July 3, 2015 Weekly Insights - fbicgroup.com...!2 July 3, 2015 Fung Business Intelligence Centre (FBIC) Publication: Retail Research Weekly Insights Copyright © 2015 The Fung Group

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July 3, 2015

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

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

July 3, 2015

This week, we co-‐hosted a second NY Disruptors Breakfast with the Entrepreneurs Roundtable Accelerator (ERA), which was attended by 100 LF North America and Global Brands Group employees

Amazon announced the sale of physical goods on its Mexican website, as well as the availability of several Kindle models

Getting cash back is the newest trend in India, and just almost everybody in e-‐commerce is embracing the cash-‐back culture

AliExpress.com is one of the top three e-‐commerce sites in Brazil, the top e-‐tail site in Russia and is growing fast in Brazil, Chile and Mexico

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July 3, 2015


FROM THE DESK OF DEBORAH WEINSWIG

This past week, we were delighted to co-‐host the second New York Disruptors Breakfast with the Entrepreneurs Roundtable Accelerator (ERA) at the newly renovated Li & Fung Hive. Over 100 LF North America and Global Brands Group employees attended the breakfast. This marked the fourth Disruptors Breakfast series that FBIC team has organized in Hong Kong and New York since April. A total of seven emerging startups in fashion and consumer space presented at the breakfast. Our long-‐time partner ERA handpicked six startups for this occasion; FBIC invited a personal video startup recommended by Israel’s New York Trade and Economic Mission. We are excited to see that Li & Fung has started to substantiate partnerships with the startup community: one of the presenting companies Trendalytics was initially mentored by Global Brands Group and now provides subscriptions of analytics-‐based fashion trend insights to several divisions of our business.

ERA had just announced their Summer 2015 class in early June, which consisted of ten startups from real estate, online jewelry marketplace, to virtual in-‐person shopping assistant. This program is designed to grow early-‐stage companies by providing them with collaboration opportunities, and access and exposure to a wide range of mentors and companies in the New York area. ERA selects 10 lucky companies from 1,000 applicants three times a year; participants receive a $40,000 investment, free coworking space in the Chelsea neighborhood and access to more than 200 mentors. So far ERA have produced 80 companies with a combined market capitalization of over $500 million

After a brief introduction by Rick Darling, Executive Director of Government & Public Affairs at Li & Fung, seven startups gave their four-‐minute elevator pitch followed by Q&As. The audience was extremely engaged and asked questions about their business models, origins of ideas, and synergies with Li & Fung.

The startups included (in alphabetical order):

• Four Mine, an online jewelry store that lets shoppers experience their favorite engagement ring styles at home through a “try before you buy” replica service, which eliminates the uncertainty of buying online. The company’s smart shopping tools identify the customer’s preferences and pinpoint the ideal ring.

• Grsp, is a mobile tool that helps people make better, faster decisions when shopping in a store. Users are advised to buy something or walk away based on comprehensive analysis of prices, deals, coupons, and product reviews.

• idomoo, a personalized engagement video platform that delivers 1:1 communication to the right target audience, meeting each customer's preferences and needs, creating long-‐lasting memorable customer experiences and tightening the brand-‐consumer connection.

• Muse Find, is a self-‐serve platform that matches brands to their ideal social media influencers, so that brands can reach and engage their audience more effectively, delivering a greater reach with a lower cost.

• RetSKU, is a business intelligence and analytics platform for retail brands selling via traditional brick-‐and-‐mortar merchants. The platform collects in-‐store competitive placement data in real-‐time, analyzes it to provide actionable insights, and helps to improve promotional effectiveness and new product launches.

• Rockerbox brings efficiency and effectiveness to digital advertising by analyzing the sites a user visits to determine their real-‐time browsing intent. It enables momentum-‐based advertising that drives better performance with smaller budgets.

• Trendalytics, provides decision support software for merchandise trends. It marries online search behavior and consumer engagement with products across the social web, so that brands and retailers are empowered with data-‐driven insights to make informed merchandising and creative marketing decisions.

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July 3, 2015


Greek Government Bond Yields Figure 1. Greek 10-‐Year Bond Yields, June 23–30, 2015

As of June 30, 2015 Source: Bloomberg

• Greek 10-‐year bond yields jumped this week as a default on obligations and a consequent exit

from the eurozone started to look like it would become a reality. • Europe waits while Greece holds a referendum, scheduled for this Sunday, on whether to accept further

austerity measures in return for continuing to receive bailout funds. • A “no” vote to austerity would almost certainly precipitate the country’s departure from the

currency bloc.

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FBIC HAPPENINGS & WEINSWIG’S WATCH ING

CHART OF THE WEEK

STAT OF THE WEEK

• This week, the FBIC New York team attended the Wearable Tech + Digital Health NYC 2015 Conference.

• FBIC also hosted its second Disruptors Series Breakfast in New York in collaboration with Entrepreneurs Roundtable Accelerator.

• UK consumers increased their spending by 4.4% in the first quarter of this year, according to the Office for National Statistics (current prices, nonseasonally adjusted).

• Spending on clothing and footwear climbed 6.4%, while spending on food and drink fell 3.5%.

4.4% Source: Office for National Statistics

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July 3, 2015


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

Through June 27, 2015 Source: ShopperTrak

• Overall store traffic were down 2.8% for the week following Father’s Day shopping.

• Apparel store traffic declined 4.1% % and. electronics store traffic sales were flat

• The upcoming July 4th is expected to lift store traffic this week.

US REGULAR GASOLINE PRICES

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

06/15/15 06/22/15 06/29/15 Week Ago Year Ago

US 2.835 2.812 2.801 (0.011) (0.903)

East Coast 2.742 2.729 2.727

(0.002)

(0.951)

Midwest 2.794 2.743 2.736

(0.007) (0.935)

Gulf Coast 2.593 2.574 2.542 (0.032) (0.941)

West Coast 3.334 3.329 3.309

(0.020) (0.727)

Source: US Energy Information Administration

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July 3, 2015


US RETAIL HEADLINES Vince Holding Appoints Mark Brody Interim CFO (June 25) Women’s Wear Daily • Vince Holding named Mark Brody as interim CFO. He will replace Lisa Klinger, who resigned from

the post.

• Brody most recently was Managing Director and Group CFO at Sun Capital Partners. The company’s portfolio included Vince.

Amazon Takes Prime Now to London (June 29) TechCrunch • Amazon has expanded its one-‐hour delivery service for Prime members to parts of central

London. This is the first location where such service is available outside the US.

• Amazon launched the one-‐hour delivery service in Manhattan last December. The London Prime Now app offers 27 categories of products.

Juicy Couture Black Label Launches New Fall Campaign (June 29) Women’s Wear Daily • Juicy Couture Black Label set off in a new direction with its fall campaign, “Couture Nouveau.”

Different from previous location-‐based campaigns, the new collection is shown against a white, seamless background to represent the brand’s rock ’n’ roll vibe.

• The campaign will be augmented by a socially driven initiative, “Couture Confessions,” which will launch in September.

Key Management Changes at Kraft Ahead of the Heinz Merger (June 29) Bloomberg • Heinz’s leadership is shaking up senior management at Kraft before the companies’ planned

merger. Kraft CFO James Kehoe and General Counsel Kim Rucker are among the departing executives.

• As Heinz’s CFO, Paulo Basilio, takes the same role at the new Kraft Heinz, more senior executives will assume new positions from the Heinz side, with the exception of Kraft’s COO, George Zoghbi, who will be COO of the US commercial business.

EUROPEAN RETAIL EARNINGS

Company

Revenues ($ Mil.) Change

Change in Reporting Currency Gross Margin (%) Change Net Income ($ Mil.)

Change YoY Store Fleet EOP

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

Hornbach Holding 1Q to May 31, 2015 1,150 1,427 (19.4) 1.6 37.9 37.7 20 N/A N/A N/A N/A N/A

Ocado 1H to May 17, 2015 775 711 8.9 18.2 33.6 32.7 94 11.0 12.4 (11.5) N/A N/A

Carpetright* FY to May 2, 2015 751 717 4.7 4.9 N/A N/A N/A N/A N/A N/A 597 614

Source: Company reports * 2015 is 53 weeks

EUROPEAN RETAIL HEADLINES Ocado Posts Further Double-‐Digit Rise in Sales (June 30) Company Press Release • British online grocer Ocado posted first-‐half revenues that were up 18.2%, to £508 million.

Operating profit before share from joint ventures climbed 8.2%, to £10.6 million. Pretax profits for the first half stood at £7.2 million, down from £7.5 million in the corresponding period of 2014.

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July 3, 2015


• Ocado said it had broadened its range, grown private-‐label sales, increased active customers by 19% and improved order accuracy in the first half.

Carpetright Reports Strong UK Sales Growth (June 30) Company Press Release • Carpetright, a UK floor coverings specialist, reported that full-‐year revenues were up 3.3%, to

£463 million. Comparable UK sales climbed 7.3%, or 5.4% in total. Comparable rest-‐of-‐Europe sales rose 0.3%, but fell 7.4% in total as the group culled stores.

• Underlying operating profit grew by 112%, to £15.8 million, while underlying profit before tax rose 183%, to £14.2 million, for the year.

TM Lewin Planning Management Buyout (June 27) The Sunday Times • An American private equity company is in talks to back a £100 million management buyout of

shirtmaker TM Lewin. The retailer has around 100 UK stores and 60 overseas stores.

• Sankaty Advisors is reported to be close to a deal to help management acquire the 20% stake currently held by Coller Capital, which was inherited when it took over the private equity portfolio of Lloyds Banking Group.

German Retail Sales Volumes Decline Year over Year (June 30) Statistisches Bundesam Release • German retail sales volumes fell 0.4% year over year in May 2015, according to provisional

results from Germany’s statistics office. In current prices, year-‐over-‐year growth was flat.

• Adjusted for calendar and seasonal variations, retail sales in May were up 0.5% in real terms (volumes) and up 0.4% in current prices.

Hornbach Grows Sales in First Quarter (June 26) Reuters • German DIY chain Hornbach reported that first-‐quarter revenues were up 1.9%, to €995 million.

Parent company Hornbach Holding saw revenues climb 1.6%, to €1,052 million, in the first quarter.

• EBIT for Hornbach DIY in the first quarter was down 11%, to €65.2 million. EBIT for Hornbach Holding was down 13%, to €76.8 million.

Liberty Department Store Plans Global Growth (June 26) The Guardian • London department store retailer Liberty is to sell its own-‐label products through department

stores in the US and Italy. Starting in July, US chain Nordstrom will feature pop-‐up shops for Liberty housewares, while Italy’s La Rinascente will host a pop-‐up for the Liberty London accessories range.

• The overseas venture underpins a planned float on the London Stock Exchange in 2018. The retailer is currently owned by private equity firm BlueGem Capital Partners.

Tesco Slows UK Sales Fall in First Quarter (June 26) Company Press Release • Grocery giant Tesco posted an improving performance for its core UK division last week,

reporting a comparable UK sales decline of 1.3%. In a deflationary environment, UK sales volumes were up 1.4% and transactions were up 1.3%, the company said.

• International comps were down 1.0%, and groupwide comps were down 1.3% in the first quarter. Total group sales (excluding automotive fuel) were down 1.0% in the quarter, with UK sales down 1.0% and international sales down by the same figure.

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July 3, 2015


ASIA HEADLINES How Widely Accepted Are Mobile Payment Methods in China’s Brick-‐and-‐Mortar Shops? (June 30) TechinAsia • Chinese tech news site Techweb recently conducted a survey of 1,607 businesses on a busy

pedestrian street in Wuhan to check the acceptance rate of mobile payments among offline shops and restaurants. Just 617 of the shops—38% of the total surveyed—accept mobile payments.

• Among 1,047 clothing shops, 28.2% accept Alipay, and 18.6% accept Tenpay.

• Of the 310 restaurant surveyed, 4.5% accept Alipay, and 1.2% accept Tenpay.

Online Restaurant Booking Service Chope Raises $8 Million; Revenue Doubled in Past Year (June 30) TechinAsia • Chope, a Singapore-‐headquartered startup, raised S$11 million (US$8 million) in a series-‐C round

led by F&H Fund Management, a fund chaired by pioneering Alibaba CTO John Wu.

• According to Tech in Asia, the startup generated revenues of about S$519,000 (US$385,000) in 2013, a fiftyfold increase over the previous year. Cofounder Arrif Ziaudeen says the startup’s annual revenue doubled from 2013 to 2014.

Replacing Body Parts: Just a 3-‐D Print Away? (June 29) Channel NewsAsia • Easton LaChappelle, a 19-‐year-‐old, recently joined NASA. He invented a mind-‐controlled robotic

arm when he was just 17, which earned him a meeting with President Obama.

• The brain’s motor cortex controls and executes the body’s voluntary movements, and LaChappelle preprogrammed a commercially available wearable device to sense thoughts occurring in the motor cortex, which in turn become signals that the robotic hand can read and respond to.

Didi Kuaidi Is About to Become China’s Second-‐Most-‐Valuable Startup (June 29) e27.co • Taxi-‐hailing app company Didi Kuaidi is raising an investment round of up to US$2 billion,

according to Reuters. The deal would value Didi Kuaidi at around US$15 billion, making it the second-‐most-‐valuable Chinese tech startup after smartphone maker Xiaomi, which is now valued at US$45 billion.

• China’s three largest tech giants are deeply involved in the country’s taxi app wars. Alibaba and Tencent have backed Didi Kuaidi, while Baidu is an investor in Uber and has provided the company with its maps and integrated it with its electronic wallet.

Asian Investors Jump in on Airbnb’s US$1.5 Billion Funding Round (June 29) e27.co • At least four major Asian investors have entered Airbnb’s latest funding round, according to

CrunchBase. The new investors were notably absent from previous rounds; the company has raised US$2.3 billion to date.

• Hong Kong’s Horizon Ventures, Singapore’s Temasek Holdings, China’s Hillhouse Capital Group (which has more than US$20 billion in funds), and China Broadband Capital are the four new Asian investors.

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July 3, 2015


Indian e-‐Commerce Market Bitten by a New Bug: Getting Cash Back (June 29) e27.co • Getting cash back is the newest trend in the Indian e-‐commerce market. Big players, emerging

players, almost everybody in the e-‐commerce niche is embracing the cash-‐back culture, compelled by an enthusiastic audience, surging market competition and recent funding rounds.

• At present, cash-‐back campaigns are being championed by top Indian mobile wallet firms such as Paytm, MobiKwik and PayU, in addition to food and deal aggregators such as TinyOwl and CashKaro.

JD.com Partners with ZestFinance to Offer Credit Services to Chinese Consumers (June 26) TechCrunch • JD.com has become the latest Internet company in China to venture into the consumer credit

space, after the NASDAQ-‐listed online retailer—and Alibaba rival—launched a joint venture with Los Angeles–based financial services company ZestFinance.

• The venture’s aim is to offer new microloan options to Chinese consumers, particularly those who have no credit history and other credentials traditionally required to obtain a credit card or other finance options.

Alibaba’s Affiliate Launches Digital-‐Only Bank for Small and Medium-‐Size Businesses in China (June 26) e27.co • MYbank, a startup backed by Ant Financial Services—an affiliate of Chinese e-‐commerce giant

Alibaba—has launched a digital-‐only bank to provide “inclusive and innovative financial solutions” at a lower cost to underbanked urban and rural consumers and small and medium-‐size businesses.

• As part of Ant Financial, which bills itself as China’s leading online financial services company, MYbank will participate in Alibaba’s e-‐commerce ecosystem, which offers potential synergies that are unavailable to other banks.

LATAM HEADLINES AliExpress.com Among Top Three E-‐Commerce Sites in Brazil (June 29) Internet Retailer • AliExpress.com is one of the top three e-‐commerce sites in Brazil, receiving 110 million visits per

month, according to SimilarWeb, a web analytics company.

• The site is the top e-‐tail site in Russia and has been growing fast in Brazil, Chile and Mexico. The top purchases in Latin America include wedding products, apparel, electronics and jewelry.

• Customers continue to favor AliExpress despite customs and delivery delays that can reach 40 days.

AT&T to Invest About $3 Billion in Mexico (June 25) Reuters • AT&T plans to invest about US$3 billion to expand its high-‐speed mobile Internet network in

Mexico.

• The company plans to provide wireless coverage to 40 million people—about one-‐third of the population—within six months, and to a total of 100 million people by the end of 2018.

• AT&T already owns Mexico’s number three and four wireless carriers, Iusacell and Nextel.

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July 3, 2015


Brazil’s Unemployment Rate Rises in May (June 25) Associated Press • Brazil’s IBGE statistics bureau reported that the jobless rate in May was 6.7%, as compared to

6.4% in April and 4.9% in May 2014.

• The unemployment rate has been rising since December 2014, when it was 4.3%.

• The number of unemployed in May remained stable at 1.6 million; however, this figure is almost 39% higher than it was a year ago.

Brazil’s Consumers Struggle with Debt (June 15) Associated Press • Brazil’s leading credit information companies estimate that as of April, more than 55 million

Brazilians were late in making credit-‐card or loan payments.

• This represents 37% of the adult population, and the list has grown by about 700,000 people since January.

• Interest rates on some Brazilian credit cards are as much as 200% per year, compared to an average of about 12% in the US.

Amazon Launched BtoC Business in Mexico (July 1) Billboard • The company announced on June 30 that it is launching business-‐to-‐consumer platform in

Mexico on Amazon.com.mx.

• Upon launch, the site will have the largest selection of both local and imported products in the country. Non-‐Amazon sellers will leverage Amazon’s storage and shipping expertise.

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July 3, 2015


EARNINGS CALENDAR

Sales (Mil.) EPS

Company

Earnings Release Period Date

Consensus TY LY Actual

Consensus TY LY Actual Currency

Alimentation Couche-‐Tard 4Q 15 Jul. 7 7,499 8,952 0.27 0.22 USD

Marks & Spencer 1Q 15 Jul. 7 N/A N/A N/A N/A GBP

Fast Retailing FY 15 Jul. 9 1,665,000 1,380,000 1,286 887 JPY

Family Dollar 3Q 15 Jul. 10 2,727 2,660 0.82 0.85 USD

eBay 2Q 15 Jul. 16 4,487 4,370 0.73 0.69 USD

VF 2Q 15 Jul. 17 2,462 2,400 0.36 0.36 USD

Google 2Q 15 Jul. 17 14,253 12,670 6.74 N/A USD

Tractor Supply 2Q 15 Jul. 17 1,762 950 1.11 0.95 USD

Apple 2Q 15 Jul. 22 48,545 37,430 1.77 1.28 USD

LVMH FY 15 Jul. 23 35,458 40,640 3.65 6.40 EUR

Kering HY 15 Jul. 23 5,290 4,747 5.07 4.41 EUR

Macerich 2Q 15 Jul. 23 327 254 0.14 0.11 USD

Westfield Financial 2Q 15 Jul. 23 8.9 8.7 0.08 0.07 USD

Facebook 2Q 15 Jul. 23 3,969 2,910 0.47 0.31 USD

Brunswick 2Q 15 Jul. 24 1,155 1,139 1.03 0.95 USD

Casino Guichard Perrachon SA HY 15 Jul. 30 24,394 23,248 1.57 1.13 EUR

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July 3, 2015


EVENT CALENDAR

Event Location Date(s) FBIC Presentation

App Promotion Summit London, England July 9

Wearable Technologies Conference San Francisco, CA July 9–10 ICSC North American Research Task Force Summer Meeting New York, NY July 10–11

Fortune Brainstorm Tech Aspen, CO July 13–15

UJA Cybersecurity Tech Talk New York, NY July 15

Mobile World Congress Shanghai Shanghai, China July 15–17

ICSC New England Idea Exchange Boston, MA July 15–17

Omnichannel Retail Executive Forum New York, NY July 16

Esri Business Summit San Diego, CA July 18–21

AAFA Project SOLE New York, NY July 19–21

AAFA 4th Annual Traceability Conference Nashville, TN July 21

Online Retailer Conference & eCommerce Expo Sydney, Australia July 21–23

NRFtech Half Moon Bay, CA July 26–28 NRF International Trade/ Supply Chain Summer Meeting Washington, DC July 28

NRF Retail Advocates Summit Washington, DC July 28–29

Colombiamoda Medellin, Colombia July 28–30

NYC Intimate Apparel Market Week New York, NY August 3–7

Magic Las Vegas, NV August 17–19

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

CIO Retail Summit Scottsdale, AZ August 23–25

Planalytics Back-‐to-‐School Outlook Online August TBD

World Retail Congress Rome, Italy September 8–10

NRF Retail Leaders Dinner Dallas, TX September 10

WWD Digital Forum New York, NY September 16–17

ICSC Western Division Conference San Diego, CA September 16–18

E-‐Commerce Paris Paris, France September 21–23

World Retail Congress Paris, France September 30–October 1

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July 3, 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] Sunny Chan [email protected] Tal Dor [email protected] Marie Driscoll, CFA [email protected] John Harmon, CFA [email protected] Aragorn Ho [email protected] John Mercer [email protected] Swarooprani Muralidhar [email protected] Charlie Poon [email protected] Kiril Popov [email protected] Stephanie Reilly [email protected] Lan Rosengard [email protected] Jing Wang [email protected]

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July 3, 2015 Weekly Insights - fbicgroup.com...!2 July 3, 2015 Fung Business Intelligence Centre (FBIC) Publication: Retail Research Weekly Insights Copyright © 2015 The Fung Group