deborah weinswig managing director, - fbicgroup · 2016-09-06 · deborah weinswig managing...

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MAY 20, 2016

DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved.

+5.4% CHART OF THE WEEK

STAT OF THE WEEK

STAT OF THE WEEK

D E B O R A H W EI N S W I G M A N A G I N G D I R E C T O R ,

F U N G G L O B A L R E T A I L & T E C H N O L O G Y 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

U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9

C H N : 8 6 . 1 8 6 . 1 4 2 0 . 3 0 1 6

MAY 20, 2016

Fitbit Maintains Market Leadership in Global Wearables Market Top Five Wearables Vendors’ 1Q16 Market Share, by Unit Volume 83%

• UK mobile commerce sales rose by 83% year over year in April,

according to the IMRG Capgemini eRetail Sales Index, which tracks the online sales of over 100 retailers. Sales made via tablets during the same period grew by 3%.

• Overall e-‐commerce in the UK grew by 11% year over year in April, which is the lowest monthly increase so far in 2016.

• Fashion continues to drive e-‐commerce growth in the country. In April, UK online clothing sales grew by 15%, while online footwear sales grew by 18% and online lingerie sales by 32%.

• This week, we attended the inaugural Shoptalk conference, which its organizers describe as “the tech event for nextgen commerce.” We joined more than 3,000 attendees as they gathered in Las Vegas to explore disruption in the retail industry, particularly in terms of how consumers discover, shop and buy. We heard from and met with representatives of large retailers, startups, brands, technology companies and investment groups.

• Subscription boxes present a variety of challenges, including logistics,

inventory, shipping and presentation. Companies that offer them must provide a positive retail experience through the mail and figure out how and where to store entirely new batches of products each month. Often, packaging is complex, including sturdy gift boxes, tissue paper and ribbon, all of which complicate the assembly process.

• High-‐street shopper traffic in the UK declined by 4.6% year over year in

April, according to the latest data from the British Retail Consortium and Springboard. While traffic at shopping centers dropped by 0.7% during the period, it grew by 1.1% at retail parks. Overall, traffic declined by 2.4% compared to the same month last year.

• Lojas Renner has revised its plan for store openings, raising its goal

from 408 stores to 450 by the end of 2021. The company currently operates 283 stores. The board also approved a plan to open Renner stores in Uruguay, and two stores are set to open in the country in the second half of 2017.

24.5%

19.0%

7.5% 4.6% 3.6% 3.6%

37.2%

1. Fitbit 2. Xiaomi 3. Apple 4. Garmin 5. Samsung* 5. BBK* Others *IDC declares a tie for Samsung and BBK, as there is less than 0.1% difference in the unit shipment share of the two vendors. Source: International Data Corporation (IDC

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MAY 20, 2016


FROM THE DESK OF DEBORAH WEINSWIG

This week, the Fung Global Retail & Technology team attended the inaugural Shoptalk conference, which took place over three days in Las Vegas. The organizers billed it as “the tech event for ne xtgen commerce” and more than 3,000 people attended, including C-‐suite executives, entrepreneurs and retail leaders from 20 countries. Each day featured keynote addresses from industry leaders, in addition to fireside chats, networking opportunities and panel discussions in several topical tracks.

Our team attended many of these events and actively participated in a number of them. We also published daily reports on the presentations and exhibitions during all three days of the conference.

Shoptalk kicked off on Monday with a keynote address from Hudson’s Bay Company CEO Jerry Storch, who reminded attendees that the vast majority of retail sales still occur in physical stores and that while the Internet is transformational, it is not transcendent.

A first-‐day panel discussion with representatives from Foot Locker, Kohl’s and Sephora touched on a number of retail basics, such as the need to focus on the customer, corporate culture and the major influence of mobile on retail transactions.

Also on Monday, in a conference track titled “Physical Retail Goes Digital,” we interviewed Nigel Oddy, CEO of House of Fraser. The British department store chain has stores across the UK and Ireland, and was acquired in 2014 by the Sanpower Group, a Chinese conglomerate. In our conversation, we discussed topics ranging from the benefits of launching an online business later than one’s competitors to Chinese consumers’ enthusiasm for all things British. Oddy also commented that House of Fraser’s relatively late entry into the digital world turned out to work to its advantage, as it enabled the company to operate a mobile business from the very beginning.

On Tuesday, we heard some interesting remarks from executives at Birchbox and The Honest Company, as well as from a panel of venture-‐capital executives, which included one of our colleagues from Fung Capital. Birchbox’s representative outlined how the company had changed the way people shop online for beauty and grooming products, and explained why it later decided to change its business model and open physical stores. An executive from The Honest Company explained that, while the company has experienced success online, demand from large retailers prompted it to begin selling in stores as well. The venture capitalists discussed current private company valuations and at which stage of a company’s development they choose to invest. The panelists also discussed whether they are pure investors or also operators, and what resources they are able to provide to emerging companies.

Wednesday was the most dynamic day of the conference, and we gave a brief presentation on the current retail environment before emceeing a startup pitch competition. There were 15 participating startups, which we classified into four categories—new retail model, all channel, experiential retail or customer engagement—and each startup had three minutes to pitch plus three minutes of Q&A with the judges. Each startup was assessed on the retail challenge it is attempting to solve, and the two winners each received a prize of $25,000. Reaction Commerce, an open-‐source platform that offers e-‐commerce solutions for businesses, and Shopic, an app for expediting self-‐checkout, were the big winners.

We enjoyed attending and participating in the first-‐ever Shoptalk conference and look forward to attending and reporting from future Shoptalks and other key events in the retail industry.

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US RETAIL EARNINGS

Company

Revenues ($ Mil.) Change YoY Gross Margin (%) Change Net Income ($ Mil.) Change YoY Store Fleet EOP

Period 2016 2015 (%) 2016 2015 (BP) 2016 2015 (%) 2016 2015 American Eagle Outfitters 1QE Apr. 749 700 7.0 39.1 37.5 159 41 29 39.7 1,191 1,163 Dick's Sporting Goods 1QE Apr. 1,660 1,565 6.1 29.8 29.9 (10) 57 63 (10.1) 746 704

Gap 1QE Apr. 3438 3,657 (6.0) 33.8 37.8 (396) 127 239 (46.9) 3727 3,749

Home Depot 1QE May. 22,762 20,891 9.0 34.2 34.4 (14) 1,803 1,579 14.2 2,275 2,270

L Brands 1QE Apr. 2,614 2,512 4.1 39.9 42.0 (214) 152 250 (39.2) 3,762 3,634

Lowe's 1QE Apr. 15,234 14,129 7.8 35.0 35.5 (44) 884 673 31.4 1,860 1,843

Ross Stores 1QE Apr. 3089 2,938 5.1 29.6 29.6 (7) 290 282 2.8 1,446 1,399

Target 1QE Apr. 16,196 17,119 (5.4) 30.9 30.4 52 632 635 (0.5) 1,793 1,795 The Children's Place 1QE Apr. 419 405 3.5 39.4 37.5 185 26 16 62.5 1,174 1,171 TJX Companies 1QE Apr. 7,542 6,865 9.9 28.8 28.3 44 508 475 6.9 3,661 3,441 Urban Outfitters 1QE Apr. 762 739 3.1 34.3 33.4 83 30 33 (9.1) 580 552

Walmart 1QE Apr. 115,904 114,826 0.9 25.3 24.7 65 3,079 3,341 (7.8) 11,527 11,489 Source: Company reports

US RETAIL HEADLINES For the First Time, Google Is Bringing Retail Ads to Image Search (May 16) Adweek • To keep up with the growth in mobile shopping, Google will begin to include ads in Google

Images. The ads will appear next to related product photos, directing interested browsers to the retailer’s website. Google has been testing the ads with various brands for months.

• Google will also introduce local inventory features. According to the tech giant, searches for a store name, zip code or phrase such as “near me” have doubled in the past year. To capitalize on this growth, Google will increase the number of ways buyers can find out which products are in stock at local stores and also allow retailers to offer shoppers a buy-‐online, pick-‐up-‐in-‐store option.

Discounting Is Killing Online Retailers…One Startup Is Trying to Fix That (May 12) Recode • JackThreads is facing a problem that is an epidemic in retail: once you start discounting, it is

difficult to go back to full-‐price. As the startup seeks to move away from flash sales and increase its revenues, it is testing out a try-‐on-‐at-‐home model.

• Shoppers can try on anything from the JackThreads site at home, make a decision to buy or return it within seven days, and pay after they have tried on the item. Delivery and returns are free. The company saw that shoppers who bought JackThreads brand clothing were more likely to

WEINSWIG’S WATCH ING

This week, the US Fung Global Retail & Technology team attended the Shoptalk conference in Las Vegas, Nevada.

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order more frequently and spend more than other customers were. The goal of the new model is to get that clothing into the hands of shoppers more quickly.

With Subscription Beauty Boxes, Rules of E-‐Commerce Do Not Apply (May 17) The Wall Street Journal • Subscription boxes present a variety of challenges, including logistics, inventory, shipping and

presentation. Companies that offer them must manage to provide a positive retail experience through the mail and figure out how and where to store entirely new batches of products each month.

• Often, packaging is complex, including sturdy gift boxes, tissue paper and ribbon, all of which complicate the assembly process. And shipping has to be executed in three waves, so customers in one region of the country do not receive their boxes before customers elsewhere, which would spoil the surprise for those who got later deliveries.

Why a Staggering Number of Americans Have Stopped Using the Internet the Way They Used To (May 13) The Washington Post • According to a new government survey, almost half of Internet users cite privacy and security

concerns as reasons that stop them from taking basic actions online, including posting to social networks and buying things from websites.

• Two out of three respondents cited identity theft as one of their biggest concerns with the Internet, and 20% said they had personally experienced some form of identity theft, an online security breach or another similar problem in the past year. This trend could have a negative impact on banks, online retailers and the overall Internet economy.

EUROPE RETAIL EARNINGS

Company

Revenues ($ Mil.) Change in $

Change in Reporting Currency Gross Margin (%) Change

Net Income ($ Mil.)

Change YoY Store Fleet EOP

Period 2016 20145 (%)

2016 2015 (BP) 2016 2015 (%) 2016 2015

Burberry FYE Mar. 31, 2016 3,792 4,070 (6.8) (0.3) 70.1 70.0 13 474.3 550.2 (13.8) 487 484

EUROPE RETAIL HEADLINES Tesco to Close Stand-‐Alone F&F Clothing Website to Simplify Online Experience (May 17) Retail-‐week.com • In June, British grocer Tesco will close the stand-‐alone website of its F&F clothing range,

Clothingattesco.com, to integrate it into its general merchandise website, Tesco Direct. The company said that the change will make the shopping experience simpler and easier for customers, as they will be able to buy general merchandise items and clothing from a single website.

• This move follows a slew of efforts undertaken by CEO Dave Lewis in the past year as he attempts to turn around Tesco from the loss it posted in fiscal year 2015. Eliminating the dedicated clothing website is likely to contribute to further cost savings at the retailer.

Maisons Du Monde Readying for Stock Market Debut (May 16) Reuters.com • French homewares retailer Maisons Du Monde is set to debut on the Euronext Paris stock

exchange on May 27. The retailer said that the issue price will be finalized on the eve of the debut, within an indicative price range of €16.60–€22.25 (US$18.30–US$24.50) per share.

• Through the IPO, the retailer hopes to raise about €325–€385 million (US$358–US$424 million) and trade about 40% of its shares. The company hopes to reduce some of its debt through the new shares raised, according to it press statement.

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UK High-‐Street Footfall Declines in April (May 16) Retailgazette.co.uk • High-‐street shopper numbers in the UK declined by 4.6% year over year in April, according to the

latest figures from the British Retail Consortium and Springboard. While traffic at shopping centers dropped by 0.7% during the period, it grew by 1.1% at retail parks. Overall, footfall declined by 2.4% compared to the same month last year.

• Springboard Marketing and Insights Director Diane Wehrle noted that “footfall during standard daytime trading hours…dropped by a greater degree than in other parts of the day.”

H&M Sales Up 5% in April (May 16) Company press release • Swedish fast-‐fashion chain H&M reported a year-‐over-‐year sales increase of 5% in April, including

VAT and at constant currency. The retailer said that the cold spring temperatures, which continued into April in many of H&M’s major markets, affected sales of its transitional garments.

• H&M operated 4,035 stores on April 30, up from 3,610 on the same day in 2015. The retailer will announce its half-‐year results on June 22.

DIA’s Net Sales Up by 8.9% in 1Q16 (May 12) Company press release • Spanish supermarket group DIA posted net sales of €2,021 million (US$2,225 million) in the first

quarter, up 8.9% at constant currency. Year-‐over-‐year sales in Spain and Portugal grew by 2.2% and 0.7%, respectively. Excluding calendar effects, DIA posted comps of 7.0%, which it said was the highest growth rate it had seen since its listing.

• The retailer’s adjusted EBIT decreased by 2.5% at constant currency, as it was adversely impacted by acquisitions and increased depreciations in Iberia. Net profit in the quarter fell by 3.0% at constant currency, to €38.7 million (US$42.6 million). The company’s CEO stated that “cash generation is a priority” for the group in 2016 and that it will “continue to invest sensibly in remodeling stores.”

ASIA TECH HEADLINES Alibaba Pictures Raises US$260 Million for Its Online Movie Ticket Platform (May 16) TechCrunch • Alibaba Pictures, the film and television subsidiary of Alibaba Group, has raised a ¥1.7 billion

(US$260 million) series A round of funding for its online ticketing platform, Taobao Movie. According to a filing with the Hong Kong Stock Exchange, the investment gives Taobao Movie a valuation of ¥13.7 billion (US$2.1 billion).

• Though Taobao Movie claims to cover 95% of the country’s total box office, Chinese market research firm BigData-‐Research says it is sharing less than half of the online movie ticketing market with Baidu-‐backed Nuomi, WePiao and Gewala.

After Huge Apple Investment, Didi Eyeing New York IPO: Bloomberg (May 16) TechinAsia • Didi Chuxing, China’s biggest ride-‐hailing company, is aiming for an IPO in New York next year,

according to a report from Bloomberg. In a statement to TechCrunch, the company denied the Bloomberg report two and a half hours after it was published.

• Last Friday, Didi Chuxing announced its biggest-‐ever single investment, US$1 billion from Apple. The company’s valuation is estimated to be about US$26 billion, with Alibaba, Tencent, SoftBank and others on its investor list.

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Singapore Startup Helps the Wealthy Visualize Their Wealth, Raises US$2.35 Million (May 16) TechinAsia • Startup Mesitis announced that it has raised US$2.35 million from undisclosed investors,

including senior corporate executives and entrepreneurs, for developing Canopy, an online service that aggregates financial data from many formats into an easy-‐to-‐view, highly visual form.

• According to company founder Tanmai Sharma, Canopy will convert the 1,000–3,000 pages of “raw data” a typical investor gets a year into “information,” typically in the form of a single chart or drawing, based on the subject the investor looks for.

This Cardboard Gadget Lets Your Phone Produce Holograms (May 16) TechinAsia • Hong Kong–based startup Project Holo is the maker of the Holo Cardboard, a smartphone-‐driven

cardboard holographic display that one can use to “animate” small objects, such as toys or jewelry, for display purposes.

• The device combines a cardboard box, which forms the backdrop and holds the smartphone, and a transparent three-‐sided pyramid. The device will work with most smartphones with screens of 4–5.5 inches, and no new app is needed. It is currently in the middle of a crowdfunding campaign.

Line Launches Spin-‐Off App to Deliver Stuff to Your Doorstep (May 16) TechinAsia • Line is looking to expand its e-‐commerce lineup with a spin-‐off app called Line Man. The new

service relies on green-‐jacketed scooter drivers to deliver takeaway meals, deliveries from local 7-‐Elevens and packages. The on-‐demand services is limited to Bangkok.

• The new Line Man app has partnered with two startups for its launch: Wongnai, Thailand’s top restaurant review app, provides the food listings for over 10,000 restaurants and street food vendors, while Lalamove, a Hong Kong–based startup that is an Uber-‐like service for motorbike couriers and truck drivers, provides the deliveries.

LATAM RETAIL HEADLINES Brazil’s Fashion Retailers Struggle with Poor Economy, Political Turmoil (May 13) WWD.com • Thousands of fashion retailers are teetering on the edge of bankruptcy and closing thousands of

stores as Brazil’s recession deepens and consumers stop spending. The few signs, however minimal, of hope in Brazil include the attention that luxury and fashion brands are paying to the country.

• Rising unemployment and high inflation are likely to keep consumption down; thus, recovery is expected to be gradual, and retailers could remain under pressure until 2018.

FEMSA Is Set to Buy Big John Convenience Stores (May 16) América Retail • FEMSA, the Mexican convenience store leader, is planning to expand its presence in Chile with

the purchase of the Big John chain of convenience stores. The secret deal is expected to close within the coming week.

• Big John is one of the largest convenience store chains in Chile, controlling 49% of the market, while OK Market controls the remainder.

Renner Changes Goal of Opening Stores in 2021 to 450 from 408 (May 12) Bloomberg • Lojas Renner has revised its plan for store openings, raising its goal from 408 stores to 450 by the

end of 2021. The company currently operates 283 stores.

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• The company’s board of directors also approved a plan to open Renner stores in Uruguay, and two stores are set to open in the country in the second half of 2017.

Mexico Is Heading for Recession, Forecaster Claims (May 18) Financial Times • Economic-‐forecasting agency World Economics predicts that Mexico is going to plunge into

recession for the first time since 2009. While the Mexican economy is expected to grow by 2% in 2016, growth is slowing.

• According to a World Economics analyst, the agency has, at minimum, a head start of two to three months with regard to forecast visibility compared to official data, due to its sales managers’ indices, which have reported negative sales growth for the past three to four months.

E = estimated

EARNINGS CALENDAR

Company Earnings Release Period Date

Sales (Mil.) EPS Currency Consensus TY LY Actual Consensus TY LY Actual

Dick’s Sporting Goods 1Q17 May 19 1,667 1,565

0.50 0.53 USD

Gap 1Q17 May 19 3,449 3,657

0.33 0.56 USD

Ross Stores 1Q17 May 19 3,113 2,938

0.73 0.69 USD

Richemont FY16 May 20 11,146 10,410

3.42 2.04 EUR

Foot Locker 1Q17 May 20 2,000 1,916

1.39 1.29 USD

DSW 1Q17 May 24 701 656

0.47 0.53 USD

Costco 3Q16 May 25 27,209 26,101

1.23 1.17 USD

Express 1Q17 May 25 523 502

0.27 0.22 USD

Guess 1Q17 May 25 465 479

(0.18) 0.04 USD

Dollar Tree 1Q17 May 26 5,096 2,177

0.81 0.34 USD

Burlington 1Q17 May 26 1,270 1,191

0.47 0.34 USD

Abercrombie & Fitch 1Q17 May 26 710 709

(0.51) (0.91) USD

Ulta 1Q17 May 26 1,030 868

1.29 1.04 USD

Chico’s 1Q17 May 26 668 693

0.32 0.22 USD

Deckers 4Q16 May 26 363 340

0.06 0.04 USD

Dollar General 1Q16 May 26 5,284 4,919

0.95 0.84 USD

Big Lots 1Q17 May 27 (E) 1,297 1,281

0.70 060 USD

Ascena 3Q16 May 31 1,736 1,150

0.13 0.15 USD

G-‐III 1Q17 May 31 (E) 474 433

0.03 0.15 USD

Michael Kors 4Q16 June 1 1,081 986

0.97 0.90 USD

Vera Bradley 1Q17 June 1 107 101

0.05 (0.10) USD

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EVENT CALENDAR

Event Location Date(s) Fung Global Presenting/ Attending

FT Business of Luxury Summit San Francisco, CA May 22–24

ICSC RECon Las Vegas, NV May 22–25 √

MIT Tech Review EmTech Digital San Francisco, CA May 23–24 Brand Innovators: Brand Week Chicago, IL May 23–27 AAFA American Image Awards New York, NY May 24 NRF Retail Advocates Summit Washington, DC May 24–25 Future Stores London, UK May 24–25 WEAR 2016 Boston, MA May 24–26 √ IATI Biomed Tel Aviv, Israel May 24–26 Connections: The Premier Connected Home Conference San Francisco, CA May 24–26

TNW Conference Amsterdam, Netherlands May 26–27

Wear: A Babywearing Conference Chicago, IL May 27–29 Global E-‐Commerce Summit Barcelona, Spain May 29–Jun 1 Ecommerce Europe Annual Conference Barcelona, Spain May 30 ILTM Asia Shanghai, China May 30–Jun 2 EMERGE 2016 Onestop Partner Summit Manhattan Beach, CA May 31 √ RISE Hong Kong Hong Kong May 31–Jun 2 RetailNext Executive Forum Napa, CA Jun 1–3 √ InfoComm 2016 Las Vegas, NV Jun 4–10 Footwear News Summit New York, NY Jun 6 Bitspiration Festival Warsaw, Poland Jun 6–7 Consumer Goods Sales & Marketing Summit 2016 New York, NY Jun 6–8 Ralph Lauren Corporation Investor Day New York, NY Jun 7 10th Annual Women of Inspiration Luncheon New York, NY Jun 7 IRCE: Internet Retailer Conference and Exposition Chicago, IL Jun 7–10 New York Fashion Tech Lab Demo Day New York, NY Jun 8

Source Africa Trade Show Cape Town, South Africa Jun 8–9

Innovation Enterprise Machine Learning Innovation Summit San Francisco, CA Jun 8–9 Innovation Enterprise Payments Innovation Summit San Francisco, CA Jun 8–9 Women in STEM Summit San Francisco, CA Jun 8–9 √ ICSC European Marketing Conference Berlin, Germany Jun 8–10

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MAY 20, 2016


Deborah Weinswig, CPA Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 [email protected] Amanda Byrne Marketing Associate

Rachael Dimit Research Associate

John Harmon, CFA Senior Analyst

Aragorn Ho Research Associate

John Mercer Senior Analyst

Kiril Popov Senior 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: 1359 Broadway, 9th Floor New York, NY 10018 Tel: 646 839 7017 LONDON: 242–246 Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0)20 7616 8988 FBICGROUP.COM

deborah weinswig managing director, - fbicgroup · 2016-09-06 · deborah weinswig managing...

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