weekly insights by fbic global retail tech jan 15.mb...!2 january 15, 2016...

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January 15, 2016

DEBORAH WEINSWIG, EXECUTIVE DIRECTOR–HEAD OF GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved.

D E B O R A H W E I N S W I G Executive Director – Head of Global Retail & Technology

Fung Business Intelligence Centre [email protected]

US: 646.839.7017 HK: 852.6119.1779

CN: 86.186.1420.3016

January 15, 2016

+5.4% CHART OF THE WEEK

STAT OF THE WEEK

STAT OF THE WEEK

• This week, we take a look at the holiday retailing period in the US, which offers early indications that pre-‐holiday retail sales were robust. Still, apparel stores faced particular challenges from unseasonal weather.

• The digital health industry reached a new investment high of nearly $5.8 billion in 2015, a small increase from the breakout year of 2014. The number of deals inked showed a 20.6% year-‐over-‐year increase and nearly hit 900.

• India's mobile phone subscriber base reached the 1 billion mark, which will likely lead to a significant portion of these subscribers becoming smartphone users, triggering explosive growth in data usage and Internet access.

• Apple is accepting job applications for its first store in Mexico, to be a global flagship and located in the Santa Fe mall in Mexico City. The company also plans to open new stores in Argentina, Chile and Peru.

• The International Council of Shopping Centers (ICSC) reports that 91% of holiday shoppers in the US made

purchases in physical stores.

• The strength of brick and mortar during the holiday season (Nov. 1 – Dec. 25) was largely due to retailers’

technological advancements.

• According to ICSC, 60% of holiday shoppers used their mobile device while shopping in-‐store, and 32% of

shoppers used click-‐and-‐collect services.

Media and Technology Companies Dominate America’s 10 Best-‐Perceived Brands

91%

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January 15, 2016


FROM THE DESK OF DEBORAH WEINSWIG

A Solid Holiday for Retail This week, we cast an eye over the holiday trading period in the US. We have had early indications from a number of data providers that US pre-‐Christmas retail sales were robust. These data points indicate a pretty good holiday season for US retail overall, although apparel stores faced particular challenges from unseasonal weather.

Indications of Solid Retail Growth According to MasterCard Advisors’ SpendingPulse, which tracks spending across cash and checks as well as cards, retail sales across November and December were up 4.6% year over year. For the period from Black Friday through Christmas Eve, retail sales grew even more strongly, at 7.9%. Credit-‐card transactions processor First Data says retail sales rose by 3.3% year over year from October 31 through January 4. And according to Johnson Redbook Service, US retail sales were up by 2.9% for the week ended January 2 and up by 2.2% for all of December. The US Census Bureau will publish its provisional figures for December on January 15, shortly after we go to press.

As a point of reference, the National Retail Federation had forecast holiday sales growth of 3.7%, which was in line with our forecast was for growth of 3%–4%.

As expected, e-‐commerce, and especially mobile, drove retail growth over the holidays. MasterCard Advisors’ SpendingPulse says e-‐commerce sales grew by around 20% year over year. Our own survey of US holiday shoppers, conducted December 19–22, found that 59% had bought online, and that online was the main shopping channel for some 41% of respondents. That 41% includes mobile shoppers, although only 2% of respondents said a mobile device was their main channel for holiday shopping, which highlights how the mobile channel tends to be a complement to, rather than a substitute for, other channels.

The ease of mobile shopping and the free shipping increasingly being offered by retailers look to have amplified the hit that stores took this holiday season: in-‐store traffic was down 5.8% in December in the US, according to RetailNext, and down 6.4% over the entire November–December holiday period. However, even though people may be visiting stores less often, and researching more online before they get there, the vast majority of shoppers are still going to stores for at least some of their holiday purchases: the International Council of Shopping Centers says 91% of US holiday shoppers made an in-‐store purchase.

“Holiday Creep” One key takeaway from holiday 2015 is the trend of “holiday creep,” the stretching of holiday shopping across an extended period. The 2015 season began with Black Friday promotions being pushed ever earlier. Walmart, Lowe’s, Sears and Target were among those offering deals earlier than they did in 2014, and our survey of US shoppers found that 48% started their holiday shopping before Black Friday weekend.

There was also evidence that the season ended with a late surge in sales. NPD Group found that 60% of consumers had not completed half or more of their shopping by December 13, up from 50% when they surveyed consumers in 2014. And FedEx said it saw an “unprecedented surge of last-‐minute e-‐commerce shipments” that “far exceeded all previous records.”

As fulfillment options grow, including the extension of buy online, pick up in-‐store, and as shopper expectations of convenience increase, we expect more consumers to become comfortable with placing online holiday orders close to Christmas. So, the lessons for Christmas 2016 appear to include: be ready to fight for shoppers early, and be prepared to fulfill their orders up to the very last minute.

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January 15, 2016


Media and Technology Companies Dominate America’s 10 Best-‐Perceived Brands Figure. 1. Top-‐10 BrandIndex Ranking in the US, 2015 vs. 2014

Source: YouGov BrandIndex

• Digital companies take the first four positions with somewhat minor changes in rankings compared the previous year, according to YouGov’s annual BrandIndex survey, which asks respondents to rate brands they have heard of in the last two weeks with a positive or negative score.

• Cancer Treatment Centers of America (CTCA) made its top-‐10 debut in the ranking, being the only healthcare company featured on the list, following polished brand image.

• Apple and Samsung are in tied in sixth position, with the South Korean company falling one place from 2014.

• Also in tied position are Walgreen’s, the largest pharmacy retailer in the US, and Lowe’s, the home improvement retailer.

• Last year’s number four in the ranking, Subway, dropped from the top-‐10 list.

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3 2

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Amazon

Nej

lix

YouTub

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Google

CTCA

Apple

Samsung

iPho

ne

Lowe's

Walgreens

2015 2014

STAT OF THE WEEK

CHART OF THE WEEK

• The International Council of Shopping Centers (ICSC) reports that 91% of holiday shoppers in the US made purchases in physical stores.

• The strength of brick and mortar during the holiday season (Nov. 1 – Dec. 25) was largely due to retailers’ technological advancements.

• According to ICSC, 60% of holiday shoppers used their mobile device while shopping in-‐store, and 32% of shoppers used click-‐and-‐collect services.

91% Source: ICSC

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January 15, 2016


US RETAIL HEADLINES Amazon to Acquire French Package-‐Delivery Company Colis Privé (January 10) The Seattle Times

• Amazon’s full acquisition of Colis Privé, a French package-‐delivery company, will make it a direct competitor of delivery titans UPS and FedEx. Some analysts think Amazon is preparing to launch a delivery service that competes even more broadly.

• Though the French company is small relative to the multinational giants that move Amazon parcels around the globe, the acquisition will be Amazon’s biggest step yet to move into the business of delivering packages for others as well as itself.

Digital Health Funding Hits New Highs in 2015, Reaching Nearly $6 Billion (January 9) CB Insights

• The digital health industry reached a new investment high of nearly $5.8 billion in 2015, a small increase from the breakout year of 2014 (which saw funding more than double over 2013). However, there was a more significant jump in the number of deals inked: they showed a 20.6% year-‐over-‐year increase and broke the 800 mark for the first time (nearly hitting 900).

• When we look at deal breakdown by stage, the spike in seed deals seems to have slowed, with deal share hovering around 36% in the last two years. The other rounds have remained relatively range-‐bound based on deal share.

Tesla Chief Elon Musk Says Apple Is Making an Electric Car (January 11) Bloomberg

• In an exclusive interview with the BBC, Tesla CEO Elon Musk said it is an “open secret” that Apple is making a rival electric car. He also predicted that vehicles that could not drive themselves would become a “strange anachronism” before too long.

• Tesla is vying with Nissan and BMW to be the world’s best-‐selling electric-‐car brand, but the company currently runs at a loss. And over recent months, several of its engineers have been hired by rivals, including Apple and China-‐backed Faraday Future. Apple has not formally announced it is working on an electric vehicle, although it did recently register several automobile-‐related Internet domains, including Apple.car and Apple.auto.

Obama Administration to Announce Efforts to Boost Self-‐Driving Cars (January 13) Reuters

• The Obama administration will announce efforts to boost self-‐driving cars on Thursday, according to government officials. Mark Rosekind, head of the National Highway Traffic Safety Administration, told reporters that Transportation Secretary Anthony Foxx will be in Detroit to talk about administration efforts to speed the introduction of self-‐driving vehicles.

• There is not yet a clear legal framework governing the presence of driverless cars on US roads. Automakers and technology companies such as Google have called on regulators to clarify guidelines for the introduction of autonomous driving technology, in part out of concern that a mishap involving a self-‐driving car could result in costly litigation.

A Department-‐Store Comeback in New York City (January 13) The Wall Street Journal

• Only in New York: It’s boom times for the old-‐fashioned department store in Manhattan. . The building boom defies the indications that these stores nationally are on the wane amid fierce competition from online shopping and a variety of other retail options. Sales at U.S. department stores fell last year by roughly 2% through November, according to the U.S. Census Bureau.

• Barneys New York will lead the push, opening a new store at its original location on West 17th Street in mid-‐February. Saks Fifth Avenue will open the first of two new stores in

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January 15, 2016


Brookfield Place in lower Manhattan later this year. Neiman Marcus and Nordstrom have each decided to build their first stores in the city.

EUROPE RETAIL HEADLINES House of Fraser Reports Strong Christmas Trading, Boosted by Black Friday Sales (January 11) Company press release

• For the six weeks through January 2, 2016, UK department store chain House of Fraser reported that comparable sales were up 5.3% year over year. In the seven days before Christmas, comps were up 6.0%, with online sales up 61.8% and store sales (adjusted for online refunds) up 2.2%. The week after Christmas saw continued momentum, with comps up 6.8%. The retailer also reported record performance from its Buy & Collect service, up 22% over last year.

• In a press release, CEO Nigel Oddy stated that House of Fraser had a good run over the Christmas season, with strong trading performance in terms of sales growth and margin improvement. Black Friday opened the season with total sales up 10% and online sales up 40% over the previous year.

ASDA Joins European Purchase Alliance EMD (January 11) EMD press release

• ASDA, the British subsidiary of Walmart, has joined EMD, Europe’s leading strategic buying and marketing alliance. The move may allow ASDA to offer lower prices to consumers, as it could mean that it is able to obtain lower costs from suppliers.

• In its statement, EMD added that, as a new partner of the alliance, which operates in 15 countries, ASDA will be able to capitalize on sourcing and marketing synergies and obtain “new options for the European brand and private label activities.” According to the alliance, its members include about 500 grocery retailers with more than 150,000 points of sale across all types of distribution, the main one being food retail.

boohoo.com Posts Increase in Sales, but a Drop in Margin, in Four Months Ending Dec. 31, 2015 (January 12) Company press release

• UK fashion pure play boohoo.com reported a 45% increase in total revenue (49% at constant exchange rates) for the four months through December 31, 2015. The company’s retail gross margin was 57%, down 290 basis points year over year, driven by “planned investments in price and customer proposition,” according to a company press release.

• Mahmud Kamani and Carol Kane, the joint CEOs, said they are optimistic about the remaining two months of the retailer’s fiscal year and that they expect full-‐year revenue growth to be marginally above the previous guidance of 30%–35%.

Debenhams Reports Positive Performance over the Holidays (January 12) Company press release

• For the 19 weeks ending January 9, 2016, British retailer Debenhams announced a year-‐over-‐year increase of 3.5% in group comparable sales, at constant exchange rates. Online sales at the retailer were up 12.1% year over year.

• Debenhams’ click-‐and-‐collect service’s penetration rose to 31% during the period, with penetration peaking at 46% in the pre-‐Christmas period. Magasin du Nord, the retailer’s Danish subsidiary, delivered “good growth and record Christmas trading.” Debenhams CEO Michael Sharp said the retailer remains “on track to deliver full-‐year profits in line with market expectations.”

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January 15, 2016


Metro Group Announces First-‐Quarter Sales in Line with Expectations (January 12) Company press release

• German retail conglomerate Metro Group reported 0.1% year-‐over-‐year growth in group comparable sales, but said that total sales were down 1.5% in the first quarter (ending December 31, 2015). Metro Cash & Carry, which generates about 47% of the group’s revenues, posted a 0.2% rise in comparable sales. Comps at Media-‐Saturn were up 0.4% and comps at Real were down 1.6%.

• Metro’s Christmas season trading was especially good in Germany, where comparable sales were up 2.1% year over year. CEO Olaf Koch stated, “We remain confident for financial year 2015/16, despite the difficult environment and expect positive development thanks to the range of measures introduced in our sales lines. We retain our original forecast.”

ASIA TECH HEADLINES Didi Kuaidi Surpassed 1 Billion Rides in 2015; Trumps Uber (January 12) ZDNet

• Ride-‐sharing service Didi Kuaidi said it completed 1.43 billion rides in 2015, almost double the total number of taxi rides taken in the US over the year. It took Didi Kuaidi’s rival Uber six years to reach the same milestone.

• According to the company’s CEO and founder, Cheng Wei, Didi Kuaidi will focus on applying its data-‐mining capability in order to enhance its “vertical capacity.” When ride pooling is introduced into taxis, private cars and Hitch, customers will begin hailing a seat in a car rather than hailing an actual car.

Kakao Acquires Leading South Korean Music-‐Streaming Service for $1.5 Billion (January 11) TechinAsia

• South Korean web giant Kakao, maker of KakaoTalk, said it has acquired a music-‐streaming service for KRW 1.87 trillion (US$1.55 billion) in order to boost its mobile chat app, which is the country’s most popular.

• MelOn is said to be South Korea’s top music-‐streaming service, with 28 million registered users, while KakaoTalk boasts 39 million monthly active users in the country of roughly 50 million. That puts it ahead of rival messaging apps such as Line, WhatsApp and Facebook Messenger in the South Korean market.

Who Are China’s Mobile Web Users? (January 11) TechinAsia

• China’s mobile Internet is massive, and mobile Internet users have long outnumbered PC Internet users. By some estimates, the country has close to a billion mobile Internet users. A new report from Chinese market research firm QuestMobile has shed some light on China’s mobile Internet demographics.

• The report says 57.4% of China’s mobile Internet users are men, up from 56% in December 2014. The well-‐documented gender gap of around 52% male/48% female does not explain the discrepancy. The report also found that 79% of mobile users are aged 40 or below and that about 60% are aged 35 or below.

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January 15, 2016


Lenovo Mobile Chief: Google Play Is Coming to China This Year (January 11) ZDNet

• Tech Sina reported that Chen Xudong, the head of Lenovo’s mobile group, commented that the Google Play store, apps and services will be back in China in 2016.

• Google simply cannot ignore the massive population of China and cede the market to Android handsets and Apple’s iPhone. The Apple iTunes App Store is available in China.

Glassmaker Biel Crystal to File for $2 Billion IPO (January 11) ZDNet

• Biel Crystal Manufactory, the manufacturer of glass covers for Apple and Samsung mobile devices, is set to file for an IPO worth $2 billion. According to IFR, a Thomson Reuters publication, sources close to the plan said the IPO will be set in Hong Kong.

• Founded in 1986, Biel Crystal is a Hong Kong–based company with manufacturing facilities in Shenzhen and Huizhou. With over 60,000 workers, the manufacturer supplies glass components for customers that include Apple, Samsung, Tag Heuer and Gucci.

India Just Hit 1 Billion Mobile Subscribers (January 6) Forbes

• India’s mobile phone subscriber base reached the 1 billion mark, per data released recently by the country’s telecom regulator. However, experts see the milestone as the beginning of some dramatic action rather than as a climax.

• A significant portion of these subscribers will become smartphone users in the next couple of years, and growth in data usage and Internet access via mobile will explode, leading to millions more Indians conducting business, socializing and participating in governance through their mobile devices, according to Gartner India Director Amresh Nandan.

LATAM RETAIL HEADLINES Brazilian Retail Sales Rise Unexpectedly in November (January 13) Bloomberg Business

• Brazil’s retail sales rose by 1.5% in November due to shoppers taking advantage of holiday specials. Analysts had estimated a 0.8% decline, whereas the country had revised its growth expectation to 0.5% in October.

• The increase was driven by a 6.9% increase in sales of furniture and appliances, which offset a 1.5% decline in food, beverages and tobacco products at hypermarkets and supermarkets. Sales of items for personal and domestic use increased by 4.1%.

Vitamin Shoppe Opens Three Stores in Guatemala (January 13) NorthJersey.com

• Specialty nutritional product purveyor Vitamin Shoppe opened its first three franchise stores in Guatemala City, the capital and largest city in Guatemala, on January 12.

• The new stores are located in strip malls and as a stand-‐alone location and are part of an agreement with Grupo Unipharm to open a total of 15 stores over the next 10 years.

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January 15, 2016


Karl Lagerfeld to Launch Collection in Brazil (January 13) WWD.com

• Karl Lagerfeld is coming to Brazil this spring, having designed a special 75-‐piece collection for fast-‐fashion chain Riachuelo that will be introduced during São Paulo Fashion Week, scheduled for April 13–17.

• The collection includes accessories such as handbags, clutches, wallets, small leather goods, iPhone cases and collectible items as well as black jersey jumpsuits and graphic T-‐shirts, priced from BRL 50–BRL 400 (US$12–US$100).

Walmart Sees Strong Sales Growth at Mexican Subsidiary (January 9) WWD.com

• Walmex reported an 11% sales increase, to MXN 485.8 billion (US$27 billion), the highest growth rate seen since 2006, when sales increased by 9.7%.

• Same-‐store sales rose by 6.4% in total and by 4.7% in Mexico and Central America, outpacing the performance of other hypermarkets such as Soriana and Chedraui.

First Mexican Apple Store to Open in Mexico City (January 8) Appleinsider.com

• Apple is already accepting job applications for its first store in Mexico, which will be located in the Santa Fe mall in Mexico City.

• The store is expected to be a global flagship, comparable to stores in San Francisco and China. While Apple is planning to open stores in Guadalajara and Monterrey, the company first plans to open stores in Argentina, Chile and Peru. It already operates two retail stores in Brazil.

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January 15, 2016


EARNINGS CALENDAR

Company

Earnings Release Period Date

Sales ($ Mil.) EPS

Currency Consensus TY LY Actual

Consensus TY LY Actual

Unilever FY 15 Jan 19 53,163 48,436

1.80 1.82 EUR

Kimberly-‐Clark 4Q 15 Jan 25 4,580 4,828

1.43 1.35 USD

Procter & Gamble 2Q 16 Jan 26 16,968 20,161

0.98 1.06 USD

Apple 1Q 16 Jan 26 77,348 74,599

3.26 3.06 USD

Coach 2Q 16 Jan 26 1,273 1,219

0.67 0.72 USD

Metro 1Q 16 Jan 26 2,929 2,841

0.53 0.45 CAD

eBay 4Q 15 Jan 27 2,317 4,921

0.50 0.77 USD

Facebook 4Q 15 Jan 27 5,358 3,851

0.68 0.25 USD

Amazon 4Q 15 Jan 28 35,993 29,328

2.79 0.45 USD

Hennes & Mauritz FY 15 Jan 28 181,712 151,419

12.96 12.07 SEK

Hanesbrands 4Q 15 Jan 28 1,532 1,523

0.46 0.37 USD

Alibaba 3Q 16 Jan 28 32,885 26,179

5.73 3.10 CNY

Under Armour 4Q 15 Jan 28 1,126 895

0.47 0.40 USD

Colgate-‐Palmolive 4Q 15 Jan 29 3,941 4,221

0.73 0.76 USD

Clorox 2Q 16 Jan 29 1,349 1,345

1.04 0.97 USD

Simon Property Group 4Q 15 Jan 29 1,380 1,297

2.66 2.47 USD

Alphabet 4Q 15 Feb 1 16,892 18,103

8.10 5.47 USD General Growth Properties 4Q 15 Feb 1 683 673

0.42 0.38 USD

LVMH FY 15 Feb 2 35,536 30,638

7.56 11.27 EUR

Ocado Group FY 15 Feb 2 1,108 948

0.02 0.01 GBP

Macerich 4Q 15 Feb 3 344 323

1.08 0.99 USD

Deckers Outdoor 3Q 16 Feb 4 847 785

4.93 4.50 USD

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January 15, 2016


EVENT CALENDAR

Event Location Date(s) FBIC Presenting

KPMG StartUp 2016! London, UK January 16

ROI SuperSaturday New York, NY January 16 Deborah Weinswig RISE – Retail Innovation and Shopper Expertise Symposium New York, NY January 16 Deborah Weinswig

NRF Foundation Gala New York, NY January 17

Digital Life & Design Conference Munich, Germany January 17–19

NRF Retail’s Big Show New York, NY January 17–20 Deborah Weinswig

Brands Innovations – Future of Consumer Engagement New York, NY January 18

Planalytics – Retail Strategy Breakfast New York, NY January 18

Hong Kong Fashion Week Hong Kong January 18–21

Israeli VR Tech Virtual Demoday Webinar January 19

JDA and FBIC Luncheon at NRF New York, NY January 19 Deborah Weinswig

Mercedes-‐Benz Fashion Week Berlin Berlin, Germany January 19–22 Credit Suisse – 2016 Latin America Investment Conference São Paulo January 19–20

Avon Products Investor Day New York, NY January 21

Brand Innovators – Content Marketing Denver, CO January 22

MAGIC – Project NY New York, NY January 24–26

ICSC – Texas Retail Forecast Dallas, TX January 25

OurCrowd Global Investment Summit 2016 Jerusalem, Israel January 25–26

Fintech Startups Finals Hong Kong January 25–26

Cybertech 2016 Tel Aviv, Israel January 26

Wearable Technologies Conference Munich, Germany January 26–27

Brand Innovators – Consumer Engagement San Francisco, CA January 28

AGD 2016 – Asia Global Dialogue Hong Kong January 28

ICSC Heartland Kansas City, MO January 28

The 7th Annual Omnichannel Retail Summit London, UK February 3

Brand Innovators – Content Marketing Summit Cincinnati, OH February 9 Finovate Europe – Financial & Banking Technology Innovations London, UK February 9–10

The Internet of Retail Conference London, UK February 9-‐10

Brand Innovators – Content Marketing Columbus, OH February 11

AAFA Social Responsibility Meeting Los Angeles, CA February 11

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January 15, 2016


Deborah Weinswig, CPA Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: 852 6119 1779 China: 86 186 1420 3016 [email protected] Filippo Battaini [email protected]

Marie Driscoll, CFA [email protected]

John Harmon, CFA [email protected]

Aragorn Ho [email protected]

John Mercer [email protected]

Shoshana Pollack [email protected]

Kiril Popov [email protected]

Jing Wang [email protected]

Steven Winnick [email protected]

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weekly insights by fbic global retail tech jan 15.mb...!2 january 15, 2016...

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