To nobody's surprise, the Covid-19 pandemic gave Amazon a huge market share boost. So far, the ecommerce giant has been able to maintain most of its pandemic share gains even as consumer shopping patterns have started to normalize. However, the combination of surging costs and slowing growth are taking a severe toll on profit margins. The rising pressure on Amazon's core ecommerce profitability raises serious questions about the financial sustainability of its business model. Red Ink Piling Up for the Retail Business In late April, …
Macy’s Beats Back Activist Attack
Last fall, investment fund Jana Partners launched an activist campaign at Macy's. The fund aimed to double Macy's share price by separating the department store's growing ecommerce business from its physical stores. Jana Partners portfolio manager Scott Ostfeld estimated that Macy's digital operations could be worth $16.8 billion: far more than the entire company's market value at the time. Macy's management took this suggestion seriously. Rather than rebuffing Jana Partners, CEO Jeff Gennette told investors in November that Macy's had hired …
Kohl’s Under Pressure
A year ago, Kohl's beat back a campaign by four activist investment funds to unseat its board and shake up its operations. The activists settled for smaller changes at the board level: adding three new directors, creating a standing finance committee to oversee capital allocation, and authorizing a $2 billion share repurchase program. The department store didn't get a very long reprieve, though. In early December, Engine Capital called for Kohl's to either spin off its ecommerce business as a separate entity or sell the whole company. And in …
BNPL Is No Panacea for Retailers
Over the past two years, buy now pay later (BNPL) services have rapidly gone mainstream in the United States. As recently as 2019, U.S. BNPL payment volume totaled just $3 billion. That rose to an estimated $55 billion last year. Many prognosticators expect this momentum to continue for the foreseeable future. BNPL has become a go-to payment method for younger consumers (particularly millennials and Gen Z) during the Covid-19 pandemic. Merchants have eagerly partnered with BNPL platforms to appeal to these cohorts. BNPL has become especially …
Autonomous Trucks Won’t Save the Supply Chain Anytime Soon
The global economy has encountered massive supply chain disruptions as it has struggled to bounce back from the Covid-19 pandemic. In the U.S., a shortage of truck drivers (especially long-haul truck drivers) has become one of the biggest bottlenecks. Several companies are racing to address this problem by developing autonomous trucks. In some areas, autonomous trucks have been operating regularly on public roads for two years or more, albeit with a safety driver available to take over if necessary. Recently, Walmart and self-driving truck …
Autonomous Trucks Won’t Save the Supply Chain Anytime SoonRead More
Activists Chart an Uncertain Future for Macy’s
Earlier this year, luxury retailer Saks Fifth Avenue announced plans to spin off its ecommerce business at a $2 billion valuation, backed by a $500 million minority investment from Insight Partners. Now, activist investor Jana Partners wants Macy's to follow a similar path. It claims that such a move could unlock billions of dollars of shareholder value. There are just two problems. First, the Saks ecommerce spinoff looks like a dubious move at best. Second, even if Saks manages to separate its physical and digital businesses without falling …
Don’t Sell the Return of Malls Short
Of the roughly 1,000 malls in the U.S., more than a third are rated C or D, which are grades that indicate low sales productivity, high vacancy rates, poor tenant quality, and other weaknesses. Once the retail apocalypse gained steam around 2015, it quickly became clear that most of these properties wouldn’t be viable as malls by 2030. The Covid-19 pandemic dealt malls another blow last year. Public health orders forced most U.S. malls to close for months and ratcheted up the financial pressure on many of their tenants. Moreover, during 2020 …
A Retail Health Check
"There are three kinds of lies," Mark Twain famously wrote over a century ago. "Lies, damned lies, and statistics." The conventional media reporting on the U.S. Census Bureau's monthly retail sales reports epitomizes how misused statistics can become no better than lies. The recently released July retail sales report is a prime example. Fake News After the report came out on August 16, media outlets ran with blaring headlines. To give just a few examples, CNBC talked about a "worse-than-expected" drop of 1.1 percent, while CNN called the …