Significant capital will be required to facilitate the American economic recovery from the Covid-19 pandemic. However, without the ability to reliably predict consumer demand, investors, lenders, and businesses in the consumer sector can neither forecast operating or capital cash needs, nor project return on investment. In this article, we outline the factors that will dictate the strength of the consumer recovery and drive the sensitivities of consumer projection models. In the accompanying infographic, we display three possible pandemic scenarios and examine how different triggering conditions might affect (i) the level of “openness” of consumer-facing businesses, (ii) traffic to these businesses and (iii) consumer confidence.
Pharmaceutical Catalysts. Each of our scenarios analyzes a different potential medical trigger – or lack thereof. We consider the impacts of the announcements of a vaccine and/or effective pharmaceutical treatments that drastically improve patients’ prognoses without prolonged hospitalization. We also consider the absence of either, and the prolonged process that would be required in that case to reach “memory loss” and return to most or all of our prior behaviors.
Confidence. We also distinguish between “openness,” “traffic” and “consumer confidence”. Openness refers to state governments allowing consumer businesses to reopen. We expect that most states will open different types of businesses at different times depending on how essential those businesses are deemed to be, and the risk associated with them opening. Thus, we expect retail stores to open before air travel and restaurants and well before stadiums, for example. Traffic, likewise, is a function of openness but also necessity, consumers’ sense of security, and their personal economic wherewithal. Finally, confidence incorporates all of the items in traffic plus a view on future prospects and the state of one’s own finances in light of the duration of the pandemic.
We note that an intervening treatment would have a dramatic impact on consumers’ willingness to go into traditional consumer venues and, if it arrives soon enough, may stimulate enough such traffic to reduce unemployment and create a virtuous cycle leading to a surge in consumer spending. The absence of such a treatment, a prolonged delay in delivering a vaccine, or a significant second surge of the virus would have the opposite effect on confidence.
Time. Finally, one must consider whether changes in consumer behavior during the pandemic are short-term or permanent changes. Most obvious among these changes is substantially increased ecommerce and home delivery. We believe the degree of permanence of these changes will be largely dictated by the speed and effectiveness with which we overcome the medical impacts of Covid-19. If a vaccine or treatment of the type described comes quickly, consumers may see current disruptions as temporary and surmountable, yielding greater confidence and a quicker return to prior behavior. However, if the virus confounds us for a prolonged period, and/or we have multiple waves of increasing infections, hospitalizations, and deaths, we can expect these behaviors to shift from stopgap to permanent.
Finally, in the absence of an intervening treatment and prior to a vaccine, we believe openness, traffic, and confidence will be directly correlated to the medical result of the lessening of social distancing. Thus, if infections, hospitalizations, and deaths don’t strongly accelerate (or, God willing, decline) as the economy reopens, consumer confidence and traffic will increase at a strong slope. However, confidence and traffic will stay low or even plummet if infections increase proportionally (or exponentially) to the reopening of society.
Given the uncertainty of pharmaceutical trials presently, we encourage business planning to incorporate sensitivities for each of the scenarios outlined in the attached infographic.
Headlines of the Week
US weekly jobless claims total 3.169 million, bringing seven-week tally to 33.5 million
Unemployment rolls continued to swell in the U.S. last week, though jobless claims hit their lowest level since the economy went into lockdown made to battle the coronavirus pandemic. First-time filings for unemployment insurance hit 3.17 million last week, bringing the total to 33.5 million over the past seven weeks, the Labor Department reported Thursday. The total was slightly higher than the 3.05 million expected by economists surveyed by Dow Jones and below the previous week’s 3.846 million, which was revised up by 7,000.
Mall owner Brookfield will spend $5 billion to save retailers
Property and mall owner Brookfield Asset Management is targeting spending $5 billion to help struggling retailers, as the retail industry reels from the coronavirus pandemic, the company announced Thursday. The company said its retail revitalization program, backed by Brookfield and its institutional partners, will focus on taking noncontrolling stakes in retailers to assist them with their capital needs during this time of “dislocation.” The announcement comes as mall-based retail has been one of the hardest hit industries during the Covid-19 crisis.
Neiman Marcus Files for Chapter 11 After Deal with Creditors
On Thursday, Neiman Marcus—the glitzy department store with roots dating back 112 years—filed for Chapter 11 in U.S. bankruptcy court for the Southern District of Texas. In the run-up to the long-expected filing, the Dallas-based retailer corralled a significant majority of its creditors to sign on to a restructuring agreement, which reduces around $4 billion of its debt and supports its operations during the COVID-19 pandemic and beyond. It’s also secured $675 million in debtor-in-possession financing.
Apparel & Footwear
Victoria’s Secret/Sycamore Partners deal off; chain will be spun off
L Brands intends to spin-off its Victoria’s Secret business as a standalone company following the termination of its agreement to sell the business to Sycamore Partners. L Brands and Sycamore Partners last week confirmed by “mutual agreement” the termination of Sycamore Partners’ previously announced agreement to acquire the retailer’s Victoria’s Secret business. In February, L Brands announced it was selling a majority stake (55%) stake in Victoria’s Secret to the private equity firm for about $525 million in a deal that valued the lingerie brand at $1.1 billion. About a month later, COVID-19 was declared a pandemic and stores shuttered nationwide. In announcing the termination of their agreement, L Brands and Sycamore agreed “to settle all pending litigation and mutually release all claims.” As part of the mutual agreement, neither party in the deal is required to pay the other a termination fee. In related news, L Brands said it remains committed to establishing Bath & Body Works as a pure-play public company and is taking the necessary steps to prepare the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK businesses (collectively, Victoria’s Secret) to operate as a separate, standalone company.
Rock-Star Outfitter John Varvatos’s Firm Files for Bankruptcy
John Varvatos Enterprises Inc., a men’s fashion brand favored by rock stars and celebrities such as Dave Matthews and Ben Affleck, sought bankruptcy protection from creditors as the fallout from the Covid-19 pandemic derailed a corporate comeback effort. The New York-based company filed for Chapter 11 as part of a plan to sell itself for an undisclosed amount to an affiliate of Lion Capital LLC, one of its creditors. Varvatos listed more than $140 million of debt in court filings in Delaware Wednesday. Varvatos earned his chops at fashion lines such as Ralph Lauren and Calvin Klein before starting his own company. He’ll remain chairman and chief creative officer of the reorganized company, according to the court filings.
Footwear retailer Aldo Group files for creditor protection amid COVID-19 pandemic
Aldo Group Inc. says it is filing for creditor protection, stating that it plans to restructure the business as it reels from the hit brought on by COVID-19. The Montreal-based footwear retailer says e-commerce at its three main brands — Aldo, Call It Spring and Globo — will continue and it plans to reopen some storefronts when able to under local guidelines for each location. Aldo says it has obtained an initial order under the Companies’ Creditors Arrangement Act from the Superior Court of Quebec. It has also applied for creditor protection in Canada and the U.S., with plans to do the same in Switzerland. CEO David Bensadoun, whose father Aldo founded the chain in 1972, says “the impact of the COVID-19 pandemic has put too much pressure” on business and cash flows.
Francesca’s issues ‘going concern’ warning
Francesca’s on Friday warned that the operational and financial consequences of the COVID-19 pandemic raise “substantial doubt about our ability to continue as a going concern.” That warning itself violates certain covenants in agreements with its lenders, according to the company’s year-end filing with the Securities and Exchange Commission. The “going concern” issue arises from temporary closure of all its boutiques from March 25 to April 30 and the disruptions to its supply chain and operations, according to the filing. If the company can’t drum up enough financing to keep operations going or execute on its growth strategy, “we may be required to delay, reduce and/or cease our operations and/or seek bankruptcy protection,” the company also warned. Francesca’s ended the year expressing confidence in its turnaround, but now says that the pandemic has interrupted its momentum.
Athletic & Sporting Goods
Dick’s Sporting Goods Re-Opens In 23 States
Dick’s Sporting Goods has re-opened locations in 23 states with new social distancing guidelines and the retention of curbside pickup. Dick’s said in a statement on its website, “As we reopen our doors in some areas of the country where local guidelines and public health considerations allow, we want to assure you that the health and safety of DICK’S Sporting Goods teammates and customers remain our top priority.” Dick’s locations had been closed since March 19 to help slow the spread of COVID-19.
Peloton gets lockdown boost as home workouts drive exercise bike sales
Peloton Interactive Inc raised its forecast for full-year revenue as “stay at home” orders led to a surge in sales of the company’s exercise bikes and fitness subscriptions, sending its shares up 5%. The strong results validated heightened expectations after analysts hailed Peloton, known for its $2,200 exercise bikes, as one of the few companies to benefit from prolonged lockdowns and a shift in consumer behavior due to the COVID-19 pandemic. With gyms and fitness clubs closed, Peloton has also become a hot topic across the internet. Online searches for “Peloton” nearly tripled since the end of February, according to Google Trends, while its stock price gained 36% in the same period. Sales of Peloton’s electric bikes and other fitness equipment jumped nearly 61% to $420.2 million in its fiscal third quarter ended March 31. Its subscribers, who shell out $12.99 per month for live online exercise sessions, almost doubled to over 886,100.
BeaverFit Announces Acquisition of Mobile Fitness Equipment
BeaverFit, a leading manufacturer of military outdoor fitness equipment and container gyms has acquired Mobile Fitness Equipment, one of the nation’s leading providers of mobile fitness training equipment for consumers. This acquisition secures BeaverFit’s position as the global leader in outdoor and mobile fitness training equipment for both commercial and consumer audiences. The consolidation of these innovative and proprietary products will accelerate BeaverFit’s strategy to bring its revolutionary products and capabilities to the commercial, personal training and home-user markets.
Cosmetics & Pharmacy
CVS Health’s Q3 driven by solid sales gains
CVS Health’s third-quarter results brought increased revenue. The Woonsocket, R.I.-based company saw third-quarter revenues increase by 8.3% over last year’s fiscal Q3, totaling $66.8 billion. Net income was $2 billion, with adjusted earnings per share coming in at $1.91. Net income reflected a substantial increase over the prior year, increasing by 41%, which the company attributed primarily to higher operating income and lower interest expense due to lower average debt. The segment’s front-store revenue increased 8.5% for the quarter, compared to the prior year, including an 8% increase in same-store sales. The company attributed the growth primarily to strength in consumer health and general merchandise sales, which was primarily driven by COVID-19 related sales; the expansion of the CarePass program; and the impact of the additional day in 2020 due to the leap year.
Revlon Said to Reach Refinancing Agreement
It looks like Revlon Inc. will be refinancing, after all. A source with direct knowledge of the deal said that Revlon had reached an agreement to close a $1.8 billion refinancing package. The deal has Jefferies Finance LLC providing two senior secured term loans, the source confirmed: one for $880 million that would be used to pay off the $200 million term loan Revlon got from Ares in 2019 that’s secured by American Crew, as well as for expenses related to refinancing and general corporate purposes; another for $950 million in order to roll up loans from a 2016 facility. The facilities would mature on June 30, 2025. Revlon also closed another $65 million loan April 30. For the loan agreement with Jefferies to go through, 50 percent of existing lenders needed to agree to the deal, which the source said they had.
NIVEA owner invests in Yorkshire manufacturer
Yorkshire-based Salford Valve Company (Salvalco) has secured an investment from Beiersdorf, a provider of skin care products, including brands such as NIVEA. The collaboration comes as Salvalco launches its Eco-Valve aerosol valve that uses ecologically sustainable propellants. The equity investment has come from Beiersdorf’s venture platform, OSCAR&PAUL Beiersdorf Venture Capital. It will support Salvalco’s further research and commercialisation of its Eco-Valve technology across the global aerosol industry, while strengthening Beiersdorf’s footprint in sustainable packaging solutions.
Pressure Biosciences Announces Deal to Acquire Dr. Denese Skin Care Through Cannaworx
Pressure BioSciences has announced a letter of intent to acquire SkinScience Labs, the holding company for Dr. Denese Skin Care & Anti-Aging Lines. Dr. Adrienne Denese, MD, PhD (Cornell, Harvard), is an industry leader in scientific skincare breakthrough technologies. Over the past 17 years, her skincare and anti-aging product lines have been top sellers on QVC. Pressure Biosciences was founded in 1978 by Harvard-trained serial entrepreneur Richard Schumacher. PBI specializes in the development and sale of broadly enabling, pressure-based instruments, consumables, and platform technology solutions to worldwide biotechnology, biotherapeutics, cosmeceuticals, nutraceuticals, and food & beverage industries. Cannaworx is a diverse portfolio of products and intellectual property developed by its founders Bobby Ghalili, DMD, and Adrienne Denese, MD, PhD. Cannaworx and its principals have 12 products, including several novel products that utilize the company’s patented / patent pending, full and partial spectrum, hemp-derived phytocannabinoid formulations for pain relief.
Discounters & Department Stores
JC Penney goes to court to try to stop Sephora from pulling out of the troubled chain’s stores
J.C. Penney is trying to avoid a major blow to its recovery prospects from the coronavirus pandemic — losing Sephora. The ailing retail giant has filed a temporary restraining order against Sephora in an attempt to prevent the makeup seller from leaving J.C. Penney stores, which are in the process of being reopened. “JCPenney filed a temporary restraining order so Sephora could not prevent JCPenney from reopening Sephora inside JCPenney (SiJCP) locations,” Penney spokesperson Brooke Buchanan said in a statement. “We remain committed to working together to drive sustainable, profitable growth, as SiJCP continues to be a beauty destination that serves millions of customers each year.” Sephora and Penney have had a joint enterprise operating agreement since Feb. 1, 2009, according to the April 27 court filing. Sephora was found to have “threatened imminent termination” of the contract, which would cause Penney to suffer “irreparable injury,” including a loss of business opportunities, the filing said.
Kohl’s CEO: Our real estate is an asset emerging from the coronavirus pandemic
Kohl’s is better positioned than its mall-based, department store peers to emerge from the coronavirus pandemic and draw customers back to shop, according to its CEO. Why? It boils down, in large part, to real estate. “We have always talked about our off-mall [stores] being a strategic asset for the company,” Chief Executive Michelle Gass told CNBC in a phone interview Thursday morning. “I think it will be even more so as we look to what the new normal is. … I do think our real estate portfolio will be an asset.” Kohl’s operates more than 1,100 locations — many of which are situated within open-air shopping centers, alongside nail salons, grocery stores and local eateries. Analysts are predicting consumers will be wary of returning to enclosed shopping malls in a post-Covid-19 world, but will be more likely instead to venture to shops that are easily accessible by car, such as Kohl’s.
Nordstrom is preparing to reopen its stores. Here’s what the retailer is changing
Plexiglass screens at cash registers, fewer fitting rooms and no cash allowed. Nordstrom is preparing to reopen some of its department stores — following the lead of Macy’s — offering a glimpse at how shopping at the mall will be different coming out of the coronavirus pandemic. “Our stores won’t open all at once,” President Pete Nordstrom and Chief Executive Erik Nordstrom said in a memo posted on the company’s website Monday evening. “We’re going to take a phased approach.” Nordstrom, which operates 380 stores including its off-price Nordstrom Rack locations, has laid out a number of changes it will be making in order to turn the lights back on.
Lord & Taylor reportedly prepping to liquidate
When Lord & Taylor’s 38 stores reopen after pandemic-related restrictions ease, they may be running liquidation sales ahead of shuttering permanently. Reuters reported the news on Tuesday, citing unnamed sources. The department store, now owned by online apparel rental company Le Tote, is delaying a bankruptcy filing in order to make the most of such sales, but has been in touch with liquidators, according to the report. A company spokesperson declined to comment to Retail Dive on the news. Hudson’s Bay Co., which last August sold Lord & Taylor to Le Tote for $100 million, held on to some real estate in that deal and may take advantage of a bankruptcy to reassume some leases, Reuters said.
Emerging Consumer Companies
Men’s shirt retailer Untuckit taps real estate restructuring firm to renegotiate deals during coronavirus
Apparel retailer Untuckit has tapped real estate advisory firm RCS Real Estate Advisors to help it evaluate its stores and leases with landlords as the economy reels from the coronavirus pandemic. Untuckit, which started selling men’s shirts online in 2011 before opening its first shop four years later, now has more than 80 locations throughout the U.S. and Canada, including in high-end shopping malls such as Westfield Garden State Plaza in New Jersey and the Mall of America in Minnesota. The move comes as a number of retailers are looking to renegotiate deals with their landlords, or shut stores entirely, as the Covid-19 pandemic has forced doors temporarily shut to try to curb the spread of the virus.
Dallas men’s custom apparel brand J. Hilburn files for bankruptcy
Dallas-based online men’s custom clothing brand J. Hilburn has filed for Chapter 11 bankruptcy. The company, which was founded in 2007 in Dallas and made it through the Great Recession as a startup, is trying to reorganize under the protection of the U.S. Bankruptcy Court in Dallas. The tailored men’s clothing line tried to pivot some in recent years by adding more casual apparel, including jeans, but its main lines were formalwear, custom suits and shirts. The company laid off an undisclosed number of employees at its Dallas headquarters last month. The company said it anticipates no interruptions in business, and all current and future orders will be filled.
BURST raises Series C led by Goldman Sachs
Burst Oral Care, the Los Angeles-based startup that sells electric toothbrushes, toothpaste, floss, and whitening strips, has raised a Series C of undisclosed size. Goldman Sachs Growth Equity led the round. Burst says it more than doubled the valuation from its previous round, and that hundreds of thousands of subscribers have bought the $69.99 toothbrush and are signed up to receive $6 replacement heads every 90 days.
Hydrant raises $5.7 million Series A
Hydrant, the New York-based maker of powdered hydration mixes for drinks, announced it has raised a $5.7 million Series A investment round. The investment was led by Coefficient Capital, with participation from Rx3 Ventures, and brings the company’s total funding to $8.8 million. The company sells its products on its own website, on Amazon, and in Whole Foods.
Grocery & Restaurants
Jefferies LLC agrees to invest $100 million in Dave & Buster’s
Dave & Buster’s reported that Jefferies LLC has agreed to buy $100 million in common stock from the struggling eater-tainment company in a move to shore up its balance sheet. “The company currently intends to use the net proceeds from this offering primarily to strengthen its balance sheet, principally as necessitated by the effects of the COVID-19 outbreak on its business, which could include use for general corporate purposes and/or repayment of outstanding debt,” Dave & Buster’s said in a filing with the Securities and Exchange Commission. As of March 20, all 137 Dave & Buster’s locations had temporarily closed due to the coronavirus pandemic.
Krave jerky comes home to Sonoma Brands
Krave Pure Foods, Inc. has come full circle. The jerky brand was created by Sonoma Brands founder Jon Sebastiani in 2009, acquired by The Hershey Co. in 2015, and now has been acquired from Hershey by Sonoma Brands. Krave focuses on premium jerky, a sub-segment of the meat snack category. The snack maker has positioned itself as a supplier of natural products. The brand’s portfolio of protein snacks features a roster of Krave Meat Cuts, Krave Pork Rinds and Krave Plant-Based Jerky, the brand’s most recent launch. Mr. Sebastiani began his career in the family wine business in Sonoma, Calif., and launched Krave in 2009. After the brand’s success and sale to Hershey in 2015, Mr. Sebastiani in 2016 launched Sonoma Brands as a consumer products incubator and venture fund targeted at products that would be innovative and disruptive of existing brands.
Restaurant re-openings: What American operators can learn from China as we enter the COVID-19 recovery stage
As certain cities and states around the country begin to loosen COVID-19 restrictions starting this week, some restaurants will begin the arduous process of reopening their dining rooms after five weeks or more of coronavirus closures. But what will these openings look like? American operators can look toward China, where the recovery process began in April and businesses have opened their doors again as restrictions were lifted. In China, there are still many rules and regulations in place to keep the general population safe and healthy — from temperature checks and limiting guest capacities to asking guests to sign waivers before stepping foot into a restaurant. Here are some lessons American operators can learn from restaurant owners and one restaurant designer operating in China.
What retail and CPG companies can expect in a post-coronavirus world
Among the many questions on the minds of retailers as we see an evolution of the coronavirus curve and a gradual opening up of other countries and parts of the United States are these: What will grocery retail and the CPG business look like in a post-COVID-19 environment? And will shoppers, whose behaviors have been altered so dramatically, return to pre-pandemic habits or is this new normal here to stay? Scott McKenzie, Nielsen Intelligence Leader, offered up three distinct time horizons for global market regeneration beyond the COVID-19 global health emergency and attached likely scenarios to each. The three-tiered framework identifies the conditions for businesses to “Rebound, Reboot or Reinvent” as they confront expected unprecedented recessionary conditions. In each horizon identified by Nielsen, a different set of factors and respective consumer behaviors can be identified.
Home & Road
L&P Q1 sales decline 9%, COVID-19 impact seen in last two weeks of quarter
Diversified manufacturer Leggett & Platt said first quarter sales decreased 9%. Volume was down 9%, largely from COVID-19 impacts in the last two weeks of the quarter, the company reported. Sales remained at weekly average levels that were consistent with 2019 through mid-March, while the rapid declines in last two weeks of the first quarter have stabilized through the first three weeks of the second quarter and are currently at approximately 55% of average levels, officials said. The company said it has undertaken aggressive cost reductions, aligned its variable cost structure to current demand levels, eliminated non-essential expenses and expects full year fixed cost reductions of $130 million to $150 million. Trade sales in the bedding products segment were down 11% in the first quarter, while organic sales decreased 15%, the company said.
Wayfair stock up after positive Q1 results
Stocks for Wayfair are up almost 27% in early trading after the company topped Q1 expectations on revenue growth of 19.8% for the first quarter ended Mar. 31. The company posted a fiscal first-quarter loss of $285.9 million, compared with a $200.3 million loss in the prior-year first quarter, while gross profit was $579.1 million or 24.9% of total net revenue for the quarter compared with $470.5 million in the first quarter of last year. Wayfair also reported a basic loss per share of $3.04 for the first quarter. Direct retail net revenue, consisting of sales generated primarily through Wayfair’s websites, increased $391.4 million to $2.3 billion up 20.3% year over year. At the end of the first quarter, total cash totaled $891 million. “During this unprecedented time … millions of new shoppers have discovered Wayfair while they shelter in place at home, and we are seeing a strong acceleration in new and repeat customer orders across almost all classes of goods and across all regions,” said Niraj Shah, CEO, co-founder and co-chairman of Wayfair in the company statement.
Mohawk’s Q1 challenged by COVID-19’s ‘unprecedented situation’
Mohawk Inds.’ first quarter was performing as planned, in line with projections. Then the coronavirus pandemic struck. “The world changed during the first quarter, and we are now managing through an unprecedented situation,” said Chairman and CEO Jeffrey Lorberbaum. “Mohawk entered the year as the world’s leading flooring company with a strong presence in all product categories, manufacturing in 18 countries and sales in more than 170 nations. … Until the COVID-19 outbreak, our results for the quarter were in line with our plan, as we benefited from the initiatives we implemented in 2019.” As the company progressed through the period, government actions to reduce the spread of the virus impacted all of Mohawk’s markets, some shutting down retail and manufacturing operations. For the three-month period, ended March 28, the flooring giant reported a 9.1% net earnings drop to $110.5 million, or $1.54 per diluted share, from $121.6 million, or $1.67 per diluted share, a year ago.
Yeti’s Q1 Sales Climb 12 Percent
Yeti Inc reported sales grew 12 percent in the first quarter but declined 25 percent in the final two weeks due to the impact of the pandemic. The company withdrew its full-year outlook and detailed an action plan to respond to the COVID-19 pandemic. “Yeti entered 2020 with tremendous momentum as a brand and delivered a great first quarter. Our results were particularly robust through mid-March, with quarter-to-date sales up 21 percent year-over-year with strength in both wholesale and DTC,” said Matt Reintjes, president and chief executive officer. “As the COVID-19 pandemic drove unprecedented disruption and volatility in the marketplace, our results were sharply impacted with sales declining 25 percent in the final two weeks of the quarter. … This focus along with the decisive actions outlined today help preserve what we value the most as an organization – nurturing a powerful, innovative and lasting brand; maintaining financial strength and flexibility; and driving a positive impact across our Yeti community.”
Jewelry & Luxury
Jared unveils virtual wedding platform
Jewelry retailer Jared earlier this week introduced its national #LoveCantWait campaign, which will provide a free virtual wedding tool for 1,000 couples. However, virtual weddings may not meet legal requirements depending on where consumers live, the company noted in press release. Through Jared’s platform, couples can create a custom digital wedding — complete with their chosen date, theme, guest list, speakers and officiants — that is as similar as possible to an in-person event. They can also consult with Jared staffers for advice on jewelry selection, sizing and other inquiries, according to the company’s release. The #LoveCantWait ceremonies will begin later this month and will feature surprises for the couples involved, the retailer noted. The company plans to feature the campaign across its social media platforms.
Signet Has Reopened More Than 100 of Its Stores
Signet Jewelers, which closed all of its stores in March, has now reopened 114 of them, with another 55 open but limited to curbside pickup. Those 55 may also reopen in the near future, depending on local ordinances. The reopenings are in states where the local authorities have loosened restrictions meant to stop the spread of COVID-19, including Georgia, Texas, Colorado, South Carolina, and Florida. Even those 169 stores are just a fraction of the company’s U.S. fleet of 2,639 doors. Signet’s stores in the United Kingdom remain closed, though a small number have reopened in Canada.
How Pandora Plans to Survive the Pandemic
Pandora has cobbled together a stockpile of cash so that it can survive even the worst COVID-19 scenarios, executives said at a conference call following the release of its first quarter financial results. The new funding includes the negotiated waiver of a loan covenant, a 3 billion Danish kroner loan-facility increase from its banks, and the sale of 8 million treasury shares. It has also suspended share buybacks and trimmed expenses, with its traditional media spending either cut or shifted to digital. “We don’t believe in a scenario where we go completely black,” said chief executive officer Alexander Lacik on a conference call following the results’ release.
Office & Leisure
Samsonite Obtains Additional Financial Flexibility to Address COVID-19 Impact
Samsonite International S.A., the world’s best-known and largest lifestyle bag and travel luggage company, announced it has completed the syndication and allocation of a new term loan borrowing and amended its credit agreement to provide financial covenant relief. These actions will enhance Samsonite’s strong liquidity position and increase its financial flexibility as the Company addresses the ongoing impact of the COVID-19 pandemic. On April 30, 2020, Samsonite completed syndication and allocation of a senior secured incremental term loan B facility in the aggregate principal amount of US$600.0 million. The Company expects to have available liquidity of approximately US$1.8 billion upon the closing of the 2020 Incremental Term Loan B Facility. Samsonite has taken significant cost-saving measures and will continue to actively pursue additional cost-saving measures going forward. The Company has also pulled many levers to conserve cash.
Homebound parents bought board games, not Barbies, crippling Mattel’s sales in the first quarter
Consumers stocked up on board games, not Barbie dolls, amid the coronavirus pandemic, sending Mattel’s sales in the first quarter tumbling. While toy sales across the industry rose 7.6% between January and March, according to NPD data, it seems that lockdowns aren’t giving all toymakers a boost. On Tuesday, Mattel reported a 14% drop in sales, as dolls, action figures and toys for preschoolers were left on store shelves and websites. With schools and afterschool programs closed, parents sought out family-friendly games, outdoor toys and art kits to keep their children busy. During the quarter, Barbie sales slumped 10% while the total doll category fell 11%. The infant, toddler and preschool segment, which includes brands such as Fisher-Price and Thomas & Friends, cratered 28%. The action figure, building set and games category fell 21%.
COVID-19 wilts floral industry, but florists hopeful to make Mother’s Day comeback
The coronavirus pandemic has uprooted the floral industry. It’s closed shops, disrupted supply chains, and forced florists to miss out on millions of dollars in revenue from big event orders. But Mother’s Day is right around the corner, and florists from across the country are looking to get their businesses back on track. Dave Pruitt, CEO of the California Cut Flower Commission and administrator of Certified American Grown, says 80 percent of the flowers sold in the U.S. come from other countries. “We only supply 20 percent, the other 80 percent of all the flowers sold in the United States are coming from out of the country. … The biggest [exporter] is Columbia, next is probably Ecuador and then you’ve got Mexico, Costa Rica, Holland.” The lack of business is leaving farmers with too many flowers, forcing them to donate or dump them. “Whole trucks got turned around and sent back to the farms. … We’re a $400 million industry, and if you look at, that’s over the course of a year. So we’ve lost at least $100 million by now,” said Pruitt.
Technology & Internet
Shopify’s sales surge shows merchants are adapting operations to survive coronavirus
Ecommerce platform and payments provider Shopify Inc. reported first-quarter revenue that topped analysts’ estimates as businesses moved swiftly online during the coronavirus pandemic. Sales grew by 47% to $470 million from the same quarter a year ago, Ottawa-based Shopify said in a statement Wednesday. “We are working as fast as we can to support our merchants by re-tooling our products to help them adapt to this new reality,” CEO Tobi Lutke said in the quarterly release. The key metric of gross merchandise volume, which represents the value of all goods sold on the platform, increased 46% or $5.50 billion to $17.42 billion from a year earlier. Shopify provides store-based point-of-sale systems for merchants that enable them to manage their online and store sales using a single Shopify platform.
Amazon wins business from reluctant brands after virus closes stores
Consultants that help brands navigate Amazon’s marketplace say the company is attracting a broad range of vendors that before the outbreak sold everything from fishing gear and art supplies to clothing and beach totes at physical stores. Brands and wholesalers assume that many of their retail partners won’t survive the pandemic, meaning Amazon will probably hang onto much of the new business. “This is one of those situations where the rich get richer,” says Andrew Lipsman, analyst at EMarketer Inc. “It’s not just Amazon. The top 10 retailers that can remain open have a tremendous advantage and we’re going to see a lot of smaller retailers get washed out.” Before the pandemic, about 45% of brands didn’t sell products on Amazon at all, according to a survey conducted by Feedvisor, which sells pricing software used by online retailers. And more than one-third said they didn’t need Amazon to reach customers. Many brands and wholesalers kept Amazon at arms length because they were concerned it would squeeze their margins, collect precious customer data and copy their most popular products. Showrooming—when shoppers check out products in physical stores and later buy them online—made retailers reluctant to give shelf space to products prominent on Amazon. The pandemic has upended those verities and accelerated the ongoing stampede online.
Pinterest teams with Shopify to offer merchants new ways to sell
Pinterest announced today it integrated with ecommerce platform Shopify Inc. to turn client catalogs into shoppable “product pins,” or pins that allow retailers to update price, availability and product descriptions on their Pinterest account. The feature allows retailers to upload their product catalogs and publish in-stock products, all from the Pinterest app integrated on Shopify. Once the Pinterest app is installed to a Shopify site, retailers can add tags to their Pinterest account, which allow consumers to quickly search for a product or category and discover the brand. Additionally, a “shop” tab will appear on the retailer’s Pinterest profile, and Shopify retailers can promote their pins as a paid ad. Once the app is installed, merchants can edit their Pinterest listings through their Shopify dashboard.
Etsy’s sales grow 100% in April
Etsy Inc. called on its crafty sellers during the first week of April to make face masks after the White House announced guidelines that U.S. consumer should cover their mouths outside of their homes to protect themselves and stop the spread of COVID-19. Since then, the marketplace for handcrafted goods has sold 12 million, or $133 million worth, of fabric face masks from 60,000 sellers in April alone. Gross merchandise sales (GMS), or the total value of goods sold on Etsy.com, grew 100% year over year to $780 million in April, executives said on a call discussing first-quarter earnings results with investors. Of that, masks were 17% of Etsy’s sales for the month, executives said. Etsy had to adjust a few things on its site to adapt to changing circumstances. First, the marketplace had to change its search results algorithm, so when a customer searched for masks, she would actually see fabric masks. Previously, they would see other items such as Halloween masks or skin care masks. Second, it needed to increase supply to meet demand so Etsy sent a push notification to every crafts seller on its website in the U.S.: “Calling all sellers. Start making face masks.” Face masks were the second-highest “category” during April, Etsy says. The “home and living” category, as Etsy terms it, was No. 1.
Finance & Economy
Consumer debt hits a record $14.3 trillion
Consumer debt hit a fresh record high to start 2020, even as credit card balances declined while Americans adjusted to the coronavirus pandemic. Household debt balances through March totaled $14.3 trillion, a 1.1% increase from the previous quarter and now $1.6 trillion clear of the previous nominal high of $12.7 trillion in the third quarter of 2008 during the financial crisis, according to New York Federal Reserve data. However, one area posted a notable decline. Credit card balances fell by $34 billion, a drop that helped offset nonhousing balance increases of $27 billion in student loans and $15 billion in auto debt. Mortgage balances rose $156 billion to $9.71 trillion.
Consumer confidence in housing falls to lowest level since the subprime crash
The economic free fall from Covid-19 is taking its toll on what had been very strong housing demand and sentiment just a few months ago. After falling sharply in March, housing confidence among consumers took an even deeper dive in April, according to the Fannie Mae Home Purchase Sentiment Index. It was the lowest level since November 2011. Back then, the market was reeling from the subprime mortgage crisis, with home prices cratering and foreclosures rampant. Consumers suddenly have a much more pessimistic view of buying and selling conditions. In addition, more consumers said their household income is now significantly lower than it was a year ago.