Last week, Target announced its quarterly earnings. The results surprised many – and with Target being a retail bellwether, it had some wide-ranging implications and effects.
While revenue grew 4% year-over-year, Target’s operating income declined 43%. Target’s CEO, Brian Cornell, cited a confluence of factors – accelerated shifts in spending, rising costs of labor, transportation, and production, supply chain challenges that have made inventory management especially difficult, and consumer inflationary concerns. It’s a pain felt from the factory floor to the cash register. As with most retailers, Target has had to increase hourly pay to attract workers. The company projects roughly a billion dollars in incremental transportation costs.
“We saw much-higher-than-expected freight and transportation costs and a more dramatic change in our sales mix than we anticipated. This resulted in excess inventory, much of it in bulky categories which put additional strain on our already-stressed supply chain.” “In our other three core merchandise categories – apparel, home and hard lines – we saw a rapid slowdown in the year-over-year sales trend at the beginning of March, when we began to see the impact of last year’s stimulus payments. While we anticipated a post-stimulus slowdown in these categories and we expect the consumer to continue refocusing their spending away from goods and into services, we didn’t anticipate the magnitude of that shift.” “This led us to carry too much inventory, particularly in bulky categories, including kitchen appliances, TVs and outdoor furniture. And with very little slack capacity after two years of unprecedented growth, we faced elevated costs to store and begin right-sizing our inventory position.”
Target isn’t alone. Walmart, Kohl’s, and Lowe’s also released quarterly earnings last week, and the numbers weren’t much more encouraging. While Walmart’s revenue rose slightly over the same period last year, earnings per share dropped 23.1%. High freight costs and excess inventory coupled with lower spending in high-margin categories all contributed. Kohl’s sales dropped 5.2% from the first quart last year. Sales for Lowe’s were slightly lower than last year, with net income slightly higher.
Target’s and Walmart’s stock prices dropped precipitously after reporting results (-25% and -11%, respectively). Lowe’s shares were off roughly 5%. Kohl’s shares seesawed throughout the week, but this may have been more influenced by news that final bids from potential acquirers are due in the coming weeks.
Since the beginning of COVID-19, big retail has remained relatively strong. In some cases, it has thrived. Now, with rising costs across the board – and without the benefit of federal stimulus checks that drove spending in 2020 and 2021 – it’s a more daunting environment.
One bright spot has been off-price. TJX, parent of T.J. Maxx and Marshalls, reported 13% year-over-year sales growth, and adjusted earnings per share of %0.68, up from $0.44 in the same quarter last year.
With costs expected to continue to rise, and supply chains remaining uncertain and expensive, the market may be adjusting to the idea that the environment will worsen before it improves.
Headlines of the Week
Target managed to grow sales in the first quarter over a tough comparison last year, but its profits took a major hit as fuel costs ripped through the retailer’s supply chain. Operating income fell by 43.3%, or roughly $1 billion, compared to last year. During the quarter, the retailer faced freight and transportation costs that were hundreds of millions of dollars above already-elevated expectations, Chief Operating Officer John Mulligan said on Target’s earnings call. The retailer also opted to discount products in some discretionary categories to move excess inventory and refresh its stores, which together with freight costs slashed more than four percentage points from Target’s gross margin rate.
Apparel & Footwear
David’s Bridal on Tuesday announced that it has acquired the assets of custom wedding dress company Anomalie. However, under David’s Bridal, Anomalie will no longer create those custom dresses. Instead, the acquisition was done for the startup’s ability to create digital products. Leslie Voorhees Means, co-founder and CEO of Anomalie, will join David’s Bridal to “lead the implementation of new strategic initiatives,” as part of the deal. The terms of the acquisition were not released. Anomalie, which launched in 2017, will no longer operate as a standalone company, but instead its assets, team and tech will be incorporated into David’s Bridal digital offerings. David’s Bridal has been increasing its tech options and services for the past few years, accelerating efforts when the pandemic forced wedding retailers to rethink operations in a high-touch industry. The company has since introduced augmented reality and 3D dress shopping, virtual appointments, a bridal planning app and a 24-hour YouTube Live channel.
Second Avenue Capital Partners (SACP), the lending arm of SB360 Capital Partners (SB360), announced the closing of a $67.5 million term loan for The Jessica Simpson Collection, the $1 billion fashion empire and signature lifestyle brand inspired by and designed in collaboration with Jessica Simpson. The new financing will be used to retire an existing credit facility and provide additional liquidity to fund new growth and a rapidly expanding portfolio. Jessica Simpson launched her label in 2005 under the guidance of Vince Camuto and the Camuto Group. In 2018 Schottenstein led Designer Brands Group partnered with Authentic Brands Group to acquire Camuto Group. In November of 2021, Jessica Simpson and her business partner and mother Tina Simpson acquired 100% of the brand. Having retained 37.5% of the brand when a majority stake was acquired by Sequential Brands in 2015, Jessica, Tina, and their team were determined to reclaim full control of the lifestyle brand they had spent 16 years developing and building.
Cosabella has a new home. The U.S.-based lingerie and loungewear brand, which has roots in Italy, has been bought by the Calida Group for $80 million. The deal allows the Swiss holding company to strengthen its position in the growing U.S. intimates market with its innerwear businesses — Aubade, Elrich and On My Skin, in addition to the nameplate brand — while Cosabella expands in Europe. “We were always looking for the bridge of how to connect Europe and the United States and to do so successfully,” Guido Campello, whose title will shift to managing director of Cosabella, told WWD. “This partnership in particular really allows us to help grow Calida’s brands in the U.S. Their presence here is still quite minimal. So I can help lead them on the U.S. side and they can help us really build out the European side.” The partnership will leverage physical stores and digital operations, both Stateside and in Europe, to grow brand awareness across the portfolio. That includes Calida’s retail fleet of 158 stores worldwide, e-commerce businesses and wholesale partners.
Just two days after Kohl’s said Doug Howe was stepping down from his post as chief merchandising officer, the retail veteran has landed at Designer Brands. The executive is the new president of DSW Designer Shoe Warehouse, and will also have an EVP title at the parent company. As president of DSW, Howe will be responsible for day-to-day leadership of the company and bringing DSW’s differentiated customer experience and desired brands to life across direct-to-consumer channels, Designer Brands said in a statement. Howe will report directly to Designer Brands’ CEO Roger Rawlins. Prior to Kohl’s, Howe held prior leadership positions across merchandising, design, product development and planning at Qurate Retail Group, Old Navy, Walmart, and May Department Stores. This news comes as DSW is in a period of growth and evolution after announcing it would roll out a revamped “store of the future,” model in April which consolidates the retailer’s 20,000 to 25,000 square foot-stores into more efficient 15,000 square-foot locations and uses digital technology to tell brand stories. These revamped stores, which will include brand-specific shop-in-shops and displays, will allow DSW’s partner brands to better expand their own DTC presences.
Athletic & Sporting Goods
After a little more than two years, Frisk is out as Under Armour’s CEO. Frisk took over the chief role at the start of 2020. He joined Under Armour in 2017, where he held the position of chief operating officer prior to being named CEO. “The CEO transition comes as a surprise as Mr. Frisk had only been in the role for roughly two and a half years and was hand-picked by Founder Kevin Plank to succeed him,” Telsey Advisor Group analysts led by Cristina Fernández, said in emailed comments. In the interim, Chief Operating Officer Colin Browne will take over the position. Frisk will remain with the retailer as an adviser until Sept. 1.
Pelican International Inc, a world leader in paddle sports, has acquired a majority stake in GSI Outdoors, a leader in the outdoor equipment industry. This transaction marks a major step in the growth of Pelican, which is building on a solid foundation to diversify its offering in the North American and international outdoor market. A small, family-owned company, GSI Outdoors makes hydration, cookware and dining products that bring the comfort of home cooking practices to the great outdoors. Since 1985, GSI Outdoors has produced innovative dining gear for use at the campsite, on the trail, and everywhere in between. Pelican International is a world leader within the paddle and nautical sports industry. Renowned for exceptional quality, innovation and expertise, Pelican has become the foremost global authority in the design and manufacture of kayaks, canoes, pedal boats, stand-up paddle boards (SUPs), fishing boats, and watersport accessories.
In response to a shifting industry, a longtime local bike shop chain is under new ownership. Carytown Bicycle Co. has been sold to California-based Specialized Bicycle Components for an undisclosed amount. Specialized is a giant in the cycling industry, offering bikes, parts and other accessories since 1974. CBC had been a dealer of Specialized goods prior to the sale. CBC was founded in Carytown in 2007 and expanded to Midlothian in 2015 and Short Pump in 2017. Specialized has been acquiring independent shops all over the globe. In the last year, the brand has reportedly purchased bike shops of sizes similar to CBC in Michigan, Indianapolis and California, as well as internationally in Australia.
Cosmetics & Pharmacy
L Catterton is going bigger in hair extensions — and sees plenty of opportunity for more growth as the category develops. The consumer private equity giant started in the area last year, acquiring control of extension specialist Beauty Industry Group. Now, BIG has closed a deal to buy Bellami Hair, expanding its portfolio to 14 extension brands and opening up a new avenue of distribution. Bellami, which was founded by Nikki Eslami and Julius Salerno in 2012, skips the distributor and sells its 100 percent Remy human hair extensions directly to salons with independent sales reps, a digital approach and educational support specialists. That’s another angle on a category that Derrick Porter, chief executive officer of BIG, said is still in the early days of a dramatic growth curve. “Right now only about 15 to 20 percent of hairdressers are offering hair extensions as a service,” Porter told WWD. “And only about 3 percent of American women are using hair extensions as a product.”
Reports are circulating that L’Oréal, the world’s largest beauty company, is said to be acquiring Byredo, the luxury fragrance brand founded in 2006 by Ben Gorham that has since expanded into color cosmetics, leather goods and eyewear. The brand, which has been backed by family office Manzanita since 2013, is said to have been considering deal options since last September, when it reportedly hired Goldman Sachs to consider a deal. Executives from L’Oréal had no comment. Manzanita declined to comment, saying it does not comment on media speculation. Gorham could not be reached for comment. Gorham did acknowledge in an interview last year with Beauty Inc that the brand was exploring its options. “I partnered with Manzanita about 10 years ago and together we realized an incredible vision,” he said. “The current discussions have more been about what the next five to 10 years look like — it is an exploration, but right now nothing more than that.”
Discounters & Department Stores
Walmart’s sales growth slowed in the first quarter, and the retailer’s U.S. operating income took a $1 billion haircut. Comparable sales in the U.S. rose by 3% and were up 9% from 2020. CEO Doug McMillon said on a conference call that inflation took a toll on company’s top and bottom line, with fuel, container, storage and other costs spiking. At the same time, customers pulled back spending on high-margin general merchandise to compensate for rising food prices. McMillon said that fuel costs alone were $160 million more than expected. In the U.S., the company’s gross profit rate fell slightly (by 38 basis points), most of the drop related to higher-than-expected supply chain, fuel and fulfillment costs.
Dillard’s on Thursday reported that total retail sales (excluding the company’s construction business) rose 22% to $1.6 billion, with store comps up 23% year over year. Retail gross margin expanded to 47.3% of sales, a record high, from 42.6% a year ago, per a company press release. The strongest categories were men’s apparel and accessories, women’s apparel and juniors apparel. Net income rose 59% year over year to $251.1 million, the company said.
Emerging Consumer Companies
Business cards feel almost as outdated as Victorian calling cards, but they are still a networking staple. Melbourne-based Blinq, a digital business card brand, announced a $3.5 million USD raise to do away with traditional business cards. The investment was led by Blackbird and Square Peg Capital. The Blinq app generates a QR code that shows your professional info, including social media links, as soon as someone scans it, even if they don’t have the app installed. A Blinq profile can also be shared through NFC cards, short links, email signatures and video call backgrounds. Users have the option of creating multiple profiles so they can control who sees what information, like their company websites, Calendly and LinkedIn. It integrates with CRM platforms and directories like Salesforce, HubSpot and Azure AD.
Eco-friendly cleaning brand Blueland officially stepped into personal care last week, with the launch of its powder-to-gel refillable body wash. The body wash comes in three scents and takes an hour to become a gel after being combined with water within the refillable “Forever Bottle,” keeping in line with the company’s mission to reduce single-use plastic. The company says a reason for creating the powder-to-gel body wash, instead of being a liquid from the onset, is to avoid the heavy shipping weights that have larger carbon emissions. The announcement follows news in February that the company raised $20 million to help it expand its presence in home cleaning and launch into new product categories. Blueland launched in 2019 to provide more sustainable alternatives to cleaning products using single-use plastic. It reports having diverted over 1 billion single-use plastic bottles from landfills and oceans.
Food & Beverage
Good Good, a brand of Icelandic snacks and pantry staples, has closed a $20 million Series B funding round led by SÍA, a private equity group in Iceland, along with additional private investors. Founded in 2015, Good Good markets a line of jams, spreads, nutrition bars, syrups and sweeteners formulated with no added sugar. The products are available online at Amazon.com, Walmart.com and goodgoodbrand.com and at more than 10,000 retail locations in 36 countries. The brand recently gained distribution for its strawberry and raspberry jams, concord grape jelly and chocolate spread in 3,500 Walmart locations. Good Good has expanded its team in Iceland, the United States and The Netherlands in recent months. The new funding will support product development and marketing efforts, according to the company. Its latest launch is a low-carbohydrate peanut butter spread made with chicory root fiber.
J&J Snack Foods Corp. has entered into an agreement to acquire Dippin’ Dots, LLC for $222 million, subject to customary purchase price adjustments. The transaction is expected to close by the end of June. Headquartered in Paducah, Ky., Dippin’ Dots uses a cryogenic freezing process to produce beaded ice cream, yogurt, sherbet and flavored ice products distributed in thousands of franchise locations, theme parks, stadiums, arenas, zoos, movie theaters and events. The company has a main production facility, warehousing, distribution and administrative offices in Paducah and leases four additional warehouses in California, Canada, Australia and China. The transaction will be funded through a combination of cash and senior debt financing and is expected to be accretive to earnings per diluted share in the range of 30¢ to 40¢ per share in the first 12 months after closing, said Ken Plunk, chief financial officer of J&J Snack Foods.
Food tech start-up, Tomorrow Farms, has raised $8.5 million in a seed funding round led by Lowercarbon Capital, a climate tech-focused fund, with participation from Maveron, Valor Siren Ventures, Simple Food Ventures and SV Angel. Founded in 2021, Tomorrow Farms partners with “deep-tech” food companies to build food and beverage brands, and is aiming to reinvent pantry and refrigerator staples “so they’re better for people, kinder to animals and easier on the planet”. With the capital, the company is looking to grow its team, launch its first product this summer and find new food technology partners to address some of the biggest problems facing the food system. Tomorrow Farms has raised a total of $10.5 million in funding to date.
Grocery & Restaurants
Brinker International Inc. CEO and President Wyman Roberts last week announced plans to retire in June and he will be replaced by Kevin Hochman, who is departing from his position as president of KFC U.S. For Roberts, the move will mark the end of an era after 17 years with the Dallas-based parent to Chili’s Grill & Bar, Maggiano’s Little Italy and two virtual brands. Roberts, who is also president of Chili’s and a board member, will officially retire June 5 but he will continue to serve in an advisory role for 12 months as part of the succession plan, the company said. The board appointed Hochman as Brinker’s president and CEO, president of Chili’s and a board member, beginning June 6. Roberts was named president and CEO of Brinker in January 2013, though he held various leadership roles with the company since August 2005, including serving as president of Chili’s, CMO of Brinker and president of Maggiano’s. Under his leadership, Brinker has invested in modernizing the brands with tech innovations that have include drone delivery and robots in Chili’s units. In 2020, the company also launched the successful It’s Just Wings virtual brand for delivery only out of Chili’s restaurant kitchens, and expanded virtual offerings with the more recent addition of Maggiano’s Classics. Hochman also announced on Monday his plans to leave Yum Brands Inc. — initially saying he planned to “assume a senior position at another public company.”
Woworks acquires Barberitos and Zoup Eatery
Saladworks and Garbanza Mediterranean Fresh parent company, WOWorks announced Thursday the acquisition of fast-casual burrito and bowl concept, Barberitos Southwestern Grille and Cantina, and fast-casual soup and sandwich concept, Zoup Eatery, for an undisclosed amount. As a result of these acquisitions, Centre Lane Partners, LLC-owned WOWorks now has six brands and 400 total restaurants in its portfolio. “Today, we welcome both Barberitos Southwestern Grille and Cantina and Zoup Eatery to the WOWorks family,” Kelly Roddy, CEO of WOWorks said in a statement. “These brands share our overall goal to grow into one of the largest plant-forward, good-for-you companies in the restaurant sector. Equally as important, both brands are in direct alignment with our WOWorks vision, mission and shared values.” Barberitos was founded in 2000 in Athens, Georgia and has 54 taco and burrito restaurants throughout the Southeastern region of the United States. Zoup was founded in 1988 in Southfield, Michigan as a soup and sandwich eatery in the mid-central region of the United States. Zoup’s stores will be joining the WOWorks team but Zoup Specialty Products, LLC, will continue to operate separately by Eric Ersher, the founder and previous CEO of Zoup Systems. WOWorks was founded in 2020 as a company of mainly plant-based and/or healthful brands, including SaladWorks, Frutta Bowls, Garbanzo Mediterranean Fresh, and The Simple Greek.
McDonald’s said Thursday it has struck a deal to sell its Russian business to its current licensee in the market, Alexander Govor. Govor will acquire all of McDonald’s locations in Russia and will operate them under a new brand. He also agreed to retain employees for at least two years, on equivalent terms, and fund the salaries of corporate employees who work in 45 regions of the country until the deal closes and existing liabilities to suppliers, landlords and utilities. Financial terms of the deal were not disclosed. The sale is expected to close in the coming weeks if it secures regulatory approval. It spells the end of an era for the fast-food giant, which first entered the country just months before the Soviet Union dissolved. “McDonald’s in Russia embodied the very notion of glasnost and took on outsized significance,” CEO Chris Kempczinski wrote in a letter to the McDonald’s system on Monday after the company announced its intent to sell. In the three decades since opening its first location in Moscow, McDonald’s had grown its Russian business to roughly 850 locations. In early March, after the Kremlin invaded Ukraine, McDonald’s said it would temporarily shutter its Russian locations. The company said in late April that the suspension of its operations in Ukraine and Russia due to the war cost it $127 million during the first quarter. And on Monday, it revealed it was planning to sell the business. Govor operates 25 McDonald’s locations in Siberia and has been a licensee of the fast-food chain since 2015.
Home & Road
The Home Depot came fast out of the gate in its first quarter, with strong earnings and record sales. The home improvement giant’s net sales rose 3.8% to $38.91 billion in the quarter ended May 1, easily topping expectations of $36.71 billion. Same-store sales increased 2.2%. Comparable sales in the U.S. increased 1.7%. Net income totaled $4.23 billion, or $4.09 per share, up from $4.15 billion, or $3.86 per share, in the year-ago period. Analysts were looking for earnings of $3.69 per share. It was the first quarter with new CEO Ted Decker at the helm. The Home Depot veteran took the reins of the chain on March 1. “Fiscal 2022 is off to a strong start as we delivered the highest first-quarter sales in company history,” Decker stated. “The solid performance in the quarter is even more impressive as we were comparing against last year’s historic growth and faced a slower start to spring this year.”
Lowe’s Cos. reported first-quarter profit that easily topped expectations, but its sales fell short, hurt by unseasonably cold temperatures in April. “Because 75% of our customer base is DIY, our Q1 sales were disproportionately impacted by the cooler spring temperatures,” stated Marvin R. Ellison, Lowe’s chairman, president and CEO. “Now that spring has finally arrived, we are pleased with the improved sales trends we are seeing in May.” Net income rose to $2.33 billion, or $3.51 a share, for the quarter ended April 29, from $2.32 billion, or $3.21 a share, in the year-ago period. Analysts had expected earnings per share of $3.22. Sales declined 3.1% to $23.66 billion, below estimates of $23.77 billion. Same-store sales fell 4.0%. U.S. same-stores sales decreased 3.8% to beat expectations of down 4.2%. “Despite some increased uncertainty in the macro environment, we remain confident in the outlook for the home improvement market and our ability to deliver operating margin expansion in 2022,” Ellison said.
High-end furniture and accessories brand Maitland-Smith has acquired luxury case goods firm Scarborough House. Maitland-Smith, which is part of the Rock House Farm Family of Brands, parent company of other brands including Century Furniture and Hickory Chair, will incorporate a selection of the existing designs as part of a collection. The Scarborough House collection for Maitland-Smith will comprise more than 150 unique items and will be available to order June 1. Maitland-Smith manufacturers luxury accent furniture, lighting, and accessories. The company is known for its handcrafted work, including hand-carved tropical mahogany, exotic wood veneers, lost wax case metal mounds, and traditional tanned and hand-tooled leather. Scarborough House offers handcrafted English reproduction furnishings of heirloom quality across the bedroom, office, dining, reception, game room and living room categories.
Motion and stationary upholstery manufacturer Manwah Holdings Ltd. posted a 28.6% revenue increase for its fiscal year ending on March 31. The company reported its year end figures to the Hong Kong stock exchange and its investors today. Revenues were $2.78 billion for the year, given in U.S. dollars, compared with $2.16 billion for the same period last year. Profits grew 16.8% to $286.33 million, up from $245.18 million during the same period last year. Despite the large revenue and profit growth, net profit margin declined 1.2% to 10.5% compared with last year’s margin of 11.7%. The company said its margins were impacted by increases in raw materials costs during the past year: Leather increased by 24.8%, steel was up by 23.2%, wood was up by 61.2%, chemicals were up by 14.3%, and packing paper increased by 14.4%. Additionally, transportation and port expenses increased by 31.7%, while customs duties for exports increased by 43.3%.
Furniture and home furnishings sales grew modestly in April, reflecting the overall retail picture, according to advance estimates from the Department of Commerce. But even with slow growth, those numbers remain ahead of 2021’s pace. For the month, furniture and home furnishings stores recorded an adjusted $12.173 billion in sales, up 0.7% from March’s $12.094 billion. That figure is also 0.8% ahead of April 2021’s $12.072 billion. The overall retail and food services sector posted $677.711 billion in April, up 0.9% from March’s $671.648 billion. However, where furniture and home furnishings sales were up only slightly year-over-year, the overall retail picture is well ahead of 2021’s pace, posting an 8.2% gain from $626.430 billion last year.
Jewelry & Luxury
Brilliant Earth Group reported strong results for its first quarter of 2022, but its stock declined steeply after the company announced it was lowering its guidance for the full year. Net sales for the period (ended March 31) came to $100 million, a 41.5% increase over the prior year. Net income was $3.5 million for the quarter. Adjusted EBITDA was $8.4 million. But the company’s stock took a huge hit—at the time of publication, it was trading at around $4—when it lowered earnings guidance for the full year. It now expects to do between $450 million and $470 million in business for the year and between $30 million and $40 million in adjusted EBITDA. In March, it said that sales would come in between $485 million and $500 million and that adjusted EBITDA would range from $51 million to $55 million.
De Beers Group continues to see strong demand for rough diamonds, with 2022 sales pacing 21 percent ahead of last year. In its fourth sales cycle of the year (May 2-17), De Beers sold $604 million in rough to sightholders and auction customers. That is a 57 percent increase from the fourth sales cycle of 2021 ($385 million) and is up 7 percent from $566 million in April, which is unusual as rough diamond sales typically decrease between April and May. Year-to-date, De Beers’ rough diamond sales have totaled $2.48 billion, up 21 percent from $2.05 billion at this point last year.
Italy’s Zegna is aiming for revenue above 2 billion euros ($2.1 billion) in the medium term, up from the 1.29 billion euros posted last year, the fashion group said on Tuesday at its first Capital Markets Day since its debut on Wall Street in late 2021. The family-owned group is targeting an adjusted operating profit margin of at least 15% in the mid-term from a level of around 10% achieved in 2021. The group, which controls Italy’s luxury menswear brand Zegna and U.S. label Thom Browne, expects a rise in store productivity to drive the growth in revenues, that should “more than offset” the increasing marketing investments planned to support the brands’ expansion.
Watches of Switzerland closed out its fiscal year on a high note, posting double-digit revenue growth for the fourth quarter and the full year. “We have delivered another record year of revenue and profitability as we continue to progress our long-range plan,” said CEO Brian Duffy. “We delivered an outstanding performance in both the U.S. and U.K., supported by broad-based sales growth across our portfolio of world-leading partner brands and driven by domestic clientele.” Here are five important takeaways from its recent earnings report. Watches of Switzerland had a good year. In the fourth quarter ending May 1, the company posted £304 million ($378 million) in total revenue, up 48 percent year-over-year.
Luxury brands face a slump in China as major cities battle to bring Covid-19 cases under control. There is only so far America’s big spenders can help. Shanghai, home to around 15% of mainland China’s luxury stores, is just starting to emerge from a grueling lockdown. Beijing, where a further 13% of the country’s designer boutiques are based, is in “shadow” lockdown, with schools, restaurants and bars closed. Luxury companies such as LVMH Moët Hennessy Louis Vuitton and Gucci’s owner Kering say that footfall is lower even in cities that don’t face restrictions due to a drop in domestic tourism. Most listed European brands exited the first quarter with sales in mainland China down 30% to 40%, according to UBS estimates.
Holly McHugh, who served as Tiffany & Co.’s director of responsible sourcing for four years, has moved to Mejuri as the jewelry e-tailer’s vice president of sustainability, she announced on LinkedIn. McHugh worked at Tiffany & Co. as director of responsible sourcing, from July 2018 to May 2022, her profile says. Before that, she was head of social compliance for Kering, based in Hong Kong. McHugh is yet another sourcing executive to depart Tiffany following its 2021 purchase by LVMH. Andy Hart, the senior vice president of diamond and jewelry supply, is now chief manufacturing officer for the Shade Store.
Office & Leisure
N3twork Studios has raised $46 million in funding to make high-quality blockchain games. Griffin Gaming Partners led the round with participation from Kleiner Perkins, Galaxy Interactive, KIP, Floodgate, LLL Capital, and N3twork Inc. As part of the financing, Griffin Gaming Partners’ Peter Levin will join the board of directors for the studio, which spun out of N3twork Inc. as Forte acquired N3twork Inc. The funding will help further the development and launch of the studio’s first two blockchain games, Legendary: Heroes Unchained and Triumph. “We’re a group of passionate veteran game makers who see a generational opportunity to leverage our expertise building and operating free-to-play games to create authentic web3 experiences that can reach audiences of millions of players,” Matt Ricchetti, president of N3twork Studios, in a statement.
As more people resume travel and plan vacations, retailers and consumer product companies including U.S. discount chain Target and cosmetics maker Coty are benefiting from a jump in luggage sales and increased spending at airports. Duty-free shops and makers of travel-related items, such as suitcases, saw sales stall during COVID-19 lockdowns across the world, but travel-related business is taking off again. United Airlines (UAL.O) last month forecast the highest quarterly revenue in its history. Target Corp (TGT.N) said on Tuesday ahead of its quarterly earnings release that luggage sales grew by half in the first quarter of 2022. Samsonite International S.A. (1910.HK), which also makes bags under Tumi and American Tourister brands, last week said its quarterly sales rose 75% from a year earlier. Commerce Department data for March, the latest available, showed the share of total spending devoted to recreation, accommodation and dining out climbed to a pandemic-era high of 10.33%. That is up from just over 6% early in the health crisis. A higher number of travelers passing through airports is also lifting prospects for goods sold at stores there, such as perfume, designer makeup and liquor.
GameStop has hired Nir Patel as its new chief operating officer effective on May 31, the company said in a securities filing. Patel comes from Belk, where he served as the department store’s chief executive for less than a year before his resignation was announced late last week. Patel also served as a senior merchandising executive with Kohl’s. At GameStop, Patel is set to make a base salary of $200,000 and is eligible for $3.4 million in sign-on bonuses. Patel’s offer also calls for a $14 million equity grant as well as a $21 million stock grant for forgoing equity awards and compensation from his previous employer (Belk) in taking the offer. Patel will become the second COO to start at GameStop since March 2021 as the company tries to transform itself and adapt to structural changes in the gaming business. Jenna Owens was the last person to fill that role. Owens, a veteran of Amazon and Google, left in October after just seven months on the job. GameStop never explained the reason for her departure.
Technology & Internet
Amazon is turning to its legions of contracted Flex drivers to deliver packages from mall-based retailers, allowing sellers to ship products from their own stores using the e-commerce giant’s delivery service. Amazon has been notifying some Flex drivers in recent months that it’s testing a new program where workers fetch packages from retailers in their area and drop them off at customers’ doorsteps, Amazon said in a notice to drivers that was viewed by CNBC. “Amazon Flex is testing a new offer type near you,” the notice says. “Retail delivery offers will allow you to pick up and deliver pre-packaged orders directly from non-Amazon retail stores in participating local shopping centers.” The notice was sent to drivers in Las Vegas and only includes orders placed at stores in Fashion Show Mall, a 2-million-square-foot shopping mall located on the Las Vegas Strip. It’s unclear what stores are participating in the test.
A new filing with the Securities and Exchange Commission sheds light on the Twitter board’s early conversations with billionaire Elon Musk as he decided to join the board, and later, abandon that plan and try to take over the company. The board eventually agreed to sell to Musk for $44 billion, though the Tesla CEO has said the deal is on hold as he studies the number of spam and bot accounts on the platform. Tuesday’s filing reveals a timeline of conversations from Twitter’s perspective in the lead-up to the deal, beginning on March 26, when Musk reached out to former CEO Jack Dorsey “to discuss the future direction of social media.” That same day, Musk also reached out to Twitter board member Egon Durban and the two discussed the possibility of Musk joining the board. The following day, Musk spoke with Twitter board Chair Bret Taylor and CEO Parag Agrawal about his interest in Twitter, saying he was considering joining the board, trying to take Twitter private or starting a competitor.
Google on Wednesday unveiled an expanded lineup of hardware products in the latest sign it remains committed to moving beyond its core advertising business and competing with the likes of Apple. At its first in-person developer conference in three years, Google announced three new smartphones and its first in-house smartwatch as well as plans to release a new tablet next year. Google also announced updates to several of its most popular tools including Maps, Google Translate and its core search product. Google surprised fans of its smartphone lineup on Wednesday by teasing two new flagship devices — the Pixel 7 and Pixel 7 Pro. While the company didn’t share many details, the two smartphones are expected to be released this fall
Finance & Economy
Consumers kept spending in April, with retail sales rising about in line with Wall Street expectations despite an ongoing surge in prices. Monthly sales rose 0.9% overall, just below the Dow Jones estimate for a 1% increase, the Commerce Department reported. Excluding autos, sales increased 0.6%, which was better than the 0.4% estimate. The numbers are not adjusted for inflation, so they are indicative both of sustained spending as well as the fastest acceleration in prices the U.S. economy has seen in about 40 years. April’s gains were powered by a 4% gain from miscellaneous retail and a 2.1% jump in online sales. Bars and restaurants also showed a solid 2% increase. All three categories posted larger gains than in March.
On every retail company earnings call of the last week or so, including Walmart, Target, Home Depot and Lowe’s, executives trumpeted the strength of consumer spending. “I would think if consumers were concerned, or if you were starting to see consumer spending slow, you wouldn’t see them still spending on $400,000 houses and $200,000 boats and RVs and stuff like that,” said Brian Yarbrough, an analyst with Edward Jones. “Maybe that’s to come.” For the most part, big retailers are still reporting sales growth, just not at the same supercharged levels as they did for part of 2020 and much of 2021. During the pandemic, consumers dined out less and cut back on travel. Fueled with stimulus checks, they shifted their spending toward goods. Demand outstripped supply, and manufacturers weren’t able to keep up, which has been one factor pushing inflation to decades-high levels in recent months. There are signs that some of that spending has started moving back to services.