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Lego shop headed for Sydney's east

The AFR reported that investment company Alceon Group has snared the rights to open stand-alone Lego stores in Australia and New Zealand under a partnership with The Lego Group. A flagship Lego store will open in March at Westfield Bondi Junction, just in time for the release of the second Lego movie. Under the partnership, Alceon has the licence to open and operate Lego-certified stores and Lego Group will be actively involved in site selection, store design and merchandise, leveraging its knowledge from establishing stand-alone stores overseas. The stores will stock exclusive Lego products not available at other retailers such as Myer, David Jones, Kmart, Target and Big W and will feature hands-on interactive experiences, including Lego's signature pick-a-brick wall and large 3D models.

Chinese shoppers still lapping up luxury brands

The AFR reported that despite tougher economic times, China's bling-happy upmarket shopaholics are still stocking up on luxury goods. Gucci posted a 25% jump in reported sales to €3.8 billion ($6.1 billion) in the fourth quarter of last year, with Gucci's Asia-Pacific sales growth motoring along at an annual rate of 45%. A few days earlier, LMVH – owner of Louis Vuitton and Christian Dior – reported that Asia-Pacific was its fastest-growing market, with sales revenue climbing 5.5% to €13.7 billion. An accepted data point is that Chinese shoppers account for more than a third of global demand for luxury goods. China's fourth-quarter GDP growth of 6.4% was the slowest since the global financial crisis, and the annual rate of 6.6% was the slowest in 28 years. Retail sales, though, bucked the downtrend, rising 8.2% for the year. But, not all companies shared in the luxury goods makers' bonanza. Apple reported a 27% drop in gadget sales in the fourth quarter.

Debenhams secures 40m pounds in extra funding

CNBC reported that Debenhams has secured 40 million pounds (US$51.45 million) in additional funding from some of its lenders as it strives to find a longer-term solution to its financial problems. Once Britain's biggest department store chain, the firm has been struggling with net debts of almost 300 million pounds and has given a string of profit warnings as it failed to keep pace with consumers moving online and to cheaper outlets. It said the new loan, agreed for a period of 12 months, would act as a bridge to "facilitate a broader refinancing and recapitalisation", adding it was still talking to its stakeholders and would conclude a "comprehensive refinancing".Shares in the company were on course to rise around 10% at opening, according to traders in London.

Skincare products now earn more than makeup

Quartz reported that skincare products have overtaken makeup products as the highest-earning big beauty category in the US. And, skincare is forecast to outperform all other cosmetics categories this year - propelling skincare supergiants like Estée Lauder and L’Oréal to record revenue. Last year, the skincare category grew 16% and the makeup category only grew 3%. Estée Lauder did US$4B in sales last quarter, and L’Oréal’s stock hit a record high. Part of the reason that skincare products are so valuable is that they sell at premium prices. However, some skincare forecasters predict that consumers won’t be willing to shell out hundreds of dollars for anti-aging serums forever and that the premium skincare bubble will burst once consumers become better educated.

Reality finally bites for Amazon's Whole Foods venture

The Wall Street Journal reported that Whole Foods is raising prices, again. Amazon slashed prices at the grocer after acquiring it in 2017, but pressure from consumer-product makers to cover rising costs for packaging, ingredients, and transportation has led Whole Foods to lift prices this month on hundreds of products.  This is in line with our earlier expectations covered in previous posts, that acquisitions of brick and mortar businesses would eventually bring Amazon more down to earth, which at some stage will put a big question mark over its vastly excessive market valuation.

Mars One Ventures crashes to earth

The Hustle reported that Mars One Ventures, a space startup that planned to establish a permanent human settlement on Mars, has quietly filed for bankruptcy. Rocket scientists, journalists, and investors insisted the project was impossible when it launched in 2012. But in spite of sustained skepticism, Mars One exploited starry-eyed space-cases for 7 years before burning up on re-entry to reality. A cosmic con of interstellar proportions: Mars One claimed to have received 202k applications from aspiring astronauts after going live in 2013. In reality, it received less than 3k. A failed Swiss mobile company called InFin bought Mars One for $92m in 2016 after T-shirt sales and donations brought in only about $1m. Ultimately, Mars One will never get off the ground: InFin filed for bankruptcy in Switzerland this past January with less than US$25k in the tank.

Toy wars - Hasbro vs Mattel

The Hustle reported that as Toys ‘R’ Us readies to officially put the nail in the toy chest, US toymakers like Hasbro continue to struggle. After Toys ‘R’ Us blew up in Q4, Hasbro’s projected holiday sales dropped 13% as brands like Nerf and My Little Pony underperformed. But Mattel, on the other hand, is killing it. Sales dropped 5%, but better-than-expected results from its Barbie and Hot Wheels brands caused the company’s stock price to jump 23%. Hasbro and Mattel have very different business models. Nerf and My Little Pony are a small fraction of Hasbro’s bread and butter. Its financial success relies mainly on Disney’s movie slate, and no Star Wars or Disney princess movies were released during the 2018 holiday season. In contrast, Mattel relies on its core franchises to bring home the bacon. Luckily for Hasbro, the Disney toy closet is jam-full in 2019.

Payless prepares second bankruptcy

Bloomberg reported that Payless Inc. is preparing for its second trip to bankruptcy court with a plan that could drastically shrink the size of the discount shoe chain. The retailer is seeking a loan to get through bankruptcy proceedings and discussing plans to shutter a significant portion, and potentially all, of its North American stores. Payless would become the latest in a wave of retail bankruptcies during the past two years as online rivals and heavy debt overtake once-iconic brands like Toys “R” Us and Sears. Payless was founded in 1956 with the goal of selling affordable shoes in a self-service setting and says it’s the largest specialty footwear chain in the Western Hemisphere. The chain employs more than 18,000 globally and operates about 3,600 outlets worldwide, with more than 2,700 in North America.

JB Hi-Fi reports profit up 5.5% in first half

According to results lodged with the ASX, JB Hi-Fi reported that strong growth in communications, games hardware, audio, fitness and connected technology categories over the first half of FY19 drove a 5.5% year-on-year increase in net profit after tax to $160.1 million. Group earnings per share reached $1.39 cents per share, a 5.4% increase, while total sales grew 4.2% to $3.8 billion for the six months ended 31 December 2018. JB Hi-Fi noted both the Australian and New Zealand arm of the business delivered sales and earnings growth, as well as recently acquired The Good Guys. While website sales saw strong growth, a drop in third-party marketplace sales led to online sales falling 2.4% to $70.7 million.  

Retail gloom and credit squeeze dominate property agenda

The AFR reported that concerns about the retail sector are dragging down sentiment across the property sector, according to the latest quarterly NAB commercial property survey. At the same time for players in the property market, getting access to finance, both debt and equity, is more difficult than it has been at any time since NAB began its survey almost a decade ago. The unease in the retail sector moderated only slightly, from negative 20 points to negative 18 points. Looking ahead, property professionals expect both debt and equity funding conditions to worsen further over the next three to six months, the survey found.

Foot Locker invests US$100m into online sneaker company 

The Hustle reported that Foot Locker invested US$100m in GOAT Group, the online sneaker marketplace for rare and high-end kicks. According to TechCrunch, the companies said that the investment will eventually lead to the two companies combining their efforts across their digital and physical retail platforms. Foot Locker is yet another store falling victim to the shifting retail sands, closing 110 stores last year and 147 in 2017. But, the investment in GOAT could be its shot at staying relevant. Founded in 2015, today GOAT has over 12m active users on the platform, up from last year’s 2.5m sneakerheads. Sneaker resale is incredibly hot right now, and these days it’s attracting more than your average hypebeast. Farfetch acquired online sneaker marketplace Stadium Goods for US$250m in December, and StockX hauled in US$44m in 2018.

David Jones CEO David Thomas departs

The AFR reported that David Jones has been rocked by its second scandal in less than 10 years, with chief executive David Thomas resigning despite being cleared of a discrimination complaint, the fourth CEO to depart in five years. DJs said Mr Thomas' successor would be announced in due course and Woolworths chief executive Ian Moir will work directly with the DJs management team in the interim. On the trading front, the retailer has been discounting heavily to lure shoppers amid the worst discretionary retail conditions since the global financial crisis. DJs' sales tanked in the run-up to Christmas, with same-store sales growth slowing to just 0.9% in the 26 weeks ending December 23 after rising 2.4% in the 20 weeks ended November 11. This followed a 3.3% fall in same-store sales in the year-ago period.