In a year in which seemingly nothing has gone as it usually does, Walmart has just added to this year’s long list of anomalies. The Company announced that all stores will be closed on Thanksgiving this year, breaking the tradition of kicking off the Holiday shopping season the night before Black Friday for the first time since the late 1980s. John Furner, President and CEO of Walmart US, said that he hopes employees will enjoy Thanksgiving at home with loved ones after the trying year we have all endured. While Walmart’s lone stated reason for this change is to allow workers to be with their families on the holiday, it is likely that the company also had two other considerations in mind: the challenge of managing crowds in the face of COVID-19, and the prospect of pivoting sales toward ecommerce.
COVID-19 has upended virtually every event and activity that results in or relies upon big crowds, and major shopping events such as Black Friday are likely to be impacted as well. It is easy to imagine proper social distancing and mask wearing protocols breaking down if customers aggressively compete for door-buster deals again this Thanksgiving and Black Friday. Big rushes could put employees and customers in danger of infection. In addition to the obvious health hazards, resulting outbreaks could weigh on foot traffic, create legal risk and staffing issues, and would be a negative for the public’s perception of Walmart. Of course, closing on Thanksgiving won’t solve the problem of big crowds if Black Friday is staged in the same way this year that it has been recently, but perhaps this announcement will be the first in a series by Walmart and other retailers rethinking door-busters and other traffic-driving initiatives.
Another likely consideration in making this decision is the ongoing shift of consumer spending to ecommerce. Walmart should be able to mitigate the impact of being closed on Thanksgiving (at least partially) for three reasons. First, Thanksgiving and Black Friday shopping has already been shifting online for years. According to ShopperTrak, foot traffic decreased by 6% during the holiday in 2019, while Adobe Analytics reports that total online sales grew by 17%. Second, this growth in ecommerce has been eroding Black Friday’s importance in the Holiday shopping season for years now. Black Friday and Cyber Monday are no longer the only days on which great deals can be found. Online deals have been stretched out into the week leading up to Thanksgiving, over the weekend, and into the next week, diluting the urgency to shop and buy on only the well-known shopping days. Third, closing stores on Thanksgiving and diverting shoppers online will give the company an opportunity to merchandise the website in ways that may not be as easy to execute in stores. For instance, perhaps Walmart will offer discounts for signing up for its new Walmart+ loyalty program. At the very least, the website may be easier to update when “door-buster” deals run out of stock than it is to correct the same problem in physical stores.
Letting workers be with their families on Thanksgiving is a great gesture by Walmart, especially given what a trying year 2020 has been. At the same time, two strategic questions, managing the risks of COVID-19 and continuing to leverage ecommerce’s growth, were likely driving factors behind the decision. Well played by Walmart, killing three birds with one stone.
Headlines of the Week
The retailer went big in the new millennium, even as clothing sales growth shrank. Its Chapter 11 filing Thursday isn’t just about the pandemic. Ann Taylor and Lane Bryant owner Ascena last year pushed back on the notion that it was anywhere near bankruptcy — its interim board chief in October pointed to its “large iconic brands and a business with significant liquidity” — and it doubled down on that as recently as March. That didn’t last. The company is restructuring under Chapter 11, filing documents on Thursday in the U.S. Bankruptcy Court for the Eastern District of Virginia that include a restructuring support agreement with more than 68% of its secured term lenders, $150 million in a new term loan from existing lenders and a plan “to significantly reduce debt” by about $1 billion, according to a company press release. It won’t emerge unscathed. After ditching its discount banners last year, (liquidating Dressbarn and all its 544 stores and selling a majority stake in Maurices), Ascena is now further dismantling its stable. That includes selling its Catherine’s plus-size banner to online plus retailer City Chic, closing all Catherine’s stores in the process. Stores run by its Justice tween brand will close, probably a significant number.
Consolidation continues apace in the world of e-commerce, and today it was the turn of the classified ads market. eBay has announced it had reached a deal to sell off its Classifieds business unit to Adevinta, a Norway-based classified ads publisher majority owned by Norwegian publisher Schibsted. The deal is valued at $9.2 billion, which includes eBay getting $2.5 billion in cash and 540 million Adevinta shares. It caps off months of speculation about the future for the classifieds business, which has come out of long-term pressure spurred by activist investors for eBay to rationalise what had once been a sprawling e-commerce business empire.
Apparel & Footwear
A company known as Sparc LLC, which is comprised of the U.S. mall owner Simon Property Group and the apparel-licensing firm Authentic Brands Group, is making a $305 million bid for bankrupt Brooks Brothers, a court filing said Thursday. The offer, still subject to better and higher bids and court approval, is to keep at least 125 of Brooks Brothers’ stores open for business, the filing said. A court hearing to approve the bid has been set for Aug. 3, while other competing offers are due by Aug. 5, according to the filing. A hearing to approve the final sale of Brooks Brothers’ assets is set to take place Aug. 11. WHP Global, a rival to ABG, is also preparing a bid for Brooks Brothers, the company told CNBC. “It’s early innings in the Brooks Brothers bankruptcy sale process,” WHP Chairman and CEO Yehuda Shmidman said in a statement. “We are big believers in the power of the Brooks Brothers brand, the global footprint and the management team.”
Tailored Brands, which owns suit sellers Men’s Wearhouse and Jos. A. Bank, is shuttering hundreds of stores and drastically reducing its corporate workforce as the coronavirus pandemic continues to decimate the retail industry. The company has identified 500 stores for closures and said it’s cutting 20% of its corporate positions in hopes of strengthening its “financial position and enable it to compete more effectively in the challenging retail environment,” according to a release. The company has around 1,500 stores in the United States, with about half operating under the Men’s Wearhouse name. The store closures and resulting layoffs will cost the company $6 million in severance payments and other termination costs, Tailored Brands said. The stores will close “over time” and it has not “yet quantified the expense savings and costs related to potential store closures.” Tailored was reportedly nearing bankruptcy and talking with advisers for the past few months.
L.L. Bean announced that it is entering into wholesale partnerships for the first time in its history. The retailer’s launch into wholesale will be with Midwestern sporting goods retailer Scheels, Nordstrom and Staples, where backpacks and accessories will be sold during the back-to-school season. L.L. Bean has been working on its wholesale initiative for over a year. The three partnerships will place its products in more than 1,200 stores as well as each retailer’s online channel. L.L. Bean is expanding the reach of its products and brand by partnering with other retailers via wholesale for the first time in its history. The goal is to broaden its omnichannel approach and strategy, the company said. “As a 108-year old retailer, we believe in the longevity and strength of the industry while also recognizing that the way customers shop and interact with brands will continue to shift and evolve quickly,” L.L. Bean President and CEO Stephen Smith said in a statement. The retailer currently operates stores in 54 locations throughout New England and the Atlantic region.
Coldwater Creek is holding a sale — a big sale — amid strong signs that it may be going out of business. The struggling women’s apparel retailer is holding a 70%-off everything sale on its website, with all sales final. The new Coldwater Creek catalog is offering the same promotion. “It’s time to say goodbye,” the retailer states on its e-commerce site. “Every brand has a story and ours has taken an unexpected turn. “We may be saying goodbye before too long so we’re taking 70% off everything. Thanks for being part of our family & history.” Founded in 1984 as a catalog retailer, Coldwater Creek went on to open stores nationwide. The company filed for Chapter 11 bankruptcy in spring 2014 with plans to liquidate and close its more than 300 stores. Coldwater Creek has 13 stores, all of which were shuttered due to the pandemic. As of July 20, the stores are all marked “temporarily closed” on the company’s website.
Athletic & Sporting Goods
Report: Topgolf Exploring Going Public
Topgolf International Inc. is discussing going public through a merger with Churchill Capital Corp. II, a public investment vehicle, according to a report from Bloomberg. In January, Reuters reported Topgolf was in talks with investment banks about hiring underwriters to support an IPO as soon as this year. As of May, Topgolf International owned and operated 57 golfing centers (54 in the U.S. and 3 in the UK) with 10 additional facilities under construction in the U.S. There is also one international franchise venue in Australia.
New owners have been approved for the embattled French wheel maker Mavic, with a court in Grenoble approving the takeover of the Tour de France technical partner by the Bourrelier group. Formerly Bricorama, the Bourrelier Group specializes in DIY retail, also owning the Gamma and Karwei hardware chains in Belgium and the Netherlands. They beat out 13 other investment groups including one championed by former Tour de France winner Bernard Hinault.
Cosmetics & Pharmacy
IEVA Group — the connected beauty group linking wellbeing, tech and the environment — keeps developing at a rapid clip, most recently with a new funding round, application and personalized subscription service, and the acquisition of Atelier du Sourcil. IEVA is meant to disrupt the personalized beauty model while remaining in sync with the executive’s quest to enhance human life. The brand has connected jewelry, introduced in January 2019 and commercially deployed in May and June, that measures environmental stressors and physical activity. That was linked to a mobile app, which gave preventative and personalized beauty recommendations based on the environmental information and diagnostic results. IEVA has just raised a new round of financing, of 12 million euros, led by Crédit Mutuel Innovation and combined with non-dilutive leverage of 5 million euros. The pool of IEVA’s investors now includes SEB Alliance. IEVA also said it acquired Atelier du Sourcil’s 109 boutiques, including 45 fully owned and 64 franchised locations, which are mostly in France, but also found in Belgium, Luxembourg, Spain and Morocco.
Ulta Beauty continues to refine its near-term new store plans as it continues to navigate the impact of COVID-19. The beauty giant expects to open approximately 30 new stores in fiscal 2020. (Pre-pandemic, Ulta planned to open about 75 stores). The retailer temporarily paused its new store growth in the first quarter due to the pandemic, but openings are expected to resume in August 2020. Ulta did not reveal store openings plans for fiscal 2021, saying only that it anticipates opening additional new stores in the U.S. Also, the retailer said it will make its entry to Canada in mid-2021 with a number of stores. In addition, after evaluating its existing store portfolio, Ulta plans to permanently close 19 stores in the second and third quarter of 2020. (As of May 2, 2020, the company had 1,264 retail stores across 50 states.)
Unilever announced its results for the first half of 2020, showing an overall sales decline of 0.1% and a personal care and beauty sales decline of 0.3% with volume growth of 0.1%.
According to the company, skin cleansing saw mid-teens volume-led growth in response to preventing the spread of COVID-19. There was, however, a lower demand for skin care, deodorants and hair which was also as a result of the pandemic amid restricted living. Unilever reported consumer oral care demand to remain robust, but the category saw negative volumes related to disruption by lockdowns.
Discounters & Department Stores
Walmart said Tuesday that it will give another round of bonuses to hourly employees and close its stores on Thanksgiving Day. The big-box retailer said in a news release that it will spend about $428 million on the bonuses to thank employees for working during the coronavirus pandemic. Full-time hourly employees will receive $300 and part-time and temporary workers will get $150. The company will pay the bonuses on Aug. 20. Walmart is the largest grocer and private sector employer in the country. So far, it’s hired more than 400,000 employees during the pandemic to help stock shelves, clean stores and keep up with online orders, according to a company spokesperson.
It has hardly been a year since lucky invitees danced the night away and sipped champagne throughout a sprawling new Neiman Marcus department store in Manhattan, with the opening party featuring a special performance by Liza Minnelli. Now in bankruptcy proceedings, the department store chain said in a court filing Thursday it is vacating the glitzy Hudson Yards shopping mall on Manhattan’s West Side. A Neiman Marcus spokesman said the company is closing its Hudson Yards location for good, along with two stores in Florida — Fort Lauderdale and Palm Beach — and in Bellevue, Washington.
J.C. Penney Co Inc said on Monday certain lenders had agreed to accept a business plan on certain conditions as the department-store operator looks to emerge from bankruptcy protection. Plano, Texas-based Penney has until July 31 to meet the conditions, according to a regulatory filing. It has also agreed to various changes to milestones similar to those set forth in the debtor-in-possession financing agreement.
Emerging Consumer Companies
Hims, the online provider of healthcare and consumer products ranging from hair loss treatments to Viagra, is exploring going public through a merger with a blank-check acquisition company that could value it at more than $1 billion. The company has been capitalizing on rising demand for telemedicine consultations amid the coronavirus outbreak by using its website to connect consumers seeking to buy prescription medicines with physicians.
Italic, an online seller of premium products from clothing to cookware, is taking a second crack at a membership model. The company began nearly two years ago as a $10-a-month club for people who wanted access to lower-priced luxury goods. About fifteen items were available, and customers could only buy two items a month. Now, Italic offers membership at $100 a year, and members can shop more than 100 goods.
Grocery & Restaurants
Vive Organic, a manufacturer of cold-pressed wellness drinks, has closed a $13 million Series B funding round led by Monogram Capital with participation by Cambridge SPG and Powerplant Ventures. Vive plans to deploy this capital to expand its digital footprint, foster its innovation pipeline and make its plant-based products more accessible to consumers nationwide, the company said. Founded in 2015 by chief executive officer Wyatt Taubman, chief operating officer Kyle Withycombe and vice president of sales JR Simich, Vive Organic offers a range of wellness shots formulated with a focus on boosting the immune system.
With their communal tables, crowded elbow-to-elbow indoor spaces, and long lines for food, the social-driven atmosphere of traditional food halls runs counter to today’s social-distancing rules. Despite the obstacles, food halls are evolving like the rest of the restaurant industry to survive the COVID-19 crisis, which is worsening across the nation. Culinary walkabouts — stretching from Southern California to Nebraska to Texas — are determined to adapt to maintain their communal spirit. Some are hosting socially distanced cornhole games, virtual Bingo, live outdoor music and virtual food events to keep diners together safely, while others are offering a digital food hall experience for the first time with contactless pickup and delivery from any of their vendors.
Home & Road
StoreBound, the maker of small electrics and other home and housewares products under the Dash, Sobro and Chef Geoffrey Zakarian brands, is signing a deal with Paris-based Groupe SEB, which is taking a majority stake in the company. StoreBound, which realized more than $100 million in sales in the past 12 months, was founded about eight years ago by Evan Dash and his wife Rachel. Dash, who is CEO, told HFN that he will remain in that role after the transaction is completed July 31, and his entire staff of about 50 employees will stay intact. Thierry de La Tour d’Artaise, CEO of Groupe SEB, said, “With the investment in StoreBound, we will strengthen our presence in the American housewares market. With its strong and innovative business models and brands, StoreBound is very complementary to our consumer business in the U.S.”
Bed Bath & Beyond and 1-800-FLOWERS.COM have settled their lawsuit over the previously announced sale of PersonalizationMall.com, the two companies said. As part of the agreement, 1-800-FLOWERS.COM has agreed to move forward with its purchase of PersonalizationMall.com from Bed Bath & Beyond for $245 million, subject to certain working capital and other adjustments. Bed Bath & Beyond had sued 1-800-FLOWERS earlier this year for postponing the purchase of the personalized gift website. The companies anticipate the transaction to close on or before Aug. 3, 2020, subject to customary closing requirements. The closing of the transaction is not subject to any regulatory or financing conditions. Upon close of the transaction, Bed Bath & Beyond will withdraw its existing litigation against 1-800-FLOWERS.COM and 800-FLOWERS INC. related to the purchase agreement previously announced on Feb. 18.
Jewelry & Luxury
Jewelry chain Zales has debuted a new program to feature the collections of talented emerging designers. The retailer’s Designer Spotlight program, which launched this month, is designed to quickly onboard upstart collections to a new online retail marketplace on Zales.com. The company is currently searching for “maverick designers and brands, with the hopes of helping small businesses affected by COVID-19, as well as giving a platform to [BIPOC] designers,” according to prepared statement on the initiative. Interested brands and designers can fill out a form and upload their portfolio of work on this landing page.
David Yurman has laid off 98 corporate employees, the famed jewelry company reported in a filing with the New York State Department of Labor on Thursday. It cited “unforeseeable business circumstances prompted by COVID-19.” The company first put a majority of its employees on furlough on April 1, it said. The news was first reported in WWD.
Luxury goods investors will look to LVMH for any glimmers of hope about recovery prospects when the French company reports second-quarter results. Thanks to its financial strength and a diversified portfolio that includes champagne and spirits as well as perfume and beauty chain Sephora, LVMH is generally expected to weather the COVID-19 crisis better than most rivals. That is mirrored in its share price, which is just 9% lower than its pre-COVID 19 peak, compared to minus 18% for Gucci owner Kering
Office & Leisure
A group of AMC Entertainment Holdings Inc. lenders opposing the company’s planned debt overhaul claims the theater chain violated terms of its credit agreement by failing to provide adequate information about the deal. The lenders, representing a majority of the company’s $2 billion term loan, sent AMC a notice of default. They said in a July 12 letter that AMC’s response to questions about the permissibility of a planned debt swap and agreement with private equity firm Silver Lake was “completely inadequate.” AMC has provided additional information since the letter was sent, but the group still doesn’t view the disclosures as sufficient and is operating as if the company is still in default, according to people familiar with the matter who asked not to be identified discussing private transactions. The letter called Silver Lake a company insider and argued the theater chain’s “blatant refusal” to provide more information means “there is no reasonable basis” to conclude the exchange is allowed. Silver Lake has a seat on AMC’s board, but recused itself from discussions related to the debt transaction.
Hertz Global Holdings Inc. agreed to pay lenders who indirectly control the company’s fleet of rental cars $650 million under a deal to suspend a bankruptcy court fight over the vehicles, according to court documents. Under the accord, Hertz will for the rest of the year halt its effort to cancel some of the nearly 500,000 leases on the cars the company rents out to consumers. A separate Hertz entity owns the vehicles, which the company leases back under a contract that gives lenders strong collateral rights. Hertz will likely pay less that it would normally owe the lenders, who the company blamed in part for pushing it into bankruptcy in May. Under the vehicle lease contract, Hertz must not only pay regular rent for each car, but also a fee to cover depreciation as the fleet ages and loses value over time. “It seems like this is a minimum payment for depreciation of vehicles in the fleet,” said Philip Brendel, a senior distressed-debt analyst with Bloomberg Intelligence.
Southwest Airlines said Thursday it lost $915 million in the second quarter compared with $741 million in net income a year earlier and warned that travel demand will likely remain depressed until there’s a vaccine or treatment for the coronavirus. The airline said demand has softened in recent weeks, echoing comments from other airline executives who have said a spike in Covid-19 cases coupled with travel restrictions in states like New York have hurt ticket sales that began recovering in late spring. Southwest estimated its third-quarter capacity to decrease between 20% and 30% over last year. Revenue dropped nearly 83% to a little over a $1 billion from $5.9 billion last year, though sales in the quarter were higher than analysts’ estimates.
Technology & Internet
Best Buy said Tuesday that it’s brought back about half of its furloughed employees as sales rebound. The retailer said in a news release its second-quarter sales are up about 2.5% through July 18, compared with the same period a year prior. That includes sales growth of 2% in the U.S. and about 8% internationally, the company said. Online sales have jumped by 255% so far in the second quarter, compared with a year ago. It said customers’ purchases of computers, appliances and tablets are driving those sales. The company is also changing the way it pays employees. During the pandemic, it has paid incentives to employees. The appreciation pay began March 22 and ends Aug. 1. Starting Aug. 2, all hourly employees will get a 4% raise and the company’s starting pay will be $15 an hour.
Finance & Economy
The number of Americans who filed for unemployment benefits rose more than expected last week as the coronavirus pandemic inflicted more damage to the U.S. economy. The Labor Department said initial jobless claims came in at 1.416 million for the week ending July 18. Economists polled by Dow Jones expected 1.3 million. It was the 18th straight week in which initial claims totaled more than 1 million, and it snapped a 15-week streak of declining initial claims.
Sales of existing homes jumped nearly 21% in June compared with May, according to the National Association of Realtors. It was the largest monthly gain since the Realtors began tracking the data in 1968 and came after sharp declines over the previous three months due to the coronavirus pandemic. Sales were still 11.3% lower annually. This count is based on closings, so it represents contracts signed in late April and May, before much of the national economy began to reopen and before the most recent surge in coronavirus cases. Much of the gains are likely from pent-up spring demand, but there are signs that it will continue at least through the summer.