Weekly Insights by Fung Global Retail Tech

 April 1, 2016
April 1, 2016
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This week, the Fung Global Retail & Technology team attended the Israel Dealmakers Summit, which was held March 29–30 in Silicon Valley, California. The Summit is the premier Israel-­‐focused business event of the year and showcases a curated gathering of companies, investors, dealmakers and entrepreneurs. At the conference, we also visited the Israel IoT (Internet of Things) delegation. •
A survey of 500 US consumers, commissioned by Retale and conducted by Survey Sampling International, shows that a significant number of shoppers take advantage of buy-­‐online, pick-­‐up-­‐in-­‐store services. All 500 polled had previously used such a service. •
UK retailer JD Sports completed its deal to acquire Dutch outdoor and sportswear retailers Perry Sport and Aktiesport from Unlimited Sports Group. The two acquired retailers have 187 stores across the Netherlands. Messaging app Line said it will launch a prepaid card, Line Pay Card, in partnership with credit card company JCB. JCB’s affiliation with American Express means customers will be able to use the card at 20 million merchant locations abroad and 9.6 million locations in Japan. The prepaid card ties into the Line Pay app, which allows consumers to make online and in-­‐store payments via smartphone at select locations. DEBORA H W EINSW IG
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STAT OF THE WEEK 62% 62% of millennials are saving more than 5% of their income, while only half of older adults are saving at the same rate, according to a survey by Bankrate.com. •
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CHART OF T HE WEEK Greg McBride, B ankrate.com’s chief financial analyst, attributes millennials’ inclination toward saving to growing up during the financial crisis. “Because the financial crisis occurred during their formative years, they don’t have the same consumption mentality as their predecessors,” McBride says. Currently, Adidas operates about 9,000 stores in China, which is its fastest-­‐growing global market. US Consumer Confidence Rebounded in March 120 100 80 60 40 20 0 10 11 DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & T ECHNOLOGY DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 H K: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. 12 13 14 15 1 16 April 1, 2016
FROM THE DESK OF DEBORAH WEINSWIG This week, the Fung Global Retail & Technology Team attended the Israel Dealmakers Summit, which was held March 29–30 in Silicon Valley, California. The Summit is the premier Israel-­‐focused business event of the year and showcases a curated gathering of companies, investors, dealmakers and entrepreneurs. At the conference, we also visited the Israel IoT (Internet of Things) delegation, which featured presentations from the following innovative startups. BreezoMeter aims to democratize environmental data worldwide through proprietary software that analyzes data from thousands of sources to map air quality in a simple, intuitive and actionable format in more than 25 countries. Dojo-­‐Labs offers a device-­‐ and cloud-­‐based service that provides consumer security and privacy solutions for all IoT devices in a connected home. GetAlert provides a solution for smart security to home monitoring and surveillance. Its video analytics and artificial intelligence use state-­‐of-­‐the-­‐art technology, including context awareness, reducing the number of false alarms to an extremely low level. HereO offers the first end to end family communication and location-­‐sharing service: the world’s smallest child watch with built-­‐in GPS and a mobile-­‐tracking application, which can be worn comfortably throughout the day by children ages three and up. Kwik offers an end to end IoT platform that connects retailers, brands and service providers to their customers. It is an open platform for repetitive purchases, enabling brands, retailers and service providers to sell direct to consumers, interfacing with ordering systems in addition to delivery and payment services. SalientEye is an app that turns any smartphone or tablet into a portable home alarm system. It uses the device’s camera to sense motion, and it sounds an alarm when a break-­‐in occurs, catching intruders and immediately sending the owner photos via e-­‐mail and text messages. Say is a wearable social platform that combines self-­‐expression and social media. Its necklace includes a computer with a screen and is connected to a mobile app that controls the device and display and also connects to social networks. Treek develops IoT-­‐connected devices and consumables that monitor, control and provide automated professional care for indoor potted houseplants. We always like to learn what amazing startups like these are developing, and we look forward to publishing additional reports as we meet more of these innovators. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & T ECHNOLOGY DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 H K: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. 2 April 1, 2016
FBIC HAPPENINGS & WEINSWIG’S WATCH ING The US Fung Global Retail & Technology attended the Israel Dealmakers Summit in San Francisco •
STAT OF THE WEEK 62% •
62% of millennials are saving more than 5% of their income, while only half of older adults are saving at the same rate, according to a survey by Bankrate.com. •
Greg McBride, Bankrate.com’s chief financial analyst, attributes millennials’ inclination toward saving to growing up during the financial crisis. “Because the financial crisis occurred during their formative years, they don’t have the same consumption mentality as their predecessors,” McBride says. •
Currently, Adidas operates about 9,000 stores in China, which is its fastest-­‐growing global market. Source: Bankrebate.com CHART OF THE WEEK US Consumer Confidence Rebounded in March Figure 1. Conference Board US Consumer Confidence 120 100 80 60 40 20 0 10 11 12 13 14 15 16 Source: Conference Board • The final reading of consumer confidence for March rebounded to 96.2 in March from 94 in Feburary. The Present Situation Index declined while the Expectations Index imrpoved. • Consumers are less optimistic about the economic condition in the US but do not see it worsening. • On the other hand, consumers are more optimistic about the labor market, according to the Conference Board press release. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & T ECHNOLOGY DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 H K: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. 3 April 1, 2016
US RETAIL EARNINGS Company Lululemon Restoration Hardware Revenues ($ Mil.) Period 2015 2014 4QE Jan. 704 603 4QE Jan. 647 583 Change YoY Gross Margin (%) 2015 2014 16.9 50.3 51.5 11.1 35.6 37.4 (%) Change Net Income ($ Mil.) 2015 2014 (113) 117 111 (183) 41 42 (BP) Change YoY Store Fleet EOP 2015 2014 5.4 363 302 (3.1) 69 67 (%) Source: Company reports US RETAIL HEADLINES Many Consumers Buy Online, Pick Up in Stores (March 29) Women’s Wear Daily • A survey of 500 US consumers, commissioned by Retale and conducted by Survey Sampling International, shows that a significant number of shoppers take advantage of buy-­‐online, pick-­‐up-­‐
in-­‐store services. While it’s not the majority and many feel there’s room for improvement, all 500 polled had previously used such a service. •
Asked how frequently they bought online and picked up in the store, 44% of survey respondents said they do it every few months, 25% said monthly, 13% said weekly, and 14% said they have bought online and picked up in the store only once. Sephora Launches Sephora Flash, Its Smart Beauty Store (March 29) The Retail Bulletin • Sephora has chosen Paris for its first smart beauty store, Sephora Flash. The innovative store seeks to create a seamless link between brick-­‐and-­‐mortar shops and online shopping. •
Customers will be able to shop 3,500 items on display and browse 14,000 online via handsets and tables. NFC tags will help customers get more information on products and fill up their electronic basket. When finished shopping, customers can purchase products with a single transaction; they will receive physically stocked goods, and goods ordered on the screens will be available in store the following day or can be delivered to their home. Instagram’s Algorithm Approach Worries Brands and Influencers (March 29) TechCrunch • In an effort to improve user experience, Instagram will soon switch to an algorithmic approach, putting the best photos at the top of your feed. Posts may be shown out of order and underperforming posts may not be shown to all followers. This change will make Instagram more like Facebook and less like Twitter. •
Brands and professional Instagrammers are likely to suffer from the change. The hard work put into increasing their Instagram following will have less impact since only a fraction of this fan base is going to receive Instagram posts. And without analytics tools, the algorithmic feed is going to force users to compete. Pop-­‐Up Stores Thrive in a World of Failing Retailers (March 30) The New York Times • Pop-­‐up stores allow entrepreneurs to build their brand and cultivate customers while staying nimble and lean. Because pop-­‐ups do not require retailers to sign long leases, stash away much cash or carry big credit lines, retailers can stay nimble and continue to innovate. •
As customers continue to want new shopping experiences and brands, pop-­‐ups will continue to succeed. They are opening in garages, around pools and even in locked storage spaces. Some retailers have incorporated innovative technology like 3D printing, doing 3D pop-­‐up printed jewelry. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & T ECHNOLOGY DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 H K: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. 4 April 1, 2016
EUROPE RETAIL HEADLINES JD Sports Acquires Dutch Chains Perry Sport and Aktiesport (March 29) retail-­‐week.com • UK retailer JD Sports completed its deal to acquire Dutch outdoor and sportswear retailers Perry Sport and Aktiesport from Unlimited Sports Group. The two acquired retailers have 187 stores across the Netherlands, 55 of which will close “imminently.” •
JD Sports has over 800 stores in Europe, and Executive Chairman Peter Cowgill has said he wants to have a store in every major European city. Storm Katie Causes Retail Footfall Slump in the UK (March 29) theguardian.com • UK shopping center and high street retailers posted a 6% and 10.5% fall in total shopper numbers on Saturday and bank-­‐holiday Monday compared with last Easter, according to retail intelligence company Springboard. Storm Katie brought heavy rain and wind across the UK during the long weekend, which is usually a busy trading period. •
On Monday, Springboard’s shopping-­‐center-­‐only index reported a 16% fall in footfall. The early fall of Easter this year is also likely to have had a negative impact on retail sales. Notonthehighstreet.com Closer to $1 Billion Valuation (March 28) sky.com • Notonthehighstreet.com, one of the UK’s fastest-­‐growing online retailers, is in talks to raise £25m via selling new shares, which would take it closer to a £700m valuation. •
The online marketplace, which was founded 10 years ago, has recruited Simon Belsham, a former Tesco executive, as its chief executive and named Poundland’s chairman Darren Shapland to its board. Morrisons Enters the Top 20 UK Fashion Retailers List (March 24) thegrocer.co.uk • Morrisons clothing brand Nutmeg entered the list of top 20 fashion retailers in the UK for the first time in the year ended January 31, according to research company Kantar Worldpanel. The own-­‐
label clothing brand, launched in 2013, is targeting newborns to age 13, but also offers adults’ essentials, including underwear and nightwear. •
Kantar reports more than 3.1 million Nutmeg transactions for the 12 months ended January 31, ranking Morrisons at No. 20, behind Amazon. Primark is ranked first, followed by George (Asda), M&S and Tesco. Chanel Extends Further into E-­‐Commerce (March 24) wwd.com • Hatmaker brand Maison Michel, owned by Chanel, launched its European e-­‐commerce site last week. Founded in 1936 and acquired by Chanel in 1997, Maison Michel’s website offers over 120 headwear items from women and men, along with other accessories such as ties and scarves. •
Maison Michel’s online store is expected to launch in the US in 2017. In November 2015, Chanel launched its e-­‐commerce site for eyewear in the US, where it has been selling fragrances, makeup and skin care online for 10 years. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & T ECHNOLOGY DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 H K: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. 5 April 1, 2016
ASIA TECH HEADLINES No Time to Drop by the Store? Metromart Will Be Your Personal Shopper (March 29) TechinAsia • The company sends out “runners” to buy and deliver goods that users have ordered on its site (the service will expand to mobile soon). It displays stores within the customer’s vicinity and promises to deliver the purchased items in 90 minutes. •
In addition to groceries, Metromart delivers pet supplies, gadgets, pastries, wine, spirits, flowers, and cosmetics. The company has 10 partner stores, including retail giant SM Supermarket, and expects to add 40 to 50 stores within the year China’s Most Famous Film Director Just Founded a New VR Brand (March 29) TechinAsia • Zhang Yimou, a film director and cinematographer who won Jury Grand Prize at Cannes and the Golden Bear at Berlin, just founded a new virtual reality brand. Zhang’s films include Red Sorghum, Ju Dou, and Raise the Red Lantern in the late 1980s and 1990s and, more recently, action films like Hero and House of Flying Daggers. •
According to China Radio International, Zhang will collaborate with Chinese VR content company Danghong Qitian on a new brand called SoReal. The company will create off-­‐line VR experiences in real-­‐world locations so users can interact with a custom-­‐built virtual world that’s “wrapped” over a physical space. Dell Selling Its IT Services Unit to Japan’s NTT Data (March 28) TechCrunch • Dell is reportedly finalizing the sale of its IT consulting unit to NTT Data for $3.5 billion. According to Reuters, the deal will help Dell pay down debt from its $67 billion acquisition of EMC. •
If the sale goes through, it will help NTT Data, a subsidiary of Japan’s NTT, expand its business in the US. Like SoftBank, another Japanese telecom giant, NTT has expanded internationally through a series of acquisitions and investments, most notably in the US and India. Japan’s Flip Phones Are Finally Dying Out (March 28) TechinAsia • Japan saw 36.6 million new mobile shipments in 2015, 20% of which were “feature phones”—
basically, flip phones—not running Android, iOS, or Windows, according to new data from IDC. The record low number is down from 28% in 2014. •
According to eMarketer, Japan has 106 million active mobile users in 2015, including 48.9% on smartphones. By the end of 2016, it is projected that 52.4% of active mobile users will be using smartphones. Messaging App Line Launches Its Own Debit Card (March 25) TechinAsia • Messaging app Line said it will launch a prepaid card, Line Pay Card, in partnership with credit card company JCB. JCB’s affiliation with American Express means customers will be able to use the card at 20 million merchant locations abroad and 9.6 million locations in Japan. •
The prepaid card ties into the Line Pay app, which allows consumers to make online and in-­‐
store payments via smartphone at select locations. The card will be linked to a new rewards service called Line Points. Users will earn 2% of cash value in points for every purchase made, with one point equivalent to one Japanese yen. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & T ECHNOLOGY DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 H K: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. 6 April 1, 2016
LATAM RETAIL HEADLINES Perry Ellis Signs License With Multimoda Import for Latin America, Mexico (March 30) WWD • Menswear company Perry Ellis has entered into a licensing deal with Multimoda Import and Comercio Excelente Norte Sur de CV to bring men’s and boys’ dress shirts, knit tops, woven tops, pants, sport jackets, shorts, jeans, swimsuits, vests, and outerwear under the Perry Ellis name to department stores in select countries of Central and South America, the Caribbean and Mexico. •
Perry Ellis will be sold at Multimoda with labels like Calvin Klein, Arrow, Michael Kors, Kenneth Cole, and Izod. Brazilians Scrimp, Save in Unwelcome Surprise for Investors (March 27) Bloomberg • Consumer confidence is at near-­‐record lows in Brazil, and in 4Q, 75% of companies in the consumer-­‐services sector reported earnings that fell short of analysts’ estimates. There are fears that services and retail may overtake the industrials sector as the major contributor to the recession. •
Even supermarkets have seen the effects of the recession, with sales dropping 3.4% in January from the year earlier. Though France’s Carrefour expanded 13.5% in 4Q, largely because of their poor performance in the previous period. Zika Trips Up Travelers to Latin America (March 25) WSJ • Fears sparked by the spreading Zika virus have caused travelers to Latin America and the Caribbean to reconsider their plans. Hotels and resorts have responded by deepening discounts to try to boost what is left of the high season. •
American Airlines says pregnant women with scheduled travel to Zika-­‐infected areas can request a full refund with a doctor’s note confirming the pregnancy. Though the margin of pregnant travelers is so low, the tourism industry in affected countries is not expecting to see a truly significant decline in bookings. Brazilian Tycoon Raises Stake in Carrefour (March 30) WSJ • Brazilian tycoon Abilio Diniz invested further in company Peninsula Participações, raising his stake in French supermarket operator Carrefour to 8.05% from 5.1%. The Brazilian investment firm has $3.4 billion in assets, including the stake in Carrefour. •
Diniz used to be the chairman of Grupo Pão de Açucar, which is now controlled by Casino, one of Carrefour’s biggest rivals in France. Completion of the Panama Canal Expansion Set for June (March 24) WWD • The $5.25 billion expansion of the Panama Canal will be finished on June 26, allowing for more ships to pass through. The expansion also includes a state-­‐of-­‐the-­‐art Scale Model Maneuvering Training Facility, providing additional hands-­‐on experience to pilots and tugboat captains. •
The Expansion Program will double the canal’s capacity to meet demand growth and ease congestion at West Coast ports that handle the bulk of Asia-­‐Pacific cargo as larger ships can transport the cargo to the East Coast. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & T ECHNOLOGY DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 H K: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. 7 April 1, 2016
EARNINGS CALENDAR Company Earnings Release Period Sales (Mil.) Date Consensus TY LY Actual EPS Consensus TY LY Actual Currency 0.99 0.85 CAD 1.29 2.11 USD 1.84 2.18 SEK NA NA JPY 0.06 0.01 USD 0.14 0.18 EUR 0.03 (0.71) GBP 0.08 0.08 GBP 0.54 0.38 GBP 0.97 0.67 GBP 0.05 0.07 USD 0.45 0.61 USD 0.62 0.18 USD 0.53 0.37 USD 7.96 5.17 USD 1.60 (0.12) USD 0.22 0.22 USD 1.50 1.41 USD 0.33 0.33 USD 2.00 2.34 USD 0.82 0.92 USD 2.54 2.28 USD Hudson’s Bay 4Q 16 Apr 4 4,353 2,632 Walgreens Boots Alliance 2Q 16 Apr 5 30,603 26,573 Hennes & Mauritz 1Q 16 Apr 6 43,877 40,276 Fast Retailing 1H 16 Apr 7 1,004 950 Rite Aid 4Q 16 Apr 7 8,403 6,848 Prada 2016 Apr 10 3,553 3,552 Tesco 2016 Apr 13 55,934 62,284 Debenhams 1H 16 Apr 14 2,713 2,323 ASOS 1H 16 Apr 19 1,393 1,151 Associated British Foods 1H 16 Apr 19 13,084 12,800 Under Armour 1Q 16 Apr 19 (E) 1,035 805 eBay 1Q 16 Apr 20 (E) 2,082 4,448 Facebook 1Q 16 Apr 20 (E) 5,247 3,543 Skechers USA 1Q 16 Apr 20 (E) 911 768 Alphabet 1Q 16 Apr 21 17,252 17,258 Amazon 1Q 16 Apr 21 (E) 27,959 22,717 Hanesbrands 1Q 16 Apr 21 (E) 1,216 1,209 Kimberly-­‐Clark 1Q 16 Apr 22 4,526 4,691 Steven Madden 1Q 16 Apr 22 (E) 326 324 Apple 2Q 16 Apr 25 52,112 58,010 Procter & Gamble 3Q 16 Apr 26 15,839 18,142 Simon Property Group E = estimated 1Q 16 Apr 26 1,269 1,216 DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & T ECHNOLOGY DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 H K: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. 8 April 1, 2016
EVENT CALENDAR Event Location Date(s) Fung Global Presenting Insider 3D Printing Expo São Paulo, Brazil April 4–5 International New York Times Luxury Conference Paris, France April 4–6 Demandware XChange Hollywood, FL April 4–6 CTA – Technology & Standards Forum San Diego, CA April 5–7 Pepcom DigitalFocus Spring Showcase New York, NY April 7 UJA Fashion Division Luncheon New York, NY April 7 RECON Latin America Cancún, Mexico April 9–12 Insider 3D Printing Expo New York, NY April 10–12 Innovate Finance Global Summit London, UK April 11 NACS State of the Industry Summit Chicago, IL April 11–13 AsiaWorld-­‐Expo – Startup Launchpad Hong Kong April 11–14 Tiffany & Co. Analyst/Investor Day Innovation Enterprise – Digital Marketing & Strategy Innovation Summit New York, NY April 12 Hong Kong April 12–13 World Retail Congress Dubai, UAE April 12–14 In-­‐Cosmetics Show Paris, France April 12–14 Milan Design Week 2016 Milan, Italy April 12–17 TJC Center for Retailing – VIP Speaker & Board Dinner Tucson, AZ April 13 ICSC – Upstate NY Idea Exchange Syracuse, NY April 13–14 2016 Global Retailing Conference Tucson, AZ April 14–15 Deborah Weinswig ICSC Retail Connections & China Retail Summit Shanghai, China April 14–15 Innovation Enterprise, Mobile Innovation Summit AAPA Sourcing, Customs, and Logistics Integration Summit London, UK April 14-­‐15 New Orleans, LA April 14-­‐15 Startup Weekend HK Hong Kong April 15-­‐17 Tribeca Innovation Week New York, NY April 15-­‐25 NAB Show Las Vegas, NV April 16-­‐21 NACDS Annual Meeting Palm Beach, FL April 16-­‐18 Singularity University Master Class Hong Kong April 17-­‐19 Social Media Marketing Conference San Diego, CA April 17-­‐19 The 13 Annual China Department Store Summit Jinjiang, China April 18-­‐20 AsiaWorld-­‐Expo – Startup Launchpad Hong Kong April 18-­‐21 CES on the Hill Washington, DC April 19 CTA Lobby Day Washington, DC April 20 th
DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & T ECHNOLOGY DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 H K: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. 9 April 1, 2016
Deborah Weinswig, CPA Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 deborahweinswig@fung1937.com Amanda Byrne Marketing Associate Rachael Dimit Research Associate John Harmon, CFA Senior Analyst Aragorn Ho Research Associate John Mercer Analyst Kiril Popov Analyst Steven Winnick Research Associate HONG KONG: 10th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: 852 2300 2470 NEW YORK: th
1359 Broadway, 9 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 DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & T ECHNOLOGY DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 H K: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. 10