Walmart’s Q1 underscores its strategies; Target debuts beauty brand; Taco Bell plans themed hotel; Today show opens café; Iconix turnaround continues; LIMA Rebrands; plus, other top brand, licensing and retail news.
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 for the retailers, licensors and brands.
Target Debuts New Skincare Brand
In its effort to be timely and on-trend, Target debuted a new skin care brand, Versed this week. The collection—which addresses everything from dryness to acne to aging—was developed by the same team that created Target-exclusive Who What Wear apparel and accessories line. Prices are all under $20.
This is another example of Target’s brand strategy that focuses on exclusive proprietary brands with attractive packaging and pricing that deliver value to its shoppers. And it’s another brand that takes the valuable shelf space from national brands, licensed brands and celeb brands.
“We know our guests are looking for options when it comes to building a skin care routine that’s right for them. The Versed collection offers trend-forward products that are affordable, made with cleaner ingredients and above all, are effective,” said Christina Hennington, Target’s senior vice president, general merchandise manager, essentials, beauty, hardlines and services. “Adding Versed to our assortment not only gives guests first access to a new beauty brand, but it’s another way we’re continuing to differentiate our beauty assortment and reinforce Target as the ultimate destination for all beauty and skin care needs.”
From cleansers to treatments to moisturizers, the 19-product collection contains proven ingredients like soothing eucalyptus oil, hydrating aloe leaf juice, brightening vitamin C and dozens more. According to Target, Versed products were formulated without over 1,300 common toxins (move over sulfates, parabens and phthalates!), added colors and fragrances, and are vegan and cruelty-free.
“After years of consumer research, we started to notice a gap in the beauty market,” explained Katherine Power, CEO and founder of Versed. “Shoppers were looking for a brand that was deeply rooted in research and was comprised of clean products that not only work great but are easy to use and make them feel good. We’ve checked all three boxes with proven, powerful ingredients, simple icons and an online quiz that directs users to products that address their specific skin concerns. And because we’re so confident in the results, our launch campaign is free of airbrushed skin and paid influencers.”
Walmart Q1 Underscores Key Strategies
Walmart reported strong financials for Q1 ended April 26 that not only underscore key initiatives for the mega retailer, but also the highly competitive retail landscape especially among the top tier companies. Walmart’s recent initiatives clearly exemplify its commitment, investment and differentiation regarding ecommerce, merchandising, technology and environmental. These are among the issues that define the new retail battleground and the major investments that are being made among the top retailers, while small and mid-sized retailers struggle with these major challenges.
Key results include:
- Total revenue was $123.9 billion, an increase of $1.2 billion, or 1%.
- Walmart U.S. comp sales of 3.4% marked the company’s best in nine years and the fourth consecutive quarter above 3%.
- Walmart U.S. ecommerce sales were up 37%, which the company attributed to strong growth in online grocery, as well as the home and fashion categories on Walmart.com.
- Net sales at Walmart International were $28.8 billion, a decline of 4.9%.
• Operating income declined 4.1%.
Key takeaways from Walmart Q1 include:
- Ecommerce: In a competitive move following Amazon’s announcement, Walmart launched free NextDay delivery with plans to reach 75% of U.S. population by year’s end. Walmart Introduced Walmart Voice Order, initially through the Google Assistant, to help make online grocery orders easier, Walmart launched new personalized online baby registry and its first online pet pharmacy, Walmartpetrx.com.
- Brands and Merchandising: Walmart launched several exclusive PL brands including a line of denim with Sofia Vergara, MoDRN brand in the home category, Hello Bello brand in the baby category with Kristen Bell and Dax Shepard, Flower brand in the home category with Drew Barrymore; Evolution_18, a health & wellness line from Bobbi Brown, a partnership with KIDBOX to deliver personalized kids fashion subscription boxes, and the creation of a new Angus beef supply chain to service 500 U.S. stores.
- Technology: Walmart launched a new Intelligent Retail Lab store to test the possibilities of artificial intelligence, acquired natural language processing startup, Aspectiva and Polymorph Labs to expand in-house advertising technology
- Environmental: Walmart launched a new reusable shopping bag campaign in U.S. stores and new plastic packaging waste reduction commitments.
Taco Bell Plans Themed Hotel
Mexican fast food chain Taco Bell unveiled plans for a themed hotel in Palm Springs, California. Beginning August 9, The Bell: A Taco Bell Hotel and Resort will offer guests a variety of brand extensions in design, apparel, gifts, and food.
According to the company, everything from guest rooms to breakfast to poolside cocktails will be infused with a Taco Bell twist. A gift shop will offer exclusive apparel, salon will offer nail art, fades and a braid bar, the menu will feature special snacks and other menu items.
“The Bell stands to be the biggest expression of the Taco Bell lifestyle to date. It will be fun, colorful, flavorful and filled with more than what our fans might expect,” said Taco Bell’s chief global brand officer Marisa Thalberg. “Also, just like some of our most sought-after food innovation, this hotel brings something entirely new for lucky fans to experience and enjoy.”
Taco Bell, which has long been active in licensing from a Forever 21 fashion line to weddings in the Las Vegas flagship Cantina, understands what it means to market its brand and give fans special experiences and immersive entertainment,
‘Today’ Cafe Opens At Universal Orlando Resort
The ‘Today Café’ officially opened this week at Universal Orlando Resort and was featured on the Today Show with live coverage by co-anchor Al Roker.
The café features a highly-themed environment that makes customers feel like they are stepping onto the set of the morning show. A variety of specialty foods and beverages are offered including seasonal dishes inspired by Roker’s favorite recipes.
This is a great example of how NBCU has incorporated one of its own shows into the theme park as well as a specific brand extension that engages fans and enhances the Today Show’s culture and programming.
The Today Cafe offers breakfast items including avocado toast, organic acai bowls and New York-inspired sandwiches and salads. Top highlights include a new twist on a classic Italian sandwich piled high with porchetta, spicy capicola, provolone, roasted tomato, arugula, basil aioli on a crunchy baguette, and an Asian-inspired chicken salad that combines baby arugula, cabbage, radicchio, shitake mushrooms, daikon sprouts, wasabi cashews and soy peanut vinaigrette.
Also, as a tribute to a long running tradition in Kathie Lee and Hoda’s hour of Today, guests can enjoy wine and beer on tap with a delicious cheese platter for two. The Today Cafe is located at the entranceway across the street from the Universal Studios Store offering breakfast, lunch and snacks.
Iconix: Analyst Remains Positive
While the turnaround continues at top licensor Iconix, financial analyst Eric Beder of Small Cap Consumer Research, remains optimistic about the company’s position especially looking ahead to 2020.
“We are reiterating our Buy rating and $8 price target for Iconix and maintaining our EBITDA projection for 2019 and 2020, while reducing our EPS to fully account for the recent 1 for 10 stock split and the impact of the convertible debt on EPS and the overall share count. While 2019 comparisons will be materially impacted by the loss of key DTRs and the bankruptcy of Sears/K-Mart, we believe Iconix management continues to aggressively shift the cost structure and build the licensing pipeline to drive year-over-year top line and EBITDA growth in 2020.
“We believe investors remain wary; we reiterate our buy rating for investors and believe the risk/reward remains positive.”
For 1Q19, revenue was $35.9 million, down 26% over last year. According to Beder, the company anniversaried the loss of the Wal-Mart “DTR” relationship, the Mossimo/Target loss, the dropping of Royal Velvet by JC Penney, the Sears bankruptcy (which resulted in no Sears driven revenue in the quarter) and a negative $2 million impact from last year’s World Cup related sales for Umbro.” However, Beder points out that the company did see solid results for key brands such as Lee Cooper, Umbro, Starter and Buffalo.
Beder reported that the Iconix pipeline for licenses remains the key focus for management pointing out that so far in 2019 the company has signed 65 licensing deals which translate to aggregate guaranteed minimum royalties of approximately $40 million that will have a limited impact in 2019 and should be positives for 2020. “Management continues to aggressively pursue further licensing transactions; the company continues to negotiate with Sears for the Joe Boxer brand and Cannon and to find new licensees for OP and Mossimo,” Beder reported.
“Following the 1Q lead and reducing our revenue assumptions but leaving our 2019 and 2020 EBITDA projections unchanged. Management’s new guidance for 2019 revenue is $147 to $158 million, a narrowing from prior guidance of $145 to $160 million and EBITDA of $71 to $78 million, a narrowing from $70 to $80 million. Our new 2019 revenue projections are now at the lower-end of the new range, reflecting conservatism and the potential limited impact from new licensing agreements, while our prior 2019 EBITDA projection of $75.5 million remains intact, as we are confident in management’s ability to hold the line on costs. Further, we now project an incremental $11 million YoY increase in 2020 revenue, to $159 million, driven by new contracts and continued gains from current deals.”
“We are encouraged by the company’s pace of new contracts, aggressiveness in tackling expenses and materially expanding the number of licensing agreements,” reported Beder. “That said, we understand, with brutal comparisons and the potential for somewhat confusing bottom line figures, that ICON will remain somewhat a “diamond in the rough” for a while. We continue to view the risk/reward favorably and reiterate our Buy rating.
Most Valuable Retail Brand: Amazon
The world’s most valuable retail brand, Amazon ($315.5 billion), accounts for nearly a quarter (23%) of the total brand value of the Top 75 Most Valuable Global Retail Brands report from WPP and Kantar. The second annual BrandZ Top 75 revealed the world’s most valuable retail brands are worth $339 billion more than last 2018 for a total of $1.4 trillion.
David Roth, CEO of The Store WPP EMEA and Asia and Chairman of BrandZ, said: “We are entering the third era of digital retail as human rhythms meet algorithms enabling retailing to be much more digital but appear more human. This year’s rankings also signal the increasing importance of Chinese retailers in online and mobile commerce indicated by Alibaba’s rise to the number two position. It is at the cutting edge of where ecommerce, mobile and physical retail intersect with the consumer.”
Graham Staplehurst, Global Strategy Director for BrandZ at Kantar, said: “What the e-commerce players have capitalized on so successfully is the importance of the human touch to online retail. Access to unprecedented computing power and near limitless data as well as artificial intelligence and visual and voice technology interfaces gives retailers and brands the ability to absorb and process vast amounts of information but in a way that puts the shopping experience firmly back in the human domain.”
LIMA Becomes Licensing International
The Licensing Industry’s Merchandising Association—known to everyone as LIMA for the past 35 years—has a new name, identity, and website.
“This change is the culmination of a nearly year-long process to strike just the right chord in representing what the licensing industry is today and where it’s going,” said Maura Regan, president. “Licensing International identity is symbolic of the changes that have occurred in the licensing industry over the past three decades, and of the future path the association will forge on behalf of its members.”
With its new look and new name, the timing is right for the association to broaden its appeal, develop new value-added programs and events, and attract new members from around the globe. Like any major industry association, Licensing International must be relevant, progressive and provide inherent value to all its members.
“The name Licensing International is also indicative of the broader scope that modern brand licensing now encompasses, reaching well beyond the realm of merchandising to touch new and growing categories–from media companies launching into experiential services, to concept shops within large retail chains, to the revival of iconic brands in new formats,” Regan said.
“Through the years, our organization has been at the center of the licensing business, promoting best-in-class successes, supporting the professional development of our members and inspiring commercial and creative excellence in licensing. Those priorities remain as we enter this new chapter. We will also place renewed importance on our key goals, including fostering the growth and expansion of licensing globally; raising the level of professionalism of licensing practitioners; and generating greater awareness of the benefits of licensing in the business community at large.
Celebrity Deal of the Week – Rihanna
LVMH has partnered with Robyn Rihanna Fenty to create a new luxury Maison called Fenty that will be based in Paris. Rihanna will develop ready to wear, shoes and accessories that will debut this spring. It’s a brand with huge potential, ability to reach new millennial consumers, and it will reinforce the trend of celeb brands and certainly attract new personalities. Rihanna said: “Designing a line like this with LVMH is an incredibly special moment for us. Arnault has given me a unique opportunity to develop a fashion house in the luxury sector, with no artistic limits. I couldn’t imagine a better partner both creatively and business-wise, and I’m ready for the world to see what we have built together.”