fbic weekly insights week 5 14 lr 8pm · !5 may 15, 2015 fung business intelligence centre (fbic)...

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May 15, 2015

Fung Business Intelligence Centre (FBIC) Publication: Retail Research Weekly Insights Copyright © 2015 Fung Group. All rights reserved.

May 15, 2015 Weekly Insights

D E B O R A H W E I N S W I G E x e c u t i v e D i r e c t o r — H e a d o f G l o b a l R e t a i l & T e c h n o l o g y F u n g B u s i n e s s I n t e l l i g e n c e C e n t r e d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m N e w Y o r k : 6 4 6 . 8 3 9 . 7 0 1 7

FBIC hosted a well-‐attended Disruptors Breakfast with about 40 attendees, featuring seven startups in diverse businesses

Verizon offered US $4.4 billion to acquire AOL, a 23% premium above its most-‐recent stock price

Tencent’s WeChat messaging app now has 549 million monthly active users, up 39% from Q1 last year

MAC Cosmetics, H&M, Outback Steakhouse, and Krispy Kreme are all bullish on Latin America and are opening new outlets there

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May 15, 2015


FROM THE DESK OF DEBORAH WEINSWIG This week, we had the pleasure of hosting seven startups introduced by the Entrepreneurs Roundtable Accelerator (ERA) at a Disruptors Breakfast held at the Peacock (the former Williams College Club) in New York City. The standing-‐room-‐only event was a follow-‐up to our Hong Kong Disruptors Breakfast. As we wrote last week, ERA is a nonprofit organization founded in 2007 that plays a key role in New York City’s ecosystem by providing select companies with a four-‐month, intensive program. This program is designed to grow early-‐stage companies by providing them with collaboration opportunities, and access and exposure to a wide range of mentors and companies in the New York area. ERA selects 10 lucky companies from 1,000 applicants three times a year; participants receive a $40,000 investment and come to New York to receive free coworking space in the Chelsea neighborhood and access to more than 200 mentors.

The startups’ founders also attend seminars and speaker events led by top entrepreneurs, technologists and industry experts. In addition, they receive free legal, accounting and business support services. They also receive support from ERA’s 25+ sponsors and partners, and exposure to New York’s leading seed investors and venture funds. ERA, in exchange, receives common stock in the companies, which helps to align their mutual interests.

After a brief introduction by ERA, seven startups gave their best elevator pitch to attendees. We believe one of the differentiators of ERA is the amount of time that they spend working with their startups on the quality of their pitches. That time and effort really showed: the audience was a large, diverse group, but all audience members had a deep understanding of what the companies did after just a five-‐minute pitch by the founders. The startups included (in alphabetical order):

• Bubbl, which places a native icon on online video sites for fans to create “snackable” clips of their favorite plot twist, slam dunk or one-‐liner, which can be forwarded to and shared with millions of viewers via social media. The company has partnered with content providers so as to be able to monetize this content.

• Bunchcut, a B2B collaboration engine to intelligently manage visual content (i.e., images) in one place and in real time. The product helps team members who are spread out in various locations and time zones evaluate and select images to be used in articles and advertisements. Of note for all you creative types.

• CUPS, which offers prepaid coffee plans for a city’s best independent cafes. Consumers can subscribe to plans for a certain number of cups or for an entire year with a smartphone app that lets users find the nearest coffee shop. Several shops are offering free coffee to celebrate CUPS’ first anniversary. We love coffee and have already tried this!

• Eventable, a marketing-‐automation platform that helps brands engage their audiences through any calendar, enabling them to promote events and drive timely interaction. Users can subscribe to notifications they’re interested in (such as sporting events), and these items are saved directly on their calendar of choice. We think this could be amazing in the corporate world if the company’s leaders would like to take it in that direction.

• Ketchup, an engagement tool for publishers that provides readers with context relevant to their content. It can manage a timeline of news articles on specific topics and enable readers to delve deeper into topics of interest. We have always loved timelines and these folks have them in droves.

• SELECT, a members-‐only “black card” that provides access to exclusive events and savings and perks at thousands of locations across the globe, with insider-‐only rates, access and VIP treatment. SELECT works in concert with major credit cards, enabling the bearer to double up on points and benefits. We already signed up.

• TripleLift, an advertising solution for the visual web that uses image-‐recognition technology to identify a brand’s most compelling visual content across the web and then amplifies it across multiple advertising channels. The technology is able to provide native programmatic advertising that is put into templates and tailored for the viewer.

The reception of the companies and event was tremendously positive, and we plan to introduce even more great startups in the future.

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May 15, 2015


April US Retail Sales Flat, Showing Slow Recovery in the First Quarter Figure 1. US Monthly Retail Sales ex Auto

• Total US monthly retail sales excluding motor vehicles were flat at $436.8 billion in April. The growth rate for the last 12 months slowed to 0.9%, its lowest rate since October 2009.

• Overall, consumers cut back on spending on autos, home furnishings and electronic goods, while allocating more money to restaurant dining and Internet sites. Sales at restaurants and bars climbed 8.5% year over year and Internet retailers’ sales rose by 6.3% year over year.

• Meanwhile, March total retail sales were revised to a stronger 1.1% from 0.9%, reflecting an early Easter shopping boost.

0.0

(10)

(5)

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5

10

15

03 04 05 06 07 08 09 10 11 12 13 14 15

CHART OF THE WEEK

STAT OF THE WEEK

• The price Verizon Communications said it will pay to acquire AOL.

• This will be an all-‐cash deal at $50 per share, approximately 23% above AOL’s recent stock price.

US$4.4 Billion

Source: The Wall Street Journal

Through April 30, 2015 Seasonally adjusted Source: US Census Bureau

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May 15, 2015


US RETAIL TRAFFIC US Weekly Traffic Fell 4.6% in the First Week of the Second Quarter

Figure 2. US Weekly Store Traffic: YoY% Change

Through May 9, 2015 Source: ShopperTrak

• US store traffic was still hurt last week by the early Easter this year. Overall store traffic fell by 4.6% year

over year for the week ended May 9.

• Apparel store traffic fell slightly, by 1.2%, while electronics store traffic decreased by 2.3%. Traffic in May is expected to be lifted by graduations and Memorial Day shopping.

US REGULAR GASOLINE PRICES

Figure 3. US Regular Gasoline Prices (USD per Gallon)

04/27/15 05/04/15 05/11/15 Week Ago Year Ago

US 2.570 2.664 2.691 0.027 (0.977)

East Coast 2.517 2.578 2.608

0.030

(1.069)

Midwest 2.439 2.499 2.508

0.009 (1.088)

Gulf Coast 2.305 2.384 2.436 0.052 (1.001)

West Coast 3.182 3.416 3.444 0.028 (0.578)

RR

(25)

(20)

(15)

(10)

(5)

0

5

10

15

10/03

10/10

10/17

10/24

10/31

11/07

11/14

11/21

11/28

12/05

12/12

12/19

12/26

01/02

01/09

01/16

01/24

01/31

02/07

02/14

02/21

02/28

03/06

03/13

03/21

03/28

04/01

04/11

04/18

04/24

05/02

05/09

Source: US Energy Information Administration

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May 15, 2015


US RETAIL EARNINGS

Company

Revenues ($ Mil.) Change

Gross Margin (%) Change

Net Income ($ Mil.)

Change YoY Store Fleet EOP

Period 2015 2014 (%) 2015 2014 (BP) 2015 2014 (%) 2015 2014

Macy's 1Q ended

May.2 6,232 6,279 (0.7) 39.0 38.9 10 193 224

(13.8) 885 841

JCPenney 1Q ended

May 3 2,857 2,801 2.0 36.4 33.1 338 289 297 (2.9) 1,020 1,100

Kohl's 1Q ended

May.2 4,123 4,070 1.3 36.9 36.8 18 127 125 1.6 1,160 1,164 Source: Company reports

US RETAIL HEADLINES Sephora to Launch China Online Flagship with JD.com (May 13) Women’s Wear Daily • LVMH-‐owned beauty retailer Sephora and China’s second-‐largest e-‐commerce player, JD.com,

announced their partnership on May 13. Sephora’s China flagship will be able to leverage the 100 million active users on JD.com.

• The new flagship store will be the largest cosmetic store on JD.com, and will feature over 1,200 items.

Alibaba Buys 4.8 Million Shares of US Flash-‐Sale Site Zulily (May 11) 24/7 Wall Street • Alibaba disclosed the purchase of 4.8 million Class A shares of Seattle-‐based e-‐tailer Zulily for

about $56.2 million last Friday.

• The company also disclosed that it already held a less-‐than-‐5% stake, or 6,687,575 shares, in Zulily. Alibaba’s stake is now worth about 9.3%, or 11.5 million shares. The stock purchase was made at prices ranging from $10.63 to $12.70 per share.

Walmart to Buy 13 Target Stores in Canada (May 8) Women’s Wear Daily • Walmart Canada is to take over 12 store leases, one owned location and one distribution facility

from Target’s Canadian operation. It will cost Walmart C$350 million (US$289 million) to acquire and renovate the locations.

• Target announced its exit from Canada back in January 2015. The company invested $4 billion to expand to Canada, but the investment yielded disappointing results.

• Walmart Canada said in February 2015 that it would open 35 new supercenters. The company currently operates 395 units in Canada, including 282 supercenters and 113 discount stores.

Tory Burch Sport Store Coming to New York (May 8) Women’s Wear Daily • Tory Burch announced that her long-‐awaited sports line, called Tory Sport, will launch in 2015.

The line will be available through several channels, including at retail stores and on e-‐commerce site TorySport.com.

• The brand is seeking one location on Fifth Avenue in the Flatiron District. The line will include yoga, running, tennis and golf categories.

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May 15, 2015


ASIA TECH HEADLINES WeChat Grows to 549 Million Monthly Active Users (May 13) TechinAsia • Tencent said that its messaging app WeChat now has 549 million monthly active users. This

figure is indicated in Tencent’s first-‐quarter 2015 earnings report.

• 549 million is an increase of 9.8% from WeChat’s 500 million-‐user milestone set at the end of 2014. It’s up 39% from the first quarter of 2014.

Alibaba’s Cloud Computing Unit to Establish Base in Dubai (May 13) Channel NewsAsia • Alibaba’s cloud computing unit said it would establish a base in Dubai to seek business from

companies and governments in the Middle East and North Africa.

• The joint venture between Aliyun and Meraas, a holding company owned by Dubai’s ruler, Sheikh Mohammed bin Rashid al-‐Maktoum, will specialize in developing applications and big data operations in areas such as payment solutions.

Alibaba Rolls Out 3-‐Hour Delivery Service for Healthcare Goods (May 12) Channel NewsAsia • Chinese online shopping giant Alibaba is rolling out a three-‐hour delivery service for healthcare

goods, mimicking rival JD.com.

• The service will launch in five Chinese cities, including Beijing and Shanghai, and expand to 19 cities by the end of 2015, Alibaba said.

Xiaomi Enters Money Market Fray with Huoqi Bao Service (May 12) Channel NewsAsia • Chinese smartphone maker Xiaomi waded into China’s red-‐hot online finance arena with a new

money market fund to compete against tech rivals Alibaba and Tencent.

• Dubbed Huoqi Bao, Xiaomi’s new personal finance service will offer deposit rates that are higher than traditional Chinese banks’ and will be accessible via an app to be bundled with Xiaomi handsets.

Uber Tests First-‐Ever Cash Payments for Car Rides in India (May 12) TechinAsia • Ride-‐hailing company Uber announced it will offer to take cash payments from Indian

customers looking to hail a car, as part of a pilot program in Hyderabad.

• Prior to the Hyderabad pilot, Uber had steadfastly avoided accepting cash for its car services. It did not accept cash for any of its ride tiers, in Asia or elsewhere.

Fujitsu’s New Wearables Might Not Be Sexy, but They Could Save Your Life (May 12) TechinAsia • Japanese tech giant Fujitsu had four of its latest enterprise wearables on display in Tokyo

yesterday: FEELythm and the Ubiquitousware HMD, location badge and vital-‐sign sensing band.

• FEELythm targets long-‐haul drivers, as it can gauge drowsiness; HMD is a support tool for infrastructure maintenance and assembly work; the location badge is equipped with “pedestrian dead reckoning” technology; and the vital-‐sign sensing band collects data about a wearer’s physical well-‐being.

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May 15, 2015


9gag’s Ray Chan: “We Were Crazy, but Not Crazy Enough to Think It Would Grow This Big” (May 12) TechinAsia • 9gag started out as a side project in 2008, but has turned into a viral media powerhouse where

millions of people converge each day for GIFs, gags and videos.

• Now 9gag has 3 million daily active users, and about 50 million to 80 million monthly unique visits. Most of its traffic comes from the US and Germany.

SoftBank’s Arora Says No Rush to Sell Alibaba Stake (May 11) Channel NewsAsia • SoftBank’s Chief Executive, Masayoshi Son, is not in a rush to sell the company’s stake in

Chinese e-‐commerce giant Alibaba, Vice Chairman Nikesh Arora told Reuters.

• “He’s never been more confident in the way he believes Alibaba will continue to grow,” said Arora, who is to become SoftBank’s president in June.

EUROPEAN RETAIL EARNINGS

Company

Revenues ($ Mil.)

Change YoY

Gross Margin (%)

Change YoY

Net Income ($ Mil.)

Change YoY

Store Fleet EOP

Period 2014 2013 (%) 2014 2013 (BP) 2014 2013 (%) 2014 2013

Home Retail* FY ended 2/28/15 9,292 8,926 4.1 35.7 35.9 (25) 116.5 85.1 36.9 1,051 1,057

N Brown* FY ended 2/28/15 1,331 1,291 3.1 52.0 52.6 (61) 80.4 119.6 (32.8) N/A N/A

Delhaize** 1Q ended 3/31/15 6,567 6,885 (4.6) 24.4 24.1 28 31.6 109.6 (71.2) 3,410 3,468

*Converted from £ **Converted from € Source: Company reports

EUROPEAN RETAIL HEADLINES Luxury Group LVMH Moves into Chinese E-‐Commerce (May 13) BusinessofFashion.com • Global beauty retailer Sephora, part of the French luxury group LVMH, has announced that it

will launch its first China-‐focused e-‐tail venture with JD.com.

• JD.com is Alibaba’s biggest rival and was reportedly selected by Sephora due to its focus on fighting counterfeit goods in the Chinese marketplace.

Pandora Reports Revenue Increases Alongside Falling Net Profit (May 13) The Retail Bulletin • Danish jewelry brand Pandora has reported a revenue increase of 36.8%, to DKK3.5 billion, in

the first quarter. Its European business increased its sales by 33.2%, while revenues in the Americas grew by 34.4%.

• Despite this, year-‐over-‐year net profit fell to DKK383 million from DKK704 million as the retailer was hit by additional tax expenses and finance costs.

Tesco-‐Owned Homeplus Closes Remaining UK Stores (May 13) Retail-‐Week.com • After revealing plans in January to close half its UK Homeplus stores, Tesco has now announced

it will close the remaining six in June this year. In line with the planned closures, around 450 jobs will be cut.

• The move follows Dave Lewis’s promised review of the grocer’s noncore assets as he continues to focus on its supermarkets and convenience stores. Tesco’s Broadband and Blinkbox services have already been sold off.

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May 15, 2015


French Economy Outperforms a Slowing German Market

(May 13) WGSN.com

• France reported that its first-‐quarter economic growth rate was its fastest in two years. Surpassing analysts’ expectations of a 0.4% increase, the country has seen an increase of 0.6%. Consumer spending and corporate investment were noted as contributing factors.

• The growth rate in Germany has unexpectedly slowed, however, reaching only 0.3%.

IKEA Announces New Design Collaborations

(May 12) RetailDetail.eu

• IKEA has confirmed it is working with renowned Belgian fashion designer Walter Van Beirendonck to create a new collection for June 2016.

• Katie Eary, a London streetwear designer, and Swedish designer Martin Bergström are also set to collaborate with the furniture retailer later in the year.

Zalando Attracts New Customers and Keeps Them

(May 12) Company press release

• Zalando, the online German fashion retailer, reported a 30% increase in turnover for the first quarter.

• The results are based on an 18% increase in customers who not only visited the site more often, but also spent more on average per visit.

Ocado Looks to Robots to Increase Efficiency

(May 11) Retail-‐Week.com

• Online retailer Ocado has announced development plans to introduce robots into its warehouse, which would reduce its reliance on staff. With the planned restructuring, the robots would remove the need for aisles and free up more space within the retailer’s fulfillment center.

• By implementing such measures, Ocado would create free space that would be filled with more produce, potentially increasing product offering and efficiency.

Supermarket Rivals in Merger Talks

(May 11) FT.com

• Dutch supermarket Ahold and its Belgian rival Delhaize are reportedly in the early stages of discussing a merger.

• Despite mixed reactions from analysts, both retailers saw their shares rise after the news was reported in the Belgian press.

Morrisons Q1 Trading Results Show Declining Comparable Sales

(May 7) Wm Morrison Supermarkets Plc – Press Release

• UK grocery chain Morrisons has announced a 1.1% drop in total sales in the thirteen weeks to May 3. This figure excludes fuel which, if accounted for, brings the decrease to 5.1%. Comparable sales were down 2.9% and 6.6% including fuel.

• Online sales contributed 1.0% to comparable sales, an increase on previous quarters.

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May 15, 2015


LATAM RETAIL HEADLINES MAC Cosmetics Plans Latin American Expansion

(May 13) Women’s Wear Daily

• MAC plans to open more than 20 shops in Latin America this year, and hopes to have more than 220 shops in the region by 2018.

• Most of the store openings are planned for second-‐ and third-‐tier cities in Brazil, Mexico and Chile.

• MAC sells four lipsticks per minute in Latin America and expects 40% sales growth in the region this year.

H&M Opens First Store in Peru

(May 12) The Retail Bulletin

• On May 12, more than 2,000 people lined up to visit H&M’s first Peruvian store in Lima’s Jockey Plaza mall.

• The store spans three floors and is one of H&M’s largest, selling both apparel and housewares.

• Later this year, the company plans to open stores in Macau, South Africa and India.

Brazilian Brands Face Challenges in Exporting

(May 11) Women’s Wear Daily

• Many Brazilian would-‐be exporters lack the infrastructure or experience needed to succeed.

• Interested exporters can seek help from Texbrasil, a government export-‐promotion program.

• Texbrasil is studying new ways to increase exporting and plans to expand its membership by 10% to 15%, to 300 firms, and for members’ exports to rise 5% to 10%, from US$1.3 billion this year.

Mexican Retailer Elektra to Close Operations in Brazil

(May 8) The Wall Street Journal

• Mexican banking and retail conglomerate Grupo Elektra plans to close its operations in Brazil, after seven years in the country.

• Elektra markets electronics, appliances, furniture and other low-‐priced products, and operates the bank Banco Azteca.

• The company exited operations in Argentina in 2013.

Krispy Kreme to Open 12 Shops in Guatemala

(May 7) Company press release

• Krispy Kreme announced the signing of an agreement to open 12 shops in Guatemala over the next four years.

• The company’s local partner, Pronto, is an experienced operator and is committed to delivering a genuine Krispy Kreme experience.

• The partners plan to offer the usual doughnuts as well as a local Guatemalan coffee blend.

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May 15, 2015


Outback Steakhouse Bullish on Brazil

(May 5) Bloomberg

• Outback parent company Bloomin’ Brands recently opened two Italian restaurants in Brazil, and it plans to open one steakhouse; it already operates 64 restaurants in the country.

• Bloomin’s CEO Liz Smith told Bloomberg that Brazil’s expanding middle class “wants to graduate to a casual-‐dining experience.”

• Bloomin’ opened its first Brazilian Outback Steakhouse in 1997 and plans to ultimately have 100 restaurants in the country.

EARNINGS CALENDAR

Company Event Date

Home Depot 1Q15 Earnings Call/Earnings Release May 19

Walmart 1Q15 Earnings Call/Earnings Release May 19

TJX 1Q15 Earnings Call/Earnings Release May 19

Burberry FY15 Earnings Call/Earnings Release May 20

Target 1Q15 Earnings Call/Earnings Release May 20

Lowe’s 1Q15 Earnings Call/Earnings Release May 20

L Brands 1Q15 Earnings Call/Earnings Release May 20

Marks & Spencer FY15 Earnings Call/Earnings Release May 20

Ross Stores 1Q15 Earnings Call/Earnings Release May 21

Gap 1Q16 Earnings Call/Earnings Release May 21

Ross Stores 1Q16 Earnings Call/Earnings Release May 21

American Eagle Outfitters 1Q16 Earnings Call/Earnings Release May 21

ANN 1Q15 Earnings Call/Earnings Release May 22

Aéropostale 1Q15 Earnings Call/Earnings Release May 22

Sears 1Q16 Earnings Call/Earnings Release May 22

Michael Kors 4Q15 Earnings Call/Earnings Release May 27

Costco 3Q15 Earnings Call/Earnings Release May 27

Abercrombie & Fitch 4Q15 Earnings Call/Earnings Release May 28

Guess? 1Q15 Earnings Call/Earnings Release May 29

Quicksilver 2Q15 Earnings Call/Earnings Release Jun. 2

G-‐III Apparel Group 1Q15 Earnings Call/Earnings Release Jun. 3

Dollar General 1Q15 Earnings Call/Earnings Release Jun. 3

PVH 1Q15 Earnings Call/Earnings Release Jun. 4

Five Below 1Q15 Earnings Call/Earnings Release Jun. 4

Men’s Wearhouse 1Q15 Earnings Call/Earnings Release Jun. 5

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May 15, 2015


EVENT CALENDAR

Event Location Date(s) FBIC Presentation

ICSC RECon Las Vegas, NV May 17–20 Alibaba Global Conference on Women and Entrepreneurship Hangzhou, China May 19–21

CES Asia Shanghai, China May 25–27

Planalytics 2015 Hurricane Outlook Webinar May 28

MIT Technology Review EmTech Digital San Francisco, CA Jun. 1–2

ULI Asia Pacific Summit Tokyo, Japan Jun. 2–4

Internet Retailer Conference Exhibition Chicago, IL Jun. 2–5

FMI Connect: More than Meets the Aisle Chicago, IL Jun. 8–11

WWD Beauty Summit New York, NY Jun. 9–10

Retail Innovation Conference New York, NY Jun. 16–17

New York Fashion Tech Lab Demo Day New York, NY Jun. 18

NRF PROTECT Long Beach, CA Jun. 23–25

Omnichannel Retail Executive Forum New York, NY Jul. 16

ICSC Next Generation Conference Miami, FL Jul. 26–28

NRFtech Half Moon Bay, CA Jul. 26–28

Magic Las Vegas, NV Aug. 17–19

NACDS Total Store Expo Denver, CO Aug. 22–25 Deborah Weinswig

CIO Retail Summit Scottsdale, AZ Aug. 23–25

Planalytics Back-‐to-‐School Outlook Online Aug. TBD

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May 15, 2015


Deborah Weinswig, CPA Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: +852 6119 1779 [email protected] Cam Bolden [email protected] Marie Driscoll, CFA [email protected] John Harmon, CFA [email protected] Amy Hedrick [email protected] Aragorn Ho [email protected] John Mercer [email protected] Charlie Poon [email protected] Kiril Popov [email protected] Stephanie Reilly [email protected] Lan Rosengard [email protected] Jing Wang [email protected]

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