Weinswig’s Weekly June 8, 2018



  • This week’s note “From the Desk of Deborah Weinswig” discusses HBC’s recent announcement that it will close the Lord & Taylor flagship store in New York City this year.
  • Rue La La has entered into an agreement to acquire Gilt, a leading member-based digital shopping business, from HBC. The combined company will join two complementary lifestyle brands into a multibrand growth platform.
  • German online pure play Zalando announced that it will launch in Ireland and the Czech Republic this summer. These will be the first new countries Zalando has launched in since 2013 and will take its presence up to 17 countries.
  • Walmart announced yet another big deal to reshape its international business and focus on the fastest-growing markets. The world’s largest retailer said on Tuesday that it had sold an 80% stake in its struggling Brazilian unit to private equity firm Advent International.

From the Desk of Deborah Weinswig

The Closing of the Lord & Taylor Flagship Store: The End of an Era

On June 5, HBC (formerly Hudson’s Bay Company) reported its first-quarter earnings and announced that it would close its flagship Lord & Taylor store in New York City as part of its larger plan to close 10 brick-and-mortar locations.

Separately, the company also announced the sale of its online e-commerce unit, Gilt, to Rue La La. HBC acquired Gilt in early 2016 for $250 million in cash.

The Lord & Taylor news comes less than six months after HBC’s announcement that it was selling the building housing the New York Lord & Taylor flagship to WeWork for $850 million. At the time of the announcement, in October 2017, HBC said that it was retaining 150,000 square feet of space in the building for its retail store. One notable exception to the trend of closures such as this is Nordstrom’s opening of a new flagship men’s store in New York City this April.

Lord & Taylor has changed hands several times in its 190-year history. The original New York location was founded as a dry goods store by Samuel Lord and George Washington Taylor in lower Manhattan in 1826. The Fifth Avenue Lord & Taylor flagship opened in 1914. The business evolved over the decades and was acquired by May Department Stores Company in 1986. The May Company was then acquired in 2005 by Federated Department Stores, which sold the Lord & Taylor chain to private equity firm NRDC Equity Partners for $1.2 billion in 2006. NRDC subsequently purchased HBC in 2008 and HBC’s portfolio now includes Saks Fifth Avenue and German retailer Galeria Kaufhof.

Current-day Macy’s, like HBC, is the product of many department store mergers and acquisitions. R.H. Macy & Co. was founded in 1858, and the store acquired several chains around the US in the first half of the 20th century. In the mid-1980s, Macy’s launched a failed attempt to acquire Federated Department Stores, but ended up acquiring Bullock’s and I. Magnin. In 1994, Macy’s successfully merged with Federated and, in 2005, the company signed an agreement to acquire May Department Stores, which owned Marshall Field’s in Chicago. Marshall Field’s stores were subsequently rebranded as Macy’s stores. In 2007, Federated changed its name back to Macy’s.

The closure of the Lord & Taylor flagship marks the end of an era and is the latest in a series of legendary department store closures that include B. Altman, Gimbels and Bonwit Teller. The stretch of Fifth Avenue in Manhattan from 15th to 24th Streets was once so packed with the original locations of department stores such as Arnold Constable, Bergdorf Goodman and Lord & Taylor that it was known as “Ladies’ Mile” due to the crowds of women who would visit the many stores in the area.

Although Lord & Taylor is closing stores, it is also evolving with the times. In November, the company announced a partnership with Walmart, and it plans to roll out a store over the next few weeks on Walmart.com that will feature 125 brands such as Vince Camuto and Tommy Bahama. Walmart has been redesigning its website, which will offer two shops, one for everyday brands such as private-label products and another for premium brands, such as Lord & Taylor. Walmart plans to regularly add new brands and products to the two shops over the coming months.

New York City retail will also survive and evolve. According to the latest available data, the metropolitan region had a GDP of more than $1.65 trillion in 2016, and that figure was up more than 3% from the prior year. Retail trade totals about $76 billion per year in New York City, and the industry employs nearly 135,000 people. Those employees earn more than $12 billion in annual wages, and they pay taxes, which feed back into the local economy.

While the Lord & Taylor flagship on Fifth Avenue is set to disappear, the brand is expanding online. The only constant in retail, particularly in New York City, is change.

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Screen Shot 2018-06-08 at 9.25.55 pmWalmart Divests Brazil Operations

(June 5) RetailDive.com

  • Private equity firm Advent International has agreed to invest an 80% majority stake in Walmart Brazil, with Walmart retaining the remaining 20%, the companies said on Monday. The transaction, expected to close later this year, is subject to regulatory approval in Brazil, according to a Walmart press release.
  • Walmart expects no material impact to earnings in the current fiscal year and a slight positive impact next year.


Screen Shot 2018-06-08 at 9.26.01 pmHudson’s Bay to Close Lord & Taylor Flagship

(June 5) WWD.com

  • HBC is pressing ahead with trimming costs and its stores—including closing its iconic Lord & Taylor flagship on Fifth Avenue in Manhattan.
  • HBC revealed the planned closure of the Lord & Taylor flagship as the group reported a net loss of C$400 million (US$308 million) for the first quarter ended May 5, compared with a loss of C$221 million (US$170 million) in the year-ago period.


Screen Shot 2018-06-08 at 9.26.06 pmRue La La to Acquire Gilt

(June 4) Company press release

  • Rue La La has entered into an agreement to acquire Gilt, a leading member-based digital shopping business, from Hudson’s Bay Company. The combined company will join two complementary lifestyle brands into a multibrand growth platform.
  • Both brands will continue to operate independently, retaining their unique identities and serving distinct customer segments. The transaction is expected to close in July 2018.


Screen Shot 2018-06-08 at 9.26.12 pmAmazon Extends Prime Benefits to Whole Foods Stores

(May 31) Nasdaq.com

  • Amazon recently announced the availability of its Prime Whole Foods discount at 121 Whole Foods Market stores across 12 US states. This move is in sync with the company’s focus on strengthening its presence in the retail sector.
  • The move enables Prime members to receive an additional 10% discount on their purchases at Whole Foods along with special weekly offers on selected purchases made at these stores.


Screen Shot 2018-06-08 at 9.26.18 pmWalmart Launches Order-by-Text Service to Challenge Amazon Prime

(May 31) Reuters.com

  • Walmart is starting a new same-day delivery service that enables customers to place orders via text message, another step in its effort to scale up its e-commerce offerings and compete with rival Amazon.com. The service, called Jetblack, allows shoppers to order items from Walmart.com and even from the websites of rival retailers.
  • Jetblack has been launched in parts of New York City, and Walmart plans to roll it out to the rest of the US over time.



Screen Shot 2018-06-08 at 9.26.25 pmWeather and Bank Holiday Weekends Drive UK Retail Sales Growth in May

(June 5) RetailGazette.co.uk

  • UK retail sales grew by 4.1% in May, against an increase of 0.2% in May last year, helped by warm weather, bank holiday weekends, the royal wedding and the FA Cup, according to the British Retail Consortium (BRC)-KPMG Retail Sales Monitor. Comparable sales growth was 2.8% compared with May 2017, when it had declined by 0.4% from the previous year.
  • The BRC breaks down sales by food and nonfood retail only on a three-month basis. In the three months through May, food sales rose by 2.0% on a comparable basis and by 3.4% on a total basis, while nonfood retail sales fell by 1.4% on a comparable basis and by 0.5% on a total basis.


Screen Shot 2018-06-08 at 9.26.30 pmZalando to Expand to Ireland and the Czech Republic

(June 4) Company press release

  • German online pure play Zalando announced that it will launch in Ireland and the Czech Republic this summer. These will be the first new countries Zalando has launched in since 2013 and will take its presence up to 17 countries.
  • The retailer also said that it will launch local language websites for Germany and Switzerland in mid-summer 2018. Beginning in August this year, Zalando will also offer a third H&M brand, Monki. It already offers H&M’s Weekday and Cheap Monday brands.


Screen Shot 2018-06-08 at 9.26.34 pmJohn Lewis Acquires Home Improvement Service Opun

(June 4) InternetRetailing.net

  • British department store retailer John Lewis has acquired Opun, a service that manages home improvement projects on behalf of its customers. The acquisition is part of John Lewis’s drive to build the services and experiences it offers customers.
  • Director of Commercial Operations Sean Allam remarked, “This acquisition will improve our capability in the home services market, built through our own trials with John Lewis Home Solutions.” Opun will continue to use its name and operate as a wholly owned subsidiary of John Lewis.


Screen Shot 2018-06-08 at 9.26.44 pmRichemont to Buy Watchfinder

(June 1) Company press release

  • Swiss luxury group Richemont announced that it is set to acquire UK-based Watchfinder, which sells premium preowned watches. Richemont stated that this acquisition “is another step in [its] strategy” and will enable it “to better serve the sophisticated needs of a discerning clientele.”
  • Watchfinder, established in 2002, employs around 200 staff and sells online and through seven boutiques in the UK. The transaction is expected to close this summer.


Screen Shot 2018-06-08 at 9.26.54 pmHouse of Fraser Confirms that Rescue Plans Are on Track

(June 4) TheRetailBulletin.com

  • British department store retailer House of Fraser confirmed that it is progressing as planned with its rescue plans. In May, House of Fraser said that it was pursuing an insolvency process known as a company voluntary arrangement (CVA).
  • The retailer said that China’s C.banner International was looking to secure a 51% stake in House of Fraser, and that the deal rested on the retailer securing the CVA. House of Fraser has now confirmed that the majority shareholder in C.banner has provided approval for its purchase of the 51% stake in the retailer, which is on course to enter the proposed CVA.



Screen Shot 2018-06-08 at 9.27.01 pmTencent’s Pony Ma Unveils WeChat Travel Plan for China, Greater Bay Area

(June 6) SCMP.com

  • Tencent is working with the Chinese government to create an electronic pass system that smooths travel between Hong Kong, Macau and the southern province of Guangdong. The unusual proposal would see multiple travel documents linked to Tencent’s WeChat app to streamline border crossings. If regulators approve the E-card ID system, users someday might be able to check into hotels and set up bank accounts through it, the company said.
  • Travelers between Mainland China, Hong Kong and Macau are required to have special permits, similar to visas, even though they are part of the same country. Tencent founder Pony Ma has been a champion of developing Tencent’s home province and the former colonies into the so-called Greater Bay Area, which could rival the region around San Francisco.


Screen Shot 2018-06-08 at 9.27.06 pmFacebook Gave User Data to Chinese Firm Huawei, Suspected of Government Links

(June 6) SCMP.com

  • Facebook allowed Huawei, a Chinese telecom company with alleged ties to the country’s government, to have special access to data on Facebook users, according to a person familiar with the matter but not authorized to speak on the record. Such a special arrangement could stoke fears that consumers’ personal information is at risk.
  • The relationship between Facebook and Huawei was one of the special agreements brokered between the social media giant and device makers over the past decade. The agreements sought to make it easier for Facebook users to access site services on a wide array of technologies.


Screen Shot 2018-06-08 at 9.27.14 pmJapanese Tech Firm Is Using Drones to Build a Hands-Free Brolly

 (June 6) SCMP.com

  • Asahi Power Service is putting a series of drone-powered parasols through their paces at its research facility in Tochigi Prefecture, north of Tokyo, but also intends to produce waterproof umbrellas when the technology has been perfected.
  • The company’s Free Parasol takes its name from its hands-free operations and has a canopy that opens out to a width of 150 cm. Beneath the canopy is the “brains” of the brolly, an AI device that can be programmed to lock onto and then follow the user’s head, providing permanent shade on the sunniest of days or keeping the rain off.


Screen Shot 2018-06-08 at 9.27.22 pmIndiegogo Expands Its Efforts to Help Chinese Startups Reach Global Consumers

(June 6) TechCrunch.com

  • Crowdfunding company Indiegogo has been running a pilot program in China for the past couple of years, and it’s now building on those efforts with the launch of the Indiegogo China Global Fast-Track Program.
  • Even while in the pilot phase, Indiegogo has had some success in helping Chinese companies launch globally. For example, Bluetooth headphone company Crazybaby raised more than $4 million across three Indiegogo campaigns.



Screen Shot 2018-06-08 at 9.27.30 pmAccor Hotels Starts Facial Recognition Trials in Brazil

(June 4) ZDNet.com

  • Accor Hotels has started a facial recognition trial in Brazil as a means to improve customer service. Selected members of the hotel’s loyalty program will be the first users of the new technology at a Pullman hotel in São Paulo. Under the trial, guests are able to register at the desk or an information pillar at reception, and then use facial recognition to access their room, thereby removing the need for a keycard.
  • According to Erwan Le Goff, Accor’s VP of Information Technology for South America, the aim is to offer more personalization and therefore a market differentiator for the brand. “We realize this technology is a big market differentiator and will be utilized by the sector in the years to come. For that reason, we decided to roll it out to improve our guest experience,” Le Goff said.


Screen Shot 2018-06-08 at 9.27.36 pmVisa Invests in LatAm M-Payments Startup YellowPepper

(June 1) ZDNet.com

  • Visa led a funding round in Latin America–focused mobile payments startup YellowPepper. The first of its kind for Visa in the region, the strategic $12.5 million series D investment in the startup will go toward growing opportunities for tokenized payments in the region, as well as toward increasing access to Visa APIs and furthering the usage of push payments via Visa Direct.
  • “Through our investment in YellowPepper, we want to bring the best of Visa’s technology and capabilities to a broader set of partners and clients across the region,” said Eduardo Coello, regional president for Visa Latin America and the Caribbean. “YellowPepper’s extensive experience in the region and the strength of their existing client base make them an ideal partner to build the future of payments,” Coello added.


Screen Shot 2018-06-08 at 9.27.41 pmWalmart Selling Majority Stake of Brazil Business in Latest International Shakeup

(June 5) Fortune.com

  • Walmart announced yet another big deal to reshape its international business and focus on the fastest-growing markets. The world’s largest retailer said on Tuesday that it had sold an 80% stake in its struggling Brazilian unit to private equity firm Advent International. The deal follows Walmart’s recent $16 billion purchase of a majority stake in Indian online leader Flipkart and its sale of its British chain, Asda, to rival Sainsbury’s.
  • The deep recession in Brazil, where Walmart has 438 stores and some 55,000 workers, has dented the company’s financial performance there for years, and it is clearly focusing on higher-growth markets like India and China. “The decision to partner with Advent in Brazil results from a thoughtful and deliberate review of Walmart’s international portfolio,” Walmart said.


Screen Shot 2018-06-08 at 9.27.47 pmCME Hog Futures Slump Following Mexico Tariff News

(June 6) Reuters.com

  • Some Chicago Mercantile Exchange hog contracts fell more than 2% at one point on Tuesday after Mexico announced it imposed tariffs on US pork, traders said. Mexico imposed tariffs on American products ranging from steel to pork to bourbon in retaliation for higher import duties by Washington on Mexican metals.
  • The US exports a significant amount of bone-in hams to Mexico for deboning because of cheaper labor, Linn Group analyst John Ginzel said. The finished product is either consumed domestically, exported elsewhere or returned to the US as a muscle cut.


Key points from global macro indicators released May 30–June 6, 2018:

  1. US: The personal consumption expenditure (PCE) deflator increased by 2.0% year over year in April, while the core PCE deflator increased by 1.8% year over year, reflecting a firming price environment in the US. Nonfarm payrolls increased by more than analysts had expected in May, rising by 223,000.
  2. Europe: In the eurozone, unemployment stood at 8.5% in April. Consumer prices in the eurozone moderated upward in May. Retail sales in the eurozone increased by 1.7% year over year in April, in line with the consensus estimate.
  3. Asia-Pacific: In South Korea, industrial production increased by 3.4% month over month in April. In Japan, industrial production increased by 0.3% month over month in April. In China, the Manufacturing Purchasing Managers’ Index (PMI) stayed above the expansion threshold in May.
  4. Latin America: In Brazil, GDP increased by 0.4% quarter over quarter in the first quarter. Industrial production in Brazil increased by 0.8% month over month in April. In Mexico, the Manufacturing PMI stayed above the expansion threshold in May.

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