The Weekly Consensus

Why It Could Be Different This Time for Off-Price Retail

Paul Alexander

With fears of an impending recession mounting, an increasing number of apparel brands and retailers have recently announced cost cutting measures and more bearish outlooks, including PVH, Gap, G-III Apparel Group, Rent the Runway, and Levi’s. Many of these companies have reported that inventories have risen to uncomfortably high levels. While this environment is worrisome for most retailers, conventional wisdom is that it should be good for off-price retailers, such as TJX, Ross Stores, and Burlington. However, opinions on the off-price sector’s prospects appear to be split. Since July 1st, shares of TJX and Ross Stores are up roughly 27% and 34%, respectively (Burlington is up about 2%). In addition, Ross gained another upgrade to Buy from analysts at Wells Fargo two weeks ago. However, recent reports from Credit Suisse and UBS have urged caution on the group and argued that historical recession trade down dynamics may not benefit off-pricers as much this time around.

Off-price retailers have taken substantial market share from the department store group over the last two decades and surpassed them in recent years. Over that period, the bull case for the off-price group has been that in a rosy economy, the rising tide lifts all boats, and in recessions, off-price retail benefits from full price retailers offloading excess inventory and from consumers looking to trade down and find bargains. This classic view of off-price’s resilience didn’t hold up very well under the unique constraints and challenges of the onset of the pandemic (including store closures, consumers’ shift to ecommerce, and supply chain snarls), but the group finds itself on stronger footing today. Traffic to physical retail stores is improving and inventory is plentiful. It is easy to see why some would argue that off-price is poised for more market share gains in the near to medium term.

However, there are compelling arguments for why a potential recession in 2023 wouldn’t be as good for off-price retail as prior ones were. The first is that we are not back to pre-pandemic economic conditions. Inflation is running at a 40 year high and making itself felt most painfully in food, energy and other cost-of-living items. With wage growth lagging behind inflation, this weighs on disposable income for all consumers (not only those directly impacted by layoffs or shrinking variable income) and is worst for lower-income households. Second, off-price chains have already grown their inventories substantially, potentially limiting their ability to take advantage of further liquidation from full-price retailers. While year-over-year growth figures are based off an especially lean 2021, end of second quarter inventory levels were up significantly at department stores and up 48% in the off-price group. With inventories so swollen, discounting could be rampant this fall/winter at all levels of retail, weighing on the off-price group’s value proposition relative to department stores and pressuring margins. Finally, another concern is the growth of reselling and shopping for second hand goods, which can be a value-conscious alternative to off-price retailers.

TJX and Ross Stores report third quarter earnings next week (11/16 and 11/17, respectively). It will be interesting to see if the companies’ management teams exude their typical confidence and heads-we-win, tails-the-department-stores-lose worldview. Given current macro dynamics, they could be more confident than ever. But maybe they shouldn’t be.


Headline of the Week

Victoria’s Secret to acquire Adore Me for $400 million

Victoria’s Secret announced Tuesday that it is buying the online lingerie brand Adore Me for an initial $400 million. Victoria’s Secret said the acquisition will serve as a growth vehicle for the Reynoldsburg-based company, which is seeking to broaden and restore its image with consumers. Adore Me has been lauded both for its inclusive image as well as its popularity among a younger audience. The acquisition will include an upfront $400 million cash payment followed by further cash consideration, some of which will be fixed and some based on the performance and growth of Adore Me over a two-year period. The transaction has been unanimously approved by Victoria’s Secret’s board of directors and is expected to close by the end of January, financed with cash on hand. Founded in 2011 in New York, Adore Me began opening retail stores in 2018 to compete with Victoria’s Secret. Today, the company has six stores in New York, New Jersey, Rhode Island, Massachusetts and Tennessee. The company was named a leading digitally-native growth brand in intimate apparel by NPD Group and this year will earn an estimated $240 million in revenue.



Apparel & Footwear

Crocs Shares Jump After Clog-Maker Raises Full Year Guidance

Shares for Crocs Inc. closed up more than 14% on Thursday after the footwear company raised its forecast for 2022. The clog maker, which completed its acquisition of Hey Dude earlier this year, reported that revenues were up 57.4% in Q3 to $985.1 million, which beats analysts’ expectations. Diluted earnings per share were $2.72, which was also ahead of expectations. Given the strong performance in the quarter, which got a boost from back-to-school sales, Crocs raised its full-year outlook and expects consolidated revenues for the year to be between $3.455 and $3.520 billion, which would represent growth between 49% and 52% over 2021. This includes a forecast for Hey Dude revenues to land between approximately $850 and $890 million for the year. Crocs also reaffirmed its long-term projections for the brand, which include a goal to have Crocs brand revenue hit $5 billion by 2026 and Hey Dude revenues to hit $1 billion in 2023. Despite the overall strong performance, the quarter was not without its challenges. Crocs brand’s gross margin was 57.3%, down 660 basis points from last year due to pressures from inflation as well as higher freight and inventory handling costs.

Canada Goose cuts revenue, profit forecast as China business takes hit

Luxury parka maker Canada Goose Holdings Inc cut its full-year revenue and profit forecast on Wednesday, with persistent COVID-related lockdowns and store closures in China hurting its business. The Chinese government’s efforts to contain the spread of COVID-19 cases with zero-COVID policy has impacted luxury fashion retailers, who have taken a hit on their revenues due to store closures, inflated inventories and a fall in demand as consumers turn more cautious in the region. The company did not disclose how much revenue it specifically earns from China, but said 20.3% of the revenue in the second quarter came from the Asia-Pacific region. Canada Goose cut its fiscal 2023 sales expectation to C$1.2 billion ($882.74 million)-C$1.3 billion, from C$1.3 billion-C$1.4 billion. It downgraded its 2023 adjusted profit per share forecast to C$1.31-C$1.62, from C$1.60-C$1.90. Demand for luxury products outside China, however, was holding up strong ahead of the holiday season despite rampant inflation, Chief Executive Officer Dani Reiss told Reuters. “We expect sales growth to re-accelerate in FY 23 and FY 24 as sales in Asia improve over the next 12 months and margins of luxury apparel brands hold up better than non-luxury,” said CFRA analyst Zachary Warring.


Fashionphile Adds Board Members, Executives

Fashionphile, the resale platform for buying and selling pre-owned luxury handbags and accessories, has added to its board of directors Andrea O’Donnell, the chief executive officer of Everlane, the San Francisco, California-based, direct-to-consumer sustainable basics brand. Hannah Kim, executive vice president, chief legal officer, chief compliance officer and corporate secretary at the Neiman Marcus Group, has also joined the board of directors at Fashionphile. Kim’s appointment to the Fashionphile board stems from Neiman’s in April 2019 becoming the first luxury retailer to make a long-term investment in resale by acquiring a minority stake in Fashionphile. In several of its locations around the country, Neiman’s has set up Fashionphile “studios” where consumers can bring their used merchandise and get paid for it. Customers can also shop the Fashionphile website, and Neiman’s expects customers who drop off the goods at Fashionphile studios to also shop its store. Fashionphile personnel authenticate products and determine the value.



Athletic & Sporting Goods

Dick’s Sporting Goods launches $50 million in-house investment fund

Dick’s Sporting Goods Inc. has launched DSG Ventures, a $50 million investment fund, joining an increasing number of companies in creating in-house vehicles for investment.  The Findlay-based sporting goods retailer said Thursday that it would target sports-related companies for investment, focusing first on outfits that directly serve athletes and their communities or that help the company better serve its own athletes. The fund will help these companies grow with Dick’s capital, distribution reach, retail expertise and relationships with athletes.  DSG Ventures’ first investments include Moolah Kicks, of New York City, a shoe brand focused only on women’s basketball players; SidelineSwap, a Boston-based online marketplace for sporting goods; and Out&Back Outdoor, a Denver broker for used outdoor gear.

Dick’s Sporting Goods invests in resale marketplace

Dick’s Sporting Goods is moving forward in a big way with its burgeoning resale market presence.  The nation’s largest sporting goods retailer is making a strategic investment into SidelineSwap, a platform for buying and selling new and used sporting goods. The unspecified investment builds upon a partnership the two companies initially launched in August 2022.  SidelineSwap offers the SidelineSwap Trade-in Platform, which includes pop-up events, in-store and online trade-in options, and a suite of tools for resellers to manage their own trade-in experiences. The Trade-in Platform runs on SidelineSwap’s proprietary marketplace technology and resale data.  The platform’s hybrid model, which includes peer-to-peer and first party sales, gives sellers the option to choose direct resale or instant trade-in value. Customers can also find listings on some platform partners’ branded marketplaces.

New England ski resort sold to new owner in $76M deal

A Utah-based resort company has completed its purchase of Jay Peak Resort, the northern Vermont ski area that was at the center of a financial scandal involving its former owner and president.  Pacific Group Resorts, which owns five other ski areas, announced Tuesday that the state of Vermont had approved the assignment of leases for ski terrain, allowing the sale to close. A federal judge in September approved the company’s $76 million bid to buy Jay Peak after it won an auction for the ski area.  Pacific Groups Resorts’ other ski areas include Ragged Mountain Resort in New Hampshire and Powderhorn Mountain Resort in Colorado, as well as properties in British Columbia, Virginia and Maryland.  Former Jay Peak owner Ariel Quiros, former president William Stenger and an adviser to Quiros were sentenced this spring to federal prison for their roles in a failed plan to build a biotechnology plant using tens of millions of dollars in foreign investors’ money raised through a special visa program.

Cosmetics & Pharmacy

Unilever Boosts Sales Goal as It Hikes Prices More Than Ever

Unilever Plc raised its sales forecast for this year after pushing through the biggest increase in prices in its history amid rampant inflation. The company now expects sales this fiscal year to increase more than 8 percent, up from a prior range of 4.5 percent to 6.5 percent, after reporting a better than expected third quarter. However, the group said volumes are falling in a sign that cash-strapped shoppers are starting to cut back on essential spending. Unilever’s stock rose slightly in early trading in London. The Anglo-Dutch group said it ramped up prices by 12.5 percent during the period, the biggest increase on record and the seventh consecutive quarter of higher prices. However, consumers are starting to take strain and Unilever sold fewer items with its volume falling and further declines are expected during the final quarter as consumers trade down to cheaper supermarket brands. Unilever, whose chief executive officer Alan Jope will step down next year, said the global macroeconomic outlook remained mixed and it expected high inflation to persist in 2023.

Estee Lauder cuts forecasts on China curbs, tightening inventories

Estee Lauder Cos Inc cut its full-year forecasts on Wednesday ahead of the most important holiday season, blaming lockdowns in China and American retailers cutting stocks of its cosmetics and fragrances on worries of a slowdown in demand. The company’s shares were down about 9% in premarket trade after it also forecast second-quarter sales and profit below market expectations. Renewed lockdowns under China’s zero-COVID policy are weighing heavily on the country’s business activity and consumer confidence, and hampering sales growth of many U.S. companies such as Estee. Many companies in China are stuck with piles of unsold stock as cautious consumers stay away from crowded shopping districts and travel destinations like Hainan. Estee also said U.S. retailers were tightening inventories of its products, a sign that the benefits of the “lipstick effect”, where consumers buy more beauty products instead of big-ticket items during an economic downturn, were beginning to fade ahead of the holiday season.

CVS reports strong Q3, raises full-year guidance

CVS Health’s third-quarter 2022 results brought increased revenue. The Woonsocket, R.I.-based company saw third-quarter revenues of $81.2 billion, an increase of 10% compared to the prior year, which CVS Health said was driven by growth across all segments. GAAP loss per share for the quarter was $2.60, inclusive of $5.2 billion pre-tax opioid litigation charges and a $2.5 billion pre-tax loss on assets held for sale related to the Omnicare long-term care business. Adjusted EPS was $2.09. “We delivered another outstanding quarter, and have raised full-year guidance as a result,” said Karen Lynch, CVS Health president and CEO. “We continue to execute on our strategy with a focus on expanding capabilities in healthcare delivery, and the announced acquisition of Signify Health will further strengthen our engagement with consumers.” Adjusted operating income increased $160 million in Q3 compared to the prior year. The increase in adjusted operating income was primarily driven by increases in the healthcare benefits and pharmacy services segments. The increase was largely offset by a decline in the retail/LTC segment, CVS Health said.

Bankrupt Revlon Says It Is Entertaining Sale Offers

Revlon Inc’s bankruptcy attorneys said in court on Thursday that the cosmetics company is engaging with possible purchasers as a way to exit from Chapter 11 as quickly as possible. Revlon attorney Paul Basta told US Bankruptcy Judge David Jones in Manhattan that the company is ready to move onto the next stage of its bankruptcy after stabilising its relationship with vendors and completing a long-term business plan. Revlon is exploring a possible sale of the company and has begun sending nondisclosure agreements to interested bidders, Basta said. Revlon junior creditors argued in court that rushing toward a sale before the 2022 holiday season would only benefit senior lenders who forced the company to accept unrealistic deadlines as part of Revlon’s $1.4 billion bankruptcy loan. That court-approved loan requires Revlon and its lenders to reach a bankruptcy restructuring agreement by mid-November, which does not leave enough time for stakeholders to review Revlon’s new business plan or offer a realistic path for rehabilitating the company, according to Robert Stark, a lawyer for the junior creditors.


Discounters & Department Stores

J.C. Penney drags down owner Simon Property Group in Q3

Simon Property Group’s retail investments dragged the company down in the third quarter, reflecting costs linked to J.C. Penney’s beauty launch and Simon’s investment in Reebok, and year-over-year sales declines from its value-oriented banners, CEO David Simon told analysts on Tuesday. Its “better brands,” including Brooks Brothers, Lucky Jeans and Nautica, are “really doing well,” Simon also said. The REIT doesn’t break out specific results from the retailers it owns. The mall business, meanwhile, is benefiting from consumers’ return to shopping in physical stores, he said. Occupancy rose 1.8% year over year to 94.5% as of Sept. 30, as base minimum rent rose 1.7% to $54.80 per square foot.


Walmart cuts the price of Walmart+ membership in half for holiday promotion

Walmart is offering up a year of its paid Walmart+ membership for $49, or roughly half the price, to new members for a promotion that started on Nov. 1 and goes through Nov. 3. Walmart tied the discount to its November holiday sale, which the retailer has dubbed “Black Friday Deals for Days.” The sale event, set to start Nov. 7, joins those of Amazon, Target, Kohl’s and Walmart’s own October sale, among others that are aimed at luring shoppers early. Pre-Black Friday shopping and the attendant promotions from retailers have become a feature of the holiday season since the pandemic began. Retailers are also hoping the early promotions will help keep inventory moving in a year of overages.

Dollar General boosts toy offering

Vying for consumers seeking holiday deals, Dollar General has added new toys to its 2022 holiday selection, including from Barbie, Lego, Fisher-Price, VTech, Pokémon and other brands, the retailer announced on Tuesday. Dollar General worked with its vendor partners to introduce products priced at $10 or less for children across various age groups, per the announcement. From Thursday through Saturday, shoppers can buy select toys and get another toy of the same or lower price for 75% off, the company said. The retailer is also offering additional discounts through the retailer’s App.

Kohl’s deals-focused holiday blitz features bevy of mobile tactics

Kohl’s unveiled a holiday campaign that focuses on value and a diverse product assortment as consumers contend with a tough economy, per a press release. “More Gifts. More Savings.” tries to brighten the mood with vibrant spots running on TV and streaming set to Earth, Wind & Fire’s “December,” a version of “September” reworked for the winter season. The effort also includes a heavy digital component.  Kohl’s is promoting shoppable influencer gift guides through its website and leveraging social media creators to share savings hacks. The retailer is also taking advantage of features on TikTok, Pinterest and Meta Platforms’ apps to push deals and perks like its Kohl’s Cash program.



Emerging Consumer Companies

Givingli, an online gifting service, raises $10 million Series A

Givingli, a Los Angeles-based digital gifting platform, announced that it raised $10 million in a Series A round led by Seven Seven Six, the VC firm founded by Reddit co-founder Alexis Ohanian, with participation from Shopify co-founder and CEO Tobi Lütke. The proceeds bring the 13-person company’s total raised to $13 million. Founded in 2019, Givingli lets users customize digital greetings and send gifts to anyone. The company generates revenue by charging users a monthly subscription fee for access to the platform, plus additional fees for premium cards.


Treet raises $3.5 million

Resale provider Treet announced a $3.5 million seed round led by First Round Capital. This brings the start-up’s total funding up to $6.4 million. Treet partners with fashion brands like Shein, Dôen and Boyish, among others to create branded resale experiences. While the first funding round was for building a base product, the next infusion will go toward team, product, sales and building innovative resale features to “help bridge the gap between buyer and seller.”

Collectibles trading platform, Courtyard, raises $7 million seed round

Courtyard, the online trading platform for physical collectible goods, announced its $7 million seed round this week. The round was led by NEA, with participation from Cherry Ventures, OpenSea Ventures, and Brink’s, among others. Founded in 2021 in San Francisco, the company has developed a blockchain infrastructure that allows physical collectibles to be owned and traded as NFTs to improve liquidity. When a customer purchases a physical asset through Courtyard, they receive an NFT complete with a custom 3D rendering of the asset to display in the digital world. The corresponding physical asset gets authenticated, insured and stored in a Brink’s-operated vault. The NFT acts as a digital voucher for proof of ownership and authenticity, and enables the physical asset to be traded without having to be physically moved around or re-authenticated at each sale. The company intends to use the proceeds from this round to fuel product development and expand its team.



Food & Beverage

Campari Group acquire majority stake in Wilderness Trail bourbon for $420 million

Campari Group is boosting its Kentucky bourbon portfolio by taking a majority stake in Wilderness Trail Distillery.  The move comes at a time when American whiskey continues to rise, and particularly higher-priced brands.  The Italian spirits company reached an agreement to acquire a 70% stake in the bourbon and rye whiskey producer, with the option to acquire the remaining 30% in 2031. The current stake is valued at $420 million, with complete ownership valued at $600 million. That would be one of the largest acquisitions for Campari, second to its purchase of Grand Marnier in 2016.  It’s not the first big whiskey move for Campari, which entered the bourbon category in 2009 by acquiring the iconic brand and distillery Wild Turkey from Pernod Ricard.  Wilderness Trail is expected to generate $57 million in sales this year, up 39% from the prior year, according to Campari.

Impossible Foods’ patent affirmed in legal battle with Motif FoodWorks

Impossible Foods’ patent for its plant-based hamburger will stand, the Patent Trial and Appeal Board ruled last week. The patent was challenged by Motif FoodWorks as part of a legal battle between the plant-based meat maker and the food tech solutions company. After Impossible sued Motif, accusing the ingredient maker of infringing on at least one of its patents with its Hemami ingredient, Motif argued to the U.S. Patent and Trademark Office’s judicial arm that it never should have given patents to Impossible because several other patents regarding meat analogs and heme proteins had already been granted.

Ethiopian chip brand receives $40 million investment from PepsiCo

PepsiCo is investing $40 million in Ethiopian subsidiary Senselet, which produces the potato chip brand SUN Chips. The investment will fund the construction of an additional potato chip production line and a new snack production line inside the brand’s existing facilities. Senselet was established in 2015, and its Ethiopian potato processing site was opened and began production in 2017. SUN Chips are sold in approximately 10,000 retailers across Ethiopia, according to the company, and are available in original salt, habesha (regional spices), tomato and paprika flavors.  “[The] investment is further proof of the confidence that PepsiCo has in the potential of the country for economic growth,” said Chris Wijnterp, general manager of PepsiCo’s Foods unit in Ethiopia. “This cash injection will allow us to increase our production capacity for snacks tenfold.”



Grocery & Restaurants

Court halts Albertsons’ $4B dividend payment under Kroger merger deal

After lawsuits filed by three state and the District of Columbia attorneys general, a county court in Washington state has paused Albertsons Cos.’ planned $4 billion dividend payment in connection with its proposed acquisition by The Kroger Co. A King County Superior Court commissioner yesterday granted a motion by Washington AG Bob Ferguson (D.) for a national temporary restraining order to block the Albertsons $4 billion dividend payment. As part of the Kroger-Albertsons merger transaction, Boise, Idaho-based Albertsons was slated to pay its shareholders a special cash dividend of $6.85 per share, totaling about $4 billion, on Nov. 7. Ferguson and the AGs of D.C., California and Illinois earlier this week had filed suit to halt the Albertsons dividend payment pending a comprehensive review of the $24.6 billion Kroger-Albertsons merger deal, announced Oct. 14, by state and federal regulators. The AGs claim the dividend’s size will hamper Albertsons’ ability to operate and compete during the merger agreement’s antitrust review. Kroger and Albertsons estimated a potential early 2024 closing for the transaction, pending regulatory approval, yet industry observers and Wall Street analysts said the process could take two years. Yesterday evening, Albertsons released a statement describing the temporary restraining order halting the special dividend payment as unfounded. The company also noted that its business and finances are healthy.

Wetzel’s Pretzels to be sold to Famous Dave’s and Cold Stone Creamery parent company

MTY Food Group — the Canadian franchisor of Famous Dave’s Papa Murphy’s, Cold Stone Creamery, Blimpie, and Pinkberry — announced Wednesday the imminent acquisition of Wetzel’s Pretzels from Dallas-based private equity firm, CenterOak Partners LLC for $207 million, subject to closing conditions. This would be the second acquisition in the past few months for MTY Food Group, which announced its acquisition of BBQ Holdings’ parent company, Famous Dave’s in August for $200 million. Wetzel’s is headquartered in Pasadena, Calif. and is the second-largest franchisor and quick-service chain operating in the snack category, known for its menu of soft-baked pretzels, pretzel dogs, and beverages. When the deal closes, MTY Food Group will add 350 locations (90% of which are franchised) across 25 states, Canada and Panama to its portfolio. CenterOak acquired Wetzel’s Pretzels in 2016, and over the last year, annual sales have grown to $245 million with 21 million customers.

Home & Road

Tempur Sealy Q3 income drops 25% from macroeconomic pressures

Third quarter net income for Tempur Sealy International dropped 25.2% to $132.7 million compared with $177.4 million in the same period last year. The bedding manufacturer said quarterly sales dropped 5.5% to $1.3 billion compared with net sales of $1.4 billion in the same quarter last year. North American sales dropped 5.4% to $1 billion, and the company’s international sales decreased 5.3% to $225.6 million. Earnings before interest, tax, depreciation and amortization decreased 16.9% to $245.4 million as compared with $295.2 million in the third quarter of 2021. Adjusted EBITDA decreased 15.4% to $251.9 million as compared with $297.6 million in the third quarter of 2021. “Our third quarter results demonstrate the continued strength of our business model and industry-leading products, as they mitigated the unfavorable foreign exchange dynamic and overall challenging operating environment in the quarter,” said Scott Thompson, chairman and CEO. “We performed largely in-line with our expectations while working through these headwinds.

As Wayfair faces big losses, company sets goal to ‘break even’

After a brief period of profitability during the pandemic, Wayfair has now returned to negative numbers. Its immediate goal for the coming quarter is to first break even and then return to profitability, CEO Niraj Shah told investors during an earnings call. “We’re continuing the work we set out last quarter to control the controllables and orienting Wayfair in this environment around three key principles: driving cost efficiency, nailing the basics, and earning customer and supplier loyalty every day. We are all focused on taking the steps needed to reach adjusted EBITDA profitability and cash flow neutrality in short order,” said Shah. Wayfair posted third quarter total net revenue of $2.8 billion, which is down 9% from the third quarter of 2021. The net loss for the quarter was $283 million compared with a loss of $78 million in the third quarter of 2021. The company posted gross profit of $824 million or 29% of total revenue for the quarter, which ended September 30. Diluted loss per share for the third quarter was $2.66 compared with a loss of 75 cents in the third quarter of 2021.

Furniture manufacturing weakens again in October; reports largest employment drop

The manufacturing sector continues to weaken, with it now being close to stagnation. The Institute for Supply Management’s October report measured the manufacturing sector at a 50.2%, the lowest reading since May 2020 and a 0.7% drop over September. That means manufacturing has nearly stagnated, as a reading below 50 would indicate a shrink in size. “The U.S. manufacturing sector continues to expand, but at the lowest rate since the coronavirus pandemic recovery began,” said ISM chairman Timothy R. Fiore. “With panelists reporting softening new order rates over the previous five months, the October index reading reflects companies’ preparing for potential future lower demand.” Of the 18 individual manufacturing industries recognized by the ISM, furniture once again saw the biggest decline. It has seen the biggest dips in every month since May. More positively, furniture saw the biggest improvement in supplier delivery speed. It also reported paying less for raw materials. Overall, the industry recorded higher inventory counts from September and lower order backlogs.


Two RH veterans join C-suite for new contemporary home brand

The parent company of young women’s fashion retailer Altar’d State is launching a contemporary home brand. Stand Out For Good has named Sean Connelly as COO and Mark Dvorak as chief design officer of its new home concept. The company announced the new concept in July, appointing Tara Ward as brand president. Connelly and Dvorak have more than 50 years of combined experience in the fashion retail and home furnishings industries, specifically handling product development and curation, inventory management and team growth for a variety of well-known brands. Most recently, Connelly was COO at luxury furniture brand Serena & Lily, leading the company’s sourcing, inventory management, distribution, transportation and customer service. Prior to joining Serena & Lily in 2016, he spent more than 15 years at RH (Restoration Hardware) in a variety of roles, including serving as VP of inventory planning – furniture from 2013 – 2016. Dvorak is also an RH veteran, serving as senior VP of product development and curation at the company for more than a decade. Prior to joining RH in 2009, he served as senior VP of global store design for Gap Inc., from 1992 – 2007. Before that, he was in store development at Polo Ralph Lauren.

Jewelry & Luxury

De Beers Q3 Rough Diamond Production Up 4%

Rough diamond production swung back to the positive in De Beers’ third quarter, the company announced Thursday. Production rose 4 percent to 9.6 million carats during the period, following a decrease in Q2 of 4 percent. The rise in the latest quarter was attributed to the treatment of higher-grade ore at Orapa in Botswana and in South Africa, as well as “continued strong performance” in Namibia, said De Beers. In Botswana, production was up 4 percent to 6.6 million carats in the quarter, driven mostly by higher-grade ore from Orapa, which was partly offset by processing lower-grade ore at Jwaneng. Namibia’s production was also up, rising 33 percent to 0.5 million carats, boosted by a strong performance from the Benguela Gem vessel, the company’s new diamond recovery vessel that started operations in March.

Pandora’s European Distribution Center Suffers Fire

On Oct. 30, Pandora’s Hamburg, Germany–based European distribution center caught fire, which could disrupt its product distribution in Europe for the next few weeks. No people were injured in the incident, the Copenhagen, Denmark–based charm and jewelry company said in a statement. The fire has since been extinguished and access to the premises is possible, it added. The company’s jewelry inventory made it through intact, it said, and it expects distribution will be back to normal in a few weeks. Pandora will attempt to fulfill stock for its stores in Europe to the greatest extent possible through its Thailand distribution center. The statement said that Pandora’s stores in Europe hold enough inventory to sustain sales until the European distribution center is operational again.

From Fifth Avenue to Fort Worth: luxury brands look to expand across US

To celebrate its new flagship store in New York City recently, Hermès hosted an elaborate party with Broadway singers performing a specially commissioned musical. Well-heeled guests, many carrying their Birkin bags, drank champagne and ate from food trucks painted in the Hermès signature orange. Although extravagant openings are par for the course for the world’s biggest luxury groups, the latest glitzy Hermès showcase on Madison Avenue highlights how much the industry cares about its biggest market, even as economic fears mount and inflation bites. In the US, demand for expensive handbags and clothes bounced back very quickly from the coronavirus pandemic and has since proved surprisingly resilient. Luxury sales in the US grew almost twice as fast as the global average in 2021, and one and a half times faster in the first half of 2022, according to Citi Research. Sector leader LVMH recently reported 19 per cent year-on-year revenue growth in the US, while Hermès grew by 24 per cent. Even the summer boom in luxury sales in Europe was driven by big-spending American tourists.


Office & Leisure

Collectible Toy Maker Pop Mart Falls Out of Favor

When you’re hot, you’re hot. And when you’re not, you’re not. That’s the painful lesson being learned these days by Pop Mart International Group Ltd., whose trendy collectible toys are not quite as big as they used to be.  Last Tuesday, Pop Mart announced a set of disappointing operating data for the quarter through September, with overall revenue declining between 5% and 10% from the same year-ago period – its first-ever decline since its 2020 IPO. Those results marked a significant break for a company that was used to seeing strong triple-digit revenue growth in recent years. Founded in 2010, Pop Mart started out as a relatively ordinary toy and stationery seller peddling its wares in traditional physical stores. It didn’t really hit its stride until five years later when it adopted an innovative business model by selling toys in “blind boxes.” Those contained limited-edition toys – like the 1980s Beanie Babies sensation in the U.S. – packaged in opaque boxes to keep the contents a surprise until opened after a purchase. The business is extremely lucrative because people are willing to pay big premiums for the latest trendy toys and figurines. Riding a wave of success as its toys gained a strong following, the company’s revenues leaped from 158 million yuan ($21.8 million) in 2017 to whopping 1.7 billion yuan in 2019, with its net profit exploding by a factor of 300 over that time. The company’s high-profile IPO in late 2020 became one of the best-performing debuts by a Chinese company in Hong Kong that year.

It’s spooky how fast Spirit Halloween stores pop up. Here’s how the retailer does it

In the world of spooky commerce, there’s one name that rises above the rest: Spirit Halloween. The seasonal retailer sells costumes, decorations and just about anything else somebody might need for Halloween. Despite only operating from early August to early November, Spirit Halloween has become as much a part of the fall season as pumpkin patches and sweater weather, and with more than 1,400 locations in the United States in Canada, it’s not hard to understand why. Spirit Halloweens are everywhere. They appear seemingly overnight, taking over vacant buildings, then they disappear — only for the cycle to repeat itself next year. The retailer has become so thoroughly ingrained as part of the season, it has made its way to internet memes. Perhaps above all, Spirit’s business model hinges on space. Lots of it. Spirit looks for anywhere between 5,000 and 50,000 square feet of space, but in the company’s own words, “no store is too large (or too small)” — and the company has no problem finding the space it needs. The company finds this space largely in abandoned buildings — malls that have shut down, retailers that have filed for bankruptcy and so on.

Ralph Lauren extends metaverse promotion to Fortnite

Ralph Lauren is partnering with another immersive gaming platform.  The upscale apparel brand is collaborating with the globally popular online game Fortnite in an initiative that includes real clothing and in-game outfits. Ralph Lauren has previously launched metaverse promotions in partnership with the Roblox virtual gaming platform and the Zepeto global social networking and avatar simulation app. The new Ralph Lauren-Fortnite collaboration includes a digital apparel and accessories collection launching in the Fortnite Item Shop virtual storefront, as well as a physical apparel capsule based on the digital collection. In a first for Ralph Lauren, the collection was developed as a digital-first capsule. The company has previously offered digital apparel items for customer avatars in both its Roblox and Zepeto metaverse promotions.

Technology & Internet

Etsy shares pop on revenue beat, rosy guidance

Etsy shares surged as much as 10% in extended trading Wednesday after the online marketplace’s third-quarter revenue and earnings outperformed expectations. The company also posted upbeat guidance for the current period. For the fourth quarter, Etsy said it expects to report revenue between $700 million and $780 million, and gross merchandise sales of $3.6 billion to $4 billion. Wall Street was projecting fourth-quarter sales of $743 million, and GMS of $3.9 billion, according to StreetAccount. Third-quarter revenue grew 11.7% from the year-ago period, boosted by Etsy’s transaction fee hike. The company announced last April it would raise the transaction fees it charges sellers to 6.5% from 5%, which spurred backlash from merchants, including a weeklong strike. Investors have been closely watching e-commerce companies’ forecasts for the fourth quarter as a barometer for inflation-weary consumers’ willingness to spend during the holidays.

Amazon pauses hiring for corporate workforce

Amazon is pausing hiring for roles in its corporate workforce, the company announced in a memo to staff Thursday. The company had already announced last month it would freeze hiring for corporate roles in its retail business, but the latest update affects its other businesses. Amazon’s HR chief Beth Galetti wrote in the memo that the company moved to further restrict new hiring amid a worsening economic outlook and after it hired rapidly in recent years. “We anticipate keeping this pause in place for the next few months, and will continue to monitor what we’re seeing in the economy and the business to adjust as we think makes sense,” Galetti said. The retail giant went on a hiring spree during the Covid-19 pandemic as it sought to keep up with a pandemic-driven surge in online shopping. Since then, it has moved to slow headcount growth as consumers have returned to physical stores, and its retail business is no longer growing at a rapid clip like it has in recent years. CEO Andy Jassy has also aggressively curtailed expenses across the company in recent months amid fears of a recession, rising inflation and soaring interest rates. Amazon has shed warehouse space, halted some experimental projects, and shuttered its telehealth service.

Finance & Economy

U.S. payrolls surged by 261,000 in October, better than expected as hiring remains strong

Job growth was stronger than expected in October despite Federal Reserve interest rate increases aimed at slowing what is still a strong labor market.  Nonfarm payrolls grew by 261,000 for the month while the unemployment rate moved higher to 3.7%, the Labor Department reported. Those payroll numbers were better than the Dow Jones estimate for 205,000 more jobs, but worse than the 3.5% estimate for the unemployment rate.  The new figures come as the Fed is on a campaign to bring down inflation running at an annual rate of 8.2%, according to one government gauge.

Holiday sales expected to increase this year, but shoppers will lean on savings and credit to afford gifts

Families may not skimp on holiday gifts for their loved ones this year, but they’ll likely slim down their list of recipients, turn to credit cards and dip into savings to afford them, according to an industry forecast.  So who will be on the list?  Retail sales for the combined November-December shopping months will grow between 6% and 8% this year compared with the 2021 holiday season, to between $942.6 billion and $960.4 billion, according to projections released from the National Retail Federation, the industry’s largest trade group.  Although consumers are feeling the pressure of inflation and higher prices, households in various income brackets are responding differently to how their budgets are impacted, NRF president and CEO Matthew Shay said in a statement, but consumers overall still remain resilient and continue to spend.