The Weekly Consensus

Is the Acquisition of Tom Ford a Sea Change for Estée Lauder?

Marshall Schleifman

Global luxury fashion mogul Tom Ford has scored a big deal for himself and his eponymous brand. On Tuesday, The Estée Lauder Companies (“ELC”) agreed to acquire the TOM FORD brand for $2.8 billion. This is the largest fashion transaction of the past decade, topping Versace’s $2.1 billion sale to Capri Holdings in 2018 and Supreme’s $2.1 billion sale to VF Corp. in 2020. Mr. Ford will continue to serve as the brand’s creative visionary after closing and through the end of 2023.

Mr. Ford has earned a reputation for having a Midas touch over his 30-plus year fashion career. From 1990 to 2005, he famously rose through the ranks and turned around the flailing House of Gucci as its creative director and did the same to boost Gucci’s sister brand Yves Saint Laurent. Pinault-Printemps-Redoute, now Kering, then outbid LVMH to bring Gucci onto its platform, launching it into the luxury fashion house it is today with additional brands such as Balenciaga, Bottega Veneta and Alexander McQueen. Valuing his independence from a corporate parent, Mr. Ford then departed PPR to create a new brand under his own name.

When launching TOM FORD in 2005, Mr. Ford announced ELC as the licensee for TOM FORD BEAUTY. Harkening the inspirational adage “True success is when those who know you the best love you the most”, Mr. Ford must be flattered that the key business partners from both his early and recent career lined up to buy his brand and business. It has been widely reported that ELC’s acquisition bid topped Kering. Additionally, ELC’s transaction relied on two more longstanding TOM FORD relationships. Since 2005, Marcolin has been TOM FORD’s licensee for optical frames and sunglasses. Marcolin is extending its license and providing a $250 million advance payment to ELC that is contributing to finance the purchase price. Ermenegildo Zegna, also a current TOM FORD licensee, is extending and expanding its license to encompass all men’s and women’s fashion as well as accessories and underwear, fine jewelry, childrenswear, textile and home design products. Zegna is further participating in the transaction by acquiring the operations infrastructure underlying TOM FORD’s fashion business.

On the surface, a house of luxury fashion brands like Kering would be the more natural acquiror for TOM FORD. ELC is a manufacturer and marketer of beauty products. The brands it owns and has acquired such as Clinique, MAC, Bobbi Brown, La Mer and Too Faced Cosmetics are focused strictly on skin care, makeup, fragrance and hair care products. When ELC has ventured into fashion brands, such as Donna Karan, Michael Kors, Tommy Hilfiger and until now TOM FORD, it has been a beauty-only licensee. For its 75 years in existence, ELC has been a pure-play beauty company.

Below the surface, ELC is in fact staying much truer to form than some headlines reveal. In acquiring TOM FORD, ELC is securing an important high-end beauty brand that has become instrumental in its luxury portfolio. In the twelve months ended June 30, 2022, TOM FORD BEAUTY grew by approximately 25% and is on pace to become a billion-dollar brand in the coming years. Under Kering’s ownership, no one knows what ELC’s prospects for keeping the TOM FORD license would have been. After all, ELC and Kering have no existing commercial relationship (e.g., Gucci fragrance is licensed to ELC competitor Coty). One could argue ELC couldn’t afford to not secure the acquisition of TOM FORD.

Moreover, because of continuity with long-tenured licensees already in place, owning TOM FORD’s intellectual property instead of licensing it will not change ELC’s operations much at all – only its accounting. In fact, ELC’s press release made clear that “ELC and Zegna will align closely on the creative direction to continue building on the luxury positioning of the TOM FORD brand”, sharing creative vision in ways traditional brand owners would not.

Some observers have quipped that ELC’s acquisition of TOM FORD could be a pivot to position the company to compete more directly with luxury fashion houses across product categories. However, given the continued relationships with Marcolin and Zegna, ELC is not expanding its core business model. In short, ELC’s big acquisition may be more defensive than offensive, more status quo than transformation.

As investment bankers, we study and help formulate rationales for transactions across consumer sectors. ELC’s acquisition of TOM FORD is notable for its size, the fame of its brand and namesake founder and the sexiness of its designs. However, despite some headlines to the contrary, ELC’s strategic rationale might itself not be so sexy. As ELC’s President and CEO Fabrizio Freda stated, “[T]his strategic acquisition will … help to propel our momentum in the promising category of luxury beauty for the long-term, while reaffirming our commitment to being the leading pure player in global prestige beauty.”

Headline of the Week

Estée Lauder Acquires Tom Ford in $2.8 Billion Deal

Estée Lauder Companies has said it plans to acquire Tom Ford in a deal valued at $2.8 billion as it seeks to build momentum in the “promising category of luxury beauty”. The brand’s ready-to-wear will be produced under licence by Ermenegildo Zegna Group, which also owns Thom Browne. The deal, pending approval, is expected to close in the first half of next year. Ford, who founded his namesake brand in 2005, will continue to serve as the brand’s “creative visionary” until the end of 2023. Chairman Domenico De Sole will stay on as a consultant during that period. “Estée Lauder Companies is the ideal home for the brand. They have been an extraordinary partner from the first day of my creation of the company, and I am thrilled to see them become the luxury stewards in this next chapter,” said Ford in a statement. It follows months of speculation about who would swoop in on Tom Ford after it emerged in July that the luxury brand had hired investment bank Goldman Sachs to explore a potential sale. In August, the Wall Street Journal said Estée Lauder was in talks to acquire Tom Ford for around $3 billion, and earlier this month, it was reported that Gucci owner Kering was also at the table.



Apparel & Footwear

Gap Inc. Logs $282 Million in Quarterly Profits, Causing Shares to Surge

Gap Inc.’s losing streak has come to an end, at least for now. The San Francisco-based retailer — which includes the Gap, Banana Republic, Old Navy and Athleta in the greater portfolio — revealed quarterly earnings of $282 million after Thursday’s closing bell. Total revenues for the three-month period ending Oct. 29 rose 2 percent to just over $4 billion, compared with $3.9 billion a year ago. Comparable sales increased 1 percent during the quarter, while online sales — which represent 39 percent of total net sales — grew 5 percent year-over-year. Store sales rose 1 percent year-over-year. By brand, both the Gap, the firm’s largest brand, and Old Navy experienced softness in kids’ and baby categories. Net sales at Old Navy grew 2 percent year-over-year to $2.1 billion, driven by improved size and assortment balance. The firm also said there was decreased demand from low-income consumers. Old Navy comparable sales fell 1 percent during the quarter year-over-year. Net sales at the Gap brand were flat to last year at just over $1 billion. The brand’s global comparable sales were up 4 percent year-over-year, while Gap North American comparable sales were flat. Like many of its peers, the retailer is expecting a weak holiday shopping season. Gap Inc. said it is now expecting fourth-quarter total company net sales to be down as much as mid-single digits year-over-year.

Burberry Aims for 5 Billion Pound Revenue

Burberry wants to become a 5 billion pound luxury brand in the long term, fueled by a bigger accessories business and a host of bestsellers courtesy of new chief creative officer Daniel Lee. Chief executive officer Jonathan Akeroyd laid out his strategy during the first half results presentation on Thursday, and while it builds on the foundation laid by his predecessor Marco Gobbetti, Akeroyd’s Burberry is going to be far different. He wants the brand to be “desirable and relatable,” with product sitting front and center, a renewed focus on “femininity” and on underdeveloped categories such as footwear. He laid out his strategy as Burberry released its results for the first half ended Oct. 1. Revenue rose 11 percent to 1.35 billion pounds at reported exchange, fueled by the weaker British currency. At constant exchange, revenue rose 5 percent year-on-year. Adjusted operating profit was up 21 percent to 238 million pounds at reported exchange, and 6 percent at constant rates. Stripping out the negative impact from China, Burberry said revenue rose 16 percent in the first quarter and 15 percent in the second quarter at constant exchange.

Fran Horowitz on the Essence of A&F’s Transformation Journey

For Fran Horowitz, chief executive officer of Abercrombie & Fitch, priority number one for transforming the image and performance of the Hollister and Abercrombie brands was resetting the mind-set of the organization. “We moved from a place of fitting in to creating a place of belonging,” said Horowitz, speaking Tuesday at the Fordham University Gabelli School of Business’ fifth annual American Innovation Conference. “Instead of doing what one singular leader wanted to do, we quickly shifted to a customer-first mind-set, listening to their feedback in good and challenging times. It was necessary for the complete transformation of the company,” said Horowitz, a native New Yorker who earned her MBA taking night courses at the Gabelli School of Business while in the merchant training program at Saks Fifth Avenue. In her keynote address, Horowitz spelled out the building blocks behind A&F’s transformation into a leading youth specialty retailer — becoming customer obsessed, technology-driven, inclusive and diverse, an early adopter of social commerce and key partner with TikTok and Instagram.



Athletic & Sporting Goods

Camping World Continues Expansion with the Acquisition of Ashley Outdoors

Camping World Holdings, Inc., America’s Recreation Dealer, announced an agreement to acquire Ashley Outdoors, a family-owned RV Dealership, in Salem, Alabama. The acquisition is anticipated to close in the first quarter of 2023 and will add to Camping World’s existing Alabama locations in Calera, Dothan, Anniston, and Robertsdale. Camping World Holdings, Inc., headquartered in Lincolnshire, IL, is America’s largest retailer of RVs and related products and services.  With RV sales and service locations in 42 states, Camping World has grown to become the prime destinations for everything RV.

Odell Beckham Jr. Sues Nike for Millions of Dollars, Cites Unfair Contract

Odell Beckham Jr., most recently a wide receiver for the Super Bowl LVI winning Los Angeles Rams, has recently filed a lawsuit against Nike over claims that the sportswear behemoth didn’t fulfill its contractual obligations to him. Beckham Jr., widely referred to as “OBJ,” claims his relationship with the Swoosh began to sour in March after more than $2 million were withheld from him. Nike reportedly cited a number of violations as to why it didn’t pay out OBJ, namely footwear and glove alterations not approved by the brand.  The 30-year-old claims Nike suppressed sales of his products — footwear, apparel, gloves, hardgoods — that would’ve triggered a contract extension. Ultimately, OBJ reportedly missed out on over $20 million, citing that the adidas deal that was offered to him in 2017 was worth $47 million in guaranteed extensions.

Cosmetics & Pharmacy

US Q3 Prestige Beauty Revenue Rises 15%: NPD Group

Prestige beauty is riding high as the holiday season approaches. In the third quarter of 2022, US prestige beauty industry sales revenue reached $6 billion, a 15% increase versus Q3 last year, according to The NPD Group. “Unit sales and revenue are both growing by double digits for beauty products sold in the prestige market, indicating that consumers are indulging in beauty products this year,” said Larissa Jensen, beauty industry advisor, The NPD Group. “Fragrance sales will grow this holiday season, albeit slower than in years past, and makeup, skincare, and hair care should also shine during the holidays, maintaining the strong sales performance these categories have experienced so far this year.” Makeup sales have officially surpassed pre-pandemic 2019 levels, with growth in Q3 unit sales and revenue, versus the same period in 2019, according to NPD. As a testament to the viability of the “Lipstick Index,” lip makeup was the fastest growing makeup segment in Q3, with sales revenue rising by 32%.

Sally Beauty closing hundreds of stores

Sally Beauty Holdings is accelerating its store optimization plans. The company said it plans to close approximately 350 stores during December 2022 amid ongoing efforts to improve its profitability. Most of the store closings will be in the United States. (The retailer currently operates more than 5,000 stores worldwide, with approximately 4,500 in North America.) “Over the last several quarters, the company has been piloting store closures in various markets with the goal of maximizing the value of its large store portfolio and providing a seamless omnichannel experience to its customers,” Sally Beauty stated. In addition, Sally Beauty said it is closing two small distribution centers in Oregon and Pennsylvania, and transferring the volumes to larger distribution centers, effective in December. As part of its optimization plan, the company incurred a $45.5 million charge in the fourth quarter of 2022, which includes a $19.4 million non-cash inventory write-down. The expense savings from this optimization plan is expected to be approximately $50 million with an expected benefit of approximately $10 million to adjusted operating earnings for fiscal year 2023.


Discounters & Department Stores

Walmart raises full-year outlook as Q3 revenue jumps nearly 9%

Walmart on Tuesday reported an 8.7% year-over-year revenue increase to $152.8 billion for the third quarter. Walmart’s U.S. comp sales were up 8.2%, and e-commerce increased by 16%. The retailer’s operating income fell 53% from last year to $2.7 billion, including $3.3 billion in legal charges “related to opioid legal settlements,” which the company announced a settlement framework for to resolve outstanding lawsuits. Gross profit rates dropped by 89 basis points in part due to markdowns and a mixture of U.S. sales. Grocery sales were a standout for the company, with the U.S. business gaining market share according to CEO Doug McMillon, but general merchandise experienced a decline in comp sales with markdowns pressuring gross margin. Walmart also raised its full-year guidance, expecting net sales growth of 5.5% compared to a previously projected 4.5%. Adjusted operating income is now expected to decline by 6.5% to 7.5%, a more positive outlook than the previously expected range of 9% to 11%.


Kohl’s pulls guidance as it buckles up for discount-heavy holiday season

Comparable sales at Kohl’s fell 6.9% in the third quarter while revenue fell 7% to $4.3 billion. Net income fell by 60% to $97 million, with gross margin shrinking by 263 basis points to 37.3%, according to a press release. As sales decelerated in October and into November, and with an ongoing CEO transition, the retailer withdrew its 2022 guidance, declining to provide performance estimates for the year.

Target’s profits tumble again, casting a shadow over the holidays

Target managed comparable sales growth of 2.7% in the third quarter, on top of 12.7% growth last year and a difficult selling environment for retail. The retailer’s operating profits, on the other hand, came down by roughly half from last year, and net profits were down by more than 50%. While Target’s sales beat, its earnings came in below analyst expectations. As it has multiple times this year, the retailer tightened its outlook for the year, now expecting a Q4 operating margin rate centered around 3% after previously estimating a margin in the 6% range for the back half of the year.

Macy’s maintains inventory discipline for a solid Q3

CEO Jeff Gennette on Thursday declared Macy’s Q3 results “further proof that our Polaris strategy first introduced in February of 2020 is working.” The department store’s net sales in the period fell 3.9% year over year, as e-commerce fell 9% and brick-and-mortar sales fell 1%. Comps including licensed sales fell 2.7% but were up 6% compared to 2019, according to a company press release. By banner, comps at Macy’s fell 4%, at Bloomingdale’s rose 4.1% and at Bluemercury rose 14%. Off-price Backstage comps weren’t disclosed, but Backstage shop-in-shops open more than a year “outperformed Macy’s full line doors by 2 percentage points,” per an investor presentation.



Emerging Consumer Companies

Hair Care Brand Arey Raises $4 Million

A Los Angeles-based hair care company specializing in aging hair has just closed an investment round of around $4 million, more than double its original $2 million target. Female Founders Fund and Greycroft acted as the lead investors in Arey, which was launched in 2021 by entrepreneur Allison Conrad and celebrity hairstylist Jay Small, and offers products formulated with vitamins, antioxidants and peptides meant to help delay and re-pigment gray hair. The brand has six products on the market, including supplements, a serum, and The Duo of shampoo and conditioner that are meant to work together to restore hair health, including reducing the likelihood of increased gray hair growth as well as thicker, fuller hair. The brand has experienced 1,100 percent year-over-year growth in revenue growth since its 2021 inception, although it declined to provide a monetary figure. Subscriptions account for over 70 percent of sales.

Herschel to open stores

Herschel, the Vancouver-based lifestyle brand known for its backpacks, is opening its first permanent U.S. store in New York City’s Flatiron District – the first in a series of new locations. Herschel Supply plans to go from the current four stores – all located in Canada – to 12-plus stores in North America by the end of 2023. The majority of the new locations will focus on major U.S. cities, where Herschel already has a robust customer base. This phase marks the start of an ambitious physical retail expansion, as the company tries to grow its DTC business to account for a bigger portion of revenue.

Latin American DTC pet food brand, Pet’s Table, raises $2 million

Pet’s Table, the Mexico City-based DTC pet food company that offers fresh meals for dogs, announced this week that it has closed a $2 million seed round. The round was led by Left Lane Capital, with participation from Goodwater Capital. The brand was founded in 2019 after the founders struggled to find healthy dog food, made with human-grade ingredients in Mexico. “Dog owners in Latin America are increasingly becoming more conscious of what goes into the food of their dogs. They are looking for healthier options that will enable their dogs to live a longer and more fulfilling life.  Pet’s Table is filling that gap,” said Jorge Salas, CEO of Pet’s Table. With Left Lane Capital’s support and its vast experience in DTC pet businesses in other regions, the brand expects it will be able to expand quickly in Mexico and in other countries in Latin America. The company intends to use the proceeds from this round to scale its team and infrastructure, in preparation for expanding to other markets in Latin America within the next year.



Food & Beverage

Oatly to cut jobs and switch to hybrid production model

Oatly announced it will lay off staff and transition the business to an “asset-light” hybrid production model after reporting a net loss of $107.9 million, with revenue growth falling short of analysts’ expectations, in its Q3 earnings report.  Hit hard by a three-week outage at its Ogden, Utah production plant this summer resulting from a failure in its fire suppression system, Oatly CEO Toni Petersson said the company underperformed sales projections during the third quarter as it worked to fill the supply gap. The Swedish oat-based alt-dairy maker, which has routinely struggled with supply and demand issues in the years since its U.S. launch, is now moving away from its fully integrated production model to embrace a hybrid approach and is seeking manufacturing partners for its under-construction Fort Worth, Texas and Peterborough, U.K. facilities.  Revenue grew 7% year-over-year to $183 million in Q3. Due to the quarter’s lower earnings, the company updated its 2022 revenue projection to between $700 million to$720 million (up around 9%-12%), down from the $800 million to$830 million expected earlier this year.

Vow raises $49.2M to expand cultivated meat production

Vow has always stood out from other cultivated meat companies. While many businesses in the sector focus on commonly consumed species, such as chicken, beef, pork and seafood, Vow looks at a broader spectrum. Its Morsel brand, which is scheduling private tastings in Singapore, is making Japanese umai quail. In 2020, Vow held a tasting event with cultured meat from six different animals: kangaroo, alpaca, goat, pork, rabbit and lamb. Company leaders have mentioned zebra, yak and Galapagos tortoise as potential meat products for Vow in previous interviews.

Upside Foods receives first-ever FDA approval for cultivated meat

Cultivated meat maker Upside Foods received approval from the FDA for its chicken grown from animal cells. This is the first regulatory approval for any cultivated meat in the U.S.  The “no questions” letter from the FDA indicates regulators have found nothing unsafe about the cultured chicken the company makes. Upside Foods now awaits approval from the USDA in order to serve its chicken products to consumers.  Several cultivated meat startups have been working since 2018 with the FDA and the USDA — which are jointly regulating the space — in hopes of gaining approval. Eat Just has the only other regulatory approval for cultured meat, which it has sold in Singapore since 2020.



Grocery & Restaurants

Starbucks workers at 100 stores go on strike on free Red Cup Day

Unionized Starbucks workers continue to show their displeasure with the company by going on strike to protest alleged unfair labor practices. Thousands of workers in 100 stores around the country are picketing on Thursday — Red Cup Day, the day when Starbucks gives out free reusable red holiday cups with the purchase of a fall/holiday beverage — and giving out their own union red cups to passersby. Known as “Red Cup Rebellion Day,” the protest is being fueled by issues baristas have like understaffing (especially during the holiday rush), mistreatment by management, inflexible scheduling, and the pushback by Starbucks management, which has been deemed union busting by SBWorkers United, the National Labor Relations Board, and several members of Congress. Starbucks also continues to stoke the ire of the National Labor Relations Board, which has asked a federal court for an injunction for the fourth time this year to compel Starbucks to rehire employees that were allegedly fired for union-related activities, though Starbucks has always denied that they ever fired someone for being active in the burgeoning union group.

Subway taps into unattended Grab & Go vending fridges

As part of the Subway sandwich chain’s efforts to get food closer to customers, the company In September installed its first interactive, unattended smart fridge at the University of California San Diego. The Milford, Conn.-based brand said the fridges are stocked daily by the franchisee’s nearby restaurant location. The fridges feature artificial intelligence and language processing, so customers can speak to the device and ask about any of the products inside. Weight-sensor shelves ensure guests are charged correctly, the company said. It also uses UV-C light sanitation after every purchase. The fridges are part of Subway’s efforts to expand into non-traditional locations. “As more of our guests search for dining experiences to meet their ‘in-the-moment’ needs, the brand’s non-traditional locations and platforms can serve them wherever and whenever they are craving Subway,” said Taylor Bennett, Subway’s vice president of non-traditional development, in a statement. “As Subway focuses on strategic and profitable growth, there is a significant opportunity to expand our footprint in non-traditional locations and for franchisees to generate incremental revenue for their business,” Bennett said. For the first three quarters of 2022, about 5,900 non-traditional locations across the U.S. and Canada saw an average 13% increase in same-store sales, the company said, adding that those 5,900 locations represent about 25% of Subway’s North American footprint. Non-traditional locations include as airports, truck stop plazas, college campuses, convenience and gas stores and hospitals, the company said.

Home & Road

The Home Depot’s momentum continues in Q3

The Home Depot extended its winning streak in the third quarter, beating analysts’ estimates for top- and bottom-line growth and comparable sales amid rising costs. The retailer is entering the holiday season on the heels of three strong quarters. In the second quarter, it delivered the highest quarterly sales and earnings in its history. The company reported profit of $4.3 billion, or $4.24 per diluted share, in the quarter ended Oct. 30, compared to $4.1 billion, or $3.92 billion, in the year-ago quarter. Analysts had expected earnings per share of $4.12. Revenue rose 5.6% to $38.87 billion, beating analyst expectations for $37.95 billion. Comparable sales increased 4.3%, and comparable sales in the U.S. increased 4.5%.

Double-digit growth from showrooms, e-commerce gave Arhaus a strong Q3

Bucking the shaky quarterly earnings trend, Top 100 retailer Arhaus reported a 57% increase in net revenue for the third quarter over last year, with strong growth coming from the retail and e-commerce channels. In its third-quarter earnings call, John Reed, co-founder, CEO and chairman noted that net revenue for the quarter ended Sept. 30 was better than expected, reaching $320 million compared with $203 million in the same quarter in 2021. The increase was driven by a 61% bump in the retail channel and a 40% rise in online for the quarter. Income from operations increased to $47 million compared with $16 million for third quarter 2021. Comparable growth was 54.3% for the quarter and 53.5% for year-to-date through Sept. 30. Year-to-date, net revenue was up 56.2% to $873 million. The company reaffirmed its net revenue and comparable growth outlook for 2022 and raised its full-year net income and adjusted EBITDA outlook.

Furniture sales inch upward in October in latest snapshot from DOC

Furniture and home furnishings sales climbed apace with retail as a whole from September to October, according to the U.S. Department of Commerce’s advance monthly estimates. Year-over-year, however, its growth is most sluggish among categories that have posted positive figures. Adjusted furniture and home furnishings sales for October came in at $12.113 billion, an increase of 0.4% from October 2021’s $12.064 billion. Month-to-month, October’s figures represent a jump of 1.1% from September’s adjusted $11.981 billion. For the year, furniture and home furnishings are up 1.6% from 2021 with $118.313 billion through the first 10 months of the year.

Lowe’s Q3 sales rise amid continued home spending by pros and DIY customers

Lowe’s Companies reported better-than-expected earnings and sales and raised its full-year profit forecast as home improvement demand remains strong even in the face of inflation. “We’re not seeing the negative impacts of inflation,” CEO Marvin R. Ellison told CNBC, adding that customers have been spending money to renovate and trade up for better products. Net income totaled $154 million, or $0.25 a share, in the quarter ended Oct. 28, down from $1.896 billion, or $2.73 a share, in the year-earlier period. Adjusted for a charge of $2.1 billion related to the company’s Canadian retail business, earnings per share were $3.27, topping analysts’ estimates of $3.09. Sales rose 3% to $23.5 billion from $22.9 billion, ahead of estimates of $23.1 billion. Total same-store sales increased 2.2%. Sales on grew 12%, on top of 25% growth last year. Lowe’s raised its full-year guidance, saying it now expects adjusted earnings per share of $13.65 to $13.80, up from its previous range of $13.10 to $13.60. Lowe’s lowered the top end of its revenue outlook to about $97 billion to $98 billion for the full year, from its previous top end of $99 billion. “There’s a lot of unknown out there, we’re not going to be overly bullish for no reason,” Ellison said on the chain’s earnings call.  “There’s a lot of unknown out there, we’re not going to be overly bullish for no reason.”

Jewelry & Luxury

Ada Diamonds Closes Funding Round

Ada Diamonds, which calls itself the “first luxury retailer” of laboratory-grown diamonds, has closed a Series A funding round, led by Valor Equity Partners’ early-stage investment fund, Valor Siren Ventures. The amount invested was not disclosed. In addition to selling online, Ada Diamonds, which specializes in bespoke engagement rings and wedding jewelry, has three brick-and-mortar showrooms: San Francisco, New York City, and Austin, Texas. Ada cofounder and CEO Jason Payne tells JCK, “At our core, we are a tech-enabled jeweler. The proceeds will be used to scale up our technical infrastructure to deliver bespoke jewelry at scale, allow us to launch innovative new product lines, and open new showrooms.”

Industry Closures Jump, Continuing Yearlong Trend

The Jewelers Board of Trade (JBT) found that 160 North American jewelry businesses closed their doors in the third quarter of 2022, a 24% jump from the third quarter of 2021. The JBT has seen year-on-year jumps in jewelry business closures for most of the year. The discontinuances in the third quarter included 133 retailers, 18 wholesalers, and nine manufacturers. Eight of these discontinuances were in Canada, the rest were in the United States. JBT considers it a discontinuance when a company ceases operations, consolidates (i.e. is sold or merges), or files a bankruptcy. An overwhelming number of this quarter’s discontinuances (134) involve a ceasing of operations, though there were 25 consolidations and one bankruptcy.

Luxury market forecast to grow despite global recession fears

Shoppers are expected to continue to splurge on luxury goods in spite of a possible global recession, boosting the €353bn sector by “at least” 3 to 8 per cent next year, according to research. The joint forecast from analysts at Bain & Co and Altagamma comes on the back of another strong year for luxury goods, with sales up 15 per cent at constant exchange rates between 2021 and 2022 against soaring inflation and rolling Covid-19 lockdowns in China. However, most of that growth — about 60 per cent — had been driven by price increases of handbags and other core luxury items, the report said. Executives at top luxury companies have been cautiously upbeat on recent earnings calls, with sector leader LVMH recording a 19 per cent year-on-year sales jump in the third quarter, while Gucci owner Kering and rival Hermès posted increases of 14 and 24 per cent, respectively.


Office & Leisure

Hasbro Puts eOne Up for Sale Less Than 3 Years After Closing $3.8 Billion Acquisition

Hasbro has listed Entertainment One’s (eOne) TV and film units for sale just under three years after acquiring the businesses in a $3.8 billion deal. Per Hasbro, the sale includes the parts of eOne’s TV and film operations “not directly supporting the company’s branded entertainment strategy,” and “Hasbro will maintain the capability to develop and produce animation, digital shorts, scripted TV and theatrical films for audiences related to core Hasbro IP.” That means brands like “Peppa Pig,” “Transformers,” “Dungeons & Dragons,” “Magic: The Gathering,” “My Little Pony,” “Power Rangers,” “Play-Doh,” and “Monopoly” and “Clue” are not only excluded from the sale, but will see “significant development, production and financing capabilities” support across film, TV, animation and digital shorts. Hasbro’s decision to put eOne up for sale comes a few months after it was revealed eOne president and CEO Darren Throop, who was key in orchestrating Hasbro’s purchase of the company alongside late Hasbro CEO Brian Goldner, will be exiting eOne when his contract expires at the end of the year.

Club Med Owners Consider Sale in Quest to Cut Debts

Fosun International Ltd. is pondering whether to sell French luxury resort chain Club Med as it’s looking to ways to reduce debts, according to a report in Bloomberg. The Shanghai-based company has been informally fielding inquiries from potential buyers, people knowledgeable about the matter said. Fosun, which owns Club Med through its leisure arm Fosun Tourism Group, could value the resort chain at around $1.5 billion. Shares of Fosum Tourism Group have fallen 19 percent in Hong Kong trading this year, and it suffered a net loss of about $28 million in the first half of 2022. However, it’s uncertain if Fosun will go forward with any transactions as a representative from the company said it has no intention of selling Club Med. A Fosun-led consortium bought Club Med in 2015 for about $968 million. The Fosum Tourism Group has since expanded Club Med’s business, including opening three resorts in the first half of this year.

Rapper Snoop Dogg releases doggie delights for animal lovers

Snoop Dogg has moved into the ranks of doggie treats. In tackling Hollywood, the cannabis industry, breakfast cereal, and now pet accessories Snoop Doggie Doggs is the latest business venture. The pet accessory line includes dog apparel, plush toys, bowls, leashes, and more. The items will be sold on the Snoop Doggie Doggs website and on Amazon. Snoop, whose real name is Calvin Broadus Jr., jumped into this space to make his canine companions match his energy. Continuing the Broadus empire it’s clear Snoop Dogg has his mind on his money, and his money on his mind. The line is in partnership with SMAC Entertainment and Little Earth Productions, Inc.

Technology & Internet

New wave of resignations hits Twitter after Musk ultimatum

A new wave of Twitter employees resigned on Thursday after Elon Musk issued an ultimatum telling them they would need to be willing to commit to a “hardcore” work environment. Internal Slack messages shared with CNBC showed engineers and other employees posting goodbye messages to a “watercooler” chat group in the run up to 5 p.m. ET Thursday deadline that Musk set just a day earlier. Hundreds of salute emojis (which convey the message “thank you for your service”) streamed by, along with dozens of goodbye messages. Musk on Wednesday sent a companywide email telling employees to expect “long hours at high intensity” if they wanted to stay. He said they had until 5 p.m. ET on Thursday to decide. Musk followed that up on Thursday with a pair of emails that said managers must meet with employees in person once a week or at least monthly, and that managers could be fired for allowing employees to work remotely if those employees do not prove, in his view, to be “excellent” or “exceptional.” Musk has asked some top engineers who opted to resign to consider staying on, according to one Twitter engineer familiar with the situation. The recent wave of resignations adds to what is now a combined mass layoff and voluntary exodus from Twitter, leaving the company significantly smaller than when Musk first took over in late October.


Amazon CEO Andy Jassy says layoffs will continue into next year

Amazon will continue to lay off employees in the coming year, CEO Andy Jassy wrote in a memo to workers on Thursday. “I’ve been in this role now for about a year and a half, and without a doubt, this is the most difficult decision we’ve made during that time (and, we’ve had to make some very tough calls over the past couple of years, particularly during the heart of the pandemic),” Jassy wrote. “It’s not lost on me or any of the leaders who make these decisions that these aren’t just roles we’re eliminating, but rather, people with emotions, ambitions, and responsibilities whose lives will be impacted.” The company this week began informing employees in some divisions, including devices and services, that they were being let go. It has also offered some employees the option to take a voluntary buyout as a means of trimming headcount in addition to the layoffs. Amazon is aiming to lay off about 10,000 employees, though the total number of impacted workers remains fluid, a person familiar with the matter previously told CNBC. Jassy said the layoffs will stretch into 2023 as the company is still in the midst of its annual operating planning process, and business leaders are still determining the need for further job cuts.


Finance & Economy

Household debt soars at fastest pace in 15 years as credit card use surges, Fed report says

Households increased debt during the third quarter at the fastest pace in 15 years due to hefty increases in credit card usage and mortgage balances, the Federal Reserve reported.  Total debt jumped by $351 billion for the July-to-September period, the largest nominal quarterly increase since 2007, bringing the collective household IOU in the U.S. to a fresh record $16.5 trillion. That’s an increase of 2.2% from the previous quarter and 8.3% from a year ago. The increase follows a $310 billion jump in the second quarter and represents a $1.27 trillion annual increase.  Debt has surged over the past year due to inflation running near its highest pace in more than 40 years and amid rising interest rates and strong consumer demand.  The biggest contributors to that debt load came from mortgage balances, which rose $1 trillion from a year ago to $11.7 trillion, and credit card debt, which climbed to $930 billion.

U.S. retail sales rise solidly; fourth-quarter GDP estimates raised

U.S. retail sales increased more than expected in October as households stepped up purchases of motor vehicles and a range of other goods, suggesting consumer spending picked up early in the fourth quarter, which could help to support the economy.  The solid retail sales reported by the Commerce Department and signs of a slowdown in inflation raised cautious optimism the economy could avoid an anticipated recession next year or experience only a mild downturn.  While other data showed manufacturing production barely growing in October, business equipment output remained strong. Continued strength in consumer and business spending will keep the Federal Reserve on track to tighten monetary policy further, though subsiding inflation gives the U.S. central bank room to scale back the size of its interest rate hikes.

The Average Monthly Payment for a New Car Just Hit an All-Time High

The average monthly payment for Americans buying new cars climbed to $748 in October, an all-time high.  In October, new vehicle transaction prices were actually just below a record high set in August. But when you factor in higher interest rates today, it’s never been a more expensive time to purchase a car, according to a report from Kelley Blue Book.  The average transaction price for new vehicles increased by $187 from September to October, rising to $48,281, the vehicle valuation company reports. That’s slightly lower than the record high of $48,301 in August, but new car prices are $1,775 higher than they were a year ago.  A large portion of car buyers are making monthly payments that are far higher than the average. More than 14% of Americans who financed a new vehicle in the third quarter of 2022 committed to monthly payments of $1,000 or more, an increase from just above 8% a year earlier, according to Edmunds.


Read the full weekly consensus