The Big Story

New Toys “R” Us Flagship Underscores Turn Toward Experiences

Maeghan Thompson

Toys ‘R Us is officially back. Tru Kids, Inc., the “proud parent” of the Toys ‘R Us® and Babies ‘R Us® brands, opened two new Toys ‘R Us stores last week in Houston, Texas, and Paramus, New Jersey. The two stores are the first of at least 10 that Tru Kids hopes to open by the end of 2020. At approximately 6,000 square feet, the new stores are much smaller than the classic Toys ‘R Us stores, which were approximately 40,000 square feet. Further, the new stores are designed to be much more experiential and engaging for customers. Tru Kids CEO Richard Barry noted that the new generation of stores “are packed with product, packed with amazing brands, packed with innovation, great technology.”

The new Toys ‘R Us stores feature classic toys and brands like Barbie and Lego, but they also boast multiple new hands-on experiences throughout. There is an interactive Nerf target range where children can try out various Nerf toys and guns. There is a treehouse in which kids can climb and explore, an interactive theater that can host parties and events, and areas across the store where customers can try out or otherwise engage with toys, books, and other products.

Tru Kids’s attempt to create a modern, experience-driving store highlights one of the dynamics in the shifting landscape of retail. With its endless aisle, one-click checkout, and expedited shipping, many consumers now feel that the internet has become more efficient and painless than stores for facilitating transactions. As a result, new stores are leaning into the things that the internet does not or cannot do well, such as providing tactile, first person experiences built around product trial and discovery, events, and/or education. If an experience can be captured on a camera and shared on Instagram, even better.

Experiential retail is gaining a foothold outside of the infant and juvenile toy industry as well. Escape The Room, a leader in the growing escape game industry, creates interactive games in which participants must work together to solve a series of increasingly challenging puzzles in a set amount of time in order to get out of a locked room. This kind of experience is great for families and small groups of friends, and is imminently shareable on social media. But importantly, it is also an experience that is most compelling in real-life, and not simulated online.

As retailers embrace experiential stores and merchandising, it remains to be seen if fun, interactive experiences will convert into stronger sales. Companies like Tru Kids and Escape the Room are betting that they will. At the very least, Tru Kids seems to understand that simply facilitating transactions alone was a losing proposition for its predecessor. Kudos to them for adapting their playbook.



Headlines of the Week

Toys R Us is back. Here’s a look inside its first new store

Hoping to bring back feelings of childhood nostalgia this holiday season? If you’re lucky enough to be near one of two cities, you’ll have the chance to go to a Toys R Us store again. Two smaller-format, permanent Toys R Us stores are about to open. The first debuts Saturday at Unibail-Rodamco-Westfield’s Garden State Plaza mall in Paramus, New Jersey. And a second will open in early December at Simon Property Group’s The Galleria in Houston. “We wanted to make sure that everywhere you turned in the store there was interactivity,” said Richard Barry, president and CEO of Tru Kids, in an interview at the Paramus store. “We have an amazing number of digital experiences throughout the store, but we also have good old analog [experiences]. … Take the products out of the boxes and kids will be able to get their hands on them.”

Private equity firm counters Baker-led offer for Hudson’s Bay Co

Canadian private equity firm Catalyst Capital Group on Wednesday plunked down 11 Canadian dollars per common share ($8.29 as of press time) for all of Hudson’s Bay Co.’s common shares. The all-cash proposition comes a day after a shareholder group led by HBC Governor Richard Baker touted its own 10.30 Canadian dollars per share cash bid ($7.86 at the time the offer was made) as its “best and final offer.” Catalyst also revealed that it filed a complaint with the Ontario Securities Commission over the “conduct by the Baker Group,” which they characterized as “contrary to the public interest,” including “misrepresentations in circular and other potential securities law violations and a deeply flawed process” in accepting the Baker offer.



Apparel & Footwear

Soled? Permira kicks Dr Martens into play with potential £1.2 billion sale

Dr Martens could be trying on a new owner for size. The British company—known for its signature stomping boots worn by celebrities including top model Gigi Hadid and Hollywood actress Kristen Stewart—is being shopped around the market in a deal which could be valued at up to £1.2 billion. If that sale price is achieved, it would represent a healthy return for Permira, the UK-based private-equity firm which bought Dr. Marten’s in 2013 for £300 million. Kenny Wilson, chief executive of Dr Martens said in August that Permira wanted to exit its investment in 2020. Potential buyers include rival buyout group Carlyle Group, according to a report by Bloomberg. Profits at Dr Martens increased by 70% for the year ending March 2019, thanks to the success of its “vegan” range of boots which now account for about 4% of total sales.


Fort Myers-based Chico’s FAS swings to loss in Q3, but results better than expected

Women’s retailer Chico’s FAS swung to a loss in the third quarter, but still performed better than expected. Chico’s FAS reported net sales — or revenue — of $484.7 million for the quarter, down from nearly $500 million last year, but still well above analysts’ estimates. In a conference call with analysts, Bonnie Brooks, the company’s CEO and president, attributed the better-than-expected results in the third quarter to several factors, saying the company is making significant progress on its strategic initiatives designed to improve its products, customer experience and ultimately its bottom line and value to shareholders.

Clarks Calls in Advisers

Clarks has appointed management consultancy firm McKinsey & Co to help review the business. McKinsey & Co will help with a “transformation” of the footwear retailer. Clarks has 553 shops in the UK and Ireland, and almost 12,000 employees. In a statement, Clarks said that the appointment was part of a wider plan to grow the business’ underlying profitability, and would focus on supporting the strategy of ”renewing the relevance of our brand to consumers and our partners”. Clarks finance director Paul Kenyon has also left the business, and will be replaced by Philip de Klerk, former chief executive of materials maker Low & Bonar. Clarks was said to be seeking rent cuts of up to 30% from landlords this summer, as it evaluates its property portfolio. It appointed a new CEO and added to its board earlier this year.

Wells Fargo Capital Finance, Gordon Brothers Support Refi of Lucky Brand Dungarees

Lucky Brand Dungarees, LLC, a portfolio company of Leonard Green & Partners, L.P. and a leading designer, distributor and retailer of premium denim and apparel goods in North America, announced the completion of a new refinancing transaction. As a result of the refinancing, Lucky Brand upsized its existing first lien term loan via existing lenders Wells Fargo Capital Finance and Gordon Brothers Finance Company, and refinanced its former second lien credit facility via a new second lien term loan provided by a joint venture backed by Lantern Capital Partners  and Restore Capital, LLC. In connection with the second lien term loan capital raise, the Lantern and ReStore joint venture also acquired a minority equity stake in Lucky Brand. “Completing the refinancing marks a significant step forward for the Company and our customers, vendors and other stakeholders,” stated Nigel Kershaw, Chief Financial Officer.


Athletic & Sporting Goods

Sneakerhead Roger Federer Signs Deal with On Running Shoes

Tennis star and quiet sneakerhead Roger Federer is putting his best foot forward in a new partnership with an upstart Swiss running-shoe company with big ambitions.  Federer previously had a deal with Nike which ran for more than a decade, but that ended in 2018. Since then, Federer signed on with Uniqlo as his apparel sponsor for $300 million; he also has ongoing deals with Rolex, Moët & Chandon and Mercedes-Benz, among other brands.

China’s Anta Sports Considers Selling Fitness Brand Precor

Anta Sports Products Ltd. is considering a sale of its fitness equipment brand Precor Inc. after receiving approaches from potential buyers, according to people familiar with the matter.  The biggest sportswear maker in China is working with an adviser for a potential sale of the U.S. business that could fetch about $500 million, said the people, who asked not to be identified because the discussions are private. A number of companies and private equity funds have shown preliminary interest in acquiring Precor, which designs and makes gym products such as indoor cycling bikes, running treadmills and elliptical machines, the people said.

Cosmetics & Pharmacy

Israeli start-up NeoWize acquired by cosmetics retailer Il Makiage

New York-based cosmetics company Il Makiage is acquiring Israeli start-up NeoWize in a bid to stay at the cutting edge of AI-enhanced e-commerce. Founded by two veterans of elite IDF intelligence units, NeoWize leverages data to make predictions on customer behavior even on the first visit, an approach which it claims can improve sales by 20-30 percent from the first day.  “Current deep learning algorithms focus on making the most out of the data available. NeoWize utilizes active machine learning, neural networks and adaptive input to create more data and better data, thus increasing its predictive power even with limited available data,” the company says. The acquisition follows Il Makiage’s release of their Powermatch AI Algorithm and new e-commerce platform Kenzza, which ties influencer content into the retail experience. Financial details on the acquisition were not disclosed.

Walgreens, UnitedHealthcare to open in-store Medicare service centers

UnitedHealthcare and Walgreens will be opening 14 UnitedHealthcare Medicare service centers within Walgreens stores in five metropolitan areas. The two companies have signed a multiyear agreement that will see the first Medicare services centers opening in January 2020. The centers — which will be located in the Las Vegas, Phoenix, Cleveland, Denver and Memphis areas — are meant to allow Walgreens shoppers to learn more about Medicare, discuss their UnitedHealthcare plan benefits with “service advocates” and even enroll in plans.

Givaudan buys up Indena’s cosmetics business

Givaudan has announced that it has reached an agreement to acquire the cosmetics business of Indena. Givaudan and Indena will also sign a long-term partnership agreement under which Indena will continue to manufacture ingredients for Givaudan as well as providing innovation capabilities and other supporting services. The acquisition forms part of Givaudan’s 2020 strategy to expand the capabilities of its Active Beauty Business, and will strengthen its global capabilities in botanical active ingredients. Indena, meanwhile, will be able to focus on its core markets, namely pharmaceuticals and health food.


Discounters & Department Stores

Target hit with trademark lawsuit over grocery brand

A federal lawsuit has been filed against Target for alleged trademark infringement related to its Good & Gather private label food brand, The Atlanta Journal-Constitution reported. A business owner in Atlanta who runs a company called Garnish & Gather filed the suit. She trademarked her business name in 2014, according to the report, and said Target’s new private label name, products and logo are too similar to her own. A Target spokesperson told the Journal-Constitution the retailer respects trademarks and is aware of the lawsuit, and will defend itself against the claims through the legal process.

Costco’s website goes down on Thanksgiving, other retailers also see outages Friday

As online shopping becomes more popular over the Thanksgiving weekend, some retailers experienced outages amid the surge in traffic. Costco’s website went down entirely for a brief period of time early on Thanksgiving Day. was experiencing “intermittent slow load and transaction times” starting late Wednesday, according to website performance monitor Catchpoint. By Friday morning, Costco had a banner on its website that said “all Thanksgiving Day-only promotions have been extended into Friday, November 29th, WHILE SUPPLIES LAST.”



Emerging Consumer Companies

Taft opens first brick and mortar store

Taft, the Provo, Utah-based men’s footwear brand, has opened its first store – in the Soho area of New York City. Founded in 2014, Taft produces footwear in Spain and Portugal with textiles ranging from suiting wool to woven upholstery fabric to Charles F. Stead leather at prices around $200. The brand has amassed a following among athletes, celebrities and other influencers – some of whom have invested in the brand.


Jinx, new dog food brand founded by former Casper execs, launches

Jinx, a new pet food subscription company founded by three former members of the Casper team, will launch in January. The company has raised $5.65 million from investors that include Alexis Ohanian of Initialized Capital, Align Ventures, Brand Foundry, Wheelhouse Group, Will Smith and his family, the rapper Nas, singer Halsey, YouTube star/late night host Lilly Singh, and TV personality/former NFL star Michael Strahan. The three founders all met while working at Casper, and set out to build “a brand that is skinned in a way that is a lot more relatable to millennial consumer.”


Studs, new retail concept focused on earrings and piercings, raises $3 million

Studs, a New York-based piercing and earring brand, announced its nationwide launch and the opening of its first brick and mortar location in New York City. The company also announced that it raised $3 million in funding led by First Round Capital with participation from Lerer Hippeau and a number of angel investors. The funding will be used to open additional retail locations, enhance the e-commerce experience, and expand the Studs team.



Grocery & Restaurants

El Torito parent acquires upscale Mexican brand with investor ties to Mastro’s

The parent company of El Torito and Chevys Fresh Mex has acquired casual dining concepts Sol Cocina and Solita Tacos & Margaritas, contemporary brands specializing in Baja California cuisine with six locations in California, Arizona and Colorado. Cypress, Calif.-based Xperience Restaurant Group said the two modern and upscale Mexican brands, founded in Southern California, are a “perfect fit” for the company as it looks for opportunities to grow.


Does a growing number of labels on natural foods lead to certification fatigue?

Keto, paleo, vegan, gluten free, fair trade, non-GMO, organic, clean label, B Corp, kosher, halal … the list of available certifications for food and beverage products continues to expand, with guarantees ranging from what many in the natural products industry consider to be the holy grail of food certifications, USDA Organic, to other standards held by government-regulated or privately owned certification bodies. These certifications verify a wide range of both functional and value-oriented concerns — be they the agricultural or production practices that go into a product or the dietary choices it represents, among other factors — ultimately offering consumers transparency and, above all, peace of mind. However, with more and more symbols filling product labels, questions abound: Might consumers be experiencing certification fatigue? Do certifications still hold value for customers? Are verification seals a good investment for brands?

Home & Road

Just in Time for Christmas, Sun Buys National Tree

Sun Capital Partners has acquired National Tree Company, an e-commerce wholesaler of seasonal and holiday decorations. National Tree Company’s (NTC) products, totaling more than 4,500 SKUs, include lit and unlit artificial Christmas trees, wreaths and garlands; as well as holiday decorations for Easter, Independence Day and Halloween. Other products include indoor and outdoor artificial bushes and topiaries. NTC was founded in 1990 by Sal Puleo, Sr., who passed away in March 2018, and is today led by his three sons – Joe, Sal, and Rich Puleo. According to Sun Capital, NTC is one of the largest domestic wholesalers of artificial Christmas trees. The company was recently awarded “Best Artificial Christmas Trees of 2019” by Better Homes & Gardens and has won other “Best of” awards from organizations including Wirecutter, House Beautiful, Business Insider, The Today Show, Good Housekeeping, and Bob Vila.

Ikea nearly doubles U.S. forestland holdings

Ikea has nearly doubled the size of its U.S. forestland holdings with the recent acquisition of about 60,000 acres in Oklahoma and Texas. Ingka Group, a partner in the Ikea franchise system, said it acquired 18,000 acres in Southeast Oklahoma and 42,000 acres in East Texas for its home furnishings production. It said the investment in forestland here and elsewhere “are part of a long-term strategy to acquire resources that the Ingka Group’s core business is directly or indirectly dependent on.” The purchase price was not disclosed. The news follow a July 9 announcement the retailer had purchased about 17,000 acres in South Carolina, a move that pushed Ikea’s U.S. forestland portfolio up to 64,000 acres. Ingka Group now owns about 125,000 acres of forestland in Texas, Oklahoma, Alabama and South Carolina.

September furniture orders rise 7%

New orders for furniture were back up in September, 7% ahead of the same month last year. Orders had dipped 1% in August following an increase of 6% in July. That’s according to the latest Furniture Insights survey of residential furniture manufacturers and distributors from accounting and consulting firm Smith Leonard. In addition, September numbers, which increased for 64% of companies surveyed, were up against a strong September 2018, when orders increased 9% relative to September 2017. Through nine months, 2019 orders are down 1% compared with the same point last year, and down for 70% of participants. “Once again, the results for the month continued the ‘choppy’ business conditions that have been described through a great part of this year,” Smith Leonard Partner Ken Smith wrote in the survey report on September numbers.

Jewelry & Luxury

LVMH Outlines Its Post-Sale Plans for Tiffany & Co.

LVMH has no plans to change the current direction of Tiffany & Co., though it believes it can offer the famed retailer greater support, executives said on a Nov. 25 conference call with analysts. “Our first and only priority is to implement the strategy that has been described by the management team,” said LVMH chief financial officer Jean-Jacques Guiony. The call followed news that LVMH had reached a deal to acquire the retailer for $16.2 billion, through a newly created subsidiary called Breakfast Acquisition Corp.

The Lab-Grown Brands That Rule Google Paid Search

The lab-grown diamond category is a competitive one for advertising on Google paid search, but the advertising there is still small compared to other jewelry segments, according to new research from Kantar Retail. “We observed 160 advertisers appearing on the keywords in product-listing ads from January through October 2019 and 307 advertisers appearing in text ads,” says Jim Leichenko, director of marketing for Kantar’s media division. “Neither is an insignificant number, considering we can see as few as 30–50 advertisers on some popular retail product keywords.”

Hong Kong loses luster for luxury brands as mainland China shines: Bain

Luxury brands are likely to retreat from Hong Kong as the city is wracked by protests at a time when wealthy Chinese shoppers are staying on the mainland, consultancy Bain said on Thursday, highlighting a shift that is reshaping the global industry. Sales growth for companies making goods like jewelry, high-end fashion or handbags would come in at the low end of its expectations in 2019 due to the Hong Kong turmoil, according to Bain, which produces closely-followed forecasts for the sector.

Tiffany doesn’t want you to call it a luxury brand anymore

Tiffany & Co., the world’s most iconic jeweler, no longer wants to be called a luxury brand. “I don’t like the word ‘luxury,'” Tiffany CEO Alessandro Bogliolo said at Bloomberg’s The Year Ahead: Luxury Summit in New York City on Thursday. “Honestly, I try to avoid it.” Bloomberg’s second luxury summit, which this year focused on sustainability in the luxury sector, drew power players in the industry such as Tiffany & Co. CEO Alessandro Bogliolo, Rent the Runway cofounder and CEO Jennifer Hyman, legendary architect Robert A.M. Stern, and Klaus Zellmer, president and CEO of Porsche Cars North America.


Office & Leisure

CEO of SoftBank-backed Wag exits to lead Shutterfly

Wag CEO Hilary Schneider is stepping down to take over as CEO of Shutterfly, ending a nearly two-year stint that began when SoftBank’s Vision Fund made a $300 million investment in the dog-walking startup. Schneider’s departure may fuel speculation that a new owner could take over at Wag. In late October, Recode reported that Wag was in talks with potential acquirers including Petco and Rover, its main rival. Earlier this year, The Wall Street Journal reported that Wag’s dog-walking sales trailed behind Rover despite being heavily funded by SoftBank. Schneider, a former CEO of LifeLock and executive VP of Yahoo, took the reins at Los Angeles-based Wag in January 2018, giving the company an experienced operator to replace co-founder Joshua Viner. Succeeding Schneider will be Garrett Smallwood, currently Wag’s VP of product and corporate development.

Mattel CEO Ynon Kreiz Is Rewriting a Toy Story

Here’s what passes for good news these days at Mattel, the iconic toymaker that has taken more knocks than one of its Rock ’Em Sock ’Em Robots: a quarter of not losing money. In late October, Mattel posted positive quarterly cash flow for the first time in three years. It grew revenues for its second consecutive quarter, a feat it hadn’t achieved since 2013. Unlike arch­rival Hasbro, it isn’t being hit by tariffs imposed in the U.S.-China trade dispute, thanks to savvy shipping arrangements with its buyers.  A key pillar in CEO Ynon Kreiz’s plan is to remake Mattel from a not-terribly-efficient toymaker to a media company that leverages its time-tested and beloved characters and gadgets. It’s enough for Kreiz, who is 18 months into his tenure running the company, to suggest that Mattel has a future, even if its problems are far from solved.


Arteza raise to disrupt arts industry

Arteza, the leading direct-to-consumer arts and crafts supplies company, has announced it has raised USD$24 million in Series A funding from growth equity firm Volition Capital.  The company’s revenue growth was driven by rapid expansion of its customer base to over 2 million globally with similarly aggressive growth in its product portfolio with over 500 new products launched in 2019. Founded in 2015, Arteza is disrupting the legacy arts and crafts supplies industry, which has been ripe for innovation in product design, retail experience, and customer service. Arteza’s unique focus on customers and its 750+ products, which are available direct to students, hobbyists, and professional artists, have fueled significant growth and customer loyalty.

A.C. Moore chain closing all of its stores

Arts and crafts supplies retailer A.C. Moore is closing all of its stores. The New Jersey-based retailer will shutter its 145 locations from Maine to Florida, most of them located along the East Coast. Its parent company, Nicole Crafts, said Monday that it decided to exit its retail operations. Michaels, the nation’s largest arts and crafts retailer, will assume the leases of up to 40 stores, a lease on an East Coast distribution facility and purchase A.C. Moore’s intellectual property.

Technology & Internet

Marketplace operator Alibaba raises $11 billion

Alibaba Group Holding Ltd. raised about $11 billion in a long-awaited Hong Kong stock sale, braving the worsening political unrest gripping the city and potentially gaining favor in Beijing. The company says it will invest the funds to improve the online experience for buyers and sellers at a time when it is also working to developer stronger ties with companies to increase sales and services to the U.S. market. China’s biggest e-commerce company said on Wednesday it has priced the shares at HK$176 (US$22.48) each, a small discount to the last close of its American depositary shares in New York. The offering was covered multiple times and more shares were allocated to individual investors due to strong demand, according to people with knowledge of the matter.


Best Buy surges after beating expectations and raising forecast ahead of the holidays

Best Buy shares surged to a 52-week high on Tuesday after the company reported earnings and revenue that beat analysts’ expectations and raised its earnings guidance. “Our teams delivered another strong quarter of top- and bottom-line growth,” CEO Corie Barry said in the earnings release. “We are delivering on our purpose to enrich lives through technology by providing customers the products and solutions they want and need, combined with fast and convenient fulfillment.”


eBay sells StubHub to Viagogo for $4.05 billion

EBay Inc. is selling its ticket marketplace StubHub to European rival Viagogo for $4.05 billion in cash, allowing eBay to focus on its main retail site and address pressure from shareholder activists. EBay bought StubHub in 2007 for $310 million as it sought to bolster its online marketplace for secondary sales of seats to concerts and sporting events. Today, it’s the largest resale ticket marketplace in the U.S., with about $4.75 billion in gross merchandise value (GMV) in 2018, according to eBay’s financial statements. StubHub’s revenue, which it largely generates from charging sellers a commission fee on each sale, was $1.08 billion in 2018.


Finance & Economy

US consumer confidence falls for fourth consecutive month

Consumer confidence dipped for a fourth straight month in November as economic conditions weaken toward the end of 2019, data released by The Conference Board shows.  This “suggests that economic growth in the final quarter of 2019 will remain weak,” said Lynn Franco, senior director of economic indicators at The Conference Board, in a statement. “However, consumers’ short-term expectations improved modestly, and growth in early 2020 is likely to remain at around 2%. Overall, confidence levels are still high and should support solid spending during this holiday season.”


Slowing global economy makes retailers even more dependent on shoppers this holiday season

As retailers gear up for the holidays to make their final revenue push of 2019, many are doing so without the buffer of foreign consumption they can usually count on to offset any slackening of domestic demand. Weaker global growth, little enthusiasm for corporate investment, and trade-related uncertainty have created an economic environment in which retailers’ fates hinge on the willingness and ability of the American consumer to keep spending.

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