Walmart recently commented that certain customers were pulling back on their basket size with fewer units purchased – and fewer calories. When the world’s largest retailer talks, many people listen. Walmart was referencing the latest weight-loss movement: prescription weight-loss drugs that have achieved blockbuster status over just the past year. Walmart’s comment has further fueled speculation that these drugs may have a transformative impact on consumer behavior and numerous consumer sectors.
The new wave of weight-loss drugs features Ozempic, Wegovy and Mounjaro. These drugs belong to a class known as GLP-1s, named after a hormone they copy, which stimulates insulin production. While GLP-1s have existed for decades to treat diabetes, this generation of drugs has great weight-loss potential by regulating the feeling of being full and delaying the time it takes for food to leave the stomach. In essence, appetite is reduced and so is caloric intake, by as much as 20% to 30%.
Studies suggest that patients can lose 15% to 25% of their body weight. The U.S. population could significantly benefit as 42% of Americans are considered obese, and the trendline has not been favorable. Goldman Sachs estimates 3 million people currently take such drugs and that this number will grow quickly to 13 million people by 2030, translating into $100 billion in sales. Morgan Stanley projects that 24 million people will take these drugs by 2035, or 7% of the U.S. population.
Walmart compared shoppers who picked up prescriptions for these medications at its pharmacies to shoppers who are otherwise similar, but did not pick up such prescriptions. The first group bought less food. Remarkably, they also bought proportionately more fresh food.
The Walmart commentary points to how the rise of these drugs may impact food-related sectors. Confectionery, baked goods, and salty snacks may be most at risk as studies have shown that the majority of patients previously ate at least three snacks a day, and now they are consuming no more than two snacks a day. At the same time, it is expected that “weight-loss management foods”, such as protein shakes and bars, will see increased demand. Also, patients are generally cutting back on sugary carbonated drinks and alcoholic beverages. Regarding dining out, Morgan Stanely forecasts that chains offering largely unhealthy menus will see same-store sales decline 1% to 2% annually until they redesign their offering.
Beyond food and beverages, there are those who expect these drugs to impact other industries including apparel and fitness and even gaming and airlines. Weight loss could prove to be a boon for clothing companies as patients need to replace wardrobes. Further, traditional retailers could take demand from plus-size retailers. Athletic apparel brands and the fitness industry, including clubs and equipment, may benefit from more active lifestyles. Less obviously, current research points to a correlation between obesity and problem gambling, which accounts for an estimated 10% to 30% of all gaming revenue. As patients become fitter and more active, problem gambling may erode. Even the airline industry could see a lift. Slimmer passengers mean less weight on board and less fuel burned. Fuel accounts for 25% of an airline’s total expenses.
However, a miracle drug has yet to be found. These weight-loss drugs have numerous negatives. First, they are expensive, ranging from $1,000 to $1,500 per month, and to date, most insurance companies do not cover the expense. Second, most of these drugs are administered by injection, which can be uncomfortable and/or inconvenient. Third, there can be considerable side effects including gastrointestinal issues and facial aging. Fourth, the loss of appetite may lose its appeal as one’s family and friends enjoy a delicious dinner. Further, people regain their weight when they stop using the drugs and often faster than they lost it. Studies show that two-thirds of those who have taken the drugs were no longer using them one year later.
Skeptics point out that each recent decade has brought a new diet approach with varying degrees of lasting impact. In the 1970s, it was calories; in the 1980s, it was salt; in the 1990s, it was fat; in the 2000s, it was carbs; and most recently it was gluten and dairy. How will these weight-loss drugs ultimately play out? Walmart may have said it best, “It is a developing story.”
Headline of the Week
Macy’s shares surge after it receives $5.8 billion buyout offer
Arkhouse Management and Brigade Capital Management have offered to buy Macy’s for $5.8 billion, people familiar with the matter told CNBC on Sunday. The offer values the retailer at $21 per share, according to the sources. Macy’s closed at just over $17 a share on Friday, down roughly 17% since the start of the year. The company’s shares were up 15% in premarket trading Monday. Arkhouse, a firm that primarily targets real estate investment, and Brigade Capital, an asset management firm, would be willing to offer a higher bid based on due diligence, the sources said. The group would already be paying a premium for the department store, which has struggled to keep up with online competitors. Macy’s has made several efforts to draw customers back to its brick-and-mortar chains. In October, it announced 30 new store locations at strip malls as it tried to pivot away from the traditional shopping mall.
Apparel & Footwear
Lawmakers are ramping up their scrutiny of Shein after it confidentially filed to go public last week. One congressman who sits on a key committee is even threatening to pursue legislation to bar the retailer from trading if the U.S. Securities and Exchange Commission doesn’t reject its application. Rep. Blaine Luetkemeyer, R-Mo., issued a video address Tuesday saying Shein “warrants extreme caution from regulators, customers and investors” as the fast-fashion powerhouse sets the stage to start trading on U.S. exchanges as soon as next year. The committee is investigating Shein over its use of forced labor and de minimis — probes that are ongoing, Luetkemeyer said. Under the de minimis provision, packages valued under $800 are not charged import duties and aren’t subject to the same oversight from U.S. customs, which is tasked with screening packages to ensure items from banned regions don’t come into the country. Shein often ships its products directly to American consumers through its network of Chinese suppliers, which allows it to typically avoid that oversight. The company has said it supports de minimis reform but has not detailed what those changes should look like.
G-III Profits Bounce Back With Tighter Inventories
After more than 50 years in fashion, Morris Goldfarb, chairman and chief executive officer of G-III Apparel Group, has developed a knack of keeping his balance — even when the rug is pulled out from under him. It was just over a year ago that PVH Corp. decided to go its own way and take back its licenses for Tommy Hilfiger and Calvin Klein over a number of years, essentially walking away with half of G-III’s sales over time. While that was a heavy blow — and one that has yet to really land — it seemed to energize Goldfarb, who moved rapidly to line up alternatives, repositioning Donna Karan and signing licenses for Nautica, Halston and Champion. The churn starts next month, when PVH takes back the Tommy jeans license and G-III pushes ahead with Nautica jeans. That’s just the beginning. In an interview with WWD, Goldfarb was more bullish than ever as he praised his team for work over a hectic year and for the kind of inventory management that helped it post big third-quarter profit gains even as sales slipped modestly. “It’s probably been the best quarter we’ve ever had,” Goldfarb said. “Our margins are off the charts. The accomplishments are just mind-boggling, for a company in our industry to have a clear path to how we reposition half our business is unheard of.”
DSW parent company income, sales fall as unseasonably warm weather hurts demand
Designer Brands Inc. cut its full-year guidance amid disappointing third-quarter earnings and sales. The footwear giant and parent company of DSW said its performance was impacted by a footwear market that contracted for the first time since COVID coupled with unseasonably warm weather, which significantly reduced customer demand for shoes and put pressure on its heavily seasonal assortment. Designer Brands posted net income of $10.1 million, or $0.17 a share, for the quarter ended Oct. 28, down from $45.2 million, or $0.65 a share, in the year-ago period. Adjusted earnings came to $0.24 a share, missing analysts’ estimates of $0.46 a share. Net sales decreased 9.3% to $786.3 million from $865.0 million a year ago, which was well below the $824.0 million analysts had expected. Total comparable sales decreased by 9.3%. By business segment, U.S. retail sales fell 10.6% to $631.6 million. Net sales fell 8.1% to $75.6 million in the Canadian segment. In DSW’s owned brands portfolio, which has been a key focus for the company, sales were down 12.5% to $94.1 million. (In February, the company expanded its owned brands stable with the addition of iconic sneaker brand Keds, supplementing its recent additions of Le Tigre and Topo Athletic.)
Done Deal: Soft Surroundings acquired by Coldwater Creek
Soft Surroundings will live on — digitally. Coldwater Creek has acquired Soft Surroundings’ direct-to-consumer business, which will continue online (at softsurroundings.com). The sale was facilitated by global asset experts Gordon Brothers. The women’s apparel and lifestyle brand filed for Chapter 11 bankruptcy in September and said it would focus on its e-commerce business going forward. In November, Soft Surroundings began chain-wide closing sales at its 43 stores. Gordon Brothers had provided Soft Surroundings a $17 million term loan to pursue a sale process and $18 million in debtor-in-possession financing for its plan of reorganization. The firm previously supported the completion of Soft Surroundings’ inventory transition to a Mexican-based third-party logistics warehouse service. “In pursuing the acquisition of Soft Surroundings’ direct-to-consumer business, we greatly benefitted from Gordon Brothers’ partnership over the last few months, their expertise and all-encompassing, tailor-made solution,” said David Walde, CEO of Coldwater Creek. In 2020, Newtimes Group, one of world’s largest supply providers to the apparel industry, acquired Coldwater Creek parent company CWC Companies from Sycamore Partners. Sycamore had acquired the Coldwater Creek brand and other intellectual property in 2014 and relaunched the business as a direct-to-consumer brand.
Susie Mulder Joins Nobull as COO
Not long after departing Timberland, Susie Mulder has landed at Nobull. Nobull has announced today that Mulder, who most recently served as global president of Timberland, has joined the performance training company as its COO, effective immediately. Mulder will report to Brent Hastie, executive chairman and acting CEO. In the role, Nobull said Mulder will lead the company’s overall strategic direction and manage day-to-day operations. Mulder, who joined Timberland as global brand president in April 2021, left her role at the brand in November. Prior to Timberland — which has been challenged amid overall weakness at VF Corp. — the exec held leadership positions at women’s apparel brand Nic+Zoe and was a partner at global management consulting firm McKinsey & Co. for 15 years. The appointment of Mulder comes months after Impact Capital, the private equity arm of sports drink brand Bodyarmour founder Mike Repole’s family office, announced that it had invested in Nobull. In July, Nobull stated Repole will partner with the athletic brand’s co-founders Marcus Wilson and Michael Schaeffer as executive chairman with the goal of accelerating its “growth as the leading training brand in the world.”
Athletic & Sporting Goods
Xponential Fitness Acquires Lindora Weight Loss Clinics
Xponential Fitness is all-in on holistic health. The boutique fitness franchisor is acquiring weight loss and wellness clinic operator Lindora. Xponential owns 10 fitness brands across its portfolio, including Club Pilates, CycleBar, Rumble, StretchLab, Row House, Pure Barre, AKT, YogaSix, STRIDE Fitness, and BFT. Focused on weight management and metabolic health, Lindora clinics offer GLP-1s like Ozempic, IV drips, hormone replacement therapy, and cold laser therapy, among other treatments. Expanding its empire beyond exercise, XPOF will acquire Lindora’s intellectual property and take over 31 existing clinics, with plans to franchise the brand globally.
Vista Outdoor Appoints Co-CEOs Ahead of Split
As part of the previously announced plan to sell its ammo business to Czechoslovak Group and change the company’s name to Revelyst, Vista Outdoor, Inc. named Eric Nyman and Jason Vanderbrink as co-chief executive officers in a regulatory filing. Vista Outdoor also announced that Gary L. McArthur resigned as interim CEO in connection with and preparing for the corporate moves. The leadership changes went into effect on November 29. McArthur, a member of Vista’s board, became interim CEO on February 2, 2023, following the resignation of Chris Metz, who had been Vista’s CEO for six years. Nyman had served as CEO of Vista’s Outdoor Products segment since August 2023. He was previously president and chief operating officer at Hasbro. Vanderbrink had served as CEO of Vista’s Sporting Products segment since April 2023. Previously, he had been president of Ammunition since 2017.
Cosmetics & Pharmacy
Procter & Gamble writes down Gillette business but remains confident in its future
Despite Procter & Gamble’s write-down of its struggling Gillette brand, executives expressed confidence about the future of the shaving business. P&G reported an impairment charge of $8.0 billion in the fiscal fourth quarter, resulting in a net loss of $5.24 billion. The one-time, noncash charge was to adjust the carrying values of Gillette’s goodwill and intangible assets. Last year, Gillette sold $6.22 billion of men’s razors and blades and $1.28 billion of women’s razors and blades worldwide, according to Euromonitor data. The consumer products giant gave two reasons for the write-down. First, the company said that currency devaluations since the carrying values were first established in 2005 played a significant role. P&G’s second reason for the write-down is the market contraction of blades and razors, primarily in developed markets. In countries like the United States, growing beards is more popular, leading fewer men to buy razors. Gillette held a 52.8% market share of men’s razors and blades in the U.S. last year, according to Euromonitor.
It’s a 10 Haircare Acquires Nisim, Rebrands as Arise
The owners and founders of It’s a 10 Haircare have acquired hair regrowth specialist Nisim and renamed the enterprise Arise Haircare. The former Nisim’s products featured a proprietary herb and amino acid blend, as well as the hair growth technology AnaGain, in its new identity, Arise Haircare will boast new packaging and imagery, as well as a revamped product lineup “tailored for a multitude of hair types all anchored by their new hair biofactors,” according to an official announcement. Nisim was founded in 1993 and was based in Vaughan, Canada.
Sara Happ Gains Minority Investor
Sarah Happ has sold a minority stake in the business to BGM Ventures, helmed by Greg Cooper and industry veteran Robert Mihin. Terms of the deal were not disclosed, though Cooper will join the company as chief executive officer. It marks the first time the brand has taken outside investment since its founding in 2005, said founder Sara Happ, who will be staying on full time and leading the brand’s creative. The brand is distributed in 22 countries and has 1,500 doors in the U.S., including wholesale partners like Saks Fifth Avenue, Anthropologie, Thirteen Lune, Nordstrom, Revolve and a fleet of roughly 600 indie retailers. “We’re a multimillion-dollar company and we’ve done it without any outside capital,” Happ said, adding that the company has grown 30 percent every year since its founding. “We cannot keep up supply with demand, and I’ve never had this much retailer and customer demand for our products. That’s why the acquisition is so helpful with scaling.”
L’Oréal acquires Lactobio to ‘strengthen’ its microbiome research
L’Oréal has acquired probiotic and microbiome research firm Lactobio for an undisclosed sum. The French beauty giant has bought the Copenhagen firm to “strengthen” and “accelerate” its microbiome research, which it has been conducting for the past 20 years. The conglomerate plans to combine its scientific knowledge and technological advancements with Lactobio’s formulations using living organisms. Lactobio was founded in 2017 by Søren Kjærulff and Charlotte Vedel. It creates probiotic and postbiotic private label skin care ingredients and operates its own probiotic skin care brand, Bak.
Discounters & Department Stores
Hundreds of new stores help push Dollar General sales up 2.4%
Dollar General’s Q3 net sales rose 2.4% year over year to $9.7 billion, as store comps fell 1.3%. Gross margin contracted slightly to 29% from 30.5% a year ago, largely due to higher shrink, lower inventory markups and increased markdowns. Net income plunged 47.5% to $276.2 million. The discount retailer added 263 stores in the quarter, ending with 19,726 by Nov. 3. In 2024, the company plans to add 800 new stores, remodel 1,500 and relocate 85.
Kohl’s extends holiday bargains through December
Continuing its sales after Thanksgiving weekend, Kohl’s is offering discounts through Dec. 24 on holiday gifts and decor, including 20% off of purchases until Dec. 10. The retailer is also adding additional markdowns for Kohl’s Card shoppers and providing more opportunities to earn Kohl’s Cash coupons on qualifying holiday items, the retailer announced on Thursday. The retailer also said that it is extending its store hours between Dec. 15 and Dec. 22 at most of its locations from 8 a.m. until midnight local time. On Dec. 23, the stores will open at 7 a.m. until midnight. On Christmas Eve, the stores will operate from 7 a.m. to 6 p.m., according to the release. The retailer is also hosting its Sephora Gifts for All event through Dec.10, during which customers can get 20% off their Sephora purchase at Kohl’s and 30% off Sephora collection purchases.
Big Lots creates new executive role to lead closeout sourcing
Big Lots has hired a new executive role to lead its team of closeout buyers and focus on “procuring outstanding products at exceptional values through unique closeout opportunities,” the company said in a press release last week. In the newly created position of SVP of extreme value sourcing is Seth Marks, a former executive of the retailer who served as Big Lots’ vice president of merchandising from 2004 to 2007. Since then, Marks has held sourcing and merchandising roles at subsidiaries of finance and liquidation specialist Hilco Global, and most recently served as chief merchandising officer at Channel Control Merchants.
Emerging Consumer Companies
DUST Identity raises $40 million, partners with Oxygen Esports for authentication
DUST Identity, a company that links physical items to their digital records for product authentication, has announced the launch of its mobile solution and expansion into new industries. Initially designed for high-security applications, the company’s technology is now being used to authenticate luxury goods, artwork, game-used apparel, and other unique items. DUST Identity has also signed a partnership agreement with Oxygen Esports, one of North America’s largest esports organizations, to reinforce authenticity for game-used merchandise. The company has raised $40 million in a Series B funding round led by Castle Island Ventures, with participation from Amex Ventures, Kleiner Perkins, Airbus Ventures, and 8VC, among others.
Ladder raises $12 million to revolutionize strength training app
Ladder, a strength training app, has raised $12 million in Series A funding led by Tapestry VC and LivWell Ventures. The company has experienced explosive growth this year, with a projected 500% increase in membership, reaching over 50,000 paying members and 4 million completed workouts. Unlike other fitness products, Ladder offers progressive and structured workout programming for strength training. Each program is led by a world-class coach specializing in different strength-training styles. The app provides personalized workout plans based on individual goals and preferred training styles. Ladder also incorporates gamification elements, such as badges and streaks, to make workouts more enjoyable and offers features like the Ladder Journal to track progress.
ROAR Organic raises $6 million, bringing total funding to $26 million
ROAR Organic, a hydration brand founded by Roly Nesi in 2013, has raised $6 million in a recent funding round, bringing its total funding to $26 million. The company had previously received backing from AF Ventures, Factory LLC, Melitas Ventures, and Odell Beckham. In February, ROAR Organic closed another $6 million funding round to support its retail expansion, following a reported 116% increase in gross revenue in 2022. ROAR Organic offers electrolyte-infused sports beverages with a coconut water base and B Vitamins. The products are available in five fruity flavors and are sold in various natural and mass retailers across the U.S., including Whole Foods Markets, Kroger, Sprouts, Wegmans, Albertsons, and Publix.
sipMARGS raises $2 million in funding for expansion and innovation
Canned Margarita brand sipMARGS has raised $2 million in funding from Lab Capital Advisors to support its growth and innovation. The brand, which launched in 2021, has gained recognition for its commitment to quality and authenticity. Made with top-quality tequila from Mexico, sipMARGS offers low-sugar, low-calorie, and low-carb options with an alcohol level of 5% ABV. The brand aims to become the go-to choice for premium canned margaritas and plans to expand its availability in Michigan, Ohio, and Connecticut, with more states to follow in the future.
Food & Beverage
Consumers on weight-loss drugs buying less in certain grocery aisles, study finds
Consumers using GLP-1 medication for weight loss are spending less in grocery stores, a survey of the purchasing behaviors of more than 100,000 panelists by Numerator found. The data showed that year-over-year net change in buy rates between GLP-1 weight loss users and non-GLP-1 users varied by category. Packaged bakery, snacks, prepared foods, and beans and grains had the largest divides among the groups at between 10% to 20%. Other departments like beverages and fresh meal kits were largely flat. The food and beverage industries have spent much of 2023 responding to investor concern that the popularity of weight-loss drugs such as Ozempic and Wegovy could sharply lower sales for items such as snacks and prepared meals.
Campbell’s: Q1 Earnings As Expected; Growth From Snack, DSD and Sovos To Come
The Campbell Soup Company celebrated the recovery of sales lost to private brands in 2022 across its top three Thanksgiving-driven categories – broth, condensed soup and stuffing – results that president and CEO Mark Clouse said indicate a notable shift in consumer behavior and cooling inflationary pressures in Q1. Overall, Campbell’s organic net sales in Q1 FY2024 declined 1% due to expected, “mid-single-digit” volume declines, reduced pricing actions and minimal promotional activity. On a two-year compounded annual growth rate (CAGR), the company’s organic net sales increased 7%. Volume and mix dropped 5% in the quarter. “The first quarter unfolded much as we anticipated, continuing our consistent track record of meeting our commitments,” Clouse said. Sales across both its Meals & Beverage and Snacks segments declined 4% and 1%, respectively. However, on a two-year CAGR basis, Meals & Beverage organic net sales grew 6% and Snacks were up 8%.
Beer slump helped by growth in premium offerings, Constellation Brands CFO says
Volatility in beer is being driven by a decline in consumer interest in lower-value brews and growing interest in higher-end options, Garth Hankinson, Constellation Brands’ executive vice president and CFO, told Wall Street investors. Hankinson said the buy rate of the premium alcohol category is up year-over-year. This indicates consumers see pricier drinks as an “affordable luxury” they are more willing to spend money on despite the run-up in inflation. As the beer category continues to struggle, alcohol giants are pivoting to higher-end offerings to meet consumer demand.
Grocery & Restaurants
Activist investor reportedly prepares Wendy’s board challenge
A battle between rival investors at another company has reportedly spilled over into the election of The Wendy’s Co. board of directors, a report by Reuters indicates. New York-based activist hedge fund Blackwells Capital is preparing to challenge the Dublin, Ohio-based company’s board of directors in a push for improvements to the fast food chain’s financial performance, people familiar with the matter told Reuters. Blackwells plans to nominate several directors to Wendy’s 12-member board, said the sources, who asked not to be identified discussing confidential deliberations. The challenge pits Blackwells against another activist investor, Trian Fund Management, which owns a 16% stake in Wendy’s and has three representatives —Nelson Peltz, Trian CEO; Peter May, Trian president; and Matthew Peltz, Trian research co-head — serving on the burger brand’s board. Trian made overtures last year for changes at the burger chain, eventually reaching an agreement. Reuters noted that Blackwells antagonized Trian last week over Walt Disney Co. Blackwells issued a statement on Thursday criticizing Trian for its attempted board challenge against the entertainment giant and came out in support of Disney CEO Bob Iger. In the same statement, Blackwells said of Wendy’s that Peltz had installed his son Matthew as non-executive vice chairman and “packed the board with business partners and friends, while presiding over a period of disappointing results for Wendy’s shareholders.”
McDonald’s unveils CosMc’s, its answer to Starbucks
Shedding light on its long-awaited and oddly secretive CosMc’s concept, McDonald’s on Wednesday finally shared more about the café pilot, which seems to be its answer to Starbucks. It was weirder than expected. Over the summer, McDonald’s teased the test of a new restaurant concept. We knew then that CosMc’s is named for a little-known McDonald’s character, an alien. We also learned that CosMc’s “is a small format concept with all the DNA of McDonald’s but its own unique personality,” in the words of CEO Chris Kempczinski, who discussed the concept during an analyst call in July. On Wednesday, Kempczinski finally revealed more during an investor event. Late in the day, after a detailed discussion of the company’s plans for bigger burgers and more restaurants, Kempczinski got to CosMc’s, with a Steve Jobsian intro. “There is one more thing,” he told attendees. “CosMc’s.” “What would happen if a McDonald’s character from the 1980s that was part alien, part surfer, part robot — what would happen if this character were to open a restaurant in 2023?” Kempczinski asked. The answer: The robot-surfer-alien would open a Starbucks rival with even more indulgent drinks, and name it after himself.
Ghost kitchens were supposed to revolutionize restaurants. They’re crashing
Big investors, celebrity chefs and chains rushed to open ghost kitchens during the pandemic, and they were expected to make up more than 20% of the restaurant industry by 2025. But ghost kitchens are now crashing. Last week, Kitchen United, which raised $175 million in funding and was backed by Kroger, announced it would sell or close all of its locations. The startup ran delivery-only restaurants from inside Kroger stores, malls, and even from inside chain restaurants, sharing cooking space. Ghost kitchens are stripped-down commercial kitchens with no dine-in option. Sometimes called cloud kitchens, dark kitchens or virtual kitchens, ghost kitchens fulfill online orders from delivery apps like Grubhub and Uber Eats. Several dozen menus can come out of the same ghost kitchen, and customers often don’t know they’re not ordering from a restaurant with a real, physical location. Ghost kitchens have been around for years, but they boomed during the pandemic. They were seen as a salvation for the restaurant industry during the height of the pandemic, and they expanded as dine-in restaurants closed and online ordering became the primary option for customers.
Home & Road
Beyond Inc. restructuring will impact vendor contracts, head count
Beyond, Inc., the parent company of online home furnishings retailer Bed Bath & Beyond (formerly known as Overstock), has initiated a fixed cost restructuring plan targeting approximately $25 million of annualized reductions by early 2025. That figure represents approximately 12.5% of Beyond’s trailing 12-month expense run-rate as of Sept. 3. The plan includes about 10% reduction in the company’s current employee base, right sizing its facility footprint, re-negotiation of vendor contracts and outsourcing certain functions. Beyond says it expects savings from the plan to begin to accrue in late fourth quarter 2023. News of the initiative came as Beyond reported record sales performance for the “Cyber 5” period from Thanksgiving Day through Cyber Monday, Nov. 23-27.
Lovesac gets a Q3 boost from new showrooms, Internet sales
Lovesac delivered a strong third quarter, buoyed by its showroom openings and Internet business, with net sales up 14.3% to $154 million for the period ended Oct. 29. The net sales increase closely mirrors the 15.5% net sales growth in the same quarter in 2022. Gross profit for Q3 2023 rose to $88.4 million vs. $64.9 million for the same period in 2022, a jump of 36.3%. Gross margin was up 920 basis points to 57.4% of net sales. The company’s total operating expenses rose nearly 23% year-over-year for the quarter, reaching $92.1 million. Net loss for the quarter was $2.3 million—an improvement of 68.2% over last year’s Q3 result. Adjusted EBITDA rose to $2.5 million, up 136.4% vs. Q3 last year.
Joann loss widens; ups full-year top-line outlook
Joann reported a wider fiscal third-quarter loss and declining net sales even as e-commerce sales surged. The arts-and-crafts and fabrics retailer reported a loss of $21.6 million, or $0.51 a share, in the quarter ended Oct. 28, compared with a loss of $17.5 million, or $0.43 a share, in the year-ago quarter. The adjusted loss came to $0.21 per share, in line with analysts’ estimates. Sales fell 4.1% to $539.8 million, missing estimates of $547 million. Total comparable sales dropped 4.1%. E-Commerce sales rose 11.5% compared to last year and accounted for 13.1% of total company net sales in the third quarter.
Jewelry & Luxury
Signet’s Sales Fall, Diamond Prices Stabilize
Signet Jewelers posted mixed results for the third quarter of fiscal 2024 (ended Oct. 28, 2023), with comps and profits down from last year. Same-store sales at America’s largest jeweler fell 12% in the quarter, compared with the same period last year. Overall sales totaled $1.4 billion, a drop of $190.8 million, or 12%. Operating income came in at $13.3 million, down $35.1 million. On a conference call following the release of Q3 financial results, Signet CEO Gina Drosos and chief financial and strategy officer Joan Hilson said the company was facing “serious headwinds” but called out certain trends in the jewelry business as also having an impact. “We continue to expect a gradual return to pre-pandemic levels of engagements that will play out over the coming three years,” Drosos said, according to the SeekingAlpha transcript. The pandemic led to a 25% drop in engagements, but “the engagement recovery has begun,” said Drosos.
Gold Price Crosses $2,100, Setting New Record
The spot price of gold briefly crossed the $2,100 mark for the first time ever Sunday night, setting a new world record. The yellow metal hit its previous all-time high, $2,067, in the summer of 2020 during the COVID-19 pandemic. Analysts had predicted gold was headed for a new record last week. At press time, bullion’s spot price had come down significantly, to $2,024 an ounce. Many market watchers characterized that as a standard pullback. “Lots of gold headlines are to be expected,” Matt Simpson, a market analyst at City Index and Forex.com, wrote on X. “But I remain suspicious of the move, given it occurred during low liquidity trade.” Jim Wyckoff, a senior market analyst for Kitco, said that “gold and silver prices have probably peaked for at least a few weeks, if not a while longer, but after that new highs are probable—likely sometime in 2024.”
Italian luxury brand Prada looks to double China business in medium term
Prada is looking to double its business in key luxury market China, Chief Executive Gianfranco D’Attis said on Wednesday, even as the country faces slowing growth in luxury demand and significant economic headwinds. “We have a lot of ambitions here in China, to double our business in the upcoming mid-term future. And with that comes also increasing our investments,” D’Attis told reporters in Shanghai. He did not give an exact timeframe for the ambition but said increased investments would not necessarily mean a major uptick in the number of stores opening across the country. “Not only the number of stores is important to us, but the quality of stores, bigger stores with more categories, with more localized products, with more experiences, with more hospitality, more events, more special capsules,” he said.
Luxury Stores Are Bursting With Unsold Stuff
Fashionistas can smell blood. Luxury brands need to find ways to unload their growing pile of unsold stock without reeking of desperation. The luxury industry is slowing as shoppers sober up after their pandemic spending spree. In 2022, sales across the sector rose by 15% at constant exchange rates, according to Bain & Company estimates. But U.S. shoppers tightened their belts toward the end of last year, and Europeans followed this summer. The Chinese haven’t been spending as much as brands hoped either since Covid-19 restrictions were lifted in January. This year’s growth rate is expected to be around half what the industry managed in 2022.
Office & Leisure
Marriott Bonvoy Partners with CAMP to Reimagine Kids’ Clubs
Marriott Bonvoy will begin offering new interactive programming in partnership with the family experience company CAMP, debuting at the upcoming Marriott Cancun, an All-Inclusive Resort slated to open this spring. The program was piloted in 2022 and offers CAMP Club experiences ranging from toddler-aged children to tweens. CAMP Club experiences are themed to fit each property, with focuses on sensory, visual and experiential play. The Marriott Cancun, an All-Inclusive Resort, is designed to cater to all generations equally for a family-friendly resort experience, across daily programming, dining, public areas and more. At the resort’s CAMP Club, the Creative Corner will feature guided arts and crafts workshops to encourage creative play; the Interactive Play will encourage engaging play, activities and storytelling; and themed environments will immerse children in fun, playful activities. The bookable CAMP Club offerings will be rolled out among additional All-Inclusive by Marriott Bonvoy locations throughout 2024, with expansion into additional Marriott Bonvoy brands in the years ahead.
CIT Northbridge Agents $75MM Revolving Credit Facility for Stella & Chewy’s
First Citizens Bank announced that CIT Northbridge Credit, as advised by First Citizens Institutional Asset Management LLC, served as administrative agent on a $75 million revolving credit facility for Stella & Chewy’s. Headquartered in Oak Creek, Wisconsin, Stella & Chewy’s provides high quality, premium natural pet food with an emphasis on raw nutrition, palatability, safety and all natural ingredients. Its dog and cat products include freeze dried dinner patties and meal mixers, frozen patties and morsels, baked and extruded kibble, stews, broths and treats. The financing will be used to support working capital needs and other corporate purposes. “Our company continues to experience growing demand from customers for our premium natural pet food products,” said Dean Nolden, Chief Financial Officer of Stella & Chewy’s. “We appreciated the expertise of the CIT Northbridge team in arranging this financing as we continue to grow to support our customers.”
Technology & Internet
Amazon CEO explains how company carries out same-day delivery
Amazon CEO Andy Jassy told CNBC’s Jim Cramer how the company has been able to increasingly carry out same-day orders. Amazon changed its U.S. fulfillment network from a “flat regional network” to eight regional hubs, reconfiguring its placement algorithms to get items closer to customers, he said. He added that the company also uses “sub same-day facilities” to ship items faster, saying many fulfillment centers have “about a million” SKUs — or stock keeping units, product identifiers used by retailers — ready to be shipped out same-day. “We were not only able to take the transportation distances down, which lowers your transportation costs and speeds up delivery to customers, but we also took our cost to serve down,” Jassy said. “We moved from two-day to a lot of the shipments being one day, and then increasingly, we’re being able to ship items to people in the same day.” Jassy said 60% of shipments in Amazon’s top 60 metropolitan areas have been same-day or one-day deliveries in the first half of the year. Amazon has found that delivery speed meaningfully changes customers’ conversion rates and the rate at which they’re willing to buy, he added. “What you find downstream for customers is when you’re able to get them delivery much faster, they consider you for much more of their purchases,” Jassy said. “Customers love getting items quickly.”
Amazon will no longer accept Venmo as a payment option starting next month
Amazon is dropping Venmo as a payment option next month, the PayPal owned mobile payment service announced on its website. The official announcement comes as Amazon notified users last night via email that Venmo will no longer be accepted on Amazon.com starting January 10, 2024. Amazon will still, however, accept Venmo debit and credit cards. “Due to recent changes, Venmo can no longer be added as a payment method,” Venmo’s notice on its website reads. “Venmo will remain available to users who currently have it enabled in their Amazon wallet until 01/10/24. ” PayPal spokesperson Joshua Criscoe told TechCrunch in an email that “Venmo and Amazon have agreed to disable Venmo as a payment option to pay on Amazon at this time. Customers can continue to add their Venmo debit card or credit card to their Venmo wallet to pay on Amazon. We have a strong relationship with Amazon and look forward to continuing to build on it.”
Finance & Economy
Mortgage refinance demand jumps 14% as rates fall to lowest point since August
After surging over 8% in October, mortgage rates are falling back toward 7% again, and that is jump-starting the refinance market. Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 7.17% from 7.37%, with points dropping to 0.60 from 0.64 (including the origination fee) for loans with a 20% down payment, according to the Mortgage Bankers Association. That was the lowest level since August. As a result, applications to refinance a home loan increased 14% from the previous week and were 10% higher than the same week one year ago.
Consumers Increase Their Holiday Spending Intentions Mid-Season
The total amount Americans estimate they’ll spend on Christmas or other holiday gifts this year averages $975 in Gallup’s final 2023 reading, taken in November. This exceeds consumers’ holiday spending estimate from a year ago by more than $100 and is the highest in Gallup’s November measures historically since 1999. Americans’ November forecast for their holiday gift spending has more than recovered from the $616 low recorded during the 2008 financial crisis when it had tumbled by $250 from the year prior. Since then, it has generally trended upward, although it was fairly steady near $850 for the past four years before surging well past that this year. The latest figure, based on a poll conducted Nov. 1-23, is also higher than Americans’ average $923 spending prediction in October. This is only the fifth time in the 18 years since 2006 that Gallup has asked the holiday spending question in both October and November that the average amount has increased between the two months.
Inflation expectations plunge in closely watched University of Michigan survey
Consumer fears over inflation tumbled in December amid declining energy prices and as the impact of interest rate hikes take hold. In the latest University of Michigan consumer sentiment survey, the one-year outlook for the inflation rate slid to 3.1%, down sharply from 4.5% in November and the lowest since March 2021. The five-year outlook also moved lower, down to 2.8% from 3.2% the previous month. Federal Reserve officials consider consumer expectations a key in the way inflation moves, so the switch in sentiment could further convince policymakers to keep interest rates on hold and possibly start cutting in 2024. The University of Michigan survey is one of the more closely watched gauges. Inflation sentiment in turn is tied closely to the direction of energy costs and prices at the pump in particular. The price of a gallon of unleaded gas has fallen 22 cents to $3.18 over the past month, according to AAA.
