Kohl’s makes major commitment to sports licensing, disappoints in Q1; Target impresses; Mattel and WBCP extend deal, but Moody’s downgrades company; Beanstalk adds major brands; plus, other top brand, licensing and retail news highlights of the pre-Memorial Day weekend.
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.
Kohl’s Commits to Sports Merch
Kohl’s announced an exclusive, long-term partnership with Fanatics, the global leader for licensed sports merchandise, to significantly broaden its product assortment. Beginning in fall 2019, Kohl’s online customers will have access to hundreds of thousands of items across team apparel, jerseys and additional merchandise categories for major sports leagues and collegiate properties, including NFL, NCAA, NBA, MLB, NHL and MLS. Fanatics will handle all fulfillment and shipping.
This deal presents a huge opportunity for Kohl’s, which is trying to deliver value and top brands to its shoppers. At the same time, the retailer wants to remain relevant and competitive in ecommerce, key merch categories such as sports, and do it without a major cash investment. This deal should be a win-win for both Kohl’s and Fanatics as well as the sports leagues and teams and the top sports brands.
“We are continually seeking opportunities to evolve our product offerings in order to give our customers even more of what they’re looking for, and this expanded partnership with Fanatics conveniently brings more officially-licensed products across more favorite sports teams to Kohl’s,” said Doug Howe, Kohl’s chief merchandising officer. “Furthermore, we’re able to offer the same convenience and value that customers have come to know and love from Kohl’s—including the capability to buy via the Kohl’s App, as well as the value of earning and redeeming Kohl’s Cash.”
The new Fanatics merchandise expands Kohl’s Fan Shop with top national sports brands including Nike, Under Armour, adidas, Majestic, Fanatics, and New Era.
“Kohl’s is a best-in-class retailer, and we’re thrilled to elevate our existing wholesale relationship through this unique new offering which gives Kohl’s customers access to a broader online assortment of fan gear across all sports and teams, including specialty hot market and championship gear,” said Jack Boyle, Fanatics co-president of direct-to-consumer retail. “We’re excited to offer more products directly to customers through Kohl’s ecommerce platform—which their loyal customer base is already familiar with—making this a win-win for everyone.”
Kohl’s to Showcase Global Designer
Kohl’s announced a new collaboration with well-known global designer Jason Wu to create an exclusive, limited-edition women’s apparel capsule for the holiday season. Inspired by classic Hollywood glamour, according to Kohl’s, the Jason Wu holiday designs will feature signature pieces including dresses, jumpsuits and jackets.
“We look for exciting ways to surprise and delight both our current and new customers with new offerings for their wardrobe that they can only get at Kohl’s. It’s an honor to partner with Jason Wu to bring his signature aesthetic of modern sophistication to Kohl’s in a one-of-a-kind women’s holiday capsule,” said Doug Howe, Kohl’s chief merchandising officer. “We know our customers are looking for stylish, quality outfitting at a great value and what better way to celebrate the holiday season than with the incredible designs from Jason Wu.”
“I am excited to bring my designs to the Kohl’s customer and give her beautifully designed pieces that will add dimension to her wardrobe,” said Wu, who is based in New York. “My inspiration for the capsule comes from classic Hollywood glamour—elegant pieces that are perfect for any festive occasion.”
Kohl’s Falls Short in Q1
Despite all its new merchandising initiatives and recent announcements, Kohl’s results for Q1 ended May 4 fell short of expectations with comp store sales decrease of 3.4% over last year. Total revenue was down 2.9% to $4.084 billion from $4.2 billion in 2018 and net income was down 17% to $62 million versus $75 million.
Michelle Gass, Kohl’s chief executive officer, said, “The year has started off slower than we’d like, with our first quarter sales coming in below our expectation. We are actively addressing the opportunities that impacted our first quarter sales and we have strong initiatives that will enhance our sales performance in the second half. We are incredibly excited about our nationwide rollout of the Amazon returns program as well as several important brand launches and program expansions. Operationally, the team reacted appropriately throughout the quarter by managing expenses in line with our expectations. While we are planning the year more conservatively, we continue to invest in our business and operate with a view on our long-term success.”
The company now expects adjusted annual earnings per diluted share to be $5.15 to $5.45, compared to its prior guidance of $5.80 to $6.15.
Target Reports Strong Q1 Comp Sales
Target Corporation reported its Q1 results, highlighted by comparable sales growth of 4.8% driven by a 4.3% increase in comparable traffic. The retailer reported GAAP earnings per share (EPS) from continuing operations of $1.53 in first quarter 2019, up 15.1% from $1.33 in first quarter 2018.
Two years ago, Target made a strategic move and major commitment to redo its merchandising position and pursue its own exclusive PL brands, and that has resonated with consumers. Its overall performance continues to reflect this factor.
“Target had an outstanding first quarter, as our team delivered a great experience for our guests and drove strong growth in traffic, comparable sales, operating income and earnings per share,” said Brian Cornell, chairman and CEO of Target Corporation. “Over the last two years we have made important investments to build a durable operating and financial model that drives consumer relevance and sustainable growth. Target’s first quarter performance and market-share gains demonstrate that the model is working. Throughout this year, we will continue to extend the reach of our same-day fulfillment options, strengthen our portfolio of owned and exclusive brands, remodel and open more stores and invest in our team. We’re confident that we’re well-positioned to deliver strong financial performance in 2019 and beyond.”
Other Q1 financials include:
- Operating income of $1.135 billion was 9% higher than last year.
- Digital channel comps were up 42%.
- GAAP EPS from continuing operations were $1.53, up 15.1% from last year. Adjusted EPS were $1.53, up 15.9% from last year.
- Target expects second quarter comparable sales growth in the low- to mid-single digit range.
- For full-year 2019, Target continues to expect a low- to mid-single digit increase in comparable sales, a mid-single digit increase in operating income, and both GAAP EPS from continuing operations and adjusted EPS of $5.75 to $6.05.
Mattel Extends WBCP Deal
Mattel extended its global licensing agreement with Warner Bros. Consumer Products. Mattel will continue to be the toy licensee for DC in the girls, preschool, vehicles, games and novelty toy categories and will support and grow existing DC Universe franchises as well as new content for “DC Super Hero Girls.”
“DC is home to some of the world’s greatest super heroes and extending our partnership will ensure we’re able to support the growth of this iconic brand and bring it to even more audiences,” said Janet Hsu, chief franchise management officer of Mattel. “Mattel is known for its winning design and innovation and, as the category leaders in dolls, vehicles and preschool, we’re thrilled to support Warner Bros. long term franchise plans.”
“Mattel has been our partner on DC for over 15 years and really knows our characters and understands the special connection they have with our fans,” said Stephen Teglas, senior vice president, North America, Warner Bros. Consumer Products. “Their leadership in the Pre-School, Vehicle and Girl categories will help us bring great toys and experiences to DC fans of all ages.”
Despite the good news in licensing, however, Moody’s issued a B-rating on Mattel’s long-term debt and Negative Outlook which was a reality check and reminder of Mattel’s turnaround challenges. “Mattel continues to face revenue pressures at Fisher-Price, Thomas and Friends and American Girl, which collectively generated approximately $1.5 billion or 30% of total gross revenue in 2018. EBITDA at $267 million in 2018, excluding $182 million of charges related to restructuring, integration, asset impairment and the Toys ‘R’ Us bankruptcy, and $278 million in 2017 are significantly down from the $900 million levels in 2015/2016 and FCF remains materially negative,” warns Moody’s as reported by Seeking Alpha.
Beanstalk Adds Five Brands
Global licensing agency Beanstalk, part of the Omnicom Group, has added five brands in major business segments to its roster of clients. Beanstalk expanded its relationship with spirts producer Diageo and will now represent its Crown Royal, Don Julio and Smirnoff brands in North America. The agency represents Guinness, Baileys, Captain Morgan and Johnnie Walker.
For Crown Royal, Beanstalk will focus on apparel and accessories, fashion collaborations, gifting, e-commerce, home bar, coffee and ready-to-drink beverages, chocolate and desserts. For Don Julio, apparel and accessories, fashion collaborations, home bar and home décor. For Smirnoff, lifestyle and food categories.
“We are delighted to work with a growing number of Diageo’s highly regarded spirits brands,” said Allison Ames, president and chief executive officer, Beanstalk. “As a longtime client of our agency, we have worked with Diageo to build and grow the successful licensing programs for the brands we currently represent. We look forward to extending the reach of the Crown Royal, Don Julio and Smirnoff brands to provide consumers new ways to interact with these great brands.”
Online travel agency Travelocity expanded its partnership with Beanstalk to identify new opportunities in the luggage, electronics and fitness tracker verticals. Travelocity’s previous licensing deals include consumer products such as wallets and accessories.
“Travelocity is a brand with travel in its name and in its DNA,” said Linda Morgenstern, vice president, brand management, Beanstalk. “Travelocity takes the guesswork out of travel, and licensed products, featuring the Travelocity Roaming Gnome, perfectly support the adventure. With its strong brand message, Travelocity has numerous opportunities to touch and improve every part of a traveler’s experience. Beanstalk is excited to continue this journey with Travelocity.”
New York’s famous venue Carnegie Hall appointed Beanstalk to expand its brand in various categories including children’s publishing, branded retail shops, premium headphones and home entertainment verticals.
“Beanstalk is honored to work with the prestigious Carnegie Hall to develop a licensing program in North America,” said Morgenstern. “Carnegie Hall has such a rich history and powerful brand to extend into products such as premium headphones and home theater equipment. In addition, we will leverage Carnegie Hall’s innovative music education programs to further enlighten children about music in all its forms through book publishing.”
Partnership of the Week: Harlem Globetrotters
Carnival Cruise Line announced an exclusive partnership with the Harlem Globetrotters, serving as the group’s official cruise line sponsor worldwide. The deal includes in-game integrations, giveaways and joint marketing efforts such as a designated Choose Fun Zone seating area with branded signage, playful décor, special player interactions and more. “For more than nine decades, we’ve used basketball as a means to bring laughter, joy and fun to our fans worldwide,” said Howard Smith, Harlem Globetrotters president. “When we heard about the opportunity to partner with cruise industry leader Carnival, we couldn’t wait to use our combined love of entertaining audiences to make our games more fun and memorable than ever.”
Name Change of Week: IMG Collegiate Licensing
Learfield IMG College announced it is restoring the iconic CLC brand name for the combined organization of IMG College Licensing and Learfield Licensing Partners. The new CLC name is a nod to the business that founded the collegiate licensing industry and the rich heritage of the combined companies building college brands and experiences for collegiate institutions across America.
“CLC was the company that gave birth to the collegiate licensing industry in 1981 after a licensing agreement between legendary Alabama Football Coach Paul “Bear” Bryant and original company founder Bill Battle,” said Greg Brown, president and CEO of Learfield IMG College, parent company of CLC. “Bill and CLC saw an opportunity in the marketplace and developed an innovative solution to meet that need, and we pledge to continue that type of visionary leadership and innovation.”
“While the CLC name solidifies our branding and foundation as the industry leader, we have no intention of looking backward,” said SVP and managing director Moss. “We are building a new company to move the industry forward at an increased pace and create new opportunities for college brands, our partners, licensees and retailers.”
Stat of the Week: Dressbarn
Ascena Retail Group is shutting down Dressbarn and closing its 650 stores. The company stated that the “decision has no impact on the operations of any of Ascena’s other brands and will strengthen the Company’s overall financial performance. Dressbarn’s wind down is another significant step taken to advance ascena’s ongoing transformation. This move is in line with the company’s commitment to comprehensively assess and optimize its portfolio by focusing resources on its most profitable brands to position the business for long-term growth and enhance shareholder value.”
Photo of the Week: Hudson Yards
Hudson Yards—located in the Chelsea and Hudson Yards neighborhoods of Manhattan—is one incredible retail, entertainment and residential complex and destination that combines the best of retail brands along with various foodservice offerings. Check out the unique structure known as “The Vessel” reflecting the Neiman-Marcus logo and its six-story flagship store.