With the benchmark 10 year treasury yield recently topping 5.0% for first time in over 16 years, there has been a lot of focus on how higher interest rates impact the general economy. Some of our readers may remember that 10 year treasury yields above 5% are not unprecedented. In fact, for the 30 year period from 1970 to 2000 there were only six months where the 10 year treasury rate was below 5%, hitting a peak of 15.32% in September 1981. But, for our younger readers, that is ancient history. They only remember that it was just three years ago that the 10 year treasury was below 1%, so the rapid increase in rates over the past couple of years has been a shock to the system.
Consumers certainly feel the impact of higher rates as everything from credit card debt, mortgages, car loans and student loans get more expensive. The expectation is that the higher cost of borrowing will eventually lead to reduced spending as consumers are less inclined to take out loans to fund major purchases. That is why analysts closely monitor the housing market, credit card balances and auto sales to look for signs that consumers are dialing back their purchases. To date, consumers have generally bucked that trend, as spending has remained strong even in the face of rising interest rates.
Rising interest rates also have a major impact on businesses. Businesses in recent years have come to expect a low interest rate environment. Many entities have taken on low cost debt to help fund their businesses. But as rates have increased, higher borrowing costs can reduce a company’s profitability. Analysts are closely watching companies that have large debt balances coming due to see how companies navigate debt refinancing in this new rate environment.
In the mergers and acquisition market, the higher interest rate environment has real observable impacts. Acquiring companies in recent years have grown accustomed to having debt readily available at relatively low rates to help fund their acquisitions. But today, both buyers and sellers have had to adjust their expectations. In this market, where the availability and cost of debt is uncertain, sellers prefer buyers that don’t have funding contingencies or are planning to use less leverage to fund their transactions.
Buyers are using less debt to acquire companies, thus having to write bigger equity checks to acquire companies. GF Data, which tracks lower middle market private equity deals found that total debt/EBITDA has dropped each of the past four quarters from 3.8x in Q2 2021 to 3.1x in Q2 2023. Pitchbook recently reported that for the first time on record, equity contributions to corporate leveraged buyouts in the syndicated loan market have exceeded 50%, meaning that buyers for the first time are funding more than half of the purchase price out of their own pocket.
With less debt available to finance deals, buyers are lowering their targets a bit and looking at relatively smaller deals. The higher borrowing costs and lack of credit availability also give a competitive advantage to strategic buyers and family offices, which, unlike private equity funds, don’t have to answer to LPs that are laser-focused on achieving certain returns over a given period of time. While it remains to be seen if the higher interest rates are here to stay, the higher borrowing costs have forced consumers, businesses and investors to adjust their behaviors.
Headline of the Week
Brand management firms WHP Global and Authentic Brands Group are both interested in buying Champion from its parent company Hanesbrands, which is considering offloading the sportswear line amid pressure from activist investors, CNBC has learned. Hanesbrands announced it was evaluating strategic options for Champion in late September — a little over a month after activist firm Barington Capital Group began pressuring the company to cut costs and generate cash as sales fall. At the time, Hanesbrands said those options could include a potential sale of Champion or another type of strategic transaction. It also said it could hold on to the brand. Hanesbrands has seen wide interest in acquiring Champion from a mix of buyers, including WHP and Authentic Brands, according to people familiar with the matter. Interested potential buyers include strategics and sponsors, the people said. Champion has estimated annual sales around $2 billion, the people said. A deal isn’t close to completion, and if Hanesbrands moves forward with a sale, it’s not expected to select a buyer until 2024, the people said.
Apparel & Footwear
Tory Burch might just be ready for a change. The fashion brand is working with Morgan Stanley to explore its strategic options, WWD has learned. That opens up the possibility of an initial public offering – something the company is said to be preparing for, just in case; some other kind of transaction that would bring in new investors, or an outright sale. Tory Burch founded the company at her kitchen table in 2004 and quickly became a mainstay in fashion, known early on for her ballerina flats and then for successfully projecting her refined, preppy aesthetic around the world. Along the way, there’s been a slow evolution in the company’s investor base. The Mexico City-based Tresalia bought a 20 to 25 percent stake in 2009, giving the company a valuation of around $1 billion. Then in 2012, General Atlantic and BDT Capital Partners each bought minority stakes, picking up shares sold by Burch’s ex-husband Chris Burch at a valuation of $2.25 billion. Tresalia hired Goldman Sachs to sell its shares in 2018 only to have the Tory Burch company buy out the stake, concentrating the ownership among the designer, General Atlantic, BDT and other smaller stockholders investors. General Atlantic and BDT have now held onto their stakes for coming up on 11 years.
Alo Yoga’s parent company is exploring a potential investment that could value the U.S. maker of celebrity-donned workout clothes at about $10 billion, according to people familiar with the matter. The deal deliberations come as the privately held company makes strides in winning young consumers away from bigger brands such as Lululemon Athletica and Nike, often thanks to savvy marketing using internet influencers. Alo Yoga founders Danny Harris and Marco DeGeorge have hired an investment bank to advise on options that include selling a stake in the company, the sources said. The potential investors, which include private equity firms and sovereign wealth funds, have discussed structuring a deal so that they receive preferential returns or debt-like protections, the sources added. No transaction structure has been agreed, and it is possible that Alo Yoga decides against any deal. Alo, an acronym for air, land and ocean, is often worn by celebrities such as Taylor Swift, Katie Holmes, Hailey Bieber and Kendall Jenner and featured in paparazzi photos. It was founded in 2007 and has more than 50 stores in the U.S. and several international locations.
Crocs Inc. cut its full-year outlook after reporting soft Hey Dude sales and a weaker outlook for the full-year and Q4. The comfort footwear company, which owns the Crocs and Hey Dude brands, beat expectations for the third quarter, but the stock was down 14 percent in pre-market trading on its softer guidance. Crocs Inc.’s reported quarterly revenues were $1.05 billion, up 6.2 percent from the prior year. This beat Crocs’ expected growth range for the quarter of between 3 percent and 5 percent. Adjusted diluted earnings per share increased 9.4 percent to $3.25, ahead of Crocs’ highest estimate of $3.15. The results also beat expectations of analysts surveyed by Yahoo, which expected to see $1.03 billion in revenues and $3.10 EPS. By brand, Crocs revenues in Q3 were up 11.6 percent to $798.8 million and Hey Dude revenues were down 8.3 percent to $246.9 million, with wholesale revenues for the latter brand down 19.4 percent due to wholesale partners being more cautious on at-once orders. Crocs Inc. CEO Andrew Rees said that the company cut its full year outlook after it took “decisive action around Hey Dude to accelerate our marketplace management strategy to ensure long-term brand health.
Athletic & Sporting Goods
Fox Factory Holding Corp has reached an agreement to acquire Marucci Sports, the maker of baseball bats and gloves, from Compass Diversified (CODI) for $572 million. Fox Factory, based in Duluth, GA, is best known for its Fox Racing Shox brand of off-road racing suspension components. CODI acquired Baton Rouge, LA-based Marucci Sports in 2020 for a purchase price of $200 million. CODI has a past relationship with Fox Factory, acquiring the business in 2008 and taking it public in 2013. Under the terms of the agreement, Marucci will be sold to Fox Factory for an enterprise value of $572 million, subject to certain working capital and other adjustments. CODI said in a statement it expects to realize a pre-tax gain on the sale of between $225 million to $245 million. Proceeds from the transaction will be used to pay down outstanding debt and for general corporate purposes.
Acme United Corporation today announced that it has sold its Camillus and Cuda hunting and fishing product lines to GSM Holdings, Inc. The sales price was $19.8 million. Acme United will recognize an after-tax gain on the sale of approximately $10.0 million during the fourth quarter of 2023. The revenues of the divested product lines were approximately $12.0 million in 2022. Acme United Corporation is a leading supplier of innovative safety solutions and cutting technology to the school, home, office, hardware, sporting goods and industrial markets.
Cosmetics & Pharmacy
Unilever announced it will sell Dollar Shave Club to private equity firm Nexus Capital Management, according to a Thursday press release. Terms of the deal were undisclosed. Unilever will retain 35% minority shareholding control through the deal. The transaction is expected to be finalized this year and is subject to customary closing conditions. Nexus Capital Management was founded in 2013 and its investment portfolio includes Lamps Plus, Sugarbear, Toms and more. Unilever acquired the subscription-based shaving company in 2016 in what was reportedly a roughly $1 billion cash deal.
Beauty brand CosRx has been acquired after Amorepacific upped its stake in the company. Amorepacific announced it will acquire 288,000 remaining shares from CosRx’s largest shareholder and related parties for 755.1 billion won (about $567.3 million as of press time), according to a company press release. After acquiring 38.4% of CosRx’s shares in 2021, Amorepacific is now expected to own 93.2% of the company’s shares. Amorepacific’s other brands include Sulwhasoo, Laneige, Innisfree and Mamonde. The beauty company was founded 10 years ago and focuses on hypoallergenic skin care. The brand has experienced rapid growth, with average annual net sales growing over 60% in the past three years. CosRx in 2022 reported 204.4 billion won in annual sales. In the first six months of this year, the brand reached 190.2 billion won in sales and 71.7 billion in operating profit. The company said international represents 90% of its sales.
Switzerland-based Clariant AG said on Monday it would acquire Canada’s Lucas Meyer Cosmetics from International Flavors & Fragrances in an all-cash deal for $810 million. “By combining our personal care ingredients portfolio with Lucas Meyer Cosmetics, Clariant will become a leader in the high value cosmetic ingredients space, one of the most attractive, profitable, and fastest-growing speciality chemicals markets,” Clariant CEO Conrad Keijzer said in a statement. The deal came as Clariant, whose products are used to make de-icers, food ingredients and skin and health care products, reported a fall in third-quarter sales and core operating profit. Clariant said it wanted to increase annual sales at Lucas Meyer to around $180 million by 2028 from $100 million at present, after completing the deal in the first quarter of 2024.
Discounters & Department Stores
Simon Property Group has reduced its stake in Sparc Group — a 50-50 venture with Authentic Brands Group — to 33%, the mall REIT said. The sale provided after-tax gains of $118.1 million in the third quarter, according to a company press release. Sparc runs Forever 21, Brooks Brothers, Aéropostale, Eddie Bauer, Lucky Brand, Nautica and Reebok. Simon also co-owns J.C. Penney with rival Brookfield, and has stakes in e-commerce company Rue Gilt Groupe and real estate developer Jamestown.
With economic pressures continuing to weigh on consumer wallets, Target is injecting a more pointed message around affordability into its holiday marketing. The big-box store’s latest campaign is guided by the mantra of “However You Holiday, Do It For Less” and promotes a selection of everyday items that complement a more typical seasonal assortment. Target at the same time is putting more energy toward generating digital traffic this year, increasing its investments in the channel by 20% and focusing on media mix optimization throughout the Q4 period. The strategy comes as 75% of Target customers’ digital shopping journeys now begin on mobile, giving greater precedence to areas like social media.
Walmart opened its third next generation fulfillment center in Lancaster, Texas, as it prepares for holiday demand, according to an Oct. 17 press release. The 1.5 million-square-foot-facility near Dallas is one of five recently announced. The retailer said the facilities will enable it to fulfill more orders, more quickly by using an automated, high-density storage and retrieval system that condenses the retailer’s 12-step fulfillment process down to five steps. “These tech-powered jobs will drive the future of Walmart’s continued promise of speedy shipping and delivery for customers in the south-central U.S. just in time for the holidays,” Karisa Sprague, senior vice president of fulfillment network operations for Walmart U.S., said in the release.
Emerging Consumer Companies
Treads, an AI-powered car maintenance subscription, has raised $4.6 million in a seed funding round led by Mucker Capital. The funds will be used to expand Treads’ services into 16 additional cities in the U.S., bringing the total to 34 cities by the end of 2023. The rising costs of motor vehicle repair, along with the increasing complexity of cars and a shortage of technicians, have made it difficult for drivers to maintain their vehicles. Treads aims to simplify vehicle maintenance through its all-in-one subscription mobile app, offering services such as tire replacement, wheel alignment, oil changes, and wiper blades. The app also allows customers to have new tires delivered and installed at their home or workplace. By using Treads, customers can save an average of $679 and 16 hours over the lifespan of their tires. The company uses AI to provide predictive maintenance updates and visual machine learning to assess tire condition. Treads is committed to environmental responsibility and allocates 1% of its revenue to initiatives aimed at reducing vehicle carbon emissions.
Shein, the China-founded fast-fashion retailer, has bought the Missguided brand from Mike Ashley’s Frasers, the e-commerce giant’s first purchase of a British brand. Frasers said on Monday Shein would acquire the intellectual property and trademarks of Missguided, while Frasers would retain its real estate and employees which have now been integrated into Frasers’ fashion division. Financial details of the deal were not disclosed but Frasers said the transaction had enabled “exciting discussions” with Shein regarding opportunities for potential collaboration across its brand portfolio. Frasers, formerly called Sports Direct, bought Missguided out of administration – a form of protection from creditors – for 20 million pounds ($24.2 million) in June 2022. “This move is particularly noteworthy because it marks Shein’s first acquisition of a British brand, aligning well with its focus on the UK as one of its fastest-growing markets,” Shore Capital analyst Eleonora Dani said. It will bring the Missguided label to Shein’s online platform, which serves about 150 million users.
Food & Beverage
Top Australian wine producer Treasury Wine Estates has agreed to a $900 million buyout of U.S. rival DAOU Vineyards, increasing its exposure to a market that it has long struggled to dominate amid uncertainty about stalled exports to China. Treasury, owner of the Penfolds and Wolf Blass labels, said it was buying the Paso Robles, California, private company to fill a gap in its luxury offering, defined as bottles retailing for $20 to $40. The deal builds on the Australian firm’s plan to take its portfolio upmarket, where it said demand and margins are higher.
Morgan Stanley Investment Management announced an investment in sustainable nutrition company Huel, aimed at supporting the company’s global expansion and reinforcing its sustainability agenda. Founded in 2015, UK-based Huel offers plant-based and ethically sourced food products, including powdered shakes and instant meals, with a mission to provide nutritionally complete, convenient and affordable food, with minimal impact on animals and the environment. Food and beverage sector emissions account for about a third of global GHG emissions and are among the most difficult to address, with the vast majority coming from the supply chains of food and beverage companies, rather than from “direct” emissions from the companies’ operations. According to Huel, the carbon footprint of its meals are 50% below those of the average U.S. meal, and the company has committed to have its meals being in line with targets to limit global warming to 1.5°C. Since launch, Huel has sold over 300 million meals worldwide, with revenues growing by more than 40% last year to $175 million.
Beyond Meat is conducting a strategic review of its global operations as its sales situation deteriorates. In a Nov. 2 announcement, six days before releasing its third-quarter earnings on Nov. 8, the company revised its full-year outlook and said it was reviewing operations and cutting its non-production workforce by 19%. With the goal of reducing operating expenses, the strategic review may include narrowing the company’s focus to certain growth opportunities and accelerating activities that prioritize gross margin expansion and cash generation, according to the company. The efforts may include the potential exit of select product lines; changes to the company’s pricing architecture within certain channels; accelerated, cash-accretive inventory reduction initiatives; further optimization of the company’s manufacturing capacity and real estate footprint; and a review and potential restructuring of the company’s operations in China. The workforce reduction will include approximately 65 employees, representing 19% of Beyond Meat’s non-production workforce and 8% of its total global workforce.
Grocery & Restaurants
Chicken Salad Chick announced the acquisition of another Atlanta-based chain, Piece of Cake bakery. The 245-unit fast casual chicken salad chain intends to bolster its dessert menu with Piece of Cake’s offerings. Terms of the deal were not disclosed. Piece of Cake was founded in 1985 by Melissa Bunnen Jernigan, who will continue to serve as the company’s “Cakexpert,” and features cakes that are made from scratch using family recipes. Also as part of the deal, Chicken Salad Chick will begin plans to bring the bakery’s cakes to its restaurants, where they will be featured as the signature dessert offerings following successful market tests.
Private-equity firm Savory Fund on Wednesday announced its newest restaurant investment, into Las Vegas-based fast casual Houston TX Hot Chicken (HHC). HHC, founded in 2021 by Edmond Barseghian, has 11 locations, six of which are franchised, in six states: Arizona, California, Idaho, Nevada, Texas, and Utah. In addition to hot-chicken sandwiches, the menu features tenders, salads, soup, waffle shakes, and loaded fries, as well as seven signature sauces. Nashville hot chicken is a flavor that has been growing in popularity over the last few years, with KFC rolling it out back in 2016. In December 2022, market research firm Datassential said Nashville hot chicken had grown 297% on U.S. menus over the previous four years.
Home & Road
Wayfair has sustained its turnaround efforts, moving closer to profitability with total net revenue for the third quarter coming in 3.7% ahead of the same period last year. Net revenue for the quarter ended Sept. 30 was $2.9 billion, up $104 million year-over-year, driven by U.S. revenue, which was up 5.4% to $2.6 billion, while international revenue fell by 7% to $372 million. Gross profit was $917 million or 31.1% of total net revenue. “Wayfair is now in a place where we can drive profitability while simultaneously investing for growth,” said Niraj Shah, CEO, co-founder and co-chairman of the online home furnishings retailer. “Q3 is one more proof of exactly that,” he added, citing adjusted EBITDA of $100 million and a second quarter of positive free cash flow of $42 million. “We also saw improvement in our active customer metric, which is well on the way to positive year-over-year growth.” The retailer had been on a cost-cutting journey, taking more than $1 billion out in costs during 2023.
Hamilton Beach Holding Co. boosted net income significantly in the third quarter as sales also gained and critical initiatives proceeded. Net income was $10.3 million, or 74 cents per diluted share, versus $5.9 million, or 43 cents per diluted share, in the year-previous period, the company reported. Revenue was $153.6 versus $150.8 million in the year-prior quarter. Operating profit was $14.4 million versus $9.4 million in the period a year earlier. As to performance, lower average sales price partially offset increased unit volume.
Ongoing weak demand for bedding and furniture impacted Leggett & Platt’s third quarter results, sending the company’s sales for the quarter on a 9% slide compared with sales from the same quarter last year. The supplier of bedding and furniture components reported net sales of $1.18 billion for the quarter compared with net sales of $1.3 billion in the same quarter last year. The company reported net income of $52.9 million for the quarter, a 26% drop from net income of $71.5 million in the third quarter of 2022. For the quarter, the company logged earnings per share at 39 cents, a 13-cent decrease vs. earnings per share of 52 cents in the same quarter last year. Leggett said its operating cash flow increased $78 million in the quarter compared with last year to $144 million.
Arhaus maintained its run of quarterly gains in the third quarter of FY 2023, outpacing its 2022 levels. The Boston Heights, Ohio-based retailer posted net revenue of $326.2 million for the three months ended Sept. 30, up 1.9% vs. $320 million in the third quarter of 2022. It tallied $19.741 million, or 14 cents per diluted share in the three months, down 46.55% compared with $36.936 million, or 26 cents per diluted share. The company attributed the decline in income to a $10 million donation to The Nature Conservancy, higher selling expenses related to new showrooms and higher corporate expenses to support the growth of the business. Adjusted EBITDA decreased 40.6% to $34 million compared with $57 million in the third quarter of 2022, giving Arhaus an EBITDA margin of 10.32%.
While the International business segment mostly offset the North America segment to bring in net sales virtually flat year-over-year, Tempur Sealy Chairman and CEO Scott Thompson called the company’s third quarter sales and earnings “solid against a challenged operating environment.” Total net sales for the period ended Sept. 30 decreased 0.5% to $1.277 billion as compared with $1.283 billion in the third quarter of 2022, with a decrease of 3.2% in the North America business segment and an increase of 12.3% in the International. Gross margin was up 1.3 percentage points to 44.9% for the period.
Jewelry & Luxury
Luxury apparel brand Canada Goose’s total revenue during the second quarter increased 1% year over year to 281.1 million Canadian dollars (about $203 million), according to a Wednesday press release. The company’s operating income dropped more than 89% to CA$2.3 million, while its net income decreased 18% to CA$4.1 million. Canada Goose lowered its fiscal 2024 outlook to a total revenue range of CA$1.2 billion to CA$1.4 billion instead of the previously predicted CA$1.4 billion to CA$1.5 billion. Direct-to-consumer revenue during the quarter grew 15% to CA$109.4 million thanks to in-store retail sales, while wholesale revenue decreased 10% due to Canada Goose’s planned streamlining of the channel as it focuses on DTC. The brand also announced that current CFO Jonathan Sinclair will step away from the position to become president of the Asia Pacific region effective April 1. Current deputy CFO Neil Bowden will replace the executive as chief financial officer.
E-tailer Watchbox, a specialist in pre-owned timepieces, is joining with three brick-and-mortar chains—Govberg Jewelers, Hyde Park Jewelers, and Radcliffe Jewelers—to form a new brand: the 1916 Company. “Watchbox, Govberg, and Hyde Park over the next six months will become the 1916 Company,” says Danny Govberg, chairman of Govberg Jewelers and its spin-off, Watchbox, who will become executive chairman of the new company. “And Radcliffe will follow after that. It will be a six-month progression to go to one unified name, under one unified website.” The new brand came together partly in response to the growing prominence of watch chains.
The number of North American jewelry businesses that closed in the third quarter increased by nearly 12% compared with the same period last year, according to the latest statistics from the Jewelers Board of Trade (JBT). The Providence, R.I.–based credit rating group said 179 businesses in the U.S. and Canada experienced a discontinuance—defined by JBT as ceasing operations, filing for bankruptcy, or merging or getting acquired by another company—from July through September this year. There were 160 discontinuances during that period in 2022. Of the 2023 third-quarter discontinuances, 146 were retailers, 21 wholesalers, and 12 manufacturers. All but eight of the businesses were in the United States. JBT added 96 new businesses to its database during the third quarter, down from the 108 it logged the year before. The new additions—all except six in the U.S.—comprised 73 retailers, 17 wholesalers, and six manufacturers.
European luxury stocks are having a tough year, with the sector down ~18 per cent in the past three months. Growth slowed in the third quarter and PE multiples have compressed, with Louis Vuitton, Moncler, and Kering all making cautious noises about 2024. It’s all tighter consumer spending and China. Visits in August and September were down across 12 brand websites by an average of 20 per cent. It’s a similar story for July, with only Dior.com visits in positive territory. Website visits to Burberry.com have fallen every single month of 2023. Since October 2021 it has only registered one month of improvement, November 2022, in which visits were up 1 percent. Gucci.com hasn’t had a positive month since January 2022.
Office & Leisure
Tommy Bahama is diving deeper into hospitality. The lifestyle apparel brand, which has long operated restaurants and bars in some of its stores, will open its first destination resort on Nov. 1. Located in Indian Wells, Calif., the Tommy Bahama Miramonte Resort & Spa is designed to offer visitors a blend of island living and desert luxury that reflects its Palm Springs setting. Future resorts are planned in other locations. The 11-acre Miramonte property has 215 guestrooms with five luxury villa suites, three saltwater pools, private cabanas, a 12,000-sq.-ft. spa and a retail store featuring “exclusive’ products. In addition, the property boasts 35,000 sq. ft. of flexible indoor/outdoor meeting and event space, along with offsite amenities such as world-class golfing at the nearby Indian Wells Golf Resort. The resort is co-owned by Los Angeles-based Lowe, (formerly known as Lowe Enterprises), a national real estate investment, development and management firm. Lowe’s hospitality subsidiary, CoralTree Hospitality, operates numerous hotel and resort properties across the U.S. Based in Seattle, Tommy Bahama is part of the Tommy Bahama Group, a wholly owned subsidiary of Oxford Industries.
New Jersey is set for a major expansion of sites dedicated to one of the country’s fastest-growing sports. Pickleball Kingdom has entered into a partnership with New Jersey entrepreneur Samrat “Sam” Sood to open 20 locations. The new facilities will be strategically located throughout the state. As part of the agreement, Sood will be signing on owners and investors to participate in the rapid market expansion. Pickleball Kingdom’s real estate strategy includes everything from strip centers to freestanding locations. Size is paramount as the venue must be able to accommodate a minimum of 10 courts, which would equate to roughly 25,000-plus square feet. The state-of-the-art indoor clubs will feature the outdoor surfaces preferred by avid pickleball players, but with all the indoor benefits, including optimal lighting, climate control and amenities that enhance the overall experience. The locations will offer professional coaching, training programs and clinics for players of all skill levels. Based in Chandler, Ariz., Pickleball Kingdom provides state-of-the-art indoor venues that cater to pickleball enthusiasts of all skill levels.
The Michaels Companies is moving onto Etsy’s turf. Following a three-month beta test, the specialty arts & crafts retailer is officially launching MakerPlace by Michaels, an online marketplace offering handmade goods, artist-led classes, how-to guides, and access to Michaels’ assortment of supplies and componentry. The MakerPlace marketplace features dozens of categories of handmade items, including jewelry, home décor, art, accessories, crafting arts, bath and beauty and clothing. The site also offers access to maker-led classes and how-to’s. At launch, MakerPlace sellers have listed hundreds of thousands of SKUs. The rollout of MarkerPlace follows Michaels’ February 2023 introduction of a third-party digital marketplace featuring more than 750,000 curated products from selected sellers. By offering an online platform for buying and selling handmade goods, Michaels is competing with handmade e-commerce pioneer Etsy, as well as similar platforms operated by retailers including Amazon and 1-800-Flowers.com.
Cedar Fair L.P. and Six Flags Entertainment Corp. said Thursday they have agreed to a merger of equals valued at about $8 billion including debt, confirming a report Wednesday by the Wall Street Journal. Under the terms of the deal, Cedar Fair unitholders will receive one share of common stock in the new combined company for each unit owned, while Six Flags shareholders will get 0.58 shares of common stock in the new entity for each share owned. Once the deal closes, Cedar Fair unitholders will own about 51.2% of the new entity, and Six Flags shareholders will own the remaining 48.8%. The deal is expected to close in the first half of 2024. The new entity will have a portfolio of 27 amusement parks, 15 water parks and nine resort properties across 17 states in the United States, Canada and Mexico. The companies said the deal is expected to create annual synergies of $200 million. The two companies had combined revenue of $3.4 billion in the 12 months through Sept. 30 after serving 48 million guests. The deal is expected to boost per-share earnings for Cedar Fair unitholders and Six Flags shareholders in the first 12 months after close.
Technology & Internet
A jury has found Sam Bankman-Fried guilty of all seven criminal counts against him. The FTX founder faces a maximum sentence of 115 years in prison. Bankman-Fried, the 31-year old son of two Stanford legal scholars and graduate of the Massachusetts Institute of Technology, was convicted of wire fraud and conspiracy to commit wire fraud against FTX customers and against Alameda Research lenders, conspiracy to commit securities fraud and conspiracy to commit commodities fraud against FTX investors, and conspiracy to commit money laundering. He had pleaded not guilty to the charges, which were all tied to the collapse late last year of FTX and sister hedge fund Alameda.
Shopify stock closed up 22.3% on Thursday after the Canadian e-commerce company reported third-quarter results that beat expectations, and gave a strong forecast for the remainder of the year. Shopify said it expects 2023 revenue to grow at a mid-twenties percentage rate on a year-over-year basis, driven by fourth-quarter revenue growth in the high teens. Gross merchandise volume, or the total volume of merchandise sold on the platform, rose 22% to $56.2 billion during the quarter. Analysts surveyed by FactSet had forecast GMV of $54.2 billion. “Our results showcased the durability of our business model as we delivered a compelling combination of both top line growth and profitability, with revenue growing 25% year over year and free cash flow margin reaching 16%,” Shopify Chief Financial Officer Jeff Hoffmeister said in a statement. “We will continue to operate with discipline, thoughtfully investing in the huge opportunities ahead across regions, products and channels to help merchants capture every opportunity every step of the way.” The solid earnings beat comes after Shopify, which makes tools for companies to sell products online, has sharpened its focus on costs.
Finance & Economy
Americans are losing confidence about the economic outlook. For the third month in a row, the Conference Board’s Consumer Confidence Index fell — dropping to 102.6 in October from an upwardly revised 104.3 in September. The index is at its second-lowest level this year, landing a hair above May’s 102.5 reading, according to Conference Board data. The decline in consumer confidence was not evident across all age groups and household income levels. Consumers below the age of 35 felt slightly more optimistic about the state of the economy this month than last. People above the age of 55 exhibited the biggest monthly decline in consumer confidence.
Shoppers are expected to spend a record amount of money this holiday season even as they confront a number of economic headwinds, including steep borrowing costs, persistent inflation and the resumption of student loan repayments. The National Retail Federation released new projections that suggest sales in November and December will rise by 3% to 4% year over year. That would amount to about $957.3 billion to $966.6 billion in spending during that period, the highest level on record. Shoppers spent about $930 billion during the 2022 holiday season, with sales up about 5.4% from the previous year. Although sales are still expected to increase this year, the NRF is forecasting a slower pace of growth than the average 5% rate over the past decade.