Last week, Leap, the retail as a service company that helps emerging brands launch and grow their physical retail channel, announced a $50 million capital raise. According to the company’s press release, the investment will be used to open new stores and improve Leap’s technology platform. Leap states that in 2021, the company quadrupled its stores and sales, and today, it works with more than thirty brands in more than fifty locations across eight markets.
As Leap opens more stores, it will not be alone. Large national retailers such as Ulta, Sephora, TJX, Dick’s, Burlington, Five Below, Academy Sports + Outdoors, Old Navy, Costco, Dollar General, and David’s Bridal are all planning to open new stores in the near future. Amazon is opening a new apparel concept, Amazon Style, and plans to open another ninety stores under banners such as Amazon Fresh, Amazon Go, and Amazon Books.
Years of declining traffic in malls and anchor department stores and the continued rise of ecommerce have led many retailers to close underperforming stores and to rethink their retail strategies over the last decade. In 2019, retailers made plans to permanently close nearly 10,000 stores, a situation made even worse by the onset of the pandemic in 2020. In 2021, however, new stores made a comeback, with Coresight Research estimating that slightly more stores opened than closed.
For many digital-first brands, the shift to retail is being driven by a need to combat the rising cost of customer acquisition online. But there are other factors at play as well. Historically, stores were places that shoppers visited to browse and buy. Although stores remain a key part of the brand and shopping experience, stores now often function as a way to touch, feel, and try on products before making the purchase later online, and to return or pick up online orders.
That return process is becoming both more common and more important. According to the National Retail Federation, online sales accounted for $1.05 trillion of total U.S. retail sales last year. $218 billion of that was returned. The NRF estimated that the rate of online returns in 2021 more than twice the rate of return for in-store purchases. That follows a doubling of online returns in 2020 from 2019. Online purchases are particularly susceptible to returns given uncertainty around size and the practice of bracketing, where customers buy the same items in different sizes and colors to decide later on what to keep.
Global market research company Forrester calls returns “the next retail competitive service differentiator.” To help solve for it, some companies have sprouted up entirely focused on managing the returns process for others. Happy Returns, acquired by PayPal in 2021, offers 4,000 drop-off locations in 288 metro areas where consumers can return products purchased online. Happy Returns accepts items without boxes, packaging, or labels and immediately initiates exchanges, refunds, or store credit. It claims that the average customer visit takes under sixty seconds. The company believes that for some online sellers, returns may amount to 40% of sales.
A report by CBRE and Optoro estimated that the cost of returns will increase 7% this year after considering all of the logistics – processing, transportation, discounting and liquidation losses. Rising costs and logistical difficulties are leading sellers to evaluate their returns processes and attempt to avoid or minimize them. Some sellers are taking a proactive approach and implementing programs – or acquiring companies – to help alleviate the issue, such as virtual styling services. Best Buy created an online outlet that sells open-box and clearance items at significant discounts. With the increasing costs and complexities, many companies are providing “returnless refunds” where the customers keep the goods but are provided a refund, sparing the seller from the administrative burden of processing returns for goods that are in some cases, low value items.
More stores may help alleviate returns by helping customers make better-informed purchases in the first place and by minimizing shipping costs. With the continued increase in ecommerce and higher rates of returns, along with costlier processing, stores will serve purposes far beyond the simple sales transactions on which they’ve historically focused.
Headlines of the Week
Kim Kardashian’s Skims doubles valuation to $3.2 billion after latest fundraise
Shapewear label Skims said it had doubled its valuation to $3.2 billion after raising $240 million in fresh funds, as investors bet on the success of the Kim Kardashian-owned brand. The funding round announced on Thursday was led by hedge fund Lone Pine Capital and also included D1 Capital Partners, as well as existing investors Thrive Capital, Imaginary Ventures and Alliance Consumer Growth. Launched in 2019, Skims sells bras, loungewear and shapewear directly to customers through its online store and at outlets owned by department store chains Nordstrom and Selfridges & Co. Kardashian and Skims Chief Executive Officer Jens Grede will retain a controlling stake in the company after the investment, according to Bloomberg News, which first reported the news. Skims was valued at $1.6 billion in April.
Athletic Greens reaches $1 billion valuation with latest fundraising round
Health and wellness ecommerce brand Athletic Greens raised $115 million in a funding round led by venture capital firm Alpha Wave Global, which also has investments in companies like Alibaba, Uber and Atai Life Sciences. The deal, which raises the powdered beverage maker’s valuation to over $1 billion, is expected to support global expansion as it seeks to increase production. The round features a number of institutional and individual investors alongside Alpha Wave, including Big Sky Growth Partners’ CEO Mark Vadon and returning investors SC.Holdings, Bolt Ventures and Dr. Peter Attia. New individuals joining the round include Schmidt’s Naturals founder Jaime Schmidt, Free Solo rock climber Alex Honnold, WNBA star Chiney Ogwumke and Amy Griffin of G9 Ventures, among others. The round comes less than a year after Athletic Greens announced its first outside capital in July 2021, which brought in celebrity investors like Hugh Jackman, Cindy Crawford and Steve Aoki. Prior to that, the brand had been bootstrapped to a $150 million revenue run-rate.
Apparel & Footwear
Rihanna’s Savage X Fenty raises $125M, eyes retail expansion
Rihanna’s lingerie line, Savage X Fenty, has secured $125 million in new funding from investors to fuel its ongoing expansion into brick-and-mortar retail. That brings the total cash haul raised by the body-positive lingerie line to $310 million. Savage X Fenty’s valuation in the latest funding round wasn’t disclosed. Investment firm Neuberger Berman led the fundraising round. Other investors include L Catteron, the private equity firm backed by LVMH CEO Bernard Arnault, as well as Marcy Venture Partners, a firm co-founded by Shawn “Jay Z” Carter, the Associated Press reported. The line’s latest backers also include Abu Dhabi-based Multiply Group, which contributed $25 million, as well as the Abu Dhabi Growth Fund. The money is expected to support Savage X Fenty’s ambitions for a retail empire.
Victoria’s Secret will sell stake in China business for $45M
Victoria’s Secret on Tuesday announced a plan to sell a minority stake in its China business to Hong Kong-based lingerie maker Regina Miracle International in the first quarter of fiscal 2022, subject to regulatory clearance. They have formed a joint venture, with Victoria’s Secret retaining 51% ownership and Regina Miracle buying the other 49% for $45 million in cash, according to an emailed press release. The joint venture, which the companies said builds on their two decade-long relationship, will run all Victoria Secret stores and its online business in China, per the release. In a statement, Victoria’s Secret CEO Martin Waters called Regina Miracle “a valued merchandise supplier partner for more than twenty years.”
FTC fines retailer Fashion Nova for suppressing negative reviews
The Federal Trade Commission has fined online fashion retailer Fashion Nova $4.2 million, saying that for years the California company blocked negative reviews of its products from being posted to its website. The agency said in a complaint Tuesday that the retailer, which is based in Vernon, misrepresented that the product reviews on its website were reflective of the views of all purchasers who submitted reviews, when in fact it suppressed reviews with ratings lower than four stars out of five. It said that from late 2015 until November 2019, Fashion Nova used a third-party review system that never approved or posted the hundreds of thousands lower-starred, more negative reviews. Fashion Nova called the agency’s allegations against the company “inaccurate and deceptive.” It said it never suppressed any website reviews, and immediately and voluntarily addressed the website review issues when it became aware of them in 2019.
Athletic & Sporting Goods
KKR buys Sparta, Raleigh bike maker Accell for $1.77 bln
A consortium led by buyout firm KKR has agreed to a takeover of Accell Group that values the maker of bicycle brands such as Sparta, Batavus and Raleigh at 1.56 billion euros ($1.77 billion). The deal is the latest sign of rising investor interest in the e-bike industry, after Dutch bike firm Van Moof raised $128 million from Hillhouse Capital last year to fund its U.S. expansion, and Cerberus Capital Management made an unsuccessful bid for Canada’s Dorel Industries. The cash offer of 58 euros per share in cash represents a premium of 26% over Accell’s closing price on Jan. 21 and a premium of 42% over its three-month volume-weighted average price, the statement said. The bike industry was one of the winners from the coronavirus pandemic, with Accell reporting a 17% rise in sales in 2020 to 1.3 billion euros, and strong growth in e-bike sales as an alternative to public transport.
Centre Partners Gathr Outdoors acquires Cascadia Vehicle Tents
Gathr Outdoors, a diversified global designer and manufacturer of outdoor products and sporting goods and a portfolio company of private equity firm Centre Partners, has acquired Cascadia Vehicle Tents. Terms of the transaction have not been disclosed. Based in Bend, OR, Cascadia Vehicle Tents is a family business that has become an industry leader developing rooftop vehicle tents, awnings, off-road trailers and car camping equipment for cars, trucks and SUVs. Gathr Outdoors, formerly known as MacNeill Pride Group, was unveiled earlier this month to reflect the company’s transformation as it continues to build a leading outdoor recreation platform.
Cosmetics & Pharmacy
Farfetch plans beauty launch with Violet Grey acquisition
Farfetch has acquired upscale, cult beauty retailer Violet Grey as a precursor to launching beauty this year. LA-based Violet Grey – viewed as the beauty industry’s answer to legendary Paris fashion boutique Colette – sells luxury, independent brands including Augustinus Bader and Westman Atelier, alongside megabrands Chanel, Giorgio Armani, Estée Lauder-backed La Mer and Tom Ford, using a mix of curation and editorial-rich content, akin to the Goop model. The acquisition is an “important step ahead of the launch of beauty on Farfetch later this year and will form part of our overall beauty strategy ‘palette’,” says Stephanie Phair, chief customer officer at Farfetch. Violet Grey also occupies a storefront on Melrose Place in Los Angeles, and has raised $29.2 million to date in financing. The company declined to share annual sales. Farfetch is betting on Violet Grey’s curated selection of products, content and community-driven strategy to make a mark in the highly competitive global luxury beauty industry, which will reach $69 billion by 2025, according to the Bain Altagamma 2021 luxury study. The acquisition means Farfetch could earn access to the kinds of prestigious brands that aren’t sold at Sephora or Cult, and founder Cassandra Grey believes that brands could benefit from the new route to market and the potential to enlarge their customer base.
U.S. Prestige Beauty Sales Shot Up 30 Percent in 2021, Per NPD Group
Supply chain woes proved no match for the beauty industry’s momentum last year, new data from the NPD Group shows. Sales figures for prestige beauty, which NPD released Monday, indicate that the industry generated $22 billion in 2021, up 30 percent from 2020, when sales only reached $16.1 billion. The sum also exceeds 2019-level sales, which reached $18.8 billion. Fragrance outperformed all other categories with 49 percent growth. Hair grew 47 percent, makeup by 23 percent, and skin care up 18 percent, per a statement from the company. Hair, one of the market’s fastest-growing categories, even saw styling product sales return to growth. Hair sprays, gels, mousses and other styling products grew 45 percent from last year, and are expected to grow another 15 percent in 2022. Critical skin care segments, such as cleansers, creams and serums, posted double-digit growth, ranging from 15 percent to 24 percent. Clinical skin care has also become the largest type of brand in the category, booting naturals from the top slot, when comparing revenues.
Discounters & Department Stores
Walmart’s store redesign could spell more trouble for department stores
Walmart on Thursday unveiled what it’s calling an “interactive store” prototype, which is being tested at its Store 4108 incubator location in Springdale, Arkansas. Dubbed “Time Well Spent,” the store includes improved lighting and use of space, more dynamic displays, and QR codes and digital screens that “create opportunities for digital exploration,” according to a company blog post written by Alvis Washington, vice president of marketing for store design, innovation and experience. The test follows an earlier store redesign focused on navigation and wayfinding that Walmart has brought to nearly 1,000 stores after “overwhelmingly positive” feedback, Washington said.
How Walmart GoLocal plans to stand out among delivery businesses
Walmart is a fresh face in the crowded delivery-as-a-service space, but the retail giant is looking to make its mark with a precise white-label delivery focus and by expanding fulfillment options to categories beyond food. Since being announced in August, Walmart GoLocal has invited comparisons to companies like DoorDash and Instacart thanks to its same-day delivery focus. Yet there is a key difference between GoLocal and other providers: GoLocal doesn’t have its own customer-facing platform. Instead, its focus is to deliver orders made on its clients’ websites and apps. “That’s a big differentiator, to be respectful of not disintermediating business-to-consumer relationships,” Harsit Patel, general manager of Walmart GoLocal, told Supply Chain Dive.
Kohl’s shares surge as takeover offers emerge from suitors including Sycamore
Kohl’s shares soared 36% last Monday, as the department store chain fields takeover offers from at least two suitors. Private equity firm Sycamore is willing to pay at least $65 per share for Kohl’s, implying a 39% premium to the stock’s last close of $46.84, people familiar with the matter told CNBC on Sunday. These people requested anonymity because the talks are private. The offer from Sycamore came two days after Acacia Research, backed by activist investment firm Starboard Value, offered to pay $64 a share for Kohl’s, according to people familiar with the proposal.
Emerging Consumer Companies
Bokksu, the New York and Tokyo-based Japanese snack subscription service and online grocery, raised $22 million in Series A funding. The funding was led by Valor Siren Ventures, with participation from Company Ventures, St. Cousair, World Innovation Lab (WiL), Headline Asia and Gaingels and valued the company at $100 million. The fresh capital will also enable Bokksu to accelerate its primary business lines: subscription, market and grocery. Bokksu ships its grocery products to the U.S. and Canada, but delivers its subscription and market services to more than 100 countries, including the U.S., Canada, the U.K, Australia, Germany, Singapore, Sweden and Netherlands.
Glossier lays off 80 employees
Beauty brand Glossier announced that it is laying off over 80 employees, about one-third of the DTC brand’s corporate workforce. In an email announcing the layoffs, the company acknowledge that it has made “some mistakes” over the past two years. According to the note, the technology team will be impacted the most. Founded in 2014, Glossier was credited with pioneering the direct-to-consumer model by using brand ambassadors and launching innovative products. Last summer, the company raised an $80 million Series E funding round, which valued the company at $1.8 billion.
Mark Cuban intros online pharmacy offering affordable generics
Millionaire investor Mark Cuban is getting on the pharmacy bandwagon. Mark Cuban Cost Plus Drug Company has officially launched its online pharmacy. The launch comes just weeks after their pharmacy benefit manager operation was established, both critical efforts in the company’s pursuit to help shield consumers from inflated drug prices. According to a September 2021 Gallup poll, 18 million Americans were recently unable to pay for at least one prescription medication for their household due to ever-rising costs, and 1 in 10 Americans have skipped doses to save money. The pharmacy’s launch represents the first critical milestone in bringing affordable medications to millions. “We will do whatever it takes to get affordable pharmaceuticals to patients,” said Alex Oshmyansky, CEO of Mark Cuban Cost Plus Drug. “The markup on potentially lifesaving drugs that people depend on is a problem that can’t be ignored. It is imperative that we take action and help expand access to these medications for those who need them most.”
Food & Beverage
Vertical Farming Company Plenty Raises $400 Million
Vertical farming company Plenty has raised $400 million in a Series E funding round, which it claims is the largest to date for an indoor farming company. New investors One Madison Group and JS Capital led the round, which also included Walmart and SoftBank Vision Fund 1. Walmart and One Madison Group will join Plenty’s board of directors. Plenty plans to use the funds to support its growth strategy of selling product from its farms directly to partners. In a new strategic partnership with Walmart, Plenty will provide vertically farmed produce to the retailer’s stores, including all of its California locations. Walmart said it plans to create a “new, market leading product category” in vertically farmed produce that’s available to shoppers year-round. Plenty’s massive funding round and strategic partnership with the retailer quickens the pace of growth in the indoor farming space over the past year.
Plant-based brand kencko raises $10 million
Plant-based nutrition platform kencko announced today the closing of a $10 million funding round that will help fuel the launch of a new line of hot meals. The round was led by existing investor Siddhi Capital with participation from new backers including Next View Ventures, Riverside Ventures, Silas Capital and Cheyenne Ventures, among others. This round brings the company’s total funding to over $13.5 million. Founded in 2016, kencko’s mission is to make fruit and vegetable consumption convenient, accessible and sustainable for all Americans, according to co-founder and CEO Tomás Froes. The company debuted its flagship freeze-dried fruit and vegetable smoothie powders in 2019, before its recent expansion into a new “treat-moment” with its plant-based gumdrops last fall. The announcement marks the direct-to-consumer brand’s next step in growing its portfolio, as it introduces hot bowls in six varieties including soups, risottos and curry dishes.
Grocery & Restaurants
Approximately 46% of restaurant operators that did not receive a Restaurant Revitalization Fund grant believe it is unlikely they will be able to stay open past the pandemic, a survey of 4,200 restaurant owners released by the National Restaurant Association revealed. The National Restaurant Association released this data, along with other statistics, in a letter to Congress, pleading for lawmakers to consider passing another round of Restaurant Revitalization Fund grants to help the 177,000 applicants that were unable to procure a piece of the $29 billion allocated to restaurants when the first round of RRF opened last May. “Two years into the pandemic, restaurants are still struggling to keep their doors open amid a surge in coronavirus cases, inflation, a labor shortage, and supply chain delays,” the National Restaurant Association letter addressed to Congressional leaders reads. “Alarmingly, the industry still hasn’t recreated the more than 650,000 jobs lost early in the pandemic, a loss of 45% more than the next closest industry.”
7-Eleven introduces subscription delivery service
Subscribers to the 7Now Gold Pass can look forward to Slurpees, taquitos and basic grocery items without an added delivery fee. The convenience store first introduced delivery through its app, 7Now, in 2018. The company teamed up with Postmates and DoorDash for on-demand ordering in May 2020, then formed a partnership with Instacart later that year, as it continued to grow its delivery services. Increasing those options followed a larger trend of delivery apps offering essential products, including groceries, during the first year of the pandemic. As a segment, convenience stores have boosted delivery efforts in an effort to gain market share.
Home & Road
Home improvement chain Lowe’s is expanding into the world of pets through a new partnership with Petco. From next month, new Petco shops will appear in a select group of Lowe’s stores. The first Lowe’s store to trial the concept is located in Alamo Ranch, Texas. Other locations in Texas and North and South Carolina will follow, according to USA Today. Lowe’s is hoping that the new partnership will enable it to capture a larger pool of consumers. Marisa Thalberg, Lowe’s chief brand and marketing officer, told USA Today that 60% of the people the company talked with “indicated they’d be more likely to shop at a home improvement retailer if they could also purchase all their pet needs in the same place.” The new partnership will bring “the best of Petco products, services, and expertise underneath the larger roof of Lowe’s,” she said. This includes pet food and toys along with grooming and vaccination services. The tie-up also aims to woo the millennial shopper, an important customer base that is buying and investing in homes and adopting pets.
Sherwin-Williams net sales up, net income declines for Q4 and FY
While the Sherwin-Williams Co. saw an increase in net sales for both the fourth quarter and the fiscal year, ended Dec. 31, 2021, the company’s net income took a hit, dipping more than 25% for the quarter compared with the same period last year. Consolidated net sales increased 8.6% for the year to a record $19.94 billion, while net sales for the fourth quarter rose to $4.76 billion, up 6.1% from $4.49 billion in the 2020 fourth quarter. The company noted that raw material availability issues negatively impacted full year sales by “an estimated mid-single digit percentage.” Net income declined, dropping from $2.03 billion for the 2020 fiscal year to $1.86 billion for the 2021 period, an 8.2% decline. For the quarter, net income dropped 25.3%, from $407 million in the 2020 period to $304 million for Q4 2021.
Flexsteel Q2 sales increased nearly 19%, but COGS up more
Flexsteel Inds. reported second-quarter fiscal 2022 sales grew 18.9% compared with the same period in 2021, but the cost of goods sold increased more than $28 million compared with the same quarter in 2020. Overall, the company’s net sales were $141.7 million compared with $119.1 million in the prior year’s quarter. The company’s retail home furnishings backlog was $121 million, up 20.4% compared with $101 million in the prior year quarter. President and CEO Jerry Dittmer underscored continuing supply chain issues that dragged on profits despite sales growth. “First and most notable, ancillary costs associated with ocean container logistics, such as demurrage, detention and chassis charges, surpassed $15 million in the quarter,” he said in the earnings release. “We’ve imported a record number of containers in the past seven months to support our robust growth and strategically build inventory.”
Witmer Furniture acquired by Wisconsin-based private investment group
Solid wood furniture maker Witmer Furniture has been acquired by private investment firm Wisconsin River Partners. “Witmer Furniture is an incredible company, and we can’t wait to help them excel,” said Kevin Kraft, Wisconsin River Partners co-founder and partner. “They have a great vision, which aligns with ours as we grow our investor group and become an even more powerful ally and support system for the companies we invest in and acquire. We have the resources to help Witmer grow.” Witmer supplies solid wood bedroom, home office and occasional furniture to retailers throughout the country. The 40-year-old company employs around 70 workers. All of the company’s furniture is handcrafted at its plant in Abbotsford, Wis. Former company owner Kevin Schlinkmann will continue as president of the company.
Jewelry & Luxury
Tiffany & Co. Sees “Remarkable Results” In First LMVH Year
Tiffany & Co. achieved “remarkable results” in its first year owned by LVMH, the luxury conglomerate said in its latest financial results. Tiffany “profit from recurring operations was almost six times higher than in 2020 and up 128% compared to 2019, the company said. It also “saw record performance in terms of revenue, profits, and cash flow,” it said. LVMH officially took over the company on Jan. 7, 2021. In the conference call following the release of the financial results, LVMH chair and CEO Bernard Arnault boasted his company has been able to achieve a “turnaround” for the fabled brand.
Swiss Watch Exports Hit New Records, but Not Everyone’s a Winner
Swiss watch exports reached their highest level ever in 2021, hitting 22.3 billion Swiss francs (about $24 billion), a 31.2% jump from COVID-19-addled 2020, according to the annual statistics compiled by the Federation of the Swiss Watch Industry (FHS). That number also represents a 2.7% jump over pre-pandemic 2019. The industry’s previous annual record—22.2 billion Swiss francs—was set in 2014. The United States was 2021’s biggest star, with sales soaring 54.8% over 2020, and 27.8% over pre-pandemic 2019. It remains the world’s leading market.
China’s consumers spent $73.6 billion on luxury goods at home last year, up 36% from 2020
Chinese consumers are spending more on luxury goods at home, even if they can’t easily travel abroad due to pandemic-related restrictions, consultancy Bain & Company said in its annual report on the luxury sector. Sales of personal luxury goods in mainland China rose by 36% to 471 billion yuan ($73.59 billion) in 2021 from the prior year, according to Bain estimates released Thursday. That’s more than double the 234 billion yuan in luxury goods spending on the mainland in 2019, before the pandemic. The growth in luxury goods sales comes despite a slump in Chinese retail sales overall since the pandemic began in 2020. The data also reflects the growth of China’s domestic market as a destination for international brands. Mainland China’s share of the global luxury market rose to about 21% in 2021, up from roughly 20% in 2020, according to Bain.
Luxury goods group Kering to sell watches division
Kering is shedding its watches division, with plans to sell high-end labels Girard-Perregaux and Ulysse Nardin to current management, a move that will allow the French luxury goods group to focus on activities in which it has scale. The transaction fits the company’s strategy of prioritizing labels “with the potential to become sizable assets within the group”, Kering said in a statement. After being hit hard by the coronavirus pandemic, the high-end watches industry is showing signs of improvement, helping to fuel a 32% rise in sales of luxury group Richemont over the third quarter ending in December. “Kering is probably making the most of a recovering watch market to exit a category where it was suffering, given its smaller relative position to bigger competitors in this space,” said Luca Solca, an analyst with Bernstein, who described the move as a “positive” one.
Office & Leisure
Mattel wins back rights for Disney Frozen, princess products
Toy company Mattel has won back the licensing rights for Disney’s princess and “Frozen” franchises. The reunion comes after Hasbro bested the rights for the “Frozen” and princess products away from Mattel in 2014. Disney released “Frozen” in movie theaters in November 2013, and it became an instant success. The new multiyear global deal between Disney and Mattel will allow Mattel to develop lines of toys for Disney consumer products, games and publishing, including fashion dolls, small dolls, and figures. Mattel will develop dolls based on Disney Princess including Aladdin, Beauty and the Beast, Brave, Cinderella, The Little Mermaid, Mulan, Pocahontas, The Princess and the Frog, Sleeping Beauty, Snow White and the Seven Dwarfs, Tangled, Disney Frozen, The Little Mermaid Live Action, Moana D+ Series, Tiana D+ Series, Aladdin Live Action, Beauty & the Beast Live Action, Cinderella Live Action, and Mulan Live Action. The products are expected to launch at retailers worldwide at the start of next year. Mattel Inc. has an existing licensing arrangement with Disney for Pixar Animation Studio’s Toy Story and Cars franchises, and recently announced a global licensing deal for Lightyear.
Hotel industry recovering but faces bumpy road
The hotel industry is projected to rebound to near pre-pandemic levels after being battered by the outbreak of COVID-19, but the path to full recovery is still a ways away, according to a new report from the American Hotel & Lodging Association. The report’s findings reveal that 2022 will be a year of growth for the industry, as “bleisure” travel – the crossover of business and leisure – will launch new demand. According to an analysis by Oxford Economics, demand for hotel rooms is projected to approach 2019 levels in 2022. But even though the industry will be moving toward recovery in the new year, full recovery can still take several years for reasons including the loss of ancillary and room revenue. In 2020 and 2021, hotels lost a collective $111.8 billion in room revenue alone. Leisure travelers will drive most of the positive momentum for the industry in 2022, but business travelers are only expected to represent 43.6% of room revenue compared to 52.5% in 2019. As the pandemic keeps much of America’s workforce at home, business travel is expected to stay down more than 20% throughout the year. Meanwhile, only 58% of meetings and events are expected to take place.
Technology & Internet
Retailers’ average return rate jumps to 16.6% as online sales grow
As shoppers buy more online during the pandemic, they are also returning a larger portion of clothes, shoes and other purchases to retailers. On average, retailers expect to get back about 16.6% of the total merchandise that customers purchased in 2021, according to survey results released Tuesday by the National Retail Federation and Appriss Retail. That’s a jump from an average return rate of 10.6% in 2020. That adds up to more than $761 billion of merchandise, according to the survey. Returns tend to be higher when consumers buy online — a mode of shopping that makes it easy to toss items into the virtual basket, but hard to visualize how they will look or fit in person. Online sales accounted for roughly 23% of the $4.583 trillion of total U.S. retail sales in 2021, according to NRF. Unwanted purchases come back to retailers’ stores and warehouses and become a headache for companies that must decide whether they can resell those items, get them written off by the manufacturer or if they must take the loss.
Apple revenue pops 11% to $123.9 billion, Cook says supply chain improving
Apple CEO Tim Cook said on Thursday that the company’s supply chain challenges were improving, sending shares up, while delivering a solid beat on earnings. Apple beat analyst estimates for sales in every product category except iPads and overall revenue was up 11% annually. It was another strong showing for Apple in its most important quarter of the year which includes holiday sales. Every one of Apple’s product lines grew year-over-year from last year, except for iPad sales, despite management warnings from October that supply issues could hurt the company’s sales. Cook said that the company’s supply issues were improving. He said that in terms of supply challenges, the December quarter was worse than Apple’s September quarter, but that he is projecting the March quarter to improve. Cook also told CNBC that Apple was seeing inflationary pressure.
Finance & Economy
The U.S. economy sped up toward the end of 2021 before a late omicron surge, expanding at an annual 6.9% pace as consumers spent more and businesses stocked back up. Economists polled by The Wall Street Journal had forecast gross domestic product to rise by 5.5% in the fourth quarter. GDP grew a slower 2.3% in the third quarter. The figures are adjusted for inflation. GDP got a big lift at the end of last year from frantic efforts by businesses to restock barren shelves and warehouses in time for the holiday season. The economy grew a lot slower if the inventory buildup is set aside. Aided by massive government stimulus spending, GDP increased by 5.7% for the full year. That’s the biggest gain since 1984.
Interest rates are set to rise. For consumers, it could “add up quickly.”
Americans are likely to find themselves paying more for loans and credit this year, with the Federal Reserve signaling that it plans to start boosting its short-term interest rate in March from its current level of close to zero. That shift is a response to the highest inflation in four decades, with prices jumping 7% in December — a trend that economists think is likely to continue for months. Tightening monetary policy raises the costs of borrowing for consumers and businesses, weakening demand and curbing prices. But it could also pinch people’s budgets as the Fed continues to normalize policy over the rest of 2022. Wall Street analysts expect the central bank to lift rates three or four times this year, with each increase boosting the benchmark federal funds rate by 0.25%, or even 0.5% if inflation persists and the Fed decides to slam on the brakes. For consumers, that likely means higher credit card rates and more expensive loans.
