In his popular book Sapiens, Yuval Noah Harari states that “from about 2 million years ago until around 10,000 years ago, the world was home, at one and the same time, to several human species.” Harari says the fossil record shows that our species coexisted with the likes of Neanderthals, Homo erectus, Homo soloensis, Homo floresiensis and several others until environmental conditions, migration, and evolutionary traits enabled our species to flourish and simultaneously wipe out each of our cousin species (this is a theory; it is not settled that our species was the culprit in the loss of these species – at least, not the sole culprit). On Tuesday, it is projected that the species H. sapiens will hit a new landmark, as our population eclipses 8 billion worldwide. Considering the species clocked in at 2 billion in 1925, it is fair to say that, evolutionarily, we’ve been on a remarkable run.
Continued growth of the species is not assured. Talk of the use of nuclear weapons this year by Russia and North Korea is testament to that. Pandemics, astrological events, and environmental factors could all play a role in the further growth of the species. But, on the assumption that none of these things disrupts the current trajectory, H. sapiens is projected to grow to 9.7 billion by 2050 and 10.4 billion by 2080, according to United Nations modeling.
Many factors impact these models, but three are key: birth rate, infant mortality, and lifespan. While infant mortality has decreased dramatically and lifespan has grown across the world (the World Health Organization states lifespan has grown on average to 73.3 years from 66.8 years in 2000), modelers believe the trend of declining birth rates will eventually more than offset these other factors. Because of this, they project our population will begin levelling off around the year 2100. To oversimplify, women on average need to have 2.1 children for the population to grow. In the 1950s, the average woman on this planet had five children according to Casey Briggs of ABC News. The trend is very much on the decline. Briggs reports that “in some parts of the world, including Australia, Europe, North America, and some parts of Asia, fertility rates are already below the replacement number.” He says the world will never again have as many babies as it does right now. This has dramatic implications for the future of humanity, namely that the population will on average be increasingly older and our families will be increasingly smaller. This has ramifications for health care, housing, transportation, agriculture, employment and taxation, among other things.
Another key trend that will shape the future of humanity is urbanization. Beginning in 2017, more than half of the world lived in cities for the first time. Population moving away from farmland is a natural outgrowth of the increasing sophistication of our agricultural systems. However, figuring out how to efficiently and cost effectively feed a bigger, older, more urban population will be one of the major challenges facing future generations.
From the perspective of the consumer industry, this milestone underscores mega-trends about which we are all increasingly focused: healthy lifestyles as we age, better-for-you ingredients in the things we put in and on our bodies, and environmental sustainability. And while the young will likely continue to set trends in our industry, businesses would be wise to listen to the voices of an increasingly numerous and powerful older demographic.
Headlines of the Week
Consumer prices rose 0.4% in October, less than expected, as inflation eases
The consumer price index rose less than expected in October, an indication that while inflation is still a threat to the U.S. economy, pressures could be starting to cool. The consumer price index, a broad-based measure of goods and services costs, increased 0.4% for the month and 7.7% from a year ago, according to a Bureau of Labor Statistics release Thursday. Respective estimates from Dow Jones were for increases of 0.6% and 7.9%. Excluding volatile food and energy costs, so-called core CPI increased 0.3% for the month and 6.3% on an annual basis, compared with respective estimates of 0.5% and 6.5%.
Levi’s names Kohl’s Michelle Gass as next chief executive
Levi Strauss & Co on Tuesday named current Kohl’s Corp Chief Executive Officer Michelle Gass as the next CEO of the denim maker, succeeding long-time head Chip Bergh. Gass’ departure from the struggling department store chain comes as activist investor groups push for management and board reshuffles, including a change of CEO. Hedge funds Macellum Advisors and Ancora Holdings spearheaded a new round of shareholder unrest for Kohl’s after the company explored a sale and decided in July to remain independent, leading to a plunge in its shares and disappointing investors who had pushed for a deal. While Levi’s does not face the same activist pressure as Kohl’s, its earnings have still taken a hit from softening demand and Gass will need to navigate the company out of an inflationary environment that has caused a slump in discretionary spending. Gass will leave Kohl’s in December to become president of Levi’s early next year and will take over as chief executive within the next 18 months. As part of Levi’s succession plan, Gass will initially report to Bergh, who has led Levi’s for the last 11 years and was involved in the company’s return to public markets in 2019.
Apparel & Footwear
Intermix ‘Exploring Options’ to Deal With Financial Woes
Financial trouble appears to be brewing at Intermix, the 30-unit multibrand specialty chain. According to sources, the company is weighing options in light of its over-inventoried position, a slowdown in sales, improperly budgeting for overall expenses, and a highly competitive and challenging retail environment. WWD has learned that Intermix has paused all payments to vendors. Sources said Intermix plans to restructure the company, but would not be filing Chapter 11. A spokesperson for the retailer said Monday, “Intermix is exploring several options to navigate the challenging retail and economic environment in an effort to strengthen the company’s long-term position. The company is confident in its path forward.” Intermix’s transition to a stand-alone company after being owned by The Gap Inc. has been difficult and the retailer is apparently trying to figure it out, said sources. The Gap sold Intermix to Altamont Capital Partners in May 2021, which included all store leases, e-commerce and assets, for an undisclosed sum. Intermix had accounted for less than 1 percent of Gap Inc.’s sales.
The RealReal Races to Accelerate Profit Timeline
The RealReal Inc. has something to prove. The resale pioneer — led by co-interim chief executive officers Rati Sahi Levesque and Robert Julian since founder Julie Wainwright left the company in June — continued to post steep losses in the third quarter and is trying to prove it can make money sooner than later. “As we continue to focus on profitable growth, our objective is to accelerate our timeline to profitability and demonstrate the efficacy of our business model,” said the co-interim CEOs in a letter to shareholders. “We believe there are levers in our business that may enable us to reach profitability with lower top-line growth than previously projected.” That includes overhauling the consignor commission structure to “incentivize the consignment of higher-value items,” optimizing pricing by refining the company’s dynamic algorithms, more aggressively cutting costs and capitalizing on new revenue streams. They said The RealReal is exploring “a warranty program, advertising technology and data monetization” as revenue drivers. The company is doing what it can to win back investors, who are proving hard to impress — especially with the economy flagging.
HanesBrands Q3 sales decline, outlook below forecast
HanesBrands Inc. net sales decreased 7 percent to 1.67 billion dollars and on a constant currency basis, net sales decreased 3 percent or 60 million dollars. The company said that the sales decline includes a 59 million dollars unfavourable impact from foreign exchange rates, compared to last year. The constant currency decline was due to the macro-driven slowdown in consumer spending in the U.S. and certain Asian markets coupled with the impact to orders as U.S. retailers tightly manage their overall inventory levels. These headwinds more than offset innerwear growth in Australia and the other Americas as well as Champion growth in Europe. “Our global team’s agility and focus helped us deliver operating profit and earnings per share in line with expectations, despite the tougher-than-expected sales environment,” said Steve Bratspies, CEO of HanesBrands. For fiscal 2022, the company currently expects net sales of 6.16 billion dollars to 6.21 billion dollars, which includes a projected headwind of approximately 196 million dollars from changes in foreign currency exchange rates.
Gap to sell Greater China units to e-commerce firm Baozun
U.S. apparel retailer Gap Inc has agreed to sell its Greater China businesses to Baozun Inc, the e-commerce service provider said on Tuesday, as headwinds persists for global consumer brands in the world’s second-largest economy. Dealmakers have seen opportunities for merger and acquisitions involving multinational firms that look to spin off their China units, as growth outlook in the country grappling with strict COVID-curbs remains uncertain amid intensifying competition with domestic brands. Earlier this year, American fast fashion retailer Forever 21 made its third effort to enter China after having left the market twice, while major sportswear companies Nike and Adidas lost ground to local brands Li Ning and Anta in recent years. China’s Baozun said its unit would acquire Gap Shanghai Commercial and Gap Taiwan Ltd, which operate the whole business of Gap Greater China, with a primary deal size of $40 million and no more than $50 million for adjustment. Separately, Baozun said Gap has granted it an exclusive right to manufacture and sell its products in Greater China area. The arrangement can last two decades, with an initial term of 10 years that can be renewed twice for each five-year term.
Athletic & Sporting Goods
Adidas scoops up CEO who turned around rival Puma
Adidas has appointed the head of Puma to succeed outgoing CEO Kasper Rorsted, betting on his ability to replicate its crosstown rival’s comeback. Norwegian Bjørn Gulden, 57, will become CEO of Adidas (ADDDF) on January 1, 2023, the German sportswear brand said in a statement. Gulden, who has been CEO of Puma since 2013, is credited with engineering a turnaround at the smaller sports company, which reported its highest ever quarterly sales between July and September. He led the apparel and accessories business at Adidas for seven years in the 1990s. A professional football and handball player, he was also CEO of Danish jewelry brand Pandora and is chairman of Salling Group, Denmark’s largest food retailer.
Adidas will continue to sell Kanye West’s shoe designs without the Yeezy name
Adidas ended its sneaker partnership with Ye, formerly known as Kanye West, last month after the musician’s anti-Semitic tirade. But Adidas will continue to sell the lucrative sneaker and apparel line, stripped of the Yeezy name and branding. The company said it’s the sole owner of all Yeezy line design rights for both existing and future colors and versions. Selling the sneakers under Adidas’ own branding will save the company about $300 million in royalty payments and marketing fees. Yeezy products generated nearly $2 billion in sales last year for Adidas accounting for 8% of the company’s total sales, according to Morgan Stanley. The line also helped Adidas get shelf space at major retailers and brought new customers into the stores who purchased other Adidas merchandise. Ending the partnership cost Adidas more than $250 million in profit and $500 million in lost revenue, the company said.
HUMBL, Inc. announced the acquisition of BM Authentics, a trusted provider of sports merchandise and memorabilia headquartered in Chicago, Illinois. BM Authentics works with clients such as professional athletes, brands, representation and marketing agencies, to provide sports merchandise ranging from autographed jerseys, bats, balls, helmets, photos and more. BM Authentics merchandise will be made available on the HUMBL platform and will be verified, registered and cataloged on blockchain. This will include Certificates of Authenticity, along with cataloging on the BLOCKS Registry™, a decentralized global database that can be used for the lifetime tracking of collectible merchandise. The HUMBL Wallet will hold and validate the Certificates of Authenticity, thus providing an additional layer of security with consumer and brand protection over the life of the physical asset or digital collectibles.
Cosmetics & Pharmacy
Coty Beats Quarterly Revenue Estimates as Beauty Demand Sits Pretty
Coty Inc on Tuesday beat Wall Street estimates for quarterly revenue as higher prices and sturdy demand for its fragrances and cosmetics helped soften the hit from a strong US dollar and the company’s exit from Russia. Consumers heading out more after lockdowns are indulging in smaller luxuries such as makeup and perfumes even as they put off bigger purchases because of rising inflation and risks of a recession. Coty’s prestige division, home to cosmetics and fragrances from the Calvin Klein and Gucci brands, saw revenue fall 1 percent due to macroeconomic headwinds. But chief executive officer Sue Nabi told Reuters that the company does not “see any slowdown or trading down in the prestige division.” In fact, consumers are trading up from lower-priced consumer beauty labels to its prestige division, she said. The Hugo Boss perfume maker will also increase prices further, by mid-single digits around winter, as it combats higher freight and labor costs.
Peace Out Skincare Gains $20 Million Investment
Peace Out Skincare has gained a minority investment, to the tune of $20 million. The brand, which has sold more than 50 million of its acne dots to date, has gained its first outside investment. The firm 5th Century Partners invested $20 million in the brand, which will go toward building out personnel as well as retail expansion and new categories. Over the five years since its inception, Peace Out said it has become the top-selling acne brand in Sephora, where it is available in key markets like Canada, Europe, the U.K., the Middle East, Australia and New Zealand, in addition to its own website and Amazon. Industry sources estimate the brand’s sales to reach between $50 million and $60 million globally at retail in 2022.
Bankruptcy May Be in Birchbox’s Future
Once upon a time, Birchbox was a beauty industry darling. Birchbox raised nearly $90 million and was once valued at almost $500 million. But the brand’s future has been tenuous for years, as growth and profitability were a constant struggle. Founded in 2010 by Harvard Business alums Hayley Barna and Katia Beauchamp, Birchbox redefined how people discover and shop for beauty and grooming by pairing a monthly subscription of personalized samples with relevant content and a curated e-commerce shop. At its height, Birchbox operated in six countries, reaching more than 2.5 million active customers with a portfolio of 500 best-in-class prestige brand partners with flagship stores in New York City and Paris.
Discounters & Department Stores
Target pivots to larger stores with new 150K-square-foot format
Target is introducing a new large-format store that will stand at around 150,000 square feet, which would make it roughly 20,000 square feet larger than its average, according to a company release. Target said that the new larger format concept will be its primary development focus in the coming years, while it will still continue to open stores of other sizes as well. With the new format, Target is playing around with other design elements, including what it described as a more open layout and localized elements, which the retailer said it would add to future remodels as well.
Macy’s launches initiative to support diverse businesses
Continuing its diversity commitment, Macy’s has unveiled its S.P.U.R. Pathways initiative, a multi-year program designed to support entrepreneurs of underrepresented backgrounds and close the racial wealth gap, the retailer announced last week. According to the press release, the retailer said it plans to invest $30 million and provide educational resources for underrepresented businesses during the next five years, providing participating companies with $100 million in capital. Through its partnership with Momentus Capital, the company also plans to provide up to $100 million in capital to businesses at various growth stages.
Emerging Consumer Companies
Zitsticka, acne care brand, acquired by Heyday
Zitsticka, the New-York based skincare brand focused on acne care, has been acquired by Heyday. The Heyday platform raised $555 million in 2021 to buy and scale direct-to-consumer brands, and says the acquisition of Zitsticka will enrich its investment in the personal care space and will provide it with a leading position in the high-growth acne patch category. Zitsticka was founded in 2017, around its hero product, the KILLA patch, a micro dart acne patch that disrupts the progression of early-stage zits. The brand has since expanded its product portfolio to include supplements, body washes, and topicals, and is on shelves at retailers including Target and Ulta. Founders Sebastian Rymarz, Daniel Kaplan, and Robbie Miller, are hoping that as a result of the brand’s integration into the Heyday platform, the brand will grow its omnichannel distribution, continue to innovate in new products, and increase the brand’s overall strength.
Direct-to-consumer custom rug brand, Ernesta, raises $25 million Series A
Launched by three of the founders of Peloton, John Foley, Hisao Kushi, and Yony Feng, Ernesta is a direct-to-consumer custom rug company that is hoping to provide a custom rug solution to the masses. The company announced this week that it has raised $25 million in a Series A round. The capital will aid the company in its goal of giving residential buyers the opportunity to buy a rug custom cut for their space – something that has previously been too cost-prohibitive for the average buyer. The company will source rolls of bulk carpet from within the U.S. and cut them to size in a New Jersey warehouse, and plans to sell 50 different styles of machine-made, custom-cut rugs in five colors, at prices closer to retailers like CB2 and West Elm. The company expects to begin selling to customers in spring 2023.
Fashion accessory rental platform, Vivrelle, raises $35 million Series B
Four-year-old fashion accessories rental platform, Vivrelle, announced this week that it has raised a $35 million Series B round led by 3L Capital. Origin Ventures, Chapford Capital Group, Plus Capital, and celebrities including Lily Collins, Nina Dobrev, and Morgan Stewart McGraw also participated in the round. To date, the company has raised $69 million across three funding rounds. The company launched with the aim of making luxury fashion accessible and sustainable, and offers a membership-based rental service that offers members access to a shared closet of designer handbags and accessories. Vivrellle said it plans to use the proceeds of this round to expand inventory, open additional showroom spaces, and bring additional team members.
Food & Beverage
KDP invests $50M in Non Alcoholic Beer Brand Athletic Brewing
Keurig Dr Pepper purchased a minority stake in Athletic Brewing through a $50 million investment in the nonalcoholic craft beer market. The investment is part of a $75 million fundraising round by Athletic. Keurig Dr Pepper said it will now own an equity stake in Athletic Brewing that is comparable to other lead investors, and it will have a seat on the company’s board of directors. Further terms of the deal were not disclosed. The investment represents Keurig Dr Pepper’s latest move into the rapidly growing nonalcoholic beverage category following its acquisition of ready-to-drink cocktail brand Atypique in June.
Keurig Dr Pepper CEO resigns after violating company’s code of conduct
Keurig Dr Pepper announced Thursday that CEO Ozan Dokmecioglu agreed to resign after violating the company’s code of conduct, less than four months into the job.
The beverage giant said the violations were not related to the company’s strategy, operations or financial reporting. Keurig Dr Pepper’s board reappointed Bob Gamgort, chairman and former CEO, as chief executive. Shares of the company rose 2% in morning trading on the news. Keurig Dr Pepper’s stock has risen 3% this year, increasing its market value to $54.4 billion. Gamgort ceded the role to Dokmecioglu on July 29 as part of a previously announced succession plan.
Monster profitability pressured by continued inflation
Increased costs for ingredients, packaging, manufacturing, freight and fuel, distribution and warehousing, and aluminum cans are pressuring earnings at Monster Beverage Corp. Rodney C. Sacks, chairman and co-chief executive officer, believes some of the strain is temporary. “Since the beginning of the COVID-19 pandemic and the subsequent increased demand for the company’s energy drinks, the company prioritized ensuring product availability for its customers and consumers,” Mr. Sacks said during a Nov. 3 earnings call. “This strategic direction has remained in place throughout the global supply chain challenges and disruptions, despite adversely impacting the company’s profitability. The company continues to stand by its strategy to ensure product availability and solidify the continued long-term growth of the company’s brands.”
Grocery & Restaurants
Ahold Delhaize ramps up U.S. sales growth in Q3
Global food retailer Ahold Delhaize built on sequential and prior-year net and comparable sales gains in its U.S. business for the fiscal 2022 third quarter. For the quarter ended Oct. 2, Ahold Delhaize tallied U.S. net sales of $14.75 billion, up 8.8% at constant exchange rates (27.4% actual) from $13.55 billion a year earlier, the Zaandam, Netherlands-based company said Wednesday. Comparable sales grew 8.6% year over year and were up 8.2% excluding fuel. The results for Ahold Delhaize USA topped gains of 7.7% in net sales and 7.4% (6.4% excluding fuel) in the second quarter and increases of 6.8% in net sales and 3.6% in comp sales (2.9% excluding fuel) in the fiscal 2021 third quarter. Ahold Delhaize noted that U.S. comp sales benefitted by about 0.4 percentage points from weather and calendar shifts. Food Lion turned in the top performance among U.S. retail banners, marking 40 consecutive quarters of comp-sales growth, while Hannaford posted its 27th comp-sales gain over the past 28 quarters.
Home & Road
Eurazeo Sells Majority Stake in Nest To North Castle Partners
Global Investment company Eurazeo has sold its majority ownership position in Nest New York in a transaction that values Nest at approximately $200 million. Under the terms of the transaction, an investor group led by North Castle Partners will purchase a majority stake in the home fragrance company, with Eurazeo and Nest Founder Laura Slatkin retaining minority ownership positions. Following the close of this transaction, Eurazeo’s invested equity capital will yield a return of approximately 2.7x. Eurazeo’s Brands Division launched in May 2017 and Nest was its first investment. Under Eurazeo’s management, Nest’s leadership team accelerated product innovation, expanded brand awareness and significantly increased the brand’s digital penetration. As a result, overall brand sales tripled, direct-to-consumer sales increased 10-fold and EBITDA margins significantly expanded, said Eurazeo. Nest represents North Castle’s second beauty and personal care investment in the last two years. The transaction is expected to close at the end of November.
Lowe’s selling its Canadian business to Sycamore Partners
Lowe’s Companies is selling its Canadian division to a U.S. private equity company. The home improvement retailer has entered into a definitive agreement to sell its Canadian retail business to Sycamore Partners for $400 million in cash, plus a performance-based deferred consideration. The transaction is expected to close in early 2023. Based in Boucherville, Quebec, Lowe’s Canadian division includes approximately 450 corporate and independent affiliate dealer stores under different banners, which include Rona, Lowe’s Canada, Réno-Dépôt and Dick’s Lumber. The deal will establish Lowe’s Canada and Rona as a standalone, Quebec-headquartered company.
Canadian sleep retailer Q3 income tumbles on consumer confidence
Sleep retailer Sleep Country Canada reported third quarter net income of C$28.9 million, a 20.7% decline from net income of C$36.5 million in the same quarter last year. Net sales for the quarter ended Sept. 30 dropped 8.3% to C$251 million compared with net sales of C$273.8 million in the third quarter last year. Online sales accounted for 18.5% of the company’s third quarter revenue. The retailer said same-store sales dropped 11.1% and attributed the drop to higher demand in the same quarter last year following the reopening of stores in 2021 following shutdowns due to the pandemic and pent-up sales from the second quarter of 2021 to the third quarter of 2021. Year-to-date sales increased 5.6% to $685.6 million this year, and net income for the nine-month period climbed to $70 million ahead of $62.2 million in the first nine months of 2021.
Ace Hardware to open more than 170 stores in 2022
Ace Hardware is not backing down from expansion. The world’s largest retailer-owned hardware cooperative said it has opened 130 new stores so far this year. It plans to open 40 more locations during the fourth quarter. Ace operates more than 5,600 locally owned hardware stores in all 50 states and 65 countries, with global sales topping $20 billion. “With 130 new stores already opened for the year, we remain enthusiastically bullish about the continued prospect for new store growth,” said Ace Hardware president and CEO, John Venhuizen. “I applaud our local Ace owners for the pace with which they’ve integrated our digital efforts with our physical assets.” Seventy percent of acehardware.com orders are picked up in-store and 20% are delivered to customers by Ace employees, Venhuizen noted, “further advancing the relevance and necessity of our neighborhood stores.” Globally, Ace has opened more than 900 stores in the past five years, while disbursing dividends of $314 million and providing a 43% return for Ace shareholders in 2021.
Jewelry & Luxury
New CEO takes reins at Lightbox Jewelry
De Beers Group has secured the next leader of Lightbox Jewelry with Antoine Borde appointed CEO of the lab-created diamond company. Borde most recently worked as global e-commerce vice president of Danone Group, a multinational food-products corporation. He has previously worked at Coty and L’Oréal. “I am thrilled to join the dynamic team at Lightbox and be part of the fast-evolving category of lab-grown diamonds,” said Borde. Borde replaces the out-going Steve Coe, who stepped down from his position as CEO in June. Coe joined the Lightbox project in 2017 after spending more than two decades working with De Beers synthetic diamond manufacturing unit. Lightbox was established in 2018 and operates out of Portland, Oregon and produces more than 200,000 lab-created diamonds per year. Borde will be based in London during his tenure as CEO.
Blue Nile Now Selling Lab-Grown Diamond Engagement Rings
Blue Nile, which for years resisted selling lab-grown diamond engagement rings, is now offering them side-by-side with natural diamonds on its site. Blue Nile has long sold lab-grown diamonds produced by De Beers’ Lightbox brand, but has, until now, not sold them for engagement rings. The e-tailer was acquired by Signet in August. Blue Nile’s inventory appears to be a little different than some of its competitors’. It seems to be offering a large number of D-color diamonds, likely because they were produced with the high-pressure high-temperature (HPHT) method, which is considered better at producing high-color diamonds than the chemical vapor deposition (CVD) method. Most HPHT diamonds are grown in China.
Rolex looks to bring luxury watches to the Metaverse
Swiss luxury watchmaker Rolex is looking to get in on the Metaverse game as evidenced by a recent trademark application filing related to cryptocurrencies, non-fungible tokens (NFTs), and virtual goods. The details of the trademark application Rolex filed with the United States Patent and Trademark Office (USPTO) were tweeted by trademark and patent attorney Michael Kondoudis and indicate that the luxury watchmaker has extensive plans for its brand in the Metaverse.
Office & Leisure
Indigo delivers strong sales, fueled by the general merchandise business record revenue
Indigo Books & Music Inc., Canada’s largest book and lifestyle retailer, reported financial results for the 13-week period ended October 1, 2022 compared to the 13-week period ended October 2, 2021. The Company recognized total revenue of $236.2 million in the quarter. In the prior year, the Company recognized total revenue of $238.8 million, which was inclusive of a one-time payment of $17.0 million from the renegotiation of its partnership with a café vendor. Merchandise sales, the total of retail and online sales and excluding other revenues, were a record high of any second quarter for the Company. Top-line performance was driven by the continued recovery of the retail channel, which for the first time since the onset of the COVID-19 pandemic, achieved sales that exceeded the last comparable pre-pandemic quarter. This was accomplished despite reduced traffic levels, which continued to normalize but still remain challenged. The online channel maintained momentum, sustaining growth levels of over 84% to the comparable pre-pandemic quarter.
Hasbro finance chief Deborah Thomas to retire
Hasbro Inc said on Wednesday its Chief Financial Officer Deborah Thomas would retire, with the toymaker working on hiring her successor from both internal and external candidates. The company said Thomas, who has been with Hasbro for 24 years, would remain as its finance chief until her successor is named and as an advisor for a period thereafter to ensure a smooth transition. In October, Hasbro missed quarterly profit estimates, having raised prices to offset surging commodity costs that led inflation-weary customers to buy fewer toys and games. The ‘Magic: The Gathering’ maker has also warned of a slowdown in demand for toys ahead of the most important holiday season due to decades-high inflation and rising interest rates turning consumers cautious.
Party City to shrink corporate workforce by 19% as consumers pull back
Party City held its ground during the Halloween holiday season — but didn’t gain any ground, with its brand comparable sales roughly flat (down 0.1%) and total retail revenue up 3.9% during its fiscal October month. During the season, Party City operated 149 Halloween City stores, up from 90 last year and 25 in 2020, but still well below the 275 it opened in 2019. For the third quarter (which ended Sept. 30), Party City’s net sales fell 1.6% to $502.2 million. With the retailer’s “core customer facing significant inflationary pressures,” Party City CEO Brad Weston said in a statement the retailer would reduce its corporate workforce by 19%, through both job cuts and by not backfilling “a significant number” of open slots. The Halloween season, which historically has made up a sizable chunk of Party City’s sales and profits, could have been worse, yet it still came in at the low end of the company’s own expectations. Weston attributed this to “macro pressures [that] impacted customers’ ability and willingness to increase spend on Halloween celebrations.”
Glorious Announces Strategic Growth Investment from Francisco Partners
Glorious, a lifestyle PC gaming hardware brand specializing in high-performance PC gaming peripherals, today announced a strategic growth investment from Francisco Partners (“FP”), a leading global investment firm that specializes in partnering with technology businesses. As part of today’s announcement, Glorious is also announcing the appointment of Pat Wachendorf as CEO, succeeding Glorious’ founder, Shazim Mohammad. Mr. Mohammad will remain a significant equity holder in the Company following the transaction. Founded in 2014, Glorious produces some of the most popular peripherals among PC gaming enthusiasts worldwide, including mice, custom mechanical keyboards, mouse pads, and other accessories. Despite taking no outside investment since inception, the Company has penetrated the global gaming hardware industry and won over a rapidly growing community of customers through an innovative, premium-quality product offering, disruptive pricing model and a transparent, brand-centric marketing approach. The new investment from Francisco Partners will enable Glorious to continue building world class gaming peripherals, penetrate adjacent product categories and expand into new geographies.
Technology & Internet
Facebook’s parent company, Meta, to lay off more than 11,000 employees
Meta will lay off more than 11,000 employees, CEO Mark Zuckerberg told workers in a message Wednesday. The layoffs will reduce the company’s workforce by about 13%, according to Meta, the parent company of Facebook, Instagram and WhatsApp. “I want to take accountability for these decisions and for how we got here,” Zuckerberg told employees. “I know this is tough for everyone, and I’m especially sorry to those impacted.” The layoffs will affect what are known as the company’s “Family of Apps” — Facebook, Messenger, Instagram and WhatsApp — and the virtual reality business Reality Labs, Zuckerberg said. They will also affect Meta’s business teams, which are being restructured, he said, adding that the company plans to hire fewer people next year and is extending its hiring freeze into the first quarter of next year “with a small number of exceptions.” Zuckerberg said the development follows his decision to “significantly increase our investments” at the start of the pandemic. He told employees he made that decision based on the belief that e-commerce would continue to grow and provide a strong source of revenue post-pandemic — a prediction that turned out to be wrong, he said.
Binance backs out of FTX rescue, leaving company on brink of collapse
Binance is backing out of its plans to acquire FTX, the company said Wednesday, leaving Sam Bankman-Fried’s crypto empire on the verge of collapse. The reversal comes one day after Binance CEO Changpeng Zhao announced that the world’s largest cryptocurrency firm had reached a nonbinding deal to buy FTX’s non-U.S. businesses for an undisclosed amount, rescuing the company from a liquidity crisis. Earlier this year, FTX was valued at $32 billion by private investors. “In the beginning, our hope was to be able to support FTX’s customers to provide liquidity,” Binance said in a tweet Wednesday. “But the issues are beyond our control or ability to help.” On Monday night, facing a liquidity crunch, Bankman-Fried was scrambling to raise money from venture capitalists and other investors before he went to Binance, according to sources with knowledge of the matter. Zhao initially agreed to step in, but his company quickly changed course, citing reports of “mishandled customer funds and alleged U.S. agency investigations.” It’s unclear who is next in line to buy the beleaguered crypto exchange. Bankman-Fried told investors that the company is facing a shortfall of up to $8 billion from withdrawal requests and needs emergency funding, according to a person familiar with the matter. The disintegration of the Binance-FTX deal is the latest chapter in a shocking collapse. Bankman-Fried tried to reassure investors just on Monday that the company’s assets were fine. But after Binance’s Zhao said publicly that his company was selling its holdings in FTX’s native token FTT, the sell-off was on, and FTX could do nothing to stop it.
Finance & Economy
Customer Satisfaction Remains Weak. So Does Consumer Spending
Nationwide customer satisfaction remains low, but there has been a tiny 0.1% uptick to 73.2 (on a 0-100 scale) this quarter. Nevertheless, no matter how small, it is an increase, which has been a rarity for a long time now. In fact, this is only the second time during the past 16 quarters ACSI has increased. Consumer spending remains weak as well, but it did grow by 1.4% in the third quarter. While GDP is a measure of the quantity of economic output, the American Customer Satisfaction Index gauges the quality of economic output as experienced by consumers. Obviously, these two measures are related. The satisfaction that people get from buying and consuming impact their future propensity to spend. The dissatisfied consumer will likely be hesitant; the satisfied consumer is more likely to repeat what was, after all, a gratifying experience. However, there are many other factors that affect aggregate demand.
Credit card interest rates hit record high
The cost of carrying a balance on your credit card is now the highest it’s been in more than 30 years. According to survey data from Bankrate.com, the average credit card interest rate has climbed to 19.04%. The new high coincides with the Federal Reserve’s raising its key federal funds rate to a level not seen in more than a decade as it fights persistent inflation. The central bank hopes making it more expensive to borrow, will slow the economy and ease upward pressure on prices. Increasing the federal funds rate cranks up what’s known as the prime rate. That’s the interest rate banks charge their most creditworthy customers. Currently, it is 7%. The final annual percentage rate for a credit card is determined by the prime rate plus a bank’s margin for lending to a given customer.
