Headlines of the Week

Nike CEO to step down; joins head of Under Armour in changing roles in 2020

The CEO shuffle continues, this time at Nike.  Mark Parker, who’s helmed the sneaker giant for the last 13 years, will be replaced by board member John Donahoe as of Jan. 13, Nike announced Tuesday. Parker will take on the new role of executive chairman and continue to head the company’s board. Donahoe, president and CEO of ServiceNow, is the former CEO of retail site eBay, as well as Bain & Co.  The leadership change was announced the same day that rival Under Armour said its founder and CEO Kevin Plank will be stepping down, becoming the company’s executive chairman and brand chief as of Jan. 1.

 

Cole Haan files confidential IPO

Cole Haan last week confidentially submitted a draft registration statement with the Securities and Exchange Commission for an initial public offering, according to a company press release. The price range and number of shares for the offering have yet to be determined. Bloomberg first reported the news that the footwear brand had commenced discussions with investment banks, citing unnamed sources. In its fiscal year ended June 1, the brand, owned since 2013 by U.K. private equity firm Apax Partners, saw sales rise 14% to $687 million and adjusted earnings before interest, taxes, depreciation and amortization rise 56% to $95.3 million, Bloomberg also said. Private equity tends to move its acquisitions to a sale or IPO five or so years after taking them on, which tracks fairly closely with Cole Haan’s 2013 acquisition by Apax Partners.

 

 

Apparel & Footwear

Resale Giant GOAT Now a Luxury, Streetwear Apparel Retailer

Sneaker resale platform GOAT has announced sweeping changes to its secondhand-centric business model, opening its app up to streetwear, contemporary and luxury apparel selling at retail prices thanks to new partnerships with hyped-up retailers and boutiques. This will be the first time GOAT has truly committed to a retail concept as a part of its business, though it has flirted with the concept by offering certain sneakers at-or-under retail prices in the past. With the addition of apparel from hybebeast-bait brands including Acne Studios, Gucci, Off-White, Maison Margiela, Saint Laurent and Stussy, GOAT’s newly expanded offering extends far beyond the sneakerhead-favorite marketplace it once was. Fifty new brands will populate GOAT’s marketplace, with more slated to come on board by year’s end. The four-year-old company plans to work directly with these brands to create a supply line of apparel at retail prices, GOAT said, which will be sold exclusively through its Android and iOS apps for the time being.

Resale platform Rebag launches Kelley Blue Book for bags

Luxury resale platform Rebag is launching a new tool to evaluate handbags, applying the same standardized rigor to the category that the Kelley Blue Book applies to cars, according to Rebag CEO Charles Gorra. The tool, called Clair — which stands for Comprehensive Luxury Appraisal Index for Resale — is a multipurpose platform that standardizes a wide range of designer handbag styles into distinct product codes, and evaluates their retail price and their resale price, plus the relationship between those two figures and price fluctuations. Customers can use Clair to find a bag they want to sell to get a quote on what it’s worth, and Rebag promises to buy it from them at that price for at least two weeks.

Destination Maternity files for bankruptcy

The world’s largest retailer of maternity wear has filed for Chapter 11 bankruptcy protection amid sagging sales, increased competition and changing customer tastes. Destination Maternity listed $260 million in assets and $240 million in debts in its filing with the U.S. Bankruptcy Court in Delaware. The company is looking to find a buyer in bankruptcy, reported CNBC, and if it does not, it will likely be forced to liquidate. As of August 3, 2019, Destination Maternity operated 446 stores in the U.S., Canada and Puerto Rico, and 491 leased departments in department stores and baby specialty stores throughout the U.S. and Canada, along with international stores via franchising. On the heels of a disappointing second quarter in which same-store sales fell 11.9%, the retailer in August announced that it was reviewing various strategic alternatives, including a possible sale.

Benetton to ‘pop-up’ in return to U.S. retail

The United Colors of Benetton is making its first foray into the U.S. retail scene after more than a two-year absence. The Italian clothing brand, known for its strong use of color and controversial advertising campaigns, will open a pop-up at Santa Monica Place, Santa Monica, Calif., on Oct. 25. The temporary shop, which will close on Nov. 24, will be based on an omnichannel model, with no stock. All purchases will be made online.

“Customers will be able to try on and interact with the clothing, but then all purchases will be made through the in-store online portal and shipped directly to the customers’ home.” Benetton, an early advocate of sustainability, said the omnichannel store model will “eliminate waste and allow for a seamless brand experience.” Benetton Group, which operates the United Colors of Benetton and the Sisley brands, has a network of about 5,000 stores globally.

 

 

Athletic & Sporting Goods

New Balance has taken a careful approach to choosing athlete endorsers, and it’s paying off

How fitting that a shoe and apparel company that used to brag it was “Endorsed By No One” now boasts Kawhi Leonard as its leading man in its reentry into the basketball shoe market.  The signing of Leonard — even before he was named NBA Finals MVP with the Toronto Raptors last June and subsequently signed with the Los Angeles Clippers — sits at the apex of the company’s remarkable string of successes in 2019 in the ultra-competitive marketplace of not only basketball but also soccer, tennis, and track and field shoes and apparel.  Besides Leonard, New Balance watched its apparel deal with Liverpool Football Club pay off with a Champions League victory; it saw Coco Gauff emerge as the most stunning young talent in tennis; it witnessed Rose Lavelle of the US women’s soccer team play a key role in the World Cup title run; and most recently it watched Jose Altuve send the Astros to the World Series with a walkoff home run to defeat the Yankees in the ALCS.

 

Dick’s Sporting Goods CEO Reportedly Considering Third-Party Presidential Bid

Billionaire businessman Edward “Ed” Stack, CEO and chairman of Dick’s Sporting Goods since 1984, is reportedly considering a run for president as a third-party candidate, a move that could further shake up the looming 2020 election.  A longtime Republican donor, Stack likely has the personal wealth to bankroll a potential campaign; Forbes estimates his net worth at $1 billion.  Beyond the attention garnered from halting gun sales at his stores, Stack has been a high-profile figure in the media recently: He just released a new book and also criticized Senate majority leader Mitch McConnell this week for not having the “guts” to address gun reform.

Cosmetics & Pharmacy

L’Oréal Acquires Mugler & Azzaro

Clarins is out of the fragrance business. L’Oréal and Clarins Group signed an agreement for the sale of the Mugler brands and Azzaro fragrances through the acquisition of the fragrance division of Clarins by L’Oréal. At the closing of the deal, this division will include the following companies: Mugler, Thierry Mugler (Fashion), Clarins Fragrance Group (CFG), CFG France, Cosmeurop and CFG UK. These activities represented approximately 340 million euros in sales last year (about $378 million at current exchange rates), according to L’Oréal. The purchase, subject to customary approvals, is expected to be completed Q1 2020.

Coty plans sale of professional beauty division

Cosmetics maker Coty is exploring the sale of its professional hair and nail products business, including Wella and Clairol, as it seeks to cut debt and simplify its structure after a series of setbacks at the company. Shares in the US-listed group rose nearly 15 per cent on news that Coty, which is majority owned by investment company JAB Holdings, had hired Credit Suisse to run a sale process for the units. The division caters to professional salons and is expected to generate $2.7bn in revenue this year.

Chinese Nuo Capital fund acquires a 30% stake in shaving cosmetics maker Proraso

Chinese Nuo Capital fund acquired 30% of Ludovico Martelli srl, the maker of Proraso shaving cosmetics. The Martelli family sold the stake for about 50 million euros. The transaction will take place part through a share purchase and part through a capital increase. The price reflects a valuation of the company of 150 million euros, as estimated at the beginning of June, when Ludovico Martelli commissioned the Gca Altium advisor to look for new members.

 

Discounters & Department Stores

Authentic Brands Group Claims Barneys IP

Authentic Brands Group called itself “the successful bidder” of Barneys New York’s intellectual property, with a stalking horse bid worth more than $270 million​ that also included backing from investment bank B. Riley Financial and other affiliates. A sale hearing is scheduled for Oct. 31. ABG said in an emailed press release Thursday that it expects the deal to close Nov. 1.

Walmart kicks off holiday discount festivities early

Walmart is launching what it says is its earliest-ever blitz of holiday deals to make up for a shortened shopping season before the Thanksgiving weekend. Discounts start on October 25^th and are spread across electronics, gaming, toys, home and sporting goods, according to a company press release. The retail giant also is touting its expanded set of shopping features and services, including personalized gift recommendations, a scannable toy catalog and free next-day delivery.

Target takes on Amazon with enhanced holiday fulfillment

Target on October 23rd said that between Nov. 1 and Dec. 21, it’s offering free shipping “on hundreds of thousands of items” available for everyone at the holidays, with orders arriving as early as the next day. No minimum purchase or membership is required, according to a company press release. The mass merchant will spend almost $50 million more than last year on payroll to “make more skilled team members available” to assist shoppers during peak holiday hours, the company also said. That includes doubling the number of employees dedicated to fulfillment, which will enable the retailer to get customers their orders “in as soon as an hour.”

Nordstrom’s welcome to New York

With the opening of a gleaming new seven-story full-line store — one floor for each year of planning — on the West Side of New York on Thursday, Seattle-based Nordstrom is moving on up. “We’re in the top 50 markets,” Co-president Erik Nordstrom told analysts at a management meeting at the New York Stock Exchange on October 22nd, where executives said New York represents a $700 million-plus market. “New York has been the big hole.”

 

 

Emerging Consumer Companies

Casper preps for an IPO

Casper, the New York-based mattress company, is preparing for an IPO that could occur later this year or in the first half of 2020. Casper’s valuation could exceed $1.1 billion.

Brooklinen launches Spaces, online marketplace of other home brands

Brooklinen, the New York-based digitally-native home goods business that led with bedding, has launched Spaces, an online marketplace of products from others brands intended to extend the Brooklinen aesthetic throughout the home. Spaces will feature 100 products by 12 partner brands, including Simply Framed, The Sill, Floyd and Dims. Brooklinen plans to open its first retail store this year, with an area dedicated to the Spaces concept.

Floyd launches first mattress

Floyd, the Detroit-based digitally-native furniture business, is launching its first mattress. The mattress measures 10 inches in height, is made in the U.S., and is designed to fit with the brand’s hero product, the bed frame. It includes a Tencel top cover made from wood pulp, and a bottom cover that includes a non-skid knit material to prevent mattress slippage against the smooth wood bed frame. The cover also includes side-handles to assist with moving the mattress.

Burrow launches rugs

Burrow, the New York-based home business known for its modular couches and loveseats, has developed eight rug designs in two sizes. The rugs retail for $395 for a 5′ x 8′ rug and $795 for an 8′ x 10′ rug, and every order includes free, one-week shipping.

 

 

Grocery & Restaurants

LaSalle capital acquires Joseph’s Frozen Foods

LaSalle Capital has purchased Joseph’s Frozen Foods from Brynwood Partners VII L.P. Financial terms of the transaction were not disclosed. Brynwood acquired Joseph’s from Nestle Prepared Foods Co. in 2013. Along with premium frozen stuffed pasta and sauces, it also provides private label products and co-manufacturing services in a variety of pasta-centric frozen foods.

Popeyes: Units are hiring more employees to prepare for return of chicken sandwich

Popeyes Louisiana Kitchen restaurants are shoring up staff in preparation for the return of the brand’s new chicken sandwich, which sold out over the summer after an epic social media spat between the Southern brand and Chick-fil-A. The statement was triggered after the CEO of Sun Holdings Inc., which operates 150 Popeyes, told Bloomberg this week that his units are hiring about 400 additional workers to help with demand when the sandwich returns in early November. Popeyes would not confirm the early November comeback.

Home & Road

Sherwin-Williams’ sales up nearly 3% for Q3

Paint and wood coatings specialist Sherwin-Williams reported $4.87 billion in third quarter sales, a 2.9% increase. This was largely due to higher paint sales volume in North America stores and selling price increases, which was partially offset by some softness in demand outside the U.S. and unfavorable currency translation rates. The currency translation changes decreased consolidated net sales by 0.9% in the in the third quarter and 1.5% in the first nine months. Diluted net income per share rose to $6.16 per share compared with $3.72 per share in the third quarter of 2018. The third quarter of 2019 includes a benefit from resolution of California resolution that increased earnings per share 28 cents and a charge for acquisition-related costs of 77 cents per share.

Mattress global sourcing scene shifting quickly

Mattress importers showing at Market Week said they moved quickly to diversify their sourcing structure as trade winds turned against Chinese imports. The importers said they are now well positioned to withstand any changes that might occur on the global mattress sourcing scene. The mattress importing landscape has changed rapidly in recent months, with Chinese imports, hammered by tariffs and stiff antidumping duties, falling sharply, and Vietnam taking over the No. 1 position, with a 31% share of imports in August, when China had a tiny 1% share.

Jewelry & Luxury

DelGatto Diamond Finance Gets $100 Million Investment

DelGatto Diamond Finance has received a $100 million facility from Crestline Investors, a credit-focused institutional alternative asset manager. DelGatto Diamond Finance specializes in collateral-based diamond and jewelry industry financing. Started by Circa founder Chris Del Gatto, the DelGatto Diamond Finance Fund has financed more than 75 companies globally since its inception.

Swatch and Calvin Klein Part Ways After 22 Years

Something has come between Swatch and its Calvins. After working together for 22 years, Swatch Group is letting its watch and jewelry licensing agreement with Calvin Klein lapse. Using the same blunt language that marked its departure from the Baselworld fair, a Swatch Group statement said it was ending the longtime partnership due to “the recent turbulence and uncertainties at the management level of Calvin Klein Inc., New York.”

Saks Fifth Avenue Owner HBC to Go Private

Saks Fifth Avenue owner HBC (also known as Hudson’s Bay Co.) will likely soon be a private company, now that its board has accepted a new offer from a group of shareholders led by executive chairman Richard Baker. The shareholder group, which already owns 57% of the company, agreed to pay CA$10.30 for company’s shares (about $7.87), a 62% premium to the stock’s June 7 closing price. In June, the group offered CA$9.45 per share, but that offer was rejected by a special committee of independent directors.

What slowdown? China’s riding to the rescue of luxury brands

When Tiffany & Co said this month it was sending its priciest jewelry to mainland China to reach wealthy shoppers no longer jet-setting abroad, it reflected a trend helping global luxury brands weather a Chinese economic slowdown. Well-off Chinese consumers, whose trips to fashion capitals like New York and Paris have long buttressed luxury-sector sales, are increasingly staying at home because of a weaker yuan currency which has blunted their overseas firepower.

 

Office & Leisure

Mattel’s Time Is Running Out Amid Federal Securities Probe, And Not Even Barbie Can Save It

With its 75th birthday right around the corner in January, Mattel, Inc. faces one of the biggest crises of its life in a perfect storm that could spell game-over if a recession bites. The company, which unleashed the iconic Barbie brand to the world 60 years ago, is struggling with its $3 billion debt and is facing a probe as to whether it violated federal securities laws. It has lost two-thirds of its value over the past three years and has a mountain of trouble as it tries to turn itself around with rapidly declining sales, operating losses, high-profile executive departures, and losing $531 million on sales of $4.5 billion last year. If hedge funds, who are by far the biggest investors, pull out amid the propagation of recession fears, MAT’s stock could go to zero, says The Edge (who source underperforming companies for activist involvement, Special Situations and Spinoffs).

Michaels Companies names CEO

The Michaels Companies Inc. has made it permanent. The arts and craft retailer named Mark S. Cosby as CEO, effective immediately. Cosby has been serving as interim CEO of Michaels and a board member since February 2019, following the abrupt departure of Chuck Rubin. Before joining Michaels, Cosby had most recently served as president, North America at Office Depot Inc., from 2014 to 2016. Prior to that, he served as president, retail at CVS Caremark Corporation, where he was responsible for all aspects of the $65 billion retail business. Prior to CVS, Cosby spent five years at Macy’s, where he served in several executive roles, including president, stores. “The search committee conducted an exhaustive evaluation of many outstanding candidates and unanimously concluded that Mark brings the right strategic vision and operating skill to lead Michaels into a new chapter,” said James Quella, chairman, The Michaels Companies, which operates more than 1,260 stores nationwide.

LEGO to sell building sets in tween girls’ retailer Justice

Danish toy production company LEGO has extended its brand partnership with US-based tween girl’s clothing retailer Justice. LEGO Friends and LEGO Disney building sets will be available in all Justice stores from this month. The partnership is also holding a “Build & Shop” LEGO building event on 10 November to inspire creative play among girls. The event will be held in 300 Justice stores across the US and Canada. Justice also has presence in Asia, Mexico, and the Middle East. With this partnership, LEGO is encouraging more girls to engage in construction play that can help boost confidence, creativity, and problem-solving.

Hasbro shares plunge after toy giant blames tariffs for canceled orders

Hasbro shares plunged nearly 17 percent Tuesday after the toy giant said retailers had canceled or changed orders in response to new and looming tariffs tied to the Trump administration’s trade war with China. The disclosure comes during a crucial period for the maker of Nerf and My Little Pony, which last year made one-third of its sales between October and December. It also comes after President Trump delayed tariffs on $156 billion worth of Chinese imports, including toys — originally scheduled for September — to Dec. 15, saying he didn’t want to affect consumers during the holiday shopping season.

But executives at Hasbro say the uncertainty of new import duties — and changes in when they will be implemented — has already had an impact. U.S. revenue fell 2 percent in the most recent quarter, while profits dropped by nearly 20 percent.

Technology & Internet

While Amazon’s Q3 sales rise 24%, its net income falls 26%

While Amazon.com Inc.’s sales rose 24% in the third quarter, the retail giant’s transformation of its Prime loyalty program into a one-day free shipping offer put a dent in its bottom line as its net income fell 26%. The push to speed up its delivery not only led Amazon to miss analysts’ estimates, but also caused Amazon’s first quarterly profit decline in more than two years. Jeff Bezos, Amazon founder and CEO, acknowledged the expense in a statement that accompanied the retailer’s earnings release, noting that “it’s a big investment, and it’s the right long-term decision for customers.” He added that “customers love the transition of Prime from two days to one day.”

Best Buy launches free next-day delivery for the holidays

Consumer electronics retail chain Best Buy Co. Inc. on Tuesday announced that it will now offer free next-day delivery for thousands of products purchased online with a $35 minimum purchase during the holiday season. This is the first time Best Buy has offered free next-day delivery ever. A Best Buy spokesman declined to say what percent of its online products will have this service available and how this will impact the profitability of orders. The retailer will use both its stores and warehouses to fulfill these orders. Best Buy is joining a growing number of large retail chains that are speeding up their delivery times.

Finance & Economy

Millionaires now hold nearly half of the world’s wealth

The number of millionaires in the world grew to nearly 47 million over the past year, and they now own close to half of the world’s wealth.  Despite the trade wars, slowing global growth and the volatile stock markets, the total number of millionaires in the world increased by 1.1 million from the middle of 2018 to the middle of 2019, according to the Global Wealth Report from Credit Suisse. The world’s 46.8 million millionaires are now worth a combined $158.3 trillion – or 44% of the world’s total wealth.

Why a Shortened 2019 Holiday Calendar Should Concern Retailers

This year, consumers will have six fewer days for holiday shopping between Thanksgiving and Christmas. And only one in three are aware of the impending calendar crunch, according to July 2019 data from RetailMeNot.  There’s no doubt that the shortened holiday calendar is going to sneak up on many consumers and impact their holiday shopping. The largest share (34%) of US internet users surveyed by RetailMeNot said they would begin searching for holiday deals earlier because of the tight timeframe. And nearly as many (28%) said they would make their first holiday purchase sooner.

Federal deficit increases 26% to $984 billion for fiscal 2019, highest in 7 years

The U.S. Treasury said that the federal deficit for fiscal 2019 was $984 billion, a 26% increase from 2018 but still short of the $1 trillion mark previously forecast by the administration.  The gap between revenues and spending was the widest it’s been in seven years as expenditures on defense, Medicare and interest payments on the national debt ballooned the shortfall.