Consensus wishes you a productive and profitable Cyber Week. The Big Story will return next Monday, December 4th.
Apparel & Footwear
Abercrombie & Fitch on Tuesday blew past estimates as it posted a 20% jump in sales thanks to a strong back-to-school shopping season and growth at both its namesake brand and Hollister. The longtime mall retailer, which has bounced back after years of stagnation, also raised its outlook again as it continues to defy an overall slowdown across the apparel industry. Here’s how Abercrombie did in its fiscal third quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv: Earnings per share: $1.83 vs. $1.18 expected. Revenue: $1.06 billion vs. $981 million expected. The company’s reported net income for the three-month period that ended Oct. 28 was $96.2 million, or $1.83 per share, compared with a loss of $2.21 million, or 4 cents per share, a year earlier. For its fourth quarter, Abercrombie expects net sales growth to be up low double digits compared with the prior year, which is in line with the 11.6% growth analysts had expected, according to LSEG.
Centric Brands LLC has recently sealed an exclusive licensing deal with Authentic Brands Group to oversee the design, production, and distribution of kids’ apparel for Quiksilver, Billabong, and ROXY across the United States and Canada. As part of this agreement, Centric Brands now holds the exclusive rights to produce kids’ apparel for these three prominent sportswear brands within the US and Canadian markets. This new partnership broadens Centric Brands’ kids’ portfolio. The inaugural collection under this agreement is set to debut in Spring 2024. It will be available in a size range catering to Boys 0-20 and Girls 0-16, accessible through better department stores, select specialty stores, and various e-commerce channels.
In arguably one of the most unexpected lawsuits related to trademark infringement in the fashion industry, a Chinese seller of knockoff Marc Jacobs handbags has sued the designer for its role in shutting down its Amazon sales. The suit was filed in United States District Court for the Southern District of New York by Guangzhou Xiao Ling Wan Trading Co., which owns and operates an Amazon store called Lingwanus. Lingwanus sells a variety of handbags, including some nearly identical to Marc Jacobs’ popular “The Tote Bag.” In October, Marc Jacobs filed a complaint with Amazon about the Lingwanus bags, which resulted in the removal of three handbag variations from the site. Guangzhou Xiao’s suit claims those “fraudulent assertions of trademark infringement” damaged its business relationship with Amazon. In the suit, Guangzhou Xiao said Marc Jacobs is relying on two intent-to-use trademark applications for “The Tote Bag,” which the Chinese company asserts the fashion giant “would get a strong genericness refusal from the U.S. Patent and Trademark Office.”
Hipster-leaning clothing retailer Urban Outfitters Inc. on Tuesday reported third-quarter results that beat expectations, helped by wealthier shoppers at its Anthropologie and Free People stores. Executives signaled optimism for the holidays and rebounding demand that has kept it from selling clothing at deeper discounts. But during the company’s earnings call, executives noted what they said was a “slight moderation in demand” starting early last month. And as with previous quarters, they were less optimistic about the company’s namesake Urban Outfitters locations. In Urban’s third-quarter earnings release, executives cited “lower merchandise markdowns.” But during the call, they said holiday markdowns at Urban Outfitters’ namesake stores were still likely, amid subdued demand, and they said they needed to do more for that clothing chain to help it resonate with consumers. Same-store sales at Urban Outfitters namesake stores tumbled 14.2% during the quarter. Total revenue rose 9% to $1.28 billion. Same-store sales rose 5.6%, lifted by digital demand and a 22.5% jump at Free People and a 13.2% gain at Anthropologie.
Athletic & Sporting Goods
Access to premium shoe brands helped make footwear a standout category at Hibbett Sports and Dick’s Sporting Goods in the third quarter. Both sporting goods chains said their Q3 results were bolstered by a strong back-to-school season and growth in the footwear category. Unlike other retailers, Hibbett and Dick’s Sporting Goods have managed to maintain a strong business with Nike, which has dialed back its wholesale business with other partners. In addition to a stream of premium inventory, the retailers also partner with Nike on connected membership programs. Nike launched the program with Hibbett in October after launching a similar program with Dick’s in 2021.
ATSports, Inc., the manufacturer of surface coatings for tennis, pickleball, basketball courts, and track fields, reported a strategic merger with Ace Sport Surfaces and launched its ATSports installation training division. The new division will specialize in training customers to apply ATSports products properly. Sean Barry, former owner of Ace Sport Surfaces, will head up the division as the vice president of customer training and field operations at ATSports, Inc.
Cosmetics & Pharmacy
Boots has inked a deal to switch the liabilities for its company pension scheme to Legal & General (L&G). The UK beauty and health retailer, which is the Trustee of the Boots Pension Scheme, has secured a £4.8bn (US$6bn) buy-in policy with the investment firm. It will see L&G pay all 53,000 members’ pensions directly to them, winding up the old Boots pension scheme. Offloading the pension responsibilities could reinvigorate Boots’ parent company Walgreens Boots Alliance plans to sell the UK beauty retailer. The American company abandoned its first sales bid process for Boots last year, citing “unexpected and dramatic” changes in market conditions as key reasons. The pension liabilities issue was rumoured to be a deterrent to the private equity firms that were previously eyeing up buying the UK retailer.
Amsterdam Schiphol Airport has agreed to acquire a 100% stake in its long-time beauty retailer Kappé starting January 1, 2024. Kappé, under family control for 83 years, employs more than 300 staff. The company has been operating the perfume, cosmetics, pharmacy, and sunglasses shops at one of Europe’s busiest hub airports since 1950. In total, Kappé runs 15 shops at the Dutch gateway. The deal gives the airport operator complete control of one of its most prized commercial revenue streams. Schiphol Airport operates a major joint venture with German travel retailer Gebr. Heinemann called Schiphol Airport Retail (SAR), which runs the liquor, tobacco, and confectionery categories at the airport. Heinemann has the larger stake at 60%. However, the Hamburg-based company has plenty of beauty expertise, so rolling the Kappé business into SAR’s existing operation seems a likely option.
Unilever has opened a global Artificial Intelligence (AI) Laboratory in Toronto, Canada. The UK-based FMCG giant’s new facility has been dubbed Horizon3 Labs and is part of a wider investment in tech across the business. The location was chosen for its easy access to ‘vibrant tech talent’, according to a report published by Inside Logistics. The team based at Horizon3 Labs will build on the Dove manufacturer’s current use of AI and machine learning. Andy Hill, Chief Data Officer, told Inside Logistics, “Unilever is making a significant investment in developing and deploying AI technology across the business, and the launch of Unilever’s AI Lab will expedite the progress we are making globally and enable us to have the right focus on technology innovation.”
Discounters & Department Stores
Nordstrom’s Q3 net sales fell 6.8% year over year to $3.2 billion, with gross merchandise value down 7.1%. The wind-down of its Canada business siphoned 270 basis points, while its anniversary sale timing added 200. Credit card sales grew 6.2% to $120 million, despite delinquencies above pre-pandemic levels. By banner, full-line Nordstrom net sales fell 9.4%, with GMV down 9.8%. At off-price Rack net sales fell 1.8%. Digital sales fell 11.3% and represented 34% of total sales in the period. Gross margin expanded 180 basis points to 35%, mostly thanks to lower markdowns, inventory productivity, and lower buying and occupancy costs. Ending inventory fell 8.8%. The company swung to net earnings of $67 million, from a $20 million net loss a year ago.
On Friday, Kohl’s announced in a Securities and Exchange Commission filing that Dave Alves, president and chief operating officer, has left the company. Alves was appointed by the retailer in February and started in April, with three decades of experience in retail, including stints at Bealls Retail Group, TJX Canada and TJX Europe, Hudson’s Bay and Sterling Shoes. In a statement, a Kohl’s spokesperson said that Alves left to pursue other opportunities. “We thank Dave for his leadership and wish him all the best in his future endeavors,” the company said. The department store has struggled in recent years, inviting activist investor pressure to sell itself or at least some of its real estate and shake up its C-suite. Alves arrived after interim CEO Tom Kingsbury took that job permanently. Michelle Gass had left as chief executive to join Levi’s.
Kohl’s Q3 net sales fell 5.2% year over year to $3.8 billion, with comps down 5.5%. The company’s “other revenue,” mostly its credit card business, fell 6.2% to $211 million. Gross margin expanded 158 basis points to 38.9%, and inventory was down 13%, according to a company press release. Shrink remains elevated but is at expected levels, Chief Financial Officer Jill Timm told analysts Tuesday. Net income declined 39% to $59 million.
Emerging Consumer Companies
SKKY Partners invests in TRUFF, a premium sauce brand
Private equity firm SKKY Partners has announced its investment in TRUFF, a premium sauce and condiments brand known for its truffle-infused products. The financial terms of the deal were not disclosed. Founded in 2017, TRUFF has rapidly expanded from a direct-to-consumer hot sauce brand to a multichannel food business with products sold online and in over 20,000 stores, including Whole Foods and Target. The brand has gained a loyal consumer base and has collaborated with notable partners such as Popeyes, Hidden Valley Ranch, and Taco Bell. TRUFF’s hot sauce is a top seller in the natural channel and the fastest-growing hot sauce in conventional grocery. The founders of TRUFF, Nick Ajluni and Nick Guillen, will continue to lead the company as co-CEOs and remain significant investors. Mark Ramadan, co-founder of Sir Kensington’s and former CEO of Hu, will join TRUFF’s board as an independent director. SKKY Partners co-founders Kim Kardashian and Jay Sammons expressed their excitement about the investment, highlighting TRUFF’s strong foundation and potential for growth. The transaction is expected to close in the first quarter of 2024.
Craftwork raises $6 million in seed funding for home repairs
Charlotte-based home repairs startup, Craftwork, has raised $6 million in seed funding. The funding round was led by Forerunner Ventures, with participation from General Catalyst, Y Combinator, a16z General Partner Jeff Jordan, and DoorDash Co-founder Evan Moore. Craftwork plans to use the funds to expand its operations and business reach. The company, led by CEO Tim Griffin, is focused on building a consumer brand in home services through a tech-enabled platform for home repairs, starting with house painting. Despite operating in only one market, Craftwork has experienced rapid growth, increasing its revenue from $1 million to $150 million in just 18 months.
Plant Press raises $1.2 million for ‘clean caffeine’ energy drinks
Clean caffeine energy drink startup Plant Press has raised over $1.2 million in a seed round, with investors including former Tory Burch CMO Miki Berardelli and former NBA Players Association head Roger Mason. The round also saw participation from Canadian music producer BLOND:ISH and two unnamed Grammy Award-winning artists. Plant Press, founded by former research scientist Ariana Farahani, produces a line of 12 oz. canned energy drinks in Grapefruit Ginger, Passionfruit Peach, and Watermelon flavors. Each can contains 100mg of caffeine derived from green coffee beans, 3 grams of sugar from agave and monk fruit, and a “calculated amount” of electrolytes and vitamins. The drinks retail for $33.99 per 12-pack. The funding will be used to expand the brand’s team, product portfolio, and retail presence. Plant Press currently sells through its website and Amazon, with its direct-to-consumer business accounting for 50% to 60% of sales. The company also has distribution in gyms, office buildings, and banks. Farahani said the brand is targeting a broad demographic of caffeine consumers who prioritize health.
Food & Beverage
The Duckhorn Portfolio, a luxury wine company, announced it reached an agreement with alcohol giant Brown-Forman to purchase chardonnay producer Sonoma-Cutrer for $400 million. Brown-Forman will receive 21.5% of Duckhorn’s stocks and $50 million in cash. Sonoma-Cutrer, known for its Russian River Ranches chardonnays, operates six vineyards in Sonoma County, California, and had net sales of $84 million in the year ending July 31. The deal is projected to close next year, Brown-Forman said. As premium chardonnay continues to grow in popularity, Duckhorn — which owns 10 wineries across the West Coast — said the purchase will boost its position in the chardonnay segment where it does not currently have a large presence.
After announcing it would drop its flailing sports drink brand BioSteel earlier this summer, Canopy Growth announced it has found two buyers for the brand’s assets through a court-approved agreement. Financial terms were not disclosed. The BioSteel Canada business – which includes IP, formulas and the bulk of its inventory – is set to be acquired by DC Holdings Ltd., a Canadian sports nutrition portfolio company which does business as Coachwood Group of Companies. Meanwhile, Biosteel’s manufacturing assets, including property and equipment from the Verona, Virginia production facility it bought from Flow Water last year, have agreed to be purchased by New Jersey-based Gregory Packaging Inc., producers of SunCup juice. BioSteel had been a highly touted piece of Canopy Growth’s portfolio, at one point drawing comparisons to an early stage BodyArmor from analysts, but the business was derailed this year after the U.S. Securities and Exchange Commission investigated the company for overstating sales and an internal review led to the exit of key executives.
Grocery & Restaurants
McDonald’s is buying Carlyle’s stake in its China business, increasing its minority share from 20% to 48% ownership. The fast-food giant sold off control of its restaurants in mainland China, Hong Kong and Macao in 2017 for $2.1 billion. It was part of McDonald’s broader strategy to own fewer restaurants, leaving it to franchisees with knowledge of local markets to run their own locations. At that time, Citic, a state-owned investment firm, took the majority stake, while private equity giant Carlyle bought a 28% stake. McDonald’s held on to 20% of the business. Financial terms of the deal announced Monday were not disclosed. The deal is expected to close in the first quarter of 2024, assuming regulators approve it. Citic still retains its 52% stake in the business.
Luckin Coffee — the longtime rival of Starbucks China — has surpassed the Seattle-based coffee giant in revenue for the first time this quarter, as first reported by The Wall Street Journal. Although Luckin Coffee has outpaced Starbucks in terms of physical growth for a long time (ending the second quarter with 10,829 locations in China compared with Starbucks’ 6,480 locations in the country), this is the first time the rapidly growing chain’s finances inched past Starbucks with $855 million in revenue, as compared with Starbucks’ $822 million in revenue for the China market. China has been one of Starbucks’ largest and most profitable international markets for years— as the company’s store network in the country has grown by 65%, with plans to operate 9,000 stores in China by 2025.
Home & Road
Lowe’s Cos. did better than Wall Street expected on earnings in the third quarter but fell short on revenues as do-it-yourself customers stepped back from bigger-ticket purchases. Net earnings were $1.77 billion, or $3.06 per diluted share, versus $154 million, or 25 cents per diluted share, in the year-earlier quarter. In the year-past period, earnings per share adjusted for one-time events was $3.27, Lowe’s pointed out. Comparable sales decreased 7.4% in the quarter year over year due to a decline in DIY discretionary spending among consumers, partially offset by positive professional customer comp sales, the company stated. Net sales were $20.47 billion versus $23.48 billion in the year-previous quarter. Operating income was $2.7 billion versus $924 million in the year-before period.
The founder of JAT Capital fired off a no-holds-barred letter to the Beyond Inc. board of directors late last week. Described by CNBC as “scathing,” the letter from John Thaler accuses the board of regarding the hedge fund’s preferred CEO candidate with suspicion, mischaracterizing the exit of former CEO Jonathan Johnson and engaging in “poor behavior.” Among other things, Thaler asked why Johnson’s ouster – which the fund had been pressing for – wasn’t described as a firing. “Rather than terminating Johnson and publicly saying so (a statement that would have been well-received by everyone involved), the board decided to craft a press release along with Jonathan suggesting that he had stepped down and even making the ludicrous statement that he and the Board had jointly concluded that ‘now was the ideal time’ for a leadership transition,” he wrote in the letter, a copy of which was published CNBC. In the Nov. 17 letter, Thaler reiterated its support for Marcus Lemonis to be appointed as the next CEO. Lemonis, who joined the board last month, is the CEO of Camping World and was star of the erstwhile CNBC business makeover show “The Profit.”
One of the grandest RH (formerly Restoration Hardware) locations to date has opened in Indianapolis. The luxe home furnishings retailer has opened a “gallery” at the 151-acre DeHaan Estate, the former home of philanthropist Christel DeHaan. The new RH features 62,000 sq. ft. of space and represents “one of the largest, most inspiring and immersive physical expressions of the brand to date,” the company said. The landmark property — considered one of the most accurate Palladian-style villas ever built in the United States — has been reimagined with respect for its original vision as a prestigious private residence. The space integrates furnishings and other items from RH’s interiors, contemporary, modern and outdoor collections with rare art, antiques and artifacts from across the globe. The interior design studio includes a private presentation room, state-of-the-art technology and design libraries showcasing a vast assortment of textiles, furniture and lighting finishes. RH Indianapolis also reflects the company’s ongoing foray into hospitality. An elegant restaurant, “The Dining Room,” boasts a 27-foot vaulted ceiling and a light installation designed to evoke rain through its 210 glass pendants. The restaurant — long with a gold-marble “Wine Bar and Terrace ” — overlooks a 35-acre private lake, lush formal gardens and forest landscapes.
Jewelry & Luxury
Unique Designs, which calls itself the “largest wholesale supplier of fine jewelry in the United States,” is suing Signet over refunds given to customers who were sold jewelry made with glass stones instead of lab-created gems. According to a suit filed Nov. 6 in U.S. District Court in Ohio, Signet had informed Unique Designs in 2020 that certain items, mass-produced for Unique by a third party, contained “artificial gemstones” composed of glass rather than the expected nanocrystal. Signet gave all customers who had bought the jewelry a full refund as well as a $100 Signet gift card, and allowed them to keep the piece they had purchased, the complaint says. (Unique terminated its arrangement with the overseas supplier of the jewelry in question when the problem was discovered.)
Kate Rogowski, who spent nearly 10 years in sales and marketing at the De Beers Forevermark brand, has joined Pandora as director of brand delivery and go-to-market for its lab-grown diamond business. In her new job, Rogowski’s responsibilities include long- and short-term marketing, distribution, expansion, and communications. Before joining Forevermark in 2014, Rogowski was an account director at Havas Worldwide advertising and public relations company and a senior marketing associate at Digitas Health, according to LinkedIn.
Montblanc’s CMO is looking to bring its iconic pens and a joy of writing to everything that the brand is looking to achieve across its portfolio. The luxury lifestyle brand now trades in leather goods, perfumes, watches and jewelry – but it will always be best known for its beautiful, elegant pens. This, though, comes with its own set of problems. Writing instruments are an ever-decreasing part of our increasingly digital world. When was the last time you sent someone a letter?
Office & Leisure
This 2023 holiday season, Yahoo has named the 20-inch Pikachu Squishmallows plush as the most popular toy to get. Unfortunately, getting one of these Squishmallows might prove difficult due to the combination of Pokemon’s popularity and potential limited production, so it’s important to know which retailers are selling this in-demand toy for the 2023 holiday season. If you’re an Amazon Prime member, the Squishmallows Pokemon 20-Inch Pikachu Plush is available for $49.99, but keep in mind that the stock status fluctuates quite a bit due to high demand. For those who are members of Gamestop’s loyalty program, the 20-inch Pikachu can be found on GameStop’s website for a slightly more wallet-friendly price of $42.74. Target’s online store also stocks this large Squishmallow on and off for $49.99. Squishmallows have been on the market for several years now, and despite countless imitations, they have not lost their popularity with consumers.
Florida-based pet retailer Pet Supermarket has named its newest CEO. Rich Tannenbaum brings 25 years of retail, e-commerce and consumer goods experience to the new role. Before joining Pet Supermarket, he held the role of senior vice president of global supply chain at Five Below for nearly five years. Prior to his position Five Below, Tannenbaum was chief supply chain officer and senior vice president of information technology at Midwest retail chain Fleet Farm. He also served 10 years as senior vice president of supply chain, IT and enterprise transformation at The Vitamin Shoppe. The company said that Tannenbaum will help execute “multi-year growth and expansion plans.” Pet Supermarket operates over 225 locations in the Southeast region.
Technology & Internet
Best Buy cut its full-year sales outlook Tuesday, as the company weathers a period of cooler demand and prepares for price-conscious holiday shoppers. The consumer electronics retailer beat Wall Street’s quarterly earnings expectations, but fell short on revenue. Best Buy said it now expects revenue to range from $43.1 billion to $43.7 billion for the fiscal year, down from its previous range of between $43.8 billion and $44.5 billion. The retailer said it expects comparable sales to decline by between 6% and 7.5%, lower than its previous guidance of a 4.5% to 6% drop. CEO Corie Barry said in a news release that Best Buy anticipated softer sales of consumer electronics this year. But as the Federal Reserve presses on with its campaign to cool down inflation by raising interest rates, consumer demand “has been even more uneven and difficult to predict,” she said.
Shares of iRobot, the maker of Roomba vacuums, closed up about 39% Friday after a report said the European Union is set to approve Amazon’s $1.7 billion acquisition of the company. Reuters said Thursday morning the deal is set to “win unconditional EU antitrust approval,” citing three sources familiar with the matter. The European Commission is expected to rule on the deal by Feb. 14. The deal is still under review by the U.S. Federal Trade Commission. The U.K.’s Competition and Markets Authority said in June the deal would not result in “a substantial lessening of competition” in the U.K. Amazon announced its intention to acquire iRobot in August 2022 for $61 a share in an all-cash deal.
Finance & Economy
According to the latest International Council of Shopping Centers (ICSC) Thanksgiving Weekend Intentions survey, consumers will spend $130 billion during the upcoming holiday shopping weekend, a 4 percent increase from last year’s spending expectations. While consumers anticipate inflation and rising prices to impact their holiday shopping patterns, they remain resilient in their spending and plan to adjust their shopping during Thanksgiving weekend to account for the economic climate.
‘Tis the season for holiday shopping and Black Friday deals, and experts from the National Retail Federation are causing a “wallet shift” stir about the state of the American consumer. According to NRF data, consumer spending is expected to reach record levels for the remainder of this year, between $957.3 billion and $966.6 billion which is a 3 to 4% increase from 2022. Each individual consumer is expected to spend nearly $900 on winter holiday shopping, with the NRF research director claiming that spending on loved ones is a priority. While shoppers are reportedly ready to dip into their pocketbooks for the 2023 holiday season, the retail expert noted there are still “major” concerns swirling around the sector including sales volume, theft, interest rates and credit card delinquencies.