Shein made the news last week with a $2 billion capital raise, quite a feat. For most companies, that would be enough to garner multiple headlines, but the biggest news in the story was that this fundraising round lowered the company’s valuation by one-third, from a $100 billion enterprise value in 2022 to $66 billion.
Without a lot of fanfare, Shein has become a global giant of fast-fashion ecommerce, with reported revenues in the range of $23 billion to $30 billion in 2022, illustrating quite a growth trajectory from its founding in 2008. The company’s business is similar in size, product offering, and customer base to H&M ($22 billion in annual sales) and Inditex, owner of Zara ($33 billion of sales), but without the stores. Target consumers are Gen Z women, born between 1997 and 2013. Publicly traded H&M and Inditex are profitable, and based on press reports, so is privately held Shein, with founders holding significant ownership stakes in all. Investors in Shein include General Atlantic, Sequoia Capital and Mubadala, the sovereign wealth fund of the U.A.E., the co-leaders of the most recent fundraising round. It is expected that Shein will file for an initial public offering sometime in 2023 or 2024.
Factors reported to have impacted Shein’s valuation include slowing sales growth, supply chain issues, and regulatory concerns. While Shein has additional expansion opportunities in some parts of the world, it already operates in the largest economies, including China, where it was founded, and the U.S. Reports indicate that Shein’s growth in the U.S. declined in the second half of 2022, which the company believes it can overcome while growing total sales to almost $60 billion by 2025. Much of the company’s growth plan is based on converting additional customers to repeat purchasers, even while facing increased competition. Currently only 40% of customers make repeat purchases, but the company has a goal of 60% repeat customer purchases by 2025. None of the press reports indicate just how the company intends to increase repeat purchasing, but additional initiatives such as the opening of a marketplace website, SHEIN Marketplace, along with the rollout of pop-up stores worldwide may well be part of the plan.
Supply chain issues have dogged nearly every business the last couple years, and Shein is no exception. Higher freight and production costs were cited as drivers of decreased profitability in 2022. On both the sourcing and regulatory fronts, the company has come under criticism by the U.S. and other countries for lack of transparency in its supply chain, including calls for the company to certify that its products are not made using forced labor. Operating in so many parts of the world, the company also must navigate multiple jurisdictions regarding its privacy policies and intellectual property rights, including defending current and future claims that the company’s products infringe on the intellectual property rights of others.
Many factors impact a company’s valuation, and we’ve cited only a few. A 33% reduction in valuation is a lot, but at $66 billion, Shein is still one of the most valuable companies in the world. We’ll be watching to see what value investors ascribe to the business when Shein becomes a public company in the not-too-distant future.
Headline of the Week
Shein’s latest funding round has reportedly lowered its $100 billion valuation by a third. The online-only fashion retailer raised $2 billion in the most recent round, and slashed its valuation to $66 billion amid a drop in share prices for tech companies, The Wall Street Journal reported Wednesday, citing unnamed sources. The news follows reports from January that Shein was planning a $3 billion funding round that would lower its valuation to $64 billion. As PYMNTS noted at the time, the 10 top tech stocks lost a combined $4.6 trillion in market capitalization last year in the wake of delays in spending by consumers, supply chain holdups, China’s struggles with COVID-19, job cuts and a constant torrent of bad news that affected market confidence. The WSJ report, again citing people with knowledge of the matter, said Shein generated $23 billion in revenue in 2022, placing it close to rivals like H&M and Inditex, while its net profit reached $800 million. These sources say Shein aims to increase revenues by 40% this year. However, the report also notes that Shein, now based in Singapore but founded in China, is facing pressure from the U.S. government over its labor and environmental record.
Apparel & Footwear
Authentic Brands Group continues to kick the tires at the Kate Middleton-approved Hunter Boots. The brand management firm’s interest in financially challenged Hunter surfaced in March, although at the time Authentic executives declined to comment on the status of discussions. Since then, talks between the company and Authentic have intensified, sources said. Though Authentic has confirmed that it’s pursuing Hunter, a spokeswoman for the Reebok owner on Tuesday declined to comment on where those talks currently stand. According to SkyNews on Monday, the New York brand manager has been christened as the boot maker’s preferred bidder in a deal that could be valued at 100 million pounds ($124.8 million). China’s BaoZun—the digital commerce firm that bought Gap’s Greater China business for $40 million—could be the back-up buyer should Authentic and Hunter’s talks break down.
Alliance, a New York-based brand management company, announced an affiliate acquisition of the US-based wholesale and retail business assets of Dutch fashion brand Scotch & Soda. The acquisition by an affiliate of the Bluestar Alliance company allows, among other things, for Scotch & Soda and its products to be sold across the USA in a fleet of retail stores. This acquisition follows the previously announced acquisition of the Scotch & Soda brand (including worldwide licensing and distribution rights) by a separate affiliate of Bluestar Alliance. The addition of Scotch & Soda to its impressive portfolio of leading consumer brands including iconic action sports brand Hurley, Bebe and Tahari, among others, further solidified the Bluestar Alliance’s position as a leader in the brand management industry.
Fanatics has agreed to acquire the U.S. operations of PointsBet, marking the sports giant’s first major leap into U.S. sports betting. The deal is worth about $150 million in cash. The companies announced the deal last Sunday night soon after CNBC reported an agreement was reached. Fanatics will gain access to at least 15 states with the deal, according to people familiar with the deal who declined to be named because discussions were private. Fanatics expects to have access to the majority of states where PointsBet operates by the start of the NFL season, according to one of the people. PointsBet, whose shares are traded in Australia, is expected to hold a shareholder vote on the deal in late June. Only PointsBet’s U.S. assets are part of the deal. Fanatics will plan to fund some of the remaining cash flow burn from PointsBet, which has had to spend heavily on marketing to compete with larger rivals DraftKings and FanDuel. NBCUniversal will get proceeds from its previous deal with PointsBet and will no longer have an equity stake, according to PointsBet. NBC acquired a 4.9% equity stake in PointsBet in 2020.
After eight months at Torrid, CFO and COO Tim Martin resigned from the company. Martin is exiting the dual roles to “pursue other opportunities” and will remain with the apparel company until May 26, according to a company press release. Paula Dempsey, senior vice president of finance and investor relations, will take on the role of interim CFO until the company names a successor. Dempsey has been with Torrid since January of this year. Additionally, Torrid Chief Technology Officer Hyon Park, who joined the company in September at the same time as Martin, will lead supply chain efforts. CEO Lisa Harper will oversee other operations including stores and real estate. “We appreciate Tim’s leadership and his many contributions to our organization. We thank him and wish him well,” Harper said in a statement. Martin came to Torrid from Guitar Center, where he was CFO. He has more than 25 years of experience at other companies like Lands’ End, Gap, Disney and Coldwater Creek.
Athletic & Sporting Goods
Britain’s Frasers Group raised its stake in online fashion retailer ASOS, a filing showed, as the Mike Ashley-owned sportswear retailer continues its drive into a more premium market. Frasers, formerly called Sports Direct, increased its stake in ASOS to 7.4% from a prior stake of more than 5%, as of May 15. The increase in stake comes a week after ASOS swung to a first-half loss, hit by a squeeze on household budgets and forecast a further drop in sales. Frasers, known for picking up stakes in fellow retailers, currently owns a 2.6% stake in German fashion house Hugo Boss, according to Refinitiv data.
Outdoorsmen.com, Inc., a digital media, social networking and e-commerce technology company operating in the Hunting, Fishing, Camping, RVing, Golfing, Soccer, Cycling, Moto Racing, and Racket Sport sectors of the outdoor industry, announced that it has completed the acquisition of HuntPost.com, WEnRV.com, GolfLynk.com, FutPost.com, CycleFans.com, RaceScene.com, RacketStar.com, EbikeLink.com, MorBoats.com, Fungilo.com, and has officially launched x2Fan.com The successful roll-up of ten outdoor industry social network and e-commerce platforms, along with their current negotiations to acquire as many as twenty trade show operators, totaling more than 60 annual trade shows throughout the United States, is being completed in preparation of taking the company public.
Cosmetics & Pharmacy
IFF is working with an adviser as it explores options for Lucas Meyer Cosmetics, which could be valued at about $1 billion, according to sources who asked not to be identified. The unit may attract interest from rivals including UK specialty chemicals group Croda International Plc and European fragrance companies Givaudan SA of Switzerland and Germany’s Symrise AG, they said. Shares in IFF rose as much as 1.4% in early trading on Friday. The stock was up 1% at 9:42 a.m. in New York, giving the company a market value of about $21.7 billion.
Skincare company Murad has agreed to pay about $3.3 million to settle allegations that for almost eight years it conspired to export goods and services to Iran, in violation of U.S. sanctions on the country. The El Segundo, Calif.-based company, founded by dermatologist Howard Murad in 1989, allegedly entered into agreements with an Iran-based distributor to sell its products in the Middle East, according to the U.S. Treasury Department. Murad was acquired by consumer-goods giant Unilever U.S. in September 2015, and the exports to Iran continued until January 2018, despite Unilever having become aware of Murad’s Iran-related business two months after its acquisition in 2015, according to the agreement. The shipments stopped after Murad’s bank asked whether certain payments might have involved Iran.
Prelude Growth Partners has invested an additional $15 million in Skin Pharm, which will aid in the continued expansion of the company’s brick-and-mortar clinics across the country, creating more 100 new jobs nationwide. The investment will also allow the company to expand its product line and continue product development. Founder and CEO Maegan Griffin will continue to lead the company. In 2021, Prelude Growth Partners invested $15 million in The Center, a multi-brand beauty and personal care platform.
Vacation, an award-winning sunscreen company that’s on a mission to make sunscreen fun, has announced the completion of a $6 million Series A funding round. Led by Silas Capital, an emerging growth equity and venture capital firm that invests behind exceptional next-generation consumer brands, the oversubscribed round includes investments from True Beauty Ventures, BFG Partners, Sonoma Brands, Marla Beck (Co-Founder and former CEO of Blue Mercury), David Grutman (Founder of Groot Hospitality), Heela Yang Tsuzuki (Co-Founder and CEO of Sol de Janeiro), and others. Vacation’s rapid growth can be attributed to its ability to bring a fun, unexpected new approach to the sunscreen category.
Discounters & Department Stores
Walmart’s total global revenue for the first quarter was $152.3 billion, up 7.6%, the retailer reported on Thursday. Operating income rose 17.3% to $6.2 billion, while Walmart’s e-commerce sales increased 27% thanks to strong performance in pickup and delivery. Comp sales for Walmart U.S. rose 7.4%, while net sales for the U.S. grew to $103.9 billion, up 7.2% from a year ago. The retailer reported $5 billion in operating income in the U.S., up from $4.5 billion a year ago. Although economic uncertainty remains a concern, the company raised its full-year guidance on Thursday. Walmart now expects its consolidated net sales to rise about 3.5%.
Target on Wednesday reported flat sales for the first quarter, with growth of 0.5%. Comp store sales grew 0.7% but were offset by a decline in comparable digital sales, which were down 3.4%. In digital sales, Target’s drive-up service saw high single-digit growth, while same-day services saw mid-single-digit growth. Overall, the retailer reported $25.3 billion in total revenue for the quarter ending April 29, a 0.6% rise from a year ago. Operating income for Q1 was $1.3 billion, down 1.4% from last year. The retailer’s Q1 gross margin rate rose to 26.3% from 25.7% a year ago. Target said strength in its beauty, food and beverage and household essential categories offset softness in discretionary purchases. The retailer also said shrink could cut this year’s profitability by more than $500 million compared with last year.
In a slight topline miss, TJX on Wednesday said its net sales grew 3.3% year over year to $11.8 billion. U.S. Marmaxx net sales, which includes T.J. Maxx, Marshalls and Sierra stores, rose 7.2%, while U.S. HomeGoods sales fell 3.4%. Store comps at Marmaxx rose 5% year over year, while comps at HomeGoods fell 7%. Overall company comps rose 3%, per a company press release. Margins were more robust, in part thanks to lower freight costs. Pretax profit margin rose to 10.3%, from 7.5%; gross margin expanded by 1 percentage point, and merchandise margin was up. Net income rose 51.8% to $891 million.
Five Below plans to open nearly 10 new brick-and-mortar locations at Simon-owned shopping centers this summer, the real estate investment trust announced Thursday. The retailer currently has 21 stores at centers owned by the Indiana-based REIT. The new Five Below stores will open through this summer. They are located at Pismo Beach Premium Outlets and Great Mall in California; at Indiana Premium Outlets in Edinburgh; at Albertville Premium Outlets and Miller Hill Mall in Minnesota; at Pocono Premium Outlets in Pennsylvania; at Gaffney Premium Outlets in South Carolina; and at Pleasant Prairie Premium Outlets and Johnson Creek Premium Outlets in Wisconsin. An existing Five Below at Arundel Mills in Maryland will receive a full remodel, Simon said.
Emerging Consumer Companies
Kim Kardashian’s SKIMS has opened its first-ever pop-up shop at Channel Gardens in Rockefeller Center, New York City. The shop will be open until Memorial Day and will offer shoppers the chance to stock up on summer wardrobe essentials. The brand is also available at a mini boutique inside Saks Fifth Avenue and at Nordstrom NYC. Skims was founded by Kardashian, Emma Grede and Jens Grede, and has attracted investment from a number of high-profile backers.
Hallow, prayer app the recently surpassed 10 million downloads, raises $50 million
Hallow, the largest prayer app in the world, passed 10 million downloads. It became the first faith-based app to ever crack the top 10 apps in the App Store, coming in at #3 overall. Despite the difficult market for startup funding, the app has also just announced the close of an additional $50 million in Series C funding bringing the total funding raised for Hallow to $105 million. The round was led by Goodwater Capital with participation from Highland Capital, Colin Moran, and several of Hallow’s existing investors.
Food & Beverage
Prime Roots, which uses koji mycelium to make meat analogs, closed a $30 million Series B round to expand its deli meat-style product. The round brings the company’s lifetime total fundraising to $50 million. Investors include noodle and alternative protein giant Monde Nissin and tech accelerator SOSV/IndieBio — which had worked with the company as part of its accelerator program in 2017. Other investors include Pangaea Ventures, Alumni Ventures, Gaingels and Hyphen Capital. While there are several alternative protein companies focused on meat categories such as hamburgers and chicken nuggets, only a few are working on deli meats.
Constellation Brands has acquired a minority stake in Töst, an alcohol-free sparkling beverage brand, the company said in a statement. The investment was made through Constellation’s venture capital group. Töst is a “never alcohol” product, meaning there is no alcoholic fermentation at any point in the production process, expanding the opportunity to reach a wider variety of occasions, the Mexican beer maker said. Once looked down upon in the beverage category, nonalcoholic drinks are quickly growing in popularity with consumers focusing more on their health or interested in getting the taste without the associated buzz. This has prompted the alcohol giants to prioritize adding them to their portfolios.
Celsius reported a 95% year-over-year increase in net revenue to reach $260 million during the first quarter, largely driven by strong sales velocity, cost-efficiency improvements and distribution expansion. According to president and CEO John Fieldly during a call with investors, Celsius is the number one dollar growth brand in total US Mulo+C for energy for the last 52 weeks, per recent IRI data. Celsius’ strong performance this quarter, including its 111% gross profit increase to $114 million, was attributed to increased brand awareness in addition to the realized impact of its continued transition into the PepsiCo distribution network. “Looking ahead, we have plans in place and initiatives underway to further leverage our expanding distribution and continue to build our global brand equity,” said Fieldly. The brand is currently the number three energy drink in the U.S. and holds 7.5% market share. Celsius is also now ranked the second largest energy drink brand on Amazon, in terms of dollar sales, capturing over 19% share of the category within the ecommerce giant’s platform.
Grocery & Restaurants
Fast-casual burger chain Shake Shack has reached an agreement with Engaged Capital, reportedly to stop a proxy battle that the minority shareholder was threatening. The New York City-based chain appointed former Domino’s Pizza chief financial officer Jeffrey Lawrence to the board and has agreed to hire an operational consulting firm and enhance corporate governance. Shake Shack also said in a release announcing the agreement that founder Danny Meyer “and certain of his affiliates have agreed to step down their director designation rights over time,” without specifying what exactly that means. The Wall Street Journal reported that Engaged, which owns around 6.6% of Shake Shack stock, wanted to appoint three board members and hire a consulting firm to help improve operational efficiencies. It also wanted Shake Shack to make changes in its super voting share structure, which give additional votes to company founders, according to the Journal, which noted that Shake Shack’s share price is currently around half of what it was at its high point in early 2021. Shake Shack said that apart from the appointment of Lawrence, it would work with Engaged to identify another independent director.
Area 15 Ventures LLC, a private-equity firm that bought the Port of Subs brand in April, has acquired the remaining equity in Daddy’s Chicken Shack, the company said. Castle Rock, Colo.-based Area 15 Ventures, created by Re/Max co-founder and chair Dave Liniger, said Daddy’s Chicken Shack, which has one restaurant in Houston, was created in 2018 by Pace Webb and Chris Georgalas and has 160 units in development. Dave Liniger, co-founder and chairman of global Re/Max, said in a statement: “I love this concept and am grateful to Pace and Chris for providing the groundwork to take this brand to the next level.” Webb and Georgalas started the brand after receiving positive reviews of her fried chicken sliders at her catering business, Taste of Pace. The Daddy’s Chicken Shack acquisition comes a month after Area 15 Ventures acquired Port of Subs, a 50-year legacy sandwich brand based in Reno, Nev. Port of Subs, founded in 1972, has 130 units in seven western states.
Home & Road
The first quarter brought lower sales and earnings at Home Depot as an increasingly wary consumer and poor weather put a damper on spring business, the company announced. Home Depot posted net earnings of $3.87 billion, or $3.82 per diluted share, versus $4.23 billion, or $4.09 per diluted share, in the period a year before. Home Depot did come out on top of a Yahoo Finance-published analyst consensus estimate of $3.80 on earnings but didn’t reach the revenue estimate of $38.28 billion. Comparable sales decreased 4.5% as comps in the United States decreased 4.6% in the quarter year over year, according to the company. The company reported sales of $37.26 billion, down 4.2% from the quarter a year previous. Operating income was $5.55 billion versus $5.93 billion in the year-prior period. In announcing the financial results, Ted Decker, Home Depot chair, president and CEO, said, “After a three-year period of unprecedented growth for our sector, during which we grew sales by over $47 billion, we expected that fiscal 2023 would be a year of moderation for the home improvement market. Our sales for the quarter were below our expectations primarily driven by lumber deflation and unfavorable weather, particularly in our Western division as extreme weather in California disproportionately impacted our results.”
In the first quarter, Ace recorded net income of $66.2 million, a decrease of 44.7% or $53.6 million, from the year-earlier period. With a $21.4 million gain from the first quarter 2022 sale of the former Gainesville, GA, retail support center excluded, net income decreased $32.2 million in the period year over year. Ace retailers who share daily data reported a 4.4% drop in comparable sales in the quarter, the result of a 3% decrease in comp transactions and a 1.4% decrease in average ticket, the coop pointed out. Revenues were $2.09 billion, down 5.8%, from the year-prior quarter. A mild winter across most of the U.S., combined with the late arrival of spring-like weather led to declines in the sale of winter and spring goods, pressuring results, Ace maintained.
At Home closed on a $200 million private placement, the retailer announced. A private placement allows a company to offer shares to a group of pre-selected investors. The company also completed some refinancing transactions. As a result of the recent financial moves, the company said it expects to exchange about $447 million of its existing unsecured notes for exchange notes in aggregate principal amount of $412 million. Overall, the financial transactions will allow At Home to strengthen its balance sheet and take advantage of opportunities in the home sector as Tuesday Morning and Bed Bath & Beyond exit. Tuesday Morning and Bed Bath & Beyond’s failure could be At Home’s gain. The Texas-based retailer said the complete shutdown of two rivals positions At Home “to take advantage of opportunities created by recent competitive exits in the sector.” At the time of their respective Chapter 11 filings, Tuesday Morning and Bed Bath & Beyond had 487 stores and 360 stores, respectively. That means more than 800 brick-and-mortar locations selling home goods and decor will be wiped off the map as they go out of business.
Bedding retail specialist American Mattress added 20 stores to its rolls when it acquired Michigan-based U.S. Mattress. The acquisition, which took place about four weeks ago, went for an undisclosed price. Mike Kenna, who has owned the 35-year-old mattress retailer for the past 25 years, said incorporating U.S. Mattress into the American Mattress family, plus another pair of scheduled store openings, will bring it to around 90 storefronts between the greater Chicago area, the greater Indianapolis area, the Detroit metro and Florida. A Michigan-area distribution center was also part of the purchase, giving American Mattress distribution centers in all of its key markets. Kenna said the U.S. Mattress stores are in the process of being converted to American Mattress, a process he expects to wrap up by late June with new signage, POS systems, etc. However, he said the U.S. Mattress website has been a strong business driver for the brand for a while, so it will continue with its current name and address.
Williams-Sonoma Inc. is launching a new brand called GreenRow, specializing in sustainable materials and manufacturing practices. The brand features colorful, vintage-inspired heirloom quality products with living, bedroom, and dining furniture as well as rugs, bedding, bath, baby, lighting, pillows, throws, curtains, table linens, dinnerware and décor. According to the company, every product in the GreenRow assortment will support at least one of Williams-Sonoma’s social or environmental initiatives and prioritize sustainable manufacturing practices with low-impact materials wherever possible, including responsibly sourced linen, cotton, wood and recycled materials.
Jewelry & Luxury
Luxury apparel brand Canada Goose reported fourth quarter revenue increased 31.4% year over year to CA$293.2 million (about $217.4 million), according to a company press release. Net loss increased from CA$9.1 million last year to CA$10 million, per an SEC filing. Revenue declined in the U.S. with a “challenging macro-economic backdrop,” the company said. Canada Goose’s gross margin in Q4 decreased year over year from 69.1% to 64.9%. Meanwhile, DTC revenue grew 22.6% year over year to CA$227.5 million due in part to retail footprint expansion, ending the quarter with 51 permanent locations. Wholesale revenue grew 30.4% from last year to CA$45.5 million partially due to an increase in order value globally. For the full year, Canada Goose grew its revenue from CA$1.1 billion in 2022 to CA$1.2 billion, while net income decreased 27% to CA$68.9 million. For fiscal 2024, the company expects total revenue between CA$1.4 billion and CA$1.5 billion, with DTC revenue in the mid-to-high 70s as a percentage of total revenue.
China’s Fosun Group and Lorie Holding have sold International Gemological Institute (IGI) to a division of Blackstone Group for $569.65 million. The news was announced in a statement from Fosun subsidiary Shanghai Yuyuan Tourism Mall. The grading lab’s buyer is BCP Asia II Topco Pte., a Singapore company wholly owned by a private equity investment fund controlled by Blackstone Group, the statement said. According to the statement, as of Dec. 31, 2022, IGI’s assets were approximately $83.22 million, and its liabilities totaled around $24.2 million. Its operating income was estimated at $94.56 million in 2022; net profit, $34.51 million. Fosun has owned 80% of the lab, through Alpha Yu BV, a subsidiary of Shanghai Yuyuan Tourism Mall. The other 20% was maintained by Lorie Holding BV, controlled by IGI’s current CEO Roland Lorie.
Watches of Switzerland ended its fiscal year on a high note, posting double digit growth in its fourth quarter. The company also posted record revenue for the full fiscal year, in spite of a “more challenging trading environment in the second half,” said CEO Brian Duffy. He touted a “record year of revenue and profitability” and expressed confidence in the year ahead. Watches of Switzerland posted strong revenue growth in Q4 and FY23. For the fourth quarter ended April 30, the company posted £371 million ($463.5 million) in total revenue, up 22 percent year-over-year.
Office & Leisure
Lab tests that reveal whether or not your dachshund Buster has ringworm have historically been far removed from consumers. Your vet asks for a stool sample, which you awkwardly procure from Buster and deliver to the office, and the vet orders the test and bills you. But a startup, MySimplePetLab, is out to change all that. It sells test kits for dogs and cats directly to consumers from its own website, or online through Amazon or Walmart. They retail for $100. After users send in samples, the company emails the results to both pet owners and their vets. Now MySimplePetLab, which began in 2019, is expanding, with care kits that treat ailments rather than diagnose them. Packaged in zippered nylon bags that resemble Dopp kits, they contain multiple products to address a single issue, like irritated ears, itchy skin, or diarrhea. The company said it will launch the care kits, which retail for $40, on Target’s website within 30 days, with plans to stock them at more than 500 Target locations in the fall. The care kits are just for dogs, but the company said it plans to introduce cat kits—not to be confused with Kit Kats—in the future.
Alphia is exploring options including a sale that could value the private equity-owned pet food manufacturer at over $1 billion, according to people familiar with the matter. Alphia, which is owned by J.H. Whitney & Co and was formed out of the merger of premium pet food manufacturers C.J. Foods Inc and American Nutrition Inc in 2020, is working with investment bank Goldman Sachs Group Inc to explore a potential sale, the sources said. The sources, who requested anonymity as the matter is confidential, cautioned that no deal is certain and JH Whitney could choose to keep Alphia. In recent years, pet food companies have been able to attract generous multiples from potential buyers, amid a worldwide shortage of pet food due to increased demand and supply chain issues. Notable deals in recent years include General Mills Inc’s’ acquisition of Blue Buffalo Pet Products Inc for nearly $8 billion, Mars Petcare’s acquisition of Champion Petfoods, and Clearlake Capital Group’s takeover of Wellpet.
JAB Holding Company (“JAB”) today announced that its pet insurance platform has acquired a majority interest in Pumpkin Insurance Services Inc. (“Pumpkin”), a best-in-class preventive care and pet insurance provider, expanding its global leadership in the under-penetrated, fast-growing pet insurance industry. Zoetis, the world’s largest animal health company, will maintain a significant minority stake in Pumpkin and continue its commercial partnership with the business. Financial terms of the transaction were not disclosed. Since Zoetis launched Pumpkin in 2020, it has grown to provide insurance to more than 65,000 pets across the United States. With this transaction, Zoetis will continue its collaborative commercial agreement with Pumpkin and provide support in the veterinary channel for its products and services.
Technology & Internet
eBay is ramping up its luxury efforts with the purchase of authentication firm Certilogo. The deal gives eBay access to the Certilogo technology platform, which lets brands and designers manage the lifecycle of clothing and lets consumers verify the authenticity of their garments, according to a Wednesday (May 17) press release. “This acquisition further solidifies eBay as a trusted destination to shop for pre-loved apparel and fashion and marks a key investment in the growing pre-loved fashion category,” the company said in the release. “It also provides customers with more confidence as they increasingly make more sustainably conscious purchase choices.” eBay said the acquisition is expected to close in the third quarter without disclosing details such as pricing. The deal came weeks after the company said it was committed to doubling down on the luxury sector, even after Cudoni, the resale platform it had backed, shut its doors. Soon after, eBay debuted the Certified by Brand program, designed to provide consumers with a broader range of sought-after and collectible luxury items while also ensuring authenticity through eBay’s Authenticity Guarantee.
The price of food continues to go up and up, but surprisingly that hasn’t (yet?) played out as pressure on the wider restaurant industry. Now, a startup that’s building technology to serve that sector announced a supersized round of funding to nourish its growth. Restaurant365, which develops all-in-one restaurant management software, announced $135 million in new funding co-led by KKR and L Catterton. Previous backers — specifically ICONIC Growth and Bessemer Venture Partners — are also participating in this round, which brings the total raised by the startup to $288 million. The company’s software, which covers accounting, analytics, staff and inventory management (but not point of sale solutions), is currently used in some 40,000 locations, with customers including small businesses, franchises and chains, and accounting firms that work with restaurants. It will be using the funding to continue developing product across all of those areas. It’s not clear if Restaurant365 is profitable, but it’s currently making some $100 million in annual revenues, it said. The company — based out of Irvine, California, and founded in 2011 — is not disclosing its valuation specifically, although a quote from CEO and co-founder Tony Smith notes that the company now has reached “$1 billion in value”.
Finance & Economy
Consumers barely kept up with inflation in April, as retail sales increased but fell short of expectations, the Commerce Department reported. The advanced sales report showed an increase of 0.4%, below the Dow Jones estimate for 0.8%. Excluding auto-related figures, sales increased 0.4%, which was in line with expectations. As the numbers are not adjusted for inflation, the headline increase equaled the 0.4% monthly rise in the consumer price index. On an annual basis, sales were up just 1.6%, well below the 4.9% CPI pace. A 0.8% drop in gasoline sales held back the spending figures. Sporting goods, music and book stores posted a 3.3% decline, while furniture and home furnishings saw a 0.7% drop.
Total consumer debt rose to an all-time high in the first quarter of 2023, according to the Federal Reserve Bank of New York, with increases to mortgage balances, auto loans and student loans putting debt at a record level. Consumer debt rose to more than $17 trillion for the first time ever, according to the data released by the New York Fed. The total represented a $148 billion increase from the previous quarter and a $1.2 trillion surge from last year. The rise in debt was spurred on by a $121 billion climb in mortgage balances in the U.S., bringing total mortgage debt to just over $12 trillion. It was the most substantial growth in any category. Auto loans increased by $10 billion over last quarter, totaling $1.56 trillion. Student loan debt increased moderately, to $1.6 trillion. Credit card debt remained flat, however, staying at $986 billion.