The Weekly Consensus

Kroger-Albertsons Merger Likely to Face Antitrust Challenges

Peter Costa

Kroger announced on October 14th that the company has signed a definitive merger agreement to acquire all of Albertsons stock for an estimated consideration of $34.10 per share, implying an enterprise value of approximately $24.6 billion. This purchase price represents a premium of 29.7% to the 30-day average share price. Kroger is eager to join forces with Albertsons as it faces increasing competitive pressures from grocery giants like Walmart, Amazon, Costco and Aldi. A combined Kroger and Albertsons company would create a grocery behemoth in the United States, representing approximately 13.5% of the total market, second only to Walmart. The combined supermarket giant would have staggering size and reach: it would employ more than 700,000 professionals and operate nearly 5,000 stores, 66 distribution centers, 52 manufacturing plants, nearly 4,000 pharmacies and 2,000 fuel centers. With Albertsons concentrated mostly on the West Coast and Kroger more heavily located in the Midwest, the combined business would reach approximately 85 million households in 48 U.S. states and the District of Columbia.  Anticipating potential antitrust challenges by the Federal Trade Commission (FTC), Kroger preemptively proposed a divestiture of as many as 375 stores under a new Albertsons subsidiary called SpinCo.  However, despite this proposal, Kroger’s merger with Albertsons will likely face strong antitrust challenges from the federal government.


The first objection about the merger that lawmakers and regulators are already beginning to raise is that it will lead to less competition. As the Dallas Morning News recently noted, “[A Kroger and Albertsons merger] could be a tough sell given the current administration’s distaste for large corporate marriages.” President Biden’s appointed FTC Chairwoman Lina Khan is an opponent of market-consolidating mergers and has voiced concerns in the past about grocery store competition. For instance, in a 2017 law review article, she called the ultimate outcome of the 2015 Albertsons-Safeway merger a “spectacular” failure that a casual observer could have anticipated.

Recent rapid consolidation in the grocery industry could give extra urgency to these arguments. The food industry in the U.S. has consolidated recently and as a result, the number of grocery stores has fallen by roughly 30% from 1993 to 2019, according to a report last year by Food & Water Watch, a consumer advocacy group. The top five grocers – Walmart, Amazon, Costco, Kroger and Albertsons – now control about half the total market, according to UBS. As a result, smaller, regional grocers have struggled to compete. The National Grocers Association (NGA), which represents small retailers and wholesalers, said the Kroger merger would put smaller competitors at an “unfair disadvantage” and increase “anticompetitive buyer power over grocery suppliers.”

The second major challenge the merger is likely to face is the argument that the deal could exacerbate already-high food cost inflation. The cost of food in the U.S. increased 13% in September 2022 compared to September 2021, according to the Bureau of Labor Statistics, the fastest growth rate in decades. Kroger will likely argue that a merger with Albertsons will allow it to achieve efficiencies and cost savings that they will pass on to shoppers in lower prices. However, a 2012 study published in the Journal of Economics and Management Strategy found that “mergers in the supermarket industry can result in significant increases in consumer prices and thereby harm consumers” in highly concentrated markets. Kroger has further noted that it plans to reinvest approximately $500 million in cost savings from the deal to reduce prices for costumers. They also said they will invest $1.3 billion in Albertsons to “enhance the customer experience.” Still, with consumers and lawmakers currently focused so closely on inflation, regulators may take an extra cautious view of the proposed merger’s impact on food costs.

Commenting on the merger and its regulatory challenges ahead, John Lopatka, an antitrust law professor at Penn State University noted, “These are two large grocery store chains. The resulting chain will be second to Walmart in terms of retail sales. That’s a big merger, and any antitrust enforcer is going to take a close look at that.” The current FTC Chairwoman has “a philosophical, ideological, hostility to mergers involving large corporations, and so I don’t know that the path forward is quite as clear…” What is clear is that this deal will receive particularly intense political and regulatory scrutiny. For some, the deal may be a home run. But will it ever cross home plate?


Apparel & Footwear

Asos overhauls operations as apparel demand becomes unpredictable

Asos on Wednesday announced a sweeping overhaul of its business, after swinging to a 32 million pound loss in the year-to-date period ending Aug. 31, ($36 million as of Wednesday’s exchange), down from last year’s profit before tax of 177 million pounds. Revenues at the apparel e-retailer, which acquired Topshop and other U.K. brands last year, rose less than 1%. Sales improved slightly in September, but the company said the “significant volatility in the macroeconomic environment” makes it difficult to predict demand in the coming months. Asos has renegotiated financial covenants, and at year end has banking facilities of over 650 million pounds. The company expects to write off between 100 million pounds and 130 million pounds in fiscal year 2023. Under new CEO José Antonio Ramos Calamonte, who arrived in June, Asos is leaving few stones unturned. The apparel retailer will institute a shorter, speedier buying cycle, explore more near-shore sourcing and reduce what it said has become a reliance on markdowns.

Second Amazon Style apparel store officially opens

Amazon is expanding its dive into fashion retail in the physical space. The company has opened its second Amazon Style store, a format that is designed to combine the personalization of e-commerce with the immediacy of brick-and-mortar shopping. Located at Easton Town Center in Columbus, Ohio, the store was initially announced in June 2022. Amazon debuted the concept in May 2022 at The Americana at Brand, an upscale lifestyle center in Glendale, Calif. Using the Amazon Shopping app, Amazon Style customers scan an item’s QR code to send it to a fitting room, or send it directly to the store’s pickup counter to purchase. The fitting rooms at the store have been reimagined as a personalized space where customers can continue to shop without having to leave. Amazon Style offers apparel from brands that range from Calvin Klein, Lacoste, and Levi’s to Blank NYC, Dolce Vita, Vince, Equipment, Theory, Joie and Velvet by Graham & Spencer.

Shein jumps into resale

Noting that customers have been selling their Shein items in other marketplace forums, fast-fashion site Shein last week said that it has launched a resale option of its own, Shein Exchange. U.S. Shein customers can buy and sell previously owned items via the existing Shein mobile app, according to a company press release. Shein Exchange is available to all U.S. customers, with plans to expand elsewhere globally next year. The marketplace was created in partnership with resale tech firm Treet, per the release. Shein joins several other retailers in tapping into what ThredUp and GlobalData researchers say could be an $82 billion market in a few years. Unlike brands like Athleta and others that have partnered with ThredUp to manage the logistics of collecting and shipping used items, the Chinese fast-fashion retailer is leaving it to its customers to take care of most of the related tasks, as they would on the marketplaces run by eBay, Poshmark or Facebook. Shein in some cases will set a maximum price that sellers can ask for an item, and sellers pay Shein 5% of their proceeds.

Skechers Sues Hermès for Patent Infringement

Skechers USA, Inc. announced that it had sued Hermès International and Hermès of Paris for patent infringement of its proprietary Massage Fit Technology.  The lawsuit was filed in the U.S. District Court for the Southern District of New York in Manhattan.  In a statement, Skechers claims that in 2022, Hermès introduced two footwear styles, the Éclair and Envol, which use mid-sole and undersole design elements that infringe multiple Skechers patents for its Massage Fit technology that Skechers incorporates into its Skechers Go Walk series and other product lines.



Athletic & Sporting Goods

New York Sports Club Acquires Fhitting Room

New York Sports Club (NYSC) acquired Fhitting Room, a NYC-based boutique fitness brand. Founded in 2013, Fhitting Room is known for its HIIT and strength training programming.  Fhitting Room’s NYC flagship studios will continue to operate as standalone locations with plans to expand the brand into select NYSC locations.  NYSC also said it would upgrade more than 20 clubs by the end of 2022, with plans to improve all locations in its portfolio with renovated studios, new programming and elevated services.

Adidas Sneakers Going Unsold as Demand Weakens, Hitting Profit

Adidas AG warned that unsold goods are piling up as consumer demand weakens across China and western markets, prompting a fresh profit warning from the sneaker maker.  The German company said it now expects an operating margin of 4 percent this fiscal year, down from a prior forecast of 7 percent. Its full-year revenues will grow at a mid-single-digit rather than mid- to high-single-digit rate.  The warning extends a run of bad news from Adidas. Earlier this month the company put its relationship with Kanye West, called Yeezy, under review amid growing acrimony and erratic behavior from the hip-hop icon and designer.  In August, the company said Chief Executive Officer Kasper Rorsted will step down next year, following an earlier profit warning in July.

Cosmetics & Pharmacy

Credo Beauty acquires Follain

The beauty brand and retailer Credo said it has acquired Follain, the Boston-based retail brand that was an early leader in the clean beauty movement. As part of the acquisition, Follain’s Boston store will be rebranded as a Credo location, becoming the second Credo location in that market. Credo will absorb Follain’s online retail business and the Follain-branded skincare line will become part of Credo’s owned brand portfolio. In addition to its online business, Credo operates with 10 stores across the country. A new location is set to open in Larchmont Village in Los Angeles. “The acquisition of Follain, a like-minded company with a shared mission, is an important step forward for Credo and the clean category,” said Stuart Millar, who has served as CEO of Credo since March. “Solidifying Credo’s clean beauty leadership position allows us to scale our impact in a meaningful way, and we are excited to continue to advocate for change in a highly under-regulated industry.” The founder and CEO of Follain, Tara Foley, will support Credo as an advisor during the coming months.

KKR Invests in SkinSpirit

SkinSpirit, a chain of medical spas, has received a minority investment from KKR. SkinSpirit CEO and co-founder Lynn Heublein will continue to lead the organization. SkinSpirit has more than tripled the number of clinics that it operates since 2018 and has more than doubled that number since 2020. It currently has 31 skin care clinics nationwide. KKR is investing in SkinSpirit through its Health Care Strategic Growth Fund II, a fund dedicated to investing in high-growth health care-related companies to which KKR can be a unique strategic partner in helping reach scale. Heublein said, “A shared growth mindset is at the heart of our company. With KKR’s strong support, SkinSpirit will continue to grow with an eye toward offering best-in-class services to our clients across the country and providing our renowned teams with advanced learning and development, industry-wide leadership opportunities, and continuous improvement through unique initiatives such as our employee advisory boards.”

Natura & Co. Considers IPO for Aesop, Its Beauty & Wellness Brand

Natura & Co., No. 8 on Happi’s International Top 30 list, said Monday that it has initiated the study of a possible initial public offering of Aesop, its luxury beauty and wellness brand and business unit, in the US or a spin-off of Aesop. That could then be followed by an IPO. The move comes less than a month after Natura executives denied rumors that The Body Shop, another subsidiary, is for sale. “The IPO has been assessed over the last months as an alternative to fund the accelerated growth of Aesop, and Natura & Co.’s management has been taking the necessary steps to pursue such [an] alternative,” Natura wrote in an October 17 statement on its website. Whether or not an IPO takes place, Aesop’s business will remain led by Michael O’Keefe, the brand’s chief executive officer, through a holding company to be listed in the US.

Kiko Milano’s Owner Percassi Buys Back Peninsula Capital’s Shares

The Percassi family has regained full control of Kiko SpA.  The founding family of the Italian beauty company has bought back the 38 percent stake Peninsula Capital had held in the firm. As reported, the private equity fund first invested in Kiko in 2018 through an 80 million euro capital increase. Financial terms of Percassi’s buyback deal were not disclosed. “This represents the trust and support the Percassi family has in our plans and the future of Kiko Milano,” said the brand’s chief executive officer Simone Dominici, who was appointed to the role earlier this year. Counting former professional experiences at Unilever, Coin, Bottega Veneta and most recently Coty Inc., Dominici succeeded Cristina Scocchia, who exited Kiko at the end of 2021 to move to Italian coffee specialist Illycaffè.

Iris Ventures invests 6 million euros in Olistic, which treats hair loss

In its bid to support purpose-driven consumer brands, Iris Ventures has invested €6 million in Olistic, a science-backed nutraceutical brand that addresses hair loss and the lifestyle factors that contribute to it. Iris, who led the Barcelona-based company’s Series A funding round, said she invested because Olistic “broke the mould, developing the best science-backed vegan and all-natural products for men and women.” Iris noted that the hair growth industry is multi-billion dollar “and remains dominated by prescription and traditional synthetic solutions, with little to no returns and customer relationships.” Olistic sells its products in Spain and Portugal through its website and the best pharmacies and hospitals. The brand’s co-founders said the investment will be used for further research, to evolve the product range and to expand in the UK and mainland Europe, particularly France, Italy and Germany.

Discounters & Department Stores

Walmart announces early Black Friday deals online, in store

Alongside the retailers offering early markdowns, Walmart announced Wednesday its three-week long “Black Friday Deals for Days” event taking place between Nov. 7 and Nov. 25, according to a press release. The retailer is also hosting a Cyber Monday event on Nov. 28. The retailer is offering deals on electronics, home goods, toys and apparel and on items from brands including Apple, Dyson and Lego. Walmart+ members will also have early access to Black Friday markdowns, according to the announcement. The retailer also updated its website and mobile app to make Black Friday shopping easier for customers by allowing consumers to see the best deals and real-time pick up and delivery options.

Target’s Deal Days event drives an uptick in store traffic: report

Signaling the success of new retail holidays, Target’s foot traffic increased by 3.2% during the week of October 3-9, 2022, compared to October 4-10, 2021, according to a report.  The October Deal Days event, which ran Oct. 6-8, attracted nearly 28% more average daily visits from customers to Target locations than last year, and nearly 57% more daily visitors per store than in 2020, according to the report. The Deal Days event generated more visits on Saturday, Oct. 8, than on the Saturday and Monday of Labor Day 2022, but the combined visits during Labor Day weekend surpassed the October 2022 deal days, the report also found.

Nordstrom in search of new finance chief at a tricky time

Nordstrom Chief Financial Officer Anne Bramman will step down from the role on Dec. 2, according to a late-Monday filing with the Securities and Exchange Commission. She arrived five years ago to replace longtime CFO Mike Koppel. Nordstrom Chief Accounting Officer Michael Maher will serve as interim CFO when Bramman leaves. The retailer has begun an internal and external search process to find her permanent replacement. In its filing, Nordstrom also reaffirmed its lowered fiscal year outlook from August, for full-year sales to grow 5% to 7%, and EBIT margin to reach 4.5% to 4.9%.

What Simon Property Group’s latest move says about the future of malls

The chief executive of Simon Property Group, a mall real estate investment trust widely seen as a survivor in a turbulent sector, has consistently brushed aside any suggestion that the traditional mall business is in trouble. “We have refuted e-commerce taking the malls down,” David Simon said during his most recent conference call with analysts. “We have withstood Covid. Our business is strong, growing — in the enclosed mall business. In the enclosed mall business it’s strong, yet we have naysayers out there that don’t believe it.” However, the company’s acquisition of a 50% stake in mixed-use developer Jamestown, announced last week, suggests that Simon may be coming to terms with the limits of having a portfolio dependent on enclosed malls, observers say. Simon Property Group didn’t immediately respond to a request to comment for this story.



Emerging Consumer Companies

Cookware brand, Caraway, set to launch in Target

Caraway, the digitally-native cookware company founded in New York in 2018, is continuing its push into brick-and-mortar retail. Already sold in Crate & Barrel, Bed Bath & Beyond, and Nordstrom, the brand announced this week that it will be hitting shelves in 350 Target stores this week. The brand’s recent push into brick-and-mortar is motivated by its desire to appeal to a broader customer base. Retailers like Target have large wedding-registry businesses that can encourage the sale of pricier items. At the same time, the brand continues to add lower-priced products to its offering. This move also comes as the brand gears up for the holidays and expects that more shoppers will buy items in person this year as COVID-19 concerns fade.

Trendsi, B2B fashion marketplace, raises Series A

Trendsi, the online fashion B2B marketplace founded in 2020, has raised $25 million in its Series A round. The round was led by Lightspeed Venture Partners, with participation from Basis Set Ventures, Footwork VC, and Peterson Ventures, among others. The company aims to help brands eliminate dead and obsolete inventory by giving sellers greater visibility into product demand. Trendsi manages sourcing, warehousing, and packaging and shipping, enabling brands to start selling with few barriers to entry. The company intends to use the proceeds from the round to improve supply chain technology, add new merchandise categories, and expand internationally.


Food & Beverage

Nestlé buys Seattle’s Best Coffee from Starbucks

Nestlé has reached an agreement to fully acquire Seattle’s Best Coffee, a dry coffee brand owned by Starbucks, four years after the Swiss conglomerate obtained global marketing and distribution rights to the brand. Terms of the transaction were not disclosed.  The acquisition is expected to close by the end of the year following regulatory approval and approval by the Starbucks board of directors.  Founded in 1970, Seattle’s Best was acquired by Starbucks in 2003 for $72 million, providing the company with a well-distributed, lower-priced brand that it could use to open up new relationships with retailers and food service providers.  In the company’s Q1 2022 earnings call in April, Nestlé CEO Mark Schneider noted that despite nearly flat sales growth across its coffee portfolio, Starbucks out-of-home products grew double digits and at-home products were up high single digits. The sale now comes as Starbucks begins a $450 million “reinvention” program focused on optimizing its retail store business.


Beyond Meat reduces revenue forecast and announces layoffs

Beyond Meat is eliminating 200 positions — about 19% of its workforce. President and CEO Ethan Brown said in a press release the layoffs are an effort to drive more sustainable growth for the company and “reflects an appropriate right-sizing of our organization” in the current economy.  The company also cut its revenue outlooks, both for the third quarter and full year. It now expects Q3 net revenues of $82 million — down 23% from the prior year period — and full-year 2022 revenues in the range of $400 million to $425 million — lower than its previous expectation of $470 million to $520 million.  The plant-based meat sector as a whole has had a bumpy year, but Beyond Meat seems to have experienced more strife than its competitors. It laid off about 4% of its workforce in August, and has consistently missed revenue targets and cut its annual projections.

Gatorade ventures into gummies

PepsiCo’s Gatorade brand is moving into gummies with its first dietary supplement as the brand aims to cover more times when an individual might use it. The company is releasing Gatorade Recovery Gummies and Gatorade Immune Support Gummies.  In a statement, the company said the Gatorade Recovery Gummies support exercise recovery, and the Gatorade Immune Support Gummies contain vitamins and minerals that support a healthy immune system. Gatorade Gummies are available for $25.99 each and bundled together for $46.80.  The gummies launch marks the latest in a series of new offerings for the Gatorade brand, which recently entered the energy drink category with its first caffeinated beverage called Fast Twitch.



Grocery & Restaurants

U.S. Senate to put Kroger-Albertsons merger under microscope

Next month, the U.S. Senate plans to hold a hearing to examine competitive and consumer concerns arising from the Kroger-Albertsons merger deal. U.S. Sens. Amy Klobuchar (D., Minn.), chair of the Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights, and ranking member Mike Lee (R., Utah) said yesterday that the subcommittee will convene a panel in November to address the $24.6 billion transaction, in which The Kroger Co. is slated to acquire Albertsons Cos. The lawmakers noted that a potential combination of the nation’s two largest supermarket chains raises an array of issues for both the grocery industry and its shoppers. “As the chair and ranking member of the Subcommittee on Competition Policy, Antitrust and Consumer Rights, we have serious concerns about the proposed transaction between Kroger and Albertsons,” Klobuchar and Lee said in a joint statement.

Enlightened Hospitality invests $10M in Chip City Cookies

Enlightened Hospitality Investments, co-founded by restaurateur Danny Meyer and affiliated with his Union Square Hospitality Group, has made a $10 million investment in New York City-based Chip City Cookies, the companies announced Thursday. Chip City co-founders Peter Phillips and Teddy Gailas said they partnered with the investment group to speed growth plans for the 14-unit gourmet cookie concept beyond New York City. The brand has expansion plans in Connecticut, Florida, Massachusetts and Virginia as well as the District of Columbia. “Our locations typically range from 500 to 1,200 square feet,” said Phillips, CEO of Chip City Cookies, in an email. “We have 10 units under construction across New York and New Jersey, with one underway in Miami Beach. We have leases signed in Boston, D.C., Bethesda, Va., and Connecticut for locations planned to open between now and Q3 of 2023.” The company plans to have 40 units open by the end of 2023, Phillips added. Meyer’s Enlightened Hospitality’s investments include Joe Coffee Co. Salt & Straw, the Goldbelly marketplace and the labor management platform 7shifts.

Home & Road

Conn’s CEO resigns as retailer faces big revenue drop; interim successor named

The chief executive of Conn’s has left after only 14 months in the role — and been succeeded by the executive she replaced. The furniture, appliance and electronics retailer said that Chandra Holt has stepped down as president and CEO and from the company’s board, effective immediately. Norman L. Miller, Conn’s former president and CEO, has been named interim president and CEO.  He previously served in the role for six years, from 2015 to 2021. Holt took the reins of Conn’s from Miller in August 2021, joining the company from Walmart, where she had most recently served as executive VP for Walmart U.S. e-commerce. Before Walmart, she held a variety of positions at Sam’s Club, including COO of Prior to Sam’s Club, Holt held various leadership roles at Walgreens. In addition to previously leading the company as CEO, Miller served as Conn’s executive chairman from August 2021 until April 2022. He has been a member of the board since September 2015.

Luxury furniture brand Marge Carson acquired

Marge Carson, which recently announced it was going out of business, has been acquired by Linly Designs, a Chicago area luxury interior design firm and retailer. “Out of many interested and highly-qualified parties, I have chosen Janet as my successor to carry on the spirit, quality and design excellence of Marge Carson,” said Jim LaBarge. “She is someone in the industry with brilliance, a reputation for achievement and a mindset for success.” Janet Linly is president and CEO of Linly Designs. After 75 years of operation as a resource for high-end upholstery, bedroom and occasional furniture sold through retailers, design center showrooms and interior designers, Marge Carson’s former CEO Jim LaBarge announced earlier this month that he would be ceasing operations to focus on his health.

Jewelry & Luxury

Bucherer Acquires Leeds & Son

Bucherer USA, which bought the Tourneau chain in 2018, has bought Leeds & Son, a jewelry and watch retailer based in Palm Desert, Calif. Leeds & Son was founded in 1947 by Edward and Eleanore Weiner. “Leeds” is a combination of the first two letters of their first names. Son Terry took over the company in 1981, running it alongside sister Riki Stein. Current management will stay in place, Bucherer said. In 2018, Bucherer bought four-store chain Baron & Leeds, which has stores in California and Hawaii. While it’s not clear what the exact relationship is between the two companies, Leeds & Son CEO, Terry Weiner, was one of the founders of Baron & Leeds.

Quality Gold Plans to Go Public Through a SPAC

Jewelry wholesaler Quality Gold plans to go public through a merger with a SPAC (special purpose acquisition company) in the first quarter of 2023. After combining with Tastemaker Acquisition Corp., Quality Gold hopes to be listed on Nasdaq under the ticker QGLD. The initial public offering (IPO) aims to raise $279 million, which would imply an enterprise value for Quality Gold of $989 million, just shy of “unicorn” status. Based in Fairfield, Ohio, Quality Gold will continue to be led by CEO Michael Langhammer; Michael’s brother, chief operating officer Jason Langhammer; and its current senior management. Founded in 1979 by their father, David, Quality Gold posted revenue of $534 million for the fiscal year ended March 31, 2022, as well as $82 million in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).

Americans cut luxury spending ahead of key holiday season

Americans have cut back on buying luxury goods like designer clothing and accessories over the past two months, according to data from three credit-card companies, raising questions over the sector’s resilience. Citigroup, Mastercard and Bank of America data released this month showing lower U.S. spending just weeks ahead of the holiday shopping season could raise concern among investors that the industry’s post-COVID-19 pandemic boom is at risk of petering out.

Brunello Cucinelli Forecasts Record Year, Relying on Strong Pipeline to Drive Revenues

Merchandise demand is exceeding supply, according to Brunello Cucinelli. Relying on a strong manufacturing pipeline is a key added value that has caused the entrepreneur to expect a 25 percent increase in revenues for the year and a 10 percent gain in the top line for 2023 based on the order intake for the men’s and women’s spring 2023 collections. “During and despite the pandemic over the past two years, we did not lay off anyone and having our production and sales facilities at full capacity is giving us a competitive advantage to cope with the large quantity of goods requested by the market where, in general, demand exceeds supply,” remarked Cucinelli, marveling at the general speed of the recovery after the pandemic. Cucinelli was speaking to analysts during a call on Wednesday evening to comment on a 27.7 percent increase in revenues of his namesake company in the first nine months of the year, which reached 642 million euros.

Office & Leisure

Hasbro delivers dour quarter as higher prices cool demand

Hasbro Inc missed quarterly profit estimates on Tuesday as the company’s move to raise prices to offset surging commodity costs led inflation-weary customers to buy fewer toys and games. While toys have typically held up better than other discretionary categories during economic downturns, Hasbro warned earlier this month that demand was starting to slip ahead of the holiday season due to stubbornly high inflation and cut its annual sales forecast. Hasbro said on Tuesday it expects to see more promotional activity heading into the gifting season as consumers get more conscious about spending their holiday budgets wisely at a time of decades-high inflation. “Promotions and entertainment field demand have become increasingly important and will be key in the quarters ahead,” Chief Executive Officer Christian Cocks said on a post earnings call, adding that Amazon’s recent Prime Day saw Hasbro’s sales volume rise in mid-double digits from a year earlier. The company expects fourth-quarter revenue growth to be flat on constant currency basis. Analysts were expecting a near 2% decline. Still, Hasbro saw its net revenue fall 15% to $1.68 billion in the third quarter ended Sept. 25, partly dented by a stronger dollar.

Michaels downgraded at S&P as pandemic craft boom wanes

S&P Global Ratings downgraded Michaels’ corporate credit rating to B- from B, according to an emailed release Friday. With expectations for a “shallow” recession and weak demand, analysts with the ratings agency expect Michaels’ leverage to remain “very high” before improving next year.  S&P’s downgrade of the crafting retailer follows that of Moody’s, which lowered its corporate rating for Michaels to B2 in July. A little over a year and a half ago, Michaels went through a leveraged buyout. In doing so, it took on new debt as an affiliate of private equity firm Apollo Global Management acquired the company for a price tag of $5 billion. The retailer at the time was coming off a year in which it added nearly $200 million to its sales as bored consumers sheltering at home took up sewing, knitting and other crafts. The deal was part of a short-lived revival of buyouts in the retail space amid an industry resurgence in 2021. In 2021, private equity firms acquired eight retail companies, including At Home, Casper, Francesca’s and Michaels, among others. Some of those companies have now run headlong into a demand shortfall and likely recession.

Technology & Internet

Snap stock falls nearly 25% after revenue hit by shrinking advertiser budgets

Snap’s bad year continues. Snap on Thursday reported revenue of $1.13 billion for the three months ending in September, a slight 6% increase from the year prior and less than Wall Street had expected, as the company confronts tightening advertiser budgets in an uncertain economy. In a letter to investors, Snapchat’s parent company said its revenue growth was slowed by several factors, including growing competition and jitters from the advertisers who make up its core business. “We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs,” the company said in the letter. Shares of Snap fell nearly 25% in after hours trading following the earnings report. Snap’s report kicks off what is expected to be a sobering tech earnings period, as layoff announcements, hiring freezes and other cost-cutting measures have become increasingly common in the industry amid fears of a looming recession. Snap helped set off a wave of anxiety among tech investors when it warned in May that the economy had worsened faster than it expected, cutting into its revenue and profit forecast for the quarter. In late August, Snap announced plans to lay off some 20% of its more than 6,400 global employees, or more than 1,200 staffers.


Apple’s top designer is leaving three years after taking over from Ive

Apple’s vice president of industrial design, Evans Hankey, is leaving the company, Apple confirmed to CNBC on Friday. Hankey took over for former Apple design chief Jony Ive three years ago when he left to start his own independent firm. Hankey has been responsible for much of Apple’s industrial design work, from the look and feel of the company’s hardware to the methods used to produce them in large volumes. She was never as well recognized as Ive, who is known in Apple lore as one of the key minds behind the introduction of the iMac, iPod and iPhone. Still, she was often quoted in the media after new products were launched, discussing specific design decisions and the way Apple’s design team works. Apple hasn’t named a replacement for Hankey, according to Bloomberg News, but the company told CNBC in a statement that she will remain at the company to manage the transition. “Apple’s design team brings together expert creatives from around the world and across many disciplines to imagine products that are undeniably Apple. The senior design team has strong leaders with decades of experience. Evans plans to stay on as we work through the transition, and we’d like to thank her for her leadership and contributions,” an Apple representative said in a statement.

Finance & Economy

66% of American workers are worse off financially than a year ago due to inflation, report finds

Rising costs have chipped away at most Americans’ standard of living.  As inflation pressures continue, two-thirds of working adults said they are worse off financially than they were a year ago, according to a recent report by Salary Finance.  To make ends meet, many are dipping into their cash reserves or going into debt.  Nearly three-quarters, or 72%, of consumers have less in savings than last year, a jump from 55% who said the same in February, the report found. And 29% said they have wiped out their savings entirely.  The consumer price index, which measures the average change in prices for consumer goods and services, rose more than expected again in September, still hovering near the highest levels since the early 1980s.

Global supply chain woes have seen ‘huge improvement,’ Flexport founder says

Global supply chain woes have eased ahead of the holiday season, according to Flexport founder and co-CEO Ryan Petersen.  Ports are less congested, and the cost of shipping goods has fallen significantly this year, Petersen said. The price of shipping a container from Asia to the U.S. is down about 80%.  The global supply chain was pummeled with high costs, lengthy delays, crowded ports and shipping container shortages during the coronavirus pandemic. The Drewry composite World Container Index — a key benchmark for container prices — reached record-high prices of over $10,000 during the height of the pandemic, up from pre-pandemic rates of $1,420.  The falling costs of shipping reflect declining demand for goods and shipping containers, Petersen said. As people readjust to their post-lockdown lifestyles, they are spending more on experiences such as travel and restaurants.


Shoppers At All Income Levels Seek ‘Resale First’ As Economy Falters

Consumer demand for secondhand and returned items is exploding amid inflation coupled with economic uncertainty. Research shows that the recommerce market grew twice as fast as the wider retail market in 2021 and is expected to reach $289 billion by 2027. And it isn’t just starving students and apparel brands who are on board with the trend. A new study reveals that affluent consumers are leading the recommerce revolution, driven by dual concern for value and the environment, and that demand for resale goes far beyond used clothing.  FloorFound announced the results of a new consumer study that illuminates consumer preferences and sentiment around resale items, including furniture, appliances, mattresses, and more.