weekly insights by fbic global retail tech jan 8 · !4 january 8, 2015...

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January 8, 2015

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 8, 2015

+5.4% CHART OF THE WEEK

STAT OF THE WEEK

STAT OF THE WEEK

• Hudson’s Bay announced that the company has entered

an agreement to acquire Gilt Groupe for $250 million in cash on January 7. The acquisition price was only a

fraction of Gilt’s peak valuation of $1billion.

• The acquisition, which is expected to close in February, will allow Hudson’s Bay and Gilt customers to return

purchases to Saks Off Fifth discount stores.

Consumer Confidence Nears Yearly Average in December

$250 Mil.

• The FBIC Global Retail and Technology team attends the Consumer Electronics Show (CES) and reports on its major themes, including applications and connectedness .

• Disappointing holiday sales prompts Macy’s to cut 4,800 jobs and close 40 stores

• Mobile phones surge ahead of tablets in sales and traffic for the first time

• Macintosh Retail Group and Vroom and Dreesman (V&D) file for bankruptcy

• Online sales are growing exponentially in Mexico, quadrupling in the past five year and expected to double again by 2020

• Total start-‐up funding in Southeast Asia surged 43% higher from the previous year

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January 8, 2015


FROM THE DESK OF DEBORAH WEINSWIG This week, the FBIC Global Retail & Technology team is attending the Consumer Electronics Show (CES), held annually in Las Vegas, Nevada. The show has become a technology and cultural phenomenon, continuing to grow every year and reaching the limits of the conference venues. Last year, the announcements and presentations focused mainly on the hardware tools necessary for creating Internet of Things (IoT) devices. This year, the emphasis is on applications and connectedness. Nearly every product demonstrated at the show is able to connect to the IoT in some way, and many of the devices are voice-‐controlled.

The show was formally launched with a glitzy multimedia presentation from Intel, which provided several demonstrations of what can be done with its Curie module. The tiny computer boasts a processor, battery and wireless communications capabilities in a device the size of a button, and has applications for gaming, fitness, extreme sports, sports watching, art and music. Another interesting demo was from Luxottica’s Oakley brand, which debuted its new sports glasses. The wearer communicates with the glasses via voice commands and, in turn, the glasses monitor his or her performance and provide coaching. We also saw demos of updated drones and robots that can follow voice commands.

A recurring theme at the show this year is that the data collected by IoT devices could be used for the benefit of society. For example, traffic and weather information collected by driverless cars could be shared in the network for the benefit of other drivers. Connected cars could also transmit information on the health of accident victims to arriving medical personnel.

Although true autonomous, driverless cars are still a couple of years away, both carmakers and chipmakers made announcements about them at CES 2016. Ford revealed its activities in driverless cars, and Nvidia and Qualcomm both demonstrated their auto-‐related technologies. In terms of connectedness, Ford showed how its vehicles can interact with Amazon’s Echo home management hub to enable drivers to remotely turn on lights in the house or unlock doors from their vehicles, and Samsung made similar announcements with partner BMW.

In his keynote address, Netflix CEO Reed Hastings outlined the history of television and stated that we are in a new age of watching what we want, when we want. He also announced that Netflix service is now available in nearly every country in the world, in a multitude of languages.

IBM CEO Ginni Rometty gave an impressive keynote describing the power of the Watson artificial intelligence platform, which works in natural language. IBM is combining the power of Watson with new partners such as Under Armour, Medtronic and robotmaker SoftBank.

Thus far at CES, we have seen impressive demonstrations across the IoT, driverless cars, drones, artificial intelligence, wearable tech, voice control, robotics, smart homes, health and fitness, augmented and virtual reality, and home/cyber security—and we are just getting started! The FBIC Retail & Technology team will continue to report from the show (which runs for two more exhausting, exciting days), and we will publish deeper analyses of what we saw after the show has ended.

LifeFuels

Fitbit Blaze

Volkswagen BUDD-‐e

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January 8, 2015


Consumer Confidence Nears Yearly Average in December Figure 1. University of Michigan Consumer Sentiment Index

Source: University of Michigan

• Consumer confidence reached the highest level since July 2015 in December and close to the yearly average of 92.9.

• The reported 92.6 for December was higher than the surveyed consensus reading of 92.

• The chief economist of Surveys of Consumers attributed the result to a lower inflation rate, which increased spending plans for big-‐ticket household durables.

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FBIC HAPPENINGS & WEINSWIG’S WATCH ING

• This week, the FBIC Global Retail & Technology team is attending the Consumer Electronics Show (CES), held annually in Las Vegas, Nevada

STAT OF THE WEEK

• Hudson’s Bay announced that the company has entered an agreement to acquire Gilt Groupe for $250 million in cash on January 7. The acquisition price was only a fraction of Gilt’s peak valuation of $1billion.

• The acquisition, which is expected to close in February, will allow Hudson’s Bay and Gilt customers to return purchases to Saks Off Fifth discount stores.

$250 mil.

Source: Company press release

CHART OF THE WEEK

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January 8, 2015


US RETAIL HEADLINES Macy’s to Slash 4,800 Jobs and Close 40 Stores After Disappointing Holidays (January 7) Los Angeles Times

• Citing a disappointing holiday season, Macy’s announced that it plans to cut about 4,800 jobs and close 40 stores as part of its efforts to slash costs. The cost efficiency and process improvement measures are to be implemented beginning in early 2016. The department store chain said comparable sales for November and December 2015 dropped by 4.7% year over year.

• Macy’s also said it will continue “the creation of shareholder value” by monetizing its real estate holdings. The company has retained Credit Suisse and Goldman Sachs regarding forming partnerships or joint venture(s) for its mall-‐based properties as well as its flagship real estate assets in Manhattan, San Francisco, Chicago and Minneapolis.

Hudson’s Bay Company Agrees to Buy Gilt Groupe to Expand All-‐Channel Push (January 7) WWD.com

• Hudson’s Bay Company (HBC) announced that it will acquire Gilt Groupe for $250 million in cash. The purchase is expected to close February 1. HBC paid $2.5 billion to buy German department store chain Galeria Kaufhof from Metro last September. The Gilt purchase represents HBC’s first acquisition in the purely digital space.

• The acquisition price represents a major drop for Gilt, which at its peak was valued at $1 billion. HBC said it plans to fold the luxury flash-‐sales site into its Saks OFF 5th division to further develop its all-‐channel retail model. HBC also plans to leverage Gilt’s mobile and personalization capabilities to accelerate the growth of its digital business across all its existing banners.

Phones Top Tablets in Sales, Traffic for First Time (January 7) Shop.org

• Mobile topped tablets in terms of online sales and traffic for the first time, according to the recent State of Retailing Online survey conducted by Shop.org, Forrester Research and Bizrate Insights. The survey revealed that smartphones accounted for 17% of total online sales in 2015, while tablets accounted for 14%. Overall, sales from phones grew by 53% in 2015 and sales from tablets by 32%.

• Despite the results, 30% of retailers surveyed said they invested less than $10,000 in smartphone platforms in 2015, while 17% invested $10,000–$50,000. However, 34% of those polled said they plan to grow their mobile investments by 1%–20% and 22% said they will grow their tablet investment by more than 20%.

Sally Beauty Holdings Names Sharon M. Leite as President of Sally Beauty Supply US and Canada (January 6) Business Wire

• Sally Beauty Holdings announced that Sharon M. Leite has been appointed President of Sally Beauty Supply’s US and Canada business, effective February 1.

• Leite is a retail veteran with over 25 years of experience. Prior to joining Sally Beauty, she held various leadership roles at Pier 1 Imports, where she led the company’s Sales & Customer Experience strategy in the US and Canada. In addition, her responsibilities included E-‐commerce, Operations and Real Estate.

Walgreens’ 1Q Income Rises by 30.6% Due to Higher Retail Sales (January 7) USA Today

• Walgreens Boots Alliance said that its fiscal first quarter net income rose by 30.6% year over year due to higher retail sales. Net income was $1.1 billion, up from $850 million a year ago. Sales increased by 48.5%, to $29 billion.

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January 8, 2015


• With baby boomers aging and demand for pharmaceutical products rising, larger drugstore chains are looking to consolidate to boost their buying power and leverage against insurers. In October, Walgreens agreed to buy competitor Rite Aid for $17.2 billion, a deal that combines the nation’s second-‐ and third-‐largest pharmacy chains. The combined company will have about 13,000 US stores, leaping ahead of current market leader CVS. Walgreens said it still expects the deal to close in the second half of this year, despite the FTC asking for more information about the acquisition.

Apparel Retailers Mostly Report Higher December Sales (January 7) RTTNews

• A sampling of US apparel retailers found that most reported higher sales results at established stores for the month of December.

• Shoppers finally spent money on winter apparel toward the end of December after the late arrival of cooler weather, which boosted the holiday sales figures of apparel retailers. Unseasonably warm weather earlier in the month had delayed purchases of winterwear.

EUROPE RETAIL HEADLINES Macintosh Files for Bankruptcy (December 30) Retaildetail.eu

• The management of Dutch fashion and home decor retailer Macintosh Retail Group has decided to file for bankruptcy. The decision was announced only a few days after a Dutch court granted the company a “suspension of payments” to enable it to cope with temporary financial difficulties.

• The group stated that the bankruptcy would apply only to the parent company and not to its subsidiaries. It added that all of the group’s retail stores are open, and that management is mulling over various options, including selling the entire group or each individual division.

Department Store Group V&D Goes Bankrupt (December 31) Dutchnews.nl

• Another Dutch company, Vroom and Dreesman (V&D), has also declared bankruptcy. The department store chain runs 67 stores and restaurants in the Netherlands and said that those will remain open pending a potential relaunch.

• Around 10,000 staff employed by V&D are said to have lost their jobs. The state job center, UWV, will reportedly pay their salaries into January. The company stated that it has been in financial difficulty for a while, made worse by unseasonably warm weather in November and December and “a number of incidents and unforeseen situations.”

Jaeger Shelves Sale Plans as Bids Fall Short of Asking Price (January 2) Telegraph.co.uk

• Better Capital, the owner of fashion label Jaeger, has decided to abandon plans to sell the label because the offers that came in were less than the target price. The investment company announced that it will pump more capital into Jaeger instead.

• Better Capital had injected £63 million (US$93 million) into Jaeger since it bought the label in April 2012. However, it recently told investors that the business was now worth only £37 million (US$54 million). Reportedly, a mini-‐auction before Christmas generated a handful of offers around the £35 million (US$51 million) mark, but the owners were firm in their decision to not sell below £40 million (US$59 million).

Next Reports Disappointing Christmas Sales (January 5) Company press release

• British high-‐street fashion retailer Next reported “disappointing” performance for the 60 days through December 24, with sales hit by unusually warm weather in November and

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January 8, 2015


December. While directory sales in the period were up by 2% and overall sales by 0.4%, store-‐based sales fell by 0.5%.

• The retailer has revised its full-‐year profit estimate to £817 million (US$1,200 million), an increase of 4.4% from last year. The estimate is at the lower end of the profit guidance of £810–£845 million (US$1,190–US$1,242 million) announced in October. The company’s full-‐year results are scheduled to be announced on March 24.

Jumbo Supermarket Chain to Cut 190 Jobs at Head Office (January 5) Retaildetail.eu

• Dutch supermarket chain Jumbo announced that it will lay off about 190 employees at its main office as a result of closing its premises in Amersfoort and a butchery in Beilen. The CEO made the announcement at the company’s 2015 results presentation and stated that many of the positions were no longer required or did not relate to the company’s core activities.

• Jumbo’s consolidated turnover for 2015 was €6.65 billion (US$7.14 billion), down €0.17 billion (US$0.18 billion) since last year. The company intends to invest nearly €100 million (US$107.5 million) in improving its stores and web shop over the next 12 months.

Home Retail Group Rejected Takeover Offer Made by Sainsbury’s in November (January 5) FT.com

• British grocery retailer Sainsbury’s reportedly made an offer to take over Home Retail Group in November, which the latter rejected. Home Retail, owner of the Argos and Homebase chains, has been the subject of takeover speculation for a few months.

• In a statement, Sainsbury’s added that “the combination is an opportunity to bring together two of the UK’s leading retail businesses.” The grocer said that while its November bid was a combination of cash and shares, that could change, as it has until February 2 under UK takeover rules to make a revised offer.

ASIA TECH HEADLINES Indonesian Cash-‐Back App Snapcart Raises Bridge Round (January 5) TechinAsia

• Snapcart, an app that lets shoppers get cash back when they submit photos of their receipts, announced that it had raised US$1.7 million in a pre-‐series A bridge round. Wavemaker Partners, SPH Media Fund (the investment arm of Singapore’s leading media group, Singapore Press Holdings), Sinar Mas Digital Ventures and Ardent Capital participated in the round.

• The company said in a statement that it was able to earn investor confidence after it signed major consumer brands Nestlé and L’Oréal in Indonesia. Other brands Snapcart has signed include Procter & Gamble and Unilever.

Paytm Acquires Context-‐Aware Personal Assistant App Shifu (January 4) e27.co

• Indian m-‐commerce and mobile payments company Paytm has acquired Shifu, a context-‐aware personal assistant app that mines the usage patterns of smartphone users and makes personalized and relevant recommendations to them.

• Shifu, owned by Delhi-‐based The Signals, is a free task-‐managing app. Once the app is installed, it analyzes the usage patterns of the device owner and makes a variety of suggestions based on a predictive algorithm.

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Ford, Toyota Ally to Counter Silicon Valley in Dashboard War (January 4) Channel NewsAsia

• Ford Motor and Toyota Motor said on Monday that they will adopt the same software to link smartphone apps to vehicle dashboard screens, and they invited other automakers to join them in order to counter Apple’s and Google’s push to control the cars of the future.

• Ford said France’s Peugeot and Japan’s Honda Motor, Subaru and Mazda Motor are also investigating adopting SDL as a standard. QNX Software Systems and UIEvolution, developers of automotive connectivity technology, are adopting SDL, too, Ford said.

Here’s How Much Startups Raised in Southeast Asia in 2015 (January 4) TechinAsia

• Total startup funding in Southeast Asia hit US$1.61 billion in 2015, a 43% jump from the 2014 figure of US$1.123 billion, according to Tech in Asia’s database. Given that many startups did not disclose the amounts they had raised, the true tally could be bigger.

• Seed funding grew by over 12%, to US$57.29 million, from US$50.89 million in 2014. Series A funding surged by 60%, to US$228.79 million, from US$143.09 million in the previous year, showing that many startups were able to survive closer scrutiny by venture capital firms and cross over to the crucial growth stage.

Funding for The Bridge, Japan’s Bilingual Startup News Source (January 4) TechinAsia

• Tokyo-‐based online media startup The Bridge announced that it has raised funds from Fuji Startup Ventures, the venture arm of the Fuji TV network, and news release distribution service PR Times. The amount was not disclosed.

• The site partnered with tech blog VentureBeat, which is headquartered in San Francisco, to facilitate its entry into Japan last March. The Bridge translates some of VentureBeat’s content into Japanese and provides the blog with English coverage of the Japanese startup ecosystem.

LATAM RETAIL HEADLINES Puerto Rico Expects a Decline of up to 30% in Holiday Sales (January 5) Associated Press

• Puerto Rico’s National Retail Federation is reporting a drop in holiday sales of up to 30% amid a deteriorating economic situation. About 70% of businesses polled for a recent survey reported a decrease.

• The decline is likely due to a recent increase in the sales and use tax, to 11.5% from 7% last year. The tax increase is expected to help generate up to $1.2 billion in revenue, but it has forced some businesses to close and dampened shopping.

Falabella to Invest US$4 Billion Through 2019 (January 4) WWD.com

• Grupo Falabella plans to invest more than US$4 billion between 2016 and 2019, a 9.5% increase over the previous four-‐year period, in order to boost its presence in South America.

• About 40% of the total investment will go to opening 131 stores and 10 shopping malls in Peru, Colombia, Chile and Argentina; 26% will go to expand and remodel stores and existing shopping malls; and the remaining 30% will be spent on infrastructure, logistics and IT.

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January 8, 2015


Apple Nearing Major Expansion in Latin America (January 4) Appleinsider.com

• Apple is preparing to expand its brick-‐and-‐mortar retail presence in Latin America. New store openings are planned across Mexico and South America.

• The expansion is expected to be led by two large stores, including a flagship in Mexico City.

How E-‐Commerce Reaches the Unbanked in Mexico (January 4) PYMNTS.com

• The low penetration rate of credit cards in Mexico has forced retailers to develop creative payment options. For example, Linio, a major online store in Latin America, also accepts PayPal, cash on delivery and cash payments (made at OXXO convenience stores). Regional e-‐commerce site MercadoLibre has its own payment system called MercadoPago that is similar to PayPal.

• Amazon, which started operating in Mexico in June, now accepts gift cards that can be purchased with cash at OXXO locations (there are more than 13,000 of them across the country) as well as OXXO brand prepaid cards.

E-‐Commerce Growing in Mexico (January 1) The Wall Street Journal

• Online shopping is growing in Mexico, owing to greater Internet access and smartphone use. However, low penetration of credit cards—there are just 22.6 million credit cards in a country with a population of 119.5 million—and consumers’ reluctance to buy goods online have prompted e-‐retailers to find creative solutions.

• Online shopping accounts for about 2% of Mexico’s roughly US$203 billion in annual retail sales, according to Euromonitor. However, the segment’s sales have more than quadrupled in the past five years and should double again by 2020.

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January 8, 2015


EARNINGS CALENDAR

Company

Earnings Release Period Date

Sales (USD 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

SuperValu 3Q 16 Jan 20 4,177 4,204

0.16 0.04 USD

eBay 4Q 15 Jan 20 2,317 4,921

0.50 0.77 USD

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 27 2,929 2,841

0.53 0.45 CAD

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

0.68 0.25 USD

Colgate-‐Palmolive 4Q 15 Jan 28 3,941 4,221

0.73 0.76 USD General Growth Properties 4Q 15 Jan 28 683 673

0.42 0.38 USD

H&M FY 15 Jan 28 181,712 151,419

12.96 12.07 SEK

Deckers Outdoor 3Q 16 Jan 28 847 785

4.93 4.50 USD

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

2.79 0.45 USD

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

0.46 0.37 USD

Alphabet 4Q 15 Jan 28 16,892 18,103

8.10 5.47 USD

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

1.04 0.97 USD

Unicharm FY 15 Jan 29 751 600

63.11 64.10 JPY

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

2.66 2.47 USD

Alibaba 3Q 16 Jan 29 32,885 26,179

5.73 3.10 CNY

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January 8, 2015


EVENT CALENDAR

Event Location Date(s) FBIC Presenting

Credit Suisse Greater China Technology & Internet Conference Hong Kong January 6–8 Israel Export & International Cooperation Institute Redefining Innovation @ CES Las Vegas, NV January 6–9

CES 2016 Las Vegas, NV January 6–9

ICR Conference Orlando, FL January 11–13

UJA i3: A Summit for Women New York, NY January 12

Brand Innovators Game Changers Detroit, MI January 13

Fashion Digital London London, UK January 14

XRC Investor Demo Day New York, NY January 14

ROI SuperSaturday New York, NY January 16

RISE Retail Innovation & 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

Planalytics Retail Strategy Breakfast New York, NY January 18

Brand Innovators Future of Consumer Engagement & Retail New York, NY January 19

Credit Suisse 2016 Latin America Investment Conference São Paulo, Brazil January 19–20

Mercedes-‐Benz Fashion Week Berlin Berlin, Germany January 19–22

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 Investor Summit 2016 Jerusalem, Israel January 25–26

2016 Fintech Finals Hong Kong January 25–26

Wearable Technologies Conference Munich, Germany January 26–27

Brand Innovators Consumer Engagement San Francisco, CA January 28

ICSC Heartland Omaha, NE January 28–29 Deborah Weinswig

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January 8, 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 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]

HONG KONG: 10th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: 852 2300 2470 NEW YORK: 1359 Broadway, 9th Floor New York, NY 10018 Tel: 646 839 7017 LONDON: 242-‐246 Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0)20 7616 8988 FBICGROUP.COM

weekly insights by fbic global retail tech jan 8 · !4 january 8, 2015...

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