With early-returning school districts already opening their doors and welcoming back students, the back-to-school shopping season is in full swing. But for a second year in a row, COVID-19 is creating significant uncertainty for students, parents, teachers, administrators, and the retailers that can typically count on a surge in school-related spending at this time of year. Despite the country’s progress in vaccinating the overall population, children under 12 are still not eligible to get the shot, and some schools are dropping mask mandates and social distancing efforts, even as they nervously eye the Delta variant’s spread. However, many more schools are set to open this year than did last year, and consumers are spending in anticipation. The result is that while anxiety for this back-to-school season is up, so is expected consumer spending.
According to the National Retail Federation’s (NRF) annual back-to-school report, total back-to-school spending is expected to reach $37.1 billion this year, up from $33.9 billion last year, and an all-time high in the NRF’s survey history. Each family with children in elementary though high school is expected to spend $848.90 on average this year, up $59 from last year. The same study shows that households with college students are also expected to spend more, with $71 billion in total this year compared to $67.7 billion last year.
The NRF projects that the top product category for back-to-school shopping will be electronics, with an average household spend of $295.65, up roughly 8% from last year. A survey on back-to-school spending by Deloitte similarly found that electronics are expected to grow strongly this year, with an eye-popping projected y/y gain of 37%. Clothing and accessories are also expected to grow nicely, as many students return to in-person classes and want to have new back-to-school outfits. The NRF projects that spending on clothing per household will grow 8% y/y to $253.46. In fact, 49% of the NRF survey’s respondents reported that their child or children were more excited to shop for clothing and accessories than any other category.
However, beyond concerns about the virus, another rising challenge for this back-to-school season is the unsettled state of the global supply chain. As some of my colleagues have noted in this space over the last few months, supply chains are in disarray for many products right now, resulting in slower deliveries and higher costs. In-demand electronics products like tablets and computers are contending with a global semiconductor shortage. And importers of back-to-school staples like apparel and school supplies are facing trade imbalances, traffic jams at key ports, and other factors that have driven the cost of shipping container capacity up nearly 400% y/y. This is resulting in shortages in certain products and higher prices.
Consequently, it seems that many back-to-school consumers smartly began their shopping early. According to the NRF, 26% of back-to-school shoppers were already browsing and spending by early June, up from 21% at the same time in 2020, and 17% in 2019. Similarly, the Deloitte survey found that families are shopping earlier this year as they expect lingering COVID-19 disruptions to make it harder to find certain products – Deloitte estimates that 59% of total back-to-school spending was spent before turning the calendar to August.
While there is plenty of uncertainty this year, we are moving in the right direction. In this year’s NRF survey, 64% of respondents said they expect their children to have most or all of their classes taught in person this year. Last year, the same figure was only 26%. Meanwhile, FDA officials and Dr. Anthony Fauci have recently stated they expect children as young as four years old to be able to get vaccinated by the end of 2021, or at the latest, in the first quarter of 2022. So, while anxiety is currently high, so is hope. And spending is following suit.
Headlines of the Week
PepsiCo announced Tuesday it has agreed to sell Tropicana, Naked and other North American juice brands to a French private equity firm. The deal with PAI Partners will net pretax cash proceeds of $3.3 billion for Pepsi. The food and beverage giant will also receive a 39% stake in a newly formed joint venture with PAI and the exclusive U.S. distribution rights for the juice brands for certain channels, like food service. PAI will also have the irrevocable option to buy certain Pepsi juice businesses in Europe. In 2020, the brands involved in the deal generated about $3 billion in revenue for Pepsi but trailed the company’s overall operating margin. Many food and beverage businesses, including rival Coca-Cola, have spent the last year and a half trimming their portfolios as a response to the pandemic.
Real estate investment trust Vici Properties is acquiring MGM Growth Properties in a $17.2 billion deal that will likely make the casino owner the largest landowner on the Las Vegas Strip. MGM Resorts International, which owns the majority stake in MGM Growth Properties, will receive about $4.4 billion in cash in the deal. The transaction includes $5.7 billion in debt. MGM Resorts has been selling off its real estate assets in recent years, and it spun off MGM Growth Properties in 2016. Its portfolio includes Mandalay Bay and the MGM Grand Las Vegas. All together, Vici will gain 15 entertainment properties in the deal, significantly expanding its geographic footprint, but keeping its focus on the casino industry. “We’re acquiring what we believe is the best-in-class experiential real estate portfolio in America. These are magnificent assets,” said Vici’s Chief Executive Edward Pitoniak in an interview.
Apparel & Footwear
The company behind Merrell, Saucony, Sperry, Stride Rite and other well-known footwear brands is adding premium women’s activewear brand Sweaty Betty to its portfolio as it expands its categories, geographies and online sales. Wolverine Worldwide bought the 23-year-old digitally native Lululemon competitor for $410 million from consumer-focused private equity firm L Catterton. The deal, which closed Monday, was funded by cash and a revolving line of credit. In a press release Tuesday, Brendan Hoffman, the incoming chief executive officer and current Wolverine Worldwide president, said, “Sweaty Betty aligns perfectly with our strategic growth plan for Wolverine Worldwide, as we focus on growing digital channels, expanding our international footprint, and building our brand portfolio beyond footwear.” Sweaty Betty CEO Julia Straus will stay on and report to Hoffman. In the release, Straus said Wolverine’s “portfolio of purpose-driven heritage brands, knowledge and expertise in building performance brands, robust international distribution, and supply chain expertise provides a strong platform to expand Sweaty Betty and further our mission to ‘empower more women through fitness all over the world.”
Levi Strauss & Co. on Thursday agreed to buy the yoga apparel brand Beyond Yoga, launching the jeans maker into the competitive activewear space. Levi didn’t disclose the size of the all-cash deal, which is expected to close in the fourth quarter. Levi expects the acquisition will add more than $100 million to its net revenue next fiscal year, and immediately bolster its earnings. “We’ve been looking at acquisitions for quite some time, and the activewear space has obviously been very, very attractive,” Levi CEO Chip Bergh told CNBC in a phone interview. “We see enormous growth potential here. It puts us as a company smack into the high-growth, high-margin activewear segment.” After the transaction is complete, Levi said Beyond Yoga will operate as a standalone division within its business. Co-founder Michelle Wahler will continue to serve as Beyond Yoga CEO, reporting to Bergh.
Hush Puppies, a division of Wolverine Worldwide, and Designer Brands Inc., today announced an exclusive distribution partnership for Hush Puppies in North America. This industry-forward initiative will make DSW Designer Shoe Warehouse the exclusive in-store distributor of Hush Puppies by 2022, helping to expand Hush Puppies retail presence throughout the U.S. and Canada, targeting ideal consumers and generating mutual brand growth and awareness. “DSW’s strong position as a footwear industry mainstay makes them the ideal retailer to reintroduce our iconic brand to the next generation of Hush Puppies consumers,” said Kate Pinkham, General Manager & Vice President of Hush Puppies. “Hush Puppies is a wonderful brand for Millennials who desire both style and comfort in their busy, on-the-go lifestyles,” said DSW’s Chief Merchandising Officer Jim Weinberg. Hush Puppies will continue to sell on its eCommerce site, www.HushPuppies.com, as well as internationally, but will exit all other North American wholesale operations effective January 1, 2022.
Sequential Brands Group has sold its Ellen Tracy and Caribbean Joe Island Supply Co. to the GMA Group, WWD has learned. Ellen Tracy sold for $17 million and Caribbean Joe was sold for $3 million, according to a filing with the Securities and Exchange Commission. Ellen Tracy, once a powerhouse label in the contemporary and bridge markets with a strong appeal to working women, was founded in 1949 by the late Herb Gallen. Originally, Gallen sold cheap blouses but as many women entered the workforce, he infused much greater style in the offering, teaming with his chief designer Linda Allard whom he eventually married. The brand still has strong consumer awareness and is primarily distributed through department stores, off-price chains, warehouse club stores and online. The New York City-based, privately held, 30-year-old GMA Group owns the Capelli and Ballet brands.
Athletic & Sporting Goods
Foot Locker Inc. has made a pair of acquisitions to help bolster its footprint both stateside and abroad. The athletic retail giant said today that it is acquiring WSS (Eurostar Inc.) for $750 million in cash. Foot Locker also announced the acquisition of Atmos (Text Trading Company K.K.) for $360 million, which also will be a cash deal. Foot Locker said it will benefit from the addition of WSS, which has 93 off-mall stores throughout the West Coast in states including California, Texas, Arizona and Nevada, because of its “differentiated market position and complementary customer base and real estate portfolio.” WSS will maintain its name, according to Foot Locker, and will operate as a new banner in its portfolio.
For the first time in more than a dozen years, the Olympics track and field events don’t have a clear hero. Since Beijing 2008 till his retirement in 2017, the Jamaican sprinter and the fastest man in the world, Usain Bolt, had attracted all the attention in the build-up to and at the summer games. However, leading up to Tokyo 2020, the Bolt-sized buzz had been missing. What filled in was plenty of discussion around a new shoe technology that uses carbon plates in the soles. This innovation helps the athlete wearing them improve their performance by about 4 per cent. The first brand to successfully use the carbon plate technology in its shoes was Nike. Other brands, including rivals Adidas, Puma and Asics, have successfully incorporated carbon technology in their shoes as well and all are on display at the Olympics where the competition is top class and margins of victory slim. However, it seems that despite the best efforts of rival brands, an emerging theme of Tokyo 2020 is Nike’s supremacy.
Cosmetics & Pharmacy
Function of Beauty, the world leader in customizable hair, skin, and body care products, has acquired Atolla, a personalized skincare company with a patented at-home skincare test and a data-driven product recommendation system that helps inform tailored formulations and regimens over time. Both companies were founded by MIT graduates and share a common vision to revolutionize beauty through customization and data science. The acquisition will further Function of Beauty’s skincare offering by combining the companies’ complementary strengths. Function of Beauty, the first and largest personalized haircare company, recently launched its own personalized skincare line, which offers customers the greatest degree of customization in skincare on the market with over 3 billion possible formulations. With this acquisition, Function of Beauty will be able to leverage Atolla’s patented skin test and data-driven product recommendation system to further improve its offering and deliver measurable results to customers.
The Hut Group keeps growing its brand portfolio and will add U.K.-based online beauty retailer Cult Beauty. The group is buying the digital platform for 275 million pounds from private shareholders including co-chief executive officer Alexia Inge and majority investor Mark Quinn-Newall, who had also cofounded Net-a-porter. The appeal was Cult Beauty’s close-knit partnerships with independent beauty labels, which are not currently available on its e-commerce platform. It stocks more than 300 brands, including the likes of Drunk Elephant, Charlotte Tilbury and Huda Beauty — two-thirds of which have no other presence on THG existing beauty sites. “Cult Beauty is frequently the partner of choice for emerging indie brands due to its personalized, content-led approach and enthusiastic consumer base who are continually seeking new, innovative solutions to complement their beauty routines,” said Matthew Moulding, executive chairman and chief executive officer of THG, also pointing to the retailer’s network of 1.7 million engaged beauty shoppers and 1.6 million Instagram followers.
While continuing to play a role in battling the pandemic, CVS Health’s second quarter brought increased revenue and earnings that beat Wall Street expectations. The Woonsocket, R.I.-based company saw second-quarter revenues up 11.1% year over year, totaling $72.6 billion, posting earnings per share of $ 2.10— a decrease of 7% over the prior-year period, but 35 cents higher than analysts expected and a strong enough showing for the company to raise its full-year guidance. Total revenues for the six months ended June 30, increased to $141.7 billion, up 7.3% compared with the prior-year period. Operating income and adjusted operating income decreased 7.6% and 8.3% year over year, respectively, compared with the prior year. The company attributed the decreases to the return of more normalized utilization levels in the healthcare benefits segment following a significant decrease in utilization during the prior-year period due to the COVID-19 pandemic. The decrease was partially offset by increased prescription and front-store volume, COVID-19 vaccinations and diagnostic testing in the retail/LTC segment, as well as improved performance in its pharmacy services segment.
Things are picking up as the prestige beauty rebound from the coronavirus continued in the second quarter of 2021 according to The NPD Group, as consumers start to “venture out into the world.” US prestige beauty sales approached $4.9 billion, a 66% increase over 2020, and a 6% increase from 2019. Retail sales are coming back as consumers returned to stores during the quarter. In-store purchases were up 284% last year, when many stores were shut down. Online saw a decrease of 19%. Makeup sales were $1.7 billion for the quarter, a 71% increase over last year driven by foundation and concealer, with the strongest growth coming from tinted moisturizer. The lip category benefited from the dropping of mask mandates, in many regions growing almost 100% year-over-year. Skincare sales totaled $1.5 billion in Q2, representing a 32% increase benefiting from the continuation of the at-home treatment trend. Suncare and products aimed at face protection saw an 80% increase in sales compared to both 2020 and 2019, while sales of facial serums and exfoliators remain strong. The hair category gained 70% year-over-year to $346 million; hair coloring and care remained strong while styling products posted a resurgence, growing nearly 100% from the prior year. Fragrance grew 123% this quarter, posting $1.3 billion in sales, up 40% compared to 2019.
Planity, France’s leading beauty appointment booking company, is raising €30 million in Series B funding. Founded 2017 by Antoine Puymirat and his partners Jérémy Queroy and Paul Vonderscher, Planity is a SaaS company that enables people to book online for free. The Planity platform seamlessly facilitates consumers’ ability to discover, book, and pay for beauty and wellness appointments via its marketplace. Salons can leverage Planity to manage their operations via its end-to-end SaaS solution. Planity plans to leverage its 75 percent share of the French market to expand internationally, beginning with Germany as well as expanding to adjacent verticals.
Discounters & Department Stores
In another sign of financial recovery after the pandemic took a toll on its operations, Macy’s is wiping away a good portion of its debt. The retailer Tuesday said that on Aug. 17 it will redeem the entire $1.3 billion principal of its 8.375% senior secured notes that were due in 2025. The notes will be redeemed at 100% of their principal amount, plus accrued and unpaid interest, according to a company press release. The move will trigger a pre-tax charge of about $185 million in the third quarter, the company said. The early redemption puts Macy’s “firmly on track” to be at or below its target debt ratio and to achieve an investment-grade financial profile by the end of the year, Chief Financial Officer Adrian Mitchell said in a statement.
Simon Property Group saw sales at its shopping malls and outlet centers bounce back to pre-pandemic levels in its latest fiscal quarter, as Americans shopped for clothes, shoes and other items. Simon Property Chief Executive David Simon told analysts Monday that retail sales at its properties in June were comparable to June 2019 levels, and up 80% from a year earlier. Parts of the United States saw sales higher than 2019 levels, he added.
Walmart remains the largest company in the world by revenue, according to the annual Fortune 500 rankings released on Monday. While Walmart’s revenue kept it at the No. 1 spot, where it has been for years, Amazon leapfrogged from No. 9 to No. 3 on the Fortune 500 list after the pandemic drove explosive growth at the e-commerce specialist. Other retailers in the top 100 of the list include Costco (No. 27), Home Depot (No. 41), JD.com (No. 59), Alibaba (No. 63), Target (No. 78) and Lowe’s (No. 80).
Target said Wednesday it will offer new perks to woo workers: a debt-free way to get a college degree and payments toward graduate programs. Starting this fall, the big-box retailer said it will cover the cost of tuition, fees and textbooks for part- and full-time workers who pursue a qualifying undergraduate degree at more than 40 institutions. It will also fund advanced degrees, paying up to $10,000 each year for master’s programs at those schools. The national retailer is the latest company to dangle perks to attract job candidates in a competitive labor market. With the move, Target joins other retailers and restaurant chains — including Chipotle and Starbucks — that have programs that help employees pay for college. Walmart recently announced it would cover the full cost of college tuition and books for its employees, after previously requiring them to pay $1 a day.
Emerging Consumer Companies
New York-based plant-cereal brand, Offlimits, raised $2.3 million in a funding round that encompasses friends and family, pre-seed and seed financing. Investors include Science Inc., Crosslink, Canaan, DBC Creative CEO Dana Cowin, Surface Magazine CEO Marc Lotenberg, TikTok executive Nick Tran and NTWRK president Moksha Fitzgibbons. OffLimits launched in 2020 out of Science Inc.’s startup studio. It uses whole ingredients, and its flavors are organic, vegan, gluten-free and lightly-sweetened with organic cane sugar. Since its launch, OffLimits’ two cereals Dash (turns your milk into cold brew coffee) and Zombie (Pandan-flavored, similar to vanilla) were picked up in stores like Intelligentsia and are available online. The cereals retail for $8.50 per box.
HeyReneee, the Los Angeles-based personal health concierge, raised $3.8 million. Investors include Quiet Capital, Mucker Capital, Fika Ventures, Tau Ventures, Global Founders Capital and SaaS Venture Capital. The company is using seed proceeds to curate digital health partners, build its team, and acquire early customers. HeyRenee is designed to consolidate, coordinate, communicate and connect all aspects of medical care. It intends to ease the burden of healthcare coordination — from appointment scheduling, in-home services and medication delivery to telehealth and symptom and vital signs monitoring, all in one easy-to-use and highly intuitive app.
Grocery & Restaurants
Restaurant workers and guests who hope to dine indoors in New York City will have to show proof of at least one dose of a coronavirus vaccine, starting Aug. 16 — though enforcement won’t begin until Sept. 13, city officials announced Tuesday. Following similar moves in France and Italy, New York City Mayor Bill de Blasio said the “Key to NYC Pass” mandate is designed to pressure more people to get vaccinated as the case count grows from the spread of the Delta variant. The vax-for-entry mandate also applies to gyms, movies and other forms of entertainment that involve crowds. The mandate will be phased in with inspections and enforcement beginning Sept. 13. To dine indoors, guests aged 12 and older must show their vaccine card, or use the NYC COVID Safe app, or the state’s Excelsior app.
Private equity firm FFL Partners has agreed to sell the 1,500-unit Church’s Chicken chain to High Bluff Capital Partners and other supporting investment funds, the companies said Monday. Terms of the deal, which is expected to close during the third quarter, were not disclosed. Under the agreement, the Atlanta-based quick-service brand will be operated by REGO Restaurant Group, the platform High Bluff Capital Partners created in 2018 to acquire Quiznos and Taco Del Mar. Church’s, which is called Texas Chicken outside the Americas, generated systemwide sales of nearly $1.2 billion in 2020, the company said.
Digital ordering platform and known third-party delivery opponent, Lunchbox, announced Tuesday the acquisition of New York City-based digital marketplace, Spread. With the acquisition of the restaurant-run alternative to third-party delivery, Lunchbox will be able to build a commission-free delivery platform with mom-and-pop restaurants in mind. Until now, Lunchbox had focused its attentions on multiunit restaurant customers, and now will be able to help “restaurants of all sizes” become more independent in their off-premises offerings. “Together with Spread, we’re creating a no-commission marketplace for the restaurant industry which is an absolute game-changer as they can keep profits in-house,” Nabeel Alamgir, CEO and co-founder of Lunchbox said in a statement. “Restaurants will no longer have to give up 15-30% of their online order costs in order to compete with other restaurants and keep their doors open. Now they can process orders online completely free and create more meaningful relationships with customers as they now have access to diner data.” Spread was created in late 2020 as a New York City-based digital ordering platform and currently has more than 1,500 restaurant members. The service charges flat fees of $1-$2 per order, instead of the larger 15-30% commission fees that Grubhub, DoorDash, and Uber Eats have become known for.
Home & Road
Revman International, supplier of bed and bath products including Nautica, Vera Wang, Tommy Bahama, Eddie Bauer, Ellen DeGeneres and Laura Ashley, has been acquired by Delaware-based limited liability company Makei II. Makei purchased 100% of Revman’s outstanding capital stock from Grupo Kaltex, which bought Revman in 2003 from Japanese retailer Aeon. Under the terms of the acquisition, the company will continue to operate as Revman. Adolfo Kalach Mizrahi, Makei’s principal, will be the chairman of the board, and Moises Kalach Mussali will be vice chairman. Richard Roman, Revman’s founder, will continue as president and chief executive officer. “I am delighted with the new ownership structure,” Roman said. “Makei is firmly committed to the continued success and growth of Revman and its distinctive portfolio of lifestyle brands. They are dedicated to making Revman Inc. bigger and better than ever.” Revman’s existing brands will remain under the new ownership, and the company will maintain its current office and showroom space on the 70th floor of The Empire State Building. Revman will unveil its new collections during Home Textiles Market Week in October. “We have known Revman for more than 20 years,” Mizrahi said. “We have always been passionate about the business and are looking forward to extending the partnership.”
New orders for furniture remained strong in May, growing 47% compared with the same month last year, according to the latest Furniture Insights survey of residential manufacturers and distributors from accounting and consulting firm Smith Leonard. “The results of our latest survey continue to show year over year strong growth as the comparisons are starting to reflect the beginnings of business coming back beginning in May 2020,” said Smith Leonard Partner Ken Smith in the report, noting 91% of surveyed companies logged order increases in May. “Year to date, new orders were up 67% over the first five months of 2020. Going back to more normal times, we compared the new orders year to date for 2021 to that of 2019. That comparison showed that new orders were up approximately 36% over that period, the same as we reported last month for the April year to date results. So, these results really seem to show that business has been as good as it seems.”
Chairish Inc., a high-end home décor marketplace, has acquired Pamono, a European online marketplace for vintage and antique furniture and art. “The future of the design industry is global, and today marks the beginning of an exciting new chapter for Chairish,” said Gregg Brockway, company CEO and co-founder. “By combining the market leader in the U.S. with the market leader in Europe, we are realizing our vision to bring the very best home furnishings from around the world to design lovers everywhere.” Brockway said the acquisition will allow Chairish and Pamono buyers to shop the world’s finest offering of high-end furnishings, decor and art while enabling the companies’ sellers to reach a global audience. The combined marketplace will now contain more than 830,000 vintage, antique, contemporary and made-to-order products, offered by 12,000 sellers worldwide. For now, Pamono will continue to operate as a standalone site and grow the team based in Europe. Chairish will share more information on deeper integration between the businesses and new solutions for the design industry in the coming months. Final closure of the acquisition is subject to customary German tax and regulatory approval.
Leggett & Platt posted all-time quarterly record sales for its second quarter, according to Chairman and CEO Karl Glassman in a release. Sales for the period were $1.27 billion, up 50% over the same period in 2020. EBIT for the period was $171.9 million, an increase of $149 million from last year, and earnings per share for the period was 82 cents per share, compared with a loss of 5 cents per share in 2020. “While we continue to navigate inflationary pressures along with supply chain disruptions, consumer demand remains strong, and we are increasing our full year guidance,” said Glassman. “We are also pleased to announce that on June 4, we acquired a leading provider of specialty foam and finished mattresses primarily serving customers in the UK and Ireland. The company, Kayfoam, is located near Dublin and has two manufacturing facilities with combined annual sales of approximately $80 million.” The Kayfoam acquisition expands the L&P’s capabilities in its European Bedding business, establishing a platform in foam technology and finished mattress production.
Jewelry & Luxury
Signet Jewelers recently marked “two significant financial milestones” that it believes will buff up its once-beleaguered balance sheet. First, its $1.5 billion asset-based lending facility has been extended by nearly two years, until July 2026. The new facility contains less restrictive covenants and will allow Signet to further invest in the business, chief financial officer Joan Hilson said in a statement issued Tuesday. In addition, Signet is—again—completely divesting its credit portfolio, after having to carry non-prime receivables on its books for three quarters following the onset of the COVID-19 pandemic.
Multimedia Commerce Group, the owner of home-shopping jewelry channel JTV, has invested over $100 million in Jedora.com, a new direct-to-consumer jewelry site that will debut in October. Jedora is intended to be a “one-stop shop” that will offer a wide range of jewelry and host storefronts from brands, some of which have never been sold online before. Among the known names that will be featured on the site: Stephen Dweck, Beverley K, Le Vian, Miseno, Nanis, Honora, Bellarri, Gumuchian, Bayco, Zeghani by Simon G., Versace Watches, and Philip Stein Watches. The site will also carry generic product as well as an assortment of house brands. Influencers and designers will have pages where they can curate “shoppable looks.”
“He’s the most famous man you know nothing about” says Louis Vuitton CEO Michael Burke, speaking of the French luxury house’s founder Louis Vuitton, born on August 4, 1821, in a French village named Anchay. 200 years later, the brand he created takes the top spot as the world’s most valuable luxury brand, according to the latest BrandZ/Kantar data. If there is one market that France dominates, it is indeed that of fashion and luxury. As our Statista chart shows, out of the ten most valuable luxury brands in 2021, six are French. With a valuation of $75.7 billion, LVMH – the parent company of Louis Vuitton owned by Bernard Arnault – ranks first, followed by Chanel with a brand value of roughly $47 billion.
Covid-19 is changing the global luxury-goods industry. Either it will emerge from the crisis much bigger than currently expected, or many privately owned brands are in very bad shape. On Friday, Birkin handbag maker Hermès said sales in the first half of 2021 were up 77% compared with the same period last year, at constant exchange rates. Even more eye-catching, revenue was one-third higher than in the equivalent period of 2019. Racing past pre-Covid sales has been a theme for the biggest European luxury-goods companies this reporting season. Cartier owner Richemont said sales in the three months through June were 22% ahead of 2019 levels. LVMH and Kering, best known for the Louis Vuitton and Gucci brands, respectively, are also significantly bigger businesses, and in LVMH’s case more profitable. Its first-half operating margin jumped 5.5 percentage points to 26.6% compared with the same time before the crisis.
Office & Leisure
U.S. pet ownership rose nearly 50% over the last year as Americans, hemmed in by the pandemic, embraced their furry friends. The surge propelled the pet industry past $100 billion in revenues and exacerbated demands on veterinarians already stretched thin. With its hybrid telemedicine subscription service, Culver City-based startup Modern Animal is looking to grow by appealing to both overtaxed vets and the new rush of pet owners. It has now announced a $75.5 million investment to help do it. The company believes its model, which relies on 24/7, app-based care, access to beautifully outfitted clinics for users and a streamlined system for veterinarians, can help upend the way the industry traditionally does business. “The problems we were trying to solve [when we started the company] were not actually related to the animal,” said CEO and co-founder Steven Eidelman. They were related to the humans: the pet-owners and the veterinarians. Eidelman is the former founder of Whistle, a pet health startup that made a ‘Fitbit for dogs’ and was acquired in 2016 for $117 million by Mars. He founded Modern Animal in 2018. It has now raised $89 million.
Pet pharmacy Mixlab has developed a digital platform enabling veterinarians to prescribe medications and have them delivered — sometimes on the same day — to pet parents. The New York-based company raised a $20 million Series A in a round of funding led by Sonoma Brands and including Global Founders Capital, Monogram Capital, Lakehouse Ventures and Brand Foundry. The new investment gives Mixlab total funding of $30 million, said Fred Dijols, co-founder and CEO of Mixlab. Dijols and Stella Kim, chief experience officer, co-founded Mixlab in 2017 to provide a better pharmacy experience, with the veterinarian at the center. Mixlab’s technology includes a digital service for veterinarians to streamline their daily medication workflow and gives them back time to spend with patient care. The platform manages the home delivery of medications across branded, generic and over-the-counter medications, as well as reduces a clinic’s on-site pharmacy inventories. The company also operates its own compound pharmacy where it specializes in making medications on-demand that are flavored and dosed.
Technology & Internet
Etsy reported better-than-expected second-quarter results after the bell Wednesday, but it gave guidance for the current quarter that suggests the pandemic-fueled e-commerce boom may be stalling. The stock slid as much as 14% in extended trading. Revenue growth slowed to 23.4% year over year during the quarter. That’s a marked deceleration from recent quarters, when sales growth topped 100% each of the past four quarters. The results underscore concerns that the pandemic bump in e-commerce activity is fading as vaccinated consumers spend less online and more on travel and other services. Etsy, which operates an online marketplace known for handmade and personalized goods, has been one of the biggest beneficiaries of the pandemic, with shoppers turning to the site for things such as face masks and home goods.
Amazon has become a lynchpin in the e-commerce machine over the years in part because it’s a site we consumers can visit to buy just about anything we want — sold either by Amazon or its 5 million+ third-party merchants — and easily get it delivered to our homes. But the system is not completely efficient, and today, one of the startups looking to build more economies of scale is announcing some funding that it will use to roll up and consolidate some of these third-party merchants. Suma Brands, which buys up what it sees as some of the more interesting and successful brands selling and fulfilling their orders via Amazon, has picked up $150 million in funding in a round led by Pace Capital and Material alongside a credit facility led by i80 Group. As with other roll-up plays that have raised huge sums of money, the majority of Suma’s round is coming in the form of debt, which will be used for acquisitions, with a smaller equity tranche to continue building out its tech stack and core business. In this case, equity is $12.5 million and the rest is in debt. In all of these, the premise is the same: Amazon has built its business on economies of scale, but that efficiency has not necessarily been played out at the marketplace level, where you still see the vast majority of sellers working as independent companies, facing all of the challenges they might face as they grow — these include the need for more sophisticated tech tools to manage areas like marketing, analytics and supply chains; more buying power with suppliers; capital to grow; and more strategic talent succession plans. This is where the roll-up plays step in: They provide a route for marketplace founders to potentially exit their businesses without giving them up by giving them a chance to grow under the wing of a company looking to build the brands alongside others they are acquiring.
Finance & Economy
Hiring rose in July at its fastest pace in nearly a year despite fears over Covid-19′s delta variant and as companies struggled with a tight labor supply, the Labor Department reported. Nonfarm payrolls increased by 943,000 for the month while the unemployment rate dropped to 5.4%, according to the department’s Bureau of Labor Statistics. The payroll increase was the best since August 2020. Economists surveyed by Dow Jones had been looking for 845,000 new jobs and a headline unemployment rate of 5.7%. However, estimates were diverse amid conflicting headwinds and tailwinds and an uncertain path ahead for the economy.
Throughout the pandemic, as millions of Americans were unemployed and struggling to put food on tables, credit-card debt declined. But that has now changed. In the second quarter of 2021, credit-card debt increased by $17 billion quarter on quarter to $790 billion, according to New York Federal Reserve data published. Still, it has not yet reached pre-pandemic levels. Adjusting for inflation using the fourth quarter of 2019 as a base tells a different story: credit-card debt decreased by nearly $3 billion from the first quarter of this year to the second, MarketWatch calculations show. This suggests that consumers are still wary of taking on more credit-card debt.