The Weekly Consensus

The Weekly Consensus

Maeghan Thompson

Story of the Week

GameStop short sellers lost almost $1 billion in monster rally

The jaw-dropping rally in GameStop on May 13 caused losses approaching $1billion for short sellers, according to data from S3 Partners. With GameStop soaring 74%, short-selling hedge funds suffered a mark-to-market loss of $838 million in the brick-and-mortar video game retailer, S3 Partners said. “Expect short covering in this stock as it already had a 100/100 squeeze score prior to today’s trading,” said Ihor Dusaniwsky, S3 managing director of predictive analytics. The sudden advance in the stock was seemingly triggered by “Roaring Kitty,” who once encouraged an army of day traders to pile into the gaming stock in 2021, an episode that made Wall Street history. The internet persona, whose legal name is Keith Gill, posted a picture on X of a video gamer leaning forward on their chair as if to indicate he’s taking the game seriously, making his first post on the platform since 2021.

Apparel & Footwear

  1. Jill pays $60M toward debt, announces quarterly dividend program
  2. Jill on May 14 announced it recently made a substantial debt repayment. The women’s apparel retailer said it repaid $60.4 million toward a $175 million term loan issued in April 2023. J. Jill said it paid a required $2.2 million principal payment on April 26. It made an additional voluntary payment of $58.2 million on May 10. The recent payments reduced the company’s term loan debt to $108 million, leaving the retailer with a cash balance of $28.2 million as of May 10, according to the company. J. Jill also reported preliminary earnings results and updated guidance on May 14 for the first quarter. The retailer expects Q1 net sales of about $160 million, a 7% year-over-year increase, and adjusted EBITDA ranging from $33 million to $34 million.

NRF rejects Shein membership as retailer pursues U.S. IPO

Shein has attempted to become a member of the National Retail Federation, the industry’s largest trade association, numerous times but has been rejected, CNBC has learned. The fast fashion company, founded in China, has been trying to convince lawmakers it can be trusted as it faces scrutiny over its supply chain and its use of a specific tariff law loophole: the de minimis provision. If Shein can earn a stamp of approval from the NRF, it would be a form of validation for the retailer and could help legitimize it in the eyes of U.S. lawmakers.

On Holdings Surpasses 500 Million Swiss Francs in Q1 Sales, Reveals Second Paris Store

On Holding is gearing up for the Olympics and, in the midst of a global boom in running, is preparing to take a higher profile with a new store on the Champs-Elysees slated to open in June. The news comes as the trendy Swiss running shoe brand continued its strong momentum, surpassing 500 million Swiss francs in sales for the first time in the first quarter ended March 31. In reporting the results May 14, the Zurich-based brand said it achieved sales of 508.2 million Swiss francs, a 20.9 percent increase, or a 29.2 percent jump on a constant currency basis, over the same period last year. Net income increased by 106 percent to 91.4 million Swiss francs from 44.4 million in the prior year.



Athletic & Sporting Goods

Hydrow Eyes Strength Training, AI With Speede Fitness Acquisition

Hydrow is rowing over to the booming strength training and longevity spaces, acquiring a majority stake in Speede Fitness, a strength training and analytics company.  The move is part of Hydrow’s plan to evolve into a whole-body health company and create a digitally variable resistance product with adaptive feedback in 2025.  Speede’s two products — Speede Challenger, an adaptive, in-home strength trainer with AI-powered cameras, and Speede Pro, a commercial strength trainer — may provide a hint as to what an upcoming product might look like, as Hydrow indicates it wants to make waves using data and AI to provide personalized workouts and “whole health” experiences.  Analytics and AI appear to be segments that Speede has mastered, incorporating muscle science and isokinetic and eccentric training in its data-driven and full-body workouts.

Lululemon to acquire Mexico franchisee, retail locations

Lululemon Athletica Inc. has agreed to acquire the operations and retail locations of its franchise partner in Mexico. The local franchisee, Lululemon Mexico, runs 15 stores in the country and has been in business since the Vancouver-based athletic-wear brand entered the market in 2017. All its employees will migrate over to Lululemon, the company confirmed in an email. It didn’t disclose financial terms. “Mexico remains an exciting market for Lululemon,” Celeste Burgoyne, president of Americas and global guest innovation at Lululemon, said in an emailed statement. “We believe we are well-positioned to continue expanding in the region.”

HealthFitness Acquires Professional Fitness Management (ProFit)

HealthFitness, a Trustmark company and leading provider of comprehensive fitness solutions for companies and organizations, is pleased to announce it has acquired Professional Fitness Management, LLC, (ProFit).  ProFit manages fitness centers for corporate, government, and residential clients in Washington, D.C., Northern Virginia, and New York City.  HealthFitness has a nearly 50-year history in the industry serving employers, hospital systems, municipalities, and other organizations dedicated to creating cultures of well-being for their people.

Cosmetics & Pharmacy

Henry Rose appoints ex-LVMH Laure de Metz as CEO to accelerate growth

Henry Rose, a genderless clean fragrance indie brand founded by Hollywood actress Michelle Pfeiffer, has appointed Laure de Metz as its Chief Executive Officer. Since launching as a direct-to-consumer brand in 2019, Henry Rose has experienced exponential growth under the leadership of Debi Theis, who will continue in her current role as President. “This strategic CEO hire will further accelerate the brand’s momentum, building upon its strong foundation and driving greater global awareness for its commitment to 100% ingredient transparency in fine fragrance,” said the brand in a statement.

Phlur’s Chriselle Lim onboards CEO and CMO for viral fragrance brand

Cool girl fragrance brand Phlur has appointed two beauty industry veterans to leadership roles. Elizabeth Ashmun, most recently President of adaptogenic brand Moon Juice, is now CEO. Meanwhile Linette Kim, who has held senior positions at Bliss and L’Oréal, takes on the CMO role. Phlur owner and Creative Director Chriselle Lim shared the news via her personal Instagram account. Lim, who rose to prominence as a lifestyle YouTuber, took over the then-dormant fragrance brand in 2021, rebooting it the following year with Ben Bennett, the founder of brand incubator The Center. In her Instagram post introducing Ashmun and Kim, Lim described the last two years as “an absolute dream”. However, she added: “Phlur has become bigger than I could’ve ever imagined.”

Sodalis Group Acquires Majority Stake in Artdeco Cosmetics Group

Sodalis Group, a prominent Italian company in the Health & Beauty sector, has signed a pivotal agreement to acquire a majority stake in Artdeco Cosmetics Group, a leading German cosmetics firm known for its affordable luxury brands. Artdeco Cosmetics Group, established in 1985, is a family-owned enterprise that houses three distinct brands: Artdeco, Make up Factory, and Anny. The acquisition marks a significant expansion for Sodalis Group, enhancing its portfolio with brands that have strong market positions and substantial consumer recognition, especially in Germany where Artdeco leads in selective makeup.


Discounters & Department Stores

Walmart confirms hundreds of corporate layoffs

Walmart on Tuesday confirmed it is laying off hundreds of corporate employees. In a memo to its U.S. campus associates from Chief People Officer Donna Morris, the company said that changes within some parts of its business “will result in a reduction of several hundred campus roles.” “While the overall numbers are small in percentage,” Morris said, “we are focused on supporting each of our associates affected by these changes.” Walmart said those affected by layoffs have been informed of the decision and that the company “will work closely with them in the coming days and months to navigate the best path forward.”

Dillard’s beats expectations in tough Q1

Total retail sales at Dillard’s (not including the company’s construction business) edged down 1% year over year in Q1 to $1.49 billion, with store comps down 2%. Retail gross margin expanded to 46.2% from 45.6% a year ago. Inventory was down 2% compared to April 29, 2023. Net income fell 10.7% to $180 million. In March, Dillard’s opened a new store at The Empire Mall in Sioux Falls, South Dakota, bringing its fleet — 274 stores, including 29 clearance centers — to a total of 30 states. In July, the department store will close its Eastwood Mall Clearance Center in Ohio.

Walmart streamlines fulfillment with third consolidation center

Walmart opened a 492,000-square-foot high-tech consolidation center in Minooka, Illinois, near Chicago, according to an April 30 press release. The facility consolidates general less-than-truckload shipments from suppliers into truckload shipments, which are then sent off to one of Walmart’s 42 regional distribution centers. Meanwhile, the center’s technology aims to benefit shippers through streamlined purchase order fulfillment, shorter lead times and overall faster delivery to customers.



Emerging Consumer Companies

Laws of Motion, AI-sizing technology company, raises $5 million

Laws of Motion, provider of AI sizing technology for e-commerce brands and retailers, announced that it has raised $5 million in seed funding from Corazon Capital, with participation from The Scout Program at Sequoia Capital, and Leadout Capital. This funding will empower the company to expand beyond its direct-to-consumer business with the launch of an AI sizing technology licensing solution. It will also support the company’s expansion into new markets, as well as the growth of its engineering, R&D, and licensing operations teams. Laws of Motion was founded in 2019 as a DTC fashion brand on a mission to make the fashion industry more size and shape inclusive.

Youth, Inc., youth sports platform, raises $4.5 million

Youth Inc., the first digital media network dedicated exclusively to youth sports content, announced that it has raised $4.5 million in a round led by Will Ventures with co-investments from Ryan Sports Ventures, Hello Sunshine co-founder Jim Toth, and private equity fund ISOS Ventures. The company’s parent is Audiorama, which is backed by Powerhouse Capital, and was launched by Gregg Olsen and Hollywood actor Vince Vaughn in March of 2022. The production company debuted its first podcast (Youth Inc.) that same month originally as a pure content play where parents, coaches and others can explore the changing world of youth sports nationwide during a show hosted by Olsen. Through its content arm, Youth Inc. will guide parents, coaches, and youth athletes through the opportunities and complexities presented by youth sports. The company will work with professional and college athletes, coaches, and thought leaders to create original material while aggregating content from third-party creators.



Food & Beverage

Kraft Heinz Exploring Sale of Oscar Mayer Business

Kraft Heinz is currently exploring the sale of its Oscar Mayer meat business, The Wall Street Journal reported on May 13. The sale could fetch anything between $3 billion and $5 billion, according to people familiar with the matter. Oscar Mayer – known for hot dogs, bacon, ham, and bologna products – has had to deal with declining consumer demand. This fall is due to customer habits shifting to healthier options. The company also wrote down the value of its Oscar Mayer and Kraft brands in 2019. The news comes after Kraft Heinz missed Wall Street expectations in the first quarter, as customers pushed back against price hikes.


Constellation buys Santa Barbara vineyard in higher-end wine push

Constellation Brands has agreed to acquire Sea Smoke, a producer of pinot noir and chardonnay, along with their estate vineyard in the Santa Rita Hills area of Santa Barbara, California. The financial terms of the deal were not disclosed. The alcohol giant said the purchase follows its goal to pursue growth in higher-end wines. Last June, the alcohol producer acquired Domaine Curry, the premium wine brand co-founded by NBA star Stephen Curry’s wife Ayesha Curry. Sea Smoke’s wines will join others in Constellation’s portfolio including Kim Crawford, Robert Mondavi and Meomi, and signals a continued interest in the pricier wine category despite the overall category facing declining sales.

Cocoa Supplier Natra in Talks to Buy Chocolate Duo Gubor, Nutkao

European cocoa supplier Natra is in conversations with lenders, including private credit funds, to finance a potential purchase of two businesses, according to people with knowledge of the matter. The Madrid-headquartered company is exploring the acquisition of German chocolate business Gubor Schokoladen and Italian hazelnut-spread producer Nutkao, said the people who declined to be identified as the details are private. Buyout firm CapVest, Natra’s owner, is reaching out to lenders for debt proposals that could be as large as €700 million ($754 million) for both businesses, the people said. The company may also choose to go to the broadly syndicated leveraged loan market for the debt, they added.

Dessert Holdings acquires Kenny’s Great Pies in all-US deal

US-based Dessert Holdings has acquired local peer Kenny’s Great Pies from investor Kaho Partners. Financial terms of the deal were not disclosed. According to the Minnesota-based company, which is owned by investment firm Bain Capital, the deal will complement its existing platform of “premium dessert brands” serving retail and foodservice customers. Kenny’s, a manufacturer of cream-based pies, will continue to operate under its current management team led by Gary Muter. Muter has been with the company for 16 years and has served as CEO since 2020. The pie maker was established in 1989 and operates out of Smyrna, Georgia.



Grocery & Restaurants

Fat Brands: Twin Peaks, Smokey Bones confidentially file for IPO

Fat Brands said Tuesday it has confidentially filed to take its Twin Peaks and Smokey Bones restaurant chains public through an initial public offering, less than a week after federal authorities charged the restaurant company and its chair Andy Wiederhorn for an alleged $47 million bogus loan scheme. Since its founding in 2005, Twin Peaks has grown to nearly 115 restaurant locations in the U.S. and Mexico. Fat Brands bought the company in 2021. The sports bar chain is known for its female staff’s revealing uniforms, similar to Hooters. Smokey Bones is a newer addition to Fat Brands’ portfolio, which currently includes 18 chains. Olive Garden owner Darden Restaurants created the barbecue chain in 1999 but later sold the brand. Fat Brands acquired it in September 2023, with the goal of converting more than half its 61 corporate-owned restaurants into Twin Peaks locations. “Our priority is to use the proceeds from any transaction to deleverage the balance sheet,” Wiederhorn said about the potential IPO on the company’s first-quarter conference call on May 1.

Red Lobster closing at least 99 locations as its future comes into question

At least 99 locations of Red Lobster are being auctioned off amid questions about the stalwart seafood chain’s long-term future. A web page dedicated to the liquidations showed closure locations across the U.S. including in Denver; Indianapolis; Rochester, New York; Sacramento, California; San Antonio; and San Diego. On Tuesday, Restaurant Business Magazine reported 99 locations were closing. The closures represent about 15% of the company’s approximately 700 locations, though it remains the largest seafood restaurant chain in the U.S. Red Lobster has struggled with a significant debt load, unfavorable lease terms, executive turnover and ill-advised strategies including an all-you-can-eat-shrimp promotion last fall that resulted in a significant loss for the company. Last month, CNBC reported Red Lobster was seeking a buyer as it looked to avoid a bankruptcy filing, but none have materialized. Earlier this year, Thai Union, the largest investor in Red Lobster, announced it was seeking to exit its position.

Home & Road

Home Depot Beats Earnings But Is Short on Revenue

In the first quarter, Home Depot beat Wall Street estimates on earnings but came up a bit short on revenues as it continues reconfiguring elements of the operation to align with business trends and market opportunities. Net earnings were $3.6 billion, or $3.63 per diluted share, versus $3.87 billion, or $3.82 per diluted share, in the year-earlier quarter. An analyst consensus estimate published by Yahoo Finance called for earnings of $3.60 per diluted share and revenues of $36.66 billion. Comparable sales for the period decreased 2.8% year over year, the company reported, and comps in the United States decreased 3.2%. Net sales were $36.42 billion versus $37.26 billion in the year-before quarter. Operating income was $5.08 billion versus $5.55 billion in the year-previous period. In a conference call, Ted Decker, Home Depot chair, president and CEO, said the company is still intent on driving business with professionals and is establishing specific programs to address opportunities with that class of customer, and initiatives that are gaining traction.

Container Store Ponders Strategic Alternatives As It Confronts Delisting Notice

Despite beating Wall Street estimates in the fourth quarter, The Container Store Group announced that it is seeking strategic alternatives for the business in the face of losses. The company also announced that it had been notified by the New York Stock Exchange that it is not in compliance with the organization’s listing requirements because the average closing price of the company’s common stock was less than $1 over a consecutive 30 trading-day period. The notice does not result in an immediate Container Store delisting, however. The company’s stock traded at 89 cents mid-morning on May 14. The Container Store board of directors stated it has initiated a formal review process to evaluate strategic alternatives for the company. It indicated that the board and company management don’t believe the Container Store’s current market value reflects its intrinsic value and will act in the best interests of the company and its stakeholders.

Momentum lost: U.S. furniture exports fall in 2023

A year after registering a 4% increase in exports, the United States furniture market has given back that gain — and then some — ending 2023 with a 4% decrease for a total of $2.297 billion vs. $2.399 billion in 2022. Nearly all of the U.S. trading partners within the Top 10, with the exception of Saudi Arabia and China, were in the deficit column. Canada, which remains America’s No. 1 customer for furniture, was down 4%, while Mexico registered a slightly smaller decline at 2%, and the United Kingdom was off by around 6%. Canada’s number dwarfs those of the other countries in the Top 10, with its $1.445.9 billion accounting for about 63% of the total. No. 2 Mexico, meanwhile, makes up about 8% of the U.S. export business.

Jewelry & Luxury

Lightbox Lowering Prices, Adding GIA “Verification”

Lightbox Jewelry, the De Beers–owned lab-grown brand that made waves upon entering the business by charging $800 a carat, has lowered the price of its entry-level product (I and J color diamonds) by nearly 40%, to $500 a carat. G-H color stones are now priced at $600 per carat. And Lightbox is charging $900 a carat for its top-tier (D, E, or F color) gems, down from their original price of $1,500. All the diamonds have a minimum “very good” cut and VS clarity, while the D-E-F colors have an “excellent” cut, the company said. These are the first price changes since Lightbox premiered in 2018.

Burberry profits slump by 40% as demand for luxury goods slows

Burberry’s profits have slumped by 40% in a year amid a wider slowdown in demand for luxury goods that has pushed down sales in Asia and the Americas. The high-end UK fashion retailer posted a pre-tax profit of £383m for the year up to 30 March in its preliminary results on Wednesday, a 40% drop on the £634m in the previous 12 months. Global sales fell by 8% in the second half of the year. It said it now expects a challenging first half of next year, with the company promising to balance investment in consumer-facing areas with disciplined cost control. The latest figures come after the company issued a profit warning in January, predicting operating profits of between £410m and £460m over the year, blaming the cost of living crisis and higher interest rates for the decline. Adjusted operating profit came in at £418m in the results released on Wednesday.

Brilliant Earth’s Sales Fall Flat in Q1

Brilliant Earth had a muted start to the year with first-quarter net sales growth flat. “As a growth company, I’m pleased with our continued ability to consistently execute our strategic initiatives and deliver share gains and profitability,” CEO Beth Gerstein said in a statement. Net sales in the first quarter 2024, which ended March 31, were flat year-over-year at $97.3 million, compared with $97.7 million in Q1 2023. The results were in line with the company’s expectations of $96.5 million to $98.5 million in sales. Adjusted EBITDA was $5.1 million, exceeding the company’s guidance range of $1 million to $2.5 million. Net income tripled to $1.1 million, up from a net loss of $1 million in the previous first quarter.


Office & Leisure

AMC completes $250 million stock sale during meme rally, shares jump 30%

AMC Entertainment raised about $250 million of new equity capital, completing the sale May 13 during the revived meme stock craze triggered by the return of “Roaring Kitty.” The movie theater operator sold 72.5 million shares in an at-the-market equity offering that it launched on March 28. AMC sold that stock at an average price of $3.45 per share before commissions and fees, the filing said. AMC shares jumped another 32% on May 14 following news of the sale. The stock more than doubled at one point earlier in the session and trading was paused for volatility. Shares of the company opened at $3.52 on May 13, up about 21% from May 10, likely spurring AMC to complete its equity sale at these elevated prices.

PlayAGS agrees to Brightstar Capital Partners acquisition

The board of the NYSE-listed slot machine and igaming supplier PlayAGS (AGS) has agreed to a take over by the private equity fund Brightstar Capital Partners. The board has recommended that shareholders approve the deal, which values the company at around $1.1bn. The deal would see AGS shareholders receive $12.50 per share in cash, a 41 per cent premium over the closing price on the NYSE on May 8. AGS President and CEO David Lopez said Brightstar could provide resources and guidance for targeted investments in R&D, operations and innovation. He said: “We are very pleased to reach this agreement, which we believe provides our stockholders with compelling, certain cash value. Joining forces with Brightstar represents an exciting new chapter for AGS and our mission to provide exceptional gaming solutions for our operator partners.”

Technology & Internet

Reddit shares close near record after two-day meme stock rally

Reddit shares popped 7% on Tuesday, climbing for a second straight day after retail traders kicked off a buying frenzy of so-called meme stocks. The stock closed at $62.34, Reddit’s second-highest close since its IPO in March. The rally began Monday when “Roaring Kitty,” aka Keith Gill, the man who inspired meme stock mania in 2021, resurfaced online, sending shares of GameStop and AMC soaring. Gill shared a picture on X that showed a video gamer sitting forward on a chair. The image is often used by gamers to signal they’re taking the task seriously. As of Tuesday’s close, the post has been viewed more than 25 million times, according to X. Reddit played a central role in the meme stock boom three years ago, largely due to the forum WallStreetBets, where traders gather to share tips and, in some cases, band together to drive a stock up or down.


Finance & Economy

Inflation pressures ease in April as consumer prices rise at slowest pace in 3 months

US consumer price increases cooled during the month of April, according to the latest data from the Bureau of Labor Statistics.  The Consumer Price Index (CPI) rose 0.3% over the previous month and 3.4% over the prior year in April, a slight deceleration from March’s 3.5% annual gain in prices and 0.4% month-over-month increase.  April’s monthly increase came in lower than economist forecasts of a 0.4% uptick. The annual rise in prices matched estimates, according to data from Bloomberg, and marked the smallest gain in three months.  On a “core” basis, which strips out the more volatile costs of food and gas, prices in April climbed 0.3% over the prior month and 3.6% over last year — cooler than March’s data. Both measures met economist expectations.


Inflation and interest rates continue to curb Americans’ spending

Americans unexpectedly paused their spending in April as inflation continued to sting and elevated interest rates made taking on debt more burdensome.  Retail sales were unchanged, coming in well below economists’ expectations, following a revised 0.6% pace in March, according to Commerce Department data. Sales rose 0.9% in February. That comes after sales fell 1.1% in January, dragged down in part by inclement weather.  Excluding gas prices and auto sales, retail sales fell 0.1%.  Retail sales were also dragged down by a 1.2% drop in online business, reflecting a new sales event at Amazon and the earlier timing of Easter this year, according to Michael Pearce, deputy chief U.S. economist at Capital Economics.

A growing number of Americans are maxed out on credit cards, with Gen Z leading the way

A growing number of Americans are maxed out on their credit cards.  Nearly one-fifth of credit-card borrowers were using at least 90% of their available credit in the first quarter of 2024. The New York Fed called attention to America’s “maxed-out borrowers” in a report this week.  Credit card balances, and attendant delinquencies, have been rising steadily since late 2021, a sharp reversal from the historic lows recorded at the pandemic’s peak. Delinquencies have risen past pre-pandemic levels, the Fed reports.  Maxed-out cardholders are far more likely to miss payments. Borrowers who became delinquent in early 2024 had a median “utilization rate” of 90% on their cards: On average, they were pretty much maxed out.  The nation’s collective credit-card balance stands at $1.12 trillion, near a record high, the Fed reports. The average card carries an interest rate of 21.6%, an all-time high. The average card balance was $6,360 at the end of 2023, according to TransUnion, another all-time high.