1 billion including debt. Univar, based in Downers Grove, Illinois, has been on the sales block, with competitor and German chemicals distributor Brenntag SE dropping plans for a bid earlier this year. Univar terminated those discussions in January, saying it would continue talks relating to “other indications of interest.” With one of largest private transportation fleets for chemicals, Univar distributes industrial and specialty chemical products including many for the beauty industry. Its product portfolio includes inorganic compounds, alcohol, acids and bases, surfactants, glycols and general chemicals.
Discounters & Department Stores
Dollar General’s net sales rose nearly 18% in the fourth quarter to $10.2 billion, up from $8.7 billion year over year, the company said in a Thursday earnings report. Operating profit for the quarter rose 17.1% to $933.2 million, while net income rose 10.3% to $659.1 million. For the year, the discount retailer reported new store and same-store sales growth helped raise net sales 10.6% to $37.8 billion. Declines in apparel, home and seasonal sales were offset by gains in the consumables category. CEO Jeff Owen said a $100 million store-level investment will fund more store-level staffing and continue to attract and retain talent which, in turn, will improve customers’ in-store experience. That news comes as the company has faced state and federal scrutiny and fines for unsafe in-store working conditions.
Walmart has launched a clean beauty shop, the retailer said in a company blog post on Thursday. It includes more than 900 products, with almost 80% of them selling for under $10, and the retailer plans to expand the offering over the years. Dubbed “Clean Beauty at Walmart,” the platform offers products without more than 1,200 ingredients, per the website. The formulated without list includes acetone, aluminum and aluminum salts, lead, talc, vitamin A and D3, phthalates, parabens and more. Walmart’s vice president of beauty, Creighton Kiper, said in the post that the retailer consulted state and federal regulations, suppliers, the Environmental Defense Fund and others to decide which ingredients to filter out of the clean beauty offering.
Nordstrom is further optimizing its supply chain as one of three priorities it outlined to improve its financial performance over the next fiscal year, executives said on an earnings call this month. Already, the retailer has moved to improve unit flow from suppliers to customers, including by changing ordering practices and partnering with suppliers on shipment standards, President and Chief Brand Officer Pete Nordstrom said. It has also seen improved productivity and throughput at its facilities due in part to prioritizing employee retention. Nordstrom expects building on these efforts will benefit its business in 2023, after Q4 net sales fell 4.1% year over year. “These actions will continue to improve the customer experience, increase sell-through and reduce markdowns by allowing us to place the right assortment with the right depth closer to the customer,” he noted on the call.
Emerging Consumer Companies
Private equity firm BGF has acquired a £6 million ($8.3 million) minority stake in Scrumbles, a UK-based pet food brand. Scrumbles offers a range of pet food products made from high-quality ingredients with a focus on sustainability and ethical practices. The company’s products are sold in over 500 stores in the UK and are also available online. Scrumbles plans to use the funding to expand its product range and launch new marketing campaigns to promote its products. The company aims to continue its growth trajectory in the UK pet food market, which has seen strong demand in recent years.
Lingerie startup Cuup has partnered with Bloomingdale’s in its first retail partnership. The brand will be available on the retailer’s website and in-store at its 59th Street Flagship Store location in New York City. Cuup, which was founded in 2017, and has raised $12.3 million to date, aims to provide women with well-fitting bras that are comfortable and stylish. The brand has grown quickly over the past few years, with a focus on online sales and social media marketing. The partnership with Bloomingdale’s will allow Cuup to expand its customer base and reach new audiences. Cuup plans to offer fittings in-store at Bloomingdale’s and provide a personalized experience for customers.
3Z Brands, a manufacturer, wholesaler, retailer and direct-to-consumer distributor of sleep products, announced the acquisition of Leesa Sleep. Leesa was founded in 2014 with the purpose of elevating life for those in need of better sleep. The company sources high-quality materials produced in America to meticulously craft a suite of sleep products built for exceptional comfort and support. Beyond its innovative offerings, the company is committed to supporting communities and to date, has donated over 40,000 mattresses through partnerships with shelters and non-profit organizations across the United States.
Food & Beverage
With Rao’s sauces generating $580 million in fiscal 2022 sales, Sovos Brands, Inc. sees the line as being on a pathway to $1 billion in annual sales and branching farther into different departments within the grocery store. “Rao’s had another impressive year, surpassing half-a-billion of net sales, up 35% organically for the full year and accelerating to 45% in the fourth quarter,” said Todd R. Lachman, president and chief executive officer, during a March 8 conference call to discuss annual results. “While we have quintupled household penetration for Rao’s, since we acquired the brand in 2017, household penetration is still just 15% today with awareness at only 58%. With plans to grow our marketing and R&D spend double digits in 2023, we are confident that we can continue to drive years of sustainable volume-led growth into the future.” While sauces are at the line’s core, Sovos Brands has extended Rao’s into frozen entrees, frozen pizza, pasta and soups. Sauces currently make up about 85% of Rao’s sales, but Mr. Lachman sees frozen pizza as a springboard for the brand’s future growth. Noting that US frozen pizza sales are approximately $6.5 billion, he said, “I mean a two share of frozen pizza is — you can get the math — that’s a sizable business for us, and that’s what we have our sights on.”
Big changes are afoot at CircleUp, a former equity crowdfunding platform that had transformed itself into a significant source of investment and lending capital to early-stage CPG brands. The company has begun divesting its financing vehicles, including a venture capital fund and a credit platform. Over the years, the CircleUp Growth Partners fund had taken part in capital raises for nearly 30 brands, including Everything Legendary, Koia, Coconut Cult, Nutpods, Barnana, Liquid IV, Good Crisp, 4505, and more. CircleUp Credit Advisors, the company’s loan fund, is now controlled by Brightflow AI, a venture-backed technology platform that offers a suite of financial tracking services for brands and lenders. The agreement was announced earlier this month and Brightflow has also absorbed several CircleUp team members as part of the transaction. CircleUp’s VC fund, CircleUp Growth Partners, is also in the process being sold to another multi-strategy asset manager, although the buyer has not yet been identified.
Swedish oat beverage maker Oatly announced that revenue increased 4.9% year-over-year to reach $195.1 million in Q4, while also informing investors that it had secured $425 million in financing commitments that will allow the business to grow as it looks to reach “self-sufficiency.” Oatly CFO Christian Hanke reported that about $300 million of the new funding was received from private convertible bonds from shareholders including Verlinvest, China Resources and Blackstone. The other $125 million came from a term loan B. Oatly also announced a commitment letter for renewal of its revolving credit facility to approximately $200 million. The company plans to use the capital infusion to expand into new geographic areas while also extending its reach in foodservice and growing its “product portfolio from coffee locations into all milk base moments” in an effort to drive to profitability, said Oatly CEO Toni Petersson on the call. During the fourth quarter, gross profit was $31.1 million, a significant improvement from the $5 million in profits for Q3 2022 as the company streamlined its supply chain. Gross margin was 15.9% during the period; however, adjusted EBITDA was a loss of $60.5 million attributed to higher operating expenses. The company attributed the results to the streamlining of production in the Americas, the easing of COVID restrictions in Asia, deflationary costs and pricing actions taken during the final quarter of the year. Company leadership reiterated that it was confident in the decision to shift to co-manufacturing.
Grocery & Restaurants
Atlanta-based quick-service giant Chick-fil-A is trying international expansion — again. But this time it’s not one-offs; it encompasses a $1 billion plan for stores across Europe and Asia. CEO Andrew Cathy spoke with the Wall Street Journal earlier this week and said that Chick-fil-A has plenty of room to grow in the U.S., but that an international presence is necessary as the family-owned business charts its future. “We feel like it’s time to continue to innovate and try [to] test how we will do in international markets so that we can learn,” Cathy said. The company said it plans to open restaurants in Europe and Asia by 2026, with locations in five international markets by 2030.
Impacted by the Silicon Valley Bank failure, online bulk-products retailer Boxed Inc. is mulling a potential bankruptcy filing as it works to shore up financing and find a buyer for the company. In an 8-K filing on Tuesday with the Securities and Exchange Commission (SEC), New York-based Boxed said it’s “actively soliciting proposals for the sale of all or substantially all of its assets, as well as other material transactions that would improve its liquidity position.” One of those options now includes a possible Chapter 11 bankruptcy protection filing, Boxed indicated in the 8-K report filed Tuesday. “The company continues to evaluate its options, which may include potentially filing for relief under the U.S. Bankruptcy Code and other strategic alternatives,” Boxed stated in the 8-K filing. The report also said Boxed’s discussions with lenders include the “anticipation of the negotiation of a stalking horse bid” as it solicits potential buyers. Financially strapped Boxed had announced in early January that it was exploring a potential sale of the company, among other strategic options. A few months earlier, the e-tailer had received delisting warnings from the New York Stock Exchange as its stock price and market capitalization fell below required levels.
Home & Road
Williams-Sonoma reported a record year of revenue even as its fourth-quarter sales were lower than expected. The home products and furnishings retailer’s net income fell to $355.0 million, or $5.28 a share, for the quarter ended Jan. 29, from $402.9 million, or $5.41 a share, in the year-ago period. Adjusted earnings per share of $5.50 beat analysts’ estimates of $5.46. Total revenue slipped 1.9% to $2.45 billion, below estimates of $2.61 billion. Revenue at Pottery Barn, the company’s largest division in terms of sales, rose to $967 million from $921 million in the year-ago quarter. Comparable brand revenue declined 0.6%. By brand, comp brand revenue rose 5.8% at Pottery Barn and 4% at Pottery Barn Teens and Kids. Comp revenue fell 2.5% at Williams-Sonoma and 10.7% at West Elm. For the full fiscal year, Williams-Sonoma reported net revenue of $8.67 billion, up from $8.24 billion last year.
In announcing the results for its fourth quarter and fiscal year ended Dec. 31, 2022, Purple Innovation’s CEO said the company made “substantial headway” against what he called a very challenging backdrop. Net revenue for the quarter dropped 22%, and the company’s net loss more than doubled over the same period last year. Operating income, however, improved by 64% year over year, although still showed a loss of $11.1 million. For the fiscal year, the change in net revenue was much the same, with a nearly 21% decline from the previous year. Operating income declined from a loss of $23.4 million the previous year to a loss of $40.3 million in 2022. Net income for the year also showed a dramatic reversal, showing a loss of $89.7 million. On Feb. 13, Purple completed a primary public offering that resulted in $57 million of net proceeds. The primary purpose of this transaction was to provide the company with financial flexibility to execute its new product and brand strategy that was unveiled at the Las Vegas Market trade show in January. In February, Purple also extinguished its $24.7 million senior term loan and reduced its existing credit revolver to $50 million, which currently has zero borrowings against it.
Hooker Furnishings will exit the Accentrics Home e-commerce business unit of its Home Meridian operating segment, as well as reposition its Prime Resources International business unit as a direct-container only business model. Concurrently, the company expects to record an approximate $34 million non-cash charge related to the exit. The charge includes inventory write downs expected to be recorded in the fourth fiscal quarter of its recently ended 2023 fiscal year on both ACH inventories and other excess inventories along with severance of about $250,000. “Although unfavorable in the near-term, we believe these actions are in the best interests of the company and its shareholders,” said Jeremy Hoff, CEO. “The operational costs related to these low-priced and lower-margin items do not allow a path of consistent profitability. The historically high freight costs as a percentage of cost on these products and the high relative cost of handling these items reinforces this direction.”
Jewelry & Luxury
London-based retailer Burberry — famous for its iconic tartan pattern and trench coats — has appointed Kate Ferry as CFO. She will join the company by late September, the company announced Wednesday. Ferry will replace Julie Brown, who will be leaving the company on April 1 after six years. Ian Brimicombe, current senior vice president of specialist finance and projects, has been appointed as an interim finance chief until Ferry officially takes the role, the company said. Last year Jonathan Akeroyd joined Burberry as CEO, replacing Marco Gobbetti.
Saks and luxury travel subscription company Inspirato have entered into a marketing partnership, which will launch in the second quarter of this year, according to a company press release. Around 3,000 Saks Fifth Avenue stylists will act as Inspirato brand ambassadors and introduce their clients to the company’s luxury travel subscriptions, both online and in stores. Saks stylists will receive training on Inspirato’s offerings and will receive support from Inspirato’s sales team.
Pre-owned luxury watch sales now account for over 30% of the high-end timepiece market—and the trend is likely to continue, said a report from Boston Consulting Group (BCG). The report, “Luxury Preowned Watches, Your Time Has Come,” found that secondhand watch sales hit $22 billion in 2021, close to one-third of the $75 billion luxury watch market. While the report didn’t provide final numbers for 2022, it estimated secondhand watch sales hit $24 billion last year, out of a total global luxury timepiece market of $79 billion. The report comes as online secondhand sellers have taken pains to buff up their image, and the market has gained legitimacy as big names like Rolex have entered the space.
The price of gold last week surged past the $1,900-an-ounce mark, following the twin closures of Silicon Valley Bank and Signature Bank. At press time, the spot price for the yellow metal was $1,931 an ounce. “Gold looks very much like it is fulfilling its mandate as a safe haven,” Bart Melek, head of commodity markets strategy at TD Securities, told Reuters. But another dealer, Alexander Zumpfe, a precious metals dealer at Heraeus, told the news agency, “If the Silicon Valley Bank’s bankruptcy is deemed an isolated incident, gold may lose some of its recent gains.” Gold has been trading near record highs for most of the year; it hit $1,950 an ounce in February. The all-time-high spot price for gold was $2,067 an ounce, which it hit in August 2020.
Brilliant Earth saw a slight drop in sales for the fourth quarter of 2022 (ended Dec. 31), as a record number of orders was undercut by a drop in average price. Overall, the e-tailer’s net sales for the fourth quarter of 2022 decreased 1.9% to $119.6 million, compared with $121.9 million in the fourth quarter of 2021, according to financial results released March 15. The decrease was fueled by a 13.7% drop in average order value, even as the number of orders also rose by 13.7%. Total sales for fiscal year 2022 were $439.9 million. Net income totaled $6.2 million and $19.0 million for the fourth quarter and fiscal year, respectively.
Office & Leisure
Samsonite International S.A., a leader in the global lifestyle bag industry and the world’s best-known and largest travel luggage company, today published its final results for the year ended December 31, 2022. Commenting on the results, Mr. Kyle Gendreau, Chief Executive Officer, said, “We are delighted with Samsonite’s performance in 2022. We made tough decisions in 2020 to reposition the cost structure of our business which enabled us to successfully navigate the COVID-19 pandemic, and we stayed focused on tightly controlling our fixed and discretionary expenses. As a result, for the year ended December 31, 2022, Samsonite’s Adjusted EBITDA surpassed that of 2019 by 7.0% despite net sales in 2022 that were still 10.4% lower than in 2019 when excluding the net sales in Russia and by Speck. Meanwhile, with the team’s continued focus on cash management and debt reduction, the Group finished 2022 with net debt of US$1.4 billion, only slightly higher than the US$1.3 billion at the end of 2019.”
Joann on Monday announced it has entered into a $100 million first-in last-out facility “that will provide the company additional liquidity, help optimize the balance sheet, and drive free cash flow across the enterprise.” The sewing and crafts retailer said that on March 10 it had borrowed the full $100 million available under the FILO facility, and that proceeds will help it repay a portion of its existing $500 million asset based revolving loan facility. Joann, which had landed on Retail Dive’s 2022 bankruptcy watch list in December, reported that it swung to a loss in Q3 and announced a cost-cutting effort predicated in part on falling ocean freight rates. Joann enjoyed brisk business during the pandemic as many people worked on projects at home. But the company has watched sales fall as pandemic lockdowns have eased, consumers again prioritized more extroverted activities, and as inflation hurt discretionary spending.
Funko is in the process of destroying between $30 million and $36 million worth of inventory after surplus stocks strained its fulfillment network and ratcheted up operating costs. The maker of toys and collectibles said that storage and container rental costs for holding the inventory excess knocked more than five and a half percentage points off its gross margin in Q4. At $246.4 million, ending inventory for the period was up 48% year over year. That includes the inventory Funko plans to destroy in the first half of 2023, which will result in a write-down on its books. Funko’s inventory surplus not only cost money to stow but also gunked up the bobble head maker’s fulfillment operations. The inventory being destroyed is in good condition. The company is targeting its oldest inventory first. To ease operational constraints, the company is also tossing out inventory that it might have been able to sell down the road, as well as inventory that is currently selling well but still represents weeks more supply than needed.
Technology & Internet
Meta will lay off 10,000 more workers and incur restructuring costs ranging from $3 billion to $5 billion, the company announced Tuesday, with CEO Mark Zuckerberg warning economic instability could continue for “many years.” “Here’s the timeline you should expect: over the next couple of months, org leaders will announce restructuring plans focused on flattening our orgs, canceling lower priority projects, and reducing our hiring rates,” Zuckerberg said in a message to employees, which was also posted to the technology company’s blog. He added that the Facebook parent plans to close 5,000 additional open roles that it hasn’t yet filled. In a nod to continued economic uncertainty, Zuckerberg noted that the company should prepare for “the possibility that this new economic reality will continue for many years.” The new round of layoffs follows a previous round of cuts, announced in November, that affected more than 11,000 workers, which equated to roughly 13% of Meta’s overall staff. Zuckerberg has pitched 2023 as the company’s “year of efficiency,” in which the firm aims to become “a stronger and more nimble organization.”
Google has stopped selling its Glass Enterprise smart glasses, the company announced on Wednesday on its website. Google will also stop supporting its software in September, the company said. The move is the end of the line for one of the first — and still one of the most recognized — smart glasses product lines from a big tech company. Glass Enterprise was the successor to Google Glass, a lightweight glasses product that displayed tiny bits of information on a transparent screen in the user’s field of view. Glass was first sold to developers and early adopters in 2013 for $1,500 and quickly captured the imagination of tech enthusiasts. But despite backing from Google founders Larry Page and Sergey Brin, the Glass project at Google never caught on as a mainstream product. The discontinuation of Glass does not mean that Google has given up on augmented reality or smartglasses, though. Last summer, Google previewed a different pair of smartglasses that could translate and transcribe speech in real-time, and said it would continue to test augmented reality glasses prototypes in public.
TikTok is at risk of being banned in the U.S. if Chinese parent ByteDance won’t sell its stake. Millions of Americans who use the popular video app are left wondering what that means for them. Some fans of the service may turn to virtual private networks (VPNs) to try and connect to TikTok should a ban take place, a workaround that can make it seem like their internet connection is coming from a different country. But that loophole may not be so easy to exploit. It’s not an issue yet, as there are still some ways a TikTok ban could be avoided or accessed legally in the U.S. Here are the key things under consideration.
Finance & Economy
Less than a week after Federal Reserve Chair Jerome Powell opened the door to a re-acceleration in the pace of interest-rate hikes, traders slammed it shut again amid the sudden eruption of financial strains at US regional banks. Goldman Sachs Group Inc. economists said they no longer expect the Fed to deliver a rate increase next week, even after US authorities moved to contain a crisis spurred by the exodus of depositors from Silicon Valley Bank and Signature Bank. The risk of a banking crisis underscores the tension between Fed efforts to cool the economy and tame inflation with burgeoning concerns that 4.5 percentage points of rate hikes in the space of a year will spark a recession and a rout in riskier assets.
Americans pulled back on their spending last month after a surprisingly spendy January. US retail sales fell 0.4% in February from the month before, the Department of Commerce reported. That drop, which was adjusted for seasonal swings, was greater than economists’ expectations of a 0.3% decline, according to Refinitiv estimates. Some of the largest monthly declines were in food services and drinking places (-2.2%), department stores (-4%), furniture and home stores (-2.5%), and auto dealers (-1.8%).
Wholesale prices posted an unexpected decline in February, providing some encouraging news on inflation as the Federal Reserve weighs its next move on interest rates. The producer price index fell 0.1% for the month, against the Dow Jones estimate for a 0.3% increase and compared with a 0.3% gain in January, the Labor Department reported. On a 12-month basis, the index increased 4.6%, well below the downwardly revised 5.7% level from the previous month. Excluding food, energy and trade, the index rose 0.2%, down from the 0.5% gain in January. On an annual basis, that reading was up 4.4%, the same as in January. Excluding food and energy, PPI was flat, vs. the estimate for a 0.4% gain.