October 16, 2015 - fbicgroup.com · !5 october 16, 2015 deborah(weinswig,(executive(director–head(of(global(retail(&(technology([email protected]((us:(917.655.6790((hk:(852.6119.1779((cn

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October 16, 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 © 2015 The Fung Group. All rights reserved.

l The NRF estimates total US spending on Halloween of $6.9 billion in 2015, down half a billion dollars from last year. Halloween’s falling on a Saturday this year could increase the number of those celebrating

l Facebook is now testing a “shop” section that will enable consumers to discover, share and purchase products, initially only from companies

l Tesco introduced a new Brand Guarantee scheme that offers an immediate price match on branded products at checkout

l Kohl’s announced that its same-‐day delivery service will be available in Boston, New York, Los Angeles, Miami, Northern New Jersey, Philadelphia, San Francisco, the Bay Area and Chicago. The department store is partnering with an Uber-‐like startup, Deliv, which hires drivers to deliver orders from stores and malls.

D EB OR A H W EIN S W IG

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

October 16, 2015

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October 16, 2015


FROM THE DESK OF DEBORAH WEINSWIG

It is almost that time of year—when the darkening gloom of autumn in the US is brightened by the prospect of Halloween parties. For retailers, events such as these provide an opportunity to drive excitement, footfall and impulse purchasing. But this will be a leaner year for American retailers, according to estimates recently published by the National Retail Federation (NRF).

Total US spending on Halloween is expected to fall by half a billion dollars year over year, to $6.9 billion in 2015, according to the NRF’s annual Halloween Consumer Spending Survey conducted by Prosper Insights & Analytics. The NRF expects average spending per person to be $74.34, down 4% from $77.52 last year.

We think this could prove a slightly pessimistic estimate. First, Halloween falls on a Saturday this year, which allows more people to attend or host events and parties—as well as shop all day long. Second, economic indicators and rising consumer confidence point toward solid consumer spending; indeed, less than one-‐fifth of NRF survey respondents said that the economy is hurting their spending plans.

However, the NRF’s survey confirms the extent to which Halloween is embraced in the US in a way that it is in few other markets: fully 94% of American consumers plan to buy Halloween candy, 67% plan to buy decorations, 64% plan to buy costumes and 34% even plan to buy Halloween-‐themed greetings cards.

Across the Atlantic, in the UK, Halloween shopping is much more modest. We expect total UK spending on Halloween to be in the region of £271 million (US$418 million) this year—equivalent to just 6% of the estimated US total.

But Halloween is still a growth story in the UK and, as a retail event, it is far from maturity. So, we expect this to be a bumper year for UK Halloween spending. A windfall in household budgets due to lower food and fuel costs, coupled with the weekend timing of the holiday, leads us to forecast UK Halloween product sales growth of 4%–5% for 2015. This is comfortably above the total UK retail growth rate of around 2% for the year so far.

Not all retail channels will gain. Amid a boom in budget retailing in the UK, we expect grocery discounters (such as Aldi) and nongrocery discount stores (such as Poundland) to lead growth, with each channel expected to see Halloween sales lifts of about 15%–16% year over year. In contrast, we expect big grocery superstores—which have been hit by shoppers switching to discount stores and smaller grocery shops—to see their Halloween sales fall by around 2%.

We see medium-‐term growth in the UK market: survey data from market research firms show that about half of British consumers are not yet buying into the Halloween mania, so there is scope to both grow the pool of shoppers and drive up average spend. Perhaps Brits could be encouraged to follow their American cousins’ enthusiastic lead: about 20 million US pet owners are expected to dress up their pets this year, spending a total of $350 million on Halloween pet costumes.

• For more on this topic, see our recent reports, US Halloween 2015 Preview and UK Halloween 2015 Preview.

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October 16, 2015


US Retail Sales Posted Weak Growth Ahead of the Holidays Figure 1. US Retail Sales ex Autos: YoY % Change

Through September 30, 2015; seasonally adjusted Source: US Census Bureau

• Total September US retail sales rose by 0.1% from August. The headline number missed economists’ estimate of 0.2%. Also, the August result was revised down, from a 0.2% gain to unchanged.

• Seven out of 13 major categories showed month-‐over-‐month declines, led by a 3.2% decline in sales at gas stations.

• “Consumption has been a strong pillar of growth over the summer, but this pillar is probably more fragile than previously expected,” said Thomas Costerg, a senior US economist at Standard Chartered Bank in New York. “Consumers would like to see more wage growth before spending a bit more freely.”

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FBIC HAPPENINGS & WEINSWIG’S WATCH ING

CHART OF THE WEEK

STAT OF THE WEEK

• This past week, the FBIC team attended Techweek New York and participated in a panel discussion at the Sourcing Journal Summit.

• On Tuesday, Twitter announced plans to cut up to 336 jobs, or 8% of its global workforce. This decision was made only a week after cofounder Jack Dorsey returned to the company.

• The job cuts will mostly affect its product and engineering teams. Recently, the social media platform has struggled with user growth.

8% Source: The Wall Street Journal

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October 16, 2015


US RETAIL HEADLINES

Facebook Adds “Shop” Section CNBC

• After testing a “buy now” button in articles in users’ newsfeeds, Facebook is now testing a “shop” section. This tab will be the designated page for people to discover, share and purchase products.

• Initially, only companies will sell products under this section; eventually, individual Facebook users will be able to use it to sell products to each other.

Kohl’s Expands Same-‐Day Delivery to Nine Markets Reuters

• Kohl’s said on Monday that its same-‐day delivery service will be available in Boston, New York, Los Angeles, Miami, Northern New Jersey, Philadelphia, San Francisco, the Bay Area and Chicago.

• The department store is partnering with an Uber-‐like startup, Deliv, which hires drivers to deliver orders from stores and malls. Macy’s used Deliv to expand same-‐day delivery service to 17 US cities. Department stores are aggressively investing in fast delivery as Amazon tries to gain market share via same-‐day delivery. E-‐commerce sales account for less than 15% of total sales for most department stores, according to research firm L2.

Under Armour CFO Brad Dickerson to Step Down Women’s Wear Daily

• Under Armour announced that its CFO and COO, Brad Dickerson, will be stepping down to pursue another professional opportunity outside the athletic performance industry. Dickerson will remain with the company until February 2016 while the company searches for an external candidate.

• Dickerson joined Under Armour in 2004 and was elevated to the CFO position in 2008. The incoming CFO is expected to assume some key operational responsibilities.

Walmart Lowers Forecast • At Walmart’s analyst meeting, the company provided a disappointing forecast. Citing

increasing competition from hard discounters and e-‐tailers, CEO Doug McMillon asked analysts to be patient as the company goes through its transformation.

• The retailer plans to generate $80 billion in cash in the next three years. Earnings per share are expected to decrease by 6%–12% in 2017, and increase by 5%–10% in 2019, compared to their current level. Walmart’s stock was down 9% on the news in midday trading.

EUROPEAN RETAIL EARNINGS

Company

Revenues ($ Mil.) Change

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

Period 2015 2014 (%)

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

WH Smith FYE Aug. 31 1,830 1,918 (4.6) 1.5 57.7 56.8 96.4 156.9 152.0 3.2 1,300 N/A

Game Digital FYE Jul. 25 1,356 1,413 (4.0) 0.6 24.7 24.3 32.7 33.5 4.6 629.8 594 557

Booker Group 1HE Sep. 11 3,442 3,804 (9.5) (1.0) 5.1 4.8 30.4 93.4 92.9 0.5 N/A 3,018

N Brown Group 1HE Aug. 29 638 671 (5.0) 4.2 57.6 57.9 (34.1) 23.6 56.2 (57.9) N/A N/A

Groupe Casino 3QE Sep. 30 11,883 15,865 (25.1) (10.7) N/A N/A N/A N/A N/A N/A 15,184 14,221 Source: Company reports

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October 16, 2015


EUROPE RETAIL HEADLINES H&M to Open Homeware Concession at Selfridges Retailgazette.co.uk

• Swedish fast-‐fashion retailer H&M will open its first homeware concession at Selfridges on October 15. The outlet will take up 650 square feet of space and create 10 new jobs.

• The concession will stock a handpicked collection of home products from H&M. The selection will include premium bed linens, organic cotton cushion covers, glassware and other home decor. H&M’s buying manager for the home category will hold a special talk on interior decoration during the launch, and the store is expected to treat attending customers with a special gift.

Sports Direct CEO Charged over Collapse of USC Fascia Retail-‐week.com

• The Insolvency Service, a government agency that investigates misconduct in companies, has launched criminal proceedings against David Michael Forsey, CEO of popular sports retailer Sports Direct. Forsey has been accused of failing to give proper notice to employees who were laid off from USC, Sports Direct’s fashion fascia.

• USC, which collapsed earlier this year, reportedly laid off 200 staff from its Ayrshire warehouse with just 15 minutes’ notice (the law requires that employees be given 30 days’ notice). The Insolvency Service confirmed the proceedings, but said that further comment could not be provided because inquiries were still at an early stage.

Marks & Spencer Plans to Exit Five Balkan Countries, Close 12 Stores Ft.com

• British clothing retailer Marks & Spencer will exit Croatia, Slovenia, Bulgaria, Serbia and Montenegro as tensions deepen between Russia and the West. The exit strategy includes the closure of 12 stores beginning in January, and staff have reportedly been notified.

• The retailer’s marketing and international director, Patrick Bousquet-‐Chavanne, said that the company will “continue to closely manage [its] international business and take decisive actions as necessary to ensure [the] store portfolio is fit for the future of M&S.” He added that the change would enable M&S to focus on business in areas of Eastern Europe that are doing well.

Tesco to Offer Immediate Price Match at Checkout Company press release

• Tesco introduced a new Brand Guarantee scheme by offering an immediate price match on branded products at checkout. Tesco’s previous price match policy gave customers vouchers bearing the difference in price between branded products and fresh food that was priced lower elsewhere.

• Tesco’s research on supermarket shoppers revealed the extent to which price match vouchers failed to meet customers’ needs. Its survey showed that 48% of shoppers forgot to use the vouchers, while 16% lost them before they could claim their savings. Tesco’s Brand Guarantee is its latest move in a drive to help customers.

Lorry Driver Shortage Could Lead to Delays in Fulfillment Retail-‐week.com

• A director from Wincanton, a logistics firm in the UK, has warned that online retailers could take longer to deliver orders due to a severe shortage of lorry drivers. She cautioned that, along with delayed deliveries, costs could also rise as businesses’ demand for qualified drivers leads to higher wages due to competition.

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October 16, 2015


• Wincanton is calling for action from the government and the industry to address the diminishing number of qualified drivers. It has collaborated with several industry bodies to lobby for increased funding to support apprenticeships and training, and encourage more people to take up careers in large-‐goods-‐vehicle driving.

ASIA TECH HEADLINES Xiaomi CEO Leads Funding in Chinese Smart Bike Maker Yunmake e27.co

• Chinese smart bike maker Yunmake announced that it has raised series A funding reportedly worth tens of millions of renminbi. The round was led by Shunwei Capital Partners, the venture capital firm cofounded by Xiaomi CEO Lei Jun, and included Foxconn, Qualcomm, ZhenFund, Ricebank Capital, Yinxinggu Capital and a few other firms.

• As a former member of Sony’s China Creative Center and Alibaba’s User Experience Design department, Yunmake founder Qui Yiwu has deep experience in design, technology and business development.

HappyFresh Expands Delivery Service to Surabaya e27.co

• Online grocer HappyFresh is delivering groceries to almost every district in Surabaya, Indonesia, although it announced the service only days ago and has opened only a single Ranch Market store as its base of operations there.

• CEO Markus Bihler said consumers in the middle to upper economic tiers in Indonesia will continue to push online retail growth. HappyFresh has also partnered with some offline stores to bring their services online.

Japan-‐Backed Fund Said to Be Considering Investing in Sharp Channel NewsAsia

• According to a confidential source, a fund backed by the Japanese government, Innovation Network Corporation of Japan (INCJ), is considering a range of options to help turn around Sharp.

• Nikkei Business Daily reported that, besides a direct investment, INCJ is considering a merger between Sharp’s liquid crystal display unit and a venture that it owned with Japan Display. A joint investment with Taiwan’s Hon Hai Precision Industry is also under consideration.

Hungry? China’s Food Delivery Apps Bite into Yum! Revival Channel NewsAsia

• Growing numbers of budget-‐minded Chinese diners are using smartphone applications to take advantage of meal delivery deals, which is threatening fast-‐food chains such as Yum! Brands’ KFC and Pizza Hut.

• To explain why China same-‐store sales grew by only 2% in the third quarter (far below the expected 9.6% growth), Yum! said this week that there is a “savage battle” under way between food delivery apps.

Now You Can Chat Even Without an Internet Connection. Sort of. TechinAsia

• Indian messaging app Hike launched a new feature called Hike Direct that allows users to chat and share photos and larger files without being connected to the Internet, provided they are within 100 meters of one another.

• The feature includes no data charge and uses a fast, 40 Mbps connection. It is built on Wi-‐Fi Direct technology that helps establish peer-‐to-‐peer connections between smartphones.

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October 16, 2015


LATAM RETAIL HEADLINES Brazilian Retail Sales Decline Faster than Expected in August Bloomberg

• Brazilian retail sales fell by 0.9% month over month in August, following a 1.6% month-‐over-‐month decline in July. The August decline was greater than the median forecast of (0.6)%, and it marked the seventh sequential monthly decline. Sales fell by 6.9% year over year, compared to a median forecast of (5.6)%.

• Sales of food, beverages and tobacco at hypermarkets and supermarkets fell by 0.1% month over month following a 1.5% decline in July. Sales of vehicles and auto parts declined by 5.2%.

Number of Past-‐Due Loans Continues to Increase in Brazil Bloomberg

• The number of individuals and companies delinquent on loans in Brazil hit 61.2 million as of the end of August, representing US$24.7 billion (BRL96.2 billion) in bad loans, according to São Paulo–based credit-‐rating firm Serasa Experian.

• The economic contraction is expected to continue through 2016, and many Brazilian banks are planning to sell nonperforming parts of their loan portfolios.

Walmex Reports Improved Results Bloomberg

• Walmart de Mexico, the largest retail chain in Latin America, reported a 7% same-‐store sales increase in September, benefiting from simplifying operations and focusing on its core business.

• External factors such as declining unemployment and a 45% increase in remittances from workers outside the country have also helped the company’s results.

Nicaragua and Other Latin American Countries Increasing Support for Local Fashion Weeks Women’s Wear Daily

• Nicaragua Diseña was launched in 2011 as a project for promoting local, emerging designers, and the fair has since grown into an event that draws 12,000 people.

• Other fashion weeks are also expanding rapidly in Latin America, and Mercedes-‐Benz is sponsoring fashion weeks in Panama and Costa Rica and independent events in El Salvador and Guatemala.

Latin America’s Economy Slows Ahead of IMF Meeting The Wall Street Journal

• Peru was selected three years ago as the venue for the International Monetary Fund’s (IMF’s) 2015 meeting. However, global forces are expected to force Latin America’s economy into a contraction, and the region’s GDP expected to decline by 0.3% this year.

• The environment in Latin America is reflected in Peru’s economy, which grew by a robust 8.5% in 2010. The IMF’s 2015 GDP growth forecast for the country was revised downward, to 2.4% from 3.8% previously.

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October 16, 2015


EARNINGS CALENDAR

Company

Earnings Release Period Date

Sales $ (Mil.) EPS

Currency Consensus TY LY Actual

Consensus TY LY Actual

ASOS FY 15 Oct. 20 1,160 976

0.44 0.45 GBP

Tractor Supply 3Q 15 Oct. 21 1,488 1,360

0.63 0.55 USD

eBay 3Q 15 Oct. 21 2,096 4,353

0.40 0.54 USD

Carter’s 3Q 15 Oct. 22 856 799

1.47 1.24 USD

Alphabet 3Q 15 Oct. 22 15,058 16,523

7.24 4.70 USD

Overstock.com 3Q 15 Oct. 22 402 353

0.14 0.07 USD

Debenhams FY 15 Oct. 22 2,668 2,313

N/A 0.07 GBP

Under Armour 3Q 15 Oct. 22 1,176 938

0.44 0.41 USD

Amazon 3Q 15 Oct. 22 24,904 20,579

0.83 (0.71) USD

Procter & Gamble 1Q 16 Oct. 23 17,531 20,792

0.96 1.07 USD

VF Corp 3Q 15 Oct. 23 3,678 3,520

1.12 1.08 USD

Taubman Centers 3Q 15 Oct. 26 136 176

0.78 0.87 USD

Luxottica 3Q 15 Oct. 26 2,232 1,883

0.45 0.36 EUR

Alibaba 2Q 16 Oct. 27 21,365 16,829

3.45 1.20 CNY

Apple 4Q 15 Oct. 27 50,878 42,123

1.87 1.42 USD

Simon Property 3Q 15 Oct. 27 1,286 1,235

2.46 1.90 USD

Macerich 3Q 15 Oct. 27 329 264

0.98 0.88 USD

Coach 1Q 16 Oct. 27 1,048 1,039

0.41 0.53 USD

Baidu 3Q 15 Oct. 27 18,479 13,520

9.30 11.00 CNY

Walgreens 4Q 15 Oct. 28 28,519 19,057

0.81 0.80 USD

Iconix 3Q 15 Oct. 28 108 95

0.54 0.37 USD

Steve Madden 3Q 15 Oct. 29 416 392

0.68 0.62 USD

Ralph Lauren 2Q 16 Oct. 29 1,960 1,994

1.74 2.21 USD

Brunswick 3Q 15 Oct. 29 995 932

0.74 0.65 USD

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October 16, 2015


EVENT CALENDAR

Event Location Date(s) FBIC Presenting

ICSC Research Connections Seattle, WA October 18–20

ABC Kids Expo Las Vegas, NV October 18–21

CEWIT Emerging Technology Conference New York, NY October 19–20

IGP – Online & Digital Summit 2015 London, UK October 20–21

CES Unveiled Paris Paris, France October 21

Cyber Delegation in NYC New York, NY October 21

Fashion Digital NY New York, NY October 22 Deborah Weinswig

ICSC Recon Asia Conference Taipei, Taiwan October 20–22 Kiril Popov

19th Annual PopTech Camden, ME October 22–24

Oracle OpenWorld San Francisco, CA October 25–29

Hygienix Conference 2015 St. Petersburg, FL October 25–29

Money 20/20 Conference Las Vegas, NV October 26

Telematics West Coast San Diego, CA October 26–27

WWD Apparel & Retail CEO Summit New York, NY October 27–28

Bio China 2015 Summit – Innovation & Partnering Shanghai, China October 27–28

Annual China Brand Development Conference Shenzhen, China October 27–28

Kroger Investor Day New York, NY October 27

eMarketer Attention! 2015 – Wearables New York, NY October 27

WWD Apparel &Retail CEO Summit New York, NY October 27–28

Bio China 2015 Summit – Innovation & Partnering Shanghai, China October 27–28

AAFA Hong Kong Executive Summit Hong Kong October 28–29

Ascena Investor Day New York, NY October 28

UJA Tech Talk: The Power of Vertical Integration New York, NY October 28

C3 Connected Mobility Summit San Francisco, CA October 28

Pepcom -‐ Holiday Spectacular! West San Francisco, CA October 28

AAFA Hong Kong Executive Summit Hong Kong October 28–29

Decoded Fashion Game Changers, IAC New York, NY October 28–29 Deborah Weinswig

Performance Marketing Insights London, UK October 28–29 Israeli & Canadian Private Equity and Venture Capital Summit New York, NY October 29

Planalytics Holiday Outlook Webcast Webcast October 29 Deborah Weinswig

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October 16, 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] 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 LONDON: 242-‐246 Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0)20 7616 8988 NEW YORK: 1359 Broadway, 9th Floor New York, NY 10018 Tel: 646 839 7017 FBICGROUP.COM

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October 16, 2015 - fbicgroup.com · !5 october 16, 2015 deborah(weinswig,(executive(director–head(of(global(retail(&(technology([email protected]((us:(917.655.6790((hk:(852.6119.1779((cn