Licensing, marketing and retail expert/opinion leader Tony Lisanti, provides insight and perspective for the top headlines of the week. “Licensing and Merchandising Report” is a must read for top execs who want objective, straightforward and authoritative analysis.
Party City Looks to Toys for Growth
The battle to grab the $11 billion in annual toy sales left behind by the liquidation of Toys “R” Us, continues with Party City.
The specialty retailer, which operates 900 stores, will open 50 new ‘Toy City’ branded pop-up stores alongside its well-established Halloween City pop-up stores in a variety of locations across the country. The Toy City pop-ups will open in early September in conjunction with the opening of Halloween City stores and operate through the holiday season.
Party City’s strategy is reminder of the seasonality of the toy business and TRU’s dependence on holiday sales, and its constant challenges and initiatives to establish a bona fide year-round toy business. If the majority of sales are holiday driven, then why have year-round stores? The pop-ups make complete sense and throughout the balance of the year, toy sales can basically become a licensed toy business merchandised around key holidays, theatrical releases, sports events, etc. Special promotions and destination displays can be incorporated in Party City stores and online.
According to Party City, the retailer already has channel exclusivity on a vast majority of licensed product and 20% of its consumer products business is licensed and 5% is direct-to-retail licenses with major specialty suppliers.
CEO James Harrison said, “The creation of a Toy City concept to complement our temporary seasonal retail strategy is a logical extension of our brand; one that will allow us to leverage our existing pop-up store capabilities and capitalize on the category whitespace that has recently been created.”
Party City will also test an expanded assortment of toys online.
For fiscal year 2018, Party City provided the following guidance: Total revenue of $2.44 to $2.49 billion; brand comparable sales growth of approximately 1%; adjusted EBITDA of $415 to $430 million; and adjusted net income of $172 to $183 million.
Amazon Turns Up Heat for BTS
While summer officially began just a week ago and shoppers are gearing up for the Fourth of July holiday next week, Amazon has already announced its back-to-school plans—and they are rather impressive.
Amazon’s BTS program features both Back to School and Off to College stores with products ranging from superhero backpacks and sequin pencil pouches to the latest adidas footwear and other apparel. Brands include Crayola, GoPro, BIC, Sharpie, Osmo, Keurig, Calvin Klein, Elmer’s, Acer, Bose and more.
While other retailers such as Walmart and Target will have major BTS promotions, they are already playing catch-up to the ecommerce giant. Amazon is out first and fittingly with a mega assortment of products, including textbooks, and other initiatives that leverage its Prime Membership benefits, free delivery, and aggressive pricing. Licensed products are also a key part of the merchandise mix.
Amazon’s redesigned Back to School store features core categories including School Supplies; Clothing, Shoes & Accessories; Electronics; Everyday Essentials; Toys & Games; and Deals. In addition, educators have their own dedicated shop where they can purchase classroom necessities on Amazon Business.
Steve Downer, director of consumer electronics, said: “Our goal is to help customers save precious time during the beautiful summer months by offering a one-stop shop where they can easily find everything they need for the upcoming school year, such as a pair of stylish shoes that can endure a semester’s worth of campus treks or flexible seating options for students whose teachers want to create more movement in the classroom.”
Amazon also introduced a new feature that allows teens 13 through 17 years old to create their own Amazon login under their parent’s account and shop independently with parents approving all orders or setting pre-approved spending limits.
Amazon’s new Off to College store offers all the dorm room décor, class essentials, and late-night snacks. Parents, students, and educators can browse popular categories, including College Essentials; Textbooks; Clothing, Shoes & Accessories; Electronics; Study Supplies; Home.
Amazon is also offering a Prime Student membership similar to its popular Prime Membership with various discounts and deals.
Fall fashion items for kids include Converse Kids’ Chuck Taylor All Star Canvas High Top Sneaker, Rockland Jr. My First Backpack, STATE Girls’ Downtown Kane Backpack, Spotted Zebra Boys’ Fleece Zip-up Hoodie, Kid Nation Girls’ Long Sleeve Rainbow Pullover Sweater, and adidas Boys’ Athletic Pullover Hoodie; playful classroom supplies such as the Blue Sky 2018-2019 Academic Year Weekly & Monthly Planner, Avery Despicable Me Durable Binders, Llama Skip Hop Zoo Lunchies, KLUTZ BFF Backpack Charms, and Crayola Silly Scents Twistables Crayons; and colorful learning essentials like Elmer’s Glow-in-the-Dark Glue, Crayola Back to School Supplies Set, Canon IVY Bluetooth Mini Photo Printer in Rose Gold and Cosmic Color Sharpie Permanent Markers.
Fall fashion items for college shoppers include: adidas Foundation Iv Backpack, 7 For All Mankind Women’s Josefina Boyfriend Jean, adidas Originals Men’s Cloudfoam Ultimate Running Shoe, Goodthreads Men’s Short-Sleeve Slub Henley Tee, and Monrow Women’s Relaxed Crewneck with Embroidered Heart; dorm room decor such as the Rivet Caden Task Table Lamp, Rivet Modern Ombre Effect Lightweight Throw, AmazonBasics Closet Storage Organizer, Nespresso Inissia Espresso Machine by De’Longhi, and Umbra Estique Entry Organizer; and study necessities like the ASUS Chromebook, Bose QuietComfort 35 (Series II) Wireless Noise Cancelling Headphones, Sharpie Liquid Highlighters, and Avery Big Tab Reversible Fashion Dividers in Assorted Glitter Colors.
DOJ OKs Disney Offer for Fox
With the U.S. Department of Justice approval paving the way for Walt Disney’s acquisition of 21st Century Fox, it doesn’t seal the deal quite yet, as another counter offer from Cablevision may be forthcoming and further complicating the final decision.
The DOJ said OK to Disney’s offer, but required that the company sell-off Fox’s 20-plus regional sports networks. This is not a concern or deal breaker as Disney has been reportedly shopping ESPN and may just be better off not involved in the sports business, regardless of its audience, content and partnership potential.
The Walt Disney Company responded to Comcast’s $65 billion bid last week by upping its offer to $71.3 billion, which is almost $19 billion more than its original offer made last December.
The focus remains on Comcast as to whether it will make another offer, what the offer will be and what it will include and whether it will sway the Fox board. Furthermore, Comcast might not get the DOJ’s quick blessing as more due diligence will be required. Regardless, it will be a few weeks before Fox makes a decision and any potential deal is finalized.
If the Disney-Fox deal is finalized, there will be a critical integration period that will include executive changes, structural changes, in-depth analysis of core synergies and a reevaluation of content in the Fox pipeline.
Remember, that it took several years for the Marvel and Lucasfilm acquisitions and strategic plans to unfold and mature. The Fox businesses, similar to the other acquisitions, are well-established so there’s no rush to force immediate and/or unnecessary change. But consider how both Marvel and Lucasfilm have grown and how they expanded content and core franchises, theatrical, television, brand licensing and retail presence. It’s almost a sure bet that Disney will follow a similar path with the Fox acquisition.
GBG Sells Brands Biz
Differential Brands Group has acquired a significant part of Global Brand Group’s North American licensing business, which is comprised of licensed products from Disney, Star Wars, Calvin Klein, Under Armour, Tommy Hilfiger, BCBG, bebe, Joe’s, Buffalo David Bitton, Frye, Michael Kors, Cole Haan and Kenneth Cole. The $1.38 billion acquisition is expected to close in the third quarter of 2018.
The deal is win-win for both companies. It significantly increases the size of DBG and its portfolio of brands comprised of Hudson, Robert Graham and SWIMS. The company, which generated $164 million in revenue last year, will add annual revenue of $2 billion from the acquisition. Meanwhile, GBG can now reduce its debt of close to $1 billion. GBG, which was formed in 2014 as a spinoff from Li & Fung, will keep its businesses in Europe and Asia as well as its interest in the CAA-GBG brand management business with Creative Artists Agency.
According to DBG chairman and managing partner of Tengram Capital Partners William Sweedler, DBG plans to invest significant capital and transform Differential into a large scale North American branded platform.
Quote of the Week
Via Forbes: “Good Retail Should Feel Like Vacation Sex”
“With retailers declaring bankruptcy left and right, and with the oft-cited refrain of the ‘retail apocalypse’ about as prevalent as a Kardashian tweet, it is important that the industry never lose sight of the universal truth that physical retail experiences still matter. Like good sex—good retail is still physical. It is unexpected, guttural and sensual. No matter how hard it tries, digital will never supplant physical retail’s greatest attribute—the shear memory and delight of being somewhere, with someone.”
Stat of the Week
Apparel Sales Continue Online Growth: According to Internet Retailer’s 2018 Online apparel Report, total apparel sales in the U.S. remained flat in 2017 at $359 billion, while online apparel sales of grew 16.8% to $98.5 billion. In 2017, the online share of total apparel sales jumped to 27.4% from 23.5% in the prior year.
In the Field
(Weekly Spotlight of Licensed Products at Retail)
It seems like everyone wants a piece of the toy biz these days even fashion retailer Nordstrom Rack. The above display, which was in the kid’s department, features Mattel brands Barbie and Hot Wheels. To say it’s awkward and out of place is an understatement. But obviously someone thought it would be a good idea to appeal shoppers as an impulse purchase. I do believe there might be an opportunity in licensed kids products, but the execution needs to be better and perhaps tied to well-known, highly visible and current franchises that resonate with shoppers. This strategy could also be a strong holiday position as well as themed promotional opportunities.
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