Weekly Insights by FBIC Global Retail Tech Jan 22 2016...Jan 22, 2016 · !1 january 22, 2016 deborah(weinswig,(executive(director–head(of(global(retail(&(technology([email protected]((us:(917.655.6790((hk:(852.6119.1779((cn

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January 22, 2016

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 © 2016 The Fung Group. All rights reserved.

D E B O R A H W E I N S W I G 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

January 22, 2015

+5.4% CHART OF THE WEEK

STAT OF THE WEEK

STAT OF THE WEEK

• The National Retail Federation (NRF) said 2015 holiday sales—

excluding automobiles, gasoline and restaurant meals—rose by 3%, to slightly more than $626 billion. The group had forecast

an increase of 3.7%.

• NRF Chief Economist Jack Kleinhenz said the missed forecast could be attributed to unseasonably warm weather, inventory

challenges, advances in consumer technology and deep discounts starting earlier this season.

• Despite these factors, the industry rallied in a challenging sales environment to achieve continued year-‐over-‐year growth.

Looking ahead, there are positive prospects for improvement, including recent job gains that will help raise income and

earnings, and a healthy housing market.

More Retail Holidays Cause A Slump In Thanksgiving Weekend Store Traffic 3%

• This week, the FBIC Global Retail & Technology team attended Retail’s BIG Show in New York City. We presented on the top 16 retail tech trends for 2016, titled “Li & Fung: Delivering Value Through Technology,” along with colleagues from Li & Fung and Catalyst, a Li & Fung Company.

• JCPenney that it will reenter the appliance business, offering a leading assortment of major appliances in 22 pilot stores beginning February 1, to accommodate more millennials entering the real estate market and a rising number of homeowners investing in updating their homes,.

• E-‐commerce giant Amazon is reportedly mulling a decision to acquire British online supermarket Ocado, which drove shares in the UK grocer up 19% in the early hours of trading on Jan. 19.

• Walmex has started the process of soliciting orders for its Suburbia apparel division, which operates 117 stores in Mexico with in 44 cities and sales of about US $835 million in FY2014.

(1.1)%

(12.4)%

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(11)%

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(5)%

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(1)%

1%

2013 2014 2015

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January 22, 2016


FROM THE DESK OF DEBORAH WEINSWIG

This week, the FBIC Global Retail & Technology team attended Retail’s BIG Show, produced by the National Retail Federation (NRF) in New York City. This year’s show included a conference that ran for four days and an exhibition that ran for three days.

I gave a presentation on the top 16 retail tech trends for 2016, titled “Li & Fung: Delivering Value Through Technology,” along with colleagues from Li & Fung and Catalyst, a Li & Fung Company. Catalyst offers an RFID platform for identifying garments that integrates with a point-‐of-‐sale system and was present in two booths on the show floor. I also gave a presentation on the top 16 retail trends for 2016 at a luncheon sponsored by JDA Software for partners and customers.

One of the key themes at the show was the need for retailers to provide an omni-‐channel offering. This is not a new theme, and many speakers objected to the term altogether; perhaps “flexible shopping and shipping” is a better description. Although many retailers have not yet fully implemented omni-‐channel service, and have separate online and physical businesses, the speakers’ consensus was that it is essential.

Another key theme was the need to generate emotions in retail. Two recent studies found that a majority of shoppers surveyed said they actually want to visit physical stores, so the onus is on retailers to offer an experience that keeps shoppers informed and delighted.

At the show, we attended presentations on big data, RFID and beacons, digital retailing, IBM’s Watson artificial intelligence platform, and cross-‐border commerce, and we received updates on what is happening in Silicon Valley and at several startups.

We were pleased to attend a presentation titled “Explorium: Experimenting with the Future of Retail,” which was given by our related company, Li & Fung. The Explorium is a shopping space on our campus in Shanghai, China, that is subdivided into small shops. Our colleagues have invited companies to occupy the spaces in order to test sales and marketing ideas and conduct experiments with real consumers. Data are collected on consumer behavior and purchases, and then analyzed by partner IBM. It is a great way for retailers to test products and sales methods before going global. The mall is open only to members, and membership has been expanded beyond just Li & Fung employees to include other successful applicants. Companies such as Toys “R” Us, Build-‐a-‐Bear Workshop and Stride Rite have occupied space at the Explorium.

We also toured IBM’s booth, where we saw many demonstrations of the benefits of data analytics and the use of Watson technology to determine a shopper’s personality type based on his or her shopper and social media posts.

This year’s NRF Retail’s BIG Show show was exhilarating and exhausting, and we made many new friends and learned a great deal about what is hot in the world of retailing. We will be publishing on these topics throughout the rest of the year.

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January 22, 2016


More Retail Holidays Cause A Slump In Thanksgiving Weekend Store Traffic Figure. 1. Thanksgiving Weekend Foot Traffic: YoY % Change

Source: RetailNext

• RetailNext reported that footfall during the 2015 Thanksgiving weekend decreased by 5.1%, and we continue to see more and more customers shopping for and researching products online.

• In December 2015, traffic continued to decline, decreasing by 5.8% on a year-‐over-‐year basis, even though average transaction value (ATV) increased by 3.6%.

FBIC HAPPENINGS & WEINSWIG’S WATCH ING

• This week, the FBIC Global Retail & Technology team were busy attending and presenting at RISE, JDA and FBIC Luncheon at NRF and ROI SuperSaturday.

STAT OF THE WEEK

CHART OF THE WEEK

• The National Retail Federation (NRF) said 2015 holiday sales—excluding automobiles, gasoline and restaurant meals—rose by 3%, to slightly more than $626 billion. The group had forecast an increase of 3.7%.

• NRF Chief Economist Jack Kleinhenz said the missed forecast could be attributed to unseasonably warm weather, inventory challenges, advances in consumer technology and deep discounts starting earlier this season.

• Despite these factors, the industry rallied in a challenging sales environment to achieve continued year-‐over-‐year growth. Looking ahead, there are positive prospects for improvement, including recent job gains that will help raise income and earnings, and a healthy housing market.

3%

(1.1)%

(12.4)%

(5.1)%

(15)%

(13)%

(11)%

(9)%

(7)%

(5)%

(3)%

(1)%

1%

2013 2014 2015

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January 22, 2016


US RETAIL HEADLINES Netflix Investors Like What They See as International User Numbers Soar (January 19) Bloomberg

• Netflix added 5.6 million subscribers to its online streaming service in the fourth quarter, including more than 4 million from outside the US, according to a company statement. Both of those figures surpassed analysts’ forecasts, as did projections for subscriber growth in the next quarter.

• Netflix must add customers at a steady clip to pay for its growing programming obligations, which will total $5 billion this year. CEO Reed Hastings has pledged material profits once the company completes the international rollout of the only global, on-‐demand TV network delivered over the Internet.

A Surging JCPenney to Reenter Category It Left 30 Years Ago (January 19) Retailing Today

• As more millennials enter the real estate market and a rising number of homeowners invest in updating their homes, JCPenney is reentering the appliance business. The retailer announced that it will introduce a leading assortment of major appliances in 22 pilot stores beginning February 1.

• Backed by customer research that reinforces the company’s decision, the pilot is one of several strategic initiatives aimed at improving home department sales productivity, the company said. JCPenney introduced a strategic framework in 2015 that focuses on opportunities in private brands, omni-‐channel and increasing revenue per customer, of which appliance sales will be a key component.

Sephora Created an Accelerator Program for Beauty Startups Led by Women (January 19) Fashionista

• In a startup landscape where companies led by women are funded at a drastically lower rate than those with a male founder—women-‐led startups received only 3% of total venture capital dollars between 2011 and 2013, Babson College estimates—Sephora is aiming to give female beauty entrepreneurs a much-‐needed lift. The company is kicking off a new accelerator program this year called Sephora Accelerate, which will focus on startups led by women.

• The program is part of Sephora’s larger social impact agenda, which includes beauty classes for women reentering the workforce or living in transitional housing or shelters (starting in April) and support for employees affected by natural disasters or major life events. In that vein, the company is requiring that startup applicants have a socially minded element in addition to a female founder.

2015 Was Hottest Year on Record (January 20) Mother Jones

• 2015 was almost certainly the hottest year on record, according to data released by NASA and the National Oceanic and Atmospheric Administration. In a press release, NASA stated that it was 94% confident that last year was the warmest since 1880.

• Record-‐shattering global temperatures are becoming increasingly common, thanks to climate change. All five of the hottest years on record have occurred in the last decade. But the amount by which 2015 shattered the previous record, set in 2014, was itself a record, scientists said. That was due in part to last year’s El Niño, characterized by exceptionally high temperatures in the Pacific Ocean.

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January 22, 2016


EUROPE RETAIL EARNINGS

Company

Revenues ($ Mil.) Change in $

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

Fast Retailing 1QE Nov. 30, 2015 4,303 4,349 (1.1) 8.5 51.2 52.8 (164.1) 422.9 660.2 (35.9) 1,670 1,519

METRO Group 1QE Dec. 31, 2015 18,734 1,606 (13.3) (1.2) N/A N/A N/A N/A N/A N/A 2,057 2,209

Burberry 1QE Dec. 31, 2015 915 956 (4.3) (0.2) N/A N/A N/A N/A N/A N/A 219 217

Asos 4 Months to Dec. 31, 2015 699 597 17.1 22.7 N/A N/A N/A N/A N/A N/A N/A N/A

Carrefour 4QE Dec. 31, 2015 24,573 28,250 (13.0) (0.8) N/A N/A N/A N/A N/A N/A 12,296 10,860 Source: company reports

EUROPE RETAIL HEADLINES Zalando Ends Fiscal Year on a Positive Note (January 19) Company press release

• In a press release, Zalando, the leading European online fashion retailer, stated that its group revenue grew by 30%, to 31%, in the fourth quarter of 2015, according to preliminary figures. For the quarter, Zalando expects an adjusted EBIT between €61 million (US$67 million) and €78 million (US$85 million), corresponding to an EBIT margin between 7% and 9%.

• In fiscal year 2015, the retailer achieved overall group sales between €2,955 million (US$3,220 million) and €2,962 million (US$3,228 million), and expects an adjusted EBIT margin of around 3.3% to 3.9%. Zalando confirmed that the full year results are within its prior guidance of 33% to 35% revenue growth. The retailer will publish its final, audited results on March 1, 2016.

Amazon May Be Mulling Ocado Acquisition (January 19) Retail-‐week.com

• E-‐commerce giant Amazon is reportedly mulling a decision to acquire British online supermarket Ocado. Shares in the UK grocer soared 19% in the early hours of trading on Tuesday, January 19, following “rumors in the city.” The first move by Amazon that suggested it might launch a UK grocery operation was its signing of a 10-‐year lease on a former Tesco warehouse in August 2015.

• The US retailer had already stepped into the online grocery retail segment in the UK with its November 2015 launch of Amazon Pantry. Prime members, who are currently able to access this service, can shop from a range of over 4,000 items in the grocery and household departments. Spokespersons from both companies declined to comment on the “market rumor and speculation.”

Bankrupt Retail Group Macintosh Sells Shoe Business (January 19) Retaildetail.eu

• Retail group Macintosh, which filed for bankruptcy in late December, has sold its shoe chain, Scapino, to a family-‐owned Dutch retailer called Ziengs Schoenen. This news comes just as Scapino’s Belgian affiliate, Brantano, is to be acquired by the CEO of footwear retailer Schoenen Torfs and two retail entrepreneurs.

• It is yet unknown whether Ziengs Schoenen, which runs 77 stores in the Netherlands, will acquire all of Scapino’s 200 stores. The bankruptcy administrators have, however, confirmed that the negotiations will include Scapino’s entire store portfolio.

ASDA to Lay Off Hundreds in the UK (January 18) Retailgazette.co.uk

• One of Britain’s largest supermarket chains, Walmart-‐owned ASDA, announced that it will make several changes in its organization structure in the coming months, including layoffs.

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January 22, 2016


Sources did not confirm the final number of layoffs, but mentioned that it would be “in the hundreds.”

• Recent data from Kantar Worldpanel suggested that sales at ASDA declined by 3.5% in the 12 weeks through January 3. The grocer’s festive trading update will be released next month, along with its parent company’s results.

Ahold and Delhaize Group File Merger Proposal (January 15) Retaildetail.eu

• Ahold and Delhaize Group have taken their merger agreement forward and filed the necessary paperwork in Brussels. The proposal details the companies’ plans once the merger is completed and includes support for their belief that the merger will not lead to a significant reduction in the labor force.

• The filing of this proposal is a necessary step for the companies to convene a meeting with their shareholders and obtain their approval. The entire process, including negotiating with the companies’ employees and obtaining the approval of the shareholders, is expected to be completed by mid-‐2016.

ASIA TECH HEADLINES On-‐Demand Logistics Startup TheLorry Scores Series A for Regional Expansion (January 19) TechinAsia

• Malaysia-‐based TheLorry announced it raised a US$1.5 million series A round led by SPH Media Fund, with participation from Silicon Valley–based Elixir Capital. The company intends to use this funding to strengthen its presence in Malaysia, introduce new services and prepare for regional expansion.

• To use the company’s service, individual customers go to the site to book vehicles and, if necessary, other extra services such as manpower, boxes, packing and dismantling. Jobs are then dispatched to TheLorry’s vendor app, where vendors can claim them on a first-‐come, first-‐serve basis.

Education Startups Capitalize on China’s “Maker” Movement (January 19) e27.co

• Chinese parents tend to enroll their children in a multitude of extracurricular classes, and the latest craze is “maker” classes, where children learn by creating various projects.

• China’s maker movement follows similar movements in Europe and the US, where maker spaces, or communal spaces where makers can share tools, knowledge and projects, started emerging in the early 2000s.

Hospital Tech Firm Medico Catches a Case of Seed Funding from East Ventures (January 18) TechinAsia

• Indonesia-‐based hospital management software startup Medico announced that it closed a seed funding round from venture capital firm East Ventures. The deal size was undisclosed. Medico is still in its development phase, with plans to officially launch in the second quarter of this year.

• According to a 2015 Frost & Sullivan report, the Indonesian healthcare sector is expected to triple, from US$7 billion in 2014 to US$21 billion in 2019. East Ventures has also invested in Indonesian medtech startup Konsula, a firm that acts as an online doctor directory: users can browse to find the right doctor and also book appointments through the site.

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January 22, 2016


India’s Swiggy Raises US$35 Million for Food Delivery (January 18) TechCrunch

• Swiggy, a restaurant delivery startup that claims to be the largest in India after passing Foodpanda last month, has raised US$35 million in a series C round. The funding brings the company’s total funds raised to just over US$53 million.

• Swiggy is planning to use the new cash injection to expand its business in its home market, where the food delivery business is estimated to be worth US$15 billion. Though Swiggy is live now in eight cities, it is still considered small, with some 5,000 restaurants on its platform and orders approaching 1 million each month.

JD.com’s Financial Services Arm Lands US$1 Billion (January 18) TechCrunch

• E-‐commerce giant JD.com’s financial services division recently took in ¥6.65 billion (around US$1.01 billion) in a funding round led by Sequoia Capital China, China Harvest Investments and China Taiping Insurance. The round leaves JD Finance with a valuation of approximately US$7.1 billion.

• JD Finance provides a range of financial services and products to consumers, startups, SMEs and other businesses in China. Last year, it partnered with US-‐based ZestFinance to create a joint venture that offers credit services in China. The new funding will be used to further expand its scope of financial offerings for customers.

LATAM RETAIL HEADLINES Walmex Considering Sale of Suburbia (January 19) WWD.com

• Wal-‐Mart de México y Centroamérica (Walmex) has started the process of soliciting orders for its Suburbia apparel division.

• Suburbia is a leading specialty apparel retailer for the entire family, with 117 stores in Mexico in 44 cities and 31 states. In fiscal year 2014, Suburbia contributed 3.5% of Walmex’s consolidated sales, or about US$835 million.

Brazilian Retailers Plan for Better Days (January 19) Chicago Tribune

• Brazilian retail sales increased by 1.5% in November, against expectations of a contraction. However, according to salespeople, shoppers are selecting cheaper items.

• This resilience has encouraged Brazilian retailers to expand, and shoemaker Arezzo Industria e Comercio plans to open as many as 25 stores in 2016, down slightly from 30 new openings planned for 2015. The country’s biggest supermarket chain, Companhia Brasileira, is maintaining its plans to increase its number of convenience and wholesale cash-‐and-‐carry stores.

Brazil Not Expected to Return to Growth Until at Least 2018 (January 19) Bloomberg

• The International Monetary Fund reduced Brazil’s 2017 economic forecast to no growth from a prior estimate of 2.3% growth against expectations that GDP will decline by 3.5% this year.

• If the revised forecast ends up being accurate, it will mark three years of non-‐growth in the country. “Economic distress” in Brazil and other nations is expected to pull Latin America and the Caribbean into a 0.3% decline this year.

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January 22, 2016


Argentine Retailers Raise Prices After Currency Controls Eliminated (January 19) Bloomberg

• Retailers in Argentina have increased prices on food, beverages and household cleaning products by as much as 60%, according to Clarins.

• The previous government, led by Cristina Fernández de Kirchner, had a “voluntary” agreement in place with supermarkets to cap prices on more than 500 products. According to the Consumer Price Index for Buenos Aires, inflation was 27% last year. This year’s inflation target is 20%–25%.

Walmart to Close 269 Locations in the US and Latin America (January 15) Company press release

• On January 15, Walmart announced plans to close 269 locations, including 115 stores in Latin America (60 of them in Brazil).

• The 60 Brazilian stores were characterized as unprofitable and representing just 5% of sales in that market. The other 55 stores were characterized as small, unprofitable stores in other Latin American markets.

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January 22, 2016


EARNINGS CALENDAR

Company

Earnings Release Period Date

Sales ($ Mil.) EPS

Currency Consensus TY LY Actual

Consensus TY LY Actual

Kimberly-‐Clark 4Q 15 Jan 25 4,580 4,828

1.43 1.35 USD

Procter & Gamble 2Q 16 Jan 26 16,968 20,161

0.98 1.06 USD

Apple 1Q 16 Jan 26 77,348 74,599

3.26 3.06 USD

Coach 2Q 16 Jan 26 1,273 1,219

0.67 0.72 USD

Metro 1Q 16 Jan 26 2,929 2,841

0.53 0.45 CAD

eBay 4Q 15 Jan 27 2,317 4,921

0.50 0.77 USD

Facebook 4Q 15 Jan 27 5,358 3,851

0.68 0.25 USD

Amazon 4Q 15 Jan 28 35,993 29,328

2.79 0.45 USD

Hennes & Mauritz FY 15 Jan 28 181,712 151,419

12.96 12.07 SEK

Hanesbrands 4Q 15 Jan 28 1,532 1,523

0.46 0.37 USD

Alibaba 3Q 16 Jan 28 32,885 26,179

5.73 3.10 CNY

Under Armour 4Q 15 Jan 28 1,126 895

0.47 0.40 USD

Colgate-‐Palmolive 4Q 15 Jan 29 3,941 4,221

0.73 0.76 USD

Simon Property Group 4Q 15 Jan 29 1,380 1,297

2.66 2.47 USD

Alphabet 4Q 15 Feb 1 16,892 18,103

8.10 5.47 USD General Growth Properties 4Q 15 Feb 1 683 673

0.42 0.38 USD

LVMH FY 15 Feb 2 35,536 30,638

7.56 11.27 EUR

Ocado Group FY 15 Feb 2 1,108 948

0.02 0.01 GBP

Michael Kors 3Q 16 Feb 2 1,355 1,315

1.46 1.48 USD

Macerich 4Q 15 Feb 3 344 323

1.08 0.99 USD

Deckers Outdoor 3Q 16 Feb 4 847 785

4.93 4.50 USD

Coty 2Q 16 Feb 4 1,205 1,260

0.34 0.38 USD

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January 22, 2016


EVENT CALENDAR

Event Location Date(s) FBIC Presenting

Brand Innovators Content Marketing Denver, CO January 22

MAGIC Project NY New York, NY January 24–26

ICSC Texas Retail Forecast Dallas, TX January 25

OurCrowd Global Investor Summit 2016 Jerusalem, Israel January 25–26

2016 Fintech Finals Hong Kong January 25–26

Wearable Technologies Conference Munich, Germany January 26–27

Brand Innovators Consumer Engagement San Francisco, CA January 28

ICSC Heartland Omaha, NE January 28–29 Deborah Weinswig

The 7th Annual Omnichannel Retail Summit London, UK February 3 Deborah Weinswig

UJA Generosity Signature Event New York, NY February 4

Brand Innovators Content Marketing Cincinnati, OH February 9 FinovateEurope – Financial & Banking Technology Innovations London, UK February 9–10

The Internet of Retail Conference London, UK February 9–10

New York Fashion Week New York, NY February 10–18

Brand Innovators Content Marketing Columbus, OH February 11

AAFA Social Responsibility Committee Meeting Los Angeles, CA February 11

Brand Innovators Fashion & Beauty New York, NY February 12

WWD Digital Beauty New York, NY February 12

Ambiente Frankfurt, Germany February 12–16

Supermarket News Toy Fair New York, NY February 13–16

CAGNY – Consumer Goods Conference Boca Raton, FL February 15–19

AAFA Sourcing @ MAGIC 2016 Las Vegas, NV February 16–17

MAGIC Tell Your Fashion Story Las Vegas, NV February 16–18

Big Data & Analytics Retail London, UK February 16–18

SAP – Infotag for Social Dusseldorf, Germany February 17

Brand Innovators Mobile & Millennials Boston, MA February 18

Asia Retail Congress Mumbai, India February 19–20 Deborah Weinswig

London Fashion Week London, UK February 19–23

Pepcom MobileFocus Global Barcelona, Spain February 21

ShowStoppers @ Mobile World Congress Barcelona, Spain February 21

Mobile World Congress Barcelona, Spain February 22–25

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January 22, 2016


Deborah Weinswig, CPA Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: 852 6119 1779 China: 86 186 1420 3016 [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 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

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Weekly Insights by FBIC Global Retail Tech Jan 22 2016...Jan 22, 2016 · !1 january 22, 2016 deborah(weinswig,(executive(director–head(of(global(retail(&(technology([email protected]((us:(917.655.6790((hk:(852.6119.1779((cn