The Big Story

David Lands a Couple of Shots on Goliath in Athletic Footwear

Michael Fine

Nike (including the Jordan brand) and Adidas have dominated the U.S. athletic footwear market for many years; according to NPD, the two brands control 51% and 11%, respectively, of the domestic athletic shoe market. However, recent developments suggest that change is underway.  According to a recent report from Footwear News, Nike/Jordan and Adidas athletic footwear sales were down year over year in the first quarter, and both lost market share.  Several factors suggest that this might only be the beginning of a trend, but one thing is clear: as the leaders in athletic footwear loosen their stranglehold on the market, smaller, nimble, and aggressive competitors are jumping at the opportunity to grow.

One notable reason for changing trends in athletic footwear is Nike and Adidas’s new strategic focus on selling direct-to-consumer and narrowing distribution to third party retailers. Nike refers to the dropped accounts as “undifferentiated” retail. A CNN report last year quoted an estimate from Nike CFO Matthew Fried that the company had eliminated about 50% of its retail accounts since 2017, including DSW.  Another CNN piece quoted Adidas CEO Kasper Rorsted, who said that his company would be “…exiting thousands of non-strategic wholesale accounts…”  Narrowing distribution allows Nike and Adidas to better control their brands and their relationships with consumers, which may ultimately bolster pricing power and margins.  But, in the meantime, it also creates open shelf space that competitors have been quick to fill.

A second major reason for changing market share in athletic footwear is changing trends. Basketball sneakers, which are a major driver for Nike/Jordan, and retro styling, which has been a major driver for Adidas, are both in cyclical downturns.  On the other hand, running has been a very strong trend the last two years, boosted by the pandemic and a surge in interest in fitness and outdoor activities.  Consequently, Brooks has overtaken Nike as the number one women’s running brand, according to NPD. Hoka One One, Saucony, On, Topo and others have also delivered innovative technical running and trail products, providing more alternatives to Nike and Adidas. Certain upstart brands such as NoBull have delivered impressive growth in fitness, while Puma is well positioned at the intersection of performance and fashion. A number of other brands have also recently athleticized their offerings to be more on trend, including Easy Spirit and Vionic, and others have leveraged the running and fitness trends to reposition or relaunch themselves, including Reebok and Under Armour.

The general market consensus is that current trends will continue and amplify.  First, new competitors are likely to enter the category. For example, lululemon just launched its first athletic shoe and has announced that it will eventually offer a small line of footwear.  Second, fitness and general wellness are expected to continue to resonate with the U.S. consumer, which should propel growth in running footwear over basketball and retro styles for the foreseeable future.

However, this view of the changing athletic footwear landscape should come with one very important caveat: Nike and Adidas earned their dominating market shares through excellent product innovation and marketing.  Both companies have powered through changes in the marketplace in the past only to emerge rejuvenated.  We should expect compelling fresh product from these leaders in the coming months and years, making market dynamics even more interesting.

Headlines of the Week

G-III Apparel to buy Karl Lagerfeld brand in $210 million all-cash deal

G-III Apparel Group Ltd said on Monday it has agreed to acquire the remaining 81% stake in Karl Lagerfeld for $210 million in cash, becoming the sole owner of the Parisian fashion brand. G-III, which owns brands including DKNY and Jessica Howard, will purchase the additional stake from a group of investors led by Fred Gehring of Amlon Capital BV. The apparel maker first acquired a stake in the brand in 2015. G-III said it expects the brand to represent more than $2 billion in retail sales. Launched in 1984 by German fashion designer Karl Lagerfeld – known for his pony-tailed hair and tinted sunglasses as well as his association with luxury brands Chanel and LVMH’s Fendi – the eponymous brand offers Parisian fashion combined with rock-chic styles, sported by everyone from model Kate Moss to Formula 1 star Lewis Hamilton. The deal is expected to close in the second or third quarter of fiscal year 2023, G-III said, adding, it would add $200 million in initial annual sales.


Chernin Group Leads Deal to Acquire 25% Stake in Funko for $263 Million, Investors Include Bob Iger

The Chernin Group, Peter Chernin’s investment firm, announced that it is buying 25% of Funko, the pop-culture collectibles company, alongside a group of investors that includes former Disney chief Bob Iger. The consortium led by TCG will make a $263 million strategic investment in Funko, acquiring 80% of ACON Investments’ shares in Funko Class A common stock for $21/share. Along with Iger, investors in the consortium include ecommerce giant eBay and Rich Paul, CEO and founder of Klutch Sports Group and UTA’s head of sports. Funko’s products include vinyl figures, action toys, plushies, apparel, board games, housewares, NFTs and accessories. The company claims it’s the world’s largest proprietor of product licenses. Funko has licensing deals with companies including Disney, Warner Bros., Marvel, Lucasfilm, NBCUniversal, Netflix, Epic Games, Blizzard Entertainment, the NFL and the NBA. With the investment, Funko and eBay are entering into a commercial agreement under which eBay will become the preferred secondary marketplace for Funko.



Apparel & Footwear

Leadership shakeup at Torrid as new CEO takes reins

A retail veteran has been tapped as the new chief executive of Torrid Holdings Inc. The women’s larger-size apparel, intimates, and accessories brand named Lisa Harper as CEO. She succeeds Liz Muñoz, who has been appointed to the new role of chief creative officer. (With the change, Muñoz has stepped down as a member of the company’s board.) Most recently, from 2016 through 2021, Harper served as CEO of department store retailer Belk. Prior to Belk, Harper served as CEO of Torrid (the predecessor of the current company) and its then-parent company Hot Topic, from March 2011 until June 2016. From 2001 to 2006, Harper served as CEO of the Gymboree Corp. She also held merchandising and design positions with several other clothing retailers, including Limited Too, Esprit, GapKids, Mervyn’s and Levi Strauss. Harper has been a member of Torrid’s board of directors and its predecessor since 2008. In addition to serving as CEO, she will remain a board member.

Wingspire Capital & TCW Private Credit Provide Unitranche Senior Credit Facility to cabi

Wingspire Capital and TCW Asset Management Company together provided a unitranche senior credit facility to women’s apparel brand cabi LLC. cabi designs and markets women’s apparel through independent stylist entrepreneurs who set their own schedules, coordinate in-home and virtual events, and curate personalized style and fit recommendations. The company also sells apparel and accessories direct to consumers through its website. cabi, which is majority owned by Sentinel Capital Partners, is using the proceeds to propel anticipated growth. Founded in 2002 by a group of professional women who had a vision to create an innovative boutique fashion brand centered around personalized styling experiences, cabi has since grown to have thousands of stylist entrepreneurs in the United States, Canada and the U.K.



Athletic & Sporting Goods

Authentic Brands Group Partners With Macy’s For Reebok Apparel

Authentic Brands Group (ABG) announced a partnership with Macy’s for Reebok sportswear and activewear for men, women and kids apparel.  Through the agreement, Macy’s will increase its product assortment of Reebok apparel on, the Macy’s app and its stores and develop exclusive products around the brand.  Product will be sourced from the Reebok Design Group (RDG), the company’s global brand hub for design, development and innovation and supplier of apparel and footwear categories.  Macy’s will roll out an increased Reebok product assortment beginning spring 2023.

Planet Fitness Franchise Group Excel Fitness Sold to Olympus Partners

One of the largest Planet Fitness franchise groups, Excel Fitness Holdings LLC, Austin, Texas, has been purchased by private equity firm Olympus Partners, Stamford, Connecticut, for an undisclosed amount, Olympus announced.  Olympus bought Excel Fitness Holdings from private investment firm Altamont Capital Partners, which had owned Excel Fitness since 2016.  Excel Fitness Holdings, which is led by Excel CEO CJ Bouchard, operates more than 90 clubs in Austin; Dallas; Fort Worth, Texas; Northwest Arkansas; Raleigh-Durham, North Carolina; Tulsa, Oklahoma; and Virginia.  The Excel team plans to operate more than 100 locations by the end of 2022 with 80 clubs left to build.

Spin-offs in works at Vista Outdoor; Remington part of its ammo firm

Vista Outdoor, the parent company of Remington Ammunition, said Thursday it’s spinning off its ammo and outdoor brands into two separate companies, a move expected to be completed sometime in 2023. Chris Metz will remain chief executive officer of the combined company and will become CEO of the yet to be named outdoor products company upon separation. Jason Vanderbrink, the current leader of the sporting products segment, will become the CEO of the ammunition spin-off. Vista Outdoor’s board of directors unanimously approved the move to break the company’s two main segments into separate, publicly traded companies through a tax-free spin-off. The company expects to provide more details on the plan at its investor day on May 23. The separated outdoor products segment will include CamelBak, Bell, Giro, Camp Chef, Bushnell, Bushnell Golf, Foresight Sports, Stone Glacier and QuietKat brands. The sporting products spin-off will focus on ammunition though brands including Federal, Remington, CCI, Speer, Estate Cartridge and HEVI-Shot. Minnesota-based Vista Outdoor formed in 2015 and now is made up of 39 outdoor brands, including, bicycles, camping gear, golf and skiing equipment, optics and ammunition makers. It purchased Remington Ammunition out of bankruptcy in late 2020.

Cosmetics & Pharmacy

Madison Reed raises US$33 million to expand hair color bars

Madison Reed has announced that it has raised US$33 million in a funding round led by Sandbridge Capital, with participation from Marcy Venture Partners. The funding will accelerate the growth of Madison Reed’s Hair Color Bar concept, with 80 locations planned by the end of the year. The prestige beauty brand is targeting expansion in New York City, South Florida, California, Chicago, Washington DC and Texas in particular. In addition, the company is planning to grow its omnichannel offering and expand its color, care and maintenance product portfolio through new innovations. Amy Errett, CEO and Founder of Madison Reed, explains, “As we continue to grow our geographic and retail footprint, we couldn’t be more excited to partner closely with Sandbridge Capital and Marcy Venture Partners in this chapter of expansion. Their deep retail and beauty experience will be critical as we enter our next stage of growth.”

Lauder Shares Fall on Outlook

The Estée Lauder Cos. posted another quarter of strong growth, but saw its shares dive on Tuesday after it sharply revised its outlook downward on concerns over the ongoing COVID-19 lockdowns in China. Lauder decreased its financial outlook for fiscal 2022. Last quarter, the company projected a sales increase of between 13 and 16 percent for fiscal 2022, but on Tuesday it cut that growth forecast in half and is now projecting sales will increase by between 7 and 9 percent. The Lauder stock dropped as much as12.3 percent on the news and ultimately closed down 5.8 percent to $245.52. The downward revision comes as there are growing concerns among observers over the outlook for the global economy and consumer demand, given spiraling inflation and ongoing supply chain shortages, and they forecast slower economic growth in the U.S., Europe and China.

CVS Health posts strong Q1 results

As the U.S. transitions out of the pandemic, CVS Health’s first quarter brought increased revenue. The Woonsocket, R.I.-based company saw first-quarter revenues up 11.2% year over year, totaling $76.8 billion. The company reported GAAP diluted earnings per share of $1.74 and Adjusted EPS of $2.22. Operating income decreased 2.4% for the three months ended March 31, compared with the prior year. The decrease was primarily due to the establishment of a legal settlement accrual related to the pending agreement with the State of Florida to settle all opioid claims against the company for 484 million, which will be paid over a period of 18 years. The decrease was partially offset by the increase in adjusted operating income and a decrease in amortization of intangible assets compared to prior year. Net income was $2.3 billion, up from $2.2 billion a year earlier.


Discounters & Department Stores

Hudson’s Bay appoints CFO

Hudson’s Bay, the brick-and-mortar operation of the Canadian department store company, hired Nadira Singh as its new CFO, the company announced on Thursday. She will report to Wayne Drummond, president of Hudson’s Bay. Before joining the retailer, Singh served as vice president of finance of Ontario Power Generation and held leadership positions within Ernst & Young. In its announcement, the company highlighted Singh’s 15 years of experience in project planning, finance and strategy development.

Kohl’s boosts reward benefits for card members to 7.5%

Kohl’s on Monday announced an enhanced rewards program, according to a company press release. Kohl’s Rewards Members that use their Kohl’s Card will now earn 7.5% in rewards on every purchase. Rewards members that use alternative payment methods will continue to receive 5% Kohl’s Rewards. Kohl’s Rewards are converted and issued in $5 increments of Kohl’s Cash coupons on the first day of the following month and are valid for 30 days.

Target focuses on customer experience, supply chain in latest leadership shuffle

Target on Thursday announced a series of leadership shifts, barely a year after making similar changes. At a time of intense supply issues, the company is elevating its chief supply chain and logistics officer to the leadership team. Already in that role, Arthur Valdez, who jumped to Target from Amazon in 2016, reports as usual to Chief Operating Officer John Mulligan. Cara Sylvester was again promoted, this time to the new role of chief guest experience officer. Her task is to “further differentiate Target’s best-in-class guest experience” and get more shoppers to its stores, website and app, per a company press release. Brett Craig was promoted to chief information officer, replacing longtime CIO Mike McNamara, who is retiring. Christina Hennington, chief growth officer only since last year, will lead Target in India, overseeing merchandising, product design and sourcing, as well as strategy, insights and growth.



Emerging Consumer Companies

United By Blue evolves, becomes both omnichannel and marketplace 

United By Blue, a Philadelphia-based sustainably focused apparel brand, is accelerating its store opening plans. Pre-pandemic, the company had just two stores, both in Philadelphia. Recent store openings in Chicago and Scottsdale, Arizona, have brought that total to four, and by the end of the year United By Blue plans to have six total locations. United By Blue began its life as a wholesale brand with only a few products and a website mostly focused on its mission of cleaning up waterways. Now, it has hundreds of SKUs, a wholesale presence with partners like REI, and direct-to-consumer sales online and in its own stores. Over the past 18 months or so, the company has pivoted once again to start selling products from partnering brands on United By Blue’s website and its storefronts.

Crown Affair Closes $5 Million Series A

Crown Affair, a two-year-old hair care brand currently sold in Sephora, Goop and Violet Grey, has closed a $5 million series A funding round. Investors include Goop founder Gwyneth Paltrow, and the round was led by True Beauty Ventures. Crown Affair launched at the start of 2020, just before the pandemic. The funding will be used to expand the brand’s relationship with Sephora, as well as invest in product development and Crown Affair’s team.

Margs, ready-to-drink Margarita brand, raises $3 million

MARGS, the ready-to-drink canned margarita brand launched last year, announced that Lab Capital Advisors is investing $3M in the award-winning beverage brand. This will be the first investment for Lab Capital Advisors, whose principals launched Rumble, the boxing-inspired group fitness company recently acquired by Xponential and GLOSSLAB, the hygiene-first membership-based nail studio operator. Launched last summer, MARGS uses top-quality tequila and ingredients to create an authentic flavor that is low in sugar, calories and carbs. MARGS is currently offered in five full-bodied flavors including Classic, Mango, Coconut, Mezcal, and Spicy. It initially launched in New York, New Jersey and  Florida and is currently available at a host of marquee stadiums and venues including MetLife Stadium, Highmark Stadium, UBS Arena, and Tao Group.



Food & Beverage

Gross margin pressures lead to Q1 loss for Oatly

Oatly Group AB aspires to generate gross profit margins of 40% in the long term. In the most recent quarter, the company’s margins moved widely in the wrong direction, despite a strong increase in sales.  In the three months ended March 31, Oatly sustained a loss of $87.5 million, more than double the loss of $38.4 million in the first quarter of 2021. Net sales were $166.2 million, up 19% from $140.1 million a year earlier.  Oatly’s gross profit in the first quarter was $15.8 million, down 62% from $41.9 million in the first quarter of 2021. The company’s gross margin narrowed more than 20 percentage points to 9.5% during the quarter, versus 29.9% in January-March 2021. While a higher share of self-manufacturing gave gross margins a 250-point lift in the quarter, the company cited a raft of reasons margins overall fell sharply. These included underutilization of new facilities because of supply chain problems (970 basis points), mostly due to COVID-19-related effects on labor absenteeism in the Americas and lockdowns in China, together with “logistical constraints delaying the timely supply of raw materials and spare parts, all of which resulted in a lower production output.” Additionally, higher expenses for raw materials, logistics and electricity (760 basis points) and the consolidation of Oatly’s EMEA (Europe, Middle East and Africa) co-packer resulted in an expense (290 basis points). Oatly attributed another 270 basis points to other, unspecified items.


Food Tech Platform HUNGRY acquires NatureBox

Technology-enabled food catering and delivery platform HUNGRY has acquired NatureBox, a subscription-based healthy snacks provider servicing corporate employees, for an undisclosed sum, marking the company’s third acquisition over the past three years after LocalStove and Ripe Catering.  HUNGRY, which was founded in 2017 by Eman Pahlavani, Shy Pahlevani, and Jeff Grass to provide corporate employees across 11 U.S. cities with curated menus cooked by local chefs, has raised $60.12 million as of April 15, 2022 at an over $200 million post-money valuation, PitchBook data showed. Earlier backers include Jay-Z’s Marcy Venture Partners, Kevin Hart, Usher, as well as celebrity chefs Tom Colicchio and Ming Tsai.  The acquisition of NatureBox came after HUNGRY’s business reportedly tripled in size since the pandemic started, according to Mr. Grass, the CEO of the company, amping up competition among employee care-focused food and beverage players, such as Caroo, recently rebranded from SnackNation. Grass expects more people returning to the office will help cement the company as a leader in the corporate food-tech industry.

Tractor Beverage announces foodservice deal with KDP and $60 million funding round

Tractor Beverage Company has reached an agreement with Keurig Dr Pepper (KDP) to enter a long-term exclusive partnership for the foodservice channel. KDP will also serve as the lead investor in a $60 million funding round to support expansion of infrastructure and marketing efforts and to grow the brand’s awareness among younger consumers.  The strategic partnership “combines the national and regional foodservice sales strength and reach of Keurig Dr Pepper with Tractor’s product, production and marketing capabilities” to make organic beverages more accessible, according to a press release.  Tractor has evolved since it was founded as a soda brand in 2014 by organic farmer Travis Potter. In 2018, one year after bringing on former Coca-Cola Company chief sales officer Luke Emery as CEO, the brand launched at restaurant trade shows with a broad, multi-category portfolio of organic, non-GMO beverage products. As of 2020, Tractor is available in nationwide eateries such as Chipotle, B.GOOD, Umami Burger, Curry Up Now, Garbanzo Mediterranean Fresh, and Pokeworks.

Voyage Foods gets $36M investment to scale up

Voyage Foods, the California-based company that has reverse-engineered chocolate, peanut butter and coffee, closed a $36 million Series A investment round. It was co-led by UBS O’Connor and Level One Fund. Horizons Ventures, SOSV’s Indie Bio and Social Impact Capital also participated.  The funds will help Voyage Foods scale and become a bigger player in what it calls the ethical food market. The company plans a mix of retail and B2B partnerships, with the launch of its peanut-free spread online and in some retailers slated for Q2 and an ingredient partnership with its cacao-free chocolate planned for Q3.  Voyage Foods is one of a handful of companies using food technology to recreate popular products from other ingredients. Many of Voyage Foods’ leaders, including founder and CEO Adam Maxwell and Head of Operations Kelsey Tenney, came from Endless West, a California company that recreates craft alcoholic beverages through a similar process.



Grocery & Restaurants

Florida-based Keke’s Breakfast Cafe sold to Denny’s for $82.5M

Keke’s Breakfast Cafe, a Florida-based breakfast restaurant chain, has been sold to the Denny’s Corporation. Denny’s announced Tuesday that it had signed a definitive agreement to acquire Keke’s Breakfast Cafe for $82.5 million. The deal includes 52 Keke’s restaurants – eight company-owned restaurants and 44 franchise restaurants, according to an online news release. “Keke’s is a high-growth brand that aligns well with our core competency while providing us with an opportunity to participate in the fast-growing A.M. eatery segment,” Denny’s CEO John Miller said in a statement. “We intend to utilize the proven capabilities of our franchise-focused business model to develop Keke’s across multiple states with the long-term target of becoming the A.M. eatery franchisor of choice.”

Amazon Fresh grows from concept to competitor

With Amazon Fresh, Amazon has stamped its brand on what’s shaping up to be a full-fledged, brick-and-mortar supermarket chain. Still unclear to competing grocery store retailers, however, are the e-tail giant’s ultimate plan for Amazon Fresh and its potential for disruption. Seattle-based Amazon opened its first Amazon Fresh store in late August 2020, a 35,000-square-foot location in Woodland Hills, Calif. It now has 29 Amazon Fresh supermarkets in six states — California (13 stores), Illinois (seven), Washington (four), Virginia (two), Maryland (one) and Pennsylvania (one) — and Washington, D.C. (one), ranging from about 25,000 to 45,000 square feet. According to Jeff Helbling, vice president of Amazon Fresh Stores, new Amazon Fresh locations are planned for California, Illinois, Pennsylvania, Virginia, Washington state and New Jersey, though he didn’t specify the number of units or an opening timetable. Given Amazon’s propensity for innovation and vast resources, brick-and-mortar grocers are justified in being concerned about Amazon Fresh, industry observers say. But they note that Amazon remains in a learning phase in both grocery and physical retail, even after nearly five years of owning Whole Foods Market.

Home & Road

Watson’s adds Detroit-based retailer to portfolio

Home furnishings and home recreation products retailer Watson’s has acquired Detroit-based outdoor furnishings, pools, spas and home recreation specialty retailer Allstate Home Leisure. Terms of the acquisition, which also includes Allstate’s Sol Casual and Carlton Billiards brands, were not disclosed. “We have had our eyes on the Detroit market for quite some time,” said Erik Mueller, CEO of Watson’s. “The Allstate Home Leisure culture and business model ended up being the right fit and aligned with our long-term growth strategy. We believe in Detroit and are excited to partner with the entire Allstate Home Leisure team to continue to help provide fun and relaxation to the families and homes in Detroit.” Allstate Home Leisure will operate as a wholly owned subsidiary of Watson’s, initially integrated as Allstate Home Leisure by Watson’s, with a full transition to complete Watson’s branding over the next 18 to 24 months.

Cookware and bakeware help boost Newell’s Q1 sales

Newell Brands turned in solid first quarter earnings with core sales up nearly 7%, boosted in part by cookware, bakeware and food preservation products. Home appliances and home solutions did not fare as well, recording slight sales declines or slight growth offset by other expenditures. Net sales in the period ended March 31, 2022, were $2.4 billion, a 4.4% increase over the prior year period. Core sales grew 6.9%, on top of a difficult 20.9% comparison from the prior year, the company noted. Core sales grew in five of seven business units, including Food, Writing, Outdoor & Recreation, Baby and Commercial. Net income was $234 million, compared to $89 million in the prior-year period. The year over year change in net income largely reflects the improvement in reported operating income, a gain on the divestiture of the CH&S business and a reduction in the effective tax rate, the company said. Normalized net income was $155 million, compared with $128 million in the prior year period.

Wayfair swings to loss as sales fall 14%

Wayfair reported a larger-than-expected first-quarter loss as consumer spending on home goods edged downward. On the company’s earnings call, CEO and co-founder Niraj Shah told analysts that consumer spending is still climbing for retail overall, but that shoppers are devoting a larger share of their wallets to non-discretionary categories and “reprioritizing experiences like travel.” The online home furnishings company reported a loss of $319 million, or $3.04 per share, for the quarter ended March 31, compared with net income of $18 million, or earnings per share of $0.16, in the year-ago period. Excluding one-time items, the company lost $1.96 per share. Analysts had expected a loss of $1.56 a share. Sales fell 13.9% to $2.99 billion from $3.48 billion. Net revenue in the United States decreased 9.9%, to $2.5 billion. International net revenue plunged 31.4% to $451 million.

Jewelry & Luxury

Luxury Brand Gucci Accepts Bitcoin, Shiba Inu

Gucci is going crypto. The iconic Italian luxury brand will accept cryptocurrency payments in some US stores at the end of May, Vogue Business reported, and plans to extend the pilot to all of its directly operated North America stores this summer. Gucci, which did not immediately respond to a request for comment, will accept payments in more than 10 currencies, including bitcoin, bitcoin cash, ethereum, wrapped bitcoin, litecoin, shiba inu and five stablecoins pegged to the US dollar. The first Gucci stores to take crypto are Wooster Street in New York, Rodeo Drive in Los Angeles, Miami Design District, Phipps Plaza in Atlanta and The Shops at Crystals in Las Vegas.

Pandora Posts Strong Q1 But Warns of US Slowdown Ahead

Pandora posted strong first-quarter results and raised its sales guidance for the year ahead. Still, the company remains cautious about its fiscal future, noting the war in Ukraine, COVID-19, inflation, and higher interest rates could all negatively impact consumer demand. “We are very pleased with the strong start to the year delivering record revenue for a first quarter,” said CEO Alexander Lacik. “All of our product platforms support the growth in Q1, as our ability to continuously offer new innovation pays off.”

De Beers Plans To Make All Its Diamonds Trackable

At this week’s sight in Botswana, De Beers offered all its sightholders diamonds whose origins can be tracked through the pipeline, through its blockchain-based Tracr platform. “We have offered invoice-based origin information for some time,” says David Prager, De Beers’ chief brand officer. “But this is a whole new ball game. Before, you had provenance-based claims that couldn’t be linked to the individual diamond.” This program “starts at the source, and gives each diamond a unique Tracr ID,” he says. “When the manufacturers sell those diamonds to retailers as polished, the retailer can look up the ID in the Tracr app and see the diamond came from us.”


Office & Leisure

Office Depot owner close to decision on sale of retail business as revenue falls

Sales in ODP’s retail division, which includes the Office Depot and OfficeMax banners, fell 9% to $943 million in the first quarter, which the company attributed to the closure of 114 stores since this time last year. Sales at the company’s business-to-business division, which suffered during the pandemic, rose 9% as workers returned to the office. After decades of decline in office supply retail, the company this year will likely either sell its consumer business — which includes its Office Depot and OfficeMax stores and digital business — or spin it off into its own company. Throughout last year, rival Staples and its private equity owner Sycamore Partners pursued ODP, first proposing to buy the entire business. After rebuffing Sycamore and Staples, ODP moved forward with a plan to separate the operations of its various divisions — a process that CEO Gerry Smith said is nearly complete — and spin off its consumer business. After previously signaling that the spinoff of ODP’s consumer business would happen this year, the company paused as it reviewed another bid from a suitor who remains anonymous, as well as Sycamore’s offer.

Embracer Group Enters Agreement to Acquire Eidos, Crystal Dynamics, and Square Enix Montreal for $300 Million

Embracer Group has entered into an agreement to acquire Crystal Dynamics, Eidos-Montréal, Square Enix Montréal, and a “catalogue of IPs including Tomb Raider, Deus Ex, Thief, Legacy of Kain and more than 50 back-catalogue games from Square Enix Holdings” for $300 million. Embracer shared the news in a press release, saying this acquisition includes roughly 1,100 employees across three studios and eight global locations. The deal, if it goes through, is expected to close during Q2 of Embracer’s financial year 2022/2023. Once this deal goes through, Embracer will have more than 14,000 employees, 10,000 game developers, and 124 internal studios. It also confirmed it has more than 230 games in development at those studios, and more than 30 are AAA titles. Crystal Dynamics is also the studio behind Marvel’s Avengers and it has been helping Microsoft’s The Initiative develop the new Perfect Dark game. Embracer is no stranger to acquisitions, as it has been undergoing a rapid expansion over the past few years. Some of the other companies it has acquired/owns are Dark Horse Comics, 3D Realms, Ghost Ship Games, Gearbox, THQ Nordic, Saber Interactive, Koch Media, and many more.

Paperchase owner hires advisers to explore sale

Paperchase owner Permira Credit has called in advisers to oversee a sale of the retailer, a year after it fell into administration. Permira Credit took control of Paperchase since its pre-pack administration in January 2021, and is being put up for sale as PwC is drafted in to oversee the process. The move comes after the owner received a number of approaches for the retailer, according to Sky News. It is understood that Paperchase has attracted interested following an improvement in its financial and operating performance. The new owners had invested in Paperchase’s digital offering as well as new shop openings and executive recruitment. At the time of its financial collapse, Paperchase employed nearly 1300 people, and traded from more than 125 sites across the UK. Permira Credit had supported Paperchase for several years as a lender, but took a controlling stake last year through a vehicle called Aspen Phoenix NewCo.

Technology & Internet

E-commerce stocks plummet as consumers pull back on online spending

Shoppers are eager to head back to brick-and-mortar stores, while inflation is stoking fears that consumers are pulling back their spending on some items to still afford the essentials. That combination spells bad news for many e-commerce focused retailers, and their stocks tumbled amid a broader market selloff Thursday as investors feared their growth could be screeching to a halt and profits could be harder to come by. Wayfair’s stock dropped more than 20%, touching a fresh 52-week low, after the online furniture retailer reported bigger-than-expected losses in the first quarter and logged fewer active customers. Etsy shares tumbled 16% on the heels of the online marketplace issuing disappointing guidance for the second quarter. Shopify stock fell nearly 17% after it forecast that revenue growth would be lower in the first half of the year, as it navigates tough pandemic-era comparisons. Poshmark, an online site for shopping secondhand, saw its shares fall about 15% around noon ET. Thursday. Shares of The RealReal and Farfetch fell around 12%, while those of Warby Parker, ThredUp, Peloton and Revolve each dropped about 10%. In a report issued Thursday morning, Mastercard SpendingPulse said total retail sales in the United States, excluding sales of autos, grew 7.2% from the prior year. Within that, e-commerce transactions dropped 1.8%, while in-store sales rose 10%, it said.


Shopify acquires shipping logistics startup Deliverr for $2.1B

Shopify announced that it will acquire Deliverr, a San Francisco, California-based e-commerce fulfillment startup, for $2.1 billion in cash and stock. The deal, rumors of which were reported in April by Bloomberg, is the largest acquisition in Shopify’s history, and Shopify founder and CEO Tobi Lütke says that it will enable the company to create an “end-to-end logistics” platform for millions of merchants. “Our goal is to not only level the playing field for independent businesses, but tilt it in their favor — turning their size and agility into their superpower,” Lütke said in a blog post detailing the acquisition. “Together with Deliverr, SFN will give millions of growing businesses access to a simple, powerful logistics platform that will allow them to make their customers happy over and over again.” Specifically, Shopify says that Deliverr will combine with Shopify Fulfillment Network (SFN) — Shopify’s fulfillment service that merchants can use to store inventory and fulfill orders — to strengthen SFN’s merchant inventory management capabilities. Deliverr’s technology will also power Shop Promise, a new service that will provide customers two-day and next-day delivery, as well as expanded options for storage, freight, inventory preparation and returns.


Finance & Economy

U.S. consumers shrug off high inflation, lean on savings to boost spending

U.S. consumer spending rose more than expected in March amid strong demand for services, while monthly inflation surged by the most in 16-1/2 years, giving the Federal Reserve ammunition to hike interest rates.  The case for an aggressive monetary policy stance from the U.S. central bank was also strengthened by other data showing compensation for American workers recording its largest increase in more than three decades in the first quarter. Companies are boosting wages in a desperate bid to attract scarce workers.  The strength in consumer spending heading into the second quarter allayed fears of a recession after the economy unexpectedly contracted in the first three months of the year.

Job openings and the level of people quitting their jobs reached records in March

Employment openings exceeded the level of available workers by 5.6 million in March while a record number of people quit their jobs, the Labor Department reported.  The level of job postings hit 11.55 million for the month, also a fresh record for data that goes back to December 2000, according to the Job Openings and Labor Turnover Survey. That was up 205,000 from February and representative of a jobs market still historically tight.  At the same time, quits totaled 4.54 million, an increase of 152,000 from the previous month as the so-called Great Resignation continued. The Covid pandemic era has seen opportunities for workers who feel confident enough to leave their current situations for better employment elsewhere.