Headlines of the Week

Forever 21 parent and Shein strike deal to distribute both companies’ products

Shein has inked a deal with Forever 21’s operator that would allow the fast fashion rivals to distribute each other’s products through both companies’ digital and retail channels, according to a news release Thursday. Under the deal, Shein will hold a one-third interest in Sparc Group, a joint venture between Forever 21 parent companies Authentic Brands Group and Simon Property Group, and Sparc will become a minority shareholder in Shein. The partnership allows for increased distribution of Forever 21 to Shein’s customer base, per the companies, and gives Shein the opportunity to test its brand experiences in Forever 21 stores across the United States, including shop-in-shops and return-to-store initiatives. The two companies hope the partnership will “utilize their complementary platforms and expertise to accelerate product innovation, explore new business strategies, enhance customer experiences, and grow their presence in the marketplace,” per the release. Sparc — which is an acronym for Simon Properties Authentic Retail Concepts — also operates Aeropostale, Brooks Brothers and Eddie Bauer, among others. Authentic has been on a recent deal making streak, having added Rockport, Hunter Boots and Vince to its portfolio.

Subway sold to private equity firm Roark Capital

Roark Capital is buying Subway, ending the sandwich chain’s more than five decades of family ownership and marking a new era for the struggling company. The announcement Thursday ends the chain’s lengthy sale process, which publicly kicked off in February. Subway reportedly sought $10 billion, a high price that alienated many potential suitors like restaurant conglomerates, leaving only private equity firms to duke it out in an auction. Subway and Roark did not announce a transaction price, but The Wall Street Journal reported Monday that the firm’s final bid was roughly $9.6 billion. Roark’s current portfolio includes more than a dozen restaurant chains. Subway dwarfs all of them by number of restaurants, and brings in more annual sales than all but Dunkin’. Roark plans to keep Subway as a separate entity within its portfolio, Subway CEO John Chidsey told the Journal. Subway has been trying to turn around its business under Chidsey, who joined the company in 2019. The company has revamped its menu, recruited new franchisees and invested in technology. In the first of half of the year, its same-store sales climbed 9.8%, showing that the turnaround may be taking hold. “This transaction reflects Subway’s long-term growth potential, and the substantial value of our brand and our franchisees around the world,” Chidsey said in a statement Thursday.

 

 

Apparel & Footwear

Lee, Wrangler parent taps new CFO

Greensboro, North Carolina-based Kontoor Brands named Joe Alkire the successor to CFO Rustin Welton, who is retiring after serving as finance chief of the denim retailer — and maker of Wrangler and Lee jeans —since it was spun off in 2019 from VF Corporation, the company announced. Alkire, who will replace Welton as CFO and executive vice president on Aug. 31, was most recently CFO of BrüMate, a private-equity backed drinkware retailer. He previously also served as vice president of corporate development, treasury and investor relations for VF and earlier in his career was an investment banking and equity research analyst with William Blair & Company. Kontoor CEO Scott Baxter credited Welton with improving the company’s balance sheet and providing “expert counsel” since the company’s inception and said Alkire was the right leader and “strategic partner” as the company focuses on “accelerated” growth.

Guess Inc. Sees Tough Sales in the Americas but Europe and Asia Provide a Silver Lining

Guess Inc. saw a solid increase in net revenues and earnings for the second quarter of fiscal 2024, but the company’s weakness was shown in its retail and wholesale business in the Americas. For the second quarter, Guess Inc. saw net revenues of $664.5 million, a 3 percent rise over the same period last year, when global sales stood at $642 million. While total net revenues climbed, Guess’ wholesale business in the Americas was down 13 percent to $43.6 million. Retail sales in the Americas were off 8 percent to $167.5 million. Asia helped make up for softer business in the Americas. Asia’s revenues jumped 19 percent in the quarter to nearly $59 million. In another positive note, Europe saw strong revenues, rising to $366.3 million, a 9 percent increase over the previous quarter. “Our strong performance this year gives us confidence for the second half of the year to deliver on our plans,” Carlos Alberini, the company’s chief executive officer, said. “We have a clear strategy, and our teams are executing well and achieving solid results.”

Foot Locker shares plunge more than 30% as it slashes guidance and blames ‘consumer softness’

Foot Locker reported another quarter of falling sales and slashed its outlook for the second time this year on Wednesday as inflation-weary consumers think twice before shelling out for footwear and apparel.  The company’s shares opened more than 30% lower Wednesday. Nike dropped about 4% in sympathy. The sneaker giant’s adjusted fiscal second-quarter earnings were in line with Wall Street’s expectations, but fell short of analysts estimates on sales and saw another quarter of slimmer margins due to promotions and higher shrink. The company swung to a loss of $5 million, or 5 cents per share, compared with a profit of $94 million, or 99 cents a share, a year earlier. Excluding one-time items, the company reported earnings of 4 cents per share. Sales declined to $1.86 billion, down 9.9% from $2.07 billion a year earlier. The dismal quarter prompted Foot Locker to lower its forecast again – just five months after introducing it. The company also paused its quarterly cash dividend beyond its board’s recently approved October payout of 40 cents per share. The athletic apparel retailer now expects sales to drop 8% to 9% for the year, compared with a previously issued forecast of down 6.5% to 8%. It is projecting a decline in same-store sales of 9% to 10%, compared with its previous guidance of down 7.5% to 9%.

Abercrombie & Fitch CEO explains how her company shocked everyone on Wall Street

In a sea of retail earnings disasters this week, there was a beacon of hope in Abercrombie & Fitch. It didn’t come as a surprise to CEO Fran Horowitz. “The story behind the story is years of hard work, lots of transformation in the company,” Horowitz said. “We’ve really top-down and bottom-up gone through every single function.” Abercrombie & Fitch hit the bullseye in almost every retail metric, which comes as fellow mall apparel players Urban Outfitters and Foot Locker served up terrible quarters and outlooks. The namesake Abercrombie & Fitch division saw second quarter same-store sales explode by 23% as Horowitz and her design team nailed summer and back-to-school styles. Amid improved assortments at Hollister, the brand finally showed some life again with a 5% same-store sales increase. Gross profit margins rose 460 basis points to 62.5% as Abercrombie sold more merchandise at full price, almost a shocker in the current challenging spending backdrop. To boot, inventories fell 30% — a clear sign of strong operational execution on ordering and planning — and earnings blew away consensus forecasts by $0.93.  The icing on the cake: The third quarter looks to be off to a strong start.  The company forecast third quarter sales growth of a “low-double-digit” percentage. Operating margins are pegged to expand close to 800 basis points from the prior year.

 

 

Athletic & Sporting Goods

Dick’s Sporting Goods blames ‘increasingly serious’ theft problem for profit plunge

Dick’s Sporting Goods warned that retail theft is damaging its business and would lead to lower annual profits.  The sporting goods and athletic clothing seller reported second-quarter results that included a 23% drop in profit, despite sales that rose 3.6% in the period.   The company blamed shrink, the industry term for theft and damaged inventory, for its surprisingly poor earnings. Although other national retailers have also warned investors about growing theft, Dick’s is among the first to blame its lackluster quarterly financial report primarily on theft.

Arccos raises $20 million in funding from PGA Tour and equipment makers

Arccos has been enabling recreational golfers to track their shots and collect data on their game since 2012, and, the company announced that as a part of a $20 million Series C fundraising, it had become the “Official Game Tracker” of the PGA Tour.  Along with the investment by the Tour, other investors include Ping, TaylorMade, Cobra Puma Golf and Topgolf Callaway Brands.  Arccos, which is based in Stamford, Connecticut, is a shot-tracking system that uses a series of small screw-in tags to tether a golfer’s clubs to a smartphone app, which then uses GPS to track the location of every shot a player hits, along with information on the club used and the location of the bullet hit (fairway, sand, rough, the green).

Investment Firms Partner to Aggregate Little Gym Franchises in New Venture

Hidden River Strategic Capital entered into a partnership with Taurus Capital Partners to create Somersault Holdings, LLC. Headquartered in Raleigh, NC, Somersault has acquired and aggregated seven franchises within The Little Gym franchise system under one management group.  The Little Gym bills itself as the “world’s premier enrichment and physical development center for children ages four months through age 12” and is part of youth enrichment platform Unleashed Brands, which also includes Urban Air Adventure Park, Snapology, Class 101, Premier Martial Arts, and XP League. With seven locations, Somersault is the largest operator in The Little Gym franchise system and the first franchise owner group to be backed by institutional capital.

Cosmetics & Pharmacy

Ulta Earnings Beat Expectations With Growth In Major Categories

Ulta Beauty reported solid results in its second quarter earnings report.  For the quarter ended July 29, Ulta reported revenue growth of 10.1% to $2.5 billion. The increase in revenue was driven by increased comparable-store sales, which surged 8%, strong new store performance, and growth in other revenue, the company said. “The Ulta Beauty team delivered another quarter of strong performance, with sales, gross profit, and SG&A expenses all better than our internal expectations,” stated CEO Dave Kimbell about Ulta’s earnings report. “The beauty category has continued to deliver healthy growth, as consumers maintain their post-pandemic routines and expand their definition of beauty.”

Sephora Helps Kohl’s Drive a 90% Increase in Beauty Sales

Beauty remains a winning category for Kohl’s, mainly due to its shop-in-shop experience with Sephora.  While in its second quarter, Kohl’s saw a 4.8% decline in net sales and a 5% decrease in comparable sales, their store sales segment outperformed the company’s overall performance, remaining flat compared to the previous year.  The retailer reported an almost 90% surge in year-over-year (YoY) sales for total beauty products. The momentum came from Sephora and resulted in a growth of over 20% in comparable beauty sales. This growth was most pronounced in the support shops that were set up in 2021 and 2022.  By the conclusion of 2023, Kohl’s has plans to integrate Sephora into over 900 of its stores, with the goal of adding these smaller format boutiques throughout the rest of the chain in the subsequent years.

Leonard Lauder steps down from Estée Lauder

Leonard Lauder has announced he will be stepping down from the Estée Lauder Companies’ board of directors before the end of the year. However, the 90-year-old heir to the ELC fortune will remain as Chairman Emeritus of the Clinique, Origins and MAC owner.  William Lauder, Leonard’s son, who serves as Executive Chairman, will also be joined by his brother Gary Lauder on the board after the company’s annual general meeting in November.  Gary is currently Managing Director of Silicon Valley-based venture capital firm Lauder Partners.  “It has been an honour and privilege to serve on the board of the company my mother and father created over 75 years ago,” said Leonard Lauder. “This board is one of the best in the business.

 

Discounters & Department Stores

Macy’s swings to a loss in Q2 as consumer situation deteriorates

Macy’s said its Q2 net sales fell 8.4% year over year to $5.1 billion, with brick-and-mortar sales down 8% and online sales down 10%. The department store swung to a $22 million loss from $275 million in net income a year ago. Overall comparable sales fell 7.3%. At Macy’s, comps fell 8.2%, at Bloomingdale’s they fell 2.6% and at Bluemercury they rose 5.8%. Inventory was down 10% year over year, and gross margin declined to 38.1% from 38.9% a year ago. The company announced further expansion of its small-format strategy. For the first time Macy’s will open smaller off-mall locations in the Northeast and West, with openings in Boston, Las Vegas and San Diego, along with a third for the Midwest, in Indiana.

Nordstrom pushes ahead with Rack expansion despite declines

Nordstrom reported that Q2 net sales fell 8.2% year over year to $3.7 billion, due in part to the shutdown of its unprofitable Canadian business (which cost 400 basis points) and the timing of its anniversary sale (about 300 basis points). E-commerce fell 12.9% and was 36% of total sales. The department store announced further expansion of and confidence in its off-price Rack business despite falling sales, including a 4.1% decline in Q2. At the full-line namesake store, net sales fell 10.1%. Traffic to both banners was softer in the period, CEO Erik Nordstrom told analysts. The company’s effort to pare inventory led to a 17.5% reduction compared to last year. Gross margin contracted by 20 basis points to 35%. Net income rose 8.7% to $137 million.

Kohl’s Q2 profits plunge 60%

Kohl’s said Q2 net sales fell 4.8% year over year to $3.7 billion, with comps down 5%. Other revenue, mostly the retailer’s store credit card, fell 3.1% to $217 million. Inventory was down 14% year over year. Gross margin declined by 61 basis points year over year to 39%, driven by increases in product cost and shrink but partially offset by lower expenses in freight and e-commerce-related shipping. Net income plunged nearly 60% to $58 million, according to a company press release.

Dollar General opens first dual distribution center

Dollar General held the grand opening of its first distribution facility designed around the company’s traditional and DG Fresh supply chain models, according to an announcement. The new distribution center encompasses approximately 1 million square feet and is expected to create over 400 new jobs. The opening of the Blair, Nebraska, center reflects Dollar General’s plans to bolster its fresh and frozen food offerings as well as grow its supply chain capacity.

Dollar Tree agrees to $1.35M OSHA penalty over store safety violations

Dollar Tree said Q2 total revenue rose 8.2% year over year to $7.3 billion, with store comps up 7.8% at namesake Dollar Tree and up 5.8% at Family Dollar. At Dollar Tree, customer traffic rose 9.6%, though average ticket dropped 1.6%; at Family Dollar customer traffic rose 3.4% and average ticket rose 2.3%, per an earnings presentation. Net income fell 44.3% to $200.4 million. In an Aug. 17 agreement with the Occupational Safety & Health Administration over hazardous conditions at stores, Dollar Tree will pay $1.35 million in penalties, submit to open inspections and maintain a 24-hour hotline to receive safety complaints, among other concessions, the U.S. Department of Labor said.

 

 

Emerging Consumer Companies

Maria Shriver’s MOSH raises $3 million for retail expansion
Maria Shriver and Patrick Schwarzenegger’s brain health brand, MOSH, has raised $3 million in Series A financing to expand its retail distribution strategy. The funding round was led by clients of MSA Advisors, LLC, along with investors such as Joyance Ventures, The Lab Capital Advisors, Verso Capital, and Entrepreneur Ventures. MOSH was launched in 2021 by Shriver and Schwarzenegger to produce protein bars in collaboration with brain health doctors. The company has gained over 100,000 customers and sold approximately $10 million worth of protein bars in just two years. With the new funding, MOSH plans to invest in retail and aims to be available in more than 1,800 stores by next year. The company also intends to launch new product lines, with a new product set to be released in September. Schwarzenegger mentioned that MOSH was not actively seeking capital but decided to take the funding to accelerate growth and expand its team for retail expansion.

Boxed acquired by MSG Distributors after filing for Chapter 11
Online retailer Boxed.com has been acquired by MSG Distributors Inc. in an all-cash transaction. MSG, a regional distributor of consumables and household essentials, acquired Boxed’s intellectual property portfolios, customer data, trademarks, social media accounts, and related items. The acquisition is part of MSG’s inorganic growth strategy and aims to diversify its distribution models nationwide. Boxed had previously announced in January that it was exploring strategic alternatives, including a potential sale of the company. In April, Boxed filed for Chapter 11 bankruptcy protection, with total assets of over $102.5 million and total debts of over $190 million. Under MSG’s ownership, Boxed customers will receive expedited delivery services and have access to a catalog of new items and brands. MSG plans to enhance its capacity for processing and distribution to Boxed customers across the U.S. MSG President Mark Gadayev stated that the acquisition strengthens their growth strategy and commitment to offering bulk-sized products at wholesale prices.

Arteza partners with Parsons School of Design for exclusive art supply deal
Direct-to-consumer art supply startup Arteza has partnered with the Parsons School of Design to become the exclusive provider of art supplies to its students. Arteza, which sells roughly 1,000 SKUs ranging from paint brushes to canvases, is expanding its distribution channels beyond its own website and Amazon. It has already launched its products in Joann stores, Michael’s, and Walmart locations, and is now looking to strike more deals with art schools. Arteza CEO Erick Haskell said the company plans to pursue more business-to-business partnerships in the future, with the structure and discounts of these deals varying. The partnership with Parsons is seen as an extension of Arteza’s direct-to-consumer offering, and the company is currently meeting with more art schools to understand their needs. The aim is to build enduring brand credibility and reach new audiences through wholesale partnerships and community experiences.

ByHeart announces nationwide retail debut and DTC relaunch
ByHeart, a baby nutrition company, has announced its expansion into retail with the launch of its infant formula at Target stores nationwide. The formula, which is clinically proven and made with certified-clean ingredients, will also be available on Target.com. ByHeart plans to relaunch its product direct-to-consumer later this year. The company has spent five years developing its formula, working with infant nutrition experts and building its own manufacturing facilities to ensure the highest quality standards. ByHeart’s formula is the only U.S.-made infant formula to include organic, grass-fed whole milk and is free from corn syrup, maltodextrin, soy, and palm oil. The formula is designed to mimic breast milk and offers benefits such as easier digestion, enhanced nutrient absorption, and longer stretches between nighttime feeds. ByHeart conducted the largest clinical trial by a new infant formula brand in 25 years and its results were published in the Journal of Pediatric Gastroenterology and Nutrition.

 

 

Food & Beverage

Tilray cannabis buys brands from Molson Coors, Anheuser-Busch

Tilray Brands is expanding its footprint in alcoholic and cannabis beverages, buying up brands from Molson Coors and Anheuser-Busch as legal restrictions hamper the marijuana industry.  The major cannabis company announced it will acquire the remaining 57.5% equity ownership of cannabis-infused drinks maker Truss Beverage from Molson Coors Canada. The transaction price was not disclosed.  The move comes amid a broader push by Tilray to branch out from more traditional cannabis products. Tilray announced earlier this month that it would acquire eight beer and beverage brands from Anheuser-Busch for $85 million. It was the latest in a string of craft beer acquisitions that has made Tilray one of the biggest forces in the space in the U.S.  Tilray is one of the largest cannabis companies in the world with a market cap of $1.79 billion. The company also specializes in beverage and wellness products, and has become the fifth largest craft beer company in the U.S.

Mycoprotein producer Enough raises $44M toward doubling its production capacity

Making protein out of mushrooms is not a new concept; however, Enough believes its technology — and the ability to scale production quickly — will set it apart.  The Scotland-based company grabbed $43.5 million in new growth funding to test out that theory. Enough is pumping that dough into doubling the output capacity of its first production site in the Netherlands, completed last September.  Enough was founded as 3F BIO in 2015 by Jim Laird, who has a background in food operations. The company’s proprietary technology feeds fungi with sugars from renewable feedstocks and then ferments it similar to the way beer is made.  What results is the Abunda sustainable mycoprotein, which the company says has a neutral flavor and meaty texture and is high in protein and fiber. That protein can then be used to make plant-based meat, fish and dairy products.  The company also boasts that Abunda is “up to 15 times more efficient than protein from beef,” also using less feed and producing fewer carbon dioxide emissions, which is how it’s also more affordable to produce.  Prior to building the Netherlands factory, Enough was producing small batches. Now with that online, the company is ramping up, initially producing over a ton of Abunda every hour and around 10,000 metric tons per year.

 

 

Grocery & Restaurants

Outback Steakhouse owner’s stock rises as activist buys stake

Shares of Outback Steakhouse owner Bloomin’ Brands rose after an activist investor disclosed its interest in the restaurant company. Starboard Value now owns 9.9% of Bloomin’s shares, according a regulatory filing. Starboard believes Bloomin’ is undervalued, CNBC’s Sara Eisen reported, citing sources. In recent quarters, Bloomin’s sales growth has slowed. Earlier in August, the company reported that its U.S. same-store sales grew just 0.8% in the second quarter as traffic to its restaurants shrank. In addition to Outback, Bloomin’ also owns Carrabba’s Italian Grill, Bonefish Grill, and Fleming’s Prime Steakhouse and Wine Bar. It’s unclear what changes Starboard plans to push for at Bloomin’ Brands at this point. Past activists investors targeting the company, including Jana Partners and Barington Capital Group, have tried to pressure Bloomin’ to cut costs and spin off some of its brands. Starboard Value has a proven track record of successful turnarounds at restaurant companies. In 2014, Starboard took control of Darden Restaurants’ board and implemented a number of changes, like improving Olive Garden’s breadsticks, that helped boost sales and the stock.

The Fresh Market set to scale store fleet by 14% over 2 years

Store expansion plans are just the latest changes for The Fresh Market as the grocery chain looks to refine its specialty retailing approach under the ownership of Cencosud. Last summer Cencosud acquired a majority stake in The Fresh Market for $676 million with potential to reach 100% in the future. The South American retailer operates a portfolio of retail segments, including 998 supermarkets such as the Jumbo supermarket chain in Chile. The acquisition aimed to improve The Fresh Market’s balance sheet with $265 million in cash of the purchase price going toward reducing the grocer’s net leverage to 2.7 times earnings before income taxes, depreciation and amortization (EBITDA).

Home & Road

Rugs USA Acquires Annie Selke Companies

Online area rug e-tailer Rugs USA has acquired the Annie Selke Cos. to further grow its stable of brands. Annie Selke provides rugs, bedding and other home goods through the Annie Selke, Pine Cone Hill and Dash & Albert brands. “With this acquisition, Rugs USA has further expanded its house of brands. Joining the Rugs USA platform propels the Annie Selke brands into the future and continues to accelerate the best-in-class customer experience — all while continuing the unique product design that customers know and love, which will go-to-market as they do today under the Annie Selke, Pine Cone Hill and Dash & Albert brands,” Lori King, who will stay on as CEO of Annie Selke, said. Company founder Annie Selke continues to be involved as the chief vision officer. Further, CODARUS continues to serve as the long-time wholesale sales representative of the Annie Selke brands. “As part of the Rugs USA and Annie Selke integration, it was determined that consolidating distribution centers into the existing Rugs US footprint would enable business growth and further advance the best-in-class customer experience,” King said. Outside of the distribution center closure, the Annie Selke brand continues to operate from the Pittsfield, Massachusetts, headquarters.

Lowe’s Beats Wall Street Earnings Estimate Despite Soft Q2

Lowe’s chief Marvin Ellison, in reporting a second-quarter earnings beat for the retailer while revenues fell a bit short of expectations, said the outlook for the home improvement market is improving.  Net earnings were $2.67 billion, or $4.56 per diluted share, versus $2.99 billion or $4.67 per diluted share, in the year-earlier quarter, the company reported.  A Yahoo Finance-published analyst consensus estimate called for earnings per diluted share of $4.49 and revenues of $24.99 billion. Comparable sales decreased 1.6%, with strong spring recovery and Pro and online sales growth, partially offsetting lumber deflation and lower DIY discretionary demand, Lowe’s noted. Net sales were $24.96 billion versus $27.48 billion in the year-previous quarter. Operating income was $3.89 billion versus $4.23 billion in the year-before period. In pointing to positive results during a conference call, Marvin Ellison, Lowe’s chairman, president and CEO, said the company is outperforming the market on appliances. He also noted Lowe’s sees a better outlook for do-it-yourself sales from somewhat improving consumer economic sentiments and recent growth in real disposable income, realigned with growing wages to surpass inflation for the first time in two years.

Flexsteel generates another round of sequential quarterly growth in Q4

Although year-over-year sales were down sharply in Q4, improved operating margins helped push profit back into the black for Flexsteel Industries. Net sales fell 15% to $105.8 million for the quarter ended June 20. But fourth quarter revenues climbed 6.8% above third quarter sales, which in turn, grew 6.4% over second quarter sales. “Despite near-term macroeconomic uncertainty and softening consumer demand within the industry, we are overcoming these headwinds and building strong sales growth momentum which we will carry into fiscal year 2024,” said Jerry Dittmer, president and CEO of Flexsteel. The fourth quarter sales decline was driven by lower sales volume at retail stores, which at $19.9 million tumbled 17.9% vs. the prior-year quarter. Sales of products sold through e-commerce channels rose 9.2% to $1.2 million.

Jewelry & Luxury

Titan Company Purchases Remaining Part of CaratLane

India’s Titan Company now owns virtually all of jewelry e-tailer CaratLane, after purchasing the remaining percentage of the business from founder Mithun Sacheti and his family for 4,621 crores (approximately $560 million). Titan first invested in CaratLane in 2016 and had owned 71% of the company before the acquisition of its remaining shares, which brings Titan’s holding to 98.28%. The deal values CaratLane at over $2 billion, according to Indian newspaper The Economic Times, which called the transaction the second-largest exit ever for an Indian e-commerce founder. The sale is subject to approval by the Indian government, and is due to close on Oct. 31.

Tacori Names First Non-Family CEO

Tacori has a new CEO and, for the first time in company history, it’s not a member of the Tacorian family. The Los Angeles-based jewelry company announced that it has promoted Chief Commercial Officer Roeya Vaughan to CEO, effective immediately. Paul Tacorian, who had been CEO since late 2016, is now chairman of the board while Nadine Tacorian Arzerounian continues as the head of design. Vaughan joined Tacori as CCO in 2020. She came to the company with more than 25 years’ experience in luxury and consumer products that included helping to grow the Oakley sunglass business for Luxottica, working on a product platform for Mattel’s Barbie franchise, and rebuilding the Asics and Meguiar’s brands.

Rolex Buys Retailer and Manufacturer Bucherer

Rolex has purchased watch manufacturer and retailer Bucherer, which is probably best known in the United States for buying Tourneau in 2018. No purchase price was given. Bucherer will keep its name and continue to operate independently, the statement said. It will be integrated into the Rolex group once the transaction receives regulatory approval. Bucherer has more than 100 retail outlets worldwide, located in the United States, Switzerland, England, Germany, France, Denmark, and Austria. The company has sold Rolex products for 90 years. Currently, 53 of Bucherer’s stores distribute the Rolex brand, and 48 distribute the Rolex-owned brand Tudor.

 

Office & Leisure

Microsoft will sell Activision Blizzard streaming rights to Ubisoft in attempt to win UK approval

Microsoft is significantly restructuring its Activision Blizzard merger proposal by selling cloud gaming rights for Activision Blizzard games to rival Ubisoft, it wrote in a blog post. That would address a key concern of UK regulators, which blocked the deal in part because of Microsoft’s potential dominance in cloud gaming — but nothing is likely to be approved until October 18th.  “As a result of the agreement with Ubisoft, Microsoft believes its proposed acquisition of Activision Blizzard presents a substantially different transaction under UK law than the transaction Microsoft submitted for the CMA’s consideration in 2022,” Microsoft President Brad Smith wrote.  As for the terms of the transaction, “Ubisoft will compensate Microsoft for the cloud streaming rights to Activision Blizzard’s games through a one-off payment and through a market-based wholesale pricing mechanism, including an option that supports pricing based on usage,” Smith said. The UK regulator will now examine the restructured deal and deliver a decision by October 18^th.

 

The marketing genius who helped move $16 billion in Harry Potter movies and merch has a nascent new project: reviving Care Bears

In the fall of 1997, George Jones—chief of licensing and retail at Warner Bros.—was reading the just-published Harry Potter and the Sorcerer’s Stone, on the rapt recommendation of his London office head. A couple chapters into the maiden adventures of J.K. Rowling’s wizard-apprentice, Jones experienced his own flash of illumination. Now, Jones is reviving his playbook at Warner Bros. to revitalize the widely-beloved but modestly-sized Care Bears brand. On August 24, IVEST—the private equity outfit that Jones co-founded—announced its purchase of Care Bears parent Cloudco Entertainment for $100 million, and now owns the collection of roly-poly, pastel-tinted stuffed cuddlees sold in the “plush” sections of Walmart and Target. The Cloudco deal fits IVEST’s game plan of purchasing and recharging middle market consumer goods manufacturers, licensors, and retailers. It’s a major player in a new area of known as “direct transaction private investments,” or “directs.” Instead of following the Blackstone or KKR model of acquiring enterprises that they gather in a large fund of, say, twelve holdings, “direct” sponsors such as IVEST raise money from family offices that then hold the majority of shares. That template appeals to those super-wealthy clans because they can hand pick deals one-by-one instead of owning part of a big pool containing numerous holdings they had no role in choosing.

Freshpet Reaches Deal with Activist Investor Jana

Freshpet has agreed to appoint two new directors to its board as part of a cooperation agreement with activist investor Jana Partners. The pet-food company and Jana, one of its largest shareholders, said that Timothy McLevish and Joseph E. Scalzo now sit on Freshpet’s board. With those appointments, Jana has agreed to withdraw its own director nominations and vowed to support the board’s slate of directors at Freshpet’s next shareholder meeting. The Wall Street Journal first reported last September that Jana had taken a considerable stake in Freshpet and was planning to push for changes and a potential sale. By May, Jana had amassed a 9.3% stake and was making moves to nominate four directors, arguing that Freshpet’s board had disregarded its duties to shareholders amid widening losses at the company. McLevish is a former finance chief of Kraft Foods and several other major companies. Scalzo is a former chief executive of Simply Good Foods and WhiteWave Foods who has also held leadership roles at Dean Foods and Coca-Cola.

Technology & Internet

Instacart files to go public on Nasdaq to unfreeze tech IPO market

Instacart, the grocery delivery company that slashed its valuation during last year’s market slide, filed its paperwork to go public on Friday in what’s poised to be the first significant venture-backed tech IPO since December 2021. The stock will be listed on the Nasdaq under the ticker symbol “CART.” In its prospectus, the company said net income totaled $114 million, while revenue in the latest quarter hit $716 million, a 15% increase from the year-ago period. Instacart has now been profitable for five straight quarters, according to the filing. PepsiCo has agreed to purchase $175 million of the company’s stock in a private placement. Instacart said it will continue to focus on incorporating artificial intelligence and machine learning features into the platform, and that the company expects to “rely on AIML solutions to help drive future growth in our business.” In May, Instacart said it was leaning into the generative AI boom with Ask Instacart, a search tool that aims to answer customers’ grocery shopping questions.

 

iPhone 14 Pro Max tops global smartphone shipments as people shun budget phones for top-end devices

The iPhone 14 was the most-shipped smartphone in the first half of the year, according to research firm Omdia, reflecting a shift in consumer buying habits toward the most high-end devices on the market and away from low- to mid-range phones. In the January-to-June period, Apple’s iPhone 14 Pro Max shipped 26.5 million units — the most out of any model from any manufacturer — compared with 21 million unit shipments for the iPhone 14 Pro. Apple accounted for all four of the top-shipping models, with the iPhone 14 coming in third on 16.5 million units, and the iPhone 13 selling 15.5 million units.

 

Finance & Economy

US 30-year mortgage rate soars to highest since 2000

The interest rate on the most popular U.S. home loan last week shot to the highest since December 2000, helping drive mortgage applications to a 28-year low, a survey showed.  The Mortgage Bankers Association said the average contract rate on a 30-year fixed-rate mortgage climbed 15 basis points to 7.31% in the week ended Aug. 18. That came after yields on the government bonds that influence home-loan rates surged to the highest since the 2007-2009 financial crisis.  In an otherwise resilient economy featuring a strong job market and robust consumer spending, the housing market has stood out as the sector most afflicted by the Fed’s aggressive actions to cool demand and undercut inflation.

Credit card delinquencies are on the upswing

A growing number of Americans are falling behind on their monthly credit card payments, a trend that may be a harbinger of economic troubles ahead, according to a new report from Wells Fargo.  Findings from the bank indicate that credit card delinquencies are surging among commercial banks – particularly at small lenders. In fact, late credit card payments at banks that are outside the top 100 in asset size recently surged to a record high.  Those delinquencies raise the pressure on small- and medium-sized banks, which are already grappling with tightening credit conditions in the wake of three major bank failures earlier this year.