It was reported last week that a jury had reached a decision concerning Google. In a California court case filed by Epic Games, the maker of the video game Fortnite, Epic Games accused Google and its app store of violating antitrust laws regarding fees charged and other anti-competitive practices related to developer and consumer access to video games on the Play Store and the Android platform. The jury found in favor of Epic Games on all 11 counts. The judge in the case will hear arguments in mid-January on what actions, monetary and otherwise, Google must take as its penalty.
Google has vowed to appeal the verdicts. In addition, it has separately negotiated a confidential settlement with the attorneys general in all 50 states plus Puerto Rico and the District of Columbia on a similar lawsuit. The details of the settlement are expected to be revealed sometime this week per agreement with the judge in the Epic Games case.
In other recent legal developments related to Google, the EU passed legislation, scheduled to take effect in 2024, that will require Google (and Apple) to allow consumers and developers to sidestep each company’s app store and payment services in offering its services, all to facilitate increased competition and presumably lower prices.
Although both the Epic Games matter and the EU ruling point to negative impacts on Google’s future financial performance, Google’s/Alphabet’s stock at the end of last week closed at only 6% below its 52 week high, and 56% above its 52 week low.
While app store revenues are important to Google’s financial results, its search engine and digital advertising revenues are much bigger pieces of its sales and profits, which may be a reason for the negligible impact on Google’s stock price to date. However, Google’s dominant positions in search and digital advertising are the subject of two additional federal court cases making their way through the system. Testimony in a federal lawsuit regarding monopolistic practices used by Google’s search engine and advertising product has concluded, with closing arguments scheduled for second quarter 2024. A separate federal lawsuit has been filed by the U.S. Justice Department that accuses Google and its ad sales technology of being anti-competitive. Although a trial has not yet been scheduled, expectations are that a court date could be set sometime in 2024.
It will be interesting to watch as these court cases wind their way through the system, especially as Google is facing headwinds related to the Epic Games verdicts and EU ruling. These headwinds no doubt have been brought on by Google’s size and dominance in the tech world. However, while Google claims its business practices were designed to compete with Apple, to date, regulators and courts are concluding that those same practices are anti-competitive for everyone else.
Headlines of the Week
Epic Games wins lawsuit against Google’s Play Store
Google’s Play Store violates antitrust laws, a federal jury found Monday, deciding a lawsuit filed by Epic Games. For years, Google and Apple have argued that their app stores’ rules and restrictions exist to benefit consumers. This decision, if it survives the appeal process, could upend how the two major mobile operating systems control the distribution of third-party apps on devices. The jury agreed with Epic Games on every question it was asked to consider: “[T]hat Google has monopoly power in the Android app distribution markets and in-app billing services markets, that Google did anticompetitive things in those markets, and that Epic was injured by that behavior,” per The Verge. [The jury] decided Google has an illegal tie between its Google Play app store and its Google Play Billing payment services, too, and that its distribution agreement, Project Hug, deals with game developers and deals with OEMs were anticompetitive too.” “After 4 weeks of detailed court testimony, the California jury found against the Google Play monopoly on all counts. The Court’s work on remedies will start in January.” Epic Games CEO Tim Sweeney posted on X (formerly Twitter) following the verdict. “We plan to challenge the verdict,” Wilson White, Google’s vice president for government affairs and public policy, said in a statement.
Chobani buys coffee roaster La Colombe for $900M
Chobani is buying coffee roaster La Colombe for $900 million. Keurig Dr Pepper, which paid $300 million for a 33% stake in La Colombe in July, will exchange its stake in La Colombe into Chobani equity. Chobani financed the acquisition through the combination of a newly issued $550 million term loan, cash on hand and the exchange of Keurig Dr Pepper’s minority equity stake in La Colombe into Chobani equity. La Colombe will continue to operate as an independent brand. The purchase gives Chobani a deep presence in the fast-growing ready-to-drink coffee category and enables the dairy firm to build on its efforts to become a more diversified food and beverage company.
Apparel & Footwear
Shein holds talks with LSE on possible listing
Fast fashion firm Shein has held talks with the London Stock Exchange about the possibility of a public listing in the United Kingdom, Sky News reported on Monday, citing sources. Shein’s chairman, Donald Tang, met executives from the LSE and other stakeholders in the UK economy during a visit to London last week, according to the report. Last month, Reuters reported that the China-founded firm had confidentially filed to go public in the United States. Goldman Sachs, JPMorgan Chase and Morgan Stanley have been hired as lead underwriters of the initial public offering (IPO), and Singapore-based Shein could launch its new share sale in 2024, the sources said at the time. The company founded in mainland China in 2012 was valued at more than $60 billion in a May fundraising, down by a third from a funding round last year.
In August, Tapestry, Inc. announced its $8.5 billion acquisition of Capri Holdings Limited, expanding its brand portfolio beyond Coach, Kate Spade and Stuart Weitzman to also include Michael Kors, Jimmy Choo and Versace. The merger was led by Tapestry CEO Joanne C. Crevoiserat, who had only landed in her role in 2020 but had already made a big, positive impact on the business. For example, based on a digital transformation plan she’d implemented, the company’s 2022 e-commerce sales tripled, compared to pre-pandemic levels, growing from $600 million to $2 billion. “I’m most proud of Tapestry’s ability to deliver consistently strong results in the face of incredible challenges in the environment,” she said. She said the Capri deal has worked to spotlight the strength of Tapestry’s capabilities, specifically when it comes to “brand building, connecting consumers with brands and connecting brands with consumers in relevant ways.” Tapestry now has the opportunity to scale its proven model.
Gildan CEO abruptly departs company; former Louisville AD named as successor
Gildan Activewear Inc. announced Monday that longtime president and chief executive Glenn Chamandy “has left” the company, effective immediately. Gildan, based in Montreal, has more than 500 jobs at its yarn-production plant in Mocksville, as well as facilities in Rockingham and Rowan counties. The basic apparel manufacturer said Vince Tyra will take over both executive posts on Feb. 12, while board member Craig Leavitt will serve as an interim in both posts. Chamandy’s departure comes abruptly, considering he was a co-founder of the company and took over both executive positions in 2004. He was listed as age 61 in Gildan’s fiscal 2022 report filed in March. Chamandy was in charge of Gildan’s third-quarter financial report and investor conference call on Nov. 2. Chamandy took the unusual step of posting a news release statement to present his side of the separation. “Yesterday, I received notice from the chairman of Gildan Activewear’s Board of Directors that the company was terminating my employment agreement without cause,” Chamandy said. “It is unfortunate that my vision of the path forward has differed from that of other Board members.” Tyra comes to Gildan having served most recently as senior vice president of Corporate Strategy and Mergers and Acquisitions for Houchens Industries.
Blending Experiences With Advertising, Lululemon Continues To Gain
Lululemon is one resilient retailer. While plenty of competitors are posting sales declines and blaming an unsettled economy, the athleisure brand continues to prove that when consumers love a brand, they’re not afraid to spend. The Vancouver-based company’s latest financial results include a hefty 19% jump in revenue, with sales in the fiscal third quarter climbing to $2.2 billion, compared to $1.86 billion in the third quarter of last year. Comparable sales grew 13%. And net income came in at $248.7 million, down from $255.5 million in the year-ago period. Direct-to-consumer revenue rose 18% and now accounts for 41% of total sales. Both sales and profits exceeded analyst expectations. Showing it’s not immune to pared-back consumer spending, Lululemon did offer a more subdued forecast than expected for the coming months, despite reporting a gangbuster start to the holiday season. That includes its best-ever results on Black Friday. The company now expects an increase of between 13% and 14% in the fourth quarter of 2023, in the range of $3.14 billion to $3.17 billion. That includes a forecast of continued double-digit growth internationally, with sales in North America likely to advance in the high single digits.
First Eagle Alternative Credit & Gordon Brothers Provide Term Loan to Rachel Zoe Creations
First Eagle Alternative Credit, a $21 billion alternative credit platform of First Eagle Investments, agented a term loan to Rachel Zoe Creations, a global fashion and lifestyle brand, in partnership with Gordon Brothers, the global asset experts. Terms of the transaction were not disclosed. Rachel Zoe is a global fashion authority who rose to prominence as a celebrity wardrobe stylist in the mid-2000s. Zoe starred in the Bravo Reality TV series “The Rachel Zoe Project” and launched her fashion lifestyle brand in 2011. The eponymous lifestyle brand will use the new term loan to support ongoing working capital needs and fuel further growth. With this financing, Rachel Zoe Creations will continue developing and growing the company’s licensing portfolio through new and existing partnerships. “We are excited to partner with the Rachel Zoe Creations management team and provide the business with capital to support their continued growth,” said Larry Klaff, Senior Managing Director and Head of Asset Based Loans at First Eagle Alternative Credit. “Rachel Zoe has strong brand recognition, intellectual property and licensing relationships to support future growth, and we look forward to being a part of its continued success,” said Tobias Nanda, Head of Brands at Gordon Brothers.
Athletic & Sporting Goods
3Step Sports Acquires EDP Soccer
3Step Sports acquired EDP Soccer, reporting that the merger will make the company the “largest owner-operator of youth soccer leagues in the United States.” EDP Soccer also owns International Sporting Events and New York Club Soccer. The company also said the merger would enhance league and event management capabilities. Founded in 1999, EDP Soccer annually provides over “130,000 youth soccer players ages five years through 22 the opportunity to play soccer at competitive levels in leagues and events, including tournaments, college showcases, and festivals.” Spanning New England, the Mid-Atlantic, Ohio, Florida, and Eastern Canada, EDP Soccer also offers college recruiting and placement services to “70 percent of youth soccer players who will compete at the collegiate level.”
Felt Bicycles to be sold as Pierer Mobility concentrates on e-bikes and motorcycles
Pierer Mobility, an Austrian firm that owns several bike, e-bike and motorcycle brands, has decided to sell its control of the Felt Bicycles brand to a consortium led by Florian Burguet. In a move to focus the company’s interest around its entities that produce motorcycles and e-bikes, the board of directors have decided to excise US company Felt, as well as the R Raymon bicycle brand. Pierer Mobility also owns the KTM, Husqvarna, MVAgusta and GasGas brands. While the move is one born out of some of the changing tides of the bike and e-bike economic market, both Raymon and Felt Bicycles will continue to exist in 2024. The only change is with their ownership structure, with both brands returning to a more independent model. Raymon, a brand that was founded in 2017, already has a signed deal with Susan and Felix Puello for the brand to continue in 2024 under an independent set-up.
McKinsey Identifies Tech Outerwear Among Hot Fashion Trends For 2024
In its “The State of Fashion 2024” study, McKinsey & Co. provided a bullish outlook for technical outerwear, stating the category “has been propelled by consumers post-pandemic embrace of healthier lifestyles as well as ‘gorpcore,’ and is likely to accelerate even further in 2024.” The management consultancy company added, “There is also a shift to spending more time outdoors, which will likely drive up demand for outdoor wear in 2024, further blurring the lines between functionality and style.” “One lasting impact of the COVID-19 pandemic has been soaring consumer interest in healthier lifestyles and nature-focused activities, like camping, hiking and boating,” McKinsey said in the study.
Cosmetics & Pharmacy
Shiseido Sets New Venture Fund, Invests in Phyla, Patricks Men’s Grooming
Shiseido is looking to take a bigger slice of the beauty and wellness market with the formation of a venture fund and investments in two small, fast-growing brands: Phi Therapeutics Inc., and Patrick Kidd Holdings Pty Ltd. Shiseido said the fund, Long Term Investments for the Future Ventures, or LIFT, will be a vehicle for investing in innovative, early-stage companies in the beauty and wellness space. LIFT Ventures will be led by Ron Gee, Shiseido Americas’ president and chief executive officer, and will be located in New York City. Shiseido said the fund “aligns with Shiseido’s goal of becoming a personal beauty wellness company. The fund will primarily focus on compelling innovation in the Western hemisphere, while maintaining a global lens.” Its aim is to put money behind “novel technologies, innovative platforms, high-growth brands, and new business models, among others.” The brand known as Phyla is a San Francisco-based pioneer in bacteriophage technology, while Patricks is a high-end men’s grooming company from Sydney.
Subtl Raises $5.5M In Series A Funding
Subtl, a makeup brand known for stackable products that on-the-go women can effortlessly slip into their purse or gym bag, has stacked up nearly $5.5 million in series A funding. More specifically, the round involves $5 million from Cult Capital, backer of scalp care brand Act+Acre and clean cosmetics brand Lawless, and slightly under $500,000 from returning investors Grouse Ridge Capital and Innovation Works. According to Subtl founder Rachel Reid, the brand has raised $1.2 million in funding throughout its history, including from participation in the accelerator AlphaLab, prior to its series A. Subtl’s revenues weren’t disclosed, but Cult Capital generally invests in brands with a minimum of $2 million in annual sales.
Straand secures $4 million from investors, including Unilever Ventures
Straand has secured AUD$4m in second round fundraising from Unilever Ventures and Harvey Norman Family Office to fuel its global ambitions. The Australian scalp care brand will use the investment to drive forward its plans for further international expansion, including the execution of a deal it has with Sephora. Straand is set to have its products stocked in more than 70 of the beauty retailer’s stores across Australia, the UK and South East Asia by early next year. A new pipeline of products will also launch globally in 2024. Unilever Ventures is a pre-existing investor in the prebiotic hair care start-up. The beauty giant’s growth capital arm injected $2m into the business in February 2023 to help expand it into new markets. This included soft-launching the brand in the US market with retail partners Urban Outfitters, Anthropologie and Amazon.
Amyris sells JVN Hair to Windsong Global
Bankrupt brand owner Amyris has sold JVN Hair, the line created in partnership with Queer Eye star Jonathan Van Ness, at auction. Brand assets for the luxury hair care line have been sold to private equity firm Windsong Global for US$1.25m, according to court filings seen by Cosmetics Business. Windsong Global has previously invested in Lime Crime, Revive and Deva Curl. Launched in 2021, JVN Hair was developed alongside Van Ness as a gender-neutral line suitable for all hair types. JVN Hair is the latest cosmetics brand created by Amyris to be sold at auction after filing for bankruptcy in August. Meno Labs, 4U, Pipette and Biossance were sold earlier this month. Biossance was the most lucrative deal as THG acquired the luxury skin care brand for US$20m. Amyris is a biotechnology company best known for developing sugarcane derived-squalane. The California-based firm later expanded into beauty brand creators with the launch of Biossance. It then ventured into celebrity-fronted brands via partnerships with model Rosie Huntington-Whiteley, and actresses Naomi Watts and Tia Mowry. In February, Amyris closed a deal with Givaudan to sell off its hero ingredients.
Discounters & Department Stores
Target woos last-minute holiday shoppers with extended hours
To attract late holiday shoppers, Target is extending its store hours from 7 a.m. until midnight at most stores through Dec. 23, the retailer announced Tuesday. The retailer has also added last-minute discounts on brands like Apple, KitchenAid, Meta and Disney, as well as on video games, holiday decor and apparel. Target is touting rapid order fulfillment for late purchases as well. Same-day delivery through Shipt is available until 4 p.m. on Christmas Eve, and Target’s Drive Up and Order Pickup services are available for orders placed that day until 6 p.m. local time for same-day pickup. The retailer teased its gifting assortment, including a collaboration with British retailer Marks & Spencer, beauty options from Fenty Beauty and an exclusive Stanley collection available in stores on Sunday and online on Dec. 24. More Stanley collections are on the way, per the press release.
Dollar General among fastest growing brands for Gen Z TikTok users: report
Compared to consumers overall, NYX Professional Makeup, Clinique, Dollar General, Crocs and Victoria’s Secret are among the fastest growing brands for Gen Z shoppers, according to a Morning Consult report shared with Retail Dive. As for all consumers, Shein, Amazon Pharmacy, e.l.f. and Clinique are the top brands and retailers on the same list, according to the report. Shein is ranked the second fastest growing brand for millennials. The proportion of parents interested in buying clothing from Shein has risen from 34% in July to 41% in October, according to the report. Nearly half (46%) of Gen Z shoppers have considered buying items from Dollar General. That share grew to 56% for Gen Z TikTok users and 60% of daily TikTok users, per the report.
Why Macy’s investors reportedly offered $5.8B to take the department store private
Two major Macy’s investors, Arkhouse and Brigade Capital, are in talks to take the department store private, offering $21 per share or $5.8 billion, The Wall Street Journal reports. The firms already have the ability to raise the required financing, and may be willing to increase their offer, per the report. “We are declining to comment at this time,” a Macy’s spokesperson said by email. A spokesperson for Arkhouse, a real estate investment firm that “takes a private equity approach,” declined to comment. A spokesperson for Brigade Capital, a specialist in credit investment strategies, also declined to comment.
Five Below looks to tech, analytics to optimize inventory
Five Below has made “meaningful progress” optimizing its inventory as the discount retailer develops methods to “improve our ability to predict demand” and “track the movement of product through the supply chain,” CEO and President Joel Anderson recently told analysts on the company’s earnings call. In Q3, inventories rose 8.8% year over year. On a per store basis, however, levels fell 5.1% year over year, according to CFO Kristy Chipman. She added that Five Below strategically ordered inventory earlier to ensure strong holiday in-stock position and that management is “pleased with the level and quality of our inventory going into this holiday season.”
Emerging Consumer Companies
Unified Commerce Group invests in athleisure brand Spiritual Gangster
Unified Commerce Group (UCG) has announced its investment in athleisure brand Spiritual Gangster, acquiring a majority stake in the Los Angeles-based company. UCG, founded in 2019, aims to enable purpose-driven lifestyle apparel brands to scale through shared services and data-driven insights. The group previously acquired Canadian fashion brand Frank And Oak, implementing operational changes that led to consistent growth and margin improvement. UCG plans to leverage its resources and leadership team to amplify Spiritual Gangster’s brand and message. Lambros Piscopos, former CFO/COO of Spiritual Gangster, will now serve as CEO. UCG CEO Dustin Jones said the brand has “enormous potential to grow in the US and beyond.” Spiritual Gangster, founded in 2008 by yoga instructors Vanessa Lee and Ian Lopatin, has evolved from a yoga studio house brand into a global lifestyle phenomenon. The brand aims to create a high vibration community centered around wellness, love, positivity, and joy. Spiritual Gangster distributes its products through its website and over 200 wholesale partners worldwide.
SmileDirectClub shuts down, leaving customers with unfinished treatments and bills
SmileDirectClub, a direct-to-consumer invisible aligners company, has announced the immediate shutdown of its global operations, leaving customers with unfinished treatments and unpaid bills. The company had previously filed for Chapter 11 bankruptcy protection. Existing customers seeking information are met with a notice on the company’s website stating that customer care support is no longer available. While SmileDirectClub will be canceling aligner treatments and orders that haven’t shipped, customers with outstanding balances are still expected to pay them off. Influencer Christine Obanor shared that the shutdown has disrupted her four-year treatment plan with only six months remaining. The company’s website also states that it is no longer accepting new customers. SmileDirectClub went public in 2019, but its shares plummeted in 2020 as it struggled to meet analyst expectations.
Food & Beverage
Campari Buys Courvoisier for $1.2 Billion, Accelerating Its Premiumization Journey
Campari has committed to acquiring cognac Courvoisier from Beam Suntory for an initial price of $1.2 billion, amounting to the biggest deal in the Italian spirit group’s history. The cognac will be positioned as the fourth major leg of the Campari Group along with aperitifs, bourbon and tequila, and grant the spirits group a boost in the U.S. and Asia. In addition to accelerating the company’s “premiumization journey” the acquisition will provide the group the opportunity to expand its bottling and distilling capacity in France and support the group’s other local operations. Those include several super premium French brands: cognac brands and distilleries Grand Marnier and Bisquit Dubouché, Trois Rivières rhums and distillery (in Martinique), and Champagne Lallier and bitter aperitif Picon. Courvoisier was founded in 1828, and has been under the Beam Suntory umbrella for nearly 20 years. The historic brand, which got a boost from early 2000s rap anthems, makes up one of the four players that dominate nearly 100% of the cognac market in the U.S. Courvoisier’s business, which includes the Salignac brand, reached net sales of $249 million in 2022.
Bain Capital invests in 1440 Foods
Bain Capital Private Equity has acquired a “significant” stake in 1440 Foods, a New York-based health-oriented solution company with brands like Pure Protein, Body Fortress and MET-Rx. Bain Capital, a private equity firm, partnered with 4×4 Capital to invest in 1440 Foods to propel the company’s growth trajectory, Bain representatives said. Financial terms of the transaction were not disclosed. Adam Nebesar, a partner at Bain, highlighted the firm’s intention to “grow 1440 Foods as a market leader in active lifestyle nutrition.” 1440 Foods, initially a division of The Bountiful Co., was acquired by 4×4 Capital in 2021. The company has since established itself as a player in the sports and active nutrition arena, with products from protein bars and powders to ready-to-drink shakes and snacks. Azania Andrews, chief executive officer of 1440 Foods, said the partnership fits well within 1440’s overall growth strategy.
Shearer’s Foods to be acquired by private equity firm
The private equity company Clayton Dubilier & Rice is acquiring Shearer’s Foods from its majority shareholder the Ontario Teachers’ Pension Plan Board, Toronto. Terms of the acquisition were not disclosed. Shearer’s Foods is a contract manufacturer and private label supplier of salty snacks, cookies and crackers that is based in Massillon, Ohio. The company has 17 manufacturing plants, and will continue to be led by Bill Nictakis, executive chairman, and Mark McNeil, chief executive officer. “CD&R shares our focus and commitment, and their track record of helping build stronger, more sustainable businesses makes the firm an ideal partner as we continue to drive our business forward,” Mr. Nictakis said. “At the same time, I would like to express my gratitude to the Ontario Teachers’ team. Under their more than a decade of ownership, we have successfully grown our footprint and significantly diversified our offerings to our valued customers.”
Meati Foods adds 2 sports moguls to investor list
Golden State Warriors star Chris Paul, and three-time Olympic gold medalist and Aly Raisman have become the most recent partners and investors in alternative meat manufacturer Meati Foods. The athletes join the company’s list of existing partners including Derek Jeter, Rachel Ray, and Sweetgreen co-founders Nicholas Jammet and Jonathan Neman, making a trendy name for itself in the space. The fermented mushroom mycelium analog company launched in major retailers in 2023, and said it has plans to become the U.S. market leader in the plant-based meat space by 2025. Despite the company’s optimism around its growth, Meati has laid off employees in recent months, with plans to shift gears and “focus on profitability.” In order to stay competitive, Meati has also said that it doesn’t consider itself a plant-based company, but instead a less processed, better-for-you alternative meat company.
Grocery & Restaurants
Restaurant chain Chuck E. Cheese exploring sale, sources tell Reuters
Chuck E. Cheese, the U.S. restaurant chain that emerged from bankruptcy three years ago, is exploring a sale amid acquisition interest, according to people familiar with the matter. The Irving, Texas-based company, known for its arcade games and rat mascot Charles Entertainment “Chuck E.” Cheese, is working with investment bank Goldman Sachs on an auction process that could attract private equity firms as well as peers such as Dave & Busters Entertainment the sources said. CEC Entertainment, the parent company of Chuck E. Cheese, has told potential acquirers it expects to generate around 1.2 billion in revenue and $195 million in earnings before interest, taxes, depreciation and amortization (EBITDA) this year, the sources added. Based on the valuation metrics of its peers, the company could fetch well over $1 billion in a sale, according to the sources.
Boston Market owner Jay Pandya files for bankruptcy
Boston Market owner Jay Pandya — who faces hundreds of lawsuits from vendors, franchisors, and employees regarding unpaid bills — filed for personal bankruptcy on Dec. 8 with the Eastern District of Pennsylvania Bankruptcy Court. Pandya cited $10-$50 million in liabilities and the same range for assets in his bankruptcy paperwork. Pandya is the head of Engage Brands under the Rohan Group of Companies, which bought Boston Market in 2020 while the then-struggling company was in the midst of a brand transformation that was meant to boost sales and bring Boston Market out of the red. But nearly four years later, Boston Market’s troubles have only grown.
Home & Road
Furniture sales up in November; how does YOY look?
While furniture and home furnishings sales picked up in November, the category remained off 2022’s pace according to the Department of Commerce’s advance monthly estimates. In the monthly snapshot, furniture and home furnishings stores sold an adjusted $10.736 billion, down 7.3% from November 2022’s $11.579 billion but up 0.9% compared with October’s $10.642 billion. Through 11 months of the year, the category had accumulated $121.962 billion in sales, down 5.5% vs. the same timeframe last year. Taking a look at the overall retail picture, $705.692 billion was sold across all the measured categories, up 4.1% vs. 2022 and up 0.3% compared with October. Year-over-year, only gas stations, which reported a sales decline of 9.4%, showed a steeper drop than the furniture category. Additionally, building material and garden equipment and supplies dealers was the only other category to show a year-over-year drop, as it fell 2.5%.
3 things to note: Hooker CEO expands on latest earnings report
Furniture industry giant Hooker Furnishings reported $116.8 million in consolidated third quarter net sales, a 22.9% decline from last year. The company attributed the decline to softer demand for home furnishings, exits from unprofitable operations within its Home Meridian segment and the implementation of a new ERP system. Furniture Today spoke to CEO Jeremy Hoff, who offered further insight into the state of the company. Here are a few takeaways from that conversation: margins are inflated, but only temporarily; and demand is down, but orders are trending up.
Where does Beyond Inc. see opportunities for growth? Where doesn’t it?
In a “fireside chat” with investors, Beyond Inc.’s new chairman laid out an ambitious plan that hits multiple business segments. In rapid-fire succession, Marcus Lemonis shared a dizzying array of initiatives – some that will go into effect immediately, others that will be pursued over a longer period of time. He began by laying out 10 “simple actions” that leadership will spend the next several years pursuing. That includes growing the customer file to 10 million from the current 5.2 million, launching paid services such as furniture set-up, shipping insurance and warranties with 3rd party partners, and possibly distributing private labels through other retailers such as Amazon marketplaces. Additionally, Beyond could go after the legacy buybuy Baby market by getting into the baby goods business, and take a bite out of Esty’s market share by cultivating small-batch home goods producers “who meet our standards,” said Lemonis.
Jewelry & Luxury
Breitling Buys Universal Genève for $69 Million
Breitling has purchased Universal Genève, a once-coveted watch line that has been mostly dormant for decades. A filing from the Hong Kong-based Stelux Group, Universal Genève’s current owner, said that Breitling is paying 60 million Swiss francs, or approximately $69 million, for the brand. Breitling and Universal Genève will be run separately, though a “dedicated team” will be brought on to oversee the acquisition, according to a statement from Breitling. Founded in 1894—the same year as Breitling—Universal Genève rose to prominence in the early 20th century. In 1927 it debuted the Cabriolet, one of the first reversible watches. By 1935 its headquarters was located on rue du Rhône in Geneva, in between Rolex’s and Patek Philippe’s, “consolidating the brand as one of the top watch manufacturers,” according to a brand history.
On Data: How Are Independents Doing So Far This Holiday Season?
The year began with a cloud of uncertainty hanging over the jewelry industry. Economic experts predicted a recession, rising inflation, and a potential decline in consumer spending. These forecasts cast a shadow over the independent jeweler, raising concerns about their ability to weather the impending economic storm. Despite these challenges, the independent jeweler has demonstrated remarkable resilience so far in 2023. They have navigated the market with agility and adaptability, a trend that appears to be continuing as the holiday season begins in earnest. The Thanksgiving weekend brought positive outcomes for our independent retailers, who recorded a commendable 3 percent surge in gross sales and an impressive 5 percent increase in average retail sale, despite a marginal 2 percent decline in units sold. During the same weekend, the diamond categories exhibited a mix of outcomes but with promising indicators.
India to Lift Ban on Rough Diamond Imports
Diamond industry leaders in India have agreed to end the voluntary suspension of rough diamond imports as prices stabilize. The two-month ban, which went into effect Oct. 15, will be lifted on Dec. 15. The announcement came from India’s Gem and Jewelry Export Promotion Council (GJEPC), which is acting as a representative for the Indian diamond industry alongside the Bharat Diamond Bourse, Mumbai Diamond Merchants Association, Surat Diamond Bourse, and Surat Diamond Association. The moratorium was put in place in the hopes of addressing the imbalance between supply and demand as natural diamond jewelry demand declined in the world’s two largest markets, the United States and China, and polished prices dropped. Indian officials are lifting the ban because market conditions have improved.
Luxury slowdown prompts fears of inventory pile-up over key holiday season
Early holiday shopping season discounts from high-end fashion retailers like Bergdorf Goodman on New York’s Fifth Avenue raised concern that a lackluster Christmas could lead to inventory gluts – potentially dragging labels into a discounting spiral that would cheapen their image. The latest U.S. credit card data from Barclays released on Wednesday showed that spending on luxury goods remained negative in November, down 15% year-on-year after a decline of 14% in October. That performance “doesn’t bring much optimism” for the fourth quarter, with the weak trends in the U.S. reason for caution about the performance of luxury brands over the period, Barclays analysts said. Credit card data from Citi, also released on Wednesday, showed purchases of luxury fashion were down 9.6% year-on-year in November, after an 11.4% decline in October, with steeper declines in department stores and online, down 13% in November year-on-year.
Office & Leisure
Hasbro laying off 1,100 workers as weak toy sales persist into holiday season
Hasbro is laying off about 1,100 employees as the toy maker struggles with soft sales that have carried into the holiday shopping season, according to a company memo obtained by CNBC. Hasbro had about 6,300 employees as of earlier this year, according to a company fact sheet. “We anticipated the first three quarters to be challenging, particularly in Toys, where the market is coming off historic, pandemic-driven highs,” CEO Chris Cocks said in the memo. “While we have made some important progress across our organization, the headwinds we saw through the first nine months of the year have continued into Holiday and are likely to persist into 2024. Hasbro, which already laid off hundreds of employees earlier this year, had warned in October that trouble was on the horizon. In the company’s most recent quarterly earnings report, Hasbro slashed its already-soft full-year outlook, projecting a 13% to 15% revenue decline for the year. Popular toy brand sales had dropped significantly, Hasbro also said in the October quarterly report. Popular brands like My Little Pony, Nerf and Transformer had fallen 18% at the time, due to “softer category trends.” Hasbro competitor Mattel had also warned of soft sales. Yet Mattel’s stock is up about 6% through Monday, powered a great deal by the box office success of the film “Barbie.” That’s still behind the 17% gain posted by the S&P 500 so far this year, though.
Gregory, High Sierra Parent Company Sees Debt Ratings Upgrade
S&P Global Ratings raised the debt ratings outlook of Samsonite International S.A., the parent of Gregory and High Sierra, as the company reported strong operating performance in the third quarter ended September due to both revenue growth and ongoing operational efficiency trends, which enabled it to accelerate its deleveraging. S&P said it now expects the company’s adjusted leverage to be close to 2x at the end of 2023 compared to its previous forecast of 2.7x. S&P’s outlook on Samsonite was improved to positive from stable and all its debt ratings were affirmed, including its ‘BB’ issuer credit rating. The positive outlook reflects the potential for an upgrade if Samsonite continues to demonstrate sustained strong performance amid stable demand in the travel industry. Samsonite’s core brands include Samsonite, Tumi and American Tourister. Smaller brands include High Sierra, Kamiliant, ebags, Xtrem, Lipault, Hartmann, Saxoline, and Secret. For the trailing 12 month (TTM) period ended Sept 30, 2023, S&P Global Ratings-adjusted leverage improved to 2.1x compared to 3.3x in the TTM period ended Sept 30, 2022 due to top-line growth and margin expansion. On a year-to-date basis, revenues reached $2.7 billion, which supported around $645 million of S&P Global Ratings-adjusted EBITDA generation, surpassing 2019 (pre-COVID) levels for the same period.
Technology & Internet
Seattle online retailer Zulily going out of business
Seattle-based online retailer Zulily appears to be shutting down for good, according to statements on the company’s website on Saturday. “All sales are final during Zulily’s going-out-of-business sale,” the website reads. “FINAL SALE. All items must go.” The statements, which appear to have been added recently, come less than 48 hours after Zulily laid off more than 800 employees, including 292 in the Seattle area, and was reportedly closing offices and other facilities in Seattle, Nevada and Ohio. But the out-of-business statements on the website, first reported Saturday by GeekWire, appear to confirm the end for a 13-year-old company that briefly dazzled the tech world with a multibillion-dollar IPO but was unable to build on that early success.
Amazon courts sellers at China summit as Temu and Shein gain momentum
Amazon is making a fresh appeal to China-based sellers as it fends off growing competition from discount online retailers Temu and Shein, which both have roots in the world’s second-largest economy. At a conference that began Tuesday and runs through Friday, Amazon said it plans to open an “innovation center” near Shenzhen, a hub for technology companies and cross-border e-commerce that’s often referred to as China’s Silicon Valley. Amazon said it will “promote sellers in the Asia-Pacific region in product launch, brand building, and digitization.” The company is also giving Chinese sellers access to its end-to-end supply chain service, which debuted in the U.S. in September. The offering allows merchants to move goods from factories overseas and replenish them on Amazon and other channels “in one stop.” The annual conference for sellers in China features some of Amazon’s top brass, and typically attracts thousands of merchants from the region. While Amazon no longer operates in China, the country has become a hotspot for businesses looking to market their products to Amazon’s global customer base. At one point, nearly half of the top Amazon sellers were based in China, according to Marketplace Pulse.
Finance & Economy
Retail sales rose 0.3% in November vs. expectations for a decline
Consumers showed unexpected strength in November, giving a solid start to the holiday season as inflation showed signs of continued easing. Retail sales rose 0.3% in November, stronger than the 0.2% decline in October and better than the Dow Jones estimate for a decrease of 0.1%, the Commerce Department reported. The total is adjusted for seasonal factors but not inflation. Excluding autos, sales rose 0.2%, also better than the forecast for no change. Stripping out autos and gas, sales rose 0.6%. With the consumer price index up 0.1% on a monthly basis in November, the retail sales number shows consumers more than keeping up with the pace of price increases. On a year-over-year basis, sales accelerated 4.1%, compared to a headline CPI rate of 3.1%.
US unemployment applications fall again as labor market continues to thrive
The number of Americans filing for jobless benefits fell last week as the labor market continues to thrive despite high interest rates and elevated costs. Applications for unemployment benefits fell by 19,000, to 202,000, for the week ending Dec. 9, the Labor Department reported. Analysts were expecting around 224,000. About 1.88 million people were collecting unemployment benefits the week that ended Dec. 2, 20,000 more than the previous week. Jobless claim applications are seen as representative of the number of layoffs in a given week. Hiring has slowed from the breakneck pace of 2021 and 2022 when the economy rebounded from the COVID-19 recession. Employers added a record 606,000 jobs a month in 2021 and nearly 400,000 per month last year. That has slowed to an average of 232,000 jobs per month this year, a still-solid number.
