fbic global retail tech weekly insights apr. 24 v2 global... · 2016. 9. 6. · executive...

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April 24, 2015

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

April 24, 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

l We just returned from the 13th China Department Store Summit in China, and the outlook for the still-‐developing Chinese retail industry remains bright

l US housing starts miss estimates, dragged down by a decline in multifamily housing starts

l Brazilians favor cheaper goods as economy weakens

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April 24, 2015


FROM THE DESK OF DEBORAH WEINSWIG Across several Western markets, dated, boring and drab store formats and me-‐too merchandise offerings are hitting the financial performance of midmarket department stores. We have seen chains such as Marks & Spencer (UK), Karstadt (Germany) and Sears (US) post declining sales. In the core apparel category, these department store retailers face heightened competition—from more sharply targeted specialists such as Zara, Primark and T.J. Maxx/T.K. Maxx, and from fast-‐growing, often well-‐positioned, Internet pure plays such as Zalando and ASOS.

We just returned from Jinjiang, China, where I addressed an audience of a few hundred department store executives at the 13th China Department Store Summit. CEO of the House of Fraser was also part of the honoured guest speakers. The outlook for the still developing Chinese retail industry remains bright, and they are very focused on looking at O2O (online-‐to-‐offline), beacons, crowdfunding, maximizing mobile advertising through WeChat and other new technologies, the question of browser versus app?, Big Data, and hyperlocal.

A number of big department store chains have been making investments in omnichannel capabilities, adding services that include next-‐day click and collect and in-‐store ordering points. FBIC Global Retail Tech thinks omnichannel services do not address the fundamental problem afflicting mid-‐market retailers, which is one of attempting to appeal to a broad swath of consumers with a diluted merchandise point of view. Omnichannel fulfilment is no good if shoppers are losing interest in a retailer’s proposition!

Premium retailers are generally performing better than their midmarket peers. The upscale segment provides attractive, “browsable” store experiences that offer a strong complement to the functionality of Internet shopping. They offer a higher level of differentiation across merchandise and brands and service levels are superior as well.

Sector maturity is a common theme in the department store markets of the France, Germany, the UK and the US. The Chinese market continues to benefit from its relative youth and a growing middle class, though we see a lack of merchandise differentiation between Chinese department store chains as a concern. The older department store markets have experienced consolidation and contraction as newer retail formats have attracted shoppers.

The issues are similar across the mature markets and the actions required are similar as well. The difficulties faced by some undifferentiated retailers in Western markets offer lessons for less mature department store markets, including China’s. For the mature, multichannel retail markets of the West, FBIC sees the opportunity for improved department store metrics, from traffic to sales to profits, but only if retailers offer appealing and worthwhile in-‐store experiences as well as desirable product. Today’s shoppers are spoiled by choice and are more demanding than ever. . And online alternatives are only a nanosecond away.

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April 24, 2015


US March Housing Starts Disappoint Figure 1. US Housing Starts

• Total US housing starts grew at a seasonally adjusted rate of 926,000, 2.5% below last year’s level. New single-‐family housing starts rose by 4.4%, while multifamily housing starts were down 7.1%.

• This figure came in below Bloomberg’s estimate of 1.04 million. Meanwhile, the NAHB/Wells Fargo Housing Market Index rose by four points in March, to 56.

• Supermarket giant Tesco reported a record statutory pretax loss of £6.4 billion in its full-‐year results.

• The loss was driven by £7 billion of one-‐off charges, which included £3.8 billion from a review of its store portfolio.

£6.4 Bil.

CHART OF THE WEEK

STAT OF THE WEEK

Through March 31, 2015 Seasonally adjusted Source: US Census Bureau

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MulL-‐unit Housing Starts-‐LeO Axis Single Family Housing Starts-‐Right Axis

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April 24, 2015


US RETAIL TRAFFIC Figure 2. US Weekly Store Traffic: YoY% Change

• Weekly traffic in the second week of April plunged by 20.7% due to heavy pre-‐Easter shopping in previous

weeks.

• Apparel store traffic dropped by 22.7%, the sharpest decline in 10 months.

• Electronics store traffic declined by 8.7% in the same week.

US REGULAR GASOLINE PRICES

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

04/06/15 04/13/15 04/20/15 Week Ago Year Ago

US 2.413 2.408 2.485 0.007 (1.198)

East Coast 2.352 2.355 2.443

0.088 (1.219)

Midwest 2.312 2.303 2.397

0.142 (1.243)

Gulf Coast 2.183 2.188 2.242 0.054 (1.249)

West Coast 2.954 2.922 2.968 0.046 (1.059)

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5

10

15

10/03

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Source: US Energy Information Administration

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April 24, 2015


RRETAIL EARNINGS

Company

Revenues ($ Mil.)

Change YoY Gross Margin (%) Change

Net Income ($ Mil.)

Change YoY Store Fleet EOP

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

Tesco FY to Feb. 28 102,619 99,422 3.2 (3.4) 6.3 N/A (9500.1) 1517.4 N/A 7,817 7,305

House of Fraser FY to Jan. 31 2,142 1,865 14.9 36.1 36.1 1 (5.4) (14.1) N/M 61 61

Primark (ABF) 24 weeks to Feb. 28 4,004 3,697 8.3 N/A N/A N/A N/A N/A N/A 287 269

Kering 1Q to Mar. 31 3,401 3,261 4.3 N/A N/A N/A N/A N/A N/A N/A N/A

X5 Retail Group 1Q to Mar. 31 2,905 4,123 (29.5) 24.6 24.0 54 65.3 70.6 (7.5) 5,639 4,618

Under Armour 1Q to Mar. 31 805 642 25.5 46.9 46.9 5 11.7 13.5 (13.4) 153 134

Etam Developpement 1Q to Mar. 31 444 448 (0.8) N/A N/A N/A N/A N/A N/A 4,084 4,296

eBay 1Q to Mar. 31 4,448 4,262 4.4 67.4 68.3 (90) 626.0 (2326.0) (126.9) N/A N/A

Facebook 1Q to Mar. 31 3,543 2,502 41.6 81.5 81.5 1 512.0 642.0 (20.2) N/A N/A

Yahoo! 1Q to Mar. 31 1,226 1,133 8.2 61.8 70.0 (822) 22.2 313.9 (92.9) N/A N/A

* GBP figures translated to USD. Source: Company reports

US RETAIL HEADLINES Sears to Include Two Primark Stores in Massachusetts (April 21) Women’s Wear Daily • Sears said that it will include two Primark stores in Massachusetts locations. Primark is a

popular European fashion retailer, and Sears signed an agreement for seven stand-‐alone Primark stores last October.

• The other Primark-‐Sears locations are in Connecticut, New Jersey, New York and Pennsylvania. Six of these stores still have a Sears store presence; the exception is the Primark store at the King of Prussia mall in Pennsylvania.

Sears Hometown and Outlet Stores’ CEO to Step Down (April 21) Company Press Release • Sears Hometown and Outlet Stores announced that, by mutual agreement, CEO W. Bruce

Johnson will leave the company on August 15, 2015. The company has started working with leading global executive search firm Heidrick & Struggles to search for a new CEO.

• Johnson has been CEO and President since July 2012, having previously held various senior executive positions within Sears Holdings, including Executive Vice President of Sears Holdings, interim Chief Executive Officer and President, and Executive Vice President, Supply Chain & Operations.

Under Armour Suffering from Growing Pains in Q1 2015 (April 21) Women’s Wear Daily • Under Armour posted a 13.4% profit drop in the first quarter. Its stock was down 4.8%, to

$83.52, on the day of the announcement, the largest single-‐day decline since April 2014.

• The company cited higher expenses from its acquisitions of two digital wellness platforms, overseas expansion, higher air-‐freight costs due to West Coast port disruptions and a higher tax rate as the reasons for the loss. Despite the loss, Under Armour’s major business segments grew at high-‐double-‐digit rates: footwear was up 41.4% and apparel was up 20.9%.

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April 24, 2015


Target’s Lilly Pulitzer Collection Sells Out (April 20) Women’s Wear Daily and Business Insider • Target’s 150-‐piece Lilly Pulitzer collection, which launched both online and in-‐store this past

Sunday, was a huge success. The online collection sold out within hours and many store locations had shoppers lined up outside. Some stores sold out within minutes.

• Despite the popularity, Target said the collection is a limited edition and that it will not replenish inventory. Target’s online operation was challenged by the heavy traffic. At 3 a.m., the company made the site unavailable for 15 minutes.

ASIA TECH HEADLINES Humanoid Robot Starts Work at Japanese Department Store (April 22) Channel NewsAsia • Humanoid robot Aiko Chihira now works at the entrance of Tokyo’s Mitsukoshi department

store. Speaking Japanese, Chihira, which has human-‐like features and blinks, can also be programmed to speak in other languages, such as Chinese.

• Developed by Toshiba, Chihira has 43 motors that allow it to move. The robot is also programmed to speak Japanese sign language.

Acquisition Highlights the Difference Between Startups in Beijing and Taipei (April 22) Tech in Asia • Chinese state media disclosed that Dianhuabang, a Beijing-‐based startup that builds software

for default dialer apps, acquired Taiwan’s StorySense Computing for US$10 million. This acquisition marks a rare Cross-‐Strait deal, wherein each company could provide the other with something currently missing.

• Dainhuabang holds an enormous database of phone numbers and addresses for Chinese businesses, and has relationships with several smartphone brands in China, which StorySense could not have accessed from Taipei.

Huawei CEO Says Chinese Cybersecurity Rules Could Backfire (April 21) Channel NewsAsia • China can only ensure its information security in the long run if it keeps its market open to the

best technology products, be they foreign or domestic, Huawei’s rotating Chief Executive Officer Eric Xu told Reuters.

• “From China’s perspective, to determine whether this is a good thing or bad thing we have to look at whether the market has healthy competition,” Xu said. “Is this good money replacing bad money or bad money replacing good money?”

Alibaba Wants its Merchants to Ditch PCs, Just Use Smartphones (April 21) Tech in Asia • Alibaba has rolled out new tools for its Taobao mobile app that allow the marketplace’s 8.4

million active merchants run their stores solely from their phones.

• “The growing adoption of smartphones and mobile shopping in China means that online merchants should shift their focus from PC to mobile,” said Zhang Juo, director of Alibaba Group’s mobile business division.

China Gets a New Unicorn as Rakuten Takes Stake in Discount E-‐Store Fanli (April 20) Tech in Asia • Japanese e-‐commerce titan Rakuten announced that it has taken a stake of less than 10% in

Fanli, a Chinese online shopping discount site. The stake will constitute an undisclosed amount of series C funding for the startup.

• Rakuten stated in a press release that the stake is essentially a strategic way to tie the Chinese startup to Rakuten’s duo of US-‐based discount stores, Ebates and Extrabux. Rakuten acquired Ebates last September for US$1 billion.

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April 24, 2015


YouTube Sensation and Entrepreneur Michelle Phan Bringing Two of Her Businesses to Asia (April 18) Tech in Asia • Michelle Phan, one of YouTube’s leading ladies, with over 1.1 billion total views and more than

7.6 million subscribers, will be temporarily relocating to Tokyo in order to bring two of her businesses to Asia.

• Phan launched lifestyle network Icon on March 31 through a partnership with Endemol Shine Group, the world’s largest independent production company. She plans to launch Icon in Japan and other countries in Southeast Asia by the end of the year.

Sony Execs Lobbied Netflix to Stop VPN Users (April 17) ZDNet • In e-‐mails leaked from Sony Pictures, executives expressed their frustration at Netflix for not

stopping users in Australia and elsewhere from bypassing geoblocks to access its streaming video service.

• Australian Minister for Communications Malcolm Turnbull has said that the use of VPN services is not a breach of Australian copyright law.

EUROPEAN RETAIL HEADLINES MANGO’s Online Investement Pays Off (April 22) RetailDetail.eu • Spanish fashion retailer MANGO’s 2014 turnover increased by 9.3% compared with the previous

year, through its new, country-‐specific online stores. In 2014, 12 countries received their own MANGO website, bringing the total to 76. The group also added 90 brick-‐and-‐mortar stores as it continued to roll out its MANGO Man brand.

• This year, the company plans to invest €300 million (US$ 325 million) in new store openings and to continue the growth of its online business with new online stores in South Africa, Asia and Africa.

Inditex Dives Deeper into Chinese Market (April 22) RetailDetail.eu • Spanish fashion group Inditex has strengthened its position in China with the launch of a

Stradivarius web shop on Alibaba’s Tmall.com just one week after it opened a Pull&Bear store in Shanghai.

• Stradivarius has been in China since 2010 and currently has 68 stores in 40 cities. Inditex itself has 501 stores in China, making the country the company’s third-‐largest market, behind Spain and Russia.

Tesco Reports Its Worst-‐Ever Pretax Loss (April 22) Company Press Release • British grocery chain Tesco reported one of the biggest pretax losses in UK corporate history this

week, £6.4 billion (US$ 10.2 billion) and a net loss of £5.7 billion (US $8.6 billion—on continuing operations). The extraordinary results were impacted by £7.0 billion of one-‐off charges (US $10.5 billion), including a £3.8 billion write-‐down in existing stores and a £925 million write-‐down on property acquired for stores that will now not be built and a host of other write-‐downs.

• Group revenues for the year ending February 28, 2015, were down 3.1% at actual rates and down 1.4% at constant exchange rates. Group trading profit slumped to £1.4 billion (from £3.3 billion in the previous year), yielding a trading margin for this latest year of 2.2% (compared with 5.2% the year before).

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April 24, 2015


Luxury Brands Help Lift Parent Company L’Oréal (April 22) RetailDetail.eu • Despite French cosmetics company L’Oréal reporting 14% growth in turnover for the first

quarter, some of its biggest consumer brands, such as L’Oréal Paris, Garnier and Maybelline, recorded sluggish organic growth of just 1.7%. The company’s only midmarket brand to perform well was The Body Shop, which increased its turnover by 4 % on a comparable basis.

• However, L’Oréal’s luxury brand group, which includes Lancôme, Yves Saint Laurent and Kiehl’s, performed much better, witnessing a 7.5% rise in organic growth, which helped the group to boost overall figures.

Comparable Sales Are Down, but Things Still Look Good for Primark (April 21) Company Press Release • Primark reported that first-‐half revenues were up 12% at actual exchange rates and up 15% at

constant rates, but that comparable sales were level with last year, due to unseasonably warm autumn 2014 weather in northern Europe. In addition, markdowns led operating margins to decline by 0.5 percentage points, to 12.6%, in the first half.

• The company said it saw very strong trading in stores that were opened over the last 12 months.

House of Fraser Releases Record Year-‐End Figures (April 21) Company Press Release • UK department store House of Fraser reported strong comparable sales growth of 5.8% for the

year ended January 31, 2015; the results were helped by growth of 32% in online sales and growth of 2.2% in in-‐store sales. Adjusted EBITDA was up 7%, to £64 million.

• The retailer has noted growth in all product categories and highlighted its improved premium brand offering and refurbished stores as two reasons for the record year-‐end sales and profits.

Chinese Tourists’ Spending Soars 122% in Europe (April 21) WGSN.com • Chinese tourists took advantage of the weak euro last month and spent a record amount on

luxury goods in Europe. The 122% increase in spending came after a 52% increase in February, bringing the first-‐quarter total to 67%. Spending had increased 32% in the fourth quarter and 18% in full-‐year 2014.

• The most popular items were watches and jewelry; sales of these items increased by 67% in March compared with 32% in February. Leather goods also performed well, with sales increasing 50% compared with 24% the previous month.

HMV Goes from Bankrupt to Britain’s Biggest Music Retailer (April 21) Sky News • After being declared bankrupt in January 2013, HMV has now overtaken Amazon as Britain’s

biggest music retailer. HMV saw a 12% increase in physical music sales in the 12 weeks ended March 15, according to Kantar Worldpanel.

• Popular British artists such as Ed Sheeran and Sam Smith have been credited with boosting physical music sales over the past quarter.

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April 24, 2015


LATAM RETAIL HEADLINES Brazilians Favor Cheaper Goods as Economy Weakens (April 21) Financial Times • A recent survey conducted by FT research service LatAm Confidential found that Brazilians

are favoring cheaper and lower-‐quality items than they were in the previous quarter.

• Categories measured included clothing, food, personal care products and electronics.

• The survey also showed a decline in preference for premium brands.

Walmex 1Q Revenues, Net Profit Increase 9% Year over Year (April 21) Reuters • Walmex’s first-‐quarter 2015 revenues increased 9% year over year, to US$7.3 billion

(MXN$111.9 billion).

• Same-‐store sales increased 4.9%, and the company opened 11 new stores in the first quarter.

• Net profit was MXN$5.558 billion, also up 9% year over year.

Brazilian Steakhouse Fogo de Chão Files for Initial Public Offering (IPO) (April 20) Reuters • Fogo de Chão, which operates 26 restaurants in the US and nine in Brazil, filed for an IPO on

April 20.

• The company plans to raise $75 million and list its shares under ticker symbol “FOGO” on the NASDAQ.

• The restaurant offers more than 20 cuts of meat, with Brazilian-‐style table service.

Brazil’s Congress Creates New Division for Tax on Internet Sales (April 16) Bloomberg • Brazil’s congress approved a constitutional amendment establishing a new division to receive

revenue from value-‐added taxes (ICMSs) on Internet purchases.

• ICMS tax revenue will be required to remain in the county in which the products and services originate, and Brazil’s wealthiest counties are São Paulo and Rio de Janeiro. The change will halt the current practice of double taxation.

• Under a revenue-‐sharing plan, states where Internet products and services originate will receive 80% of the tax revenue, and states where services are delivered will receive 20%.

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April 24, 2015


EARNINGS CALENDAR Company Event Date

Facebook 1Q15 Earnings Call/Earnings Release Apr. 23

Procter & Gamble 3Q15 Earnings Call/Earnings Release Apr. 23

VF 1Q15 Earnings Call/Earnings Release Apr. 24

Simon Property 1Q15 Earnings Call/Earnings Release Apr. 24

Steve Madden 1Q15 Earnings Call/Earnings Release Apr. 24

Baidu 1Q15 Earnings Call/Earnings Release Apr. 24 Apple 2Q15 Earnings Call/Earnings Release Apr. 27

General Growth Properties 1Q15 Earnings Call/Earnings Release Apr. 27

Overstock.com 1Q15 Earnings Call/Earnings Release Apr. 27

Coach 1Q15 Earnings Call/Earnings Release Apr. 28

Carter’s 1Q15 Earnings Call/Earnings Release Apr. 29

Brunswick 1Q15 Earnings Call/Earnings Release Apr. 29

Iconix Brand Group 1Q15 Earnings Call/Earnings Release Apr. 29

H&M Annual General Meeting Apr. 29

Taubman Centers 1Q15 Earnings Call/Earnings Release Apr. 30

Macerich 1Q15 Earnings Call/Earnings Release Apr. 30

Esprit Holdings 3Q15 Earnings Call/Earnings Release Apr. 30

CVS Health 1Q15 Earnings Call/Earnings Release May 1

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April 24, 2015


EVENT CALENDAR

Event Location Date(s) FBIC Presentation

Wearable Technologies Conference Milan, Italy Apr. 29

Retail and Consumer Goods Analytics Summit Chicago, IL Apr. 29–May 1 Deborah Weinswig

Disrupt NY New York, NY May 4–6

RetailNext Executive Forum Monterey, CA May 6–8

Vanity Capital BAML Conference Singapore May 12–13 Deborah Weinswig

Internet of Things World San Francisco, CA May 12–13

RECon Las Vegas, NV May 17–20

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

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

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

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

NRF PROTECT Long Beach, CA Jun. 23–25

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

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

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April 24, 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]

fbic global retail tech weekly insights apr. 24 v2 global... · 2016. 9. 6. · executive...

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