The holidays are going to look and feel different this year. Typically, Thanksgiving is a time when family and friends gather to enjoy a turkey dinner and reflect on shared blessings. However, a traditional Thanksgiving is not the safest option this year, thanks to COVID-19. The Centers for Disease Control recommend having a virtual Thanksgiving dinner or having dinner only with those in your immediate household to lower the risk of spreading the virus. Consequently, 70 percent of Americans plan to celebrate Thanksgiving differently this year, according to Numerator. These changing behaviors will impact several industries.
Many families are rethinking their Thanksgiving plans in real time and will continue to do so over the coming weeks, but for turkey famers, most decisions on the quantities and sizes of this year’s birds were made before the virus. Farmers have invested years of planning and effort to raise birds under the assumption that most Thanksgivings will be roughly similar. But, according to the Washington Post, demand for large turkeys will most likely be much lower this year as smaller gatherings are encouraged, resulting in fewer and smaller home-cooked turkeys. Turkey farmers fear that they will be stuck with too many large turkeys and not enough small ones.
Another industry that will be impacted is one that has already suffered greatly: travel. According to Statista, the number of Thanksgiving travelers in the United States last year was 55.3 million. The Transportation Security Administration (TSA) broke records screening more than 26 million passengers and crew. This year will undoubtedly be much different. While airlines expect that the Thanksgiving period will be relatively stronger than prior months, any holiday bump will be off of a severely depressed baseline. According to the TSA, daily checkpoint throughput of travelers is currently only between 30-40% of last year’s levels at this time, and as of October 5, online travel agency Kayak reported that domestic flight searches were down 81% year over year.
The impact of COVID-19 on restaurants this Thanksgiving could be more of a mixed bag. While many restaurants will be unable to open their dining rooms this year, there is a chance that the industry could see a spike in take-out. With fewer large family gatherings, more people who don’t usually cook the meal will be forced to fend for themselves on Thanksgiving. Coupled with a potential shortage of smaller birds, this could result in higher demand than usual for restaurant-prepared meals. While national data on this dynamic is hard to come by, local newspapers and dining websites are exploding right now with lists of restaurants that are pivoting to offer to-go options on Thanksgiving.
It is also hard not to wonder what Thanksgiving and the start of the Christmas shopping season will look like for retailers under current conditions. Over the summer, a number of the biggest retail chains announced that they won’t be open on Thanksgiving due to the coronavirus including Walmart, which will be closed on Thanksgiving for the first time since the late 1980s. Black Friday is surely in for some changes this year as well. One change is retailers announcing the launch of Black Friday deals much earlier than usual as consumers will be faced with restrictions on store capacity and the prospect of delayed online orders. Fear not, however, as retailers are reassuring us that the best deals will be available online to reduce crowds and the need to rush into a store.
There is very little that the pandemic hasn’t affected, Thanksgiving included. And while this year and this holiday will be different, we encourage people to be sensible and safe.
Hopefully, by next Thanksgiving, with vigilance (and a vaccine), there will be much more for which to be thankful.
Headlines of the Week
The U.S. economy grew at a record-shattering pace in the third quarter as businesses reopened from the coronavirus shutdown, but the nation remains in a deep hole from the COVID-induced recession. Gross domestic product, the broadest measure of goods and services produced across the economy, surged by 33.1% on an annualized basis in the three-month period from July through September, the Commerce Department said in its first reading of the data. The previous post-World War II record was a 16.7% increase in 1950. But the headline figure obscures the full picture: The economy contracted at an annual revised rate of 31.4% in the previous quarter, the sharpest decline in modern American history. Looking at the quarterly data, the nation’s GDP grew 7.4% from the second to the third quarter, compared with a 9% decline between the first and second quarters.
Inspire Brands Inc. and Dunkin’ Brands Group Inc. have made a definitive agreement to merge the two restaurant companies, with Inspire to buy Dunkin for $106.50 a share, for a total of approximately $11.3 billion, including assumption of Dunkin’s debt, the companies said Friday. The merger brings Dunkin’ and Baskin-Robbins into Inspire’s existing portfolio of Arby’s, Buffalo Wild Wings, Sonic Drive-In, Jimmy John’s and Rusty Taco, which combined have $26 billion in systemwide sales and more than 31,600 restaurants in more than 60 companies, according to a statement from the two companies. It will make Inspire one of the largest restaurant companies in the world. Inspire Brands is majority owned by affiliates of Atlanta-based private-equity firm Roark Capital, and its acquisition of Dunkin’ Brands, which is expected to be concluded by the end of the year, will take that company private.
Apparel & Footwear
Tapestry got off to a strong start in its first quarter amid surging e-commerce sales. Excluding one-time charges, Tapestry earned $0.58 per share, easily topping analyst expectations for $0.23 per share. Net sales fell 14% to $1.17 billion from $1.36 billion, fueled by strong online sales and double-digit year-over-year revenue growth in mainland China. Analysts had forecast sales of $1.07 billion. By brand, Coach net sales fell 9% to $875.4 million, and Kate Spade net sales fell 21% to $240.4 million. Stuart Weitzman net sales were down 35% to $56.4 million. Tapestry said it gained nearly 800,000 new customers across its three brands online in North America during the quarter. It expects e-commerce sales will make up nearly 50% of all North American holiday sales. “We are very pleased with our first-quarter results, which exceeded expectations and demonstrated the bold actions we are implementing as part of our Acceleration Program,” said Joanne Crevoiserat, who was named permanent CEO on Oct. 27.
Rue21 has named a new chief executive. The apparel retailer announced the appointment of Bill Brand as CEO. He will take the reins from John Fleming, who has served as interim CEO since Feb. 2020, following the departure of Michael Appel. Fleming will return as a board member. Most recently, from 2018 to June 2020, Brand served as senior VP and chief retail officer of Carnival Corp., where he was recruited to lead the creation of a new retail arm for the $18 billion global cruise company. Previously, Brand spent 11 years at TV shopping network HSN, including serving as president from 2014 to 2017. With a focus on experiential retail — enhancing customer connections by delivering value-based and attention-driving content that creates a “halo effect” around brands — Brand revamped the decades-old TV model into a more modern, digital and mobile experience, according to Rue21.
Carly Cushnie, CEO and Creative Director of Cushnie announced that she will be closing down the doors of her label, citing COVID-19 as the reason. “The effects of Covid-19 have hurt my business beyond repair, and it is with great sadness that I share Cushnie will be closing its doors,” Cushnie wrote in a letter sent to the media Wednesday morning. Mastering the art of monochromatic selects and silky silhouettes, Carly Cushie was a force in the industry. Most importantly, she was a part of a very small community of Black women who sit at the helm of a luxury fashion house. In 2008, the designer created the fashion house with her then business partner Michelle Ochs, under the starting name Cushnie et Ochs. After a 10-year-run, the design duo split in 2018 with sources stating the split was a natural end and announced Cushnie as a namesake label with Carly Cushnie as the CEO.
House of Fraser billionaire Mike Ashley is considering making a bid for Jaeger to bolster his growing stable of brands. The fashion firm – whose classic style has attracted famous customers such as Marilyn Monroe and Twiggy – is part of rival Philip Day’s stricken Edinburgh Woollen Mill high street empire. Edinburgh Woollen Mill, which employs 20,000 staff, faces going bust unless it can raise cash to survive the crisis, potentially making it the biggest failure of the pandemic so far. Ashley, 56, whose Frasers Group also owns Sports Direct, is interested in taking over Jaeger, Austin Reed and Jacques Vert, which employ 2,000 people between them, The Sunday Times reported. TM Lewin’s parent company Torque Brands, Simba Sleep co-founder James Cox and Jaeger’s former owner Harold Tillman are also said to be interested in making bids.
You can always tell when the apparel business is bad and brands are looking for ways to pick up a few bucks. How? They start a home line. Talbots, the classically preppy womenswear retailer, announced this week it is launching a new brand, called Haven Well Within, which includes a home furnishings collection. The line is heavy on the soft textiles, with a smattering of housewares and kitchenware products. CEO Lizanne Kindler announced the news in a letter to Talbots customers. “There has never been a better time for us to launch this brand,” wrote Kindler, who has helmed the company since 2012. Left unsaid is the other reason that the timing is advantageous—which is that the apparel business has taken some serious hits during the pandemic, as many people work from home in jeans and loungewear rather than in tailored tops and bottoms. Meanwhile the malls where most Talbots stores are located have mainly been devoid of customers for the past eight months.
Athletic & Sporting Goods
Callaway and Topgolf announced an all-stock merger with an implied equity value of Topgolf of approximately $2 billion. Callaway invested in Topgolf in 2006 and the equipment manufacturer already owned 14 percent of the open-air entertainment company. That agreement included an integrated partnership at all Topgolf venues. Topgolf has 63 locations around the globe with more than 23 million customers and approximately $1.1 billion in revenue in 2019. Regulatory approval of the agreement is expected to be completed in 2021 and upon completion of the merger Callaway will own approximately 51.5 percent of Topgolf.
Some of the biggest names in sports are investing in the wearable company Whoop amid a global pandemic. The fitness tracking company announced it closed a $100 million financing round, valuing it at $1.2 billion. The latest round of investors includes Super Bowl MVP Patrick Mahomes, champion golfers Rory McIlroy and Justin Thomas, Arizona Cardinals wide receiver Larry Fitzgerald and two-time NBA Finals MVP Kevin Durant (via his business venture ThirtyFive Ventures). Whoop makes fitness trackers that can monitor vitals like movement, sleep and workouts. It’s been the fitness tracker of choice for a number of recognizable pro athletes and has been used to help monitor potential symptoms of Covid-19 as sports came back after play was suspended due to the pandemic in the spring.
Under Armour, a global leader in branded athletic performance apparel, footwear and accessories, announced that it has entered into a definitive agreement to sell the MyFitnessPal platform to Francisco Partners for $345 million. Francisco Partners is a leading global investment firm that specializes in partnering with technology and technology-enabled businesses. The firm invests in opportunities where its deep sectoral knowledge and operational expertise can help companies realize their full potential. The transaction value is $345 million, inclusive of the achievement of potential earn-out payments and subject to working capital and other customary adjustments.
Cosmetics & Pharmacy
Beauty is officially hot property in Australia, with the country’s oldest pure-play online beauty retailer Adore Beauty making a confident debut on the Australian Securities Exchange on Friday Australia time. The year’s biggest initial public offering and the largest, female-led Australian market float, the 20-year-old, Melbourne-based e-commerce company raised 269.5 million Australian dollars, or $192 million at current exchange, at 6.75 Australian dollars, or $4.80, a share. This gave Adore Beauty a valuation of 653.5 million Australian dollars, or $464.4 million — 3.9 times the company’s forecast calendar 2020 sales of 158.2 million Australian dollars, or $112.4 million. At one point in early afternoon trading, the shares were up as much as 10 percent to 7.42 Australian dollars, or $5.27, before closing at 6.92 Australian dollars, or $4.92, up 2.5 percent. Launched in April 2000 by 21-year-old Melbourne student Kate Morris and her partner James Height out of Morris’ garage, with 12,000 Australian dollars, or $7,157 at April 2000 exchange, in start-up capital loaned from Height’s father, Adore Beauty today sells 11,000 products across more than 230 brands, the latter a mix of professional, prestige, niche and masstige names, with 590,000 active customers and 18.5 million users across its Australian and New Zealand web sites.
The US$4.5 trillion global wellness economy is growing twice as fast as the global economy. A new Ogilvy study quantifies the wellness baps for brands looking for growth and found consumers expect all brands to provide wellness offerings. “Every brand can be a wellness brand now. Wellness is in many ways the more tangible benefit of ‘purpose.’ We think this is very good news for brands. It shows that wellness remains an opportunity for double-digit growth by meeting numerous consumer expectations to close the gap,” said Marion McDonald, Ogilvy’s Global Health & Wellness Practice Lead. The Ogilvy Wellness Gap study quantifies the gap between consumers’ wellness expectations of brands and how they judge delivery against those expectations in seven key sectors – food, snacks, skincare, airlines, hotels, cars, and banking. Ogilvy surveyed 7,000 consumers from 14 countries across 4 continents to gain new insight into how they see wellness in 2020.
DTC start-up Wild Cosmetics has raised £2MM in early-stage funding led by JamJar Investment to expand its business. UK-based Wild Cosmetics was co-founded by Freddy Ward and Charlie Bowes-Lyon in August 2019 with the hopes of reducing the amount of waste produced by bathroom products. The DTC deodorant brand makes refillable plastic-free deodorant in eight scents. The product is packaged in a bamboo pulp refill and reusable aluminum case. The financial backing will fuel international expansion and product development. “While most of us are now familiar with using compost bins for food waste, or putting glass, paper, and cans in the ‘right’ bin, the bathroom is lagging behind in terms of reducing household landfill,” said Freddy Ward, co-founder of Wild. “We feel the bathroom is going to change radically over the next five years and packaging has to change. We want to be the company that tries to push everyone forward and challenge the industry norms.”
The North American branch of Avon has opened its first physical location, in the Koreatown neighborhood Los Angeles. The 19,000-sq.-ft. space, called Studio 1886 in a nod to the year the beauty company was founded, is designed as an immersive experience for the brand and a playground for beauty lovers, including consumers as well as Avon’s independent sales representatives. The two-level space showcases all of Avon’s best-selling collections and latest innovations in skincare, color cosmetics, fragrance and personal care, along with brands provided by Avon owner LG Household & Health Care. (In 2019, the North American division of Avon was acquired by the South Korean company.) Following strict COVID-19 safety measures, consumers can learn about and order product on site. Customers can virtually try on makeup and have shades matched with foundation, eyeshadow, blush and lip colors using Avon’s new digital catalog, which utilizes augmented reality. (Services such as makeovers, skin treatments and in-studio classes are suspended due to the pandemic.)
Discounters & Department Stores
Hudson’s Bay Co. has filed a lawsuit against the landlord of several of its department stores, alleging a failure to operate and maintain “first class shopping centers.” In a statement of claim filed in an Ontario Superior Court, HBC alleges that Oxford Properties Retail Holdings is in breach of lease agreements and the contractual duty of good faith. The retailer claims that Oxford, which has a portfolio of malls including the Yorkdale Shopping Centre in North York, Ont., and the Square One Shopping Centre in Mississauga, Ont., has refused to deliver suitable premises since reopening after COVID-19 shutdowns.
Walmart has opened new test stores aimed at quickly experimenting with omnichannel technology and processes. The stores currently are focused on blending online and in-store inventory, accelerating inventory movement from backroom to sales floor, speeding up in-store pick rates for online orders and experimental checkout technologies. Walmart has two test stores up and running with two more set to open, according to a blog post from John Crecelius, senior vice president for associate product and next generation stores at Walmart U.S.
Nordstrom on Tuesday announced the opening of its fourth and fifth Local stores in the Los Angeles area, in Newport Beach on Nov. 6 and in Manhattan Beach “in the coming months.” The new merchandise-free locations will offer pickup of online orders from Nordstrom, Rack or HauteLook; curbside pickup with delivery to the trunk of a customer’s car; returns; alterations; free styling advice; and gift wrapping, according to a company press release. A Nordstrom spokesperson declined to say whether the company will open Locals in more cities ahead of the holidays as previously planned.
Tuesday Morning said it will not seek a sale of its assets in Chapter 11, according to a Monday court filing. Rather than sell itself, Tuesday Morning will seek approval for a plan to reorganize as a standalone entity and exit bankruptcy. The retailer has requested a hearing date of Nov. 9 to approve its disclosure statement, which will summarize its reorganization plans.
Emerging Consumer Companies
Faire, the San Francisco-based marketplace the connects brands with local retailers, raised a $170 million Series E led by Sequoia. The deal valued the company at $2.5 billion. Existing investors Y Combinator, Lightspeed Venture Partners, Forerunner Ventures, Khosla Ventures and Founders Fund participated in the round and were joined by new investors DST Global, D1 Capital Partners, Norwest Venture Partners and Dragoneer. The company has raised a total of $439 million since it was founded in 2017. Faire was created by four former Square employees to help mom-and-pop stores compete against Amazon by making it easier to discover and stock new products.
Cann, the Los Angeles-based brand behind cannabis-infused social tonics, announced that a group of actors, musicians, athletes and creators, including Gwyneth Paltrow, Rebel Wilson, Ruby Rose, Darren Criss, Baron Davis, Tove Lo, Casey Neistat, and Bre-Z, have invested in the company. Cann is reportedly the fastest growing THC beverage to date with over 2 million cans sold. Cann’s pitch is that it is a better alternative to alcohol. Said Paltrow, “Cann sits at the intersection of two powerful trends we’ve been monitoring at goop for some time: the ‘sober curious’ and ‘cannabis curious’ movements. There’s no reason why alcohol should be so much easier to purchase than Cann, and I’m confident the founders will lead the charge in finding ways to integrate it into the same purchasing channels and drinking environments.”
Hydrow, the immersive at-home rower with live and on-demand athlete-led workouts, and Fabletics, the active lifestyle brand, announced a partnership that includes Hydrow product placement at Fabletics’ 51 retail stores. As part of the Fabletics x Hydrow partnership, Fabletics members will be able to purchase a Hydrow at members only pricing, plus an exclusive accessories and gear package. Additionally, Hydrow is creating unique content and fitness milestone rewards specifically for the Fabletics VIP community. In addition, Fabletics will now serve as Hydrow’s official apparel partner. Fabletics will design and produce all Hydrow apparel, and Hydrow’s world-class trainers will exclusively wear Fabletics within all of Hydrow’s workout content. The Fabletics x Hydrow partnership goes live with the launch of a dedicated Hydrow experience on Fabletics.com and in-store Hydrow pop-up shops in seven Fabletics retail locations across the country on November 4th. The pop-ups will offer Fabletics members and guests the opportunity to experience Hydrow’s immersive concept via demonstrations with Hydrow experts.
Grocery & Restaurants
B&G Foods, Inc. has agreed to acquire the Crisco oils and shortening business from The J.M. Smucker Co., based in Orrville, Ohio, in a cash transaction valued at approximately $550 million, subject to a post-closing inventory adjustment. The transaction includes oils and shortening products sold under the Crisco brand, certain trademarks and licensing agreements, dedicated manufacturing and warehouse facilities located in Cincinnati, and approximately 160 employees. The business generated net sales of approximately $270 million in the fiscal year ended April 30. B&G Foods projects continued increased demand for Crisco oils as consumers continue to cook and bake more at home due to the pandemic. The divestiture aligns with J.M. Smucker’s previously stated intent to exit the US baking category and focus more on pet food, coffee and snacking. Two years ago, the company sold its Pillsbury, Martha White, Hungry Jack, White Lily and Jim Dandy baking mix and flour brands to private equity firm Brynwood Partners for $375 million.
Affiliates of Roark Capital Group have sold the Dallas-based Corner Bakery Cafe brand to Pandya Restaurant Growth Brands LLC, the companies said Thursday. The fast-casual cafe brand had been a Roark subsidiary since 2011. Pandya Restaurant Growth Brands is one of the Rohan Group of Companies, which owns Engage Brands LLC and purchased Golden, Colo.-based Boston Market earlier this year. Pandya is owned by the real-estate investor and restaurant operator, Jignesh (Jay) Pandya. Pandya sees opportunities for strategic alliances between Corner Bakery and Boston Market, the company said in a statement. For the fiscal year ended December 2019, the company had $361.1 million in domestic sales, down from $362 million in the preceding year. It had 178 units at year-end, down from 182 in the preceding year.
Home & Road
Bed Bath & Beyond will outline its detailed three-year growth strategy, representing $1 billion to $1.5 billion in capital investments, during its first Investor Day. Key initiatives include a more curated assortment with more than 10 new private-label brands, and more opening price point and value-tiered items to enable it to better compete with mass merchants. The company also plans to invest approximately $250 million over the next three years to reinvent its supply chain, and another $250 million to drive modernization and innovation in its technology platforms. In a separate announcement, Bed Bath & Beyond said it has launched a $225 million accelerated share repurchase, as part of a three-year program to repurchase up to $675 million in shares. Prior to the meeting, Bed Bath gave a synopsis of its plans: It identified five core customer segments—the nester, the minimizer, the juggler, the innovator and the creative—and said it would reinvent its loyalty program. The retailer said that it has a customer base of 37 million, and “one in five homes in the U.S. is a Bed Bath & Beyond home.”
Preliminary sales growth for At Home Group Inc., the home décor superstore, came in at approximately 47% for Q3 of fiscal 2021 which ended on Oct. 24. The company also posted a comparable store sales increase of approximately 44% for the third quarter. “At Home’s third-quarter comparable store sales growth established a new high watermark for our business, even higher than our record second quarter,” said Lee Bird, At Home Group chairman and CEO. “We believe we are continuing to gain meaningful market share and emerge as a major winner in the home décor space,” he added. Bird said the company should continue to benefit from favorable trends such as nesting and de-urbanization. The company expects preliminary earnings per share of between 58 cents and 62 cents and total liquidity for the company of more than $350 million.
A bankrupt home décor chain is making an online comeback. Retail Ecommerce Ventures LLC (REV), which purchased the intellectual property, data and online-related assets of Pier 1 for $31 million in July 2020, is officially opening a new online store for Pier 1 Imports. Pier 1 closed its brick-and-mortar stores earlier this year in February. The new Pier 1 site currently stocks hundreds of familiar SKUs in categories including holiday and seasonal, furniture, pillows and cushions, dining and entertaining, décor, lighting and candles, rugs, curtains, bed and bath, and outdoor. Pier 1 is exploring the addition of a wider array of product offerings. In addition, the retailer is trying to re-establish its online community of collectors and influencers by restarting its Facebook, Instagram, and other social media accounts. It is also working on a new blog called “Pier 1 of a Kind,” and will introduce iPhone and Android apps in Q1 2021.
Jewelry & Luxury
LVMH has gotten Tiffany & Co. to do what many thought impossible: sell at a discount. Nearly 11 months after the luxury conglomerate struck a deal to buy Tiffany & Co. for $16.2 billion, it’s now struck a second deal to buy it for $15.8 billion, more than $400 million less than the original price. The new agreement comes after LVMH declared in September that it was no longer bound by the terms of the original deal, sparking an often-bitter legal battle, which this pact ends.
Lightbox, De Beers’ lab-grown diamond brand, began selling its products on e-tailer Blue Nile on Thursday, the same day it officially opened its diamond-producing factory in Gresham, Ore. Blue Nile will sell the product not just domestically but in the 44 countries where it has a presence—marking the first time that Lightbox has sold its wares beyond the United States and Canada. Lightbox product will also be displayed in Blue Nile’s expanding fleet of showrooms—it currently has eight—though its stores don’t actually sell product, but rather guide customers to the company’s website.
Dominion Diamond Mines, which filed for insolvency protection in April, has asked a Canadian bankruptcy court to allow it a little more time to save the company. Dominion owns the Ekati diamond mine in Canada’s Northwest Territories, as well as 40% of the nearby Diavik mine. In an Oct. 27 application before the Court of Queen’s Bench of Alberta, Dominion requested that Canada’s bankruptcy protections be extended for five more weeks while it sought a buyer or capital injection for the company.
Office & Leisure
Comcast CEO Brian Roberts said theme parks may have been “the single biggest drag” on NBCUniversal’s quarter, but executives are optimistic the division will break even in 2021. Amusement parks were one of many industries that were battered by the coronavirus pandemic, particularly due to forced closures and limited capacity restrictions upon reopening. Revenue for Comcast’s theme parks revenue fell nearly 81% in the third quarter, to $311 million, the company reported Thursday. For now, Comcast has only been able to open its parks in Florida and Japan. Its California-based park will not be able to resume operations until Los Angeles County reaches a coronavirus infection rate of less than 1 case per 100,000 residents. It’s seeing 11 cases per 100,000, up from 10.1 a week ago. The company is also gearing up for the opening of a new theme park in Beijing by summer.
Spin Master Corp., the company behind the Etch A Sketch and Paw Patrol brands, has agreed to acquire Rubik’s Brand Ltd. for about $50 million, tying together two of the world’s most iconic toy brands. The merger comes at a boom time for classic toymakers, as parents turn to familiar products to entertain kids stuck in lockdown. Like sales of Uno, Monopoly and Barbie dolls, Rubik’s Cube purchases have spiked during the pandemic, according to the puzzle maker’s chief executive officer, Christoph Bettin. He expects sales to jump 15% to 20% in 2020, compared with a normal year, when people purchase between 5 million and 10 million cubes. By acquiring Rubik’s, Toronto-based Spin Master can better compete with its larger rivals, Hasbro Inc. and Mattel Inc. All three companies have pivoted to become less reliant on actual product sales, diversifying into television shows, films and broader entertainment properties based on their toys. Spin Master CEO Anton Rabie said he wouldn’t rule out films or TV shows based on Rubik’s Cubes, but he was focused for now on creating more cube-solving competitions and crossmarketing it with the company’s other products, like the Perplexus.
The music could stop at Guitar Center in the near future. The retailer is preparing for bankruptcy after missing a $45 million interest payment on its debt, the New York Times reported. The company has reached out to creditors to explore a plan where it could emerge from bankruptcy in 2021. Guitar Center has faced issues with its debt since earlier this year, when it engaged in a distressed debt exchange and skipped an interest payment. The exchange allowed the company to buy $32.5 million in new notes and use the money to meet its April interest payment. Moody’s said the “downgrades reflect the high likelihood of further restructuring transactions to address the company’s high leverage and upcoming maturities.” Guitar Center, which was founded in 1959, has close to 300 stores nationwide. The company had an estimated debt of $1.3 billion as of March, according to Moody’s.
The category, struggling since the death of Toys R Us, has gotten a boost this year as desperate parents try to keep their kids entertained. The volatile effects of COVID-19 have not been felt equally across categories. It has been a terrible year for suit sellers like Tailored Brands and Brooks Brothers but a banner one for retailers of outdoor gear, bicycles, sweatpants, hammocks and booze. Also on the list is toys, which is heading into the massively important holiday season. U.S. toy industry sales spiked 16% in the first half of 2020, according to the NPD Group. As the toy makers themselves know well, the pandemic has driven much of that demand. Growth, at least for the major players, has continued into the third quarter. This week, Hasbro reported Q3 sales in the U.S. and Canada, at $977.1 million, were up 9% year over year. Fellow toy giant Mattel reported North America sales growth of 13% in the quarter, led by doll sales, which grew 31% in the region. Barbie sales alone grew 35%.
Technology & Internet
Amazon reported better-than-expected third-quarter results after the bell on Thursday, including soaring profits and 37% revenue growth. Amazon said sales in the fourth quarter will be between $112 billion and $121 billion, which comes out to growth of 28% to 38% from a year earlier. Amazon continues to be one of the biggest beneficiaries of the pandemic, as consumers flocked to the site for essential goods, groceries and household items. Amazon is expected to face even greater demand heading into the holiday season, with shoppers likely to do the bulk of their gift buying online instead of making trips to the store. “We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season,” Amazon CEO Jeff Bezos said in a statement. Once again, third-party sales grew faster than Amazon’s first-party business. Third-party sales increased 55% year-over-year, while first-party sales grew 38% year-over-year. Sales fell 10% in Amazon’s physical store unit, which includes Whole Foods Market.
Apple reported earnings on Thursday and investors did not like the results. Apple stock dropped as much 5% in extended trading even though the company beat Wall Street expectations for both profit and revenue. The drop was likely because iPhone revenue came in at $26.4 billion, which was 20% lower than the same quarter last year. Apple sales in China also suffered, mainly because of weak iPhone sales, Apple said. Revenue from China dropped to $7.95 billion from $11.13 billion a year before, a 29% decrease. But the iPhone sales situation isn’t as bad as it looks. This year, Apple’s new iPhones went on sale about a month later than before, as Apple telegraphed over the summer. So the iPhone weakness may be partly because people were waiting for the new iPhone 12, which didn’t go on sale until October. In fact, both Apple CEO Tim Cook and CFO Luca Maestri said that iPhone customer demand was strong and grew until mid-September — when Apple typically releases new iPhones.
TikTok is further investing in social commerce with the announcement of a new global partnership with e-commerce platform Shopify. The deal aims to make it easier for Shopify’s over 1 million merchants to reach TikTok’s younger audience and drive sales. The partnership will eventually expand to include other in-app shopping features, as well, the companies said. At launch, the agreement allows Shopify merchants to create, run and optimize their TikTok marketing campaigns directly from the Shopify dashboard by installing the new TikTok channel app from the Shopify App Store. Once installed, merchants will have access to the key functions from the TikTok For Business Ads Manager at their disposal. These ad tools allow merchants to create native, shareable content that turns their products into In-Feed video ads that will resonate with the TikTok community.
Finance & Economy
Consumer confidence waned in October, reflecting somewhat less optimism about the jobs market and the U.S. economy in the next six months amid another outbreak of coronavirus cases. The latest survey was largely compiled before the sharp upturn in coronavirus cases this month, suggesting confidence could suffer an even bigger swoon in November. Confidence is still far below pre-pandemic levels. The index stood at 132.6 before the viral outbreak in February.
The stay-at-home trend prompted by the coronavirus pandemic has benefited retailers including Home Depot. The latest tallies from American consumers’ housing purchases suggest those sales bonanzas may not be going away anytime soon. Existing-home sales rose for the fourth straight month in September to a seasonally adjusted annual rate of 6.54 million, up nearly 21% from a year ago, the National Association of Realtors said. The stay-at-home trend isn’t just benefiting those categories directly tied to the home. Fast-casual restaurant chain Chipotle said Wednesday that its third-quarter sales from online orders had more than tripled to represent 49% of sales as more consumers work at home and dine-in service remains limited. As consumers eat more breakfast and other meals at home, beverage giant PepsiCo has attracted new customers to brands like Quaker Oats.
U.S. consumer spending increased more than expected in September, but a resurgence in Covid-19 cases across the nation could slow spending in the fourth quarter. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 1.4% last month after gaining 1% in August, the Commerce Department said. Economists polled by Reuters had forecast consumer spending rising 1% in September. Personal income rose by 0.9% in the month, exceeding expectations of a 0.4% increase. Income dropped 2.7% a month earlier.