FROM THE DESK OF DEBORAH WEINSWIG

Recent Retailer Bankruptcies Are Sparking Mergers and Acquisitions While people generally consider a bankruptcy filing as the end of the road for a business or a retailer, this is hardly the case in reality. A filing under Chapter 11 of the US Bankruptcy Code is designed to relieve pressure on a business—giving it the opportunity to reorganize and renegotiate with its creditors. A filing can also end in liquidation, as in the case of sporting-goods retailer Modell’s or home décor retailer Pier 1 Imports. There have been several bankruptcy filings recently that do not necessarily mean disaster for retailers; rather, the filers are attracting multiple buyers that see such long-term value in the businesses that they have made bids to acquire them. These bids are being made even during a period when demand is soft due to consumers staying at home—in the apparel sector, for example, people are not shopping for work attire or fashion clothing—and feeling hesitant to enter reopened stores and malls. Brooks Brothers is one example. The 200-year-old retailer occupies the epicenter in the shift in demand for business clothing to casual workwear, which shifted again to even more casual clothing as workers transitioned to working from home. The company received $75 million in financing alongside its filing on July 8, 2020, and attracted two potential buyers: WHP Global, a brand management company that owns the Anne Klein and Joseph Abboud brands; and Sparc LLC, a partnership between Authentic Brands (owner of Barneys New York since 2019) and Simon Property Group. On July 23, less than one month after the filing, Sparc announced a $305 million stalking-horse bid for Brooks Brothers. A series of court hearings is scheduled to begin on August 3, with final offers due by August 5 and the final court determination on August 11. JCPenney is another iconic American retailer whose filing has attracted multiple potential buyers. As part of its May 15, 2020 filing, the company arranged to receive another $450 million to maintain operations. Interested potential buyers include many of the “usual suspects” that have recently acquired retailers, including Authentic Brands Group, Brookfield Properties, Hudson’s Bay, Simon Property Group and private-equity firm Sycamore Partners. Sycamore is emerging as the leading contender, with reportedly the highest bid, exceeding those of Hudson’s Bay and a joint offer from Brookfield Properties and Simon Property Group, according to the NY Post. Sycamore has reportedly offered $1.75 billion for the retailer. Sycamore also owns retailers Staples, Talbots and The Limited, and had agreed to acquire Victoria’s Secret before the deal ultimately fell through. Retailer bankruptcy filings are, unfortunately, on the rise and likely to continue. There have been 25 major US bankruptcy filings so far in 2020 (with eight of these in July alone)—including 15 department stores and apparel retailers—up from 17 in the full year of 2019 and 16 in 2018. Reasons behind the filings include the difficulty of servicing debt levels amid the current retail sales depression, in addition to many stores remaining closed and consumers’ intentions to avoid public places, particularly malls and shops. According to our most recent proprietary US consumer survey, around two-thirds of consumers are currently avoiding shopping centers and malls, and nearly half of those surveyed are avoiding shops in general. While bankruptcy filings typically involve painful actions such as store closures and employee layoffs, the positive news is that the process gives the retailer another lease of life, preferably with a more rational store network and a lower debt load. The other benefit lies in the collection of potential buyers that recognize the value of retailers waiting on the sidelines and that have the resources required to make an offer should any valuable retailers or brands become available. With more retailer bankruptcy filings on the horizon, we expect to see a number of merger and acquisition announcements over the course of this year.

US RETAIL AND TECH HEADLINES

Old Navy Introduces Pre-Teen Clothing Line with POPSUGAR (July 27) Company press release

• Old Navy has launched a clothing line for children aged 10–13 years, in collaboration with lifestyle website POPSUGAR. The limited-edition clothing range, PS x ON, features athleisure and basic denim essentials.
• Products in the new line will be priced from $9.99 to $39.99 and will be available from August on the Old Navy website and in stores in the US and Canada.

Target To Close Its Stores on Thanksgiving Day (July 27) BusinessInsider.in

• Target plans to keep its doors closed on Thanksgiving Day—the day before Black Friday and the start of the holiday shopping season—to keep shoppers safe in the midst of the coronavirus pandemic. Target also revealed that it would begin holiday sales in October to inhibit large crowds gathering at stores.
• Best Buy, Dick’s Sporting Goods and Walmart have made similar announcements to remain closed on Thanksgiving Day.

L Brands Plans To Cut 15% of Corporate Workforce (July 28) CNBC.com

• L Brands, the owner of Victoria’s Secret, has announced plans to slash 15% of its corporate staff—around 850 jobs—in an effort to reduce costs in the wake of the coronavirus pandemic.
• The company hopes to save around $400 million annually through cost-cutting efforts, such as job cuts. L Brands expects overall net sales for the second quarter of 2020 to be around 20% lower than the previous year, following a rise of approximately 10% at Bath & Body Works and a 40% fall at Victoria’s Secret.

Albertsons Sees Net Sales Grow and Digital Sales Surge in the First Quarter (July 27) Company press release

• Grocery retailer Albertsons announced that net sales rose 21.4% to $22.8 billion in the 16 weeks ended June 20, 2020. Comparable sales growth of 26.5% drove overall growth, which was partly offset by a fall in revenues related to store closures and lower fuel sales.
• Digital revenues surged 276%—primarily driven by the pandemic and increased online orders as people stayed at home. The company did not provide guidance, citing uncertainty surrounding the pandemic and the effects it might have on the business.

CES Event Will Be Held Online in 2021 (July 28) VentureBeat.com

• The Consumer Electronics Show (CES) is one of the largest exhibitions and trade fairs for consumer electronics, held in Las Vegas in January each year. In 2021, CES will be held online for the first time as the event organizer, the Consumer Technology Association, believes that this is the best way to keep participants safe during the pandemic.
• The new CES format will still allow exhibitors, visitors, press representatives and tech companies to connect with each other through online discussions and video conferences.

EUROPE RETAIL AND TECH HEADLINES Carrefour Expands Uber Eats Partnership to More French Locations and Belgium (July 27) Reuters.com

• Carrefour and Uber Eats have revealed that they are expanding their home-delivery collaboration within France, as well as launching in Belgium.
• The service, which offers 30-minute home delivery, started on April 6, 2020 with 15 Carrefour stores in and around Paris and has now expanded to 330 stores in France. The service in Belgium will be launched in September.

Sainsbury Unveils New Virtual Queuing App (July 27) Company press release

• UK-based supermarket chain Sainsbury’s has developed a virtual queuing app, “ufirst,” to help staff manage store traffic and enable customers to shop safely in stores amidst the coronavirus. Customers can use the app to join a virtual queue and wait in their vehicles, homes or nearby cafes until it is their turn to enter the store.
• Sainsbury’s staff can also add shoppers that do not have a smartphone to the queue. The retailer is testing the app at five stores until mid-August and will roll it out to other stores based on feedback.

Advertima Raises €15 Million for Computer Vision-Powered Behavioral Analytics Technology for Stores (July 28) TechCrunch.com

• Swiss startup Advertima has raised €15 million ($17.5 million) to develop a machine learning application that provides real-time consumer behavior analysis within stores. Swiss real-estate firm Fortimo Group, an existing shareholder, led the Series A funding round.
• Advertima’s application plugs into a display monitor and uses visual sensors to identify shoppers. It then communicates personalized, targeted messages to shoppers based on their age and gender.

Selfridges To Slash 450 Jobs (July 28) TheRetailBulletin.com

• Selfridges is set to slash 450 positions across its department stores as it experiences its toughest year in recent history. The cuts will reduce its workforce by around 14% in response to the company’s predictions for a sizeable decline in annual revenues owing to the coronavirus crisis.
• Selfridges MD Anne Pitcher reported that the decision to cut these jobs was one of the toughest that the business has ever had to take. The retailer runs four stores across London, Birmingham and Manchester. It has not stated where the job cuts will be.

Next’s Second Quarter Sales Plummet 28% (July 29) Company Press Release

• Apparel retailer Next reported that its full-price sales plummeted 28%, with retail sales down 72% and online sales up 9% in the quarter ended July 25, 2020. Next stated that the performance was “better than expected and an improvement on the best-case scenario” when it provided in its first-quarter trading statement in April.
• The company reported that its warehouse capacity has returned faster than anticipated, and store sales have been more robust than previous expectations. Next now expects full-year profit before tax to be £195 million ($253 million) and year-end net debt to fall by £460 million ($596 million) to £650 million ($843 million).

ASIA RETAIL AND TECH HEADLINES

Homeplus Accelerates the Sale of Outlets To Maintain Liquidity (July 26) KoreaHerald.com

• Korean discount-store chain Homeplus is accelerating its plan to sell stores to maintain liquidity. This move comes on the back of the net loss of ₩532.2 billion ($446.2 million) incurred by Homeplus between March 2019 and February 2020.
• During the same period, revenues fell 4.69% to ₩7.3 trillion ($6.1 billion) while its operating profit dropped 38.39% to ₩160.2 billion ($134.3 million). Homeplus cited a slow market and diminishing consumer sentiment amid the pandemic as reasons for its liquidity crunch and its move to sell stores.

RIL Moves Closer to Buying Future Group’s Retail Business (July 27) Timesofindia.indiatimes.com

• Indian conglomerate Reliance Industries is reportedly in late-stage discussions to acquire Future Group’s retail segment, Future Retail, as it looks to boost its physical store presence in India, according to sources that spoke to newspaper The Times of India.
• Future Retail is one of India’s largest retailers by turnover and has been burdened with liquidity pressure, rising debt and declining earnings during the pandemic. It operates around 1,700 stores across India.

Flipkart Makes a Second Attempt at Hyperlocal Delivery (July 28) TechCrunch.com

• Walmart-owned Indian e-commerce platform Flipkart has re-introduced a hyperlocal delivery service in the city of Bengaluru—four years after the business abruptly concluded its previous trial. Flipkart Quick, as the new service is called, aims to offer more than 2,000 goods ranging from groceries and perishables to smartphones, electronics accessories and stationery items for delivery within 90 minutes.
• Once an order is placed, Flipkart Quick sources the items from nearby retail stores and warehouses, and delivers them within a two-hour slot that customers can reserve between 6:00 a.m. and 12:00 a.m. for a fee starting from ₹29 ($0.39).

Parkson To Exit Full-Scale Outlets in Vietnam (July 28) InsideRetail.Asia

• Malaysian department-store retailer Parkson plans to stop operating full-scale stores in Vietnam after years of losses. The firm ran 10 stores in the country at one point and was optimistic about long-term growth.
• The company plans to sell the Parkson TD Plaza Shopping Center for $10 million, translating to a $500,000 loss on book value, but a $500,000 premium on local valuation. This would leave one remaining Parkson property in in Ho Chi Minh City, which houses Japanese retailers Muji and Uniqlo.

Victoria Beckham Beauty Launches on Tmall Global (July 27) Alizila.com

• Victoria Beckham Beauty launched its luxury cosmetics line on Alibaba’s Tmall Global platform this week, marking the brand’s entry into China. CEO Sarah Creal stated that the company is focused on building a luxury beauty brand that is “forward-thinking and fresh.”
• Partnering with Tmall Global will help Victoria Beckham Beauty to reach customers in China who share the same values as the brand, Creal reported.