The Big Story

Amazon’s Second High-Profile Divorce

Maeghan Thompson

Earlier this year, Amazon founder and CEO and world’s richest person Jeff Bezos and his now ex-wife divorced after 25 years of marriage.  Amazon is now in the midst of a divorce of its own.  The retail behemoth is separating from the world’s most valuable apparel brand – Nike.  After two years of participating in Amazon’s Brand Registry program, Nike sneakers and clothing will no longer be sold directly on Amazon.

Launched in 2017, Amazon’s Brand Registry program provides wholesalers with greater control over how their products are sold on Amazon through enhanced tools to control product pages and optimize search results.  The program also helps fight counterfeit merchandise from third parties on the website’s marketplace.  In mid-2017, after years of existing on Amazon only through gray-market items and counterfeits, Nike became the most high-profile Brand Registry partner.  Today, more than 130,000 brands around the world participate in the program.

Ultimately unsatisfied with its two-year-old partnership, Nike’s withdrawal from Amazon’s Brand Registry comes amid a seemingly larger revamp of its retail strategy.  Two weeks ago, Nike announced that former eBay CEO John Donahoe will become President and CEO in January 2020 – a move that will presumably sharpen the company’s focus on ecommerce.  In announcing its departure from Amazon, Nike stated that it “want[s] to make sure that customer buying experiences are the most premium experiences that we can possibly provide.”  In addition to being able to control an elevated shopping experience, direct-to-consumer ecommerce offers Nike better data on shoppers, such as purchase history, which can inform marketing and be used to cultivate a long-term customer relationship.

As ecommerce analytics have advanced, an increasingly widespread concern about selling through Amazon is the lack of transparency into customer and transaction information.  After all, sales of wholesalers’ products through Amazon ultimately are Amazon sales to Amazon customers (not even known to, much less controlled by, the brands).  Although Amazon Brand Registry is better than the previous program, companies still seek improved search results, policing of counterfeit sales, ability to enforce pricing standards, greater flexibility to shape the shopping experience, and information shared on product pages.  The departure of a high-profile brand like Nike may only serve to compound other companies’ unease.

The question now is whether other current Amazon wholesalers may follow Nike’s lead.  Few companies have the brand and marketing prowess of Nike, so undoubtedly it would be much harder for many to leave Amazon.  With Amazon’s reach, sales volumes and efficiencies, is there a viable alternative?  Or is Amazon’s dominance so entrenched today that Nike is singularly suited to pursue a strategy that others cannot execute?  With an ecommerce market share approaching 50%, it is hard to imagine that many can take the Amazon-free path.  Most may need to stay married to Amazon, like it or not.

Even Nike may come back.  You never know.






Headlines of the Week

KKR Makes Formal Approach to Walgreens Boots on Record Buyout

KKR & Co. has formally approached drugstore giant Walgreens Boots Alliance Inc. about a deal to take the company private, in what could be the biggest-ever leveraged buyout, people familiar with the matter said. The New York-based private equity firm has been preparing a proposal to potentially buy out shareholders of Walgreens Boots, said the people, who asked not to be identified because discussions are private. It’s unclear how feasible the transaction would be, given the need for large amounts of financing, and Walgreens Boots and KKR could decide against pursuing a deal, the people said. Walgreens Boots, led by Chief Executive Officer Stefano Pessina, has been reviewing a potential deal with a financial adviser to take the company private amid buyout interest, Bloomberg News reported last week. Some buyout firms looked but decided against pursuing such a big deal, people with knowledge of the matter said at the time.


Amazon will launch new grocery store as alternative to Whole Foods

Amazon said it plans to open its first new brand of grocery store in California next year, as it amps up its ambitious push to become a bigger name in food. The store will be different from Amazon-owned Whole Foods, the company said. It didn’t say whether it will open more of these locations, what its selection or pricing will be, or what the brand name is. But in the jobs postings, the company described the Woodland Hills location as “Amazon’s first grocery store,” suggesting that it will have the Amazon brand name and that the company could expand to multiple sites.



Apparel & Footwear

Why Fashion Designers Are Finally Starting to Stitch Up High-End Apparel for Plus-Size Women

It took cult fashion blog Man Repeller profiling Katie Sturino, founder of Megababe beauty products, for the body-positivity influencer to finally see that when it came to finding clothes that fit, her size was not the problem—the fashion industry was the problem. “I was reading the comments on it and women were saying how nice it was to see someone with their body shape represented,” said Sturino, who uses social media to encourage women to wear what they like and to call out fashion companies that offer a limited range of sizes. Sturino’s Instagram has 389,000 followers, and she runs recurring features like #supersizethelook, which shows a celebrity fashion look and the look recreated in a larger size, and #makemysize, which shows selfies of the influencer trying on too-small clothing in retail dressing rooms. Historically speaking, luxury fashion has always been about exclusivity, say analysts like Marie Driscoll, managing director, luxury and fashion at Coresight Research.

What did Untuckit do right that J.Crew did wrong?

Untuckit launched eight years ago with a premise so simple that some people thought it was a joke: dress shirts cut short to be worn untucked, and a brand named accordingly.  Since then, the company has expanded from its signature shirts to over 500 products (additions include outerwear, bottoms and footwear, along with some women’s and kid’s offerings), 86 stores and a recent UK expansion.  The brand will earn around $200 million in 2019 revenue. Some consider this a big deal while others consider it the Goop of menswear, which is not intended as a compliment.  Anyone who has worked in the consumer goods industry (especially those outside of fashion) should not be surprised that a seemingly bland and obvious idea could become a big business. But how did Untuckit apply a seemingly similar formula as J.Crew’s men’s business, which was already established, but fare much better than its legacy counterpart?

True Religion names CEO

It’s a homecoming of sorts for the new chief executive of True Religion Apparel. The denim and sportswear brand has appointed Michael Buckley as its new CEO, effective immediately. Buckley joins True Apparel from Differential Brands Group (renamed Centric Brands upon the acquisition of Global Brands Group) where he was CEO. Prior to that, from 2011-2016 he was CEO of Robert Graham Designs until its sale to Differential Brands. Before Robert Graham, Buckley served as president of True Religion, from 2006 to 2010. As CEO of True Religion, Buckley replaces Farla Efros, president of HRC Retail Advisory, who has served as its interim CEO since June. True Religion filed for bankruptcy in July 2017, and exited less than four months later.

Moose Knuckles leans on wholesale and micro-influencers as it embarks on U.S. expansion

Canadian outwear company Moose Knuckles is making its official retail debut in New York City, expecting word-of-mouth and existing wholesale partnerships to build a cult-like following in the U.S. Founded in 2007, Moose Knuckles has seen five consecutive years of 60-70% annual growth in sales. It’s projected to grow the revenue an additional 70% this year.  CEO Ayal Twik said word-of-mouth has been a major factor in driving that continual growth in Canada and abroad, especially in Korea. “We really grew very quickly because Koreans living in Toronto became really into the brand about six years ago.  The community told all of their friends back in Korea, and then a lot of the Korean celebrities started wearing our jackets,” Twik said.


Athletic & Sporting Goods

Adidas to close German, U.S. robot factories

Adidas plans to close high-tech “robot” factories in Germany and the United States it launched to bring production closer to customers, saying deploying some of the technology in Asia would be “more economic and flexible”.  The Adidas factories were part of a drive to meet demand for faster delivery of new styles to its major markets and to counter rising wages in Asia and higher shipping costs. It originally planned a global network of similar factories.  The German sportswear company did not give details for why it was closing the facilities, which have proven expensive and difficult to extend the technology to different products.


Bonafide Kayaks and Big Adventures Announce Merger

Native Watercraft and Liquidlogic Kayaks, together with Bonafide Kayaks, announced the merger of their businesses. Bonafide Kayaks founder Luther Cifers will serve the combined business as President.  Bonafide Kayaks was founded by Luther Cifers in 2017, and began shipping its unique, premium fishing kayaks in January, 2018, rapidly ascending as a leading brand in the premium tier of paddle kayaks.   BIG Adventures is a paddlesports industry leader and innovator with the Native Watercraft, Liquidlogic, and Hurricane Aquasports brands.

Nike Pulling Its Products from Amazon in E-Commerce Pivot

Nike Inc. is breaking up with Inc.  The athletic brand will stop selling its sneakers and apparel directly on Amazon’s website, ending a pilot program that began in 2017.  The split comes amid a massive overhaul of Nike’s retail strategy. It also follows the hiring of ex-EBay Inc. Chief Executive Officer John Donahoe as its next CEO — a move that signaled the company is going even more aggressively after e-commerce sales, apparently without Amazon’s help.

Cosmetics & Pharmacy

CVS to close 22 underperforming stores in first quarter 2020

CVS will have fewer pharmacies next year. CVS Health announced that it is planning to close 22 underperforming retail pharmacy stores in the first quarter of 2020, according to an SEC filing by CVS Health on Nov. 6. The filing noted a $96 million store rationalization charge during its third quarter related to operating lease right-of-use asset impairment charges for the 22 stores it plans to close.

DevaCurl Now Belongs to Henkel

In a bid to strengthen its standing in the premium curly hair category, Henkel has signed an agreement to acquire Deva Parent Holdings, Inc., New York City/USA from a fund managed by the Private Equity Group of Ares Management Corporation. Deva Parent Holdings owns DevaCurl, a high growth professional hair care business. Founded in 1994, the company offers high-growth, premium and category-leading hair care and styling products for all types of curly and wavy hair with a comprehensive portfolio of vegan and “free from” formulas.

Diplomat posts Q3 loss along with drop in PBM segment

Diplomat Pharmacy is seeing revenue decline from its PBM segment, as the Flint, Mich-based company swung to a loss in the third quarter, according to the company’s earnings announcement Tuesday. Revenue decreased 5% from $1.4 billion to $1.3 billion and gross profit decreased from $93.4 million to $63.4 million from the prior-year quarter. Adjusted EBITDA was $11.5 million compared to $41.9 million in the prior-year period, and earnings loss per share were $2.35.

Discounters & Department Stores

Walmart names new Sam’s Club CEO

Walmart picked a new chief executive for its Sam’s Club business, the company announced Friday November 15th. Filling the role is Kathryn McLay, who has served in a handful of executive positions at Walmart since 2015, most recently as executive vice president of Walmart’s U.S. Neighborhood Markets unit. Her appointment is effective as of Friday November 15. McLay replaces John Furner in the role. Walmart in October promoted Furner to CEO of its U.S. business following the departure of Greg Foran from the company.


J.C. Penney narrows loss, but comp sales drop 6.6%

J.C. Penney sales fell more than 10% year over year in the third quarter to about $2.4 billion. Comp sales fell 9.3%, or fell 6.6% excluding appliances, a category that Penney is exiting. The department store retailer slashed inventory by 9% and reduced its cost of goods sold by 3.5%. Driving the reduction of costs as a percentage of sales were margin improvements (both in-store and online), reduced shrink and the exit from appliance and furniture categories, the company said.

Target integrates Shipt into its mobile app

Target on Nov. 14th announced it will expand customer access to same-day delivery through Shipt. Using the Target app, customers can elect to use Shipt in order to receive same-day shipping, with some orders arriving to doorsteps in as little as one hour, according to a company blog post. Guests who shop on the Target app can choose same-day delivery for 65,000 items, including toys, baby-care products and groceries. The retailer touts that membership is not required to access fast delivery, though delivery costs $9.99 per order. For consumers looking to use fast deliveries more frequently, Target offers Shipt membership plans, which cost $99 annually for unlimited orders of $35 or more. However, for consumers who have yet to sign up for a Shipt membership, Target is offering a free four-week trial.

Walmart posts 41% online sales growth but hunts for margins

Walmart’s third quarter revenue rose 2.5% year over year to $128 billion, the company reported Thursday November 14th. At Walmart, U.S. top-line sales jumped 3.2% to $83.2 billion, while comp sales rose 3.1% (including fuel) for the U.S. unit. E-commerce sales in the U.S. went through another large expansion, growing 41%. Sales growth was slower at Sam’s Club, which posted a 0.7% increase in total sales and a 0.8% increase in comps (including fuel).



Emerging Consumer Companies

Vitamin brand Hundred raises

Hundred, the New York-based, direct-to-consumer personalized vitamin subscription company, announced that it has raised $8 million in an investment round led by Insight Partners. The company designs its vitamins for increased efficacy through improved capsule technology, and subscribers create a custom mix by completing a five-minute holistic consultation that is based on the four critical pillars of wellness – nutrition, movement, sleep and stress balance. Its growing portfolio of 34 vitamins and supplements can fulfill over 75K unique combinations.

Everlane launches $300 suit

Everlane, the San Francisco-based apparel brand, has launched a $300 men’s suit. It’s made of lightweight, Italian-milled wool, with some stretchy elastane for comfort and wrinkle resistance, and is available in navy and charcoal. The lining is made of 100% recycled materials, and Everlane describes the suit as machine washable.

Branch Furniture raises

Branch, the New York-based company that offers premium office furniture built to grow with modern teams, announced that it has $2.4 million in seed funding. The round was led by led Nine Four Ventures, with participation from Alate Partners and RRE. Branch claims to save companies more than 50% on premium office furniture that is delivered and installed in as little as a week. The “buy now, work now” approach aligns with the fast-paced nature of startup culture. The company will use the funding to accelerate product development and national reach.



Grocery & Restaurants

Dean Foods, America’s biggest milk producer, files for bankruptcy

Dean Foods on Tuesday announced that it has filed for Chapter 11 bankruptcy protection. The Dallas-based milk processor said that it plans to use the Chapter 11 proceedings to keep running the business, and address debt and unfunded debt obligations as it seeks to sell the company. Customers are expected to receive their dairy products without any interruptions. Dean Foods also said that it is engaged in “advanced discussions” with Dairy Farmers of America about selling “substantially” all of its assets. Dean Foods’ business has struggled as more consumers turn to nondairy milk or buy private label products.


TGI Fridays agrees to deal to take it public

Privately held TGIF Holdings LLC and Allegro Merger Corp., a special purpose acquisition company, have signed an agreement that would take the casual-dining chain public, the companies announced. The Dallas-based parent of the TGI Fridays and New York-based Allegro Merger, said that, at closing, TGI Friday’s holders will receive a combination of cash and stock valued at $30 million and Allegro will assume about $350 million of net debt. The majority owners of TGI Fridays are TriArtisan Capital Advisors LLC, expects to exchange a majority of its ownership in the TGI Fridays business for shares of Allegro, and MFP Partners L.P., led by Michael F. Price, which intends to exchange all of its ownership in the TGI Fridays business for shares of Allegro.


AB InBev’s Deal With Craft Brew Alliance Was Years in the Making

Anheuser-Busch InBev, the world’s largest brewer, has just placed its biggest bet yet on craft beer. On Monday, the Budweiser and Stella Artois brewer agreed to buy Craft Brew Alliance in a deal that values the smaller Portland-based peer at $321 million. AB InBev, which already owned a 31.2% stake in Craft Brew Alliance, will buy the rest of the outstanding shares. In recent years, AB InBev has been busy scooping craft brands from all across the country—a dozen in total. AB InBev’s goal with these brands is to tap strong consumer interest in the craft movement, a subsegment of beer that is worth $27.6 billion. And though craft beer sales growth has cooled of late from the heady double-digit gains the subsegment used to post years ago, smaller brewers reported a 3.9% jump in volume last year, outpacing the total category’s 0.8% drop.


Butterfly Picks Up Orgain to Compliment Bolthouse

Los Angeles-based private equity firm Butterfly has announced its acquisition of a majority stake in “clean” protein brand Orgain. The deal is Butterfly’s fifth investment and second in beverage, following the purchase of fresh juice focused Bolthouse Farms earlier this year. Terms of the deal, which is expected to close at month’s end, were not disclosed. Orgain founder Dr. Andrew Abraham will remain on as CEO. Orgain produces a range of both plant-based and dairy-based offerings including bars, shelf stable beverages and shake powders, most of which are certified organic.

Home & Road

China’s decline fuels drop of 4% in U.S. furniture imports

U.S. furniture imports fell in the first half, a result of a double-digit drop in shipments from China due to tariffs on finished goods including wood furniture and upholstery. Imports fell to $11.67 billion from $12.14 billion, in the first half of 2018, a 4% drop. This was fueled by a 17% decrease in shipments from China, which totaled $5.6 billion in the first half, compared with $6.7 billion the year before. China fell in each of the top five product categories: miscellaneous wood furniture, down 19%; upholstered wood seats, down 21%; upholstered wood chairs, down 13%; outdoor seats with textile covered cushions, down 22%; and furniture of other materials, down 19%. Double-digit increases from source countries such as Vietnam and Malaysia failed to stem those losses, which were further heightened due to decreased shipments from Italy and Poland.

Fusion Designs acquires Borkholder from Kountry Wood Products

Amish case goods manufacturer Fusion Designs has purchased Amish case goods manufacturer Borkholder Furniture from kitchen and bath cabinet producer Kountry Wood Products for an undisclosed price. Fusion Designs will assume management of all Borkholder’s operations on Jan. 1, 2020, and Borkholder will complete all in-house orders until the end of the year, officials said. Both companies are based in Elkhart County, Indiana.

Jewelry & Luxury

The Problem with Diamonds Is They Keep Getting Cheaper

Five years ago, the diamond industry’s biggest worry was being forgotten by millennials, who — the theory went — didn’t covet sparkly gems the way their parents had. The concern turned out to be mostly unfounded, but the reality is almost worse. While Americans are buying more diamond jewelry than ever before, most polished diamonds are getting steadily cheaper. The lower prices and a glut of the type of stones that go into a discount-store engagement ring or pair of earrings have pushed the global diamond trade into crisis.

Hodinkee and Omega Debut 10-Day Pop-Up Shop in SoHo

Swiss watch brand Omega and watch news/retail platform Hodinkee have opened a 10-day pop-up in New York City to celebrate Hodinkee’s new status as an official retailer of new Omega watches. The pop-up shop, located at 274 Lafayette St. in SoHo, debuted Thursday night and features a collection of new Omega watches (all for sale) and an exhibition of historical timepieces from Omega’s museum in Switzerland. The Hodinkee Shop—Hodinkee’s e-commerce retail platform—also began offering new Omega timepieces to its consumers last night.

German Partnership Looks to Resurrect Historic Luxury Brands

This week’s launch in Berlin that saw the revival of a long-lost men’s wear brand will be the first of many such events, if all goes according to plan for a new luxury goods collective in the German capital. Five experienced media, marketing and business executives are behind the relaunch of Manheimer suits, founded in Berlin in 1839, part of the German capital’s thriving prewar fashion sector. The historic brand returned to life officially at a glossy function on Thursday evening, where well-heeled investors rubbed shoulders with potential customers, journalists and be-suited models.

Farfetch shares soar as Gucci, Fendi and other luxury brands target customers online

Gucci, Fendi and Stella McCartney are just some of the big names in the Farfetch Ltd. lineup, a sign that luxury labels are making the shift online to follow luxury shoppers, analysts say. “The market for personal global luxury products is in the midst of a structural shift to online,” Cowen analysts led by John Blackledge wrote in a note. “[W]e view Farfetch as best positioned to capitalize on the multi-year transition in the more-than $300 billion market, with Farfetch’s Marketplace yielding a forecast of 16% revenue growth over the next decade and especially helped by the growing luxury consumer in China and other emerging markets.”


Office & Leisure

How a few former Toys ‘R’ Us employees are helping lead the brand’s comeback and putting workers first

With Toys “R” Us having descended into bankruptcy, a group of front-line employees found themselves last year fighting for lost compensation but also pressing for something more fundamental: a chance to be heard by those calling the shots. The aim, one worker said at the time, was to “force them to have to listen to us.” No longer. With the Toys “R” Us brand trying to position itself for a comeback, coercion has turned into cooperation thanks to the company realizing this: listening to workers is actually a smart way to run the business. Today, a trio of former Toys “R” Us employees will meet formally for the first time with top executives as part of a “mirror board”—a body meant to have access to key corporate information and provide candid advice, just as the regular board of directors does. Labor advocates say that the model could prove to be an effective means of giving workers more voice and power during an era when unions don’t have nearly the membership and clout they once did.

Barnes & Noble says it’s back to books with redesign in Virginia Beach

Shoppers, we might be living in an upside-down retail world: is opening physical stores and mailing printed holiday catalogs, and former bookstore behemoth Barnes & Noble is channeling an indie book shop feel. On Wednesday morning, the book chain re-opened a new version of itself in the Town Center section of Virginia Beach, a smaller, brighter, more open version that, as one customer told the store manager, “breathes.” “When you walk in, the books are the heroes,” said Frank Morabito, the company’s vice president of stores. The company has been trying to change under the oversight of its new CEO, James Daunt. He’s the British indie bookseller who revived the chain of Waterstones book stores there largely by letting store managers cater to their community rather than have cookie-cutter features and products across the brand. The Virginia Beach location is the first Barnes & Noble to get a new look with input from Daunt, who was tapped to lead the chain in July.

PlayMonster Grows with Acquisition of Kahootz Toys

It’s been a big year for mergers and acquisitions, and the latest transaction brings together two Midwestern toymakers. Wisconsin-based PlayMonster LLC has acquired the assets of Michigan-based Kahootz Toys, the company behind 17 popular arts and crafts brands, including Y’Art, Spirograph, Colorforms, Fashion Plates, Waterfuls, and more. “This is PlayMonster’s largest acquisition to date and we’re thrilled to continue our multicategory growth strategy building and adding classic brands while expanding our footprint in the activity and stationery aisles,” says Chief PlayMonster Bob Wann. Founded in 2012, Kahootz forged partnerships with such licensors as Hasbro, which spawned the relaunch of Spirograph, and an assortment of Play-Doh branded items. Acquisitions have fueled PlayMonster’s growth in recent years, adding multiple products and companies to its portfolio, including Automoblox, My Fairy Garden, Set Enterprises, and others.


Technology & Internet

Apple reportedly plans 2022 release for first AR headset, followed by AR glasses in 2023

Apple plans to release its first augmented reality headset in 2022, followed by a smaller device — a pair of AR glasses — in 2023, according to a new report from The Information. As well as the new timeline, The Information’s report offers new detail about Apple’s AR headset, codenamed N301. The device supposedly resembles a slimmer version of the Oculus Quest, a virtual reality headset released in May. It has AR and VR capabilities, uses external cameras to map the user’s surroundings (including the outlines of people, furniture, and rooms), and has a high-resolution display to show information and blend virtual objects with the real world. After Apple has built this larger headset it plans to release a smaller pair of AR glasses. Unlike the headset, these will be designed to be worn for longer periods of time, with The Information reporting that “current prototypes look like high-priced sunglasses with thick frames that house the battery and chips,” according to a person who has seen prototypes. As the smartphone market matures, Apple and many other tech companies are looking to virtual and augmented reality as the next big tech platforms.


Nike will pull its products from Amazon

Nike Inc. is breaking up with Inc. The athletic brand will stop selling its sneakers and apparel directly on Amazon’s website, ending a pilot program that began in 2017. The split comes amid a massive overhaul of Nike’s retail strategy. It also follows the hiring of ex-eBay Inc. CEO John Donahoe as its next CEO—a move that signaled the company is going even more aggressively after ecommerce sales, apparently without Amazon’s help. Some big brands shun Amazon’s platform, where fakes flourish and unauthorized sellers undercut prices—a recipe that diminishes the value of sought-after labels. The unraveling of the Nike arrangement threatens to reinforce retailers’ unease.


Finance & Economy

Retail sales rebound in October, but just a small group of stores reap most of the gains

Sales at gas stations, car dealers and internet stores such as Amazon rose in October, but most other retailers posted weak results just before the start of the critical holiday shopping season.  Sales at gas stations jumped 1.1%, largely reflecting an increase in prices at the pump.  Internet retailers also reported a nearly 1% increase in sales while receipts at auto dealers and grocers both climbed 0.5%.  Yet sales fell at restaurants, home centers and retailers that sell clothing, electronics, home furnishings, books and sporting goods.  Sales were basically flat at department stores and pharmacies.


70% of Americans say they are struggling financially

Many Americans remain in precarious financial shape even as the economy continues to grow, with 7 of 10 saying they struggling with at least one aspect of financial stability, such as paying bills or saving money.   Despite solid U.S. economic growth this year, the share of Americans who are struggling financially remains statistically unchanged from a year ago, said Rob Levy, vice president of research and measurement with Financial Health Network. About 1 in 5 middle-class workers are spending more than they earn and about 20% of women say they are stressed by money, compared with 13% of men.