My favorite story last week was Megxit – the announcement on Instagram that the Duke and Duchess of Sussex, Harry and Meghan, are stepping away from their roles as ‘senior’ members of the British royal family, will divide their time between the UK and North America, and will look to become financially independent. While the story caused quite a stir in the press for all sorts of reasons, what made it most interesting to us is the brand connection, which, according to press reports, is the likely road for the couple to become economically self-supporting.
While the announcement appeared to be very sudden, clearly the couple had put in a lot of time and effort prior to last week into making their decision and planning for their future. The domain name for their new website, sussexroyal.com, was created over nine months ago by a private domain registration service, going live with sophisticated imagery and content shortly after the announcement. In addition, applications were made on their behalf in June of last year for Sussex Royal trademark registrations in the UK, covering six classes and over one hundred types of goods and services including clothing and footwear, printed matter (including magazines), health and wellness, and charitable fundraising, among others.
Brand experts estimate that the Sussex Royal brand may generate over £500 million (US$650 million) in revenue in the first year alone. While this revenue estimate seems quite lofty, the rankings of the top global brands by Kantar, the self-described “world’s leading data, insight and consultancy company,” indicate Sussex Royal would not even come close to being a top 100 worldwide brand. Kantar values the brand ranked #1, Amazon, at $316 billion, while the #100 brand, Adidas, is worth $13 billion.
Yet another brand expert believes that the pair is going to create “the most famous brand in the world.” Both Harry and Meghan are, in fact, pretty famous already, but they are looking to revise their relationship with the media by removing themselves from the Royal Rota system, which gives reporters from British news outlets exclusive royal family coverage. The pair believe they have been portrayed unfairly by the British press, and in separating from their official roles, they will “focus more on grassroots media organizations and young, up-and-coming journalists.” They also intend to remain active on social media platforms, and believe their new media relationships will better represent their family and their brand.
This story will certainly have more twists and turns to come. In the meantime, we wish Harry and Meghan the best of luck, and hope to have one or both of them as keynote speakers at the 2020 Consensus Great Brands Show!
Headlines of the Week
Privately held mattress maker Casper Sleep filed regulatory paperwork to take the company public, according to a CNBC report. The company would be listed on the New York Stock Exchange under the ticker symbol “CSPR.” Casper said it lost $92.1 million in 2018 and $73.4 million in 2017, according to its stock registration statement with the Securities and Exchange Commission. It said it brought in net revenue of $357.9 million in 2018, of $250.9 million in 2017 and of $169.1 million in 2016, the CNBC report said.
Topgolf has taken a big step toward an initial public offering of stock that could be valued at $4 billion. Topgolf has been expanding rapidly, from 39 locations two years ago to 60 last month with the opening of a three-level, 65,000-square-foot facility in Cleveland. It has three locations in the U.K. and one in Australia. Late last year, Topgolf said it was expanding into Mexico, Canada, Europe and Asia.
ClassPass is now worth more than $1 billion, after raising new cash from investors, the startup said on Wednesday. The latest funding marks the fitness class subscription app’s entry into the unicorn club of startups, as fitness companies titillate investors. The New York-based company, which lets users take classes across multiple boutique fitness studios and gyms without purchasing memberships at those locations, raised $285 million led by L Catterton and Apax Digital. The startup will use the funds to continue its international expansion.
Apparel & Footwear
The chief executive of Roots Canada has left the company. The outdoor lifestyle brand announced that it has appointed Meghan Roach as interim CEO, effective immediately.
She succeeds Jim Gabel, who had served in the post since February 2016. Roots did not say why Gabel left. But in a statement, board chairman Erol Uzumeri said “the board believes that Roots requires renewed leadership to carry the company into its next phase – executing on profitable growth opportunities while enhancing operational efficiency.” Roach joins Roots from Searchlight Capital Partners, the company’s largest shareholder. She served on the Roots board from 2015 to 2017, and has acted as interim CFO of the company since August. (Roots recently named a permanent CFO, Mona Kennedy.)
The National Football League has announced a partnership with fashion retailer H&M to launch a range of NFL-branded apparel and accessories in a deal brokered by IMG. The NFL-branded men’s, women’s and children’s products will be sold in more than 20 countries, excluding the US but including the UK, China, Japan, Columbia, Germany, India, Mexico, South Korea and the Middle East. A range of men’s jackets, tops and loungewear is already available in stores and online with women’s, children’s and accessories lines to follow next season. IMG Licensing became the NFL’s exclusive licensing representative across select markets in Europe and Asia in 2017 with a remit to expand the league’s international presence through new licensed goods aimed at overseas fans.
Forever 21 is relaunching its international online store to target consumers in Canada, Asia, the Asia-Pacific region and Latin America, in partnership with cross-border e-commerce platform Global-e. Global-e enables the site to support more than 95 currencies, more than 150 local and alternative payment methods, and localized tax and duties calculation, and allows customers to checkout and make returns in 21 languages. The U.S.-based, privately held fast-fashion retailer filed for bankruptcy in September, saying at the time that it would close as many as 178 U.S. stores along with most of its international stores in Europe and Asia, in order to refocus on its U.S. and Latin American businesses.
Athletic & Sporting Goods
Town Sports International Holdings Inc., one of the largest owners and operators of fitness clubs in the Northeast, agreed to acquire the studio business of Flywheel Sports Inc., the spin chain. The acquisition is expected to close in the first quarter of 2020, upon satisfaction of customary closing conditions. Established in 2010, Flywheel has 29 indoor cycling locations across the United States and multiple modalities and content, including its results-driven indoor cycling and off-bike precision training workouts, including “FlyBarre” and “FlyFIT”. In June 2018, reports arrived that Flywheel had been taken over by a lender amid financial struggles and was working with an advisor to explore a possible sale. In August, Flywheel Sports announced it was closing 11 of its 42 locations, including all its studios in Los Angeles.
Tough Mudder Inc. creditors are attempting to push the organizer of extreme obstacle races into bankruptcy over $855,000 that they say the company owes them. The firm is facing claims from Valley Builders LLC, Trademarc Associates Inc. and David Watkins Homes Inc., all of which provide general contractor or building services. The trio filed an involuntary petition for Chapter 11 in Delaware, court papers show. Signs of distress have been hovering around the Brooklyn-based firm, with Chief Executive Officer Kyle McLaughlin departing the company in December, according to his LinkedIn profile. The company’s website says ticket sales have been suspended. Tough Mudder was founded in 2009 by Guy Livingstone and William Dean.
PVH Corp., one of the world’s largest apparel companies, announced today that it has entered into a definitive agreement to sell its Speedo North America business to Pentland Group, parent company of Speedo International Limited, for $170 million in cash, subject to a working capital adjustment. Speedo International licenses the Speedo trademark to a PVH subsidiary for perpetual use in North America and the Caribbean. The transaction, which is expected to close in the first quarter of PVH’s fiscal 2020 year, is subject to customary closing conditions, including regulatory approval. Pentland Group, which also owns the Berghaus, Canterbury, Ellesse and SeaVees brands, acquired Speedo in 1991 and has since developed it into the world’s leading performance swimwear brand. The acquisition by Pentland Group comes ahead of the 2020 Tokyo Olympics and Paralympics and the participation of many Speedo athletes.
Cosmetics & Pharmacy
Walgreens Boots Alliance posted results for the first quarter of its fiscal year 2020, missing Wall Street estimates as headwinds stymied solid pharmacy sales increases in the United States and international challenges affected overseas operations. Net earnings were 95 cents per share, down 19.8% from the prior-year period as the company saw what executive vice chairman and CEO Stefano Pessina described as a “slow start” to the year on a call with analysts.
Brazilian cosmetics company Natura &Co has completed the acquisition of direct-selling company Avon Products. The deal closure comes after Natura secured all mandatory regulatory approvals required for the acquisition last month. Natura &Co will now have annual gross revenues of over $10bn and a total of 40,000 associates in over 100 countries. The global, purpose-driven, multi-channel and multi-brand cosmetics group includes Avon, Natura, The Body Shop and Aesop. Natura &Co will also hold significant positions in relationship vending online and offline by selling via Avon and Natura. With over 3,000 retail stores and an expanded digital presence, the acquisition will strengthen the group’s position in the retail space.
Helen of Troy reported third-quarter earnings that surpassed analysts’ expectations. The maker of consumer products said its adjusted earnings declined 4% to $2.40 per share, higher than $2.16 per share expected by analysts. Consolidated net sales revenue rose 2.4% to $431.1 million driven by growth in Housewares segment and online sales. This came above analysts’ consensus of $420.2 million. Total online sales for the quarter jumped 6%, and currently constitutes 18% of the company’s total net sales. HELE shares jumped 2.2% following the results.
The French subsidiary of US online subscription beauty kit specialist Birchbox announced on Wednesday it has been bought by its two co-founders, in partnership with the Otium Capital investment fund. Birchbox was founded in 2010 in the USA, and since 2011 it has been operating in France, where it merged with JolieBox, created by Quentin Reygrobellet and Martin Balas. Reygrobellet and Balas, respectively the CEO and COO of Birchbox France, “have partnered with Otium Capital to acquire Birchbox France, which has become an independent company,” stated the French company in a press release. Birchbox France added that being independent will help accelerate its expansion, notably relying on “personalisation” by tapping its customer database, and on an increasingly directional selection of partner brands (they are currently 300) for its catalogue.
Discounters & Department Stores
A federal appeals court Monday upheld a 2016 decision saying Walmart must pay back “tens of millions of dollars in damages” in a class-action suit brought by the company’s truck drivers, according to court documents. Total damages add up to $54.6 million.
The drivers filed the suit originally seeking back pay for time spent in layover (a mandatory break as required by the Department of Transportation), on break or in inspections.
J.C. Penney wasn’t able to buck the trend of declining sales at U.S. department store chains this holiday season. But despite a steep sales decline, it reaffirmed its financial outlook for the year. The company said its same-store sales over a nine-week period that ended on Jan. 4 dropped 7.5%. Penney shares were down more than 3% in premarket trading Thursday following the news. The retailer said that its adjusted same-store sales — which exclude the impact of its exit from major appliance and furniture categories — were down 5.3%.
Walmart thinks it has a technological weapon that will enable it to pick, pack and deliver shoppers’ online grocery orders faster as the company tries to strengthen its foothold as America’s largest grocer. The big-box retailer on Wednesday unveiled a platform called Alphabot, which it has stealthily been testing at one of its Supercenters in Salem, New Hampshire, since the middle of last year. Walmart says the Salem store will continue to serve as Alphabot’s “home,” while the new picking and packing process is analyzed again and again, and improvement are made. It says it will eventually assess plans for a broader rollout across the U.S.
Emerging Consumer Companies
Proctor & Gamble announced plans to acquire Billie, the fast-growing female body care company founded in 2017. Billie made its mark with a subscription-based, direct-to-consumer brand focused on quality shaving supplies and premium body care products for women. Its current product portfolio includes razors, shaving cream, body wash and body lotion. Billie will join P&G’s female grooming portfolio, which includes the Venus, Braun and joy brands.
Allbirds, the San Francisco-based sustainable footwear brand, announced that it has filed a Series D round. The round hasn’t closed yet, but it will be led by Baillie Gifford and Fidelity, and it will be up to $75 million. This brings the brand’s total funding to up to $150 million. The company said that some of the money will go toward its current growth, but they’ll also use it to help achieve its goals to become more sustainable in the age of climate change, including developing systems to reduce its carbon emissions and investing in regenerative agriculture.
Bloomscape, the Detrot-based digitally native plant company, announced it has entered into a partnership with West Elm, its first partnership with a major retailer. As part of the agreement, Bloomscape products will be available for purchase on West Elm’s U.S. website. Bloomscape raised $7.5 million in a Series A fundraise in 2019.
Grocery & Restaurants
Bimbo Bakeries USA, Inc., a business unit of Grupo Bimbo S.A.B. de C.V., has acquired the Lender’s Bagels business from Conagra Brands, Inc., Chicago. Terms of the transaction were not disclosed. The acquisition includes the Lender’s brand and a manufacturing plant in Mattoon, Ill. Conagra Brands acquired the Lender’s Bagels business when it bought Pinnacle Foods, Inc. in 2018.
Yum! Brands, Inc, has agreed to buy The Habit Restaurants, Inc, parent of Habit Burger Grill for approximately $375 million. The Habit Restaurants, an Irvine, Calif.-based burger brand, was founded in 1969. The fast-casual brand specializes in made-to-order chargrilled burgers as well as chicken and tuna sandwiches. The brand has grown to about 270 restaurants in 13 states. It has seen six consecutive quarters of positive same-store sales growth and has recently expanded in-house and off-premise ordering solutions for customers with kiosks and an enhanced mobile app.
Borden Dairy Co. has filed for Chapter 11 bankruptcy. The company said it is using the court process to “pursue financial restructuring designed to continue operating in the normal course of business.” The filing comes on the heels of Dean Foods Co., the nation’s largest dairy processor, filing Chapter 11 bankruptcy this past November. “Borden is EBITDA-positive and growing, but we must achieve a more viable capital structure,” said Tony Sarsam, chief executive officer. Borden is a manufacturer of a full range of dairy products, including fluid milks, sour cream, creams and dips. The company operates 13 manufacturing plants and employs 3,300. In 2017, the business was bought by ACON Investments.
Grubhub said on Thursday there is no sale process, denying reports that the online food delivery company was considering strategic options that include a possible sale or an acquisition. “We felt it was important to clarify that there is unequivocally no process in place to sell the company and there are currently no plans to do so,” a Grubhub spokesperson said in a statement. The New York Post reported earlier Thursday that executives from Walmart and at least three other grocers have considered acquiring Grubhub, while a Wall Street Journal report said the Chicago-based company has tapped financial advisers to help with the review.
Home & Road
Pier 1 Imports said it will close up to 450 stores — nearly half of the remaining store count — in an effort to return to profitably and better position itself with the current business conditions. The news came in the Top 100 company’s fiscal third quarter earnings release, which included a $59 million loss for the period ended Nov. 30, a 13.3% net sales decline and a comparable stores sales decline of 11.4%. The closings would be on top of 45 stores that closed in the third quarter, which left the company with 942 stores at the end of the period. “To reflect the revised store footprint, the company also plans to close certain distribution centers and reduce its corporate expenses, including via cuts in corporate headcount,” it said.
Liquidity Capital announced a $12.5 million funding agreement with Resident, the direct-to-consumer e-commerce retail tech startup that owns and operates a portfolio of consumer furnishing brands including Nectar, DreamCloud, Level, Awara, Wovenly, Bundle and 1771 Living. Resident plans to use the investment to further capitalize on its position as North America’s fastest-growing e-commerce retailer and increase growth into additional home products, the company said.
Jewelry & Luxury
Amazon is planning to roll out a digital shopping platform that will let high-end luxury brands run their own virtual stores, according to a report in WWD, quoting unnamed sources. The brands will run “concessions similar to those in high-end specialty stores,” and they will have full control of the stores’ look and feel, merchandise selection, and pricing policies, the publication said. At the same time, they will also have access to Amazon’s delivery and customer service platform and expertise as well as its extensive database of consumer preferences.
Pandora’s new strategy may be called Programme Now, but any big improvements will come later. That was the message Pandora gave the market on Jan. 6, when it announced that its fourth-quarter comps fell around 4%, and it expects that its like-for-like sales will continue to fall for all of 2020.
Rolls-Royce had its best year ever in 2019, driven in large part by its 3-ton SUV that sells for over $400,000. The company, a division of BMW, said it sold 5,152 cars last year, the most in its history and 25% more than the 4,107 vehicles it sold in 2018. The main drive was the new Rolls-Royce Cullinan, a hulking giant of an SUV that starts at $330,000 but typically retails for over $400,000 with the usual add-ons and customizations.
Office & Leisure
A.C. Moore has announced plans to terminate almost 500 workers at two South Jersey sites as it prepares to close its chain of arts-and-crafts stores. The firm will terminate 383 workers at its Winslow headquarters and distribution center by Feb.9, according to a WARN notice filed with the state Department of Labor. A related WARN notice says 82 jobs will end at an affiliated firm, Sbar’s Inc. of Moorestown. Those job losses will occur by Feb. 13. The impact on some workers could be lessened because another crafts retailer, the Michaels chain, has agreed to take over A.C. Moore’s distribution center in Winslow. But Michaels does not expect to take over the distribution center until mid-March, with hiring to come even later, a spokeswoman said Tuesday. The South Jersey retailer in November said it would shed its chain of more than 145 stores, and that Michaels would assume the leases of about 40 stores and the distribution center.
The dragon has landed — at least for the time being. Warner Bros. announced that it will open the first official Harry Potter flagship store, at 935 Broadway in Manhattan, next to the iconic Flatiron building. Opening in summer 2020, the store will house the largest collection of Harry Potter and Fantastic Beasts products in the world under one roof.
The assortment will range from personalized wizards’ robes to a new line of house wands with a design exclusive to the New York location. Spanning three floors, the 20,000-sq.-ft.-plus space will provide fans with a number of exciting retail experiences that evoke the magic of the Wizarding World, promised Warner Bros.
Technology & Internet
Microsoft Corp. is unveiling new cloud tools designed for retail customers, seeking to position itself as an alternative to Amazon.com Inc. and corporate software companies like Slack Technologies Inc. and Salesforce.com Inc. The retail industry has been one of Microsoft’s most successful as the software maker tries to gain ground in cloud computing against market leader Amazon Web Services and lure more customers to its internet-based Office products. Some retailers are loath to work with ecommerce rival Amazon. Microsoft is also targeting another lucrative Amazon business—digital advertising for products on retailers’ websites. In August, Microsoft acquired New York-based PromoteIQ, which helps companies sell ads on their websites to companies who want prime placement for their goods.
CES is over, and I am quite sure you’ll be happy to be done with it. In the hopes of having something we can look back on later this year when asked what the hell even happened at CES, I’m going to list some of my big takeaways. If there’s one major takeaway, it’s this: in the absence of one clear Next Big Thing, there are a lot of ideas getting thrown at the wall. Many of them are intriguing, but overall it seems like we’re waiting for some parts of the consumer electronics ecosystem to mature. That trend expresses itself differently in different types of product categories, but it was pretty consistent across all of them.
Finance & Economy
The U.S. trade deficit fell more than expected in November ahead of negotiations with China that cooled the simmering tariff battle between the two sides. The shortfall in goods and services declined to $43.09 billion for the month, below the $43.6 estimate from economists surveyed by Dow Jones. President Donald Trump has made reducing the trade deficit a major priority of his administration, and November marks the first month that it actually happened. The gap had continued to grow despite the White House’s intense pressuring of Beijing to loosen its trade barriers and to stop appropriating U.S. technology.
The huge service side of the U.S. economy sped up at the end of 2019, coinciding with solid holiday sales and reduced trade tensions with China. The Institute for Supply Management’s survey of service-oriented companies such as banks retailers and restaurants rose to a four-month high of 55% in December, from 53.9% in the prior month. Service-oriented companies that derive most of their sales in the U.S. have been better shielded from the conflict with China than more internationally oriented manufacturers. Most of Americans now work for service-style companies and that is why the economy is still growing despite a slump in manufacturing.