Many department stores and malls were struggling well before most Americans became familiar with the term coronavirus. A new report, however, says that the situation is in the process of going from bad to worse with a dire forecast for both retailers and landlords.
More than 50 percent of department stores in malls across the country will be shuttered by the end of next year, according to a recent Green Street Advisors webinar. Around 60 percent of U.S. malls currently have department store anchors.
“A lot of the disruption we were expecting to see over the next five to 10 years, is being pulled forward to the next two years,” said Vince Tibone, senior analyst, retail at the commercial real estate advisory firm.
Department store operators with high debt levels (Neiman Marcus and J.C. Penney) are most frequently mentioned as candidates for bankruptcy, while even those typically considered to be in stronger financial positions (Macy’s and Nordstrom) are struggling in the face of mass store closures.
One of the possible “knock-ons” that Mr. Tibone sees from anchor stores closing is that it will trigger co-tenancy clauses in lease deals with other retailers operating in malls. These provide non-anchor tenants with rent relief or a lease opt-out in the case of anchor space going unfilled for an extended period of time.
Mr. Tibone said filling anchor space becomes incredibly challenging in an environment “where demand for space (from retail and non-retail sources) is virtually non-existent.”
Discussion Questions: What do you think will be the repercussions if half of all department stores close the end of 2021? What will the greater retailing industry look like five years from now?
Comments from the RetailWire BrainTrust:
The downward spiral of department stores has just been greatly accelerated by the pandemic. There are so many alternative sources for everything department stores sell, the demise of a significant number of them will hardly impact consumers. The far greater impact will be on mall operators and property managers who rely on the massive square footage department stores occupy across the country. The reckoning for department stores was coming — now it’s truly here.
Mark Ryski, Founder, CEO & Author, HeadCount Corporation
I’m old enough to remember the wave of consolidation that struck the department store industry in the 1980s and 1990s following a period of LBOs and overexpansion. Anybody remember ADG, Allied Stores, Federated, May Company, BATUS Retail, Marshall Field’s and so forth? Macy’s was the only traditional store left standing with a national footprint, and it has had to deal with too much square footage; the impact of COVID-19 will happen even faster as online, off-pricers and discounters continue to gain share.
Dick Seesel, Principal, Retailing In Focus LLC
Every trend that was present before COVID-19 got accelerated during the crisis, and this is one of them. What we’re about to witness is a great culling of the way-too-big herd of physical U.S. retail in hyperspeed. The best malls will survive, the marginal will not and, right now, there are a LOT of marginal malls with marginal anchors. I see this culling as a good thing and believe that it was inevitable anyway so, the sooner the better. Let’s move on to 21st century retail and leave the mistakes of the last century behind. All ahead full power!
Lee Peterson, EVP Thought Leadership, Marketing, WD Partners
The retail landscape will have fewer chain stores, an increase in smaller store formats, a wave of mom-and-pops and different experiences for shoppers.
Over the last few decades with many mergers and acquisitions, the department stores have too many locations in duplicate markets and there is an abundance of apparel, a high category for this segment, saturating the market. This disequilibrium of supply and demand has come to head with stores closing. Some retailers will be looking for various liquidity measures to keep the business running and will close underperforming stores thereby providing sustainability to the other profitable stores. Rents will ultimately drop which will allow for a new breed of stores to emerge, many niche and unique brands. Malls will create multi-use areas as have been seen in the recent build-outs like American Dream including shopping, dining, entertainment and events. Creating community environments and some inclusive of vertical neighborhoods (like New York’s Hudson Yards) will be the new normal for shopping centers.
Shelley E. Kohan, Associate Professor, Fashion Institute of Technology
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Headlines of the Week
US consumer spending plunges 7.5% in March, reflecting virus
U.S. consumer spending plunged 7.5% in March, reflecting the growing impact of the coronavirus pandemic as Americans complied with stay-at-home orders. The government reported that the overall economy, as measured by the gross domestic product, shrank at an annual rate of 4.8% in the January-March quarter, led by the biggest quarterly drop in consumer spending since 1980. Consumer spending accounts for 70% of economic activity and has been the economy’s standout performer in recent years. However, with further sharp spending declines forecast, analysts are predicting that GDP will shrink by around 40% in the current April-June quarter, the biggest quarterly decline on record.
Macy’s to reopen 68 stores on Monday
Macy’s on Thursday unveiled staggered plans to open “a majority” of its 775 stores in six to eight weeks, starting with 68 on Monday and 50 more on May 11, CEO Jeff Gennette said during a call with Gordon Haskett Research Advisors. Based on retailers’ experience reopening stores in Asia and Europe in recent weeks, Gennette expects maybe 20% of Macy’s normal sales volume at first, as well as slow traffic, but for both to steadily pick up. The company has shifted some stores to online fulfillment, and that will expand.
Apparel & Footwear
J.Crew files for bankruptcy as coronavirus slams retailers
Iconic American clothing retailer J.Crew on Monday became the first nationwide retailer to file for bankruptcy as the coronavirus crisis ravages the retail industry. J.Crew will emerge from the restructuring with new owners — it reached a deal to turn $1.65 billion of its debt into equity for its lenders, including the investment firm Anchorage Capital Group, effectively handing them control of the company. The chain’s lenders will also provide $400 million in financing to see it through the bankruptcy process, during which it plans to keep operating, according to a news release. “As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come,” J.Crew CEO Jan Singer said in a statement. Private equity firm TPG Capital and Leonard Green & Partners took over J.Crew in 2011 in a $3 billion leveraged buyout. There were talks in 2014 about selling the company to Uniqlo parent company Fast Retailing, but the negotiations fell through.
Brooks Brothers Seeks Buyer with Wall Street Working from Home
Brooks Brothers Inc., the two-century-old menswear company that set the standard for aspiring Wall Street bankers, is seeking to sell itself. The retailer has extended a sale process begun last year, according to people familiar with the matter who asked not to be identified because it wasn’t public. Depending on how many stores a buyer wanted, a transaction could ultimately be part of a bankruptcy filing, they said. The company has about $600 million in debt. While even the affluent Brooks Bros. clientele has little need for new suits at the moment, the brand’s history and cache has elicited interest, the people said. Many of the company’s approximately 250 U.S. locations have struggled, some of the people said. It operates a similar number of stores in more than 40 other countries, according to its website.
Coach owner Tapestry sales plunge nearly 20% as coronavirus pandemic shuts vast majority of its stores
Coach owner Tapestry reported Thursday a nearly 20% drop in quarterly sales, as the coronavirus pandemic forced 90% of its stores either shut or to operate on reduced hours during the period. Chief Executive Jide Zeitlin said the crisis materially weakened the retailer’s results during the period. ″No one is immune to the effects of this one hundred year storm,” he said. The company also Thursday laid out its reopening strategy. Starting Friday, it will reopen roughly 40 shops in North America for curbside pickup. Tapestry said it plans to use a phased-in approach to bring shoppers back to stores, and it will provide gloves and masks to store workers. The company said it has already opened back up most of its stores across China and South Korea.
Gap Inc. Partners with IMG to Leverage Its Iconic Brands Through Strategic Licensing
Gap Inc. announced it has appointed global licensing leader IMG as its first ever multi-brand, exclusive licensing representative. Through this partnership, IMG will deliver cross-category product extensions that increase existing consumer touchpoints while engaging with and introducing new audiences around the world to Gap Inc.’s beloved and trusted portfolio of brands. IMG will first focus on Gap, Banana Republic and Janie and Jack, extending their reach and helping bring to market complementary products that embody the company’s distinct brand labels: Gap for casual, optimistic American style and expertise in elevated essentials; Janie and Jack’s modern twist on classics for kids and babies; and Banana Republic’s iconic, modern style designed for a life with no boundaries. IMG will also support GapKids and babyGap, leveraging the strong multi-generational trust and emotional connections these brands have developed for quality and practical “go-to” needs when raising children.
Athletic & Sporting Goods
Iconix offloads Umbro China business
Iconix Brands Group Inc. grew its cash flow earlier this month as it entered into an agreement to sell all of its equity interests in Umbro China to HK Qiaodan Investment. The deal earned the New York-based brand management company $62.5 million and includes the sale of the Umbro sports brand in the People’s Republic of China, Hong Kong, Taiwan and Macau. The Umbro China sale is anticipated to close on or prior to September 15, 2020. The company, which owns brands including Joe Boxer, Danskin and Lee Cooper, anticipates using the net proceeds from the sale to repay amounts due under its existing financing arrangements, and otherwise for general corporate purposes.
Federal judge ends Toronto Raptors star’s copyright suit against Nike
A federal judge in Oregon has decided that basketball player Kawhi Leonard’s copyright claim against Nike will not go forward. In June 2019, the Toronto Raptors star filed a lawsuit against Nike to reclaim control over the Klaw logo he says he created. The logo in question was a traced outline of his hand, featuring his initials and the number 2, which was his jersey number. Leonard permitted Nike to use the Klaw logo on some of its merchandise after a sponsorship deal, although the suit claimed he never transferred the rights to them and continued to use the logo on non-Nike goods. The lawsuit alleged Nike filed an application for copyright registration of Leonard’s logo without his knowledge or consent and misrepresented their authorship of the logo on that application.
Adidas CEO doubles down on ecommerce as 70% of its global stores remain closed
German sportswear giant Adidas plans to ramp up its digital presence as more than 70% of its global store base remains shut during the coronavirus pandemic. The German sportswear titan posted a 19% decline in net sales to 4.7 billion euros ($5 billion) for the first quarter of the year after the coronavirus outbreak bought sales to a near standstill in some parts of the world. In a call with investors after reporting earnings, Adidas underscored the importance of digital acceleration in its business model and its plans to ramp up this area of its business.
Cosmetics & Pharmacy
CVS ramping up COVID-19 testing to 1,000 sites; Walgreens also expanding sites
CVS Health is planning a dramatic expansion of COVID-19 testing in about a month’s time. And it’s not the only company doing so. CVS, Walgreens, Walmart Inc. and Kroger Co. all announced expansions of COVID-19 drive-through testing sites, with CVS leading the charge. Executives from the chains and other companies joined President Trump at the White House to announce the massive ramp up of the nationwide testing. In mid-March, CVS, Walmart, Rite Aid and Walgreens were among the retailers that committed to opening up drive-thru test sites in the parking lots of their stores across the country. Their efforts to date have been somewhat hampered for various reasons, including a lack of adequate lab capacity. On Monday, some of the retailers, including CVS, warned that that ability to roll out the testing is still dependent of having adequate supplies and lab capacity. CVS said it expects to have up to 1,000 locations nationwide offering self-swab COVID-19 testing by the end of May, with the goal of processing up to 1.5 million tests per month. It noted, however, that the expansion is “subject to availability of supplies and lab capacity.”
U.S. Prestige Beauty Sales Dip 14 Percent in Q1
The coronavirus has hit U.S. prestige beauty sales, which were down 14 percent for the first quarter of the year versus the prior-year period, data from The NPD Group show. U.S. prestige beauty sales totaled $3.6 billion for the first quarter, according to NPD, reflecting store closures across the U.S. Online sales increased 24 percent in that period, accounting for less than 25 percent of volume in January and February, and 48 percent of sales in March. Makeup was down 22 percent, to $1.4 billion; skin-care sales were down 8 percent, to $1.3 billion, fragrance sales were down 13 percent, to $655.3 million, and hair-care sales were up 13 percent, to $199.1 million. Online, makeup was up 18 percent, skin care was up 27 percent, fragrance was up 19 percent, and hair was up 41 percent, compared with dot-com sales from 2019, NPD said. The numbers reflect a shift to self-care. Home scents were up 4 percent, driven by candles and diffusers, and nail care was up 9 percent. Body-skin-care products were up, with body serum gaining 32 percent, body oil gaining 10 percent and deodorant gaining 3 percent.
Discounters & Department Stores
More than half of mall-based department stores could close in two years
Green Street Advisors now expects “about a little more than half of all mall-based department stores to close by the end of 2021,” according to Vince Tibone, a retail specialist at the property research group. Losing those anchors would have a “knockdown” effect as in-line mall tenants would be allowed to lower rents, he said during an April 29 webinar. In two years, traditional malls overall are likely to see a 20% decline in cash flow compared to 2019, which will “accelerate the demise of many malls,” he said.
Walmart adds 2-hour delivery service
Walmart on Thursday announced a two-hour delivery service called Express Delivery, rivaling Amazon’s Prime Now. The retailer “accelerated the development of the service in the wake of the coronavirus pandemic,” according to a press release. It piloted the service at 100 stores in mid-April and will expand to nearly 1,000 stores in early May, followed by 2,000 stores in the weeks after. Walmart’s team of personal shoppers will pick orders in store, and the retailer will utilize its existing delivery partners for last-mile delivery.
Target, Walmart workers and others plan ‘sickout’ protests over coronavirus safety
A Target worker in Virginia wearing his own mask, gloves and safety glasses said he felt helpless recently when customers swarmed him as he organized a clearance area. Another Target worker, a cashier in North Carolina, said he welcomed the installation of plexiglass partitions at the registers over a week ago, but said they should have come sooner. A Whole Foods worker in Portland said she and some of her colleagues are feeling “scared, angry and devastated” after a fellow employee died from the coronavirus last week.
Emerging Consumer Companies
Layoffs at WeWork continued with another cost-cutting measure last week that could impact hundreds of employees. A company spokesperson indicated that additional layoffs will follow. WeWork grew to 14,500 employees last year, but after struggles in the fall, let go 2,400 people in November and another 250 in March.
Rothy’s created coalition to help manufacture PPE
San Francisco-based footwear brand Rothy’s announced that it has launched a group called the Open Innovation Coalition to help apparel and footwear companies produce PPE. Participating companies can share tips with one another about how to best manufacture PPE, where to donate excess materials that could be used to make PPE, and which groups around the country are in need of supplies. The Open Innovation Coalition set a goal to give PPE to 1 million people in the next three months. One month in, Rothy’s said that the group has been able to secure more than 190,000 units through a combination of brands buying and manufacturing their own PPE. The coalition now has roughly 20 members, including digital-first brands Framebridge, Native and ThirdLove.
Allbirds releases running shoe, the Dasher
Allbirds, the San Francisco based sustainable footwear brand, released an eco-friendly running shoe. The new performance shoe, named the Dasher, is made with natural materials including Allbirds’ Sugarcane-based SweetFoam, eucalyptus and a reengineered version of its merino wool. Allbirds described the sneaker as an ideal choice “for everything from your morning 5K to your dash to the grocery store.”
Grocery & Restaurants
Boston Market acquired by Engage Brands of Rohan Group of Companies
Boston Market announced that the company has been acquired by Engage Brands, LLC, one of the Rohan Group of Companies owned by real estate investor and restaurant operator, Jignesh Pandya. Boston Market’s former owner, Sun Capital Partners Inc., sold the Golden, Colo.-based company to Engage Brands, LLC for an undisclosed amount. The Rohan Group of Companies operates multiple franchised restaurant concepts and is a franchisee of brands including Pizza Hut and Checker’s & Rally’s. The sale follows a tumultuous time for Boston Market: in July 2019 the company shuttered 10% of its stores due to store underperformance and seven months later, former CEO Frances Allen stepped down and was replaced by former Boston Market COO Eric Wyatt, who took the helm in February.
Starbucks sees road to recovery extending to fourth quarter
The message Starbucks Corp. executives delivered to the investment community during its April 28 conference call to discuss second-quarter results was simple — It’s going to get worse before it gets better. In the United States, which is part of the company’s largest business unit, executives said the negative financial impact of the coronavirus (COVID-19) will be significantly greater in the third quarter compared to the second quarter and extend into the fourth quarter. “At the enterprise level, we expect the absolute flow-through impact of COVID-19 to be materially greater in Q3 compared to Q2, in particular due to the longer duration of US, Canada and Japan business disruption in Q3 compared to Q2,” said Patrick J. Grismer, chief financial officer. Kevin R. Johnson, chief executive officer, used Starbucks’ China experience as a potential roadmap for how other developed markets may recover.
Online grocery sales jump 37% in April
Home delivery and store pickup online grocery sales reached a new 30-day record for April, hitting $5.3 billion and marking a 37% increase from $4 billion in March, according to the latest Brick Meets Click and Symphony RetailAI Online Grocery Survey. Strategic advisory firm Brick Meets Click said Tuesday the month-over-month sales growth reflects a 33% increase in the monthly number of online orders, from 46.9 million to 62.5 million, plus a 3% gain in order size — from $82 to $85 — as households continue stock-up purchases of essential products. Compared with March, the number of active online grocery shoppers in April who received a home delivery or picked up an order at a store rose just over 1%, lifting the total of U.S. households shopping online for groceries from 39.5 million to about 40 million for April, Brick Meets Click reported. On average, online shoppers made 1.6 orders for delivery or pickup over the past 30 days versus 1.2 orders for March.
Home & Road
Bed Bath & Beyond converts 25% of its stores into regional fulfillment centers
Bed Bath & Beyond has made a quick pivot to meet surging online demand during the COVID-19 pandemic. The home goods retailer said it converted approximately 25% of its stores across the US and Canada into regional fulfillment centers — almost doubling its digital fulfillment capacity — to support a significant rise in online sales. Bed Bath & Beyond said its digital sales are up by more than 85% to date in April. To support the enhanced regional fulfillment network and accelerate the introduction of new services for customers, the company has brought several hundred associates back from furlough. In addition, hundreds more new positions have been created in the company’s e-commerce distribution centers to meet the increased demand across digital channels.
In addition, Bed Bath & Beyond is starting curbside pick-up at its Harmon stores, which remain open during the pandemic, and is extending buy-online-pickup-in-store and contactless, curbside delivery services to customers at certain Bed Bath & Beyond stores in the U.S. (starting with a number of stores across Florida and Texas), subject to state and local regulations. It also is adding BOPIS and curbside pick-up at all buy buy Baby stores and Bed Bath & Beyond stores in Canada.
Helen of Troy’s Houseware Sales Climb 15 Percent In Q4
Helen of Troy Ltd. reported sales at its Housewares segment, which includes Hydro Flask and OXO, increased 15.0 percent in the fourth quarter ended February 29. The gains were primarily due to point-of-sale growth with existing domestic brick & mortar customers, an increase in online sales and revenue from new product introductions. These factors were partially offset by lower club channel sales, a decline in international sales and lower closeout channel sales. Operating income in the segment decreased 31.5 percent to $14.0 million, or 9.6 percent of segment net sales, compared to $20.4 million, or 16.2 percent of segment net sales in the same period last year. The 6.6 percentage point decrease was primarily due to higher advertising and new product development expense to support strategic initiatives, higher freight and distribution expense to support increased retail customer shipments, and higher restructuring charges. These factors were partially offset by the impact of a more favorable product mix and increased operating leverage from sales growth. Adjusted operating income decreased 24.8 percent to $17.1 million, or 11.8 percent of segment net sales, compared to $22.8 million, or 18.1 percent of segment net sales.
Flexsteel revenue off 11.4% in fiscal Q3
Full-line manufacturer and importer Flexsteel Industries reported fiscal 2020 third-quarter sales of $98.8 million, an 11.4% decrease from the comparable prior-year period. The company attributed the decline to China tariffs’ ongoing impact on volume and to a lesser extent store closures starting in mid-March in response to COVID-19-related restrictions. A bright spot was a 37.1% third-quarter sales uptick for the e-commerce channel, which Flexsteel has continued to serve through the pandemic. The most recent quarter also was the third consecutive quarter of solid sequential growth for Flexsteel’s ready-to-assemble furniture sold primarily through e-commerce. While third-quarter residential sales were off $5.4 million, or 5.7%, Flexsteel’s continued migration from the contract sector led to a $7.4 million, or 41.7% decline, in that segment. Flexsteel lost $5.3 million for the three-month period ended March 31, an improvement compared with a $15.6 million shortfall in fiscal 2019’s third quarter.
Sherwin-Williams reports increase in Q1 sales, earnings
Sherwin-Williams reported an increase in net sales and earnings for the first quarter ended March 31. The company had net consolidated net sales of $4.15 billion, up 2.6% from the $4.04 billion reported in the first quarter of 2019. The company said the increase was due largely to higher architectural paint sales volume in North America stores and increased sales in its packaging and coil divisions within the Performance Coatings Groups across all regions. This was partially offset by impacts related to COVID-19 as well as continued softness in demand in some markets outside the U.S. as well as unfavorable currency rate changes. The company also reported that COVID-19 had an estimated 1.5% impact on consolidated sales during the quarter, while currency translation rate changes decreased consolidated net sales by 1.4% during the first quarter. The company’s consolidated net income during the quarter was $321.7 million, up 31% from $245.2 million in the first quarter of 2019. Diluted net income was $3.46 per common share, compared with $2.62 during the same period last year.
TSI expects operating loss in Q2 due to COVID-19 impact
Tempur Sealy International, noting a “major reduction” in total net sales since the COVID-19 pandemic began impacting its business in mid-March, now sees an operating loss in the second quarter. Scott Thompson, CEO and chairman, commented on the impact of the pandemic in TSI’s report of its first quarter results. “These are truly unprecedented times as we move from a record first quarter to a very challenging second quarter,” Thompson said. “The negative impact from COVID-19 is expected to result in an operating loss and negative EBITDA in the second quarter. Despite this challenging environment, we believe that our consumer-preferred products and brands, our compelling marketing, and our powerful omnichannel distribution platform make Tempur Sealy uniquely well-positioned to withstand these headwinds.”
Jewelry & Luxury
Jewelers Mutual Appoints New Chief Financial Officer
Sumit Dangi has joined Jewelers Mutual Group as chief financial officer and treasurer.
Dangi comes to Jewelers Mutual from HSBC Global, where he was senior vice president and chief financial officer. He has led cross-functional teams for more than 20 years in countries spanning Asia, North America, and Europe. In addition, Dangi’s family has been in the jewelry business for four generations, which gives him a greater appreciation of the business, Jewelers Mutual says.
Swarovski Names Robert Buchbauer CEO
Swarovski has named Robert Buchbauer, the great-great-grandson of the company founder, its new chief executive officer. His appointment is part of an overall realignment of the company that gives it a more centralized management structure than it has had traditionally. In a terse statement, the company said that Buchbauer will retain his current title as chairman of the company’s executive board, the panel of family members that has traditionally run the business. He plans to “realign the company along a common vision, growth strategy and organization,” it added.
Neiman Marcus investors to challenge bankruptcy deal, call for sale
A group of investors in Neiman Marcus plan to challenge the $600 million financing package that the department store operator has arranged for its imminent bankruptcy. Instead, Mudrick Capital Management LP and Daniel Loeb’s hedge fund Third Point LLC are calling on the retailer to find a buyer, according to Reuters. Mudrick recently submitted a $700 million proposal to Neiman Marcus for debtor-in-possession financing — a deal with terms that would require an attempt to sell.
How Luxury Shopping Habits Will Change Forever Because Of COVID-19
With Neiman Marcus reportedly teetering on bankruptcy, surging unemployment figures and mandated store closures across the country, recent retail headlines have painted a gloomy future for the industry. The indulgent, nonessential nature of luxury retail, at first glance, should place the sector in even hotter water. But from vintage Hermes bags to sweatsuits that cost upwards of $1,250, luxury e-tailer Moda Operandi says its current bestsellers are proof that the luxury shopper is a different animal, even during the COVID-19 crisis. The Moda Operandi report found that amid all the uncertainty, the luxury shopper is still on the hunt, particularly for high-value timeless products. “It’s all about how the luxury shopper views investor purchasing, which means fewer and better, with longevity,” says Lisa Aiken, director of fashion and buying at Moda Operandi.
Office & Leisure
CMX Files Chapter 11, Asks Studios, Landlords For “Industry Rebalancing”
Cinemex Holdings USA, Inc. and Cinemex USA Real Estate Holdings, Inc. have filed for bankruptcy protection and reorganization under Chapter 11 of the US Bankruptcy Code in Miami, Florida, where it is based. CMX Cinemas is the brand used in US for parent corp Cinemex, which is Mexico-based and did not file for bankruptcy protection. CMX was recently embroiled in a case over its planned acquisition of the Star Cinema Grill chain, which consists of 11 Houston-area movie theaters, by CMX parent Cinemex Holdings USA Inc. for an undisclosed price. The deal would have made CMX the seventh-largest US theater chain. However, the deal fell through, with Cinemex allegedly reneging at the last-minute, citing issues arising from the pandemic and subsequent closures. Star Cinema owner Omar Khan filed a suit April 2 in the US District Court for Southern District of Texas.
Hasbro Faces Reduced Revenue, Earnings Amid Film Tentpole Delays
Debt ratings agency S&P Global Ratings on Thursday reduced its 2020 revenue and earnings forecasts for toy giant Hasbro over concerns around the impact of the COVID-19 crisis on its retail and production pipelines. Following Hasbro’s earnings release on Wednesday, S&P Global said retail store closures and delays in the production and delivery of film and TV episodes by its Entertainment One business due to public health guidelines will lower full-year revenue and EBITIDA assumptions by the credit agency. “Restrictions on out-of-home consumer activities intended to prevent the spread of the coronavirus have reduced Hasbro’s toy sales in its brick-and-mortar retail channel and it appears that the company’s e-commerce sales will offset this decline to varying degrees depending on the region,” the credit agency said Thursday in an ratings report. S&P Global analysts also argued Hasbro’s toy and merchandise sales around theatrical releases will also be impacted by the major Hollywood studios delaying most tentpole rollouts until later this year and into 2021. Despite the retail closures and production delays, S&P Global analysts said Hasbro’s “strong liquidity will position it to weather the potential volatility in its revenue and EBITDA over the next several months.”
Twin River buying casinos in New Jersey, Nevada, Louisiana
A casino company in the smallest state is pulling off one of the biggest deals of the year in the gambling industry, buying casinos in Atlantic City, New Jersey, Shreveport, Louisiana, and Lake Tahoe, Nevada. And it could remove a major potential obstacle to the ongoing merger of Caesars Entertainment and Eldorado Resorts, the granddaddy of all gambling deals. Lincoln, Rhode Island-based Twin River Worldwide Holdings announced Friday it is buying Bally’s Atlantic City Hotel & Casino from Caesars Entertainment for $25 million. It also is buying Eldorado Shreveport Resort and Casino and the Mont Bleu Resort Casino & Spa in Lake Tahoe from Eldorado Resorts for a combined $155 million. The move expands Twin River’s footprint into three additional states. The company currently owns and manages seven casinos: two in Rhode Island, one in Mississippi, one in Delaware, and three casinos and a horse racetrack in Colorado. The purchase of Bally’s should also remove a potential stumbling block to the $17.3 billion merger of Caesars Entertainment and Eldorado, a transaction that still needs the approval of gambling regulators in multiple states.
Technology & Internet
‘If you’re a shareowner in Amazon, you may want to take a seat’ — Amazon reports earnings, plans to spend all Q2 profits on coronavirus response
Amazon reported its first-quarter earnings after the bell on Thursday, revealing the pandemic’s impact on the business that has been a rare bright spot on the stock market. The stock fell about 5% after hours after missing estimates on earnings while beating revenue expectations. Beyond the results, the biggest news in Amazon’s report was that it plans to spend all of its profit from the second quarter — an estimated $4 billion — on responding to the coronavirus pandemic. That includes hundreds of millions of dollars it plans to spend on Covid-19 tests for its workers and beefing up its delivery network to get packages to customers on time. Amazon CFO Brian Olsavsky told CNBC’s Deirdre Bosa he expects the company will spend $1 billion on Covid-19 testing in the full year 2020. Some of the $4 billion will also fund higher wages for workers, personal protective equipment (PPE), better cleaning protocols at facilities and “less efficient process paths” that will allow for social distancing.
Apple CEO Tim Cook says company saw an ‘uptick across the board’ in late April thanks to stimulus and work from home
When Apple reported second-quarter earnings on Thursday, CEO Tim Cook and CFO Luca Maestri gave quite a bit of color on a call with analysts about what they’ve seen economically in response to Covid-19 and how Apple has fared so far, as world economies brace for a lockdown-related slowdown and China starts to economically recover from its period of quarantine. Apple executives discussed how the timing of lockdowns around the world affected demand for Apple products. “The real thing for the rest of the world happened in March when the shelter in place orders went in and the work from home began. For those two, three-week period, at the end of the quarter we saw a sharp decline in demand,” Cook said. “If you now step out until April and look at that, early April started like the end of March, but in the second half of April we’ve seen an uptick across the board.” Cook also gave two possible reasons why: Stimulus packages and a shift to working from home. Apple’s execs were clear on the call on Thursday: its supply chain is going back to normal, which has implications for new product launches through the end of the year, which Cook called the company’s “lifeblood.”
Best Buy Opening 200 Stores for By-Appointment Shopping
How to open up stores in the COVID-19 pandemic is up for consideration across the retail industry, and Best Buy has determined to restart operations in 200 stores across the U.S. to offer an in-store, by appointment consultation service. Consumers will be able to schedule appointments with Best Buy staffers for their essential tech needs. Each customer making an appointment will work with a dedicated sales associate, while the stores will limit the number of customers in the store at any one time to maintain social distancing. Best Buy also said it is returning to the kind of in-home work many customers have been asking for.
Shopify launches Shop, a new mobile app
While Shopify is best-known for powering the online stores of more than 1 million businesses, the company is launching a consumer shopping app of its own today, simply called Shop. The app is actually an update and rebrand of Arrive, an app for tracking packages from Shopify merchants and other retailers, which the company says has been used by 16 million consumers already. Shop provides customized product recommendations to each shopper, but Carl Rivera, the general manager of Shop, noted that these recommendations all come from brands that you’ve already shown an interested in, either by purchasing a product from their Shopify store or by following their profiles in the app.
Finance & Economy
US weekly jobless claims hit 3.84 million, topping 30 million over the last 6 weeks
First-time filings for unemployment insurance hit 3.84 million last week as the wave of economic pain continues, though the worst appears to be in the past, according to Labor Department figures. Economists surveyed by Dow Jones had been looking for 3.5 million. Jobless claims for the week ended April 25 came in at the lowest level since March 21 but bring the rolling six-week total to 30.3 million as part of the worst employment crisis in U.S. history. Claims hit a record 6.87 million for the week of March 28 and have declined each week since then.
Mortgage applications jump 12%, showing signs of consumer confidence returning
Weekly applications to purchase a home are on the rise, still recovering from a five-year year low hit during the coronavirus pandemic. The seasonally adjusted purchase index jumped 12% from one week earlier, according to data for the survey ending April 24 and released by the Mortgage Bankers Association. Mortgage loan application volume fell 3.3% in the week, and the refinance index also fell 7%. The rosier survey data comes after a few weeks of falling applications, even as mortgage rates remain low, as the coronavirus pandemic and state lockdowns hindered consumers’ ability to buy a home. In addition, eroded consumer sentiment may have put some homebuyer’s plans on pause.