September 18, 2015

Weekly Insights

                                             

September 18, 2015

D EBO RA H W EI N S WI G Ex e c uti ve D ir ec to r, H e ad o f G lo ba l Ret ai l & Tec h n o log y Fu n g Bus i n es s I n tel li g en c e C en tr e d ebo ra h we in s w ig @ f un g 19 37. c om N ew Y or k : 64 6. 83 9. 701 7

               

This  week,  we  attended  Under  Armour’s  Investor  Day,  where  the   company  generated  positive  buzz  among  sports  fans  and  investors  alike   with  two  announcements:  one  with  Stephen  Curry  and  one  financial   Global  Brands  Group  just  closed  an  acquisition  of  Joe’s  Jeans  for  $13   million  and  will  hold  the  long-­‐term  license  agreement  for  the  brand’s  core   categories    

Lidl  plans  to  open  281  new  stores,  many  of  them  in  central  London.  Lidl   currently  operates  about  70  stores  within  the  M25  motorway  that  nearly   encircles  Greater  London   The  Mexican  textile  industry  is  expected  to  grow  by  4%  this  year,  to  about   US$26  billion,  aided  by  a  recovery  in  US  exports  and  strong  demand  

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

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        September 18, 2015   FROM  THE  DESK  OF  DEBORAH  WEINSWIG   This   week,   we   attended   Under   Armour’s   Investor   Day   at   its   headquarters   in   Baltimore,   MD.   The   company   generated   positive  buzz  among  sports  fans  and  investors  alike  with  two   announcements.  First,  NBA  star  Stephen  Curry  has  extended   his   contract   with   Under   Armour   through   2024.   Second,   the   company   has   set   a   2018   revenue   target   of   $7.5   billion,   representing  a  25%  compound  annual  growth  rate  from  the   $3.1   billion   in   revenue   the   company   reported   in   2014.   The   figure  represents  a  step  up  from  the  prior  growth  rate  target   of  22%.   CEO   Kevin   Plank   characterized   the   company’s   first   20   years   as   having   been   built   on   a   promise   to   make   athletes   better.   Now,   by   leveraging   its   Connected   Fitness   network,   Under   Armour   is   positioning   itself   to   evolve   from   a   company   focused   on   changing   the   way   athletes   dress   to   one   focused   on   changing   the   way   athletes   live.   At   the   same   time,   the   company   says   that   it   is   just   getting   started   in   its   evolution   from   a   leading  performance  sports  brand  to  a  great  global  brand.  The  establishment  of  retail  stores,  particularly  in  Asia,  should  enable   Under  Armour  to  reach  more  athletes.   How   does   management   plan   to   more   than   double   revenue   by   2018?   By   focusing   on   the   sports   category,   developing   innovative   products,   merchandising   globally,   maintaining   its   speed   and   reaching   more   athletes.   For   example,   Under   Armour   soon   plans   to   enter   the   sportswear   category.   A   key   focus   is   women’s   athletic   wear—and   the   company’s   women’s   team   business   grew   by   more   than   40%   this   year.   The   motto   is   “We   design   for   her.”   In   footwear,   the   company   plans   to   establish   product   leadership   (which  leads  to  market  leadership),  build  franchises  and  market  its  products  by  creating  an  emotional  connection.   EVP   of   Innovation   Kevin   Haley   said   that   Under   Armour   is   an   unconventional,   contrarian   brand,   zigging   where   other   have   zagged.  The  company  offers  performance  apparel  and  tight  T-­‐shirts  made  from  synthetic  materials  and  priced  at  $50;  it  sells   over  the  phone;  and  it  does  not  discount  its  prices.  Its  technologies  include  microthreaded  apparel,  which  reduces  drying  time   and  weight  by  30%  and  increases  breathability  by  70%,  and  its  CoolSwitch  technology,  which  uses  a  proprietary  coating  that   pulls  heat  away  from  the  skin,  enabling  greater  endurance  and,  therefore,  higher  performance.   The  company’s  unconventional  approach  has  created  the  world’s  largest  health  and  fitness  community,  Connected  Fitness,  with   a  total  of  150  million  registered  users.  Within  this  group  are  60  million  active  users,  engaging  in  1.3  billion  workouts  per  year,   and   recording   the   intake   of   6   billion   foods.   Under   Armour’s   Connected   Fitness   platform   can   monitor   daily   activity,   nutrition,   fitness  and  sleep,  and  interface  with  connected  apps,  connected  devices,  Under  Armour  shirts  and  shoes,  and  advertisers.  The   platform   includes   a   Consumer   Insight   Engine,   which   creates   personalized   content,   communications,   experiences,   recommendations   and   products   for   users.   The   platform   has   $200   million   in   direct   revenues   today   and   can   access   the   $8   trillion   health   and   fitness   industry,   the   $2   trillion   food   and   nutrition   industry,   and   the   $250   billion   sports   apparel   and   footwear   industry.   Stephen   Curry,   the   winner   of   the   league   MVP   award,   who   drove   the   Golden   State   Warriors   to   their   first   championship   in   40   years,   made   a   surprise   appearance   at   the   investor   meeting.   Curry’s   first   basketball   shoe,   the   Curry   One,   and   his   signature   apparel  line  were  launched  in  February  2015,  and  the  shoes  continue  to  nearly  sell  out  across  all  retail  distribution  channels.   The   Curry   Two   has   already   been   launched   in   Asia,   in   conjunction   with   Curry’s   Under   Armour   tour   there.   The   shoes   will   be   released  in  the  US  and  globally  on  October  24.  Curry’s  relationship  with  Under  Armour  will  continue  to  grow,  as  his  signature   product  line  expands  and  is  increasingly  sold  on  a  global  basis.  At  the  same  time,  Curry  will  be  a  centerpiece  of  the  company’s   marketing   campaigns,   including   for   Connected   Fitness:   he   will   have   a   presence   on   fitness   apps,   and   will   design   new   training   programs  that  will  be  available  to  everyone.   In  addition  to  Curry,  Under  Armour  highlighted  its  relationship  with  the  NBA,  announcing  a  10-­‐year  partnership  as  well  as  its   participation  in  the  NBA  FIT  App,  which  will  be  powered  by  the  Connected  Fitness  platform.   Plank   also   showed   artwork   of   the   company’s   new   headquarters,   located   in   South   Baltimore,   which   employees   will   begin   occupying  in  January  2016.  The  company  spent  more  than  $90  million  acquiring  130  acres  of  waterfront  property,  which  will   serve   both   Under   Armour   employees   and   Baltimore   residents.   It   will   encompass   innovation   labs,   sporting   fields,   fitness   centers,   manufacturing   facilities,   public   parks   and   green   spaces.   While   the   company   has   historically   spent   3%   of   revenues   on   capital   investment,   it   expects   to   spend   8%–10%   of   revenues   on   capex   through   2018,   with   about   half   devoted   to   the   new   campus,   investments  in  technology  and  expanding  distribution  centers.   Even   after   its   huge   success,   Under   Armour   is   excited   about   taking   itself   to   the   next   level   through   a   strong   combination   of   connected  and  garment  technologies,   expanding  its  reach,  and  creating  buzz  about  its  brand  through  associations  with  leading   athletes  and  professional  leagues.  We  are  fascinated  by  the  company’s  leadership  in  combining  connectivity  and  smartphones   with  athletic  wear,  and  we  look  forward  to  future  innovations  in  this  space.  

 

 

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

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        September 18, 2015              

FBIC  HAPPENINGS  &  WEINSWIG’S  WATCH  ING    

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This  week,  the  FBIC  Global  Retail  &  Technology  team  attended  the  Goldman   Sachs  24th  Annual  Communacopia  Conference.  

 

 

STAT  OF  THE  WEEK  

    $900  Mil.    

New  York  Fashion  Week  (September  10–17)  will  generate   $900  million  for  the  city  via  181  shows  and  308  events.     This  number  is  greater  than  the  revenue  generated  by  the   US  Open,  the  New  York  City  Marathon  or  the  2014  Super   Bowl.  

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      Source:  WWD.com         CHART  OF  THE  WEEK     US  Retail  Sales  Posted  Healthy  Results  in  August  

 

Figure  1.  US  Monthly  Retail  Sales  ex  Autos:  YoY  %  Change     10     8     6    

 

%  

4     2     0     (2)   (4)   (6)   (8)   (10)   03  

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06  

07  

08  

09  

10  

11  

12  

13  

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Source:  US  Census  Bureau/Haver  Analytics  

 

  • Total  US  retail  sales  were  healthy  in  August,  rising  0.2%  month  over  month  (adjusted).  The   results  met  economists’  expectations.  Excluding  autos,  sales  rose  0.1%  in  August.   • In  August,  consumers  continued  to  benefit  from  lower  gas  prices,  a  strong  dollar  and  a  healthy   labor  market.  Ten  out  of  the  13  major  retail  categories  posted  gains.  Auto  and  auto  parts   sales  posted  a  solid  0.7%  increase  over  July,  as  did  sales  at  bars  and  restaurants.   • Fed  Chairman  Janet  Yellen  pointed  to  strong  car  sales  in  May  and  June  as  a  sign  that  “many   households  have  both  the  wherewithal  and  the  confidence  to  purchase  big-­‐ticket  items.”    

 

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

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        September 18, 2015

  US  RETAIL  HEADLINES   Tory  Sport  Opens  Pop-­‐Up  Store  in  New  York   (September  14)  Women’s  Wear  Daily   • On  September  16,  Tory  Burch  will  open  a  Tory  Sport  pop-­‐up  shop  at  257  Elizabeth  Street,  the   same  location  where  Burch  started  the  brand  11  years  ago.  The  collection  will  be  exclusively   available  at  TorySport.com.  A  permanent  store  will  open  in  the  Flatiron  District  in  March  2016.   • The  new  sports  line  features  clothing,  shoes,  bags  and  accessories  for  running,  studio,  tennis,   golf  and  swim.  Retail  prices  range  from  $55  to  $550.   Global  Brands  Group  Eyeing  Denim  Deals   (September  14)  Women’s  Wear  Daily   • Global  Brands  Group  just  closed  an  acquisition  of  Joe’s  Jeans  for  $13  million,  and  will  hold  the   long-­‐term  license  agreement  for  the  brand’s  core  categories.  Joe’s  Jeans  will  use  the  proceeds   to  repay  some  of  its  outstanding  debts.   • Bruce  Rockowitz,  CEO  and  Vice  Chairman  of  Global  Brands,  told  Women’s  Wear  Daily  that  “We   really  have  been  focused  on  what  are  the  categories  that  we  want  to  be  big  in  and  have  some   scale.  Denim  was  one.”   Walmart  to  Expand  Grocery  Pickup   (September  15)  MarketWatch   • Walmart  is  adding  several  dozen  grocery  pickup  locations  to  the  parking  lots  of  existing   Neighborhood  Markets  in  Northwest  Arkansas.   • The  company  wants  to  test  customers’  responses  to  picking  up  groceries  without  getting  out  of   their  cars.  The  additional  locations  are  part  of  a  bigger  expansion  of  the  service.   Target  Tests  On-­‐Demand  Grocery  with  Instacart   (September  15)  Target.com   • Target  is  piloting  one-­‐hour  grocery  delivery  service  with  Instacart  in  the  Minneapolis   metropolitan  area.  The  collaboration  will  allow  customers  to  purchase  select  Target  household   items,  such  as  health  and  beauty,  pet,  and  baby  products,  in  addition  to  groceries.   • Jason  Goldberger,  President  of  Target.com  and  Mobile,  stated,  “Our  team  is  constantly  listening   to  guests’  needs  and  looking  for  new  ways  to  help  them  shop  Target  wherever,  whenever  and   however  they  want.”   Wayfair  Partners  with  Tech  Company  roOomy  to  Improve  Online  Furniture  Shopping  Experience   (September  15)  PRNewswire.com   • Wayfair  announced  a  partnership  with  tech  solutions  provider  roOomy  to  use  high-­‐resolution   image  renderings  based  on  3D  product  models  for  DwellStudio  and  Birch  Lane  products.   • Now,  customers  shopping  on  these  sites  will  be  able  to  experiment  with  multiple  textures  and   fabrics,  and  see  360-­‐degree  views  to  find  the  perfect  pieces  of  furniture  for  their  home.    

 

 

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

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        September 18, 2015

ASIA  HEADLINES   China’s  Biggest  Internet  Companies  Rush  to  the  Entertainment  Sector   (September  15)  TechinAsia   • Tencent  announced  it  is  launching  its  own  filmmaking  arm,  Penguin  Pictures.  The  subsidiary  will   focus  primarily  on  original  online  programming,  but  it  will  also  invest  in  a  dozen  or  so  feature   films  each  year.  

• Alibaba  launched  its  own  film  business,  Alibaba  Pictures  Group,  last  year,  and  it  cofinanced  a  

summer  blockbuster,  Mission  Impossible:  Rogue  Nation.  Recently,  the  company  launched  its   own  Netflix-­‐style  subscription  streaming  service,  and  it  also  runs  a  crowdsourced  film-­‐investing   platform.  

Indian  Cab-­‐Hailing  Firm  Ola  Is  Raising  over  US$500  Million  at  a  Valuation  of  Around  US$5  Billion   (September  15)  TechCrunch   • India’s  Ola  is  raising  more  than  US$500  million  at  a  valuation  of  about  US$5  billion,  with  US$225   million  committed  so  far.  In  April,  the  company  was  valued  at  US$2.5  billion.   • Documents  filed  with  India’s  Registrar  of  Companies  revealed  Falcon  Edge  Capital  as  the  lead   investor.  Tiger  Global  Management,  SoftBank,  Hong  Kong’s  Steadview  Capital  Management,   Pittsburgh’s  ABG  Capital  and  the  FII  LTR  Focus  Fund  are  all  previous  investors  that  are  also   involved  in  this  round.  New  investors  include  JS  Global  Capital,  Parkwood  Bespin  and  Daniel  E.   Neary.   Nintendo  Promotes  Executive  to  Replace  Late  President  Iwata   (September  14)  Channel  NewsAsia   • Japanese  video  game  maker  Nintendo  said  that  it  was  promoting  Managing  Director  Tatsumi   Kimishima  to  replace  former  President  Satoru  Iwata,  who  died  of  cancer  in  July.   • Genyo  Takeda,  one  of  the  lead  developers  of  the  Wii,  and  Senior  Managing  Director  Shigeru   Miyamoto,  creator  of  the  Mario  and  Donkey  Kong  games,  will  remain  Nintendo’s  other  two   representative  directors.   Barron’s:  Alibaba  Shares  Could  Fall  Another  50%   (September  14)  Channel  NewsAsia   • Shares  of  Alibaba,  which  recently  slipped  below  their  initial  offering  price  after  having  rocketed   75%  in  their  first  two  months  of  trading,  could  lose  another  50%  of  their  value,  Barron’s  said  in   its  September  14  issue.   • Barron’s  cited  China’s  struggling  economy,  increasing  competition  in  e-­‐commerce,  and  more   scrutiny  of  the  company’s  culture  and  governance  as  the  reasons  for  its  dour  outlook.   Alibaba  Hits  Out  at  Report  that  Warns  of  50%  Stock  Dip   (September  14)  ZDNet   • Alibaba  issued  a  sharp  retort,  accusing  Barron’s  of  publishing  a  report  that  lacked  “integrity,   professionalism  and  fair  play.”  It  said  the  forecasts  were  based  on  incorrect  calculations;  for   instance,  Barron’s  compared  Alibaba’s  stock  performance  to  eBay’s,  although  the  latter  did  not   have  operations  in  China.  

• Alibaba  explained  that  it  transferred  ownership  of  Alipay  into  a  separate  private  partnership  

controlled  by  Jack  Ma  in  order  to  meet  Chinese  banking  licensing  requirements  that  say  that   nonbank  payment  processors  have  to  be  domestically  owned.  Barron’s  had  commented  that   both  before  and  after  the  transfer,  Alipay  was  domestically  owned.  

   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  ©  2015  The  Fung  Group.  All  rights  reserved.  

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        September 18, 2015

  Baidu  Injects  US$40  Million  into  Mobile  Health  Startup  Quyi   (September  14)  e27.co   • Founded  in  May  2015,  Quyi  develops  medical  apps  designed  to  shake  up  China’s  medical  sector.   The  Shanghai-­‐based  startup  has  developed  three  services  that  target  core  links  in  the  industry.   • All  of  Quyi’s  apps  are  constructed  on  the  company’s  comprehensive  information  platform,   which  is  supported  by  patient  data  collected  from  Quyiyuan  and  which  is  integrated  with  the   systems  of  partner  hospitals.  The  company  claims  to  have  more  than  1,000  public  hospitals  on   board  and  expects  the  number  to  reach  2,000  by  the  end  of  this  year.   Japanese  Edtech  Startup  Acquired  by  US  Startup  amid  Online  Tutoring  Boom   (September  13)  TechinAsia   • American  edtech  startup  EnglishCentral  announced  it  would  acquire  a  Japanese  startup,   Langrich,  which  offers  similar  online  tutoring  for  English  learners.  Tokyo-­‐based  Langrich  will  be   acquired  in  a  share-­‐swap  agreement  in  which  its  investors,  KLab  Ventures  and  Hitomedia,  will   become  minority  shareholders  in  EnglishCentral.   • Founded  in  2010,  Langrich  uses  English  tutors  in  the  Philippines  to  provide  English  instruction   via  Skype.  The  site’s  users  will  now  benefit  from  a  video  lesson  archive  available  online  and  via   mobile,  as  well  as  EnglishCentral’s  speech  recognition  technology  for  studying  vocabulary  and   pronunciation.   Snapdeal  Now  Offers  Instant  Refunds  to  Lure  Reluctant  E-­‐Commerce  Customers   (September  12)  TechinAsia   • Snapdeal  announced  that  it  will  offer  instant  refunds  via  an  IMPS  (immediate  payment  system   or  interbank  mobile  payment  service)  transfer,  a  service  that  is  well  known  to  consumers  in   India.  IMPS  is  granted  to  banks  that  are  registered  with  a  mobile-­‐banking-­‐service  license.  The   instant  refund  can  be  accessed  on  mobile  phones  and  computers.   • Flipkart  made  a  similar  move  weeks  ago,  promising  IMPS  refunds  within  24  hours  of  receiving  a   returned  product.  Snapdeal  wants  to  shorten  the  wait  to  90  minutes,  possibly  because  the   company  thinks  that  this  will  help  attract  Indian  consumers  who  are  still  wary  of  shopping   online.  

EUROPEAN  RETAIL  EARNINGS       Company  

Revenues  ($  Mil.)  

Change    

Change  in   Reporting   Currency  

Gross  Margin  (%)  

Change  

Net  Income  ($  Mil.)  

Change    

Store  Fleet  EOP  

Period  

2015    

2014    

(%)  

2015    

2014    

(BP)  

2015    

2014    

(%)  

2015  

2014  

Kingfisher    

1H  ending  Aug.  1    

8,404  

9,688  

(13.3)  

  (4.8)  

36.7  

36.5  

19.8  

486.6  

487.1  

(0.1)  

1,178  

1,157  

JD  Sports  Fashion    

1H  ending  Aug.  1  

1,239  

1,126  

10.1  

20.8  

47.4  

47.9  

(50.8)  

52.7  

21.3  

147.8  

879*  

766*  

Grupo  Inditex   Source:  Company  reports  

1H  ending  Jul.  31  

10,418  

10,056  

3.6  

16.5  

58.1  

57.6  

46.0  

1,289.4  

1,154.2  

11.7  

6,777  

6,460  

EUROPEAN  RETAIL  HEADLINES   H&M’s  August  Sales  Grow  Modestly  Due  to  Warm  Weather  in  Europe   (September  2015)  About.hm.com   • Swedish  fashion  retailer  H&M  reported  a  strong  year-­‐over-­‐year  sales  increase  of  11%  for  its   third  quarter  (June  1  through  August  31),  in  local  currencies.  In  Swedish  krona,  sales  increased   by  18%,  to  SEK5.3  billion  (US$6.3  billion),  due  to  the  weakening  of  the  Swedish  krona  against   the  euro  during  the  reporting  period.  

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

6

        September 18, 2015 • August  sales  increased  by  only  1%  in  local  currencies,  year  over  year.  The  company  stated  that   sales,  which  were  below  analysts’  expectations,  were  pulled  down  by  unseasonably  warm   weather  in  most  of  its  main  European  markets.   NEXT  Analyzes  the  Impact  of  Living  Wage  Increase  in  Its  Half-­‐Year  Results   (September  10)  Nextplc.co.uk   • NEXT  half-­‐year  results  through  July  showed  that  total  group  sales  were  up  by  2.7%,  to  £1.9   billion  (US$3  billion),  and  that  NEXT  brand  year-­‐over-­‐year  sales  increased  by  3.3%,  to  £1.8  billion   (US$2.9  billion).  Profits  before  tax  increased  by  7.1%,  to  £347.1  million  (US$534.5  million).  Retail   margin  increased  by  14.9%  year  over  year  thanks  to  better  currency  rates,  productivity   improvements  and  closure  of  underperforming  stores.   • NEXT  also  outlined  the  impact  of  the  Living  Wage  Premium  (LWP,  which  sets  a  new  minimum   wage  for  employees  who  are  25  or  older)  on  the  company’s  balance  sheet.  NEXT  stated  that  it   estimates  the  cost  of  implementing  LWP  will  be  £27  million  (US$42  million)  per  year  during  the   next  four  years.  The  company  deems  the  cost  manageable,  but  said  it  will  need  to  pass  part  of   the  burden  on  to  consumers  by  raising  prices  by  1%  during  the  same  period.   Morrisons  Reports  Negative  Half-­‐Year  Results  and  Sells  its  Convenience  Stores  at  a  Loss   (September  10)  Morrisons-­‐corporate.com   • Morrisons’  half-­‐year  results  showed  a  like-­‐for-­‐like  sales  decline  (excluding  fuel  and  VAT)  of  2.7%   and  a  total  turnover  decline  of  5.1%  (to  £8.1  billion,  US$12.6  billion).  Profit  before  tax  declined   by  35%,  to  £117  million  (US$182  million).  To  revive  its  business,  the  retailer  is  reconsidering  its   priorities.  Its  immediate  strategic  focus  is  to  improve  performance  in  its  core  supermarkets— which  explains  its  decision  to  exit  the  convenience  store  channel.   • The  company  announced  it  would  sell  140  of  its  M  Local  convenience  stores,  all  but  five  in   operation,  to  private  equity  firm  Greybull  Capital  and  a  team  led  by  retail  entrepreneur  Mike   Green  for  £25  million  (US$30  million).  The  remaining  stores  are  either  on  forecourts  or  will  be   converted  to  small  Morrisons  supermarkets.  Morrisons  expects  to  incur  a  loss  of  around  £30   million  (US$47  million)  from  the  sale.  The  outlets  will  be  rebranded  as  My  Local  stores  by  the   new  owners  and  will  continue  to  operate.   IKEA  Announces  Strong  Sales  Growth  for  Fiscal  Year  2015   (September  10)  Ikea.com   • IKEA  reported  strong  sales  growth  for  its  fiscal  year  ending  August  31.  Total  sales,  adjusted  for   currency  impacts,  increased  by  8.9%,  while  turnover  (reported  in  euros)  increased  by  11.2%,  to   €31.9  billion  (US$34.9  billion).  IKEA’s  bed  and  bathroom  furnishing  solutions  contributed  to   comparable  store  sales  growth,  as  did  the  opening  of  new  stores  and  new  multi-­‐channel   solutions.   • During  fiscal  year  2015,  China  remained  IKEA’s  fastest-­‐growing  market,  followed  by  Russia.   Germany  and  North  America  performed  strongly,  too,  as  did  the  majority  of  the  markets  in   which  IKEA  operates.  Even  Southern  Europe  showed  improvements.  Only  a  few  markets  were   still  struggling  due  to  the  persistence  of  challenging  economic  conditions.   Ocado  Releases  Trading  Update  for  Third  Quarter   (September  15)  Conveniencestore.co.uk   • Ocado  recorded  a  15.3%  increase  in  gross  retail  sales  in  its  third  quarter,  with  average  orders   per  week  going  up  16.6%,  to  190,000.  The  average  order  size,  however,  dipped  £1.15  to   £110.46  (US$170).  CEO  Tim  Steiner  stated  that  he  expects  future  growth  to  be  “slightly  ahead  of   the  online  grocery  market.”   • CFO  Duncan  Tatton-­‐Brown  told  reporters  that  Ocado  is  targeting  an  overseas  technology   partnership  this  year.  Previously,  the  company  had  said  that  it  was  looking  toward  Western   Europe  or  North  America  for  a  partnership  in  licensing  its  technology.  

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

7

        September 18, 2015   Boden  to  Expand  Further  in  the  UK  and  the  US   (September  14)  Financial  Times   • Boden  intends  to  open  more  shops  in  the  UK  and  its  first  US  store  in  response  to  increased   demand  for  its  clothes.  Currently,  the  online  and  catalog  retailer  has  just  one  shop  in  West   London,  but  the  newly  appointed  Deputy  Chairman,  Julian  Granville,  informed  the  Financial   Times  that  the  company  plans  to  open  shops  in  key  markets  over  the  next  few  years.   • Granville  mentioned  that  Boden  wants  to  give  customers  a  chance  to  “come  to  [their]  brand”   and  that  those  who  “buy  a  limited  part  of  a  range  can  buy  more  at  stores.”  Customers  can  also   pick  up  products  ordered  online  at  the  stores.  Granville  stated  that  the  company  has  been   expanding  successful  products  in  its  womenswear  range,  particularly  dresses  in  printed  fabrics.   South  African  Group  Looking  to  Buy  Office   (September  14)  Financial  Times   • Truworths,  a  South  African  company,  is  looking  to  buy  British  shoe  chain  Office  from  Silverfleet   Capital.  Truworths  did  not  disclose  the  deal  price  and  said  it  had  not  yet  made  a  binding  offer.   • Silverfleet,  a  US  buyout  group,  had  acquired  Office  from  a  Scottish  entrepreneur  five  years  ago   for  £150  million  (US$230.81  million).  Asda’s  former  chief  executive  is  the  current  chairman  of   Office.  The  chain  has  about  99  stand-­‐alone  outlets  and  48  concessions  in  department  stores   Selfridges,  House  of  Fraser,  Harvey  Nichols  and  Topshop.   Lidl  Announces  Store  Opening  Strategy  that  Targets  Areas  within  London’s  M25   (September  14)  Retailanalysis.igd.com   • Lidl  plans  to  open  281  new  stores,  many  of  them  in  central  London.  It  previously  focused  on   locations  that  were  in  the  suburbs.  Currently,  Lidl  operates  about  70  stores  that  are  within  the   M25  motorway  that  almost  encircles  Greater  London;  10  of  these  stores  are  either  in  or  around   central  London.   • Lidl  has  been  investing  heavily  in  brand  campaigns  that  emphasize  its  value  and  quality,  which   have  reportedly  attracted  new  customers,  including  more  affluent  shoppers.  The  German   retailer  is  looking  for  sites  that  are  between  10,000  and  28,000  square  feet  for  some  stores  and   properties  that  are  up  to  four  acres  for  bigger  developments.  The  property  director  of  Lidl  told   reporters  that  prices  of  products  in  the  city  stores  will  remain  the  same  as  those  at  Lidl’s  other   stores.    

 

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

8

        September 18, 2015

LATAM  HEADLINES   Brazil’s  Political  Vacuum  Worsens  Economic  Crisis   (September  14)  The  Globe  and  Mail   • Last  week,  Standard  &  Poor’s  downgraded  Brazil’s  sovereign  debt  to  below-­‐investment-­‐grade   status.  Brazil’s  currency  is  off  40%  year  over  year  from  the  US  dollar  and  down  60%  since  2011,   and  the  real  is  expected  to  fall  another  16%.   • The  unemployment  rate  currently  stands  at  7.5%,  as  compared  to  4.3%  last  December,  and  is   expected  to  hit  10%  by  the  end  of  the  year.   • The  government’s  ability  to  intervene  has  been  severely  weakened  by  the  Petrobras  scandal.   Mexican  Textile  and  Apparel  Industry  Expected  to  Hit  US$26  Billion  This  Year   (September  10)  WWD.com   • The  Mexican  textile  industry  is  expected  to  grow  by  4%  this  year,  to  about  US$26  billion,  aided   by  a  recovery  in  US  exports  and  strong  demand.   • Exports  are  expected  to  increase  by  10%  this  year,  to  $4.5  billion,  based  on  a  sharp  increase  in   the  first  half  following  a  10%–15%  decline  last  year.   • Domestic  apparel  consumption  is  expected  to  increase  by  3%–4%  in  2015,  after  a  2%  increase   last  year.   Walmex  Expects  Strong,  Stable  Prices  throughout  the  Remainder  of  the  Year   (September  9)  Reuters  Mexico   • Walmex  hopes  to  maintain  stable  pricing  throughout  the  remainder  of  the  year,  amid  a  strong   recovery  in  consumption  and  thanks  to  strong  foreign  remittances.   • Sales  increased  by  7.4%  during  the  first  eight  months  of  the  year,  and  same-­‐store  sales   increased  by  5.4%  in  the  same  period.   • Walmex  expects  to  double  in  size  over  the  next  10  years.   Carlos  Slim  Plans  to  Expand  Philosophy  Jr.  Studio  into  Stand-­‐Alone  Retail  Chain   (September  8)  Forbes   • Billionaire  Carlos  Slim  Helú’s  companies  recently  announced  their  intention  to  expand   Philosophy  Jr.  Studio,  a  new  fashion  brand  for  young  women,  into  a  stand-­‐alone  retail  chain.   • Beginning  this  September,  Philosophy  is  expected  to  be  offered  in  two  malls  in  Mexico  City  and   in  the  state  of  Mexico.   • Slim  plans  to  invest  US$20  million  to  open  100  stand-­‐alone  stores  by  2017.   Fashion  Week  Mexico  to  Expand  to  Other  Cities   (September  8)  WWD.com   • Fashion  Week  Mexico,  which  is  held  biannually  in  Mexico  City,  is  expected  to  expand  to  the   cities  of  Guadalajara  and  Monterrey.   • The  Guadalajara  show,  held  in  Mexico’s  second-­‐largest  city,  is  expected  to  attract  1,000   attendees,  versus  1,600  attendees  at  its  first  occurrence  in  2014.   • The  Monterrey  show  was  held  May  9–11  and  attracted  1,200  attendees.    

 

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

9

        September 18, 2015

EARNINGS  CALENDAR  

 

Sales  (Mil.)  

EPS  

Earnings   Release   Period  

Date  

Consensus   TY  

LY  Actual  

Consensus   TY  

LY  Actual  

Currency  

Industria  de  Diseno  Textil  

1H  16  

Sep.  16  

9,388  

8,085  

0.37  

0.30  

EUR  

Rite  Aid  

2Q  16  

Sep.  17  

7,603  

6,523  

0.04  

0.13  

USD  

Esprit  Holdings  

FY  15  

Sep.  23  

19,867  

24,227  

(0.01)  

0.11  

HKD  

Hennes  &  Mauritz    

3Q  15  

Sep.  24  

45,624  

38,805  

N/A  

3.20  

SEK  

Nike  

1Q  16  

Sep.  24  

7,603  

6,523  

0.04  

0.13  

USD  

Costco  

4Q15  

Sep.  29  

36,486  

35,524  

1.66  

1.58  

USD  

J  Sainsbury  

1H  16  

Oct.  1  

12,428  

12,667  

0.12  

0.14  

GBP  

Tesco  

1H  16  

Oct.  7  

30,429  

30,473  

0.06  

0.08  

GBP  

Walgreens    

4Q  15  

Oct.  8  

28,519  

19,057  

0.81  

0.80  

USD  

Fast  Retailing  

FY15  

Oct.  8  

1,668  

1,383  

N/A  

N/A  

JPY  

eBay  

3Q  15  

Oct.  14  

2,096  

4,353  

0.40  

0.54  

USD  

Google  

3Q  15  

Oct.  16  

15,030  

16,523  

7.23  

4.70  

USD  

VF  Corp  

3Q  15  

Oct.  19  

3,678  

3,520  

1.12  

1.08  

USD  

ASOS    

FY15  

Oct.  20  

1,160  

976  

0.44  

0.45  

GBP  

Apple  

4Q  15  

Oct.  20  

50,878  

42,123  

1.87  

1.42  

USD  

Tractor  Supply  

3Q  15  

Oct.  21  

1,488  

1,360  

0.63  

0.55  

USD  

Brunswick    

3Q  15  

Oct.  22  

995  

932  

0.74  

0.65  

USD  

Procter  &  Gamble  

1Q  16  

Oct.  22  

17,531  

20,792  

0.96  

1.07  

USD  

Carter’s  

3Q  15  

Oct.  22  

856  

799  

1.47  

1.24  

USD  

Overstock.com  

3Q  15    

Oct.  22  

402  

353  

0.14  

0.07  

USD  

Debenhams  

FY15  

Oct.  22  

2,668  

2,313  

N/A  

0.07  

GBP  

Amazon  

3Q  15  

Oct.  23  

24,904  

20,579  

0.83  

(0.71)  

USD  

Under  Armour  

3Q  15  

Oct.  23  

1,176  

938  

0.44  

0.41  

USD  

Taubman  Centers    

3Q  15  

Oct.  26  

136  

176  

0.78  

0.87  

USD  

Company  

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

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        September 18, 2015

  EVENT  CALENDAR  

 

 

Event  

Location  

Date(s)  

FBIC  Presenting  

WWD  Digital  Forum  NYC      

New  York,  NY  

September  16–17  

 

Mélange  –  Where  Fashion  Meets  Technology    

New  York,  NY  

September  16–17  

 

BAML  Global  Consumer  &  Retail  Conference  

London,  UK  

September  16–18  

 

ICSC  Western  Division  Conference  

San  Diego,  CA  

September  16–18  

 

Mfashion  4WRD  –  Future  of  Digital  Technology  

Boston,  MA  

September  17  

 

TechCrunch  Disrupt  San  Francisco    

San  Francisco,  CA  

September  21–23  

 

Alimentation  Couche-­‐Tard  Analyst  Day  

Laval,  Québec  

September  22  

 

Silicon  Valley  Robotics  Network  Breakfast    

San  Jose,  CA  

September  23–24  

 

Hermès  Retail  Week  Supply  Chain  Awards  

London,  UK  

September  24  

 

Online  News  Association  15  –  Future  of  Media  

Los  Angeles,  CA  

September  24–26  

 

Apparel  Executive  Forum  by  Apparel  Magazine  

New  Orleans,  LA  

September  28–30  

 

ICSC  –  VRN  Fall  Outlet  Convention  

Secaucus,  NJ  

September  29–30  

 

Pepcom  Holiday  Spectacular    

New  York,  NY  

September  30  

 

Ecommerce  Expo  

London,  UK    

Sept.  29–Oct.  1  

 

Dunkin'  Brands  Analyst  Day  

New  York,  NY  

Sept.  29–Oct.  1  

 

WWD  –  Real  Estate  20/20  Summit  

New  York,  NY  

October  1  

 

TAP  Conference  2015  –  Mobile  Commerce  

New  York,  NY  

October  1  

 

Gartner  ITxpo  

Orlando,  FL  

October  4–8  

 

Shop.org  Digital  Summit  

Philadelphia,  PA  

October  5–7  

 

Urban  Land  Institute  –  Fall  Meeting    

San  Francisco,  CA  

October  5–8  

 

IT  Expo  West    

Anaheim,  CA  

October  5–8  

 

Amsterdam  E-­‐Week  

Amsterdam,  Netherlands    

October  5–9  

 

How  Cascading  Disruptions  Will  Change  Our  World  

San  Francisco,  CA  

October  7  

 

Future  of  Storytelling  

New  York,  NY  

October  7–8  

 

AAFA  Footwear  Workshop  

Lawrence,  MA  

October  8  

 

Lundgren  Center  Executive  Board  University  of  Arizona   Tucson,  AZ  

October  10  

 

TEDxHongKong  2015  

Hong  Kong  

October  11  

 

National  Association  of  Convenience  Stores  

Las  Vegas,  NV  

October  11–14  

 

October  13–15  

 

NG  Retail  –  12th  Annual  Next  Generation  Retail  Summit     Dublin,  Ireland    

   

 

 

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

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        September 18, 2015     Deborah  Weinswig,  CPA  

Executive  Director—Head  of  Global  Retail  &  Technology   Fung  Business  Intelligence  Centre   New  York:  917.655.6790     Hong  Kong:  +852  6119  1779   [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:   th 1359  Broadway,  9  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  

 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  ©  2015  The  Fung  Group.  All  rights  reserved.  

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