The outbreak of COVID-19 is having an unsettling effect worldwide, and many businesses have been negatively impacted by stringent lockdowns and waning consumer confidence. Unexpected events, such as the COVID-19 outbreak, can trigger the material adverse change (MAC) clause in contractual agreements. MAC clauses can be triggered when a buyer has signed, but not executed, an agreement to purchase or merge with a target and unexpected events have had a material adverse impact on the target. The September 11th terrorist attacks and the 2008 financial crisis resulted in increases of parties invoking MAC clauses. Likewise, the devastating impact of the COVID-19 outbreak on the world economy has led to legal disputes and settlements in several marquee consumer transactions in 2020.
On February 20, 2020, Sycamore Partners agreed to buy a 55% stake in Victoria Secret from parent company L Brands for $525 million. The transaction agreement included two closing conditions: a) “Any state of facts, circumstance, condition, event, change, development, occurrence, result or effect… that would prevent, materially delay or materially impede the performance by [L Brands] of its obligations under” the transaction agreement, or b) Any “material adverse effect on the financial condition of” Victoria’s Secret, excluding any effect resulting from pandemics. Sycamore invoked these provisions as they sought to dissolve the deal, claiming that there was a material adverse change because COVID-19 prevented L Brands from fulfilling its interim operating covenants, including furloughing employees, cutting executive salaries and refusal to pay rent at retail stores and the target violated operating covenants by operating outside the ordinary course of business and changing its cash management policies. Instead of enduring a long legal fight, the transaction was ultimately cancelled, and the dispute was settled between the two parties.
Separately, on February 9, 2020, Simon Property Group and Taubman Centers announced a merger in which Simon would purchase 80% of the shares of Taubman for $52.50 per share in cash. Total consideration for the transaction was $3.6 billion, and the Taubman family would retain a 20% minority interest. On June 10, 2020, Simon terminated the merger agreement, claiming that Taubman was materially and adversely impacted by COVID-19 and that Taubman did not properly mitigate the impact of the pandemic and did not make essential cuts in operating expenses and capital expenditures. Taubman has responded, noting that Simon’s claims are without merit and the deal should progress under the February merger agreement. The question before the state court of Michigan is how the MAC clause in their merger agreement should be interpreted.
For a buyer to rely on a MAC, it needs to show that the target’s long-term earning capacity has been impacted negatively and will persist for years. A temporary disruption, lasting mere months, is not sufficient. The buyer must also demonstrate that, since signing the agreement, there are significant changes in the economic challenges that the target faces. In addition, a buyer needs to also show that the target has been impacted negatively disproportionately to other businesses in its industry. Although COVID-19 is causing significant disruption in the global markets, the MAC test is a high bar and will be challenging for buyers such as Simon to hurdle in court, especially since industry participants are all being negatively impacted by the worldwide pandemic. Still, one can understand why buyers are trying to invoke MACs – the impacts of the COVID-19 pandemic are clearly both material and adverse.
Headlines of the Week
Simon pulls out of $3.6B Taubman deal
Simon Property Group, Inc. on Wednesday said it terminated its Feb. 9 agreement to merge with rival mall developer Taubman Centers Inc. The deal for Simon to acquire an 80% ownership interest in The Taubman Realty Group Limited Partnership, including all of Taubman common stock, for about $3.6 billion, was originally expected to close about now. Instead, Simon has filed a lawsuit in a Michigan Circuit Court arguing that Taubman breached covenants regarding the operation of its business, specifically that “Taubman has failed to take steps to mitigate the impact of the pandemic as others in the industry have, including by not making essential cuts in operating expenses and capital expenditures.”
Just Eat Takeaway agrees to acquire Grubhub in $7.3B deal
Just Eat Takeaway.com, a third-party delivery company based in Amsterdam, has agreed to acquire Chicago-based Grubhub Inc. in an all-stock transaction valued at about $7.3 billion, the companies announced late Wednesday. The acquisition would create the largest food delivery company outside China, the companies said. Grubhub had been in discussions since May with Uber Technologies Inc., parent to the Uber Eats restaurant delivery platform, but those talks raised antitrust concerns from some federal lawmakers. Upon the deal’s completion, expected in the first quarter of 2021, Grubhub shareholders would own about 30% of the combined company.
Apparel & Footwear
World’s largest fashion group, Inditex, reports first loss despite jump in online sales
The world’s largest fashion group, Inditex, reported its first quarterly loss Wednesday, as it described being “materially impacted” by the coronavirus pandemic. The company, which owns Zara, reported a net loss of 409 million euros ($465 million) for February through April, in comparison with a net profit of 734 million euros over the same period in 2019. The loss included a provision of 308 million euros for its store optimization program, which will continue until 2021 despite of pandemic. Sales fell to 3.3 billion euros from nearly 6 billion euros in the first quarter of last year. The loss came despite a 50% increase in online sales in the first quarter, and a 95% jump in online sales in April. Inditex expects online sales to represent more than 25% of its total sales by 2022. At the end of 2019, online transactions made up 14% of net sales.
Tailored Brands mulls bankruptcy
Tailored Brands is contemplating a potential bankruptcy filing to help reduce its debt burden, according to a Bloomberg report that cited anonymous sources. The men’s apparel retailer is working with law firm Kirkland & Ellis, which has worked on many prominent retail bankruptcy cases, and the investment bank PJT Partners, according to Bloomberg. The news service reported that the retailer could close some weaker locations to “satisfy its creditors” in bankruptcy. The report noted that plans are still “in the early stages” and that Tailored Brands, owner of Men’s Wearhouse, is also seeking alternative forms of financing. Tailored Brands — which runs the Jos. A. Bank, Moores and K&G banners along with Men’s Wearhouse — has struggled with top-line declines for years, while margins and profits have shrunk.
RTW Retailwinds could close all stores in bankruptcy scenario
After earlier indicating bankruptcy was “probable,” RTW Retailwinds said in a securities filing it could close more than 150 stores, or close all of its stores, were it to file. The apparel retailer, owner of New York & Co., already planned to turn itself into a “digitally dominant retailer,” with plans to close more than a third of its 387 stores over the next year and a half. RTW said earlier this week it entered into a forbearance agreement with its bank, Wells Fargo, after RTW acknowledged previously that it had defaulted on its credit facility terms. The agreement with Wells Fargo calls for a reduction in available letters of credit, new repayment terms and reporting requirements, cash sweeps, and increased interest rates, among other changes to the loan.
Hanesbrands names Walmart executive Bratspies as new CEO, effective Aug. 3
Hanesbrands Inc. has chosen a Walmart merchandising executive as its next chief executive. Hanesbrands’ board of directors announced Tuesday that Stephen Bratspies, 52, will become the company’s third chief executive since the company was spun out of Sara Lee Corp. in September 2006. Bratspies takes over as chief executive Aug. 3. Bratspies will succeed Gerald Evans Jr., who announced March 11 his plans to retire on Jan. 2 after a 37-year career at the basic apparel manufacturer. Bratspies has more than 25 years of retail, digital and consumer-product leadership experience. Most recently, he served as chief merchandising officer at Walmart Inc., where he managed $330 billion in sales, drove a major merchandising transformation initiative, and accelerated comp-store sales and market-share gains.
Brooks Brothers seeks financing for potential bankruptcy, as it continues sale process
Brooks Brothers is talking to banks about raising financing for a potential bankruptcy that could come as soon as July, as the coronavirus pandemic squeezes the sales of the two-century-old retailer, people familiar with the matter tell CNBC. Brooks Brothers is continuing a sale process it launched earlier this year to heavy interest, and could still conduct a sale without filing for bankruptcy, these people say. However, its talks about so-called debtor-in-possession financing, which would support its operations in bankruptcy, show that one option it is preparing for is filing for court protection. The retailer has not finalized how large of a DIP loan it might need, as that would depend on how many stores it closes in any potential bankruptcy proceeding, the people said. Brooks Brothers Chief Executive Claudio Del Vecchio told The New York Times this week that while he was not “eager” to consider a Chapter 11 bankruptcy filing, he would not rule it out. Brooks Brothers, known for its upscale preppy attire, calls itself the country’s oldest clothing retailer.
Athletic & Sporting Goods
North Castle Partners Announces Strategic Investment in Sparx Hockey
North Castle Partners announced a strategic investment and partnership with Sparx Hockey, the inventors of the Sparx Skate Sharpener and one of the fastest growing brands in sports. The partnership provides the company with additional resources and expertise to assist Sparx Hockey in its continued growth and increasing global presence. Founded in 2013, Sparx Hockey’s flagship product, the Sparx Skate Sharpener is an affordable, automated skate sharpener that allows anyone, anywhere to sharpen skates with pro-level accuracy. North Castle’s current portfolio includes well-known brands such as Barry’s Bootcamp, SmartyPants Vitamins, HydroMassage, Encore Vet Group, VitaCup, Inc., Maya Kaimal Foods, Windham Mountain Resort, Mack Weldon, CR Fitness, and Echelon.
New York activist investor is taking a swing at Callaway Golf
A New York activist investor and his hedge fund disclosed they have more than a 9 percent stake in Callaway Golf Co., and they want to see some changes made in the California golf company. JANA Partners, a New York-based hedge fund run by Barry Rosenstein, disclosed in an SEC filing that it purchased nearly 9 million shares of Carlsbad, California-based Callaway shares for about $140 million, and JANA now owns slightly more than 9 percent of Callaway’s shares. JANA may be targeting Callaway’s forays into non-golf entities. In November, Callaway said it was buying active lifestyle company Jack Wolfskin for $476 million. That premium outfitter purchase followed similar 2017 acquisitions of TravisMathew and Ogio.
Cosmetics & Pharmacy
Unilever Simplifies Structure, Lays Groundwork for More M&A
Unilever is simplifying its legal structure as it gears for more M&A deals, with COVID-19 easing and countries unlocking. The beauty-to-food giant said Thursday it plans to unify its group legal structure under a single parent company, Unilever plc. The move, it said, creates “a simpler company with greater strategic flexibility that is better positioned for future success.” Unilever, which owns brands ranging from Dove and Ponds to Ben & Jerry’s and Hellmann’s and has a burgeoning premium beauty portfolio, said after a “comprehensive review” over the last 18 months, the board continues to believe that moving from the current dual-headed legal structure to a single parent company will bring significant benefits. It said the pandemic demands “having as much flexibility and responsiveness as possible.”
Nestlé Health Science to Acquire Majority Stake in Vital Proteins
Nestlé Health Science will make the first acquisition of a collagen-based wellness company to date, proving that consumer mindsets are shifting toward bettering one’s personal well-being. In 2012, former NASA aerospace engineer Kurt Seidensticker launched Chicago-based Vital Proteins as a direct-to-consumer company offering “clean,” simple, and allergen-free collagen that was both easily soluble and flavorless. It has grown to become America’s leading collagen brand and a lifestyle and wellness platform offering supplements, beverages, and food products. Nestlé Health Science (NHSc), a wholly-owned subsidiary of Nestlé, is a globally recognized leader in the field of nutritional science.
Discounters & Department Stores
Macy’s raises $4.5 billion, says it has ‘sufficient liquidity’ to weather pandemic
Macy’s has raised roughly $4.5 billion in new financing to help it weather the coronavirus pandemic. The funding includes $3.15 billion in asset-based credit and a previously announced $1.3 billion bond offering. Macy’s said, as a result, it expects to have “sufficient liquidity” to address the needs of its business during this time of upheaval. This includes purchasing fresh merchandise for the upcoming selling seasons and repaying upcoming debt maturities in fiscal 2020 and 2021. In April, CNBC reported Macy’s was considering the financing as a way to relieve the pressure from having all of its stores shut during the coronavirus pandemic.
Macy’s store reopenings ‘better than anticipated’
Macy’s on Tuesday said that store reopenings have exceeded expectations with “strong digital business sales” continuing throughout May. By June 1, some 450 stores were opened, most “in their full format,” CEO Jeff Gennette said in a statement. The department store also said it expects first quarter net sales to reach $3 billion, down from $5.5 billion last year, with net loss of $652 million (down from net income of $136 million) and operating loss of $969 million (down from operating income of $203 million). Gennette said the company expects to exit the current quarter with clean inventory.
Sam’s Club rolls out curbside pickup across the US
Sam’s Club is deploying curbside pickup service to all of its 597 locations in the United States, the Walmart-owned membership warehouse chain announced in a press release. The company expects the rollout to be complete by the end of June. The company is primarily aiming the curbside pickup service at Plus-level members, who pay $100 per year for shopping privileges and will be able to use the pickup option without paying extra.
Emerging Consumer Companies
Attn: Grace, the first sustainable wellness brand for women as they age, has launched. To start, the company is focusing on bladder leakage, a condition experienced by 1 in every 3 women. The business has raised $1 million from a number of early-stage investors, including XFactor Ventures, Precursor Ventures, and 37 Angels. Attn: Grace offers discreet, convenient, subscription delivery of products at a cost competitive with traditional brands, and a female point-of view where many other major brands are founded and run by men.
Audrey Gelman, cofounder and CEO of The Wing, the women’s coworking and social club, is stepping down from her position. The resignation announcement came as Wing employees staged a digital walkout in solidarity with Black and brown workers, criticizing The Wing for failing to “practice the intersectional feminism that it preaches.” Gelman will be replaced by an “office of the CEO” held by three women.
Following accusations of racism, Yael Aflalo, who launched the brand in 2009, is stepping down from her role as chief executive, and current president Hali Borenstein will serve as her replacement. The news follows a former employee’s claims of experiencing racism at the company—and from Aflalo in particular—and charges that the brand rarely features black models in its promotions. Aflalo acknowledged the shortcomings, and said that Reformation will update is quarterly sustainability report to include goals and metrics on diversity and inclusion, and strive to feature more diversity in its branding and marketing
Grocery & Restaurants
Instacart nabs nearly $14 billion valuation in new funding round
Instacart has raised a new round of financing that makes it one of the most valuable private companies in the U.S., leapfrogging DoorDash, Palantir and Robinhood. Amid surging demand for grocery delivery due to the coronavirus pandemic, Instacart has raised $225 million in a new funding round led by DST Global and General Catalyst. The round increases Instacart’s valuation to $13.7 billion, up from $8 billion when it last raised money in 2018. “COVID-19 created a massive shift for the grocery industry and forever changed how people view the necessity of on-demand services,” Instacart founder and CEO Apoorva Mehta said in a press release. “Overnight, Instacart became an essential service for millions of families across North America.”
BurgerFi to go public after proposed merger with Opes Acquisition Corp.
BurgerFi said it has a “non-binding letter-of-intent” to merge with a shell company that will ultimately take the fast-casual burger chain public. The North Palm Beach, Fla.-based better-burger concept, which operates nearly 125 company and franchised units, has reached a deal to combine with Opes Acquisition Corp., a “blank check” investment company that takes money from public investors and makes an acquisition. The two firms said they expect to reach an agreement by the end of this month, with a deal expected to close by the fall of this year. It will then be publicly traded on the Nasdaq Stock Exchange. Terms of the proposed deal were not available, but BurgerFi shareholders will roll over most of their equity into the combined company. By merging with Opes, BurgerFi will get funding to support its growth and will become a publicly traded firm, which will give it access to more types of capital in the future.
Taco Bell owner sues Grubhub, claiming it violated distribution agreement
Taco Bell owner Yum Brands is suing Grubhub, claiming that it violated its distribution agreement. Yum bought a 3% stake in the third-party delivery app in 2018 as more national chains looked to lift sales by offering delivery. As part of the deal, the two signed a contract that required the delivery app to give Yum favorable pricing and service levels for thousands of Taco Bell and KFC restaurants, which are largely operated by franchisees. The lawsuit, filed Thursday in New York County’s Supreme Court, alleges that Grubhub CEO Matt Maloney improperly terminated the company’s contract with Yum on June 2. He sent the company a letter claiming that Yum’s work with Uber Eats and Postmates violated the terms of the deal. Yum denies the allegation.
Nestle to sell North America pasta business to private equity firm
Brynwood Partners VIII LP has acquired Nestle SA’s North American Buitoni pasta business. Terms of the agreement were not disclosed. The business will be operated as the Buitoni Food Co. within Brynwood Partners and headquartered in Stamford, Conn. As part of the agreement, the Buitoni Food Co. is acquiring a manufacturing facility in Danville, Va., from Nestle. The transaction includes the rights to the Buitoni brand in the United States, Canada and the Caribbean territories. Buitoni is the second pasta business Brynwood Partners has acquired from Nestle. In 2013, the company acquired Joseph’s Gourmet Pasta Co.
Home & Road
Serta Simmons Bedding enters into agreement to recapitalize the company
Serta Simmons Bedding has entered into a transaction support agreement with a majority of its first lien and second lien term loan holders to recapitalize the company.
The transaction is expected to reduce net debt by approximately $400 million and further provides for $200 million in new capital to increase the company’s financial strength and support the acceleration of SSB’s business transformation plan, officials said. “The agreement with our lenders announced today is further validation of our business and transformation strategy as well as our leadership team,” said SSB Chairman and CEO David Swift.
Aaron’s provides second quarter financial update
Lease-purchase specialist Aaron’s Inc. provided an update on expectations for its second quarter ending June 30. The company said it expects revenues ranging from $975 million to $1 billion and non-GAAP earnings between 80 cents and 85 cents per share. As of May 31, it also reported its cash balance was about $230 million, up $90 million since April 30. Aaron’s expects revenues and non-GAAP earnings in the third and fourth quarters will be highly correlated to new lease originations in both quarters, preceding each reported quarter. For its Progressive Leasing segment, it said that as its retail partners begin to reopen their stores the company is experiencing a recovery in invoice volume from a low point in April 2020 and expects this improving trend to continue.
Top Bedding Producers: Sealy regains No. 1 spot on list
In a year of big performance swings by major players, Sealy regained the sales leadership it lost at the end of 2011 to Serta and stands atop Furniture Today’s list of the Top 20 U.S. bedding producers. Sealy engineered a 12.5% gain in 2019 to record wholesale shipments of $1.436 billion, comfortably claiming the coveted No. 1 spot on the list, according to Furniture Today estimates. Sealy includes Sealy and Stearns & Foster branded shipments. Serta suffered an estimated 20% decline in shipments, which dropped to $1.205 billion, and it dropped to the No. 3 spot on the list. Simmons had an estimated 10% decline in shipments for its Simmons and Beautyrest brands and fell to $1.229 billion, but it managed to hang on to the No. 2 spot.
Lovesac stock up after company posts Q1 net sales increase
Stock for Lovesac, the furniture company known for making Sactional adaptable sofas, are trading up more than 20% today after the company posted a net sales increase of 32.8% or $54.4 million in the first quarter of fiscal 2021, which ended on May 3, compared with net sales of $41 million in the first quarter of fiscal 2020. Gross profit dollars increased by 30% to $27.3 million for the first quarter of fiscal 2021 compared with $21 million in the first quarter of last year. The company posted a net loss of $8.3 million for the first quarter of fiscal 2021 compared with a net loss of $9.1million in the prior-year period, which resulted in net loss per share of 58 cents compared to a net loss per share of 67 cents in the first quarter of 2020.
Purple’s direct-to-consumer orders up 125% in May
In a business update, Purple Innovation said its May direct-to-consumer orders increased 125% to approximately $71 million compared with the same month last year. It said that growth that driven by growth in mattresses and bases as well as ancillary products including pillows, sheets, and seat cushions. May wholesale orders were $17.3 million, a decline of less than 2% year-over-year, compared to down 43% in April, as more wholesale doors reopened and weekly orders have increased on a sequential basis. As of May 31, more than two thirds of the company’s approximately 1,800 wholesale partner doors have reopened.
Jewelry & Luxury
Direct-To-Consumer Jewelry Brands See Spike in Sales During Pandemic
New data shows that jewelry has been one of the hardest-hit retail industries during the pandemic. Other reports indicate that website traffic to online jewelry retailers has steadily decreased since February 25. However, select retailers within this vertical (most outside the fine jewelry market segment) are seeing remarkable sales growth in recent months. The direct-to-consumer (DTC) market for jewelry appears to be thriving. Take Gorjana, for example. They’re currently experiencing 300% growth year-to-date, with 400% monthly growth between April and May.
Tiffany’s Sales Fall as Takeover Questions Swirl
With most of its stores shut due to COVID-19, Tiffany posted bleak results for the first quarter of fiscal 2020—but management didn’t address reports that LVMH was taking a fresh look at its pending acquisition of the retailer, given ongoing unrest in the United States. A statement from chief executive officer Alessandro Bogliolo noted only that the acquisition had been cleared by antitrust authorities in Russia and Mexico—and that it hoped to complete the merger by the middle of the year. “I am confident that Tiffany’s best days remain ahead of us, and I am excited we will be taking that journey with LVMH by our side,” he added.
Signet Closing 380 Stores This Year as Sales Are Hit by COVID-19
Signet Jewelers won’t reopen 230 stores it closed due to COVID-19 and then plans to close another 150 stores this year, executives said in a conference call held Tuesday. The stores that won’t reopen include 150 stores in North America and 80 stores in the United Kingdom. These closures mean that Signet’s store footprint will have shrunk more than 20% over the past few years, chief executive officer Gina Drosos said in a conference call following the release of its financial results.
Chinese shoppers are giving luxury brands some hope
Chinese shoppers are finally starting to snap up high-end handbags, shoes and jewelry again, giving the luxury goods industry hope that a recovery from the coronavirus pandemic is on the way. But leading brands still face a tough road ahead, and will likely have to rethink the way they do business to withstand a damaging, worldwide hit to sales this year, as well as a shift in shopping habits in many recession-scarred economies. Several luxury goods companies reported an uptick in China this spring as people emerged from weeks of lockdowns, spurring what some analysts have called a trend of “revenge spending” — the release of pent-up demand once people aren’t forced to stay home.
Office & Leisure
Bankrupt Hertz Seeks Permission To Raise $1 Billion In Preposterous New Stock Sale
Hertz Global Holdings, in a filing Thursday, asked the court overseeing its Chapter 11 bankruptcy reorganization to authorize a stunning plan to raise $1 billion by selling 246.8 million new shares. “It’s bananas,” says Matthew Cavenaugh, a bankruptcy attorney with Jackson Walker, who has no involvement in the case. “The whole concept of funding a Chapter 11 through an equity raise, in the first month, in this unprecedented environment, strikes me as ludicrous.” This is because by almost any stretch of the imagination, shares in Hertz should already be considered worthless — with equity holders so far down the totem pole that they would be foolish to believe a Hertz reorg would leave them with any value whatsoever. But don’t tell that to retail investors who have inexplicably piled into Hertz since its May 22 bankruptcy filing, driving up the share price from 56 cents to as high as $5.53 earlier this week.
AMC Entertainment Expects To Be “Fully Opened Globally” In July, Posts Expected, Massive Q1 Loss
Giant exhibitor AMC Entertainment said net losses swelled to $2.18 billion, including a giant $1.8 billion in non-cash impairment charges, for the first quarter of the year from a negative $130 million the year before in what CEO Adam Aron called “unprecedented times.” Revenue dropped 22% to $941 million from $1.2 billion for the three months ended in March. As the company celebrates an historic 100-year birthday this year, Aron during a conference call to discuss the earnings, gave an unusual callout to a pair of strategic and financial allies in hedge fund Silver Lake and Citibank for standing by the company in a difficult period. The company itself said as recently as last week it wasn’t sure it would be able to continue as a “going concern” and big ratings agencies Moody’s and S&P downgraded its credit rating over a controversial distressed debt swap that would force debt holders to take a haircut. S&P called the move tantamount to a default. The company has been successfully renegotiating with “hundreds and hundreds of landlords” around the world, Aron said, including getting first quarter rent completely forgiven, converting fixed-price rent to a percentage of revenue going forward, lowering rents for the second half of 2020 or in some cases for the duration of the lease.
Disney Cruise Line, Cunard Line cancel sailings well into the fall because of coronavirus
Disney Cruise Line and British luxury cruise line Cunard have joined a myriad of other lines canceling additional future sailings and pushing back their restart dates. Disney Cruise Line, which extended its sailing suspension through July 27 last month, has added more cancellations to its list, including sailings scheduled as far ahead as October. Departures from Europe are suspended through Oct. 2, according to a statement on Disney Cruise Line’s website, and departures from Canada are suspended through Sept. 14 while Disney Dream and Disney Fantasy departures remain suspended through July 27. Passengers on affected sailings will be given the option of a future cruise credit or a full refund and are advised to contact their travel agent or Disney, directly.
GameStop swings to Q1 loss but digital sales soar
GameStop reported a loss for its first quarter as its stores were shuttered due to COVID-19 but its online sales jumped as the company pivoted to an online and curbside pickup model. The videogame retailer reported a net loss of $165.7 million, or $2.57 a share, for the quarter ended May 2, compared with net income of $6.8 million, or 7 cents a share, in the year-ago period. The company’s adjusted net loss was $103.9 million, or $1.61 a share. Revenue declined 17% to $1.02 billion. Global e-commerce sales surged 519% from the year-ago quarter. After including the impact of stores that were closed for the majority of the quarter due to the COVID-19 pandemic, comparable sales decreased by approximately 30%.
Technology & Internet
Used car seller Vroom is the latest IPO to boom and zoom
Online used car seller Vroom is the latest startup to find that investors have an insatiable appetite for new stocks. Vroom shares debuted on Wall Street Tuesday and quickly more than doubled from their offering price. Vroom, which competes with traditional used car sellers such as AutoNation (AN) and CarMax (KMX) as well as internet car dealer Carvana (CVNA), priced its stock sale at $22 a share — above its expected range. The stock wound up soaring 118% to finish the day at $47.90. The company has impressive financial backers. Vroom’s top investors include venture capital firm General Catalyst Group, mutual fund company T. Rowe Price (TROW) and Cascade investment, a firm controlled by Microsoft (MSFT) co-founder Bill Gates. AutoNation also owns a nearly 5% stake in Vroom.
Why luxury brands are betting on Bilibili
Born as a playground for anime, comics and games fans in 2009, Chinese video sharing website Bilibili has successfully broken out of its subculture circle and entered the mainstream by acquiring users and diversifying into advertising and paid content. Often compared to YouTube, Bilibili allows users to consume video content on topics, from lifestyle and games to technology, and selected creators to share user-generated content. The platform also has a social element, with users able to overlay commentary on the video to engage with each other, and has expanded its capabilities to include live streaming, advertising, mobile gaming and e-commerce. For luxury brands, Bilibili represents an opportunity to seize on Gen Z customers, which make 81 per cent of the platform’s user base, according to QuestMobile, and familiarise them with their products and brand ethos. The advantage is clear: while they might not have a strong purchasing power for now, this generation is expected to account for 55 per cent of total luxury consumption by 2025.
The World’s Livestream Queen Can Sell Anything
Huang Wei can sell anything. For instance: In April, Huang—known professionally as Viya—sold a rocket launch for around 40 million yuan ($5.6 million). The live, online shopping extravaganza the 34-year-old hosts most nights for her fans across China is part variety show, part infomercial, part group chat. Last month, she hit a record-high audience of more than 37 million—more than the “Game of Thrones” finale, the Oscars or “Sunday Night Football.” Each night, Viya’s audience places orders worth millions of dollars—typically for cosmetics, appliances, prepared foods or clothing, but she’s also moved houses and cars. On Singles Day, China’s biggest shopping event of the year, she did more than 3 billion yuan in sales. The spread of coronavirus, which put most Chinese people under stay-at-home orders, doubled her viewership. In a world where we all shop almost exclusively from our couches, Viya is one vision of our collective future. Livestream shopping is a natural confluence of several current tech trends—streaming, influencers, social, commerce—and offers companies a new path to consumers’ hearts and wallets.
Finance & Economy
Total U.S. debt surges to $55.9 trillion amid big increases in corporate and government borrowing
Debt surged and household net worth tumbled in the first three months of the year as the initial impact of the coronavirus pandemic hit, according to Federal Reserve data. Total domestic nonfinancial debt jumped by 11.7% to $55.9 trillion, the Fed said in its quarterly statement on domestic financial accounts. At the same time, plunging stock market values took a bite out of net worth, which fell $7.4 trillion to $110.8 trillion. Wall Street, however, staged a sharp recovery off its March lows, so much of that loss likely has been made up. Equity values fell by $7.8 trillion, while real estate value increased by $400 billion in the first quarter. The biggest debt gain come on the business side, rising 18.8%, while federal government debt also jumped 14.3%. Total federal debt recently passed $26 trillion.
U.S. inflation subdued with economy in recession
U.S. consumer prices fell for a third straight month in May and underlying inflation was weak as demand for goods and services remained subdued amid a recession caused by the COVID-19 pandemic. But with nonessential businesses reopening after shuttering in mid-March to slow the spread of COVID-19, deflation, a decline in the general price level, is unlikely. Still, the report from the Labor Department suggested the disinflationary trend could persist for a while.
