FROM THE DESK OF DEBORAH WEINSWIG

Are the Wheels Coming Off Big Tech? We have seen several alarming data points from the first quarter of fiscal 2022 from leading technology companies:

• Revenues from Amazon’s online stores (i.e., first-party sales on Amazon.com) declined by 1%.
• Netflix reported a decrease in paid memberships and recently laid off 150 employees.
• Revenue reported by Meta (parent company of Facebook) and second-quarter guidance missed analysts’ expectations. Its Realty Labs segment (its metaverse business) reported a net loss of nearly $3 billion, and the company has implemented a hiring freeze to get a hold on expenses.
• While Uber reported positive EBITDA, the company is slowing hiring and promised to be aggressive in managing expenses.
• Apple reported 9% revenue growth yet declined to give revenue guidance for its June quarter, stating that the combination of Covid-19 constraints and industry-wide chip shortages would hurt revenues by $4–8 billion (Apple’s revenue was $97.3 billion for its March-ended quarter).
• The tech-laden NASDAQ stock index is down nearly 28% year to date.

What in the world is going on with big tech? Let’s start with Amazon. The company is, to a certain extent, a victim of its own success. While its 1% revenue decline looks anemic at best, revenue growth in its online stores was 41% in the year-ago quarter, which results in 40% growth on a two-year basis. It is understandable that with consumers traveling again, rediscovering experiences and physical stores, their reliance on e-commerce could take a breather. Amazon also over-expanded in anticipation of higher levels of demand, recording $2 billion in costs from lower productivity due to being overstaffed. The company also mentioned having excess capacity in its fulfillment and transportation network. In some categories, consumer demand appears to have hit saturation. Consumers returning to the office and resuming their normal ways of living likely have less time to watch streaming services—causing them to streamline their subscriptions and generating churn. Moreover, critics claim that Netflix has elected to pursue quantity over quality in an effort to drive subscriber growth, and this strategy appears to be no longer viable. Meta’s platforms, Facebook and Instagram, face competition from challengers such as TikTok and Snapchat, which resonate more with younger generations. The company’s CEO, Mark Zuckerberg, recently commented that its metaverse business was laying the groundwork for an exciting 2030—suggesting that the segment’s losses could continue for the next eight years. Although Uber reported 35% growth in gross bookings, it reported a large GAAP net loss due to a decline in the value of its investments in other companies, and its EBITDA margin represented 0.6% of gross bookings. This slim profit margin likely disappointed investors, prompting management to start a cost-containment program. Despite solid demand for its products, the realities of global supply chains finally caught up with Apple. While the company is likely the largest customer of Taiwanese semiconductor foundry TSMC, which should put it first in line for its chip output, Apple also purchases chips from 200 other suppliers, many of which are facing capacity constraints. Chip-making equipment also uses chips, which can be in short supply, creating a vicious circle of chip shortages. Apple CEO Tim Cook declined to make a prediction on how the chip shortage would unfold in the second half of the year. Although investors were clearly disappointed with recent results and the near-term outlook for tech companies, these stocks are highly volatile, and investor expectations can become overheated and fall back to earth quite rapidly. Much of the violent reaction is due to the naïve expectation that the prosperity of the past couple of years—when consumers surrounded themselves with electronic gadgets and streaming services to stay entertained while staying at home, and retailers had to bolster their e-commerce capabilities in short order—would continue indefinitely. Although there are likely some near-term bumps in the road due to new Covid-19 outbreaks, inflation and geopolitical conflict, these issues usually resolve themselves eventually—however, our reliance upon technology tools and toys, as well as the convenience of shopping online, will likely continue for decades to come.

US RETAIL AND TECH HEADLINES

Gap Expands Its Presence in Metaverse Commerce Through Partnership With Roblox (May 17) ChainStoreAge.com

• Apparel specialty retailer Gap launched a virtual, purchase-free experience on digital gaming platform Roblox on May 20, 2022. Gap is integrating the experience into Club Roblox, a user-generated world built on Roblox, in collaboration with youth technology platform SuperAwesome.
• Gap has styled its Club Roblox boutique as a metaverse version of a Gap Teen store. Customers can participate in digital activities, such as joining Gap Teen's fashion show mini-game and style stage, which allows users to create virtual Gap Teen outfits with various themes. Users will also be able to visit a virtual juice bar and photobooth within the store to take photos of their Roblox avatars.

Home Depot Reports Positive Sales Growth in Its First Quarter, Raises Sales Guidance for Fiscal 2022 (May 17) Company press release

• Home-improvement retailer Home Depot has reported sales growth of 3.8% year over year in its first quarter of fiscal 2022, ended May 1, 2022. The company’s comparable sales increased by 2.2% year over year and its diluted EPS increased by 6.0%. Its gross margin decreased by 20 basis points (bps) year over year to 33.8%, due to transportation and product cost pressures.
• For fiscal 2022, the company raised its sales and comps guidance and now expects both sales and comp growth of 3.0% year over year, compared to prior guidance of slightly positive growth. The company also raised its diluted EPS guidance to percentage growth in the mid-single-digits, compared to prior guidance of low single-digit growth.

Target Collaborates with Tabitha Brown on Limited-Edition Collection (May 17) Company press release

• Target has announced its ongoing collaboration with US actor Tabitha Brown on four limited collections over the next year, starting in summer 2022. The collections will include accessories, apparel and swimwear, as well as entertainment, food and kitchenware, and home and office items.
• The first collection will be available online at Target.com and in most Target stores starting on June 11, 2022. It will feature more than 75 items, with most priced under $30.

Urban Outfitters Expands Partnership with Klarna in the US (May 16) ChainStoreAge.com

• Apparel specialty retailer Urban Outfitters has expanded its partnership with global retail payments and shopping service provider Klarna to offer a buy now, pay later (BNPL) payment service to its online customers in the US. The US partnership is an extension of the existing collaboration between the companies in several European countries.
• BNPL allows Urban Outfitters’ shoppers to pay for purchases in four interest-free installments across the Anthropologie, Free People and Urban Outfitters banners.

Walmart Reports Positive Revenue Growth in Its First Quarter, Raises Sales Guidance for Fiscal 2023 (May 17) Company press release

• Walmart has reported sales growth of 2.4% year over year in its first quarter of fiscal 2023, ended April 30, 2022. Its Walmart US comp sales increased by 3.0% year over year and its diluted EPS declined by 23.1%. The company’s gross profit rate decreased by 87 bps year over year, due to elevated supply chain costs.
• For fiscal 2023, the company raised its sales and US comps guidance and now expects sales growth of 4.0% year over year, compared to 3.0% growth in prior guidance. It expects US comp growth of 3.5%, compared to prior guidance of 3.0% growth. However, Walmart revised down its EPS guidance and expects it to decline by 1.0% year over year, compared to prior guidance of mid-single-digit growth.

EUROPE RETAIL AND TECH HEADLINES

Clarks Partners with Roblox To Enter the Metaverse (May 16) ChargedRetail.co.uk

• UK-based shoe manufacturer and retailer Clarks has entered the metaverse in partnership with online gaming platform Roblox. The partnership offers a unique Roblox stadium for fans to connect, access exclusive content, share experiences, and participate in mini-games.
• The Clarks “CICAVERSE” will feature the brand’s unisex styles for kids and inspire users with an immersive gaming experience. Users can also access a virtual Clarks store to purchase accessories for their avatars.

Delhaize Announces Home Delivery Subscription Service (May 16) ESMMagazine.com

• Belgian food retailer Delhaize has introduced a delivery plus subscription service for its online home delivery offer. The subscription service starts at €10.00 ($10.50) per month and offers customers a range of benefits including unlimited free delivery, free products and priority booking for delivery time slots.
• The service is currently available in the Brussels region and in Antwerp, Liège, Ghent and Leuven.

Flink Acquires Cajoo (May 17) ESMMagazine.com

• Berlin-based grocery delivery startup Flink has acquired French quick-commerce company Cajoo, boosting its assortment and customer base. With this acquisition, Flink has become one of the largest quick-commerce operators in France, serving over six million customers across nine cities in the country.
• Furthermore, Flink has announced a partnership with French hypermarket retail chain Carrefour, an early investor and retail partner of Cajoo. Carrefour is now Flink’s exclusive retail partner for the French market and a direct shareholder.

JD Williams Launches Sustainable Clothing Brand (May 17) RetailGazette.co.uk

• UK-based fashion and homeware retailer JD Williams has launched a sustainable clothing range named Anise. The company claims that the collection uses premium sustainable fabrics without compromising on design, material or quality. Anise offers sizes from 10–24 with prices between £24 ($30) and £80 ($100).
• The move comes as part of JD Williams’ parent company N Brown’s sustainability strategy and commitment to responsible sourcing of its branded products by 2030. N Brown aims to source 50% of its cotton from more sustainable sources in 2022.

SuperValu Launches “Taste of Local” Initiative (May 16) ESMMagazine.com

• Irish supermarket chain SuperValu has announced a new initiative, “Taste of Local,” to showcase products from 33 small food and drink producers across Ireland. The products include plant-based offerings, organic produce, healthy convenience items and innovative non-alcoholic drinks.
• The producers are part of a Food Academy Programme that supports over 320 Irish food and drink producers to sell their products in local markets.

ASIA RETAIL AND TECH HEADLINES

Fashinza Raises $100 Million in Series B Funding Round (May 17) BusinessWire.com

• India-based business-to-business marketplace and real-time global supply chain platform for fashion brands and retailers Fashinza has raised $100 million in Series B funding. The round, which includes a mix of equity and debt financing, was led by Prosus Ventures and Westbridge, with participation from Accel, Elevation, ADQ, Naval Ravikant, Jeff Fagnan, Jake Zeller, Nivi and Nitesh Banta.
• Fashinza plans to utilize the funding on supply chain technology and developing its global presence. This includes monetizing fintech offerings, extending into raw material procurement and developing a sustainable supply chain by 2030.

JD.com's Revenue Grew 18% in Its Fiscal 2022 First Quarter (May 17) Company press release

• Chinese e-commerce company JD.com reported net revenue of $37.8 billion, up 18% year over year, in its first quarter of fiscal 2022 (ended March 31, 2022). JD Retail, the company's primary division, made the most significant contribution to revenue, bringing in $34.3 billion.
• JD.com reported a net loss of $472 million, compared to a net profit of $535.5 million in the same quarter last year. Its operating income increased by 54% year over year due to improved results from both its JD Retail and JD Logistics operations.

Melorra Raises $16 Million in Series D Funding Round (May 17) BusinessToday.in

• Melorra, an Indian direct-to-consumer (DTC) jewelry company, has raised $16 million in a Series D fundraising round led by Axis Axis Growth Avenues, AIF-I, SRF Family Office, N+1 and existing investors. The company plans to use the new funding to boost brand marketing efforts and expand its store network around the country.
• Melorra states that the current funding round has doubled the company's valuation to $78.4 million. It aims to reach $1 billion in revenue by fiscal year 2026 by consolidating its online leadership strength in the large gold jewelry industry and expanding its offline footprint.

Owndays To Open Premium Concept Store in Singapore (May 17) InsideRetail.asia

• Japanese eyewear company Owndays opened a premium concept store in Singapore's Takashimaya shopping center on May 20, 2022. The new store will be the company's second premium concept store worldwide and its 33rd store in Singapore.
• The store will feature a large product range, including a collection of made-in-Japan eyewear and luxury ophthalmic lenses curated specifically for the premium concept space.

Pandora To Build a Jewelry Plant in Vietnam (May 17) RetailNews.asia

• Danish jewelry retailer Pandora plans to establish a $100 million manufacturing facility in the Binh Duong province in Vietnam. The plant will be built to LEED Gold green building standards—a compliance metric focused on building sustainability—and powered entirely by renewable energy.
• The facility marks Pandora's third manufacturing site and first production facility outside of Thailand. Construction is set to begin in early 2023, with operations up and running by late 2024. The plant will employ more than 6,000 artisans and produce 60 million pieces of jewelry every year.